Annual Report (ESEF) • Apr 28, 2023
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Download Source FileUntitled ANNUAL REPORT 2022 CONTENTS CONTENT 2 FRØY ASA | ANNUAL REPORT 2022 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 Frøy business segments 12 Revenue Model and Backlog 14 Our History 16 Board of Directors 18 Executive Management 20 Targets and Policies 24 Shareholder Information 26 Board of Directors’ Report 28 Sustainability in Frøy 34 Corporate Governance 62 Equality Statement 68 Financial Statements - Frøy Group 75 Financial Statements - Frøy ASA 129 Auditors Report 143 Frøy is an integrated aqua service com- pany, delivering a wide range of day-to-day farming services to aquaculture companies. Frøy install fish farms and perform regular maintenance on farming sites at sea, carry out biological treatments and deliver trans- portation of live fish and fish feed. Frøy has operational track-record of more than 20 years and a modern and well invested fleet. The Frøy team include 940 specialized aqua service professionals, of which 722 are full time workers. As of 31.12.22 the fleet consisted of 19 wellboats, 64 aqua service vessels, 3 feed transport vessels and 9 local offices 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 deliver administrative functions to the operating subsidiaries. All vessels and crew are owned and operated out of the operating subsidiaries of the group. Frøy ASA was listed on Oslo Stock Exchange in March 2021. NTS AS is the majority share- holder, holding 72.11% of the shares as of 31 December 2022. Frøy’s geographical footprint: Head Quarters Offices THIS IS FRØY Storslett Finnsnes Måløy Ulsteinvik Namsos Rørvik Dønna Frøya Trondheim FRØY ASA | ANNUAL REPORT 2022 3 tions on how to manage mortality, escape and decease are changing. Frøy consider good fishwelfare and biosecurity a com- petitive advantage. We will continue to uphold regulations and requirements from both the government and our customer by adding specialist inhouse competence on water chemistry and veterinary, investing in data platform and systems, as well as participate in industry projects together with research institutes. We continue to invest in green technology on our vessels. This is important for our customers, but also to Frøy, as reducing CO2 emissions requires a collective effort from the entire industry. As an example we have signed an agreement to retrofit Frøy Valkyrien with batteries and power banks, reducing the fuel consumption with 50%. 2022 was a also year were we took multiple growth initiatives. We ordered a 4500 m3 wellboat with delivery in 2024. We signed several multi-year time charter agreements in the service segment and took delivery of several newbuilds, including the Frøy Challenger, a rebuilt PSV designed for efficient and gentle delousing operations. We increased the number of framework agreements with small and medium sized customers along the Norwe- gian coast, and carried out the acquisition of Marinus Aquaservice AS – increasing Frøy’s geographical foothold in South-West Norway. Frøy is a pioneer in the Norwegian aqua service industry, with more than 25 years history of continuous improvements in cooperation with global leading salmon farmers. That position is something to be proud of, and more importantly to protect in the years ahead. We believe Frøy has a solid platform for further growth both in Norway and abroad, with a competent organization, solutions that secure the wel- fare of the fish, and a green and modern fleet. Lastly, I would like to thank you all for the trust you have placed in Frøy. We remain optimistic about the outlook for the indus- try and are confident that Frøy is well posi- tioned to deliver value for all stakeholders in the years to come. Tonje Foss Chief Executive Officer We are pleased to present Frøy ’s Annual Report for 2022. A report that shows how the company has taken important steps towards our goal to be the preferred and leading supplier of aquaservices. The war in Europe creating a global energy crisis, general inflation and consequently increasing interest rates had an impact on our business in 2022. Despite this, Frøy has delivered good results throughout the year, and at the same time developed the company in accordance with the growth strategy set out in 2020. In Frøy we work systematically with three main objectives: build competence and culture in the organization, develop better fishwelfare solutions, and offer a green and modern fleet. We have strengthened our competency by hiring +15% new employees during 2022. An important contributor to this our focus on the apprenticeship scheme. In 2022 Frøy was awarded maritime apprenticeship of the year. A solid recognition of many years of work on making the industry an inter- esting working place for young people. We are also pleased to see a 20% increase in female cadets and trainees on our vessels. Good fishwelfare solutions will be our driv- ing force for future growth. The transport and handling of live fish are increasingly complex processes, as the industry regula- LETTER FROM THE CEO Dear shareholders, FRØY ASA | ANNUAL REPORT 20224 Passende bilde? FRØY ASA | ANNUAL REPORT 2022 5 LARGE SERVICE VESSEL Installation and mainte- nance of fish farms WELL-BOAT Transport of smolt to fish farms DIVING VESSEL Installation and mainte- nance of fish farms SEA TRANSPORT VESSEL Feed and cargo transport SMOLT FACILITY LARGE SERVICE VESSEL Installation and mainte- nance of sh farms WELL-BOAT Transport of smolt to sh farms SEA TRANSPORT VESSEL Feed and cargo transport 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 DIVING VESSEL Installation and mainte- nance of sh farms 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 fish farmers’ day to day needs at sea. A key pillar to achieve this ambition is to continuously develop our service offering through efficient utilization of inhouse competence and innovation. Frøy’s business and service offering has gradually developed together with the indus- trialization of the Norwegian fish farming industry. Today, Frøy assist fish farmers throughout the full production cycle at sea. Our service offerings range from installation of new farming sites, transport of live fish from smolt facilities to fish farming sites at sea, inspection and maintenance, biological treatments, transport of live fish from the farming sites to the processing facilities and disinfection of the farming site after the production cycle is finished. SOLUTIONS FOR THE OCEAN SPACE FRØY ASA | ANNUAL REPORT 20226 DELOUSING TREATMENT VESSEL Sea lice removal SMALL SERVICE VESSEL Installation and maintenance of fish farms NET CLEANING VESSEL Cleaning of fish farming nets WELL-BOAT Transport of live fish to processing facilities PROCESSING FACILITY LARGE SERVICE VESSEL Installation and mainte- nance of sh farms WELL-BOAT Transport of smolt to sh farms SEA TRANSPORT VESSEL Feed and cargo transport 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 DIVING VESSEL Installation and mainte- nance of sh farms FRØY ASA | ANNUAL REPORT 2022 7 The Frøy family includes 940 special- ized aqua service professionals, each essential to the successful delivery of our strategy and ensuring sustained business performance. Our people play a critical role in developing and delivering solu- tions that have a significant impact on fish farmers’ performance and results in challenging environments with advanced machinery. Competing effectively and sustainably in the ever-evolving aqua service landscape requires competent and empowered individuals who work safely together as a team. Our team comprises of individuals Director of Fish Welfare, Solveig Gåsø, 27 years of experience The ongoing improvement of fish welfare standards and practices At Frøy, we’re constantly striving to deliver the best possible solutions for our clients. Each day we assist fish farmers with planning and exe- cuting complex farming operations. The welfare of the fish is of the utmost importance of our work. Our experienced staff on board the ves- sels bring valuable expertise to the operations of fish farmers with their unique hands-on experience from farming sites along the Norwegian coastline. We work together with local expert teams ensuring that they are equipped with the necessary analytics and fish health competence to deliver high-quality fish welfare solutions. Through a focus on con- tinuous learning and uniform appli- cation of best practices, we strive to provide that the fish in our care are healthy, happy and thriving. Captain on board diving vessel, Jonas Tobiassen, 16 years of experience The Frøy gathering and uniting as One Frøy The Frøy family has grown to host over 900 aqua service professionals all along the Norwegian coastline, from the south-west to the far north. Despite our broad reach and diverse operations, I truly feel like we are united under one Frøy, sharing the same strong culture, values, and vision for the ocean space. Knowing each other and building strong relationships is important for teamwork and further development. Our shared dedication to the welfare of the fish, the fleet, and our folks drives us forward as we continue to grow and evolve. I am proud to be part of the team. Director of maritime staffing, Kristin Sugustad, 3 years of experience Awarded Maritime Apprentice Company of the Year At Frøy, we believe that competence is the foundation for delivering exceptional services to our clients. Our commitment to attracting top young talent and investing in their development through internal training has enabled us to assemble teams with complementary strengths and experiences, which is fundamen- tal to delivering sustained high-qual- ity services and preserving our strong Frøy culture. We are proud to have been honored with the Nor- wegian Maritime Competence award by the Foundation for Norwegian Maritime Competence (SNMK), which is a testament to our team’s unwav- ering dedication to excellence in the maritime industry. OUR PEOPLE ARE OUR GREATEST STRENGTH Captain on board small service boat, Martin Lindgren, 6 years of experience The establishment of the Frøy School The Frøy School has enabled us to share our knowledge and experience across the organization, fostering a culture of continuous learning and improvement of our skills. It’s a testament to Frøy’s commit- ment to excellence and investing in its people, which enables us to provide even better services to our clients. The sense of camaraderie and shared purpose among my colleagues makes Frøy a truly special place to work. FRØY ASA | ANNUAL REPORT 20228 with a range of complementary strengths, from fish welfare to risk management, technical and maritime competence. Through close collaboration and special- ist know-how, our employees strive every day to make an impact for our customers. At Frøy, we call this “teamwork at sea”. Cadet on board Folla, Inger Johanne Svartemyr, 5 years of experience Awarded Maritime Company of the Year Frøy shall be the leading compe- tence-hub for aqua services globally. We are committed to building a diverse and inclusive team as we believe this leads to better outcomes. I am proud to be part of a company that has increased the number of female cadets by 25% in the past year and honored that our efforts have been recognized by being awarded the title of Maritime Company of the Year by The Seafood Network. Crew Manager, Jan Are Nordheim, 14 years of experience Completed the Leadership Development Program I had the privilege of participating in the Internal Leadership Development Program, which helped me enhance my leadership skills and collaborate effectively with my colleagues. The program provided us with valuable tools and insights on how to lead and inspire a diverse team while maintaining a positive and innovative work environment. It is encouraging to be part of an organization that invests in the development of its employees and encourages them to be the best leaders they can be. Founder and operation manager, Dave Ole Eidet, 20 years of experience The Aqusition of Marinius Aqua Service I am proud to have built a company that over the past 15 years has delivered high-quality solutions and strong financial results. When the opportunity to join Frøy arose, it was an easy decision for us. Frøy shares our values for both our people, the welfare of the fish, and our fleet. Joining the Frøy family was a natural fit, and we are excited to continue working together as one. With our combined expertise and resources, I am confident that we will expand and strengthen our services in the southwestern part of Norway. Wellboat director, Andreas Moe, 11 years of experience The fifth new-built wellboat is under construction Another contract for a new-built wellboat has been signed, which is a reflection of the renewed trust from our clients. I am happy to see that our team’s efforts have been recognized. The new wellboat will be equipped with the latest in fish welfare technology, including an advanced de-licing system, as well as DP, battery, and diesel-electric propulsion systems for optimal envi- ronmental safety and efficiency. FRØY ASA | ANNUAL REPORT 2022 9 Modern and effective tools are pre-req- uisites to deliver efficient and sustainable solutions. Frøy has a modern and well invested fleet of vessels with large capacity which facilitates efficient operations com- bined with gentle fish handling. As the operator of the largest maritime service fleet for the fish farming sector, it is essential for Frøy to deliver sustainable and cost-efficient solutions for their custom- ers. Reduction of carbon footprint is a key consideration in Frøy’s fleet management plan. Frøy target to reduce carbon footprint and reduce the longer term risk related to its fleet by ordering new vessels with diesel electric or hybrid propulsion machinery. New initiatives are constantly being considered to further bring down emissions. Frøy is also 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 13 large service vessels (including newbuilds) Average age 4 years Fleet overview 3 large delousing vessels Average age 8 years (age based on rebuild date) 24 small service vessels (including newbuilds) Average age 6 years 17 net cleaning vessels Average age 5 years 9 diving vessels (including newbuilds) Average age 5 years Vessel length: 16-25 meters Fitted with cranes for heavy duty operations & ROV’s for underwater operations Some fitted with mechanical delousing equipment Technical info Vessel length: 40-80 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 fish farming nets to remove marine fouling is done to maintain high flow through of water and optimal living conditions for the fish 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 202210 investing in infrastructure and technological solutions, such as battery packs and shore power on its fleet. As of 2022 27% of the wellboats and cargo vessels have diesel elec- tric or hybrid propulsion machinery. Further- more 58% of the large service vessels and 14% of the smaller service vessels have the same features installed. Over time Frøy seek to reduce the carbon footprint of the fleet both by setting higher goals for efficiency for new build vessels and by installing new technology solutions on existing vessels. 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 19 wellboats (incl. newbuilds and one vessel on bareboat) Average age 7 years (owned vessels) 3 Sea transport vessels Average age 14 years Fleet overview Fleet overview 6 small wellboats > 3000 m3 well capacity 11 medium sized wellboats 3000-5000 m3 well capacity 2 large wellboats < 5000 m3 well capacity 2500 – 3200 DWT 2 multi-purpose vessels fitted with cranes and freezing capabilities 1 specialized feed transport vessel Technical info Technical info Facilitating the transport of smolt from onshore facilities to pens at sea. Transport of matured fish from the pens at sea to the har- vest sites onshore. Transport of fish feed from feed suppliers to salmon farmers Transport of frozen seafood Key operations Key operations FRØY ASA | ANNUAL REPORT 2022 11 FRØY BUSINESS SEGMENTS Wellboat Transport of live fish and biological treatment 19 vessels (incl. 3 newbuilds) Service Installation, maintenance and cleaning of salmon farmers site infrastructure 64 vessels (incl. 8 newbuilds) Sea transport Transport of salmon feed, frozen seafood and other cargo 3 vessels 2022 REVENUE 1108 NOK million 2022 REVENUE 879 NOK million 2022 REVENUE 143 NOK million FRØY ASA | ANNUAL REPORT 202212 FRØY ASA | ANNUAL REPORT 2022 13 REVENUE MODEL AND BACKLOG REVENUE MODEL Frøy offer 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. Close to 100% of Frøy’s vessel time charter contracts have annual price adjustment mechanisms to hedge against inflation. 2022 REVENUE SPLIT (excluding reinvoiced costs and other revenues) CONTRACT BACKLOG Contract backlog is defined as the aggregate value of work on signed customer contracts, including options. Framework agreements and other agreements without fixed commit- ments or minimum value clauses are not included in the backlog figures. 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 31.12.22 the total backlog amounted to approx. NOK 6.0 billion including options. Fixed backlog Total fixed revenue commitments of approx. NOK 3.6 billion. Options Most fixed time charter contracts include extension options. Total options of approx. NOK 2.4 billion. Time charter 64% Framework agreements 22% Spot 14% BACKLOG (NOKm) 1 119 1 038 852 684 542 441 432 385 296 130 30 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 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 202214 FRØY ASA | ANNUAL REPORT 2022 15 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 first Frøy company was created in 1997. Originating from the aquaculture hub around Frøya, the group expanded its operations 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 Namdal-Helge- land area in mid-Norway. – from local service provider to leading national provider of fish farming solutions OUR HISTORY 2015 FRØY ASA | ANNUAL REPORT 202216 NTS ASA announce transaction to acquire Frøygruppen AS with payment in NTS ASA shares. All aqua service companies are combined into Frøy during 2020 Frøy acquire Mari- nus Aquaservice AS and their fleet of 3 service vessels 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 SalMar through acquisition of NTS becomes 72.1% indirect share- holder in Frøy 2017 2021 20232019 2018 Leading global aqua-service provider FRØY ASA | ANNUAL REPORT 2022 17 SVEIN SIVERTSEN Chairman The Chairman of the Board, Svein Sivertsen (1951), was elected to the Board by the extraordinary general meeting on 26 February 2021. Mr. Svein Sivertsen has extensive experience from board positions within maritime fields, covering sectors of aquaculture, oil service, construc- tion and shipping, amongst others. Mr. Sivertsen holds a degree in Master of Science, Chemical Engineering from the Norwegian University of Science and Technology. Mr. Sivertsen is currently chairman in Aalesundfisk Holding AS and Arctic Fish (Iceland). Previous board positions include 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 or options in Frøy ASA. MORTEN LOKTU Board Member Morten Loktu (1960), was elected to the Board of Directors by the extraordinary general meeting on 20 December 2022. Mr. Morten Loktu has experience from multiple board positions within aquaculture, finance and others. Mr. Loktu is currently a member of the Board in SalMar ASA and SalMar Aker Ocean AS. Previous board positions include IOGP (International Association of Oil & Gas Producers), EIT (European Institute of Innovation & Technology) and the Norwegian University of Science and Technol- ogy). Mr. Loktu has previously held executive positions as CEO of Sintef Gruppen and several executive positions in Statoil ASA and Equinor ASA. Mr. Loktu holds a degree in Master of Science, physics and economics from the Norwegian University of Science and Technology. Mr. Loktu owns 0 shares in Frøy. PERNILLE SKARSTEIN CHRISTENSEN Board Member Board member Pernille Skarstein Christensen (1966) was elected to the Board of Directors by the extraordinary general meeting on 20. December 2022. Mrs Skarstein Christensen has broad experience from the financial markets and extensive background as Head of Investments from Alfred Berg Asset Management, Carnegie Asset Management and C WorldWide Asset Management. She holds a MA in Economics from the Norwe- gian School of Economics & Business Administration (NHH), Norway. Mrs. Skarstein Christensen is currently Investment Director of Kverva AS. In addition, she holds a board position in the seafood company NTS AS. She owns 0 shares in Frøy ASA. BOARD OF DIRECTORS FRØY ASA | ANNUAL REPORT 202218 LINDA JOHNSEN Board Member Mrs. Johnsen has 20 years of experience from tax authorities, including as tax assessor for Nærøy, Vikna and Leka municipality. She also has experience from BDO, with special focus on the fisheries sector. Mrs. Johnsen is currently working as a financial consultant in Williksen Fangst AS. Mrs. Johnsen owns 0 shares in Frøy. RUNE JULIUSSEN Board Member Board member Rune Juliussen (1977) was elected to the Board of Directors by the extraordinary general meeting on 20. December 2022. Mr. Juliussen is currently Investment Director of Kverva AS. He holds a MSC in Business from the Norwegian Business School (BI), Nor- way, and has over 10 years’ previous experience from Investment Banking in Carnegie and Pareto until 2010. He holds a board position in among others Salvesen & Thams and Sparebank1 Markets and was until February 2023 chairman of the processing vessel company Napier Holding. Mr. Juliussen owns 0 shares in Frøy. FRØY ASA | ANNUAL REPORT 2022 19 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. Tøff AS, a close associate to Tonje Foss owns 10.000 shares in Frøy ASA. SONDRE VEVSTAD CFO Sondre Vevstad (1983) has been engaged by Frøy since 2020 and assumed the position as CFO June 2022. Prior to his current position Vevstad assisted the Company with IPO preparations, investor relations and cor- porate strategy services. Vevstad has more than 10 years’ experience from investment banking, covering the seafood and aqua services sector and holds a master’s degree within finance from NHH – Norwegian School of Economics. Ocean Capital Advisers AS, a close associate to Sondre Vevstad owns 8.196 shares in Frøy ASA. ANDERS GÅSØ Head of Service and Sea Transport Anders Gåsø (1986) joined Frøy in 2017 and has today the position as the Head of the Service and Sea Transport. Prior to joining the Group, Mr. Gåsø held a leading position at Sparebank 1 SMN, the largest bank in region of Middle Norway. Mr. Gåsø holds dif- ferent board positions and has been board member of NTS ASA. Mr. Gåsø holds a non-controlling ownership position in Gåsø Næringsutvikling AS, a major shareholder in Frøy Kapital AS that owns 9 212 017 shares in Frøy ASA FRØY ASA | ANNUAL REPORT 202220 ANDREAS MOE Head of wellboat Andreas Moe started his current position as Head of Wellboats in January 2023. Mr. Moe joined Norsk Fisketransport in 2012 and has sailed on several wellboats until 2018 when he moved onshore for a position in the qual- ity department in NTS Management. Prior to his current position Mr Moe served as Head of the QA department in Frøy ASA. Mr. Moe owns 0 shares in Frøy. ANDREAS KROGSTAD Head of Sales Andreas Krogstad (1976) holds the position as Head of Sales at Frøy ASA. Prior to this position he has been working as a Sales & Marketing manager of service vessels in Frøy, and as operations coordinator for service vessels since he was first recruited to Frøy in April 2013. Mr. Krogstad has studied Market Economics & Business Economics at BI Norwegian Business School. Mr. Krogstad holds several board memberships, and acted amongst others as a Deputy Board Member of NTS ASA from 2021 -2022. Mr. Krogstad holds 19.286 shares in Frøy. LINN HOLMEN Head of Operational Support Linn Holmen holds the position as Head of Operational Support. Mrs. Holmen started at the QA division at Frøy during 2016 where she acted as Head of the QA department and Chief Sustainability Officer. Before join- ing Frøy Mrs. Holmen worked as Operating Manager offshore at Statoil ASA. Mrs. Holmen owns 1.739 shares in Frøy. FRØY ASA | ANNUAL REPORT 2022 21 KRISTIN SUGUSTAD Director Maritime Staffing Kristin Sugustad (1979) joined Frøy in 2019 and has today the position as Director Mari- time Staffing. Prior of joining Frøy, Ms. Sugus- tad worked 12 years as a financial advisor at Sparebank 1 SMN and Nordea Bank ASA. Ms. Sugustad acquired her Bachelor of Econom- ics from Trondheim Økonomiske Høyskole and executive master of management at BI Norwegian Business School. Mrs. Sugustad owns 0 shares in Frøy. TOVE TORSTAD Director HR Tove Torstad (1969) started her current position as Director of HR following the merger between NTS and Frøy in April 2020. Prior to her current position, Torstad acted as interim CEO in NTS Mangement. Before starting at Frøy, Torstad worked Eidshaug Rederi and the local government administra- tion in Nærøy. Mrs. Torstad owns 1.928 shares in Frøy. ARNT SOLEM Director Business Development and Innovation Arnt Solem (1967) started his position as Director of Business Development and Innovation in January 2023. Prior to joining Frøy, Mr. Solem worked 11 years as CEO of Fosenkraft AS. Before that, he had a signif- icant career and experience from various management positions and companies in the oil industry, including Altera Infrastructure (formerly known as Teekay) and PGS. ASAP Invest AS, a close associate to Mr. Solem, owns 17899 shares in Frøy ASA. FRØY ASA | ANNUAL REPORT 202222 FRØY ASA | ANNUAL REPORT 2022 23 PROFITABILITY: Frøy targets return on equity of minimum 10-18% depending on client, project structure and contract length (risk) GROWTH: Frøy has disciplined focus on long-term contracts for new vessels. New growth projects are subject to satisfactory return profile in line with or above the targeted profitability level. CAPITAL STRUCTURE: Frøy’s primary source of debt financing is long term bank loans. Frøy has a strategy of financing its vessels and equipment with 5-year term loans with repay- ment profiles depending on ves- sel or equipment and contract coverage. DIVIDEND POLICY: Frøy’s ambition is to maximize long term value for its share- holders through positive share price development and a grow- ing dividend based on long term earnings. Frøy intend to pay out minimum 50% of net profit as dividend. In its dividend proposal, the Board will take into account future gearing level and liquidity requirements. Frøy’s financial targets and capital allocation strategy provides a framework for allocation of capital to new investments, dividends and debt. TARGETS AND POLICIES FRØY ASA | ANNUAL REPORT 202224 FRØY ASA | ANNUAL REPORT 2022 25 SHAREHOLDER INFORMATION Frøy intends to communicate actively and openly with shareholders, potential inves- tors, analysts and other participants in the financial 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 financial markets are treated equally with regards to access to financial and other information. DIVIDEND The Frøy Board of Directors will propose a total dividend of NOK 1.50 per share for the financial year 2022 to the Annual General Meeting in June 2023. The dividend will be split into two tranches of NOK 0.75 per share to be paid in June and November 2023. Furthermore, the Board of Directors will propose to the Annual General Meeting to introduce half-yearly dividend payments going forward. SHARES AND SHARE CAPITAL As of 31 December 2022, Frøy ASA has 86 348 603 ordinary shares; each share has a par value of NOK 1. As of 31 December 2022, Frøy had 4 114 shareholders. 3.3% 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 2022. STOCK EXCHANGE LISTING Frøy ASA was listed on Oslo Stock Exchange on 29 March 2021 (ticker: FROY). The Frøy shares are registered in the Norwegian Central Securities Depository. The shares have the securities registration number ISIN NO0010936792. Nordea Bank Abp, Norway Branch is Frøy‘s registrar. MAJORITY SHAREHOLDER Frøy‘s majority shareholder is NTS AS, a wholly owned subsidiary of SalMar ASA. Companies that are a part of SalMar ASA are legally and financially independent units. SalMar ASA exercise active ownership in order to systematically create value for all Frøy shareholders. Frøy have entered multiple agreements with companies owned by SalMar 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 financial market. Frøy investor relations information, including financial calendar, quarterly and annual reports, investor presentations, articles of association, investor relations policy and corporate 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 staff. NOMINATION COMMITTEE The Company’s Articles of Association provide for a nomination committee elected by the general meeting. The nomination committee shall at the outset consists of minimum two members, elected for a term of two years. 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 Sistranda, Norway ANNUAL SHAREHOLDERS’ MEETING A written notification will be sent to all shareholders individually or to shareholders’ nominees. SHAREHOLDER INFORMATION FRØY ASA | ANNUAL REPORT 202226 20 LARGEST SHAREHOLDERS AT 31.12.22 Name Number of shares held Ownership % NTS ASA 62 269 112 72.11 Gåsø Næringsutvikling AS 3 019 800 3.50 HSBC Bank Plc 1 185 494 1.37 ABG Sundal Collier ASA 1 185 000 1.37 Verdipapirfondet Fondsnans Norge 875 000 1.01 Trøndelag Helgeland Invest AS 702 411 0.81 BNP Paribas Securities Services 656 820 0.76 Amble Investment AS 654 417 0.76 Riiber Holding AS 644 490 0.75 DNB Bank ASA 591 146 0.69 Verdipapirfondet Alfred Berg Norge 574 208 0.66 Torghatten Aqua AS 570 000 0.66 Verdipapirfondet Alfred Berg Norge 510 500 0.59 Verdipapirfondet Alfred Berg Aktiv 444 939 0.52 GH Holding AS 427 868 0.50 Furberg & Sønn A/S 400 000 0.46 HMH Invest AS 365 787 0.42 LIN AS 327 868 0.38 Verdipapirfondet Alfred Berg Norge 298 887 0.35 The Bank of New York Mellon SA/NV 284 396 0.33 Total 20 largest shareholders 75 991 805 88.01 Total other 10 356 798 11.99 Totale number of shares 86 348 603 100.00 SHARE PRICE DEVELOPMENT Share price data from the first day of listing January 2022 - December 2022. 60 NOK per share 55 50 45 35 30 1.7.20221.4.2022 1.10.2022 30.12.20223.1.2022 FRØY ASA | ANNUAL REPORT 2022 27 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 transport of fish feed and frozen seafood. The Company’s headquarter is located at Sistranda in Frøya municipality. 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 pre- ferred provider of sustainable aquaculture services. Taking good care of the fish and people has been core focus in Frøy for more than 20 years. Delivering solutions that improve efficiency and sustainability for clients is both a prerequisite to operate and a key driver for Frøy’s growth going forward. Frøy’s business and service offering has gradually developed together with the indus- trialization of the Norwegian fish farming industry. Today, Frøy assist fish farmers throughout the full production cycle at sea, in all Norwegian farming regions and with an increasing international footprint. With its more than 900 aqua service special- ists, Frøy has a unique competence base, vital to deliver continuous improvement in fish welfare and efficiency to fish farmers across all international production regions. Frøy’s service offering is reported through three operating segments: Wellboat: Frøy is a leading provider of wellboat services. Frøy has operations in Norway and Iceland and target all the large salmon farming markets in the North Atlan- tic Ocean; Norway, UK, Canada and Iceland. Service: Frøy is the largest provider of service vessels in the North Atlantic basin. The Frøy fleet primarily operates along the Norwegian coast from Rogaland in the south to Fin- nmark in the north, providing a wide range of services to the aquaculture industry. Frøy’s market focus includes all the large salmon farming regions in the North Atlantic Ocean, Norway, UK, Iceland and Canada. Furthermore, wellboats are used as support- ive infrastructure for salmon farmers under biological operations during the production phase at sea. Wellboats can perform a wide range of different sea lice treatments such as flushing, thermal wash and freshwater bath. The fish is pumped into the wellboat and treated in a closed and controlled envi- ronment which minimize risk of emissions to sea and cross contamination of sea lice from one pen to another. After biological treat- ments the sea lice is contained and disposed in accordance with regulatory requirements. The majority of Frøy’s fleet is employed on long-term contracts. Activity in 2022 followed a normal seasonal trend. The beginning of 2022 started slowly with low sea lice levels and low harvesting activity. Activity picked up during summer, with high activity across all vessels well into December. The wellboat segment generated total revenues of NOK 1107.6 million (2021: NOK 876.0 million) and an operating profit of NOK 212.5 million (2021: NOK 244.7 million including gain from sale of assets of NOK 52.1 million). 2022 – SERVICE SEGMENT Frøy operates 56 service vessels of dif- ferent sizes. Frøy service segment offers diving, inspection, biological risk mitigation services and infrastructure integrity services to salmon farmers. With specialized aqua service professionals 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. The 13 large service vessels mainly operate on time charter contracts, while the smaller service vessels generally operate on frame- work agreements. During 2022, Frøy put four newbuilds into operation and sold two vessels in line with its fleet optimization strategy of selling older and less efficient vessels. In 2023 Frøy is scheduled to take delivery of seven new service vessels. One additional vessel is scheduled for delivery in 2024. Sea transport: Frøy’s sea transport vessels provide transport services mainly on the Norwegian coast, as well as transport of refrigerated cargo to the Baltics and Poland. 2022 HIGHLIGHTS The soaring inflation, increased fuel prices and increasing interest rates all impacted Frøy’s business in 2022. Profitability in the company’s long term charters were to a large degree protected through CPI adjustments and reinvoicing of fuel costs. For the fleet operating on frame- work agreements and spot the increased fuel prices had a negative impact of approx. NOK 50 million in 2022 compared to 2021. During 2022, the high inflation and weak- ened NOK pushed newbuild prices higher. Frøy has fixed prices on its newbuilds under construction. During the year Frøy placed several new newbuild orders, including one new wellboat and seven new service vessels. Frøy experienced high demand for its new vessels and competent crews that contrib- ute with improved solutions, increased oper- ational efficiency and improved fish welfare. At the end of 2022 all newbuilds ordered except for two were placed on contracts with clients, well in advance of delivery from yard. 2022 - WELLBOAT SEGMENT At the end of 2022, Frøy owned a total of 15 wellboats, and leased one wellboat on a bareboat agreement. During 2022 Frøy ordered one new wellboat, increasing its newbuild program to three vessels, of which two will be delivered in 2023 and one in 2024. Key services offered 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. BOARD OF DIRECTORS’ REPORT FRØY ASA | ANNUAL REPORT 202228 on life, disability, sexual orientation, gender identity and gender expression. About 23% of all employees per 31.12.2022 are temporary employees. Of these, 44 % are apprentices/cadets who are on a time-limited training agreement. The remaining temporary employees cover for employees on sick leave. The average number of weeks of parental leave in 2022 was 9.7 weeks for men and 29.3 weeks for women. Frøy’s principles, procedures and standards for equality are rooted in Frøy’s various strat- egies, tools and policies. All Frøy policies can be found at www.froygruppen.no. A separate report has been prepared, Equal- ity Statement, which describes Frøy’s work on gender equality and diversity in more detail. The report is provided in a separate 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 took its first steps towards a structured reporting on how we integrate sustainability into the overall business strategy. This reporting has been further refined during 2022. In 2019 Frøy made a strategic decision to reduce greenhouse gas emissions from its fleet by investing in more climate friendly vessels. Since 2019 all wellboat newbuilds have been ordered with either diesel elec- tric or hybrid propulsion machinery. At the end of 2022, 25 % (21%) of the wellboats and sea transport vessels have diesel electric or hybrid propulsion machinery installed, 58% (45%) of the larger service vessels have diesel electric or hybrid propulsion machinery, and 7% (3 %) of the smaller service vessels have diesel electric or hybrid propulsion machinery. The goal is to increase the percentage of vessels with Activity in the service segment followed a normal seasonal trend in 2022, with a slow seasonal activity level in the first quarter of 2022. As sea temperatures increased the activity level picked up. In the fourth quarter activity level remained high, with high demand for sea lice removal services and net cleaning well into December. Fuel prices increased materially in first half of 2022, impacting margins negatively. The increased cost of fuel had a negative impact of approximately NOK 50 million in 2022 compared to 2021. The Service segment generated total revenues of NOK 879.3 million (2021: NOK 774.6 million) and an operating profit of NOK 72.7 million (2021: NOK 132.4 million). 2022 - SEA TRANSPORT SEGMENT Frøy operates three vessels in the sea trans- port segment, of all operate on time charter and framework agreements. The sea transport segment has improved its contract coverage and utilization compared to 2021. The Sea transport segment generated total revenues of NOK 143.3 million (2021: NOK 134.2 million) and an operating profit of NOK 24.3 million (2021: NOK 19.3 million). EMPLOYEES As of 31.12.2022, there were a total of 940 employees (including temporary employees) in Frøy. These are divided into 315 (285) employees in the wellboat segment, 501 (426) employees in the service segment, 65 (58) employees in the maritime transport segment and 59 (45) employees in Frøy ASA. The proportion of women per 31.12.2022 was 7% (5%). At the end of 2022, Frøy’s executive manage- ment group consisted of 44 % women, while the expanded management group consisted of 33 % 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 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 5.3% in 2022, compared to 5.1% in 2021. 4.6% of the absence is long-term absence. We observe an increase in LTI-frequency in 2022 of 9.7 from the previous year of 8.5. Most lost-time injuries is however short term. Follow-up of sick leave and facilitation for people on sick leave including lost-time inju- ries has been a focus area in 2022. Routines and procedures are reviewed, and each individual injury case is used for training and learning. 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 affected by natural variations in weather, sea temperature and fish 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 fleet is crucial for achieving a satisfactory return on invested capital. Variable operating costs mainly consist of personnel costs, fuel costs and costs for repair and maintenance of the fleet. FRØY ASA | ANNUAL REPORT 2022 29 Credit risk Frøy’s credit risk represents the risk for counterparties not being able to fulfil 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 insignificant in both 2022 and the year before. No set-off agreements or other financial 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 significant part of its revenues in EUR and USD. This currency exposure is partially offset by bunker costs nominated in USD. When contracting new vessels at shipyards abroad, the contract price will be denominated in a foreign cur- rency. 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 newbuilds is continuously monitored and currency derivatives have been applied to reduce the risk. Frøy has entered into currency swaps related to the scheduled payments on the newbuilds under construction in Turkey. The company is exposed to changes in inter- est rates, as parts of the group’s debt have floating interest rates. Furthermore, changes in interest rates may affect investment opportunities in future periods. Long-term interest rate hedging agreements have been entered into for parts of the debt to reduce interest rate risk. Tax risk Frøy Rederi has received from the Norwe- gian Tax Authorities (“NTA”) a draft decision stating that Frøy Rederi’s activities are not newbuilds are committed. Furthermore, Frøy has a portfolio of cash and cash equiva- lents at the end of 2022 of NOK 319 million (2021: NOK 738 million) and available credit facilities of NOK 30 million (2021: NOK 39 million). The group’s liquidity on the balance sheet date is considered satisfactory. SHAREHOLDER INFORMATION The company’s largest shareholder is NTS ASA, a subsidiary of SalMar ASA, which as of 31.12.2022 owns 72.1% of the shares in Frøy ASA. The 20 largest shareholders at the end of 2022 were as follows: covered by the tonnage tax scheme and that there is basis for amending its tax assessment for the income years 2019 and 2020. Frøy disputes 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 financial statement for further details. Liquidity risk Liquidity risk is a risk that Frøy will not be able to service its financial obligations as they fall due. In 2022, Frøy had a positive cash flow from operating activities of NOK million 621 (2021: NOK million 499). The group’s investments in newbuilds are financed with equity and long-term loan facilities from credit institutions before Shareholder No. of shares Ownership % NTS ASA 62 269 112 72.11 Gåsø Næringsutvikling AS 3 019 800 3.50 HSBC Bank Plc 1 185 494 1.37 ABG Sundal Collier ASA 1 185 000 1.37 Verdipapirfondet Fondsnans Norge 875 000 1.01 Trøndelag Helgeland Invest AS 702 411 0.81 BNP Paribas Securities Services 656 820 0.76 Amble Investment AS 654 417 0.76 Riiber Holding AS 644 490 0.75 DNB Bank ASA 591 146 0.69 Verdipapirfondet Alfred Berg Norge 574 208 0.66 Torghatten Aqua AS 570 000 0.66 Verdipapirfondet Alfred Berg Norge 510 500 0.59 Verdipapirfondet Alfred Berg Aktiv 444 939 0.52 GH Holding AS 427 868 0.50 Furberg & Sønn A/S 400 000 0.46 HMH Invest AS 365 787 0.42 LIN AS 327 868 0.38 Verdipapirfondet Alfred Berg Norge 298 887 0.35 The Bank of New York Mellon SA/NV 284 396 0.33 Total 20 largest shareholders 75 991 805 88.01 Total other 10 356 798 11.99 Totale number of shares 86 348 603 100.00 FRØY ASA | ANNUAL REPORT 202230 growth in revenues is primarily attributable to the increase in Frøy’s fleet of vessels and increase in reinvoiced fuel costs during 2022. In 2021, Frøy sold vessels with a total gain of NOK 91 million vs. NOK 16 million in 2022, which explains the majority of the drop in operating profit in 2022 vs. 2021. These sales were carried out as part of the group’s strat- egy for continuous renewal of the fleet. Ordinary profit before tax ended at NOK 221 million compared to NOK 300 million in 2021. Annual profit for continuing opera- tions ended at NOK 224 million compared to NOK 284 million in 2021. Total assets increased from NOK 7,657 million at the end of 2021 to NOK 8,026 million at the end of 2022. The equity ratio of the group as of 31.12.2022 was 41% compared to 42% the previous year. The equity ratio remained flat despite an increase in total assets. The consolidated financial 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 profit was NOK -40.4 million compared to NOK -21.6 in 2021. Profit before tax ended at NOK 261.3 million compared to NOK - 0.3 million in 2021. Financial income in 2022 was positively impacted by share dividends and group contributions. The parent company accounts have been prepared in accordance with the Accounting Act of 1998 and generally accepted account- ing principles in Norway. INVESTMENTS Investments are mainly related to the group’s newbuild and rebuild program. In 2022, NOK 615 million has been invested in the wellboat segment, NOK 126 million in the service seg- ment, NOK 65 million in the maritime trans- port segment. In addition, NOK 64 million has been invested in other investments which includes periodic maintenance and develop- ment of the company’s data platform. The number of shareholders as of 31.12.2022 was 4,114 compared to 4,398 shareholders as of 31.12.2021. COMPOSITION OF THE BOARD The board consists of five 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). In the assessment of the board of directors (the “Board”), Frøy has the two deviations 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. Two of the five shareholder-elected Board members are independent of the Company’s executive management and material business relationships, while NUES recommends that the majority of the Board members are independent of the Company’s executive management and material business relationships. By having an independent chairperson, it is the opinion of Frøy that this balances the deviation from NUES and secures the common interests of all shareholders, including the minority shareholders.” 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 2,132 million in 2022 compared to NOK 1,787 million in 2021. In 2022, the group had an operating profit of NOK 267 million compared to NOK 378 million in 2021. The At the end of 2022, remaining investments under the current investment program amounts to approx. NOK 1 billion. These investments are expected to accrue with NOK 744 million in 2023 and NOK 232 million in 2024. 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 confirms that the precondition for going concern is present. 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 three new vessels under construction. MS Gåsø Odin is expected to be delivered in April 2023, MS Veidnes is expected to be delivered during the summer of 2023 and Frøy Saga is expected to be delivered third quarter 2024. During 2023, the Service segment will put six vessels and one pen cleaning barge into operation. Furthermore, the segment has one large service vessels under construction with planned delivery in 2024. The aqua service industry is expected to continue growing in the years to come. To date Frøy has yet to experience any direct demand effects following the Norwegian Government’s proposal to introduce a new resource rent tax on salmon farming. Frøy will adapt its operations based on the competitiveness of the Norwegian frame- work conditions and prioritize to grow and support salmon farmers in the regions where they choose to grow and operate. In 2023, Frøy will operate two wellboats in Iceland and will seek to diversify further through growth opportunities in geographi- cal regions outside its current core areas. FRØY ASA | ANNUAL REPORT 2022 31 High inflation and weakened NOK continue to push the price of newbuilds higher. Newbuild prices have increased with more than 20% the last 12 months. Frøy has a well-maintained fleet and fixed prices on its newbuilds under construction. The Frøy fleet has been built at low newbuild prices com- pared to the newbuild prices seen today. Over time, Frøy expect that the increased prices for newbuilds will push time charter rates and prices on framework agreements higher also for the existing fleet of vessels. CORPORATE SOCIAL RESPONSIBILITY Frøy defines social responsibility as achieving business profitability in line with basic ethical and sustainable values and with respect for people, the environment and society. Business profitability 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. ments carried out in accordance with the Norwegian Transparency Act (in force from 1 July 2022) will be published on www.froy- gruppen.no within 30 June 2023. EVENTS AFTER THE BALANCE SHEET DATE On January 6th Frøy announced that it had entered into an agreement to acquire 100% of the shares of Marinus Aquaservice AS. The transaction values Marinus at a total enterprise value of NOK 101 million, subject to certain closing conditions. The acquisition of Marinus strengthens Frøy’s position in the southwest of Norway, a region where Frøy has limited foothold today. Marinus operates three modern and well-maintained vessels and has a particular strong position within ROV services, a fast-growing subseg- ment of the aqua service industry. On January 13th SalMar ASA announced a strategic review of its indirect holding in Frøy. Based on incoming interest regarding Frøy, NTS AS, a wholly owned subsidiary of SalMar ASA, has decided to explore strategic alternatives in Frøy with the aim of maximizing value for its shareholders. NTS currently holds 62,269,112 shares in Frøy representing approximately 72.11% of the shares and votes in Frøy. The strategic review is expected to be concluded within 2023. No decisions have been taken and a transaction, if any, remains subject to market conditions. In February 2023 Frøy Rederi was notified by the Norwegian Tax Administration (the “NTA”) of a possible amendment of its tax assessments for income years 2019 and 2020. Frøy Rederi disagrees with the NTA’s preliminary position and will object to and defend its legal position. Should the NTA rule in line with the draft decision received and this is upheld in a final and biding ruling, the Company’s assessment is that there will be limited changes in taxes to be paid for income years 2019 to 2022. Operations in Frøy have proceeded as normal after the balance sheet date. The board is therefore not aware of any other 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. In 2022, 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; Development of an inhouse data plat- form for efficient collection, sharing and analysis of operational data Testing of new methods for removal of sea lice, including the newly approved method of combining fresh water and mechanical delousing Machine learning to improve hole detec- tion under net inspection. Continuous development of next genera- tion wellboats and service vessels Future service scope related to seaweed production. LIABILITY INSURANCE FOR THE CEO AND BOARD MEMBERS Frøy has taken out a board and management liability insurance. The insurance applies to members of the board, members of Frøy’s management team or other employees who have been assigned independent manage- ment responsibilities. The insurance covers the insured’s personal liability for economic loss caused to someone in their capacity as a director or an employee. NORWEGIAN TRANSPARENCY ACT An account of our due diligence assess- FRØY ASA | ANNUAL REPORT 202232 RESPONSIBILITY STATEMENT FROM THE BOARD OF DIRECTORS AND CEO We confirm, to the best of our knowledge, that the consolidated financial statements for the year ended 31 December 2022 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, financial position and profits and loss for the period. Furthermore, we confirm, to the best of our knowledge, that the consolidated financial statements include a fair view of important events that have occurred during the finan- cial year and their impact on the financial 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 2022. significant events in the period from 1 Janu- ary 2023 to the date of this report. PROFIT ALLOCATION The board has proposed a dividend for 2022 of NOK 1.50 per share. The dividend will be split into two tranches of NOK 0.75 per share to be paid in June and November 2023. The total ordinary dividends proposed for the financial year 2022 is approx. NOK 130 million. The two tranches will have separate ex. dividend and record dates. Profit after tax in the parent company, Frøy ASA, ended at NOK 257 million which the board proposes to allocate as follows (num- bers in NOK): Dividend 129 522 905 Transferred to other equity 127 195 068 Total profit allocation: 256 717 973 Frøya, 28 April 2023 Board of Directors Frøy ASA Svein Sivertsen Chairman Pernille Christensen Board Member Rune Juliussen Board Member Morten Loktu Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Officer FRØY ASA | ANNUAL REPORT 2022 33 SUSTAINABILITY IN FRØY SUSTAINABILITY IN FRØY Frøy´s vision is solutions for the ocean space. Our ambition is to be the leading and preferred provider of sustainable aquaculture ser- vices. 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 prerequisites 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 opera- tions, 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 require- ments in all our operations. Flexible– We strive to be agile in everything 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 strate- gies 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 responsibility to reduce our environmental footprint and climate gas emissions, and we continually 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. During the course of 2022 we have taken a big step forward in this aspect. COMMITMENT TO THE UN’S AND NORWAY’S CLIMATE GOALS Frøy is committed towards the UN’s Climate Goals for 2050, aiming to prevent global warming from exceeding 1,5 o C by reducing worlds GHG emissions by 2050 to a net-zero. We are also committed to Norway’s Climate Goal towards 2030, which state that Norway’s GHG emissions aim to be reduced by 55 % by 2030. Our most important contribution towards these goals is our commit- ment of electrifying our eet, making them more energy ecient, and being an important contributor in sustainable production of sh for food consumption. Additionally, we have taken measures to reduce food waste generated from our vessels by having a more sustainable approach towards food consumption since food waste contributes to almost ten per cent of global man-made greenhouse gas emissions and is one of the Norwegian Government’s focus areas towards 2030. Sustainable development of the industry is the “license to oper- ate” and a key factor for long-term growth. Frøy are committed to contribute with our share as an important part of the farmers value chain. Out of our key operating areas, we have identied aspects where sustainability has a material impact on how we work. These aspects are identied and sorted under the ESG umbrella-topics of Governance, Environment, and Social responsibility. In this report, we will highlight how we in Frøy work towards adapting and improv- ing our operations to reach these goals. Illustration 1: Sustainability in Frøy Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement 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 202234 SUSTAINABILITY IN FRØY Frøy´s vision is solutions for the ocean space. Our ambition is to be the leading and preferred provider of sustainable aquaculture ser- vices. 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 prerequisites 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 opera- tions, 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 require- ments in all our operations. Flexible– We strive to be agile in everything 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 strate- gies 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 responsibility to reduce our environmental footprint and climate gas emissions, and we continually 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. During the course of 2022 we have taken a big step forward in this aspect. COMMITMENT TO THE UN’S AND NORWAY’S CLIMATE GOALS Frøy is committed towards the UN’s Climate Goals for 2050, aiming to prevent global warming from exceeding 1,5 o C by reducing worlds GHG emissions by 2050 to a net-zero. We are also committed to Norway’s Climate Goal towards 2030, which state that Norway’s GHG emissions aim to be reduced by 55 % by 2030. Our most important contribution towards these goals is our commit- ment of electrifying our eet, making them more energy ecient, and being an important contributor in sustainable production of sh for food consumption. Additionally, we have taken measures to reduce food waste generated from our vessels by having a more sustainable approach towards food consumption since food waste contributes to almost ten per cent of global man-made greenhouse gas emissions and is one of the Norwegian Government’s focus areas towards 2030. Sustainable development of the industry is the “license to oper- ate” and a key factor for long-term growth. Frøy are committed to contribute with our share as an important part of the farmers value chain. Out of our key operating areas, we have identied aspects where sustainability has a material impact on how we work. These aspects are identied and sorted under the ESG umbrella-topics of Governance, Environment, and Social responsibility. In this report, we will highlight how we in Frøy work towards adapting and improv- ing our operations to reach these goals. Illustration 1: Sustainability in Frøy Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement 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 2022 35 SUSTAINABILITY AT A GLANCE WELLBOAT: TONS OF CO 2 FOR EACH TON BIOMASS PROPORTION OF WOMEN: 6.6% OUR EMPLOYEES (940) CONSIST OF 12 DIFFERENT NATIONALITIES FREIGHT VESSELS: TONS CO 2 PER NAUTICAL MILE TOTAL TONS CO 2 EMISSION SERVICE: TONS CO 2 EMISSION FOR EACH Service operation Net cleaned Dive operation 102,691 2.243 Treatment 0.100 0.094 0.113 103,724 1.411 2021 2022 2021 2022 2021 2022 2021 2022 0.522 Transportation 0.134 0.097 0.808 0.353 0.479 0.121 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 ESG KPI's 2021 2022 Tons CO 2 emission per ton biomass treated 0.100 0.094 Tons CO 2 emission per ton biomass transportated 0.134 0.097 Tons CO 2 emission per net cleaned 0.522 0.353 Tons CO 2 emission per service operation 2.243 1.411 Tons CO 2 emission per dive operation 0.808 0.479 Tons CO 2 emission per nautical mile for freight vessels 0.113 0.121 Vessels with SCR [%] 25% 26% Reportable incidents of poor sh welfare 5 5 Incidents of sh escaping 2 4 Biosafety incidents with serious consequence 0 0 HSE KPI’s Lost Time Injury frequency 8.49 9.71 Oil spillage to sea 3 9 Women 62 Men 878 9 OFFICE LOCATIONS spread along the entire Norwegian coast from Haugesund in the south to Storslett in the north. REDUCING CARBON FOOTPRINT FROM THE FLEET EMISSIONS 909 Tons NOX in 2021 895 Tons NOX in 2022 25% 58% 7% ENTIRE FLEET WELLBOATS & SHIPPING LARGE SERVICE VESSELS SMALL SERVICE VESSELS 75% 42% 93% 19% 81% Conventional powered Diesel electric or hybrid powered FRØY ASA | ANNUAL REPORT 202236 SUSTAINABILITY AT A GLANCE WELLBOAT: TONS OF CO 2 FOR EACH TON BIOMASS PROPORTION OF WOMEN: 6.6% OUR EMPLOYEES (940) CONSIST OF 12 DIFFERENT NATIONALITIES FREIGHT VESSELS: TONS CO 2 PER NAUTICAL MILE TOTAL TONS CO 2 EMISSION SERVICE: TONS CO 2 EMISSION FOR EACH Service operation Net cleaned Dive operation 102,691 2.243 Treatment 0.100 0.094 0.113 103,724 1.411 2021 2022 2021 2022 2021 2022 2021 2022 0.522 Transportation 0.134 0.097 0.808 0.353 0.479 0.121 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 ESG KPI's 2021 2022 Tons CO 2 emission per ton biomass treated 0.100 0.094 Tons CO 2 emission per ton biomass transportated 0.134 0.097 Tons CO 2 emission per net cleaned 0.522 0.353 Tons CO 2 emission per service operation 2.243 1.411 Tons CO 2 emission per dive operation 0.808 0.479 Tons CO 2 emission per nautical mile for freight vessels 0.113 0.121 Vessels with SCR [%] 25% 26% Reportable incidents of poor sh welfare 5 5 Incidents of sh escaping 2 4 Biosafety incidents with serious consequence 0 0 HSE KPI’s Lost Time Injury frequency 8.49 9.71 Oil spillage to sea 3 9 Women 62 Men 878 9 OFFICE LOCATIONS spread along the entire Norwegian coast from Haugesund in the south to Storslett in the north. REDUCING CARBON FOOTPRINT FROM THE FLEET EMISSIONS 909 Tons NOX in 2021 895 Tons NOX in 2022 25% 58% 7% ENTIRE FLEET WELLBOATS & SHIPPING LARGE SERVICE VESSELS SMALL SERVICE VESSELS 75% 42% 93% 19% 81% Conventional powered Diesel electric or hybrid powered FRØY ASA | ANNUAL REPORT 2022 37 GHG emissio n 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 ABOUT THE REPORT ABBREVIATIONS The report has been prepared in line with the World Economic Forums reporting framework for Measuring Stakeholder Capital; WEF IBC Common Metrics. The reporting period is from January 1 st , 2022, to December 31 st , 2022. The WEF-framework includes 21 indicators divided into four sus- tainability aspects: governance, people, planet, and prosperity. Each aspect is covered by a separate chapter in the report. The WEF-in- dicators are in line with key indicators from leading reporting stan- dards within sustainability, which as the GRI and SASB standards. ASC Aquaculture Stewardship Council BOD Board of Directors CEO Chief Executive Ocer CFO Chief Financial Ocer DNV Det Norske Veritas DOC Declaration of Compliance (third party subcontractor assessment) or Document of Compliance (certication of compliance to standard) DOF Directorate of Fisheries ESG Environment, Social, Governance EU European Union FHF Norwegian Seafood Research Fund GHG Greenhouse Gases GRI Global Reporting Initiative HSE(Q) Health, safety, environment, quality. IMO International Maritime Organization ISM International Management Code for the Safe Operations of Ships and for Pollution Prevention ISO International Organization for Standardization ISPS International Code for the Security of Ships and of Ports facilities KPI Key Performance Indicator LTI Lost Time Injury MLC Maritime Labour Convention NFSA Norwegian Food Safety Authority NHO Norwegian Trade Organization NMA Norwegian Maritime Authority NTNU Norwegian University of Science and Technology NTS ASA Namsos Trakkselskap ASA NUI Norsk Undervannsintervensjon AS QA Quality Assurance R&D Research and Development ROV Remotely Operated Vehicle SASB Sustainability Accounting Standards Board SCR Selective Catalytic Reduction SNMK Norwegian Maritime Competence Foundation UN United Nations WEF IBC World Economic Forum’s International Business Council GOVERNANCE - SUSTAINABILITY GOVERNANCE A sustainable corporate governance can be manifested in many ways. In Frøy, we manifest it through maintaining an open and active dialogue with our investors, customers, national authorities, and other stakeholders about our strategies and focus areas on sustain- ability. We believe this is a key prerequisite in the long-term growth and value creation of Frøy. SUSTAINABILITY IN MANAGEMENT The CEO is responsible for the sustainability governance and imple- mentation in Frøy. The practical implementation of our sustainability goals is delegated to the executive directors, with the support from the QA-department and other management resources. Promoting and ensuring sustainability at all levels is a considerable investment, and Frøy acknowledge that more dedicated resources will be neces- sary to reach our goals. Frøy management systems is certied to comply with the Manage- ment 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 2022. The company has adopted the «follow or explain principle» with respect to the Code´s applica- tion in the Frøy Code of Practice of Corporate Governance. Please nd Frøys corporate governance policy in the chapter “Cor- porate Governance” in the annual report. MATERIAL ASPECTS AND STAKEHOLDER ENGAGEMENT In 2021 we carried out a materiality analysis with the aim of identify- ing material aspects within the areas of Planet, People, Governance and Prosperity. Some of the aspects are operational, while other are more strategic. Furthermore, some of the aspects were identied as especially important and labeled “leading” to establish Frøy’s key sustainability focus. The aspects identied in the 2021 analysis is equally relevant for 2022 and is thus continued. 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: As an integrated service and solutions provider to the aquaculture industry, Frøy engages with sh farmers, equipment manufacturers and government bodies actively throughout the year. It is important for Frøy to understand our stakeholders’ priorities, and how our busi- ness impact them. Other important stakeholder groups include our employees, shareholders, and the communities in which we operate. Frøy’s leading material aspects, which are at the forefront of our business’ sustainability focus, are sh welfare and biodiversity, tech- nological development, and to be an attractive employer. Illustration 3: Organization Chart Frøy management 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 Table 1: Frøy’s material aspects within the pillars of Planet, People, Governance and Prosperity CEO Operational Managers Operational Managers Executive Director Operational Support Executive Director Service and Freight Executive Director Wellboat Fish Wellfare QA Technical HR/Crew Director of Sales CFO FRØY ASA | ANNUAL REPORT 202238 GHG emissio n 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 ABOUT THE REPORT ABBREVIATIONS The report has been prepared in line with the World Economic Forums reporting framework for Measuring Stakeholder Capital; WEF IBC Common Metrics. The reporting period is from January 1 st , 2022, to December 31 st , 2022. The WEF-framework includes 21 indicators divided into four sus- tainability aspects: governance, people, planet, and prosperity. Each aspect is covered by a separate chapter in the report. The WEF-in- dicators are in line with key indicators from leading reporting stan- dards within sustainability, which as the GRI and SASB standards. ASC Aquaculture Stewardship Council BOD Board of Directors CEO Chief Executive Ocer CFO Chief Financial Ocer DNV Det Norske Veritas DOC Declaration of Compliance (third party subcontractor assessment) or Document of Compliance (certication of compliance to standard) DOF Directorate of Fisheries ESG Environment, Social, Governance EU European Union FHF Norwegian Seafood Research Fund GHG Greenhouse Gases GRI Global Reporting Initiative HSE(Q) Health, safety, environment, quality. IMO International Maritime Organization ISM International Management Code for the Safe Operations of Ships and for Pollution Prevention ISO International Organization for Standardization ISPS International Code for the Security of Ships and of Ports facilities KPI Key Performance Indicator LTI Lost Time Injury MLC Maritime Labour Convention NFSA Norwegian Food Safety Authority NHO Norwegian Trade Organization NMA Norwegian Maritime Authority NTNU Norwegian University of Science and Technology NTS ASA Namsos Trakkselskap ASA NUI Norsk Undervannsintervensjon AS QA Quality Assurance R&D Research and Development ROV Remotely Operated Vehicle SASB Sustainability Accounting Standards Board SCR Selective Catalytic Reduction SNMK Norwegian Maritime Competence Foundation UN United Nations WEF IBC World Economic Forum’s International Business Council GOVERNANCE - SUSTAINABILITY GOVERNANCE A sustainable corporate governance can be manifested in many ways. In Frøy, we manifest it through maintaining an open and active dialogue with our investors, customers, national authorities, and other stakeholders about our strategies and focus areas on sustain- ability. We believe this is a key prerequisite in the long-term growth and value creation of Frøy. SUSTAINABILITY IN MANAGEMENT The CEO is responsible for the sustainability governance and imple- mentation in Frøy. The practical implementation of our sustainability goals is delegated to the executive directors, with the support from the QA-department and other management resources. Promoting and ensuring sustainability at all levels is a considerable investment, and Frøy acknowledge that more dedicated resources will be neces- sary to reach our goals. Frøy management systems is certied to comply with the Manage- ment 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 2022. The company has adopted the «follow or explain principle» with respect to the Code´s applica- tion in the Frøy Code of Practice of Corporate Governance. Please nd Frøys corporate governance policy in the chapter “Cor- porate Governance” in the annual report. MATERIAL ASPECTS AND STAKEHOLDER ENGAGEMENT In 2021 we carried out a materiality analysis with the aim of identify- ing material aspects within the areas of Planet, People, Governance and Prosperity. Some of the aspects are operational, while other are more strategic. Furthermore, some of the aspects were identied as especially important and labeled “leading” to establish Frøy’s key sustainability focus. The aspects identied in the 2021 analysis is equally relevant for 2022 and is thus continued. 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: As an integrated service and solutions provider to the aquaculture industry, Frøy engages with sh farmers, equipment manufacturers and government bodies actively throughout the year. It is important for Frøy to understand our stakeholders’ priorities, and how our busi- ness impact them. Other important stakeholder groups include our employees, shareholders, and the communities in which we operate. Frøy’s leading material aspects, which are at the forefront of our business’ sustainability focus, are sh welfare and biodiversity, tech- nological development, and to be an attractive employer. Illustration 3: Organization Chart Frøy management 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 Table 1: Frøy’s material aspects within the pillars of Planet, People, Governance and Prosperity CEO Operational Managers Operational Managers Executive Director Operational Support Executive Director Service and Freight Executive Director Wellboat Fish Wellfare QA Technical HR/Crew Director of Sales CFO FRØY ASA | ANNUAL REPORT 2022 39 Fish welfare and biodiversity Fish welfare and biodiversity are fundamentally important aspects for all stakeholders in the aquaculture value chain. Reducing the risk of escapes and maintaining good sh welfare is vital in all of Frøy´s services. Frøy regards taking good care of the sh and the surrounding environment as prerequisites to our operations, and key growth drivers for our business. Technological development A determined focus on innovation, development of equipment, digita- lization, and making use of data is key to improve sustainability in the aqua service industry. Reducing our carbon footprint requires invest- ments in new vessels with lower carbon emissions, eventually zero car- bon vessels. Delivering new solutions that reduce the risk of escapes and improve sh welfare, require sharing of best practice across the organization, between Frøy and our customers and suppliers. Attractive employer Frøy´s most important stakeholders are our employees. The competence and experience of our employees are fundamental to deliver continuous quality services, and to maintain the position as the leading and preferred provider of aquaculture services. Sustainability Risk Management To achieve our commitment to be a sustainable service provider and meet our stakeholders’ expectations we must manage the sustainability risk. A sustainability risk can be environmental, social, or governance events or conditions that could cause actual or potential material negative impact on the value of the investment 1 . These investment-impacting risks are implemented by the EU through the new taxonomy, as a tool to discourage investment in non-sustainable activity. As a stock exchange listed company, Frøy is subject to such risks. We are also a company in a sector dened by high competition and rapid changes in technology, expertise, and legislation. The technological developments may lead the industry to be a completely dierent market in the 25-30 years our vessels are built to last. We in Frøy believe that our willingness to adapt and invest in new technology along with our customers’ increased demands for more sustainable and greener solutions, are important measures to manage these risks. SUSTAINABILITY STRATEGY Frøy sustainability strategy is an integrated part of the company’s overall business strategy. For 2022, each operational area had the following KPIs: Our ESG KPIs: Key Performance Indicator Goals Measures Reduction in CO 2 emissions Wellboats Reduction of CO 2 emissions per ton transported or treated sh Electrication Collection of data of fuel consumption from vessels Benchmarking of fuel eciency throughout eet Net cleaning vessels Reduction of CO 2 emissions per net cleaned Diving vessels Reduction of CO 2 emissions per diving job executed Service vessels Reduction of CO 2 emissions per service job executed Freight vessels Reduction of CO 2 emissions per nm sailed Reduction in NO X emissions Increase percentage of eet with SCR-system Installation of SCR-system Electrication of eet Increase percentage of eet with electric power utilization All newbuilds to be diesel electric or hybrid powered Serious incidents of poor sh welfare 0 Training Use of Viability Assessment prior to transport or treatment Incidents of sh escape 0 Training Installation of escape preventive barriers on vessels that carry or handle sh Internal control of net inspections Biosafety incidents with serious consequence 0 Training of crew Internal control of iosafety routines Our HSE KPIs: Key Performance Indicator Goal Measures Lost Time Injury frequency Improvement from 2021 Risk Management Training Experience transfers of important lessons from non-conformities and near misses HSE campaigns Internal control of HSE routines Days since last incident with absence The number to increase from day to day Severe incidents or near miss incidents with potential 0 Oil spillage to sea 0 The key gures will be systematically followed up in regular meet- ings throughout the organization and measures will be taken when necessary to adjust the course to achieve our goals. SUSTAINABILITY GOVERNANCE POLICIES Code of Conduct For Frøy to be recognized as company with high ethical standard, we depend on sound and responsible actions from all our employ- ees. Hence, we have established a Code of Conduct that we expect everyone associated with Frøy to follow. Frøy Code of Conduct are based on the requirements set out in SA8000:2014 and describe how Frøy as an employer and our employees should conduct in business. 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 condenti- ality and information processing. The guidelines are available to all employees through our management systems. Frøy has established channels for internal whistleblowing that allow employees to remain anonymous when reporting concerns. The cases can be handled by an independent third party if they cannot be resolved at the lowest possible level. How dierent cases are followed up will depend on the type of case, scope and severity. Various matters will be followed up with relevant resources such as designated person, immediate manager, area manager, operations director for the segment, CEO or in special cases by the board. Whistleblowing cases are reported to group management and the board of directors. In, 2022 zero complaints were led through our whistleblower channels. Anti-corruption policy Frøy opposes all forms of corruption, and we work actively to ensure that corruption does not occur in our business activities. All personnel are prohibited from planning, performing, or facilitating any corrupt activity, in the public or private sector. This also includes cases where Frøy or its personnel do not benet directly. In line with the listing of the company’s shares on Oslo Stock Exchange in March 2021, there were prepared guidelines for anti-corruption, “Frøy Group: Policy for anti-corruption 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 temporary employees of Frøy, members of Frøy’s Board of Directors, as well as hired per- sonnel, 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 implementation 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 2022. 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 internally, as well as a good reputation amongst our stakeholders. We have established several policies and guidelines for ethical conduct, which we continuously adapt and take active steps to ensure our operations complies with national and international regulations and standards. These policies and guidelines describe how to convey strategies and measures decided by the BoD and management team to all employees. Our guidelines and policies are published on our website: Climate change Environmental impact and biodiversity Fish welfare and biosecurity Food safety Food waste Freshwater management HSE-policy Human rights policy Marketing policy Mental health Non-discrimination policy Plastics policy Political involvement Procurement policy Substance abuse and gambling Whistleblowing 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 NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL FRØY ASA | ANNUAL REPORT 202240 Fish welfare and biodiversity Fish welfare and biodiversity are fundamentally important aspects for all stakeholders in the aquaculture value chain. Reducing the risk of escapes and maintaining good sh welfare is vital in all of Frøy´s services. Frøy regards taking good care of the sh and the surrounding environment as prerequisites to our operations, and key growth drivers for our business. Technological development A determined focus on innovation, development of equipment, digita- lization, and making use of data is key to improve sustainability in the aqua service industry. Reducing our carbon footprint requires invest- ments in new vessels with lower carbon emissions, eventually zero car- bon vessels. Delivering new solutions that reduce the risk of escapes and improve sh welfare, require sharing of best practice across the organization, between Frøy and our customers and suppliers. Attractive employer Frøy´s most important stakeholders are our employees. The competence and experience of our employees are fundamental to deliver continuous quality services, and to maintain the position as the leading and preferred provider of aquaculture services. Sustainability Risk Management To achieve our commitment to be a sustainable service provider and meet our stakeholders’ expectations we must manage the sustainability risk. A sustainability risk can be environmental, social, or governance events or conditions that could cause actual or potential material negative impact on the value of the investment 1 . These investment-impacting risks are implemented by the EU through the new taxonomy, as a tool to discourage investment in non-sustainable activity. As a stock exchange listed company, Frøy is subject to such risks. We are also a company in a sector dened by high competition and rapid changes in technology, expertise, and legislation. The technological developments may lead the industry to be a completely dierent market in the 25-30 years our vessels are built to last. We in Frøy believe that our willingness to adapt and invest in new technology along with our customers’ increased demands for more sustainable and greener solutions, are important measures to manage these risks. SUSTAINABILITY STRATEGY Frøy sustainability strategy is an integrated part of the company’s overall business strategy. For 2022, each operational area had the following KPIs: Our ESG KPIs: Key Performance Indicator Goals Measures Reduction in CO 2 emissions Wellboats Reduction of CO 2 emissions per ton transported or treated sh Electrication Collection of data of fuel consumption from vessels Benchmarking of fuel eciency throughout eet Net cleaning vessels Reduction of CO 2 emissions per net cleaned Diving vessels Reduction of CO 2 emissions per diving job executed Service vessels Reduction of CO 2 emissions per service job executed Freight vessels Reduction of CO 2 emissions per nm sailed Reduction in NO X emissions Increase percentage of eet with SCR-system Installation of SCR-system Electrication of eet Increase percentage of eet with electric power utilization All newbuilds to be diesel electric or hybrid powered Serious incidents of poor sh welfare 0 Training Use of Viability Assessment prior to transport or treatment Incidents of sh escape 0 Training Installation of escape preventive barriers on vessels that carry or handle sh Internal control of net inspections Biosafety incidents with serious consequence 0 Training of crew Internal control of iosafety routines Our HSE KPIs: Key Performance Indicator Goal Measures Lost Time Injury frequency Improvement from 2021 Risk Management Training Experience transfers of important lessons from non-conformities and near misses HSE campaigns Internal control of HSE routines Days since last incident with absence The number to increase from day to day Severe incidents or near miss incidents with potential 0 Oil spillage to sea 0 The key gures will be systematically followed up in regular meet- ings throughout the organization and measures will be taken when necessary to adjust the course to achieve our goals. SUSTAINABILITY GOVERNANCE POLICIES Code of Conduct For Frøy to be recognized as company with high ethical standard, we depend on sound and responsible actions from all our employ- ees. Hence, we have established a Code of Conduct that we expect everyone associated with Frøy to follow. Frøy Code of Conduct are based on the requirements set out in SA8000:2014 and describe how Frøy as an employer and our employees should conduct in business. 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 condenti- ality and information processing. The guidelines are available to all employees through our management systems. Frøy has established channels for internal whistleblowing that allow employees to remain anonymous when reporting concerns. The cases can be handled by an independent third party if they cannot be resolved at the lowest possible level. How dierent cases are followed up will depend on the type of case, scope and severity. Various matters will be followed up with relevant resources such as designated person, immediate manager, area manager, operations director for the segment, CEO or in special cases by the board. Whistleblowing cases are reported to group management and the board of directors. In, 2022 zero complaints were led through our whistleblower channels. Anti-corruption policy Frøy opposes all forms of corruption, and we work actively to ensure that corruption does not occur in our business activities. All personnel are prohibited from planning, performing, or facilitating any corrupt activity, in the public or private sector. This also includes cases where Frøy or its personnel do not benet directly. In line with the listing of the company’s shares on Oslo Stock Exchange in March 2021, there were prepared guidelines for anti-corruption, “Frøy Group: Policy for anti-corruption 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 temporary employees of Frøy, members of Frøy’s Board of Directors, as well as hired per- sonnel, 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 implementation 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 2022. 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 internally, as well as a good reputation amongst our stakeholders. We have established several policies and guidelines for ethical conduct, which we continuously adapt and take active steps to ensure our operations complies with national and international regulations and standards. These policies and guidelines describe how to convey strategies and measures decided by the BoD and management team to all employees. Our guidelines and policies are published on our website: Climate change Environmental impact and biodiversity Fish welfare and biosecurity Food safety Food waste Freshwater management HSE-policy Human rights policy Marketing policy Mental health Non-discrimination policy Plastics policy Political involvement Procurement policy Substance abuse and gambling Whistleblowing 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 NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL FRØY ASA | ANNUAL REPORT 2022 41 TRANSPARENCY IN REPORTING AND COMMUNICATION Transparency in reporting and communication are identied as important aspects 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. Especially important is our shareholders, to whom we seek to provide comprehensive and fully updated informa- tion. The sustainability report is an important step for making non-nancial disclosures more accessible and transparent, and in 2022 we proceeded with several measures to rig the company for data collection and data management throughout our value chain. We have invested in a data platform for data collection and structuring of data for analysis and reporting purposes, and we have run a thorough process for assess and choose the correct system supplier for data collection from our eet. This process continues into 2023 and the implementation of the system will start during Q2 2023. Since this work is not completed by the end of this reporting period, we will still have uncomplete data in all areas, including historical data. The data platform has given us a higher detail level than what was possible for our rst ESG-report in 2021 and explains why some numbers dier from last year. Frøy look for- ward to increasing the level of detail and accuracy going forward. 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 sustainable, considering both the social and environmental impact, we are gradually increasing our supply chain manage- ment. The wellboat and freight vessel departments have partly implemented purchase order systems that impose requirements to our subcontractors related to social responsibility, and we plan to implement an equivalent purchase order system for the service vessel segment with similar requirements. Both nationally and internationally, new regulations and require- ments for transparency of the supply chain are developed and established, which will aect how we work with risk management and due diligence going forward. Frøy has a large number of sub- contractors. We have established a data platform to gather facts about them and what they deliver. Based on this, we selected more than 30 subcontractors, asking them to reply to a survey related to the Transparency Act. The survey covered topics such as sustainability and climate, health and security, fundamental human rights, decent working conditions and anti-corruption. The survey focused on behavior, i.e., what they actually do, rather than awareness and intentions. Our subcontractors have already shown their commitment with a 100% response rate on the sur- vey, which is very positive. The survey will be distributed annually. When it comes to the results from the survey, there are areas of improvement. As an example, we found that 2 out of 3 of our subcontractors didn´t know whether their subcontractors were working actively with ESG reporting and ESG measures. This is something Frøy will actively follow up with our subcontractors. Late 2022 we nalized the process of recruiting a Purchasing Manager which will have supply chain management as one of the main responsibilities focusing on transparency when entering new supplier agreements. THE WAY FORWARD – PLANS FOR 2023 The most important step forward in 2023 is the further develop- ment of Frøy’s data platform and the implementation of data collec- tion directly from the vessels. The data platform will provide import- ant management tools in the form of reports and dashboards that can be used throughout the organization to measure how we are doing in relation to the KPIs that have been established, from the individual vessel all the way up to the top management. This will take us closer to our strategic goal to be more data driven and give us the opportunity to utilize this data for optimization, market devel- opment, innovation or other strategic or operational measures. This is also important in the context of sustainability and implementing transparency as a key principle in our corporate governance policy, as this work is entirely dependent on a high-quality data base. We will also establish a digital channel for both internal and external anonymous whistleblowing. ENVIRONMENT - PLANET As part of the aquaculture industry, Frøy faces similar challenges as sh farming companies regarding the climate and environ- mental footprint. Our operations are carried out at sea, and our vessels emit greenhouse gases in connection with the transport, processing, and execution of various service assignments for our customers. It is important for us that our services contribute to a sustainable industry. Based on the relatively low CO 2 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 remains that food production overall is estimated to account for almost 40 % of the world’s green- house gas emissions 2 . Frøy is therefore committed to contributing to reduce greenhouse gas emissions associated with sh farming through investing in new vessels and equipment that contribute to lower carbon footprint. Fish welfare is the key driver for all development and industry growth. Research shows that during their life cycle, farmed sh are exposed to the most stress and negative inuence during transport, delousing and other treatments, as well as the various activities in the farming cages. As an integrated service provider, Frøy wants to actively contribute to continuously improve upon the sh welfare during these activities. Through delivering net inspection and cleaning services, Frøy contributes to reduce the risk of escapes, and thereby ensuring and safeguarding the ocean’s biodiversity. Frøy’s inspection services and documentation are key in maintaining 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 popu- lations through genetic crossing, and measures to prevent escapes have a high focus in Frøy and in the industry. Frøy is aware of the importance to minimize any other environmen- tal impact on marine life from our activities. FISH WELFARE AND BIODIVERSITY Despite a high awareness to ensure that our operations are exe- cuted in a manner that ensures good sh welfare and no escapes, incidents may still happen. In 2022, we experienced the following incidents with respect to poor sh welfare and escapes. Category 2020 2021 2022 Incidents of poor sh welfare with serious consequense 3 - 5 5 Incidents of sh escaping or near miss - 2 4 Biosafety incidents with serious consequense 4 - 0 0 When increased mortality with undetermined cause occurs, or conditions that have led to serious welfare consequences for the farmed sh, the sh farmer is required to notify the NFSA immedi- ately. If the elevated mortality rate or welfare consequences may be due to conditions on board one of our wellboats or delousing vessels, the NFSA will request documentation from Frøy to clarify cause of causalities. In 2022, documentation was requested from us in connection with 5 cases of elevated mortality subsequent of transports or delousing missions carried out by Frøy. None of the incidents have resulted in any formal sanctions being made against the company or any of its underlying companies from the NFSA. There have been three cases where sh have escaped from our ves- sels in 2022. One of the incidents resulted in the escape of a minor number of farmed salmons, but the other two incidents resulted in a major number of farmed salmon escaping. Both incidents referred to in the former paragraph were notied to the DoF, and they have completed their proceedings and concluded that Frøy implemented adequate measures to prevent and avoid future similar incidents and found no basis for deciding on injunc- tion and considers the case closed. Frøy, however, consider escape of sh as serious incidents, which should not under any circum- stances occur in connection with our operations. We have therefore taken measures, both organizational and operational, by training and emergency preparedness measures, in order to prevent further escapes. One of the measures taken is that we have developed our own internal e-learnings courses in escape prevention. There have also been one near miss incidents where sh could have escaped in connection with our services under a minor change in circumstances. In addition, we had one incident from 2021 concerning inadequate inspection of nets and a lack of documentation by one of Frøy’s ser- vice vessels which were investigatet by the DoF to be the cause of a major escape incident from a sh farm. The directorate completed their investigation of the case in 2022 and gave Frøy a notice of decision of imposing a violation fee in the matter. The fee is still to be imposed. Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Sustainability in management Tran sparency in rep orting and comm unication 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 202242 TRANSPARENCY IN REPORTING AND COMMUNICATION Transparency in reporting and communication are identied as important aspects 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. Especially important is our shareholders, to whom we seek to provide comprehensive and fully updated informa- tion. The sustainability report is an important step for making non-nancial disclosures more accessible and transparent, and in 2022 we proceeded with several measures to rig the company for data collection and data management throughout our value chain. We have invested in a data platform for data collection and structuring of data for analysis and reporting purposes, and we have run a thorough process for assess and choose the correct system supplier for data collection from our eet. This process continues into 2023 and the implementation of the system will start during Q2 2023. Since this work is not completed by the end of this reporting period, we will still have uncomplete data in all areas, including historical data. The data platform has given us a higher detail level than what was possible for our rst ESG-report in 2021 and explains why some numbers dier from last year. Frøy look for- ward to increasing the level of detail and accuracy going forward. 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 sustainable, considering both the social and environmental impact, we are gradually increasing our supply chain manage- ment. The wellboat and freight vessel departments have partly implemented purchase order systems that impose requirements to our subcontractors related to social responsibility, and we plan to implement an equivalent purchase order system for the service vessel segment with similar requirements. Both nationally and internationally, new regulations and require- ments for transparency of the supply chain are developed and established, which will aect how we work with risk management and due diligence going forward. Frøy has a large number of sub- contractors. We have established a data platform to gather facts about them and what they deliver. Based on this, we selected more than 30 subcontractors, asking them to reply to a survey related to the Transparency Act. The survey covered topics such as sustainability and climate, health and security, fundamental human rights, decent working conditions and anti-corruption. The survey focused on behavior, i.e., what they actually do, rather than awareness and intentions. Our subcontractors have already shown their commitment with a 100% response rate on the sur- vey, which is very positive. The survey will be distributed annually. When it comes to the results from the survey, there are areas of improvement. As an example, we found that 2 out of 3 of our subcontractors didn´t know whether their subcontractors were working actively with ESG reporting and ESG measures. This is something Frøy will actively follow up with our subcontractors. Late 2022 we nalized the process of recruiting a Purchasing Manager which will have supply chain management as one of the main responsibilities focusing on transparency when entering new supplier agreements. THE WAY FORWARD – PLANS FOR 2023 The most important step forward in 2023 is the further develop- ment of Frøy’s data platform and the implementation of data collec- tion directly from the vessels. The data platform will provide import- ant management tools in the form of reports and dashboards that can be used throughout the organization to measure how we are doing in relation to the KPIs that have been established, from the individual vessel all the way up to the top management. This will take us closer to our strategic goal to be more data driven and give us the opportunity to utilize this data for optimization, market devel- opment, innovation or other strategic or operational measures. This is also important in the context of sustainability and implementing transparency as a key principle in our corporate governance policy, as this work is entirely dependent on a high-quality data base. We will also establish a digital channel for both internal and external anonymous whistleblowing. ENVIRONMENT - PLANET As part of the aquaculture industry, Frøy faces similar challenges as sh farming companies regarding the climate and environ- mental footprint. Our operations are carried out at sea, and our vessels emit greenhouse gases in connection with the transport, processing, and execution of various service assignments for our customers. It is important for us that our services contribute to a sustainable industry. Based on the relatively low CO 2 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 remains that food production overall is estimated to account for almost 40 % of the world’s green- house gas emissions 2 . Frøy is therefore committed to contributing to reduce greenhouse gas emissions associated with sh farming through investing in new vessels and equipment that contribute to lower carbon footprint. Fish welfare is the key driver for all development and industry growth. Research shows that during their life cycle, farmed sh are exposed to the most stress and negative inuence during transport, delousing and other treatments, as well as the various activities in the farming cages. As an integrated service provider, Frøy wants to actively contribute to continuously improve upon the sh welfare during these activities. Through delivering net inspection and cleaning services, Frøy contributes to reduce the risk of escapes, and thereby ensuring and safeguarding the ocean’s biodiversity. Frøy’s inspection services and documentation are key in maintaining 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 popu- lations through genetic crossing, and measures to prevent escapes have a high focus in Frøy and in the industry. Frøy is aware of the importance to minimize any other environmen- tal impact on marine life from our activities. FISH WELFARE AND BIODIVERSITY Despite a high awareness to ensure that our operations are exe- cuted in a manner that ensures good sh welfare and no escapes, incidents may still happen. In 2022, we experienced the following incidents with respect to poor sh welfare and escapes. Category 2020 2021 2022 Incidents of poor sh welfare with serious consequense 3 - 5 5 Incidents of sh escaping or near miss - 2 4 Biosafety incidents with serious consequense 4 - 0 0 When increased mortality with undetermined cause occurs, or conditions that have led to serious welfare consequences for the farmed sh, the sh farmer is required to notify the NFSA immedi- ately. If the elevated mortality rate or welfare consequences may be due to conditions on board one of our wellboats or delousing vessels, the NFSA will request documentation from Frøy to clarify cause of causalities. In 2022, documentation was requested from us in connection with 5 cases of elevated mortality subsequent of transports or delousing missions carried out by Frøy. None of the incidents have resulted in any formal sanctions being made against the company or any of its underlying companies from the NFSA. There have been three cases where sh have escaped from our ves- sels in 2022. One of the incidents resulted in the escape of a minor number of farmed salmons, but the other two incidents resulted in a major number of farmed salmon escaping. Both incidents referred to in the former paragraph were notied to the DoF, and they have completed their proceedings and concluded that Frøy implemented adequate measures to prevent and avoid future similar incidents and found no basis for deciding on injunc- tion and considers the case closed. Frøy, however, consider escape of sh as serious incidents, which should not under any circum- stances occur in connection with our operations. We have therefore taken measures, both organizational and operational, by training and emergency preparedness measures, in order to prevent further escapes. One of the measures taken is that we have developed our own internal e-learnings courses in escape prevention. There have also been one near miss incidents where sh could have escaped in connection with our services under a minor change in circumstances. In addition, we had one incident from 2021 concerning inadequate inspection of nets and a lack of documentation by one of Frøy’s ser- vice vessels which were investigatet by the DoF to be the cause of a major escape incident from a sh farm. The directorate completed their investigation of the case in 2022 and gave Frøy a notice of decision of imposing a violation fee in the matter. The fee is still to be imposed. Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Sustainability in management Tran sparency in rep orting and comm unication 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 2022 43 Escape of sh Through escape-prevention measures during operations when working at our customers’ sh farms, Frøy contributes to ensuring biodiversity in the ocean. 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 represented in the Norwegian authorities’ escape forum, established in 2019 by the then Norwegian Minister of Trade, Industry and Fisheries, “Forum for Escape Safety in the Aquaculture Industry”. The forum consists of representatives from relevant trade associations aliated with the aquaculture industry. The forum has received clear orders from the Ministry: 1 Be a forum for discussing strategy and priorities in the escape safety work 2 Discuss and follow up on current escape questions 3 Facilitate good cooperation between the business organizations and the authorities. 4 Be an information arena for new projects that are, or are planned to be initiated by the industry or the authorities 5 Identify key issues jointly, based on experiences and trends, and nd solutions to these 6 Actively contribute to disseminating knowledge and experiences across the industry Frøy also provided input in connection with the revision of the stan- dard for oating aquaculture facilities NS 9415:2009 and has impro- vised changes after the revised standard NS 9415:2021 came into force in the autumn of 2021. Together with the NYTEK Regulations, NS 9415:2021 regulates the construction, installation, operation, and maintenance of oating aquaculture facilities to prevent the escape of farmed sh. As an important measure to increase the awareness and com- petence regarding the risk for and the measures to prevent the escape of sh in connection with our operations, Frøy started in the fall of 2022 the job of developing internal e-learning courses on this subject. The courses will be deployed among our crew members during the rst quarter of 2023. Wellboat and delousing vessels According to the FHF-funded SINTEF project “Knowledge and meth- ods for preventing escapes”, the escape of sh from wellboats or delousing vessels is mainly caused by: Propeller in net when 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 FISH WELFARE Frøy has a dedicated Fish Welfare Manager with veterinary background, who support our crews with analytics and sh health competence. Our Fish Welfare Manager works across the organization to share best practices and to ensure experience sharing and training throughout the organization. Eective sharing of best practice and veterinary sup- port 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 theo- retical and practical training in sh welfare, through attending “Fish welfare courses” according to NFSA requirements. The training will ensure that our crew understands which factors are important in their line of work to execute the activities ensure a good sh wel- fare. This training is to be repeated every ve years. Wellboats and delousing vessels Frøy provides services covering several delousing methods, both medicinal and non-medicinal, and dierent combination methods. Delivering solutions that ensure that the delousing is carried out eciently and with good sh welfare is key for the client, and busi- ness critical for Frøy. Fish welfare competence and ecient tools (equipment and vessels) are prerequisites to operate eciently and sustainably. More information about the delousing methods Frøy provides can be found on our website. Frøy works closely with equipment suppliers to develop new equip- ment 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 the summer of 2022, Frøy hired a trainee in sh welfare and water chemistry to assists the Head of Fish Welfare with this work. In 2021 Frøy took delivery of the worlds largest wellboat Gåsø Høvding, which is equipped with a range of new equipment and technology that contribute to improved sh welfare. As an example, the vessel is equipped with a freshwater production unit on board which enables the reuse of freshwater up to 10 times. Reusing the water multiple times without comprismising on sh welfare requires the right equip- ment 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 freshwater 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 con- tributes to quicker delousing which reduce the risk of cross contimina- tion across the farming pens. Throughout 2022, we have gained many valuable and useful experiences in utilizing the opportunities a vessel like Gåsø Høvding provides in terms of improved sh welfare. 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, and handled according to national regulations. 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 washing vessels ush the nets clean of algae-growth, as a clean net is crucial to ensure optimal ow of water through the pens. Net cleaning is carried out in a gentle manner by using double systems 5 extensively to reduce the time the net cleaner stays in nets and lessen the time spent disturbing the sh. Where possible, we equip our net washing vessels with battery-driven aggregates to reduce noise in and around 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 Fish welfare Manager is available for consultation by the vessels in case of doubt regarding applicable regulations for biose- curity, or if there is need of sh health personnel to conrm that the cleaning carried out on board is in accordance with the require- ments. The in-house veterinarian regulates the vessels’ cleaning plans. These plans describe how cleaning and disinfection routines of vessel and equipment shall be carried out in order to comply with the regulations. Our veterinarian also provides the necessary train- ing to the crew in how to preform cleaning and disinfection when in demand. Through these measures Frøy reduce the risk of spreading infectious sh diseases. Frøy operate both under the NFSA regula- tions and the customers’ internal biosecurity regulations. All vessels in Frøy use disinfectants approved by the NFSA as pri- mary 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 NFSA have documented sucient ecacy to kill bacteria 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-disinfection, a primary disinfectant is used in combination with a secondary disin- fectant. In those cases, it is not a requirement that the secondary disinfectant should be on the NFSA’s list of approved disinfectants since the primary disinfectant are approved. FRØY ASA | ANNUAL REPORT 202244 Escape of sh Through escape-prevention measures during operations when working at our customers’ sh farms, Frøy contributes to ensuring biodiversity in the ocean. 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 represented in the Norwegian authorities’ escape forum, established in 2019 by the then Norwegian Minister of Trade, Industry and Fisheries, “Forum for Escape Safety in the Aquaculture Industry”. The forum consists of representatives from relevant trade associations aliated with the aquaculture industry. The forum has received clear orders from the Ministry: 1 Be a forum for discussing strategy and priorities in the escape safety work 2 Discuss and follow up on current escape questions 3 Facilitate good cooperation between the business organizations and the authorities. 4 Be an information arena for new projects that are, or are planned to be initiated by the industry or the authorities 5 Identify key issues jointly, based on experiences and trends, and nd solutions to these 6 Actively contribute to disseminating knowledge and experiences across the industry Frøy also provided input in connection with the revision of the stan- dard for oating aquaculture facilities NS 9415:2009 and has impro- vised changes after the revised standard NS 9415:2021 came into force in the autumn of 2021. Together with the NYTEK Regulations, NS 9415:2021 regulates the construction, installation, operation, and maintenance of oating aquaculture facilities to prevent the escape of farmed sh. As an important measure to increase the awareness and com- petence regarding the risk for and the measures to prevent the escape of sh in connection with our operations, Frøy started in the fall of 2022 the job of developing internal e-learning courses on this subject. The courses will be deployed among our crew members during the rst quarter of 2023. Wellboat and delousing vessels According to the FHF-funded SINTEF project “Knowledge and meth- ods for preventing escapes”, the escape of sh from wellboats or delousing vessels is mainly caused by: Propeller in net when 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 FISH WELFARE Frøy has a dedicated Fish Welfare Manager with veterinary background, who support our crews with analytics and sh health competence. Our Fish Welfare Manager works across the organization to share best practices and to ensure experience sharing and training throughout the organization. Eective sharing of best practice and veterinary sup- port 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 theo- retical and practical training in sh welfare, through attending “Fish welfare courses” according to NFSA requirements. The training will ensure that our crew understands which factors are important in their line of work to execute the activities ensure a good sh wel- fare. This training is to be repeated every ve years. Wellboats and delousing vessels Frøy provides services covering several delousing methods, both medicinal and non-medicinal, and dierent combination methods. Delivering solutions that ensure that the delousing is carried out eciently and with good sh welfare is key for the client, and busi- ness critical for Frøy. Fish welfare competence and ecient tools (equipment and vessels) are prerequisites to operate eciently and sustainably. More information about the delousing methods Frøy provides can be found on our website. Frøy works closely with equipment suppliers to develop new equip- ment 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 the summer of 2022, Frøy hired a trainee in sh welfare and water chemistry to assists the Head of Fish Welfare with this work. In 2021 Frøy took delivery of the worlds largest wellboat Gåsø Høvding, which is equipped with a range of new equipment and technology that contribute to improved sh welfare. As an example, the vessel is equipped with a freshwater production unit on board which enables the reuse of freshwater up to 10 times. Reusing the water multiple times without comprismising on sh welfare requires the right equip- ment 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 freshwater 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 con- tributes to quicker delousing which reduce the risk of cross contimina- tion across the farming pens. Throughout 2022, we have gained many valuable and useful experiences in utilizing the opportunities a vessel like Gåsø Høvding provides in terms of improved sh welfare. 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, and handled according to national regulations. 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 washing vessels ush the nets clean of algae-growth, as a clean net is crucial to ensure optimal ow of water through the pens. Net cleaning is carried out in a gentle manner by using double systems 5 extensively to reduce the time the net cleaner stays in nets and lessen the time spent disturbing the sh. Where possible, we equip our net washing vessels with battery-driven aggregates to reduce noise in and around 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 Fish welfare Manager is available for consultation by the vessels in case of doubt regarding applicable regulations for biose- curity, or if there is need of sh health personnel to conrm that the cleaning carried out on board is in accordance with the require- ments. The in-house veterinarian regulates the vessels’ cleaning plans. These plans describe how cleaning and disinfection routines of vessel and equipment shall be carried out in order to comply with the regulations. Our veterinarian also provides the necessary train- ing to the crew in how to preform cleaning and disinfection when in demand. Through these measures Frøy reduce the risk of spreading infectious sh diseases. Frøy operate both under the NFSA regula- tions and the customers’ internal biosecurity regulations. All vessels in Frøy use disinfectants approved by the NFSA as pri- mary 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 NFSA have documented sucient ecacy to kill bacteria 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-disinfection, a primary disinfectant is used in combination with a secondary disin- fectant. In those cases, it is not a requirement that the secondary disinfectant should be on the NFSA’s list of approved disinfectants since the primary disinfectant are approved. FRØY ASA | ANNUAL REPORT 2022 45 Thorough risk analyses, risk-reducing measures and barriers have been identied to prevent escapes caused by or from any of our vessels. Examples include: Instrumental barriers in the control system of the sh han- dling systems Net at the end of all sh handling pipes and hoses when not in use Use of nets or grating in front of scuppers 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 Frøy is a service provider with prociency in inspecting nets, cages, and mooring systems to uncover possible holes or defects of the components. Inspections are carried out either by divers, by ROV, or by net cleaning robot (when inspection are carried out as an inte- grated part of the net cleaning). 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 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 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 corrected by divers with exper- tise in net repair in accordance with the net user manual. Frøy also oers installation of mooring equipment for oating 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 certication company Aquastruc- tures AS as an organization that performs the following services in accordance with requirements of the NYTEK Regulations and NS 9415:2009: Installation of mooring for oating aquaculture 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 produc- tion, 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 requirements, and cleaning of vessels is carried out at a reassuring distance from aquaculture sites where there are sh. Frøy started in 2021 transitioning 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 stock, and the end product would not be approved for human consumption. This is an extensive process and will be carried out successively by scheduled replacement of hydraulic oil in accordance with the vessel’s maintenance programs. During the course of 2022 there were no progress in the replacement plan, but the percentage of vessels with food-approved hydraulic oils have increased through eet renewal. Our routines are intended to ensure that there will be no emissions of diesel fuel or oil when operating in and around aquaculture sites. Frøy is a veried supplier according to the Global G.A.P. Aquaculture standard and holds a Declaration of Compliance issued by DNV. This means that our entire business is audited annually by an inde- pendent third party to ensure that we comply with the elements of the standard relevant to our business. Annual revisions ensure our Global G.A.P certied customers that use of our services will be in compliance 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 6 Workers’ occupational health & safety GLOBAL G.A.P. Risk Assessment on Social Practice (GRASP) Animal welfare Environmental and ecological care 7 Frøy is also regularly audited by a selection of customers according to relevant elements within the ASC standard. The standard 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 conscientious neighbor; that means operating their farm in a socially responsible manner, car- ing for their employees and working with the local community. In connection with the 2023 annual audit of an independent third party the Global G.A.P. scope will be expanded to include relevant ASC checkpoints so that the DoC will include supplier verication according to the ASC standard as well. This will make customer audits unnecessary. 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 process, we have started mapping out climate emissions inspired by the GHG Accounting Protocol. The climate account presents a general overview of the company’s greenhouse gas emissions in the form of the greenhouse gas CO 2 in relation to Scope 1 and 2 (i.e., the parts of the business where Frøy has operational control) and in relation to Scope 3 (i.e., the parts of the business where Frøy hasn’t operational control). GHG EMISSIONS TOTAL CO 2 EMISSIONS 2020 2021 2022 Scope 1 8 CO 2 emissions [tonnes] - 102,339 102,782 Scope 2 9 Electrical power consume [kWh] - 1,330,285 1,219,714 CO 2 e [tonnes] - 14.63 10 46.35 11 Scope 3 12 CO 2 emissions [tonnes] - 337.5 895.2 Total (Scope 1 + scope 2 + scope 3) CO 2 + CO 2 e [tonnes] - 102,691 103,724 RELATIVE CO2 EMISSIONS 13 2020 2021 2022 Wellboats CO 2 emissions per ton transported sh [tonnes] - 0.134 0.097 CO 2 emissions per ton treated sh [tonnes] - 0.100 0.094 Net cleaning vessels CO 2 emissions per net cleaned [tonnes] - 0.533 0.353 Diving vessels CO 2 emissions per diving job executed [tonnes] - 0.808 0.479 Service vessels CO 2 emissions per service job executed [tonnes] - 2.243 1.411 Freight vessels CO 2 emissions per nm sailed [tonnes] - 0.113 0.121 14 ELECTRIFICATION OF VEHICLES 2020 2021 2022 Vessels - Wellboat and Shipping Vessels with diesel power [%] - 79 % 75 % Vessels with diesel-electrical power [%] - 16 % 20 % Vessels with hybrid power [%] - 5 % 5 % Vessels - Larger service-vessels Vessels with diesel power [%] - 55 % 42 % Vessels with diesel-electrical power [%] - 27 % 15 33 % Vessels with hybrid power [%] - 18 % 25 % Vessels - Smaller service-vessels Vessels with diesel power [%] - 97 % 93 % Vessels with diesel-electrical power [%] - 0 % 2 % Vessels with hybrid power [%] - 3 % 5 % Company cars Company cars with diesel power [%] - 100% 97 % Company cars with hybrid power [%] - 0% 0 % Company cars with electrical power [%] - 0% 3 % FRØY ASA | ANNUAL REPORT 202246 Thorough risk analyses, risk-reducing measures and barriers have been identied to prevent escapes caused by or from any of our vessels. Examples include: Instrumental barriers in the control system of the sh han- dling systems Net at the end of all sh handling pipes and hoses when not in use Use of nets or grating in front of scuppers 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 Frøy is a service provider with prociency in inspecting nets, cages, and mooring systems to uncover possible holes or defects of the components. Inspections are carried out either by divers, by ROV, or by net cleaning robot (when inspection are carried out as an inte- grated part of the net cleaning). 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 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 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 corrected by divers with exper- tise in net repair in accordance with the net user manual. Frøy also oers installation of mooring equipment for oating 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 certication company Aquastruc- tures AS as an organization that performs the following services in accordance with requirements of the NYTEK Regulations and NS 9415:2009: Installation of mooring for oating aquaculture 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 produc- tion, 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 requirements, and cleaning of vessels is carried out at a reassuring distance from aquaculture sites where there are sh. Frøy started in 2021 transitioning 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 stock, and the end product would not be approved for human consumption. This is an extensive process and will be carried out successively by scheduled replacement of hydraulic oil in accordance with the vessel’s maintenance programs. During the course of 2022 there were no progress in the replacement plan, but the percentage of vessels with food-approved hydraulic oils have increased through eet renewal. Our routines are intended to ensure that there will be no emissions of diesel fuel or oil when operating in and around aquaculture sites. Frøy is a veried supplier according to the Global G.A.P. Aquaculture standard and holds a Declaration of Compliance issued by DNV. This means that our entire business is audited annually by an inde- pendent third party to ensure that we comply with the elements of the standard relevant to our business. Annual revisions ensure our Global G.A.P certied customers that use of our services will be in compliance 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 6 Workers’ occupational health & safety GLOBAL G.A.P. Risk Assessment on Social Practice (GRASP) Animal welfare Environmental and ecological care 7 Frøy is also regularly audited by a selection of customers according to relevant elements within the ASC standard. The standard 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 conscientious neighbor; that means operating their farm in a socially responsible manner, car- ing for their employees and working with the local community. In connection with the 2023 annual audit of an independent third party the Global G.A.P. scope will be expanded to include relevant ASC checkpoints so that the DoC will include supplier verication according to the ASC standard as well. This will make customer audits unnecessary. 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 process, we have started mapping out climate emissions inspired by the GHG Accounting Protocol. The climate account presents a general overview of the company’s greenhouse gas emissions in the form of the greenhouse gas CO 2 in relation to Scope 1 and 2 (i.e., the parts of the business where Frøy has operational control) and in relation to Scope 3 (i.e., the parts of the business where Frøy hasn’t operational control). GHG EMISSIONS TOTAL CO 2 EMISSIONS 2020 2021 2022 Scope 1 8 CO 2 emissions [tonnes] - 102,339 102,782 Scope 2 9 Electrical power consume [kWh] - 1,330,285 1,219,714 CO 2 e [tonnes] - 14.63 10 46.35 11 Scope 3 12 CO 2 emissions [tonnes] - 337.5 895.2 Total (Scope 1 + scope 2 + scope 3) CO 2 + CO 2 e [tonnes] - 102,691 103,724 RELATIVE CO2 EMISSIONS 13 2020 2021 2022 Wellboats CO 2 emissions per ton transported sh [tonnes] - 0.134 0.097 CO 2 emissions per ton treated sh [tonnes] - 0.100 0.094 Net cleaning vessels CO 2 emissions per net cleaned [tonnes] - 0.533 0.353 Diving vessels CO 2 emissions per diving job executed [tonnes] - 0.808 0.479 Service vessels CO 2 emissions per service job executed [tonnes] - 2.243 1.411 Freight vessels CO 2 emissions per nm sailed [tonnes] - 0.113 0.121 14 ELECTRIFICATION OF VEHICLES 2020 2021 2022 Vessels - Wellboat and Shipping Vessels with diesel power [%] - 79 % 75 % Vessels with diesel-electrical power [%] - 16 % 20 % Vessels with hybrid power [%] - 5 % 5 % Vessels - Larger service-vessels Vessels with diesel power [%] - 55 % 42 % Vessels with diesel-electrical power [%] - 27 % 15 33 % Vessels with hybrid power [%] - 18 % 25 % Vessels - Smaller service-vessels Vessels with diesel power [%] - 97 % 93 % Vessels with diesel-electrical power [%] - 0 % 2 % Vessels with hybrid power [%] - 3 % 5 % Company cars Company cars with diesel power [%] - 100% 97 % Company cars with hybrid power [%] - 0% 0 % Company cars with electrical power [%] - 0% 3 % FRØY ASA | ANNUAL REPORT 2022 47 REDUCED GREENHOUSE GAS EMISSIONS THROUGH ELECTRIFICATION OF THE FLEET The largest contributor to Frøy’s carbon footprint is the emission of greenhouse gases from our eet. In 2019, Frøy made a strate- gic decision to reduce greenhouse gas emissions from the eet by investing in more climate friendly vessels, and from then, all wellboat newbuilds have been ordered with either diesel electric or hybrid propulsion machinery. At the end of 2022, 25 % of our wellboats and cargo vessels, 58 % of our larger service vessels, and 7 % of our smaller service vessels have diesel electric or hybrid propulsion machinery installed, which represent an improvement at all areas. REDUCED GREENHOUSE GAS EMISSIONS THROUGH GREATER OPERATIONAL UTILIZATION Carefully planned logistics is Frøy’s denition of great operational utilization. Greater operational utilization leads to a reduced energy and fuel consumption, which lessen our greenhouse gas emissions. One example of operational utilization to reduce greenhouse gas emissions is logistics managers to focus on achieving as good a level of coverage as possible for any transport assignment for our sea transport vessels. A proactive approach to increase the utilization of the eet with transport of additional goods, will reduce fuel con- sumption per ton freight transported. Replacement of freshwater in connection with freshwater delous- ing will be reduced by building well boats with larger well volumes. Fewer transport stages lead to reduced fuel consumption per delousing operation. In addition, a larger proportion of the sh in cages can be processed per assignment, which again reduces the total energy consumption for the delousing operation. In cases where fresh water is produced on board the wellboat, the need for transport will be further reduced. Improved utilization of battery packages on vessels with hybrid power systems will also contribute to the reduction of greenhouse gas emissions. In collaboration with one of our customers, Frøy has explored the possibility of using power banks for charging batter- ies during operations. The empty power bank is returned to an onshore charging station for recharging and a fully charged bank could be brought back to the sh farm for further operations. As mentioned earlier, Frøy started in 2022 the work on choosing a supplier for systems for data capture from vessels. Such a system will give the individual master an overview of fuel consumption and engine load during transfer or operations, and thus be able to opti- mize driving patterns with regard to greenhouse gas emissions. REDUCED GREENHOUSE GAS EMISSIONS THROUGH INCREASED USE OF REMOTE INSPECTIONS Remote inspections will contribute to a reduction in greenhouse gas emissions generated from transport to and from land. There are clearly dened requirements for cleaning, washing and disinfection of vessels and equipment used at aquaculture sites. The require- ments have dierent levels depending on the status of the sh and are dened in the Aquaculture Operations Regulations and the various disease regulations. Where there are requirements for con- trol of the object before further operation, it is authorized sh health personnel (veterinarians 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. In addition to saving transport time, remote inspections reduce time for the inspection subject and for the inspector. Frøy uses to some extent remote inspections and aims to use it to a greater extent in the future. As the regulations allowed for further use of remote inspections during the course of 2022, Frøy signed an extended agreement with a company approved by the Norwegian Food Safety Authority for this type of inspection. MINIMIZE OUR ENVIRONMENTAL IMPACT As reected in our Code of Conduct, Frøy’s goal is that the environ- mental impact from our activities is to be kept to a minimum and we have a zero tolerance for oil spillage at sea. Pollution from ships is regulated by the International Convention for the Prevention of Pollution from Ships (MARPOL 73/76). The MAR- POL regulations consist of six annexes that regulate various forms of pollution from ships. All our vessels are equipped with oil collection equipment in accor- dance 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 to air is regulated by MARPOL – annex VI which sets limits on sulfur 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 mea- sure 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 2023 were subject to any emission permit requirements. POLLUTION YEAR Oil pollution 2020 2021 2022 Oil spillage to sea [number of incidents] - 3 9 Air pollution 2020 2021 2022 NO X emissions [kg] - 909,105 895,392 Vessels with SCR [%] - 25 % 26 % There have been 9 cases of oil spills to sea registered in 2022. Of these, 5 cases relate to spillage of diesel and 4 cases to spillage of hydraulic oil. In connection with diesel emissions, 3 of the cases were due to non-compliance to the diesel lling procedure. These events are dened as highly severe in Frøy, and special measures have been implemented to prevent this from happening again and to reverse this negative trend. There have been 4 cases where hydraulic oil has ended up at sea due to damage or leakage to the hydraulic system. All these cases have occurred in the vicinity of cages with sh, which is unfortunate in terms of food safety and contamination of food sh. None of the cases resulted in contamination of sh. WASTE DISPOSAL All our vessels have prepared their own Waste Management Plan describing procedures for handling dierent types of waste. Han- dling 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 way they may be disposed of. Annex V completely bans the disposal of all forms of plastics into the sea. Measures to prevent microplastics in the ocean As mentioned above, 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 through approved waste disposal facilities ashore. Concerning the disposal of parts from the farm, such as rings, nets, and moorings, are the farmers’ responsibility to dispose of through disposal facilities. These components often contain plastic materials and therefore required by MARPOL to be collected, and if possible, recycled. A large part of Frøy’s shipping department’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. WATER CONSUMPTION Freshwater has become a resource under pressure. Due to this, more detailed data on the consumption of freshwater will be required in the upcoming years. Frøy has therefore begun gathering data on our consumption of water bunkered from onshore facilities, and investing in solutions that produce water on board. A reverse osmosis plant has been installed on board the wellboat Gåsø Høvding to produce fresh water from seawater, which is a measure to reduce the freshwater consumption from land in connection with freshwater delousing operations. This initiative will be implemented on other new builds in the future if appropriate. FRØY ASA | ANNUAL REPORT 202248 REDUCED GREENHOUSE GAS EMISSIONS THROUGH ELECTRIFICATION OF THE FLEET The largest contributor to Frøy’s carbon footprint is the emission of greenhouse gases from our eet. In 2019, Frøy made a strate- gic decision to reduce greenhouse gas emissions from the eet by investing in more climate friendly vessels, and from then, all wellboat newbuilds have been ordered with either diesel electric or hybrid propulsion machinery. At the end of 2022, 25 % of our wellboats and cargo vessels, 58 % of our larger service vessels, and 7 % of our smaller service vessels have diesel electric or hybrid propulsion machinery installed, which represent an improvement at all areas. REDUCED GREENHOUSE GAS EMISSIONS THROUGH GREATER OPERATIONAL UTILIZATION Carefully planned logistics is Frøy’s denition of great operational utilization. Greater operational utilization leads to a reduced energy and fuel consumption, which lessen our greenhouse gas emissions. One example of operational utilization to reduce greenhouse gas emissions is logistics managers to focus on achieving as good a level of coverage as possible for any transport assignment for our sea transport vessels. A proactive approach to increase the utilization of the eet with transport of additional goods, will reduce fuel con- sumption per ton freight transported. Replacement of freshwater in connection with freshwater delous- ing will be reduced by building well boats with larger well volumes. Fewer transport stages lead to reduced fuel consumption per delousing operation. In addition, a larger proportion of the sh in cages can be processed per assignment, which again reduces the total energy consumption for the delousing operation. In cases where fresh water is produced on board the wellboat, the need for transport will be further reduced. Improved utilization of battery packages on vessels with hybrid power systems will also contribute to the reduction of greenhouse gas emissions. In collaboration with one of our customers, Frøy has explored the possibility of using power banks for charging batter- ies during operations. The empty power bank is returned to an onshore charging station for recharging and a fully charged bank could be brought back to the sh farm for further operations. As mentioned earlier, Frøy started in 2022 the work on choosing a supplier for systems for data capture from vessels. Such a system will give the individual master an overview of fuel consumption and engine load during transfer or operations, and thus be able to opti- mize driving patterns with regard to greenhouse gas emissions. REDUCED GREENHOUSE GAS EMISSIONS THROUGH INCREASED USE OF REMOTE INSPECTIONS Remote inspections will contribute to a reduction in greenhouse gas emissions generated from transport to and from land. There are clearly dened requirements for cleaning, washing and disinfection of vessels and equipment used at aquaculture sites. The require- ments have dierent levels depending on the status of the sh and are dened in the Aquaculture Operations Regulations and the various disease regulations. Where there are requirements for con- trol of the object before further operation, it is authorized sh health personnel (veterinarians 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. In addition to saving transport time, remote inspections reduce time for the inspection subject and for the inspector. Frøy uses to some extent remote inspections and aims to use it to a greater extent in the future. As the regulations allowed for further use of remote inspections during the course of 2022, Frøy signed an extended agreement with a company approved by the Norwegian Food Safety Authority for this type of inspection. MINIMIZE OUR ENVIRONMENTAL IMPACT As reected in our Code of Conduct, Frøy’s goal is that the environ- mental impact from our activities is to be kept to a minimum and we have a zero tolerance for oil spillage at sea. Pollution from ships is regulated by the International Convention for the Prevention of Pollution from Ships (MARPOL 73/76). The MAR- POL regulations consist of six annexes that regulate various forms of pollution from ships. All our vessels are equipped with oil collection equipment in accor- dance 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 to air is regulated by MARPOL – annex VI which sets limits on sulfur 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 mea- sure 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 2023 were subject to any emission permit requirements. POLLUTION YEAR Oil pollution 2020 2021 2022 Oil spillage to sea [number of incidents] - 3 9 Air pollution 2020 2021 2022 NO X emissions [kg] - 909,105 895,392 Vessels with SCR [%] - 25 % 26 % There have been 9 cases of oil spills to sea registered in 2022. Of these, 5 cases relate to spillage of diesel and 4 cases to spillage of hydraulic oil. In connection with diesel emissions, 3 of the cases were due to non-compliance to the diesel lling procedure. These events are dened as highly severe in Frøy, and special measures have been implemented to prevent this from happening again and to reverse this negative trend. There have been 4 cases where hydraulic oil has ended up at sea due to damage or leakage to the hydraulic system. All these cases have occurred in the vicinity of cages with sh, which is unfortunate in terms of food safety and contamination of food sh. None of the cases resulted in contamination of sh. WASTE DISPOSAL All our vessels have prepared their own Waste Management Plan describing procedures for handling dierent types of waste. Han- dling 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 way they may be disposed of. Annex V completely bans the disposal of all forms of plastics into the sea. Measures to prevent microplastics in the ocean As mentioned above, 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 through approved waste disposal facilities ashore. Concerning the disposal of parts from the farm, such as rings, nets, and moorings, are the farmers’ responsibility to dispose of through disposal facilities. These components often contain plastic materials and therefore required by MARPOL to be collected, and if possible, recycled. A large part of Frøy’s shipping department’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. WATER CONSUMPTION Freshwater has become a resource under pressure. Due to this, more detailed data on the consumption of freshwater will be required in the upcoming years. Frøy has therefore begun gathering data on our consumption of water bunkered from onshore facilities, and investing in solutions that produce water on board. A reverse osmosis plant has been installed on board the wellboat Gåsø Høvding to produce fresh water from seawater, which is a measure to reduce the freshwater consumption from land in connection with freshwater delousing operations. This initiative will be implemented on other new builds in the future if appropriate. FRØY ASA | ANNUAL REPORT 2022 49 FRESH WATER FOR DELOUSING OPERATIONS YEAR 2020 2021 2022 Fresh water bunkered from onshore facility [m3] - - 1,379,175 Fresh water produced by RO [m3] 0 0 292,400 In addition to the use of freshwater for delousing operations, we need access to freshwater in the form of drinking water. Drinking water is supplied 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 as shown in the gure below. Figure 2: Origin of fresh water bunkered in 2022 – locations marked with dots (shown in cutouts from Water Risk Atlas, www.wri.org) 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 important in terms of reducing the discharge of Cu-holding impregnation to sea. Our washing robots meet the maximum permissible ushing pressure requirements for ASC certied locations. All vessels in Frøy that fall under the ballast water treatment regu- lations 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. The transferred species may survive to establish a reproductive population in the new host environment, becoming invasive, out-competing native species and multiplying into pestilent proportions. All wellboats in Frøy, with exception of one, comply with the regula- tions 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 2022.The vessel was sold in beginning of 2023. Disin- fection of transport water is a measure to prevent the spread of infectious sh diseases between farms 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 Trans- port Regulations that the treatment water consisting of medicine residue should not be emptied closer than 500 meters from shrimp elds or spawning grounds specied in the Directorate of Fisheries’ online mapping tool. THE WAY FORWARD – PLANS FOR 2023 Going forward, we aim to expand our GHG reporting, as we are able to collect more data from our operations and our value chain. With the implementation of a system for data collection from our vessels, we will get more accurate data directly from engines, equipment and sensors, and reduce the need for reporting and retrieving data manually. This system will also give us more accurate data for fresh- water consumption and other important operational data. Parallel with implementing the system for data collection from our vessels, we will continue the job of developing and adjusting our data platform for data management and analysis. This will, as mentioned earlier, give us an overview of fuel consumption and engine load during transfer or operations, which we will actively use as a measure to reduce our GHG footprint. The data platform will also enable easy access to customer specic GHG-data which can be provided in monthly or quarterly reports giving them better documentation of their scope 3 emissions. An important measure to reduce the climate footprint and specif- ically the GHG emissions from our operations, is the shift to more environmentally friendly vessels. The goal is to increase this per- centage of vessels with either diesel electric or hybrid power over the coming year through eet renewal. Frøy aims to use remote biosecurity inspections to a greater extent moving forward. By gaining more experience together with a selected service supplier, we plan to extend the volume of remote inspections. Another important measure to reduce the environmental impact of our operations is to continue increasing the percentage of ves- sels with SCR units to reduce the NO X emissions from the engine exhaust by eet renewal program. All new-builds are required com- ply with the regulations for NO X reducing measures described in the MARPOL – annex VI from day one. We will also establish a plan for the replacement of hydraulic oil in cranes and other hydraulic deck equipment to food-approved hydraulic oil, to further reduce the risk of food contamination with a potential leakage in the vicinity of the sh cages. Frøy will during 2023 formalize our supporting initiatives for beach and shoreline clean-up operations in addition to other initiatives, which will contribute to reducing plastic waste in the ocean. An example of this is that Frøy has signed a letter of intent with the company Ogoori to run a full-scale pilot of their product Ogoori Nature for semi-automated beach and shoreline clean-up. FRØY ASA | ANNUAL REPORT 202250 FRESH WATER FOR DELOUSING OPERATIONS YEAR 2020 2021 2022 Fresh water bunkered from onshore facility [m3] - - 1,379,175 Fresh water produced by RO [m3] 0 0 292,400 In addition to the use of freshwater for delousing operations, we need access to freshwater in the form of drinking water. Drinking water is supplied 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 as shown in the gure below. Figure 2: Origin of fresh water bunkered in 2022 – locations marked with dots (shown in cutouts from Water Risk Atlas, www.wri.org) 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 important in terms of reducing the discharge of Cu-holding impregnation to sea. Our washing robots meet the maximum permissible ushing pressure requirements for ASC certied locations. All vessels in Frøy that fall under the ballast water treatment regu- lations 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. The transferred species may survive to establish a reproductive population in the new host environment, becoming invasive, out-competing native species and multiplying into pestilent proportions. All wellboats in Frøy, with exception of one, comply with the regula- tions 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 2022.The vessel was sold in beginning of 2023. Disin- fection of transport water is a measure to prevent the spread of infectious sh diseases between farms 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 Trans- port Regulations that the treatment water consisting of medicine residue should not be emptied closer than 500 meters from shrimp elds or spawning grounds specied in the Directorate of Fisheries’ online mapping tool. THE WAY FORWARD – PLANS FOR 2023 Going forward, we aim to expand our GHG reporting, as we are able to collect more data from our operations and our value chain. With the implementation of a system for data collection from our vessels, we will get more accurate data directly from engines, equipment and sensors, and reduce the need for reporting and retrieving data manually. This system will also give us more accurate data for fresh- water consumption and other important operational data. Parallel with implementing the system for data collection from our vessels, we will continue the job of developing and adjusting our data platform for data management and analysis. This will, as mentioned earlier, give us an overview of fuel consumption and engine load during transfer or operations, which we will actively use as a measure to reduce our GHG footprint. The data platform will also enable easy access to customer specic GHG-data which can be provided in monthly or quarterly reports giving them better documentation of their scope 3 emissions. An important measure to reduce the climate footprint and specif- ically the GHG emissions from our operations, is the shift to more environmentally friendly vessels. The goal is to increase this per- centage of vessels with either diesel electric or hybrid power over the coming year through eet renewal. Frøy aims to use remote biosecurity inspections to a greater extent moving forward. By gaining more experience together with a selected service supplier, we plan to extend the volume of remote inspections. Another important measure to reduce the environmental impact of our operations is to continue increasing the percentage of ves- sels with SCR units to reduce the NO X emissions from the engine exhaust by eet renewal program. All new-builds are required com- ply with the regulations for NO X reducing measures described in the MARPOL – annex VI from day one. We will also establish a plan for the replacement of hydraulic oil in cranes and other hydraulic deck equipment to food-approved hydraulic oil, to further reduce the risk of food contamination with a potential leakage in the vicinity of the sh cages. Frøy will during 2023 formalize our supporting initiatives for beach and shoreline clean-up operations in addition to other initiatives, which will contribute to reducing plastic waste in the ocean. An example of this is that Frøy has signed a letter of intent with the company Ogoori to run a full-scale pilot of their product Ogoori Nature for semi-automated beach and shoreline clean-up. FRØY ASA | ANNUAL REPORT 2022 51 SOCIAL RESPONIBILITY – PEOPLE AND PROSPERITY Skilled employees are Frøy’s most important resource. Their hard work and competence are crucial for delivering services with high quality, and for the continuous 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. 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 industries in the Norway with high risk 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. Prosperity relates to Frøy’s role in local communities and other societal contributions. For Frøy, prosperity involves securing the best people, local value creation through job creation and activities in coastal communities, payment of taxes to local governments and fair payment of dividends to shareholders. 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 nancial gures within the annual accounts section in our 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 oper- ations at sea. All vessels in Frøy covered by certication require- ments have valid ISM/MLC/ISPS certicates and underlie a shipping company with a valid Document of Compliance in accordance with the ISM code. Vessels that are not covered by certication require- ments, meet the Safety Management System requirements issued by the NMA. CATEGORY YEAR Work related injuries 2020 2021 2022 Number of hours worked - 1,649,432 1,853,826 Lost time injuries frequensy (LTI) 16 - 8.49 9.71 High-consequence LTI 17 - 0 0 Number of work-related fatalities - 0 0 Main categorys of work related injuries - Fall injuries (33 %) Crush injuries (23 %) Cut injuries (13 %) Fall injuries (35 %) Crush injuries (25 %) Cut injuries (10 %) Other safety related incidents 2020 2021 2022 Damage to vessel or critical equipment - 3 8 Groundings or collisions with potential - 1 1 Near miss incidents with potential - 5 0 We observe an increase in LTI-frequency in 2022 from the previ- ous year. Most lost-time injuries resulted in absence during the employer period (< 16 dg), but we see an increasing trend in falls and cuts that result in absence. Fall injuries are also a focus area from the Norwegian Maritime Authority for 2022 after a fall accident with fatal outcome on one of our competitors’ vessels at the begin- ning of the year. The lessons learned from the AIBN’s investigation report have been communicated to all vessels, and a review of our vessels has been carried out to identify where there is a need for improvements as recommended in the AIBN’s investigating report. In 2022, we had 8 incidents that resulted in damage to either vessels or critical equipment. None of the incidents suered a more serious outcome than damage to vessels or equipment. Unfortunately, we experienced a negative trend in the number of ground touches or minor groundings without water intrusion in 2022. We have taken a number of measures with regard to naviga- tion and safe sailing among our masters. However, we are pleased that we had no serious near misses in 2022, while at the same time observing that near miss incidents with lower severity are still being registered. All near miss incidents with potential are analyzed to uncover causalities and necessary measures are taken to avoid similar incidents. Frøy also received notication of a decision on a violation fee from the NMA in connection with a case where violations of the rest period regulations on board one of our wellboats were uncovered in connection with certicate renewal and MLC supervision. At the end of 2022, the case was still being processed by the NMA. Frøy has clear procedures for recording and certifying rest periods, and the conditions uncovered by the NMA were clear violations of our procedures as well as the rest period regulations. We have subse- quently tightened routines for internal control of rest hour registra- tions, as well as had a review of the regulations with all vessels were the importance of compliance were emphasized. 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 fall, crush 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 sharing across the organization to prevent similar incidents. In addition to the continuous preventive work to reduce the number of personnel injuries during high season, we observe that through- out 2022 there was a signicant increase in other categories of incidents compared to earlier years. We observe an increase in the number of groundings, escaped sh, and number of incidents with oil spill to sea. Such an increase in unwanted incidents could correlate to a deterioration in the company’s overall safety culture, and extra measures have been taken to identify the root cause of this increase, ensuring that the organization as a whole, learn from these incidents through experience transfer. Review of nonconformities last period is a xed agenda item in all operational meetings, 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 HSQA-department, to identify if immediate or preventive measures need to be taken throughout the organization to prevent similar incidents down the line. Based on cause analysis and preventive measures identi- ed, experience transfer is sent out to all relevant vessels either via monthly HSE newsletter, or by using the internal “Experience Report” form. In the event of high-consequence incidents, in-depth internal investigations are carried out. Based on the increase of unwanted incidents of higher severity degrees, for example the escape of farmed sh, groundings and oil spills to sea, and the repetitive matter of the incidents, we carried out a comprehensive investigation of our systems and routines for experience transfer and learning from incidents in the autumn of 2022. Measures were implemented to improve upon our internal routines for experience transfer and learning from incidents. Knowledge transfer and dialogue with the industry There are several arenas for experience transfer and dialogue with the industry, such as the Maritime Safety Conference arranged by the NMA, the Professional Diver Conferance arranged by NUI, an organization owed by the subsea industry and a local HSE forum facilitated by the ScaleAQ. In 2022, several people from Frøy’s administrative sta attended the Professional Diver Conference for important knowledge transfer regarding our diving services with both the authoroties, interest organizations and other businesses in the industry. One of our sta members also spoke at the conference addressing the topic “Accidents and incidents – experience transfer and improvement”. Frøy also participated in a local HSE forum facilitated by the ScaleAQ. The forum is initiated to achieve the goal of zero injuries and deaths across the aquaculture industry. To achieve that, coop- eration is essential and allows progress to be achieved faster. By learning from each other and sharing experiences, a best practice standard can be developed throughout the value chain, and avoid- able accidents and deaths can be prevented. Frøy also actively use dierent digital channels for experience transfer and learning, such as the NMA’s Safety investigations and reports and SINTEF’s Safety and risk management in aquaculture. HSE-training of new employees As part of our 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 the placement of emergency and rescue equipment, muster point, the alarm instruc- tions, 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 procedures for use and han- dling 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 with risk of injury. At the end of 2022 we started the process of recruiting a dedi- cated training responsible in Frøy, which started work early 2023. The training responsible will have developing of corporate specic training material, both in the form of e-learning and other forms of training material. Among the prioritized areas of training material is HSE training, where we have for example developed an e-learning course in chemical handling. The work towards full digitalization of documentation of the training for all employees were intensied during 2022 and towards the end of the year we started the assessment process of systems for an internal digital training and development platform. The portal platform be implemented in 2023. Facilitation in Frøy All employees, with the exception of a segment of crew on some smaller service boats, have Safety Insurance in accordance with NHO Shipping. As a result of mergers, there are dierences between employees within the dierent companies. For example, treatment insurance currently applies only to parts of the organi- zation. The treatment insurance allows the usage of various private services are used to get employees back to work faster, which is an important measure in sickness absence follow up. Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement 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 202252 SOCIAL RESPONIBILITY – PEOPLE AND PROSPERITY Skilled employees are Frøy’s most important resource. Their hard work and competence are crucial for delivering services with high quality, and for the continuous 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. 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 industries in the Norway with high risk 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. Prosperity relates to Frøy’s role in local communities and other societal contributions. For Frøy, prosperity involves securing the best people, local value creation through job creation and activities in coastal communities, payment of taxes to local governments and fair payment of dividends to shareholders. 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 nancial gures within the annual accounts section in our 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 oper- ations at sea. All vessels in Frøy covered by certication require- ments have valid ISM/MLC/ISPS certicates and underlie a shipping company with a valid Document of Compliance in accordance with the ISM code. Vessels that are not covered by certication require- ments, meet the Safety Management System requirements issued by the NMA. CATEGORY YEAR Work related injuries 2020 2021 2022 Number of hours worked - 1,649,432 1,853,826 Lost time injuries frequensy (LTI) 16 - 8.49 9.71 High-consequence LTI 17 - 0 0 Number of work-related fatalities - 0 0 Main categorys of work related injuries - Fall injuries (33 %) Crush injuries (23 %) Cut injuries (13 %) Fall injuries (35 %) Crush injuries (25 %) Cut injuries (10 %) Other safety related incidents 2020 2021 2022 Damage to vessel or critical equipment - 3 8 Groundings or collisions with potential - 1 1 Near miss incidents with potential - 5 0 We observe an increase in LTI-frequency in 2022 from the previ- ous year. Most lost-time injuries resulted in absence during the employer period (< 16 dg), but we see an increasing trend in falls and cuts that result in absence. Fall injuries are also a focus area from the Norwegian Maritime Authority for 2022 after a fall accident with fatal outcome on one of our competitors’ vessels at the begin- ning of the year. The lessons learned from the AIBN’s investigation report have been communicated to all vessels, and a review of our vessels has been carried out to identify where there is a need for improvements as recommended in the AIBN’s investigating report. In 2022, we had 8 incidents that resulted in damage to either vessels or critical equipment. None of the incidents suered a more serious outcome than damage to vessels or equipment. Unfortunately, we experienced a negative trend in the number of ground touches or minor groundings without water intrusion in 2022. We have taken a number of measures with regard to naviga- tion and safe sailing among our masters. However, we are pleased that we had no serious near misses in 2022, while at the same time observing that near miss incidents with lower severity are still being registered. All near miss incidents with potential are analyzed to uncover causalities and necessary measures are taken to avoid similar incidents. Frøy also received notication of a decision on a violation fee from the NMA in connection with a case where violations of the rest period regulations on board one of our wellboats were uncovered in connection with certicate renewal and MLC supervision. At the end of 2022, the case was still being processed by the NMA. Frøy has clear procedures for recording and certifying rest periods, and the conditions uncovered by the NMA were clear violations of our procedures as well as the rest period regulations. We have subse- quently tightened routines for internal control of rest hour registra- tions, as well as had a review of the regulations with all vessels were the importance of compliance were emphasized. 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 fall, crush 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 sharing across the organization to prevent similar incidents. In addition to the continuous preventive work to reduce the number of personnel injuries during high season, we observe that through- out 2022 there was a signicant increase in other categories of incidents compared to earlier years. We observe an increase in the number of groundings, escaped sh, and number of incidents with oil spill to sea. Such an increase in unwanted incidents could correlate to a deterioration in the company’s overall safety culture, and extra measures have been taken to identify the root cause of this increase, ensuring that the organization as a whole, learn from these incidents through experience transfer. Review of nonconformities last period is a xed agenda item in all operational meetings, 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 HSQA-department, to identify if immediate or preventive measures need to be taken throughout the organization to prevent similar incidents down the line. Based on cause analysis and preventive measures identi- ed, experience transfer is sent out to all relevant vessels either via monthly HSE newsletter, or by using the internal “Experience Report” form. In the event of high-consequence incidents, in-depth internal investigations are carried out. Based on the increase of unwanted incidents of higher severity degrees, for example the escape of farmed sh, groundings and oil spills to sea, and the repetitive matter of the incidents, we carried out a comprehensive investigation of our systems and routines for experience transfer and learning from incidents in the autumn of 2022. Measures were implemented to improve upon our internal routines for experience transfer and learning from incidents. Knowledge transfer and dialogue with the industry There are several arenas for experience transfer and dialogue with the industry, such as the Maritime Safety Conference arranged by the NMA, the Professional Diver Conferance arranged by NUI, an organization owed by the subsea industry and a local HSE forum facilitated by the ScaleAQ. In 2022, several people from Frøy’s administrative sta attended the Professional Diver Conference for important knowledge transfer regarding our diving services with both the authoroties, interest organizations and other businesses in the industry. One of our sta members also spoke at the conference addressing the topic “Accidents and incidents – experience transfer and improvement”. Frøy also participated in a local HSE forum facilitated by the ScaleAQ. The forum is initiated to achieve the goal of zero injuries and deaths across the aquaculture industry. To achieve that, coop- eration is essential and allows progress to be achieved faster. By learning from each other and sharing experiences, a best practice standard can be developed throughout the value chain, and avoid- able accidents and deaths can be prevented. Frøy also actively use dierent digital channels for experience transfer and learning, such as the NMA’s Safety investigations and reports and SINTEF’s Safety and risk management in aquaculture. HSE-training of new employees As part of our 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 the placement of emergency and rescue equipment, muster point, the alarm instruc- tions, 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 procedures for use and han- dling 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 with risk of injury. At the end of 2022 we started the process of recruiting a dedi- cated training responsible in Frøy, which started work early 2023. The training responsible will have developing of corporate specic training material, both in the form of e-learning and other forms of training material. Among the prioritized areas of training material is HSE training, where we have for example developed an e-learning course in chemical handling. The work towards full digitalization of documentation of the training for all employees were intensied during 2022 and towards the end of the year we started the assessment process of systems for an internal digital training and development platform. The portal platform be implemented in 2023. Facilitation in Frøy All employees, with the exception of a segment of crew on some smaller service boats, have Safety Insurance in accordance with NHO Shipping. As a result of mergers, there are dierences between employees within the dierent companies. For example, treatment insurance currently applies only to parts of the organi- zation. The treatment insurance allows the usage of various private services are used to get employees back to work faster, which is an important measure in sickness absence follow up. Responsible value chain Fish welfare and biodiversity Minimize our own environmental impact GHG emission Security at work Gender equality and diversity Attractive employer Local contributor Technological developement 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 2022 53 GENDER EQUALITY AND DIVERSITY The Frøy Group has announced clear attitudes towards safeguard- ing 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 established clear guidelines for limiting discrimination 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 discrimination cases were received in 2022. YEAR 2020 2021 2022 Women Men Women Men Women Men Number of employees Total number of employees 32 810 36 768 62 878 Age group 16-30 years 18 11 300 16 317 32 375 30-40 years 4 213 3 184 9 222 40-50 years 5 126 5 125 6 141 50-60 years 8 116 8 98 11 95 60-70+ years 1 54 2 44 3 45 Occupational groups 19 Not placeable at level - - - - 13 173 Level 1 1 4 1 3 Level 2 - - 17 305 25 254 Level 3 - - 14 383 19 403 Level 4 - - 6 84 6 50 Women’s average salary as a percentage of men’s average salary per occupational group 20 Not placeable at level - - 31 % Level 1 - 81 % 70 % Level 2 - 74 % 82 % Level 3 - 85 % 61 % Level 4 - 57 % 54 % Women’s average salary as a percentage of men’s average salary overall 21 Frøy ASA overall - - 91 % Parental leave Percentage number of persons on parental leave - - 2 % 4.6 % 3 % 5 % Average number of weeks of parental leave - - 28 9.4 29.3 9.7 Our employees consist of 12 dierent nationalities. Our manage- ment systems are mainly available in Norwegian as it is a require- ment 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 The proportion of women in Frøy overall is 6.6 % as of 31.12.2022 (ref. Table 1). This is almost 2 % more than at the same time last year. There are generally few women represented in all companies with operations at sea, between 0 and 5%. This is considered to have several reasons, where culture, tradition, working hours, and shift work are important factors. In Frøy ASA, which consists of onshore employees, there is a female share of 45.8 %. Actions has been taken increase the proportion of women, including in senior and management positions. The Board of Directors of Frøy consists of representatives with broad experience and competence and has a female share of 43 %. The board is aware of the gender equality obligations that are incumbent on the company. Frøy’s executive management con- sisted at the end of 2022 of 8 employees, 4 of which are women, including the CEO. In line with the duty of activity and reporting, an “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 discrimination related to gender, pregnancy, maternity leave or adoption, care taking tasks, ethnicity, religion, beliefs, disability, sexual orientation, gender identity and gender expression and com- binations of these foundations. ATTRACTIVE EMPLOYER Employees In 2022 Frøy had 940 employees, and there are limited number of employees in part-time positions in Frøy’s companies. Approx- imately 23 % of all employees as of 31.12.22 are temporary employees. Of these, 44 % are apprentices/cadets who are on a time-limited training agreement and the remainder mainly sick leave. During 2022, Frøy welcomed 122 new employees to our team, and although we have some internal turn-over in that employees change jobs within the company, the average external turn-over is 3% for 2022. YEAR 2020 2021 2022 Number of employees - 814 940 Full-time employees [%] - 100 % 100 % Part-time employees [%) - 0 % 0 % Number of substitutes 22 - 81 184 Number of new hires - 200 122 Turnover rate - 15 % 3 % We experienced a slight improvement in the job market in 2022 compared to 2021. We had good access to applicants when we advertise positions, while at the same time low turnover. Employee wellbeing and engagement For Frøy, it is very important to be an attractive employer for our employees. Our employees shall experience 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 continuous focus on our “Mental Health Strategy”. This initiative was developed in 2021 to facilitate an inclusive and safeguarding culture, thereby contrib- uting 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 “Follow-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. Frøy considers sobriety at sea as an essential safety measure, and therefore have intensied the use of un-announced drug-testing among crew members on our vessels. In 2022 we executed 180 un-announced drug tests among crew members on our vessels dis- tributed on 27 test visits. We will further intensify our un-announced drug test and our preventive work in 2023. Following the merger with NTS ASA, the companies Norsk Fisket- ransport AS, NTS Shipping AS and NTS Management AS, a work- group was established to work actively on measures to ensure a common corporate culture and a sense of unity among all employ- ees of the new combined company. In 2022, the Covid-19 regula- tions were nally lifted, and we were able to gather employees for a corporate team building, as well as team buildings for selected groups (for example gatherings of ship masters) to build team spirit and work with the “One Frøy” culture. In 2022, we sent out an employee survey among all our employees with questions in the following categories: HSE Management Organization and cooperation Job requirements Job organizing and content Relations and leadership Individual and job interaction Social capital Health and well-being The survey showed that 94 % were proud to work in Frøy and 91 % feel that their eorts are important for Frøy’s results. The survey also identied some areas where there was room for improvement, and we will through 2023 implement measures to work to preserve our forces as well as improve our development areas. Frøy ASA has become a large corporation, with several hundred employees. To ensure a good ow of information across our organization, newsletters are sent out from the administration to all employees every two months with updates in large and small mat- ters since the last time. In addition, separate letters of information are sent out in special news stories. Once every quarter of the year, a digital assembly of all employees is gathered, where information on the status of the company is shared. More informal channels internally in Frøy is our closed internal Face- book group, used for informal information sharing to our employ- ees, which is also used as a channel for community building and communication between crews on the dierent vessels. FRØY ASA | ANNUAL REPORT 202254 GENDER EQUALITY AND DIVERSITY The Frøy Group has announced clear attitudes towards safeguard- ing 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 established clear guidelines for limiting discrimination 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 discrimination cases were received in 2022. YEAR 2020 2021 2022 Women Men Women Men Women Men Number of employees Total number of employees 32 810 36 768 62 878 Age group 16-30 years 18 11 300 16 317 32 375 30-40 years 4 213 3 184 9 222 40-50 years 5 126 5 125 6 141 50-60 years 8 116 8 98 11 95 60-70+ years 1 54 2 44 3 45 Occupational groups 19 Not placeable at level - - - - 13 173 Level 1 1 4 1 3 Level 2 - - 17 305 25 254 Level 3 - - 14 383 19 403 Level 4 - - 6 84 6 50 Women’s average salary as a percentage of men’s average salary per occupational group 20 Not placeable at level - - 31 % Level 1 - 81 % 70 % Level 2 - 74 % 82 % Level 3 - 85 % 61 % Level 4 - 57 % 54 % Women’s average salary as a percentage of men’s average salary overall 21 Frøy ASA overall - - 91 % Parental leave Percentage number of persons on parental leave - - 2 % 4.6 % 3 % 5 % Average number of weeks of parental leave - - 28 9.4 29.3 9.7 Our employees consist of 12 dierent nationalities. Our manage- ment systems are mainly available in Norwegian as it is a require- ment 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 The proportion of women in Frøy overall is 6.6 % as of 31.12.2022 (ref. Table 1). This is almost 2 % more than at the same time last year. There are generally few women represented in all companies with operations at sea, between 0 and 5%. This is considered to have several reasons, where culture, tradition, working hours, and shift work are important factors. In Frøy ASA, which consists of onshore employees, there is a female share of 45.8 %. Actions has been taken increase the proportion of women, including in senior and management positions. The Board of Directors of Frøy consists of representatives with broad experience and competence and has a female share of 43 %. The board is aware of the gender equality obligations that are incumbent on the company. Frøy’s executive management con- sisted at the end of 2022 of 8 employees, 4 of which are women, including the CEO. In line with the duty of activity and reporting, an “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 discrimination related to gender, pregnancy, maternity leave or adoption, care taking tasks, ethnicity, religion, beliefs, disability, sexual orientation, gender identity and gender expression and com- binations of these foundations. ATTRACTIVE EMPLOYER Employees In 2022 Frøy had 940 employees, and there are limited number of employees in part-time positions in Frøy’s companies. Approx- imately 23 % of all employees as of 31.12.22 are temporary employees. Of these, 44 % are apprentices/cadets who are on a time-limited training agreement and the remainder mainly sick leave. During 2022, Frøy welcomed 122 new employees to our team, and although we have some internal turn-over in that employees change jobs within the company, the average external turn-over is 3% for 2022. YEAR 2020 2021 2022 Number of employees - 814 940 Full-time employees [%] - 100 % 100 % Part-time employees [%) - 0 % 0 % Number of substitutes 22 - 81 184 Number of new hires - 200 122 Turnover rate - 15 % 3 % We experienced a slight improvement in the job market in 2022 compared to 2021. We had good access to applicants when we advertise positions, while at the same time low turnover. Employee wellbeing and engagement For Frøy, it is very important to be an attractive employer for our employees. Our employees shall experience 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 continuous focus on our “Mental Health Strategy”. This initiative was developed in 2021 to facilitate an inclusive and safeguarding culture, thereby contrib- uting 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 “Follow-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. Frøy considers sobriety at sea as an essential safety measure, and therefore have intensied the use of un-announced drug-testing among crew members on our vessels. In 2022 we executed 180 un-announced drug tests among crew members on our vessels dis- tributed on 27 test visits. We will further intensify our un-announced drug test and our preventive work in 2023. Following the merger with NTS ASA, the companies Norsk Fisket- ransport AS, NTS Shipping AS and NTS Management AS, a work- group was established to work actively on measures to ensure a common corporate culture and a sense of unity among all employ- ees of the new combined company. In 2022, the Covid-19 regula- tions were nally lifted, and we were able to gather employees for a corporate team building, as well as team buildings for selected groups (for example gatherings of ship masters) to build team spirit and work with the “One Frøy” culture. In 2022, we sent out an employee survey among all our employees with questions in the following categories: HSE Management Organization and cooperation Job requirements Job organizing and content Relations and leadership Individual and job interaction Social capital Health and well-being The survey showed that 94 % were proud to work in Frøy and 91 % feel that their eorts are important for Frøy’s results. The survey also identied some areas where there was room for improvement, and we will through 2023 implement measures to work to preserve our forces as well as improve our development areas. Frøy ASA has become a large corporation, with several hundred employees. To ensure a good ow of information across our organization, newsletters are sent out from the administration to all employees every two months with updates in large and small mat- ters since the last time. In addition, separate letters of information are sent out in special news stories. Once every quarter of the year, a digital assembly of all employees is gathered, where information on the status of the company is shared. More informal channels internally in Frøy is our closed internal Face- book group, used for informal information sharing to our employ- ees, which is also used as a channel for community building and communication between crews on the dierent vessels. FRØY ASA | ANNUAL REPORT 2022 55 Training and development We have competence matrices for all positions 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 qualications for the position beyond regulatory requirements. TRAINING COSTS [MNOK] YEAR 2020 2021 2022 Total training costs - 4,054 6,509 During onboarding of new employees, they get an introduction to the company’s quality systems incl. safety management systems. In connection with this review, they will be introduced to Frøy’s “Code of Conduct”, as well as the shipping company’s “Policy for Safety and Environmental protection”. Frøy’s sustainability practices is an integral part of the company’s management systems and employees will be introduced into this in the same way as other management documents and procedures. Historically, there have been few formal competence requirements for crew members on our service vessels related to the tasks they perform. In the last years, the operations have become more complex, and in general the industry has become professionalized through introduction of more regulations both from the authorities and our customers. In the revision of the NYTEK-Regulations and the associated standard NS 9415:2021, the competence require- ments regarding inspections of nets, repair of net when in sea and installation of mooring for aquaculture facilities have now become more formalized. As per today, there is no specialized public 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. Frøys internal education programs The expertise and experience of our employees are some of our most important assets. It is therefore important for Frøy to give our employees good opportunities for professional development and advancement internally in Frøy. In 2021, we established Frøy’s inter- nal education program. The goal is to ensure that all employees at all levels, through a tailor-made program, have a good basic knowl- edge of Frøy’s operations, management, and culture. The program is built around the following structure for leadership development and culture building: Middle management (operational managers + their managers): • Follow-up of the management program - 2 sessions per year • The topic/content is determined by group management, in line with strategy and needs. • External assistance for professional replenishment Masters: • 1 session per year, conducted in two rounds to include both shifts. • The relevant topic/content is determined by the extended management team, in line with company strategy. On shore employees: • 1 team-building event per year • The relevant topic/content is determined by the extended management team, in line with company strategy. • External assistance for professional replenishment All employees: • Frøy corporate team-building event for all employees (con- ducted every other year (2022 – 2024 – etc.) • Culture building/Professional content in line with strategy and needs. In 2022 we completed the middle management program for all our operation managers. As mentioned earlier, we started at the end of 2022 the process of assessing which system Frøy should use as an internal digital training and development platform for their employees. This plat- form will also provide an e-learning module for distribution of both internally and externally developed training material. Frøy specied these set goals for this digital platform: Develop a minimum of 5 new e-learning courses: • Chemical courses (all sea employees) • Basic management modules (all new managers at all levels) • Maintenance service vessels (all employees on service boats) • Hygiene and Biosafety (all sea employees) • Fish welfare (all employees) In addition to these, we will continuously prioritize establishing: • Onboarding package • Simple training videos on individual operations (Frøy practice) • Existing courses in escape protection and on inspection of nets come in addition. We are trying to nd a technical solu- tion to get these onto a new platform Collaborations with educational institutions Frøy actively contributes towards educating skilled workers, and hire several apprentices and cadets every year. We attend apprentices’ conferences to recruit new apprentices to our organization. In 2022 Frøy had a total of 66 apprentices and 16 cadets distributed on our vessels. Every year, the SNMK hand out the “Maritime Training Com- pany of the Year” award. The award is handed out to companies that make a special eort to recruit to the seafaring profession, and Frøy is proud to be awarded this prestigious title in 2022. In addition to being an attractive employee for apprentices and cadets we welcome internship students on our vessels. We cooperate with the “blue” educations at both upper secondary and university college level, with Ungt Entrepenørskap (Young Entre- preneurship), Blått Kompetansesenter (Center for Blue Compe- tence), NTNU and SINTEF. These initiatives are further described in the chapter about ‘Technological Development and R&D’. 5 new e-learning courses 5 new e-learning courses Existing courses Simple training videos Fish Wellfare Fish Wellfare Culture and values New employees/ On-boarding Chemical handling Employees at sea Basic manager modules All new managers Organisation and system Hygiene and biosecurity HSE/Fish Welfare Maintenance service vessels Economy Operational topics Management FRØY ASA | ANNUAL REPORT 202256 Training and development We have competence matrices for all positions 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 qualications for the position beyond regulatory requirements. TRAINING COSTS [MNOK] YEAR 2020 2021 2022 Total training costs - 4,054 6,509 During onboarding of new employees, they get an introduction to the company’s quality systems incl. safety management systems. In connection with this review, they will be introduced to Frøy’s “Code of Conduct”, as well as the shipping company’s “Policy for Safety and Environmental protection”. Frøy’s sustainability practices is an integral part of the company’s management systems and employees will be introduced into this in the same way as other management documents and procedures. Historically, there have been few formal competence requirements for crew members on our service vessels related to the tasks they perform. In the last years, the operations have become more complex, and in general the industry has become professionalized through introduction of more regulations both from the authorities and our customers. In the revision of the NYTEK-Regulations and the associated standard NS 9415:2021, the competence require- ments regarding inspections of nets, repair of net when in sea and installation of mooring for aquaculture facilities have now become more formalized. As per today, there is no specialized public 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. Frøys internal education programs The expertise and experience of our employees are some of our most important assets. It is therefore important for Frøy to give our employees good opportunities for professional development and advancement internally in Frøy. In 2021, we established Frøy’s inter- nal education program. The goal is to ensure that all employees at all levels, through a tailor-made program, have a good basic knowl- edge of Frøy’s operations, management, and culture. The program is built around the following structure for leadership development and culture building: Middle management (operational managers + their managers): • Follow-up of the management program - 2 sessions per year • The topic/content is determined by group management, in line with strategy and needs. • External assistance for professional replenishment Masters: • 1 session per year, conducted in two rounds to include both shifts. • The relevant topic/content is determined by the extended management team, in line with company strategy. On shore employees: • 1 team-building event per year • The relevant topic/content is determined by the extended management team, in line with company strategy. • External assistance for professional replenishment All employees: • Frøy corporate team-building event for all employees (con- ducted every other year (2022 – 2024 – etc.) • Culture building/Professional content in line with strategy and needs. In 2022 we completed the middle management program for all our operation managers. As mentioned earlier, we started at the end of 2022 the process of assessing which system Frøy should use as an internal digital training and development platform for their employees. This plat- form will also provide an e-learning module for distribution of both internally and externally developed training material. Frøy specied these set goals for this digital platform: Develop a minimum of 5 new e-learning courses: • Chemical courses (all sea employees) • Basic management modules (all new managers at all levels) • Maintenance service vessels (all employees on service boats) • Hygiene and Biosafety (all sea employees) • Fish welfare (all employees) In addition to these, we will continuously prioritize establishing: • Onboarding package • Simple training videos on individual operations (Frøy practice) • Existing courses in escape protection and on inspection of nets come in addition. We are trying to nd a technical solu- tion to get these onto a new platform Collaborations with educational institutions Frøy actively contributes towards educating skilled workers, and hire several apprentices and cadets every year. We attend apprentices’ conferences to recruit new apprentices to our organization. In 2022 Frøy had a total of 66 apprentices and 16 cadets distributed on our vessels. Every year, the SNMK hand out the “Maritime Training Com- pany of the Year” award. The award is handed out to companies that make a special eort to recruit to the seafaring profession, and Frøy is proud to be awarded this prestigious title in 2022. In addition to being an attractive employee for apprentices and cadets we welcome internship students on our vessels. We cooperate with the “blue” educations at both upper secondary and university college level, with Ungt Entrepenørskap (Young Entre- preneurship), Blått Kompetansesenter (Center for Blue Compe- tence), NTNU and SINTEF. These initiatives are further described in the chapter about ‘Technological Development and R&D’. 5 new e-learning courses 5 new e-learning courses Existing courses Simple training videos Fish Wellfare Fish Wellfare Culture and values New employees/ On-boarding Chemical handling Employees at sea Basic manager modules All new managers Organisation and system Hygiene and biosecurity HSE/Fish Welfare Maintenance service vessels Economy Operational topics Management FRØY ASA | ANNUAL REPORT 2022 57 LOCAL CONTRIBUTOR As an active industry player in Norwegian coastal areas, Frøy is a major contributor in local communities through job creation that contribute to upholding sustainable coastal communities in areas that are generally seeing a population decline. ECONOMIC CONTRIBUTION [MNOK] YEAR 2020 2021 2022 Total contributions - 0.394 0.679 Frøy employs more than 900 people, who all reside in communities along the entire Norwegian coast. We create important jobs for these communities, and we contribute signicant tax revenues to local governments. In Seafood Norway’s report “Aquaculture 2030”, they have ana- lyzed the aquaculture industry’s impact on local value creation in coastal communities 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 Norwegian 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 communities in which we operate. We also work with local upper secondary schools to maintain and grant local vocational education programs, in addition to supporting initiatives that ensure higher education in aquaculture-related education. TECHNOLOGICAL DEVELOPMENTS Frøy wants to be a leader in the development of technology and services that contribute to more sustainable development. As part of this work, we collaborate in R&D projects with suppliers, cus- tomers, universities, and research communities that stimulate the creation of more sustainable solutions to the industry’s challenges. R&D COSTS [MNOK] YEAR 2020 2021 2022 Total R&D costs - 8,242 8,003 In 2022, Frøy signed a partnership agreement with NCE Aquatech Cluster, which is a technology cluster with the following overall goals towards 2024: Cooperation on the development of technology and solutions that enable sustainable growth in aquaculture-based food production. Strengthen the cluster’s common resource and compe- tence base. Stimulate increased international demand through collaborative marketing activities. Stimulate the cluster’s entrepreneurship and capital environment. NCE Aquatech Cluster is a part of the Norwegian Innovation Clus- ter program. IN-HOUSE PROJECTS Field trials Frøy eld trials with sh were approved in August 2020. The Norwe- gian Food Safety Authority states that: “Farmed sh are entitled to good welfare. Therefore, the consequences and suitability of methods and equipment must be documented before they can be used”. There is a great need for laboratory animal enterprises that have expertise in the use of equipment for non-drug delousing 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 handling (delousing, sorting, displacement) of live sh, in line with the Norwegian regulations. In 2022 we have continued with implementation of the new meth- ods for better ecacy and improved sh welfare. This important work will be ongoing in close cooperation with our customers. COLLABORATION PROJECTS Coastal Preparedness The project “Coastal Preparedness” is an innovation project for the business sector, part-funded by the Research Council of Norway which extends from 2020 to 2022. The project’s vision is “Increased safety in coastal waters through strengthened operational pre- paredness» and is a collaborative project between various actors in the business sector and the research institution SINTEF Ocean. 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 preparedness Emergency response vessel Environmental and algae monitoring Operational emergency response support/operations center Simulator-based training Frøy primary contribute in connection with the development of an emergency vessel and operational emergency response support. The project was completed in 2022, and some of the other parts of the project will be continued into other ongoing projects through some of the project partners. Improved hole detection in connection with net inspections In 2022 Frøy continued their collaborative pilot project with ABB, and supplied the machines with material for further developing the algorithms for improving hole detection and reducing margin of error under dicult conditions of real-time net inspections. The goal of the project is to develop a tool that can assist the net inspector to detect holes in the net during net inspections, and contribute to better quality in our inspections. This technology wil supply the sh farmer with a better overview of their plant’s integrity, and thus lead to fewer incidents of sh escapes. 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 Center for Blue Competence on Frøya in relation to both “Blue Innovation Camp” and the “Bridgehead Conference”. “Blue Innovation Camp” is an aquaculture-oriented innovation camp, focusing on the blue industry that is part of the Trøndelag UE (Young Entrepreneurship) initiative. Here, pupils in 10 th grade at junior high schools come up with proposals for solutions to some of the industry’s issues, and in 2022 Frøy participated for the second year in a row alongside two other companies from the blue industry and contributed with a problem from our every-day work. “The Bridgehead Conference” is a meeting place for businesses, students, researchers, pupils, teachers and committed social actors, that is held twice a year. Frøy participated at the confer- ence during the fall of 2022 and held a presentation on the topic “Are the providers of services to coastal aquaculture in a time of upheaval?”. The conference is also a great arena to connect with researchers and students who could be potential future collabo- ration partners with Frøy. Both these initiatives are important arenas to ensure sustainable research and innovation in an ever-evolving industry. In addition, Frøy have a collaboration with the Rørvik Vocational School, where Frøy’s Fish Welfare Manager have lectures in sh welfare. Student thesis Towards the end of 2022 we started the initial conversations with a group of bachelor students, to dene hypothesis and content for a bachelor’s thesis in collaboration with Frøy. The aim of the thesis is to investigate how the appetite and behavior of the sh is inuenced by the amount of net fouling and frequency of net cleaning. The work includes analysis of relevant historical data and collection of experience-based knowledge, aiming to suggest a net cleaning strategy for optimal feeding and sh welfare. The thesis will be completed during the rst half of 2023. THE WAY FORWARD – PLANS FOR 2023 The continuous work to improve upon our HSE results and ensure that all our workers have a safe and secure workplace will continue into the coming years. Frøy will participate in important meeting are- nas such as the Maritime Safety Conference and HSE forums, to draw on the experience of others in the same industry and contribute with the experience we have gained. Increased stang will strengthen the HSEQ department to improve routines for internal control and audits. In 2023, we will continue our eorts to ensure at greater degree of gender diversity among our crew members, especially among the ocers, and in middle management the level on shore. We will also intensify our eorts to produce internal training materials to better ensure adequate training among our employees in relation to the tasks they perform. Better systems will also ensure better documentation of the training, by establishing a common training portal for our employees. The work to further develop competence matrices for each job category continues, and we will conduct regular gap analyses to map the organization’s competence needs. The work of ensuring a common corporate culture will continue in 2023. Team buildings for further developing our management levels will proceed, and Frøy’s talent development program will be formal- ized within the next year. An important measure to secure a com- mon corporate culture is to harmonize collective agreements and benets, and the goal is to complete negotiations with employee representatives during Q1 2023. The delivery of the wellboat MS Gåsø Odin was planned in 2022 but is delayed to Q2 2023. In addition is the vessel MS Veidnes scheduled for delivery during 2023. Both vessels will be built with battery packages and diesel-electric propulsion, equipped with technology which will reduce energy consumption further. MS Gåsø Odin will be equipped with a RO unit for production of fresh water, and MS Veidnes will be built with a DC plant that may reduce the total energy consumption with up to 8% and a heat recovery system from cooling water and exhaust. In the service segment Frøy will plan to delivery of 7 new vessels in 2023. All of the vessels will be installed with battery hybrid propul- sion systems. In 2023, Frøy will continue all our initiatives where we are contribut- ing to local growth and development. We will participate at both the “Blue innovation Camp” and the “Bridgehead Conference” in 2023, to encourage pupils to take an interest to the blue industry and help us solve our future problems with sustainability at mind. We will also continue to seek opportunities to cooperate with higher level students for future student assignments. As a part of the ongoing development of an overall sustainability strategy, Frøy will also strengthen and bring together the company’s innovation processes to ensure that the necessary means are taken to nd good sustainable solutions to the issues we meet in our day- to-day line of work. FRØY ASA | ANNUAL REPORT 202258 LOCAL CONTRIBUTOR As an active industry player in Norwegian coastal areas, Frøy is a major contributor in local communities through job creation that contribute to upholding sustainable coastal communities in areas that are generally seeing a population decline. ECONOMIC CONTRIBUTION [MNOK] YEAR 2020 2021 2022 Total contributions - 0.394 0.679 Frøy employs more than 900 people, who all reside in communities along the entire Norwegian coast. We create important jobs for these communities, and we contribute signicant tax revenues to local governments. In Seafood Norway’s report “Aquaculture 2030”, they have ana- lyzed the aquaculture industry’s impact on local value creation in coastal communities 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 Norwegian 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 communities in which we operate. We also work with local upper secondary schools to maintain and grant local vocational education programs, in addition to supporting initiatives that ensure higher education in aquaculture-related education. TECHNOLOGICAL DEVELOPMENTS Frøy wants to be a leader in the development of technology and services that contribute to more sustainable development. As part of this work, we collaborate in R&D projects with suppliers, cus- tomers, universities, and research communities that stimulate the creation of more sustainable solutions to the industry’s challenges. R&D COSTS [MNOK] YEAR 2020 2021 2022 Total R&D costs - 8,242 8,003 In 2022, Frøy signed a partnership agreement with NCE Aquatech Cluster, which is a technology cluster with the following overall goals towards 2024: Cooperation on the development of technology and solutions that enable sustainable growth in aquaculture-based food production. Strengthen the cluster’s common resource and compe- tence base. Stimulate increased international demand through collaborative marketing activities. Stimulate the cluster’s entrepreneurship and capital environment. NCE Aquatech Cluster is a part of the Norwegian Innovation Clus- ter program. IN-HOUSE PROJECTS Field trials Frøy eld trials with sh were approved in August 2020. The Norwe- gian Food Safety Authority states that: “Farmed sh are entitled to good welfare. Therefore, the consequences and suitability of methods and equipment must be documented before they can be used”. There is a great need for laboratory animal enterprises that have expertise in the use of equipment for non-drug delousing 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 handling (delousing, sorting, displacement) of live sh, in line with the Norwegian regulations. In 2022 we have continued with implementation of the new meth- ods for better ecacy and improved sh welfare. This important work will be ongoing in close cooperation with our customers. COLLABORATION PROJECTS Coastal Preparedness The project “Coastal Preparedness” is an innovation project for the business sector, part-funded by the Research Council of Norway which extends from 2020 to 2022. The project’s vision is “Increased safety in coastal waters through strengthened operational pre- paredness» and is a collaborative project between various actors in the business sector and the research institution SINTEF Ocean. 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 preparedness Emergency response vessel Environmental and algae monitoring Operational emergency response support/operations center Simulator-based training Frøy primary contribute in connection with the development of an emergency vessel and operational emergency response support. The project was completed in 2022, and some of the other parts of the project will be continued into other ongoing projects through some of the project partners. Improved hole detection in connection with net inspections In 2022 Frøy continued their collaborative pilot project with ABB, and supplied the machines with material for further developing the algorithms for improving hole detection and reducing margin of error under dicult conditions of real-time net inspections. The goal of the project is to develop a tool that can assist the net inspector to detect holes in the net during net inspections, and contribute to better quality in our inspections. This technology wil supply the sh farmer with a better overview of their plant’s integrity, and thus lead to fewer incidents of sh escapes. 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 Center for Blue Competence on Frøya in relation to both “Blue Innovation Camp” and the “Bridgehead Conference”. “Blue Innovation Camp” is an aquaculture-oriented innovation camp, focusing on the blue industry that is part of the Trøndelag UE (Young Entrepreneurship) initiative. Here, pupils in 10 th grade at junior high schools come up with proposals for solutions to some of the industry’s issues, and in 2022 Frøy participated for the second year in a row alongside two other companies from the blue industry and contributed with a problem from our every-day work. “The Bridgehead Conference” is a meeting place for businesses, students, researchers, pupils, teachers and committed social actors, that is held twice a year. Frøy participated at the confer- ence during the fall of 2022 and held a presentation on the topic “Are the providers of services to coastal aquaculture in a time of upheaval?”. The conference is also a great arena to connect with researchers and students who could be potential future collabo- ration partners with Frøy. Both these initiatives are important arenas to ensure sustainable research and innovation in an ever-evolving industry. In addition, Frøy have a collaboration with the Rørvik Vocational School, where Frøy’s Fish Welfare Manager have lectures in sh welfare. Student thesis Towards the end of 2022 we started the initial conversations with a group of bachelor students, to dene hypothesis and content for a bachelor’s thesis in collaboration with Frøy. The aim of the thesis is to investigate how the appetite and behavior of the sh is inuenced by the amount of net fouling and frequency of net cleaning. The work includes analysis of relevant historical data and collection of experience-based knowledge, aiming to suggest a net cleaning strategy for optimal feeding and sh welfare. The thesis will be completed during the rst half of 2023. THE WAY FORWARD – PLANS FOR 2023 The continuous work to improve upon our HSE results and ensure that all our workers have a safe and secure workplace will continue into the coming years. Frøy will participate in important meeting are- nas such as the Maritime Safety Conference and HSE forums, to draw on the experience of others in the same industry and contribute with the experience we have gained. Increased stang will strengthen the HSEQ department to improve routines for internal control and audits. In 2023, we will continue our eorts to ensure at greater degree of gender diversity among our crew members, especially among the ocers, and in middle management the level on shore. We will also intensify our eorts to produce internal training materials to better ensure adequate training among our employees in relation to the tasks they perform. Better systems will also ensure better documentation of the training, by establishing a common training portal for our employees. The work to further develop competence matrices for each job category continues, and we will conduct regular gap analyses to map the organization’s competence needs. The work of ensuring a common corporate culture will continue in 2023. Team buildings for further developing our management levels will proceed, and Frøy’s talent development program will be formal- ized within the next year. An important measure to secure a com- mon corporate culture is to harmonize collective agreements and benets, and the goal is to complete negotiations with employee representatives during Q1 2023. The delivery of the wellboat MS Gåsø Odin was planned in 2022 but is delayed to Q2 2023. In addition is the vessel MS Veidnes scheduled for delivery during 2023. Both vessels will be built with battery packages and diesel-electric propulsion, equipped with technology which will reduce energy consumption further. MS Gåsø Odin will be equipped with a RO unit for production of fresh water, and MS Veidnes will be built with a DC plant that may reduce the total energy consumption with up to 8% and a heat recovery system from cooling water and exhaust. In the service segment Frøy will plan to delivery of 7 new vessels in 2023. All of the vessels will be installed with battery hybrid propul- sion systems. In 2023, Frøy will continue all our initiatives where we are contribut- ing to local growth and development. We will participate at both the “Blue innovation Camp” and the “Bridgehead Conference” in 2023, to encourage pupils to take an interest to the blue industry and help us solve our future problems with sustainability at mind. We will also continue to seek opportunities to cooperate with higher level students for future student assignments. As a part of the ongoing development of an overall sustainability strategy, Frøy will also strengthen and bring together the company’s innovation processes to ensure that the necessary means are taken to nd good sustainable solutions to the issues we meet in our day- to-day line of work. FRØY ASA | ANNUAL REPORT 2022 59 END NOTES 1. Source: Article 2(22) in https://eur-lex.europa.eu/legal-content/ EN/TXT/PDF/?uri=CELEX:32019R2088 2. Source: https://www.newscientist.com/article/2290068-food-pro- duction-emissions-make-up-more-than-a-third-of-global-total/ 3. Defined as an incident where a significant number of injured or dead fish in cargo which have to be reported to the Norwegian Food Safety Authority 4. Defined as an incident where violation of biosecurity measures leads to the spread of ILA-virus or “stamping out” disease 5. Use of 2 washing robots at the same time in the net 6. The GLOBALG.A.P. Aquaculture Standard has been successfully assessed against the Global Food Safety Initiative (GFSI) Bench- marking Requirements and achieved GFSI recognition for scope A2 farming of Fish - the ONLY Aquaculture farming standard to have achieved this. 7. The Standard has also been benchmarked against the Global Sustainable Seafood Initiative’s Global Benchmark Tool Version 1 and are recognized by the GSSI Steering Board. A seafood certification scheme is recognized after successfully completing the 7-step Benchmark Process. The expert-led process involves objective assessments made against the Benchmark Framework. 8. Scope 1 includes CO2 emissions from vessels and vehicles owned or operated by Frøy ASA or underlying companies. The emissions mainly stem from the combustion of either diesel or MGO (Maritime Gas Oil) which has a CO2 factor of 3.17 kg CO2/ kg fuel. It does not include CO2, (eq) emission data from other climate gases as methane, nitrous oxide, etc. We will however aim to include this data in next year’s report 9. Scope 2 includes CO2 (eq) emissions from use of electric power to heat company buildings as offices or workshops, or electric power to supply vessels with shore power from the national electric grid 10. Based on a CO2 factor of 11 grams CO2,(eq) /kWh for electric power produced in Norway in 2021. Source: Hvor kommer strømmen fra? - NVE 11. Based on a CO2 factor of 38 grams CO2,(eq) /kWh for electric power produced in Norway in 2022. Source: Live-data: Strøm og CO2 – Energi og Klima 12. Scope 3 includes CO2 emissions in connection with work travel, either by plane or using private car. Scope 3 does not include CO2 emissions where public transport was used since we were not able to retrieve data for this for 2022. We will however aim to include this data in next year’s report as well as emission data from our sub-contractors 13. CO2 emissions includes transport to and from missions 14. The increase is due to a more extensive use of DP in connection with the delivery of feed, which is more energy-intensive 15. Comparing with the 2021 data reported last year this year’s number are smaller. This can be explained by more accurate data collection this year 16. Rate of recordable work-related injuries = [Number of recorda- ble work-related injuries/Number of hours worked]x1.000.000 17. Rate of high-consequence work-related injuries = [Number of high-consequence work-related injuries (excluding fatalities)/ Number of hours worked]x1.000.000 18. Including apprentices 19. The employee level is based on a weight of criteria within competence, responsibility, and working conditions and efforts related to the position: Level 1: CEO, Directors Level 2: Group Managers, Staff Functions, Operational Managers, Officers (Machine/Bridge), Vessel Managers Level 3: Deck personnel with and without a certificate Level 4: Cadets and apprentices 20. Changes in women’s percentage pay compared to men’s from 2021 to 2022 are partly due to reorganization effective from 01 July 2022 where the distribution of employees in wage levels was changed, and partly due to the fact that we were not able to place the total of 190 employees in a wage level. This repre- sents a margin of error in our statistics, and we will correct this in next year’s report. All employees in pay group 1 and a large proportion of employees in pay group 2 are individually paid. Salaries are determined on the basis of criteria such as the experience and competence the employee has that is relevant to the position, the number of employees for whom the employee has man- agement responsibility and the total responsibility assigned to the position. In wage level 3 and 4, women generally have lower percent- age pay compared to men on the basis that they have a lower seniority to a greater extent than men, and based on tar- iff-based pay, this will result in wage differences. Tariffs, on the other hand, provide equal pay regardless of gender with equal seniority. 21. Based on average salaries for men and women in Frøy ASA and all of its underlying companies 22. Substitutes as a result of absence, or apprentices/cadets, who are on a time-limited training agreement FRØY ASA | ANNUAL REPORT 202260 FRØY ASA | ANNUAL REPORT 2022 61 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. In compliance with NUES, two of the shareholder-elected Board members are independent of the Company’s main shareholder (including the chairperson). Two of the five shareholder-elected Board members are independent of the Company’s executive management and material business relationships, while NUES recommends that the majority of the Board members are independent of the Company’s executive management and material business relationships. By having an independent chairperson, it is the opinion of Frøy that this balances out the deviation from NUES and seeks to secure the common interests of all shareholders, including the minority shareholders.” 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 defined the following long-term dividend policy: The Company has an intention to pay out minimum 50% of net profit as dividend. In its dividend proposal, the Board will take into account future gearing level and liquidity requirements. The Board of Directors will propose to the Annual General Meeting in 2023 to intro- duce half-yearly dividend payments going forward. 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 different purposes, the specific 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 specific purposes. See also item 4. 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 par- ticipate in general meetings. The Company emphasises that the interests of the share- holders is advanced and that all sharehold- 1. STATEMENT OF CORPORATE GOVERNANCE Frøy complies with the Norwegian Code of Practice for Corporate Governance for the financial 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 fish farmers with maintaining effi- cient day-to-day farming operations at sea. The service of Frøy includes transportation of fish, sorting, counting, cleaning, treatment, inspection, installation and maintenance of sites. Frøy’s team includes 940 special- ised aqua service professionals and 9 local offices along the Norwegian coast. The fleet is modern and well invested and consists of wellboats, service and transport vessels. Frøy has a management and organisation 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 fish farming sites b) Safe and efficient transportation of smolt and feed c) Sorting, counting and bio- logical treatment of salmon, and d) Harvest and transport of fish. The Company ’s objectives, as stated in its articles of association, is to own shares in companies within fisheries 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, strat- egies and risk profile at least annually and reports on these matter in the Board report. 3. EQUITY AND DIVIDEND In the opinion of the Board, Frøy’s equity capital is appropriate to the Company’s objectives, strategy and risk profile. FRØY ASA | ANNUAL REPORT 202262 Board, represented by the chairperson, may conduct dialogue directly with investors. 5. FREELY NEGOTIABLE SHARES The shares of Frøy are 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 beneficial 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. 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: 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 ers, 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-emp- tion rights of existing shareholders when increasing the share capital, such waiver must be justified by the common interest of the Company and the shareholders and explained by the Board in a separate stock exchange notice. Transactions involving own shares are normally executed 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 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 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 sufficiently detailed and compre- hensive to enable shareholders to reach decisions on the matters to be considered at the meeting. The notification deadline for shareholders wishing to attend the general meeting of shareholders is maximum five days prior to the meeting. The notification deadline may be extended or shortened and will in all cases be evident from the notice of the gen- eral meeting. In accordance with the Compa- ny’s articles of association, shareholders that do not provide a notification of attendance to the general meeting within the deadline are not entitled to vote over matters raised in the general meeting. In general, only shareholders registered in the VPS are entitled to voting rights. Beneficial 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 beneficial owner wishes to attend and vote at a general meeting, in person or by proxy, the beneficial owner must provide written confirmation from the nominee that he or she is the real shareholder, as well as declaration from the beneficial owner themselves, that they are the rightful owner of such shares. If such documentation cannot be provided, shares registered in a nominee account FRØY ASA | ANNUAL REPORT 2022 63 must be re-registered in the Norwegian Central Securities Depository (VPS) and be registered in the VPS on the fifth 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. 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 shareholder of SalMar ASA, and SalMar is Frøy’s largest shareholder through its wholly owned subsidiary NTS AS. 8. BOARD: COMPOSITION AND INDEPENDENCE Pernille Skarstein Christensen and Rune Juliussen are both investment Directors of Kverva AS, a significant shareholder of SalMar ASA. Morten Loktu is board member of SalMar ASA. SalMar is Frøy’s largest share- holder through its wholly owned subsidiary NTS AS. SalMar is also a major customer of Frøy. The two remaining Board members, including the Chairman, are considered to be 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 Compa- ny’s overriding goals, objectives and strat- egies, including approval and endorse- ment of plans and budgets; 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. 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 current members of the Nomination Committee are Gustav Witzøe, Tor Lønnum and Magnus Dybwad. None of the members are executive personnel or board members in Frøy ASA. Gustav Witzøe and Tor Lønnum, are both members of the board of SalMar ASA, and Magnus Dybwad is executive per- sonnel in Kverva AS. Kverva AS is a significant FRØY ASA | ANNUAL REPORT 202264 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. 10. AUDIT COMMITTEE The Audit Committee has 2 members, Morten Loktu and Linda Johnsen. Johnsen is considered independent of the main share- holder of the Company. In the opinion of the Board, the Audit Com- mittee met the Norwegian requirements regarding independence and competence. 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 man- agement; (d) regularly be in contact with the Compa- ny’s auditor regarding audit of the annual accounts; (e) supervise and review the auditor’s inde- pendence and (f) prepare for the Company’s election of its auditor, and provide a recommendation in this respect. 11. RISK MANAGEMENT AND INTERNAL CONTROLS The Board ensures that the Company has sound internal controls and appropriate risk management systems through, for example, 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. monitoring and reviewing the annual and interim financial 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 effectiveness of the Compa- ny’s policies on ethics, conflicts of interest and compliance with competition law. The Board has established procedures for its own work and that of the Company’s man- agement, with particular emphasis on clear internal division of responsibilities whereby the board has responsibility for supervising and administrating the Company, 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 conflicts 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 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 finan- cial officer. 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 reflect 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 financial statement. 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 ordi- nary general meeting of the shareholders FRØY ASA | ANNUAL REPORT 2022 65 at least every fourth year and in any event if a significant change to the guidelines. 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 reflect 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 general meeting approved a share-based bonus program for its executive manage- ment in 2021, in order to ensure that the executive personnel and shareholders have convergent interests. The board members are not covered by this bonus program. More detailed information on the remuner- ation of the executive management for 2022 can found in note 7.1 to the annual accounts The Company will prepare a report on sala- ries and remuneration to the management. This report shall be presented at the ordi- nary general meeting of the shareholders for an advisory vote. The report shall contain a comprehensive overview of paid and out- standing salaries and remuneration to the management. The report shall be published on the webpages of Frøy. The Board has established a remuneration committee. 14. INFORMATION AND COMMUNICATION Frøy has established guidelines for the Com- pany’s reporting of financial and extra-fi- 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. use their best efforts to ensure that all the shareholders of the Company are treated equally. The Board shall also use its best efforts to ensure that sufficient 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 offer at a fair price for the purchase of the balance of the issued shares in the capital of the Company. The mandatory offer must be made within four weeks after the threshold was passed. If an offer is made for the shares in the Company, the Board shall issue a statement evaluating the offer and make a recommendation as to whether the shareholders should accept the offer. If the Board finds 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. 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 Shareholder information is available at www. froygruppen.no. The financial 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 Shareholder information is available at www. froygruppen.no. The financial statements and annual report are sent 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 sufficient information and time to form a view of the offer. 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 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 effect 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 FRØY ASA | ANNUAL REPORT 202266 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. bids for the Company’s shares should only be entered into where it is self-evident that such an agreement is in the common inter- est of the Company and the shareholders. The same applies to any agreement on pay- ment of financial compensation to the bidder if the bid does not proceed. Any financial compensation should be limited to the costs the bidder has incurred in making the bid. In addition, the auditor shall present a review of the Company’s internal control procedures, with identification 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 FRØY ASA | ANNUAL REPORT 2022 67 EQUALITY STATEMENT PART 1: ACTUAL STATE – GENDER EQUALITY Table 1 shows an overview of the proportion of women in the Group by company, as well as the number of temporary employees/temporary workers. POSITION LEVELS AND SALARIES: To calculate the pay gap, we have separated regular salaries and additional income, such as bonuses, for the budget year of 2022. 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 assessment of which positions are included in the dierent levels. Involuntary part-time: Due to the fact that there are very few part-time employees in our companies, we have chosen to carry out the survey without much involvement from employees. Findings from the survey: A review of salary levels in Frøy shows that women in the company on average have a salary of about 91 % of the average men’s salary. EQUALITY STATEMENT We work for equality and against discrimination related to gender, pregnancy, leave of absence at birth or adoption, caregiving tasks, ethnicity, religion, beliefs, disability, sexual orientation, gender identity and gender expression, and combi- nations of these foundations The report includes Frøy ASA and its subsidiaries, hereby referred to as Frøy. Frøy has a line/sta organization, where the sta functions in Frøy ASA serve all Frøy’s companies. The work we describe below will therefore apply to all Frøy companies. Contract type Frøy Akvaservice AS Frøy ASA Frøy Rederi AS Frøy Shipping AS Norsk Fisketransport AS Total Company Legal Entity Total Frøy AkvaRessurs AS Frøy Akvaservice AS Frøy Nord AS Frøy Vest AS Total Total Fisketransport AS Frøy Reder AS Total Total 1 - Permanent employee Men 375 123 121 55 76 23 104 5 99 39 137 678 Women 12 4 3 1 4 22 6 0 6 0 3 43 Total 387 127 124 56 80 45 110 5 105 39 141 722 % women 3.1% 3.1% 2.4% 1.8% 5.0% 48.9% 5.5% 0.0% 5.7% 0.0% 2.1% 6.0% 2 - Substitute/ temporary Men 103 13 47 21 22 2 7 2 5 11 46 169 Women 5 1 1 3 0 1 0 0 0 2 5 13 Total 108 14 48 24 22 3 7 2 5 13 51 184 % women 4.6% 7.1% 2.1% 12.5% 0.0% 33.3% 0.0% 0.0% 0.0% 15.4% 9.8% 7.1% 3 - Extra/ commitment Men 6 5 1 7 3 4 20 Women 0 0 0 4 1 1 6 Total 6 5 1 11 4 5 26 % women 0.0% 0.0% 0.0% 36.4% 25.0% 20.0% 23.1% Undened 1 1 9 10 Total Men 484 136 173 77 98 32 112 7 105 62 187 877 Women 17 5 4 4 4 27 6 0 6 3 9 62 Unknown 0 0 0 0 0 0 0 0 0 0 1 1 Total 501 141 177 81 102 59 118 7 111 65 197 940 % women 3.4% 3.5% 2.3% 4.9% 3.9% 45.8% 5.1% 0.0% 5.4% 4.6% 4.6% 6.6% FRØY ASA | ANNUAL REPORT 202268 PART 1: ACTUAL STATE – GENDER EQUALITY Table 1 shows an overview of the proportion of women in the Group by company, as well as the number of temporary employees/temporary workers. POSITION LEVELS AND SALARIES: To calculate the pay gap, we have separated regular salaries and additional income, such as bonuses, for the budget year of 2022. 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 assessment of which positions are included in the dierent levels. Involuntary part-time: Due to the fact that there are very few part-time employees in our companies, we have chosen to carry out the survey without much involvement from employees. Findings from the survey: A review of salary levels in Frøy shows that women in the company on average have a salary of about 91 % of the average men’s salary. EQUALITY STATEMENT We work for equality and against discrimination related to gender, pregnancy, leave of absence at birth or adoption, caregiving tasks, ethnicity, religion, beliefs, disability, sexual orientation, gender identity and gender expression, and combi- nations of these foundations The report includes Frøy ASA and its subsidiaries, hereby referred to as Frøy. Frøy has a line/sta organization, where the sta functions in Frøy ASA serve all Frøy’s companies. The work we describe below will therefore apply to all Frøy companies. Contract type Frøy Akvaservice AS Frøy ASA Frøy Rederi AS Frøy Shipping AS Norsk Fisketransport AS Total Company Legal Entity Total Frøy AkvaRessurs AS Frøy Akvaservice AS Frøy Nord AS Frøy Vest AS Total Total Fisketransport AS Frøy Reder AS Total Total 1 - Permanent employee Men 375 123 121 55 76 23 104 5 99 39 137 678 Women 12 4 3 1 4 22 6 0 6 0 3 43 Total 387 127 124 56 80 45 110 5 105 39 141 722 % women 3.1% 3.1% 2.4% 1.8% 5.0% 48.9% 5.5% 0.0% 5.7% 0.0% 2.1% 6.0% 2 - Substitute/ temporary Men 103 13 47 21 22 2 7 2 5 11 46 169 Women 5 1 1 3 0 1 0 0 0 2 5 13 Total 108 14 48 24 22 3 7 2 5 13 51 184 % women 4.6% 7.1% 2.1% 12.5% 0.0% 33.3% 0.0% 0.0% 0.0% 15.4% 9.8% 7.1% 3 - Extra/ commitment Men 6 5 1 7 3 4 20 Women 0 0 0 4 1 1 6 Total 6 5 1 11 4 5 26 % women 0.0% 0.0% 0.0% 36.4% 25.0% 20.0% 23.1% Undened 1 1 9 10 Total Men 484 136 173 77 98 32 112 7 105 62 187 877 Women 17 5 4 4 4 27 6 0 6 3 9 62 Unknown 0 0 0 0 0 0 0 0 0 0 1 1 Total 501 141 177 81 102 59 118 7 111 65 197 940 % women 3.4% 3.5% 2.3% 4.9% 3.9% 45.8% 5.1% 0.0% 5.4% 4.6% 4.6% 6.6% FRØY ASA | ANNUAL REPORT 2022 69 The proportion of women in Frøy overall is 6.6 % as of 31.12.2022 (ref. Table 1). This is almost 2 % more than at the same time last year. There are generally few women represented in all companies with operations at sea, between 0 and 5%. This is considered to have sev- eral reasons, but culture/tradition, working hours and shift work are important factors. In Frøy ASA, which consists of onshore employees, there is a female share of 45.8 %. Active eorts have been made to increase the proportion of women, including in senior positions. The Board of Directors of Frøy ASA consists of 5 members of which 2 board members are women. The board is aware of the gender equality obligations that are incumbent on the company. Frøy’s group management, which consists of 9 employees, 4 are women. Frøy ASA also has a female CEO. There are essentially no employees in part-time positions in Frøy’s companies. Approximately 23% of all employees as of 31.12.22 are temporary employees. Of these, 44 % are apprentices/cadets who are on a time-limited training agreement and the remainder mainly sick leave. The average number of weeks of parental leave in 2022 is 9,7 weeks for men and 29,3 weeks for women respectively. Corporation Company Legal Entity Men Women Total % women Fixed salary (women) Fixed salary (men) Fixed salary (total) Womens salary in % of mens salary Frøy Akvaservice AS Frøy AkvaRessurs AS 136 5 141 3.5 % 372402 695975 535519 54 % Frøy Akvaservice AS 173 4 177 2.3 % 579473 652174 455031 89 % Frøy Nord AS 77 4 81 4.9 % 603183 600232 396407 100 % Frøy Vest AS 98 4 102 3.9 % 559252 643393 441511 87 % Total 484 17 501 3.4 % 519391 654440 465779 79 % Frøy ASA Total 32 27 59 45.8 % 812292 916422 705876 89 % Frøy Rederi AS Total 112 6 118 5.1 % 514324 716314 613141 72 % Fisketransport AS 7 0 7 0.0 % NaN 740177 592676 NaN Frøy Rederi AS 105 6 111 5.4 % 514324 714723 614443 72 % Frøy Shipping AS Total 62 3 65 4.6 % 118555 487813 501640 24 % Norsk Fisketransport AS Total 187 9 197 4.6 % 286201 607079 617205 47 % Total 877 62 940 6,6 % 593209 650023 532921 91 % Table 2 shows women’s xed salary as a % of men’s xed salary total in Frøy PART 2: FRØY’S WORK FOR EQUALITY AND AGAINST DISCRIMINATION DESCRIPTION OF FRØY’S PRINCIPLES, PROCEDURES AND STANDARDS Our gender equality work is rooted in Frøy’s various strategies, tools and guidelines. Frøy has its own guide for dealing with discrimination. Frøy has a routine for handling sexual harassment. There is a routine for internal notication of censurable conditions. The consideration of equality and non-discrimination is other- wise included in the rest of the personnel policy. THE STRUCTURE OF GENDER EQUALITY WORK IN FRØY: Frøy’s sta department for HR/stang (crew dept), which con- sists of 7 employees, will 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 has weekly meetings, and works with both prevention and possible incidents related to this topic. The department works directly with all Frøy’s compa- nies in general, and more specically with an internal division of labor in relation to each company. The department is headed by Group Manager Maritime Stang, who is also a permanent member of the Group’s management team. The Group Manager HR/CEO is also actively involved in the group, and a participant in the Group’s management team. Group Manager Maritime Stang conducts meetings with employee representatives, where gender equality is the topic. Group management meetings are held weekly, where gender equality eorts are up for discussion as needed. The crew department’s employees regularly participate in meetings with operations managers in the various companies where, among other things, recruitment and employee follow-up are topics. FRØY’S WORK TO INVESTIGATE DISCRIMINATION RISKS AND EQUALITY BARRIERS. Frøy’s guidelines in the various personnel policy areas are, if nec- essary, subject to continuous improvement throughout the year. Mapping of gender equality and pay conditions was carried out for 2022 Gender equality and non-discrimination were raised at several departmental meetings throughout the year, as well as in meet- ings with operations managers in the various companies. DESCRIPTION OF RISKS In Frøy, the vast majority of our employees work shifts at sea. This means that work is carried out on a boat for 2, 3 or 4 consecutive weeks (somewhat dierent rotation schemes), with corresponding periods of time o. This makes it possible to combine work and family life in the form of longer periods of time o. On the other hand, it is dicult to facilitate being able to work shorter days, or a reduced working week, as a result of the shift work. Nevertheless, there are good opportunities to take parental leave in accordance with regulations. To work at vessels it requires an approved health certicate. This means that there is little room for facilitation for disabled people at our sea-related jobs. No survey of ethnicity, religion and beliefs has been conducted among our employees. In the wage survey, we found some dierence between wom- en’s and men’s wages. This shows a risk of discrimination in our wage policy. For employees at sea, wages are regulated by collective agree- ments, and there should therefore be no room for discrimination between women and men. Shipping company allowances, which are negotiated in local negotiations, are based on position and are not individual. For employees of Frøy ASA, there are no collective agreements that regulate wages. As a result of the fact that Frøy today consists of several merged companies, one sees a certain dierence in salaries in equal positions. A wage policy has been drawn up for Frøy’s onshore employees in 2022. Here it is stated, among other things, that individual remuneration is practiced, that the wage system should contribute to high performance/eort paying o and that there should be no dierent remuneration due to gender. DIFFERENT CAUSES OF RISKS AND OBSTACLES: Shift work may be one reason for the low number of women among sea employees Guidelines against harassment and discrimination must be part of onboarding, to a greater extent than it is today. Norwegian as a working language on our boats can be an obsta- cle to a diverse workplace, especially for foreign job seekers. We will continue to work on establishing good culture, attitudes and jargon in the workplace. FRØY ASA | ANNUAL REPORT 202270 The proportion of women in Frøy overall is 6.6 % as of 31.12.2022 (ref. Table 1). This is almost 2 % more than at the same time last year. There are generally few women represented in all companies with operations at sea, between 0 and 5%. This is considered to have sev- eral reasons, but culture/tradition, working hours and shift work are important factors. In Frøy ASA, which consists of onshore employees, there is a female share of 45.8 %. Active eorts have been made to increase the proportion of women, including in senior positions. The Board of Directors of Frøy ASA consists of 5 members of which 2 board members are women. The board is aware of the gender equality obligations that are incumbent on the company. Frøy’s group management, which consists of 9 employees, 4 are women. Frøy ASA also has a female CEO. There are essentially no employees in part-time positions in Frøy’s companies. Approximately 23% of all employees as of 31.12.22 are temporary employees. Of these, 44 % are apprentices/cadets who are on a time-limited training agreement and the remainder mainly sick leave. The average number of weeks of parental leave in 2022 is 9,7 weeks for men and 29,3 weeks for women respectively. Corporation Company Legal Entity Men Women Total % women Fixed salary (women) Fixed salary (men) Fixed salary (total) Womens salary in % of mens salary Frøy Akvaservice AS Frøy AkvaRessurs AS 136 5 141 3.5 % 372402 695975 535519 54 % Frøy Akvaservice AS 173 4 177 2.3 % 579473 652174 455031 89 % Frøy Nord AS 77 4 81 4.9 % 603183 600232 396407 100 % Frøy Vest AS 98 4 102 3.9 % 559252 643393 441511 87 % Total 484 17 501 3.4 % 519391 654440 465779 79 % Frøy ASA Total 32 27 59 45.8 % 812292 916422 705876 89 % Frøy Rederi AS Total 112 6 118 5.1 % 514324 716314 613141 72 % Fisketransport AS 7 0 7 0.0 % NaN 740177 592676 NaN Frøy Rederi AS 105 6 111 5.4 % 514324 714723 614443 72 % Frøy Shipping AS Total 62 3 65 4.6 % 118555 487813 501640 24 % Norsk Fisketransport AS Total 187 9 197 4.6 % 286201 607079 617205 47 % Total 877 62 940 6,6 % 593209 650023 532921 91 % Table 2 shows women’s xed salary as a % of men’s xed salary total in Frøy PART 2: FRØY’S WORK FOR EQUALITY AND AGAINST DISCRIMINATION DESCRIPTION OF FRØY’S PRINCIPLES, PROCEDURES AND STANDARDS Our gender equality work is rooted in Frøy’s various strategies, tools and guidelines. Frøy has its own guide for dealing with discrimination. Frøy has a routine for handling sexual harassment. There is a routine for internal notication of censurable conditions. The consideration of equality and non-discrimination is other- wise included in the rest of the personnel policy. THE STRUCTURE OF GENDER EQUALITY WORK IN FRØY: Frøy’s sta department for HR/stang (crew dept), which con- sists of 7 employees, will 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 has weekly meetings, and works with both prevention and possible incidents related to this topic. The department works directly with all Frøy’s compa- nies in general, and more specically with an internal division of labor in relation to each company. The department is headed by Group Manager Maritime Stang, who is also a permanent member of the Group’s management team. The Group Manager HR/CEO is also actively involved in the group, and a participant in the Group’s management team. Group Manager Maritime Stang conducts meetings with employee representatives, where gender equality is the topic. Group management meetings are held weekly, where gender equality eorts are up for discussion as needed. The crew department’s employees regularly participate in meetings with operations managers in the various companies where, among other things, recruitment and employee follow-up are topics. FRØY’S WORK TO INVESTIGATE DISCRIMINATION RISKS AND EQUALITY BARRIERS. Frøy’s guidelines in the various personnel policy areas are, if nec- essary, subject to continuous improvement throughout the year. Mapping of gender equality and pay conditions was carried out for 2022 Gender equality and non-discrimination were raised at several departmental meetings throughout the year, as well as in meet- ings with operations managers in the various companies. DESCRIPTION OF RISKS In Frøy, the vast majority of our employees work shifts at sea. This means that work is carried out on a boat for 2, 3 or 4 consecutive weeks (somewhat dierent rotation schemes), with corresponding periods of time o. This makes it possible to combine work and family life in the form of longer periods of time o. On the other hand, it is dicult to facilitate being able to work shorter days, or a reduced working week, as a result of the shift work. Nevertheless, there are good opportunities to take parental leave in accordance with regulations. To work at vessels it requires an approved health certicate. This means that there is little room for facilitation for disabled people at our sea-related jobs. No survey of ethnicity, religion and beliefs has been conducted among our employees. In the wage survey, we found some dierence between wom- en’s and men’s wages. This shows a risk of discrimination in our wage policy. For employees at sea, wages are regulated by collective agree- ments, and there should therefore be no room for discrimination between women and men. Shipping company allowances, which are negotiated in local negotiations, are based on position and are not individual. For employees of Frøy ASA, there are no collective agreements that regulate wages. As a result of the fact that Frøy today consists of several merged companies, one sees a certain dierence in salaries in equal positions. A wage policy has been drawn up for Frøy’s onshore employees in 2022. Here it is stated, among other things, that individual remuneration is practiced, that the wage system should contribute to high performance/eort paying o and that there should be no dierent remuneration due to gender. DIFFERENT CAUSES OF RISKS AND OBSTACLES: Shift work may be one reason for the low number of women among sea employees Guidelines against harassment and discrimination must be part of onboarding, to a greater extent than it is today. Norwegian as a working language on our boats can be an obsta- cle to a diverse workplace, especially for foreign job seekers. We will continue to work on establishing good culture, attitudes and jargon in the workplace. FRØY ASA | ANNUAL REPORT 2022 71 MEASURES 2022 – EVALUATION: Personnel area Description of measures Targets Responsible Deadline / Status Result Recruitment Honour active at educational fairs etc. for pupils and students, and work particularly actively to attract female apprentices and cadets More female employees Employees of the Crew Department Continuous We have participated in various fairs / gatherings for students throughout the year. A total of 86 apprentices, of which 9 girls. A total of 16 cadets, of which 3 girls. Recruitment Vi will work actively to have female employees at all levels of the organization, and through that ensure good role models for young newly qualied women. Visible female characters will make a positive contribution Recruiting managers Continuous Female cadets are followed up separately and presented in internal and external publications. Female apprentices are deliberately highlighted in presentations and advertisements throughout the year. Promotion and development opportunities In 2022, a management program will be implemented for the middle management level in Frøy, in collaboration with “Senter for Ledelse”. Central themes are recruitment and corporate culture Good managers who contribute to good recruitment processes Head of Operation together with HR December 2022 All operations managers have completed the program and passed the exam. Provides evidence about the leadership role’s responsibility for good recruitment in line with strategies. Work environment An employee survey will be conducted for all employees during 2022, in collaboration with the Centre for Management (SFL) Identify challenges that contribute negatively to gender equality eorts HR in collaboration with (SFL) PWC December 2022 The survey was conducted, and emphasis has been placed on good action work from all managers to follow up the results, Workplace culture Frøy culture and desired attitudes must be claried in our onboarding routines. Create a good environment and good attitudes Personal managers/ crew. dept. /HR Continuous Meetings have been held for all commanders in Frøy, with emphasis on attitudes, culture and leadership roles. There has also been held a group gathering for all the sta in Frøy. Harassment, sexual harassment and gender-based violence We will focus on and put the same team / shift on board our vessels that make it more attractive for women, e.g. by having more than one woman on the same team / shift. Contribute to a good and safe working environment for everyone Operation managers in cooperation with Crew Dept. Continuous This is a long-term work, which crew managers and operations managers work continuously with. Pay and working conditions Collective agreements and any local wage agreements shall be harmonized within the segment Equal terms for everyone within the same segment Head of operation / operation manager/ HR December 2022 A demanding work, which has been led by Director Maritime stang. Negotiations are conducted in all segments, and at the end of the year in the nal phase before the conclusion of the agreement. MEASURES WE ARE PLANNING FOR 2023: Establish a common learning platform for all Frøy employees – to ensure a good onboarding of new employees and ensure Frøy standards for all services through adapted e-learning courses for all employees. Establish the Personnel Handbook also for all employees operating at sea. Continue the measures from 2022 (apart from middle manager program) FRØY ASA | ANNUAL REPORT 202272 MEASURES 2022 – EVALUATION: Personnel area Description of measures Targets Responsible Deadline / Status Result Recruitment Honour active at educational fairs etc. for pupils and students, and work particularly actively to attract female apprentices and cadets More female employees Employees of the Crew Department Continuous We have participated in various fairs / gatherings for students throughout the year. A total of 86 apprentices, of which 9 girls. A total of 16 cadets, of which 3 girls. Recruitment Vi will work actively to have female employees at all levels of the organization, and through that ensure good role models for young newly qualied women. Visible female characters will make a positive contribution Recruiting managers Continuous Female cadets are followed up separately and presented in internal and external publications. Female apprentices are deliberately highlighted in presentations and advertisements throughout the year. Promotion and development opportunities In 2022, a management program will be implemented for the middle management level in Frøy, in collaboration with “Senter for Ledelse”. Central themes are recruitment and corporate culture Good managers who contribute to good recruitment processes Head of Operation together with HR December 2022 All operations managers have completed the program and passed the exam. Provides evidence about the leadership role’s responsibility for good recruitment in line with strategies. Work environment An employee survey will be conducted for all employees during 2022, in collaboration with the Centre for Management (SFL) Identify challenges that contribute negatively to gender equality eorts HR in collaboration with (SFL) PWC December 2022 The survey was conducted, and emphasis has been placed on good action work from all managers to follow up the results, Workplace culture Frøy culture and desired attitudes must be claried in our onboarding routines. Create a good environment and good attitudes Personal managers/ crew. dept. /HR Continuous Meetings have been held for all commanders in Frøy, with emphasis on attitudes, culture and leadership roles. There has also been held a group gathering for all the sta in Frøy. Harassment, sexual harassment and gender-based violence We will focus on and put the same team / shift on board our vessels that make it more attractive for women, e.g. by having more than one woman on the same team / shift. Contribute to a good and safe working environment for everyone Operation managers in cooperation with Crew Dept. Continuous This is a long-term work, which crew managers and operations managers work continuously with. Pay and working conditions Collective agreements and any local wage agreements shall be harmonized within the segment Equal terms for everyone within the same segment Head of operation / operation manager/ HR December 2022 A demanding work, which has been led by Director Maritime stang. Negotiations are conducted in all segments, and at the end of the year in the nal phase before the conclusion of the agreement. MEASURES WE ARE PLANNING FOR 2023: Establish a common learning platform for all Frøy employees – to ensure a good onboarding of new employees and ensure Frøy standards for all services through adapted e-learning courses for all employees. Establish the Personnel Handbook also for all employees operating at sea. Continue the measures from 2022 (apart from middle manager program) FRØY ASA | ANNUAL REPORT 2022 73 CONTENT FRØY GROUP 2022 FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income 75 Consolidated Statement of Financial Position 76 Consolidated Statement of Cash Flows 78 Consolidated Statement of Changes in Equity 79 Notes to the Financial Statements 80 1.1 Significant accounting policies 80 2.1 Operating Segments 82 2.2 Revenue 85 2.3 Other income 87 2.4 Direct expense and Inventory 87 2.5 Employee benefit expenses 88 2.6 Other operating expenses 89 2.7 Trade and other receivables 90 2.8 Trade payables and other current liabilities 91 3.1 Property, vessels and equipment 91 3.2 Goodwill 93 3.3 Right-of-use assets and lease liabilities 94 3.4 Impairment considerations 97 4.1 Overview of financial instruments 99 4.2 Interest-bearing liabilities 101 4.3 Aging of financial liabilities 102 4.4 Cash and cash equivalents 104 4.5 Financial income and expenses 105 4.6 Fair value measurement 106 4.7 Capital management and financial risk 108 4.8 Share capital and shareholder information 110 4.9 Earnings per share 111 4.10 Derivative financial instruments 111 5.1 Taxes 113 6.1 Consolidated entities 115 6.2 Business combinations 118 6.3 Associated entities 120 7.1 Remuneration to Management and the Board 123 7.2 Related party transactions 125 7.3 Subsequent events 126 8.1 Changes in IFRS and new standards 127 FRØY ASA | ANNUAL REPORT 202274 Amounts in NOK thousands Note 2022 2021 Revenue 2.2 2 115 102 1 695 789 Other income 2.3 16 402 90 777 Total revenue 2 131 504 1 786 566 Direct expenses (goods/services delivered) 2.4 507 587 287 211 Employee benet expenses 2.5 617 464 499 830 Other operating expenses 2.6 343 087 307 975 Depreciation 3.1 396 289 313 793 Operating prot 267 076 377 758 Financial income 4.5 103 506 7 737 Financial expenses 4.5 -150 893 -89 292 Share of prot (loss) from associates 6.3 1 588 3 341 Prot (loss) before tax 221 278 299 544 Taxes 5.1 2 331 -15 991 Prot (loss) for the period 223 609 283 553 Prot or loss for the period attributable to: Equity holders of the parent 223 609 283 553 Non-controlling interests - Total 223 609 283 553 Earnings per share Basic, prot for the year attributable to ordinary equity holders of the parent (NOK) 4.9 2.59 4.27 Diluted, prot for the year attributable to ordinary equity holders of the parent (NOK) 4.9 2.59 4.27 Other comprehensive income Net gain (loss) on cash ow hedges 4.10 14 909 11 595 Total comprehensive income for the period 238 518 295 148 Total comprehensive income for the period attributable to: Equity holders of the parent 238 518 295 148 Non-controlling interests - Total 238 518 295 148 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FINANCIAL STATEMENTS - FRØY GROUP FRØY ASA | ANNUAL REPORT 2022 75 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December Amounts in NOK thousands Note 2022 2021 ASSETS Non-current assets Goodwill and other intangible assets 3.2, 4.2 687 612 687 612 Property, vessel and equipment 3.1, 4.2 6 011 351 5 447 138 Right-of-use assets 3.3, 4.2 514 619 455 410 Pension assets 2.5 498 586 Investments in associates 6.3 24 967 28 053 Other nancial assets 4.1 94 728 16 464 Total non-current assets 7 333 776 6 635 262 Current assets Inventory 2.4 14 966 11 488 Trade receivables 2.7, 4.2 287 982 187 908 Other receivables 2.7 70 747 83 706 Cash and cash equivalents 4.4 318 705 738 463 Total current assets 692 400 1 021 564 TOTAL ASSETS 8 026 175 7 656 827 FRØY ASA | ANNUAL REPORT 202276 Amounts in NOK thousands Note 2022 2021 EQUITY AND LIABILITIES Equity Paid-in equity Share capital 4.8 86 350 86 350 Share premium 4.8 2 289 751 2 289 751 Total paid-in equity 2 376 101 2 376 101 Other equity 918 875 809 880 Total retained earnings 918 875 809 880 Total equity 3 294 976 3 185 981 Liabilities Non-current liabilities Non-current interest-bearing liabilities 4.1, 4.2, 4.3, 4.7 3 609 570 3 370 397 Non-current lease liabilities 3.3 314 670 269 423 Deferred tax liabilities 5.1 31 474 40 528 Total non-current liabilities 3 955 714 3 680 349 Current liabilities Current interest-bearing liabilities 4.1, 4.2, 4.3, 4.7 443 142 474 259 Current lease liabilities 3.3 119 780 92 918 Trade payables and other current liabilities 2.8 209 800 223 259 Taxes payable 5.1 2 763 61 Total current liabilities 775 485 790 497 Total liabilities 4 731 199 4 470 846 TOTAL EQUITY AND LIABILITIES 8 026 175 7 656 827 Frøya, 28 April 2023 Board of Directors Frøy ASA Svein Sivertsen Chairman Pernille Christensen Board Member Rune Juliussen Board Member Morten Loktu Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Officer FRØY ASA | ANNUAL REPORT 2022 77 CONSOLIDATED STATEMENT OF CASH FLOWS Amounts in NOK thousands Note 2022 2021 Cash ows from operating activities Prot or loss before tax 221 278 299 544 Income taxes paid 5.1 -61 -8 625 Gain/loss on disposal of property, vessels and equipment 2.3 -16 402 -90 777 Depreciation and impairment 3.1, 3.3 396 289 313 793 Finance income 4.5 -103 506 -7 737 Finance expenses 4.5 150 893 89 292 Changes in inventories, trade receivables, trade payables and other current liabilities 2.4, 2.7, 2.8 -27 530 -96 660 Net cash ows from operating activities 620 961 498 830 Cash ows from investing activities Purchase of property, plant and equipment 3.1 -876 663 -2 089 528 Purchase of intangible assets 3.2 -250 Purchase of nancial assets 4.1 -62 Proceeds from sale of property, vessels and equipment 3.1, 3.3 17 195 162 349 Dividends 6.3 2 673 - Interest received 4.5 5 033 6 535 Net cash ow from investing activities -851 762 -1 920 956 Cash ow from nancing activities Proceeds from borrowings 4.3 1 005 537 2 488 785 Repayment of borrowings 4.3 -797 481 -1 124 460 Issue of Share Capital 4.8 - 1 000 000 Transactions cost 4.8 - -22 433 Acquisition of non-controlling interest 6.1 -86 000 Payments for the principal portion of the lease liability 4.3 -116 596 -131 914 Interest paid 4.5 -150 893 -81 555 Payments of dividends 4.8 -129 523 -30 646 Net cash ow from nancing activities -188 957 2 011 778 Net change in cash and cash equivalents -419 758 589 652 Cash and cash equivalents, beginning of period 4.4 738 463 148 811 Cash and cash equivalents, end of period 318 705 738 463 The consolidated statements of cash flows are prepared using the indirect method. FRØY ASA | ANNUAL REPORT 202278 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 01.01.2022 86 350 2 289 751 2 376 101 814 071 -4 191 809 880 - 3 185 981 Prot or loss for the period - 223 609 223 609 223 609 Other comprehensive income - 14 909 14 909 14 909 Total comprehensive income - - - 223 609 14 909 238 518 - 238 518 Dividends 4.8 - -129 523 -129 523 -129 523 Equity as at 31.12.2022 86 350 2 289 751 2 376 101 908 157 10 718 918 875 - 3 294 976 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 6.2 - -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 FRØY ASA | ANNUAL REPORT 2022 79 NOTES TO THE FINANCIAL STATEMENTS 1.1 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, primarily along the Norwegian coastline. The consolidated financial statements of the Group for 2022 were authorized for issue in accordance with a resolution of the Board of Direc- tors on 26 April 2023 and will be presented to the general meeting for decision on 6 June 2023. Frøy ASA is incorporated in Norway with headquarters in Sistranda, Frøya. The address of its registered office is Siholmveien 34, 7260 Sis- tranda, Norway. 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 pre- sented 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 The financial statement is covering the period 1. January 2022 to 31 December 2022. 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. FRØY ASA | ANNUAL REPORT 202280 1.1 SIGNIFICANT ACCOUNTING POLICIES Significant accounting judgements, estimates and assumptions The preparation of the consolidated financial statements in accordance with IFRS and applying the chosen accounting policies requires manage- ment to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The esti- mates 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 circum- stances 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. Ongoing case with Norwegian Tax Authorities In 2019 the NTA (the Norwegian Tax Administration) initiated a coordinated effort to verify whether vessels used in the fish farming indus- try qualified under the tonnage tax regime. On 5 November 2019, Frøy Rederi was notified that the NTA considered a reassessment for the income year 2018, claiming that Frøy Rederi did not fulfill the requirement for a distance sailed of at least 30 nautical miles for more than 2/3 of the sailing days. On 10 December 2018, Frøy Rederi submitted a response, claiming inter alia that the requirement regarding a qualified number of sailing days were fulfilled. On 24 August 2021 Frøy Rederi was notified that the NTA considered a reassessment for the income years 2019 and 2020, claiming that the use of well boats for delousing of farmed fish is not a permitted activity for a company within the Tonnage Tax system. Consequently, Frøy Rederi must exit the special Tonnage Tax system and be taxed according to the general rules of the Tax Act. On 12 October 2021 Frøy Rederi submitted a response, claiming inter alia that the use of well boats for delousing of farmed fish was indeed a permitted activity for a company within the Tonnage Tax system. On 22 February 2023 Frøy Rederi received a draft decision of amended tax assessments for the income years 2019 and 2020. The NTA’s rea- soning continues to be that that Frøy Rederi’s use of well boats for delousing of farmed fish is not a permitted activity within the Tonnage Tax system. In addition, the NTA claims that the SkatteFunn R&D project no. 307979 is not permitted activity. It follows from a cover note to the draft decision that the NTA has decided not to proceed with a reassessment for the income year 2018. The NTA has on the other hand requested Frøy Rederi to submit a detailed overview of activities for the vessels Gåsø Viking and Gåsø Jarl on a day- by-day basis, including sailing distance in 2019 and 2020. In short Frøy Rederi’s position is: i. the use of wellboats for delousing of farmed fish is a permitted activity for a company within the Tonnage Tax system. In short, the NTA’s view is not supported by the wording of the law or the preparatory works. Furthermore, ESA has, in its approval of the Norwegian special tonnage tax system for the period 2018-2027, openly discussed and approved up to 50% income from other activities than core boat transport. ii. SkatteFunn R&D project no. 307979, a project related to cleaner fish grade separators, is a permitted activity within the Tonnage Tax Regime. Even if the requirement of a certain minimum sailing distance is not part of the NTA’s reasoning in the current case concerning income years 2019 and 2020, the NTA has still requested additional information, ref. above. Frøy Rederi’s position regarding this is that the required minimum sailing distance and days is 30 nautical miles for a minimum of 50% of the sailing days, not 2/3 as the NTA takes for its basis. This is supported e.g. by remarks in the notification letter from Ministry of Finance to ESA 24 May 2017. Hence Frøy Rederi is of the opinion that the requirements regarding sailing distance and days are fulfilled for Gåsø Viking and Gåsø Jarl in 2019 and 2020. Considering how the case appears in the draft decision on changes to the tax assessment for 2019 and 2020 from the NTA, dated 22 February 2023, and based on the assessments that has been made, it is Frøy’s clear opinion that it is more likely that Frøy Rederi AS will prevail with its view in the tax case than that they do not. FRØY ASA | ANNUAL REPORT 2022 81 2.1 OPERATING SEGMENTS 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 results of its busi- ness 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 2022, the Group had 16 well- boats in operations. In addition, the Group has three vessels under construction scheduled for delivery in 2023 and 2024. Service The Group has 56 service vessels in operation, and eight service vessels under construction scheduled to be delivered during 2023 and 2024. 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. The service vessels are performing a wide range of operations including diving, inspection, net cleaning and installation of infrastructure. Sea transport In 2022, the sea transportation segment included three vessels engaged in transportation of feed to the salmon facilities and frozen fish. All three vessels operated under a TC contract. 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 2022, the Group recognised revenue from customers in the following geographical markets: Norway, UK, Iceland, Lithuania and Turkey. Information about major customers Three of the Group’s external customers amounted to 10% or more of the Group’s total revenues (2021: Three). Revenue from these custom- ers amounted to MNOK 1196 for 2022. FRØY ASA | ANNUAL REPORT 202282 2.1 OPERATING SEGMENTS Wellboat Service Sea transport Elimination and non- allocated 2022 Revenues from external customers - Contract revenue 618 040 400 610 87 650 1 106 300 Framework agreements 56 600 322 200 970 379 770 Spot 141 20 8 86 571 17 370 1 264 246 413 Fuel and other reinvoiced costs 286 800 58 509 37 310 382 619 Other 4 973 11 428 - 16 402 Total revenues 1 107 621 879 319 143 300 1 264 2 131 504 Depreciation 189 839 183 692 21 435 1 322 396 289 Operating costs 705 233 622 905 97 556 42 444 1 468 138 Operating profit 212 549 72 721 24 309 -42 502 267 076 Financial income 12 796 1 655 793 88 263 103 506 Financial expenses 118 218 41 065 13 660 -22 049 150 893 Share of profit (loss) from associates (note 6.3) 1 781 -193 1 588 Earnings before tax 107 127 33 311 13 223 67 617 221 278 Tax 208 6 816 11 -9 366 -2 331 Net income 106 919 26 495 13 212 76 983 223 609 Revenue from external customers 2022 Norway 1 046 979 879 319 101 552 1 264 2 029 114 United Kingdom 25 122 38 261 63 383 Iceland 35 117 3 043 38 160 Other 403 444 847 Total revenue from external customers 1 107 621 879 319 143 300 1 264 2 131 504 The revenue information above is based on the locations of the customers. Revenue from major customers 2022 Major customer 1 397 790 98 802 496 592 Major customer 2 189 410 277 602 96 467 108 Major customer 3 13 724 218 655 232 379 Other customers 506 697 284 260 143 300 1 168 935 425 Total revenue from external customers 1 107 621 879 319 143 300 1 264 2 131 504 Balance sheet items 31/12/2022 Assets 5 531 337 1 530 606 446 200 518 031 8 026 175 Liabilities 3 733 170 1 020 557 316 150 -338 678 4 731 199 Equity 1 798 167 510 049 130 051 856 709 3 294 976 Other disclosures Investments in associates (note 6.3) 24 968 - 24 968 Capital expenditure 760 317 395 190 78 505 -22 049 1 211 962 FRØY ASA | ANNUAL REPORT 2022 83 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 5 611 319 404 Operating costs 481 820 503 151 95 282 14 763 1 141 568 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 Revenue from external customers 2021 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 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 Revenue from major customers 2021 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 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 Investments 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 FRØY ASA | ANNUAL REPORT 202284 2.2 REVENUE 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 por- tion 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 reve- nues 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 consider- ation 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. FRØY ASA | ANNUAL REPORT 2022 85 2.2 REVENUE 2022 2021 Revenue from contracts from customers 1 510 672 1 206 468 Lease revenues 604 431 489 321 Other 16 402 90 777 Total revenue 2 131 504 1 786 566 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 2022 2021 Wellboat 737 760 542 207 Service 684 066 570 576 Sea transport 87 582 91 919 Non-allocated 1 264 1766.46 Total revenue 1 510 672 1 206 468 Geographical markets Norway 1 436 106 1 152 485 United Kingdom 43 859 31 695 Iceland 29 860 16 198 Other 847 6 091 Total revenue 1 510 672 1 206 468 Payment is generally due within 14 days after delivery. Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 2022 2021 Within one year 627 129 557 616 After one year but no more than five years 1 376 171 1 340 023 More than five years 184 167 370 513 Total 2 187 466 2 268 152 Timing of revenue recognition 2022 2021 Point in time 246 413 267 489 Services transferred over time 1 264 258 938 979 Total 1 510 672 1 206 468 FRØY ASA | ANNUAL REPORT 202286 2.3 OTHER INCOME 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 differ- ence between net sales price and the booked value of the asset. Other income 2022 2021 Gain related to sale of PV&E 11 428 90 777 Other 4 973 - Total other income 16 402 90 777 2.4 DIRECT EXPENSE AND INVENTORY 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. Direct expenses 2022 2021 Marine gas oil 119 947 110 984 Hire of external boat and crew 1 643 2 962 Reimbursable cost by customers, included fuel and chemicals 382 619 165 800 Other 3 378 7 465 Total direct expenses 507 587 287 211 Inventories 2022 2021 Bunkers 10 373 7 067 Spare parts and other equipment 4 592 4 422 Total inventories (gross) 14 966 11 488 Write down of inventories Total inventories at the lower of cost and net realisable value 14 966 11 488 FRØY ASA | ANNUAL REPORT 2022 87 2.5 EMPLOYEE BENEFIT EXPENSES 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. Employee benefit expenses 2022 2021 Salaries 521 728 425 122 Social security costs 49 854 39 895 Pension costs 16 464 18 503 Other employee expenses 29 418 16 311 Total employee benefit expenses 617 464 499 830 Average number of full time employees (FTEs) 940 814 For information on remuneration to key management personnel, see note 7.1. The Group has received government wage support of MNOK 84.179 during 2022 under the net salary scheme (2021: MNOK 97.509). At the end of the year, the total pension funds for the Group amounts to NOK 498.000 FRØY ASA | ANNUAL REPORT 202288 2.6 OTHER OPERATING EXPENSES 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 expenses, depreciation or amortization. Other operating expenses 2022 2021 Freight 1 923 1 768 Harbour and cleaning cost 15 020 14 948 Maintenance cost and repairs 188 048 163 385 Travel expenses 43 147 36 039 Consulting expenses and insourcing 24 100 30 696 Marketing expenses 1 981 5 748 Insurance 23 193 19 760 Other 45 676 35 630 Total other operating expenses 343 087 307 974 Auditor related fees 2022 2021 Audit fee 2 449 2 094 Audit related services 357 702 Other advisory services 439 968 Total auditor fees (excl. VAT) 3 246 3 764 The audit fees presented above are related to the Group, including the parent company and subsidiaries. All amounts are excl. VAT. FRØY ASA | ANNUAL REPORT 2022 89 2.7 TRADE AND OTHER RECEIVABLES 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 policies and proce- dures 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. Trade receivables 31/12/2022 31/12/2021 Trade receivables from revenue contracts with customers at nominal value - external 288 052 187 978 Total trade receivables (gross) 288 052 187 978 Allowance for expected credit losses -70 -70 Total trade receivables (net) 287 982 187 908 Other receivables 31/12/2022 31/12/2021 Prepaid rent and other expenses 35 138 29 833 Receivable government wage support 11 328 16 382 Other 24 281 37 491 Total other receivables (net) 70 747 83 706 Allowance for expected credit losses 31/12/2022 31/12/2021 At the beginning of the period Provision for expected credit losses -70 -70 At the end of the period -70 -70 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 receivables: Trade receivables 31/12/2022 Days past due Contract assets Current < 30 days 31-60 days 61 - 90 days over 90 days Total Trade receivables 203 210 43 016 8 388 11 000 22 369 287 982 Trade receivables 31/12/2021 Days past due 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 FRØY ASA | ANNUAL REPORT 202290 2.8 TRADE PAYABLES AND OTHER CURRENT LIABILITIES 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 31/12/2022 31/12/2021 Trade payables - external 96 885 110 731 Payroll tax, VAT payable and social security 72 547 70 004 Other current liabilities 40 368 42 524 Trade payables and other current liabilities 209 800 223 259 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. 3.1 PROPERTY, VESSELS AND EQUIPMENT 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 carry- ing 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 build- ings, 3-5 years for other machines and equipment. Periodic maintenance is depreciated over the period until the next maintenance, usually 5 years. Periodic maintenance only applies for owned vessels. No impairments of property, plant and equipment were made in 2022. 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 maintenance 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. FRØY ASA | ANNUAL REPORT 2022 91 3.1 PROPERTY, VESSELS AND EQUIPMENT Wellboats Service vessels Sea Transport Periodic Mainte- nance Land and buildings Other machines and equip- ment Total Acquisition cost 01.01.2022 4 418 654 842 045 402 327 44 658 24 016 108 867 5 840 567 Additions 614 537 126 264 64 720 27 562 8 664 27 654 869 401 Disposals - -11 661 -11 661 Acquisition cost 31.12.2022 5 033 191 956 648 467 047 72 220 32 680 136 521 6 698 307 Accumulated depreciation and impairment 01.01.2022 223 944 66 194 33 125 14 330 2 877 52 959 393 429 Depreciation for the period 164 919 45 399 21 029 12 017 1 549 48 613 293 526 Accumulated depreciation and impairment 31.12.2022 388 863 111 593 54 154 26 347 4 426 101 572 686 955 Carrying amount PV&E 31.12.2022 4 644 328 845 055 412 893 45 873 28 254 34 949 6 011 352 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Straight-line method Wellboats Service vessels Sea Transport Periodic Mainte- nance Land and buildings Other machines and equip- ment Total Acquisition cost 01.01.2021 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 709 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 24 016 108 867 5 840 567 Accumulated depreciation and impairment 01.01.2021 89 313 31 054 13 663 8 009 1 101 20 023 163 163 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 52 959 393 429 Carrying amount PV&E 31.12.2021 4 194 710 775 851 369 202 30 328 21 139 55 908 5 447 138 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Straight-line method FRØY ASA | ANNUAL REPORT 202292 3.2 GOODWILL 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 require- ment 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. Trade Marks Goodwill Total Acquisition cost 01.01.2022 250 687 361 687 612 Additions 0 Acquisition cost 31.12.2022 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2022 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2022 - - - Carrying amount 01.01.2022 250 687 361 687 612 Carrying amount 31.12.2022 250 687 361 687 612 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 Accumulated impairment 01.01.2021 - - 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 FRØY ASA | ANNUAL REPORT 2022 93 3.3 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES 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 measure- ment 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 policies 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 8.112 in 2022 (2021: 7.356). The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognised in the statement of financial position is 3.31% for 2022 (2021: 3.46%). No impairments of right-of-use assets were made in neither 2021 or 2022. FRØY ASA | ANNUAL REPORT 202294 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 01.01.2022 325 976 12 435 116 999 455 410 Additions 148 347 3 212 40 109 191 668 Adjustment -25 349 -25 349 Depreciations -54 481 -4 747 -43 535 -102 763 Termination of contracts -3 667 -157 -522 -4 346 Termination of contracts - gains and losses 53 0 -53 -0 Carrying amount 31.12.2022 390 879 10 743 112 998 514 619 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line The Group’s lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2022 362 342 New leases recognised during the period 191 668 Cash payments for the principal portion of the lease liability -129 433 Interest expense on lease liabilities 12 837 Termination of contracts -2 963 Total lease liabilities at 31.12.2022 434 450 Current lease liabilities in the statement of financial position 119 780 Non-current lease liabilities in the statement of financial position 314 670 Total cash outflow during the period -129 433 FRØY ASA | ANNUAL REPORT 2022 95 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 53 918 117 278 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 -16 668 Carrying amount 31.12.2021 325 976 12 435 116 999 455 410 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line The Group’s lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2021 New leases recognised during the period 475 064 New leases recognised during the period from acquisitions (note 6.2) 117 279 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 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 exer- cise 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 circum- stances 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 vessels 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. FRØY ASA | ANNUAL REPORT 202296 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 recover- able 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 2023, with assumption for increase in sales price linked to CPI and an estimate of wage increase for the following 4 years, in line with a historic performance. There is also an ele- ment for capex for periodic maintenance of the vessel every 5 years. Restructuring activities and significant future investments are excluded from the budgets. 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 2022 prices. 3.4 IMPAIRMENT CONSIDERATIONS FRØY ASA | ANNUAL REPORT 2022 97 3.4 IMPAIRMENT CONSIDERATIONS 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, 31.12.2022 Service vessel Wellboats Pre-tax discount rate 7.99% 6.75% Annual increase in free cashflow 2.00% 2.00% Carrying amount of the intangible assets allocated to the CGU, 31.12.2022 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 16 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 9,99% (2021: 11.2%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 8,75% (2021: 9.3 %). 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 2.00% 2.00% Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 FRØY ASA | ANNUAL REPORT 202298 ACCOUNTING POLICIES A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument 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 bear- ing 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 histor- ical losses, adjusted for forward-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 liabil- ity 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. 4.1 OVERVIEW OF FINANCIAL INSTRUMENTS FRØY ASA | ANNUAL REPORT 2022 99 4.1 OVERVIEW OF FINANCIAL INSTRUMENTS 31/12/2022 Note Financial instruments at amortized cost Financial instru- ments at FV through P&L Financial instru- ments at FV through OCI Total Assets Other financial assets 2.3, 4.6 6 985 87 743 94 728 Trade receivables 2.7 287 982 287 982 Other receivables 2.7 70 747 70 747 Cash and cash equivalents 4.4 318 705 318 705 Total financial assets 684 419 87 743 - 772 162 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 622 537 -12 967 3 609 570 Non-current lease liabilities 3.3 314 670 314 670 Current interest-bearing liabilities 4.2 443 142 443 142 Current lease liabilities 3.3 119 780 119 780 Other financial liabilities - Trade payables and other current liabilities 2.8 209 800 209 800 Total financial liabilities 4 709 929 -12 967 4 696 962 31/12/2021 Note Financial instruments at amortized cost Financial instru- ments at FV through P&L Financial instru- ments 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 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 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. FRØY ASA | ANNUAL REPORT 2022100 4.2 INTEREST-BEARING LIABILITIES Non-current interest-bearing loans and borrowings 31/12/2022 31/12/2021 Loan from credit institutions 3 609 570 3 370 397 Non-current lease liabilities 314 670 269 423 Total non-current interest-bearing loans and borrowings 3 924 240 3 639 821 Current interest-bearing loans and borrowings 31/12/2022 31/12/2021 Loan from credit institutions, due within 12 months 443 142 474 259 Current lease liabilities 119 780 92 918 Current interest-bearing loans and borrowings 562 922 567 177 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 (2021: MNOK 38.5). The Group has pledged assets as security for its liabilities, presented in the table below: Assets pledged as security for interest bearing loans and borrowings 31/12/2022 31/12/2021 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 924 240 3 639 821 Current interest-bearing liabilities 562 922 567 177 Total 4 487 162 4 206 998 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 246 061 118 041 Right-of-use assets 514 619 455 410 Property, vessels and equipment 5 913 529 5 341 687 Other 24 967 77 685 Total 6 699 176 5 992 823 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest-bearing liabilities: - Equity Ratio >20% -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 provision 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 2022. FRØY ASA | ANNUAL REPORT 2022 101 4.3 AGING OF FINANCIAL LIABILITIES Contractual undiscounted cash flows from financial liabilities, including interest payments are presented below: Remaining contractual maturity 31/12/2022 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 486 498 565 967 499 347 1 663 944 584 216 310 225 4 110 197 Trade payables and other current liabilities 212 563 212 563 Lease liabilities 121 343 102 974 81 941 57 020 34 166 72 429 469 872 Total financial liabilities 820 404 668 941 581 288 1 720 964 618 382 382 654 4 792 632 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. Reconciliation of changes in liabilities incurred as a result of financing activities: Non-cash changes 01/01/ 2022 Repay- ment of borrow- ings Pay- ments for principal portion of the lease liability Proceeds from bor- rowings New leases Reclas- sified Termi- nation of leasing con- tracts 31/12/ 2022 Loans from credit institutions non-current 3 370 397 -766 364 1 005 537 3 609 570 Lease liabilities non-current 269 423 -1 624 49 834 -2 963 314 670 Non-current interest- bearing liabilities 3 639 821 -766 364 -1 624 1 005 537 49 834 - -2 963 3 924 240 Loans from credit institutions current 474 259 -31 117 443 142 Lease liabilities current 92 919 -114 973 141 834 - 119 780 Current interest- bearing liabilities 567 178 -31 117 -114 973 - 141 834 - - 562 922 Total liabilities from financing 4 206 998 -797 481 -116 597 1 005 537 191 668 - -2 963 4 487 161 FRØY ASA | ANNUAL REPORT 2022102 4.3 AGING OF FINANCIAL LIABILITIES Contractual undiscounted cash flows from financial liabilities, including interest payments are presented below: Remaining contractual maturity 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 Repay- ment of borrow- ings Pay- ments for principal portion of the lease liability Proceeds from bor- rowings New leases Reclas- sified Termi- nation of leasing con- tracts 31/12/ 2021 Loans from credit institutions non-current 1 831 656 -950 044 2 488 785 3 370 397 Lease liabilities non-current 371 571 -41 595 30 347 8 489 -99 389 269 423 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 liabilities 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 FRØY ASA | ANNUAL REPORT 2022 103 4.4 CASH AND CASH EQUIVALENTS 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 Group’s cash management. Cash and cash equivalents 31/12/2022 31/12/2021 Bank deposits, unrestricted 289 526 714 112 Bank deposits, restricted 29 179 24 350 Total in the statement of financial position 318 705 738 462 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. FRØY ASA | ANNUAL REPORT 2022104 4.5 FINANCIAL INCOME AND EXPENSES 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. 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 in the statement of financial position. Financial income Note 2022 2021 Interest income 5 033 6 535 Gain on sale of other financial assets - - Other finance income 4.1 98 473 1 203 Total finance income 103 506 7 737 Financial expenses Note 2022 2021 Interest expenses -133 747 -66 362 Interest expense on lease liabilities -12 837 -14 168 Other finance expenses -4 310 -8 762 Total Financial expense -150 893 -89 292 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. Newbuilds: In 2022 we have capitalized financial expenses for MNOK 23. FRØY ASA | ANNUAL REPORT 2022 105 4.6 FAIR VALUE MEASUREMENT 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 31.12.22 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 31.12.2022. 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 2022, the Group acquired shares in Campus Blå AS, a non-listed equity investment measured to fair value of MNOK 2.0 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. FRØY ASA | ANNUAL REPORT 2022106 4.6 FAIR VALUE MEASUREMENT Information on fair value for the Group’s financial assets and liabilities: Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31/12/2022 2 000 2 000 x Hedge accounted interest swaps 31/12/2022 12 967 12 967 x Interest swaps 31/12/2022 85 741 85 741 x Liabilities disclosed at fair value Loan from credit institutions 31/12/2022 3 609 570 3 609 570 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 31/12/2021 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. FRØY ASA | ANNUAL REPORT 2022 107 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 cove- nants. 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 41.1% as of 31.12.2022 (2021: 41.6%). The NIBD / EBITDA ratio was 6.28 as of 31.12.2022 (2021: 5.02). 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 receiva- bles, other financial assets (mainly lease receivables) and cash and short-term deposits that derive directly from its operations. The Group do not hold derivative financial instruments. 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 equiva- lents 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. FRØY ASA | ANNUAL REPORT 2022108 4.7 CAPITAL MANAGEMENT AND FINANCIAL RISK 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 probabili- ty-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. (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. Mar- ket 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 descrip- tion 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: Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31/12/2022 +/- 100 37 594 31/12/2021 +/- 100 38 234 Interest-bearing liabilities 31/12/2022 31/12/2021 Interest-bearing loans and borrowings 4 110 196 3 840 162 Lease liabilities 434 450 362 300 Foreign currency instruments are primarily 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. (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 liabilities refer to note 4.3. FRØY ASA | ANNUAL REPORT 2022 109 4.8 SHARE CAPITAL AND SHAREHOLDER INFORMATION 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. 31/12/2022 31/12/2021 Ordinary shares, par value 1 NOK per share 86 348 603 86 348 603 Total ordinary shares issued and fully paid 86 348 603 86 348 603 All shares are ordinary and have the equal voting rights and rights to dividends. Number of shares Share capital Changes in share capital 31/12/2022 31/12/2021 31/12/2022 31/12/2021 Beginning of period 86 348 603 69 955 181 86 348 603 69 955 181 Issuance of share capital - 16 393 422 - 16 393 422 End of period 86 348 603 86 348 603 86 348 603 86 348 603 Dividends The Board has proposed to distribute dividend of MNOK 129 523 for 2022. The dividend per share is NOK 1.5. The dividend for 2022 is proposed to be paid in two tranches, NOK 0.75 in June and NOK 0.75 in November. The Group’s major shareholders: Name Ownership NTS ASA 72.1 % Gåsø Næringsutvikling AS 3.5 % HSBC Bank Plc 1.37 % ABG Sundal Collier 1.37 % Verdipapirfondet Fondsfinans Norge 1.01 % Trøndelag Helgeland Invest AS 0.81 % BNP Paribas Securitites Services 0.76 % Amble Investment AS 0.76 % Riiber Holding AS 0.75 % DNB Bank ASA 0.69 % FRØY ASA | ANNUAL REPORT 2022110 4.9 EARNINGS PER SHARE 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 ordi- nary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: 31/12/2022 31/12/2021 Profit or loss attributable to ordinary equity holders - for basic EPS 223 609 283 553 Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution 223 609 283 553 Weighted average number of ordinary shares - for basic EPS 86 348 603 82 565 506 Weighted average number of ordinary shares adjusted for the effect of dilution 86 348 603 82 565 506 Basic EPS - profit or loss attributable to equity holders of the parent 2.59 3.43 Diluted EPS - profit or loss attributable to equity holders of the parent 2.59 3.43 4.10 DERIVATIVE FINANCIAL INSTRUMENTS 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 2022 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 instru- ment. 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 For information on fair value and principles related to valuation of derivatives, see note 4.6. FRØY ASA | ANNUAL REPORT 2022 111 4.10 DERIVATIVE FINANCIAL INSTRUMENTS The impact of the hedging instruments on the statement of financial position is, as follows: Balance sheet date Notional amount of interest rate swap Line item in the statement of financial position Change in fair value applied when measur- ing ineffective- ness Interest rate swap 31/12/2022 1 133 125 Other non-cur- rent liabilities - Interest rate swap 31/12/2021 1 238 641 Other non-cur- rent liabilities - Curreny swap 31/12/2022 301 644 Other non-cur- rent liabilities - The impact of the hedged items on the statement of financial position is, as follows: Balance sheet date Fair value of interest rate swap Line item in the statement of financial position Change in fair value applied when measur- ing ineffective- ness Interest-bearing liabilities 31/12/2022 85 741 Other non-cur- rent liabilities - Interest-bearing liabilities 31/12/2021 2 598 Other non-cur- rent liabilities - The effects on the consolidated statement of profit and loss and comprehensive income for 2022 is as follows: Total hedging gain (loss) rec- ognized in OCI Total hedging gain (loss) recognized in P&L Ineffectiveness recognized in the profit or loss Interest rate swap agreements 14 909 85 771 - The effects on the consolidated statement of profit and loss and comprehensive income for 2021 is as follows: Total hedging gain (loss) rec- ognized in OCI Total hedging gain (loss) recognized in P&L Ineffectiveness recognized in the profit or loss Interest rate swap agreements 11 595 - - FRØY ASA | ANNUAL REPORT 2022112 5.1 TAXES 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 and liabilities 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-as- sessed 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. Current income tax expense: 31/12/2022 31/12/2021 Tax payable 10 955 - Change deferred tax/deferred tax assets (ex. OCI effects) -13 286 15 991 Total income tax expense -2 331 15 991 Reconciliation of income tax expense: 31/12/2022 31/12/2021 Profit before tax 221 278 299 544 Profit from business subject to Norwegian tonnage tax -234 171 -229 113 Permanent differences 2 297 2 256 Basis for income tax expense -10 596 72 687 Income tax expense (22%) -2 331 15 991 Total income tax expense -2 331 15 991 FRØY ASA | ANNUAL REPORT 2022 113 5.1 TAXES Current tax liabilities consist of: 31/12/2022 31/12/2021 Income tax payable for the period as above 10 955 - Tax effect of group contribution -8 255 - Tonnage tax 63 61 Current tax liabilities 2 763 61 Deferred tax liabilities 31/12/2022 31/12/2021 Property, plant and equipment 84 540 150 532 Right-of-use assets and lease liability 78 236 66 786 Other current assets -70 -70 Untaxed profit 29 435 23 937 Accounting provisions - -230 Losses carried forward (including tax credit) -49 077 -56 737 Basis for deferred tax liabilities 143 064 184 218 Calculated deferred tax liabilities 31 474 40 528 Deferred tax liabilities recognised in balance sheet 31 474 40 528 Changes in deferred tax liabilities 31/12/2022 31/12/2021 Deferred tax liabilities opening balance 40 528 22 516 Recognized in the statement of profit and loss -13 286 15 991 Other changes 4 232 2 021 Deferred tax liabilities closing balance 31 474 40 528 Ongoing case with Norwegian Tax Authorities At the balance sheet date, there is an ongoing case with the Norwegian Tax Administration (the “NTA”) concerning the tonnage tax scheme. Please see note 1.1. Should the NTA rule in line with the draft decision received and this is upheld in a final and biding ruling, Frøy’s (“the Company”) preliminary assessment is that there will be limited changes in taxes to be paid for Frøy Rederi in the income years 2019 and 2020. This is mainly due to the fact that the new tax basis in the ordinary tax regime will equal the market values of the vessels and that the vessels would be deprecia- ble on a declining basis with 14 % annually. As a consequence Frøy expects that there will be no incremental tax payable even if the taxable income is computed in the ordinary tax regime. This would also apply for the 2021 and 2022 income years. If the NTA’s draft decision is upheld in a final and binding ruling, the change in equity and deferred tax are summarized in the table below: 01.01.2022 Profit/loss 2022 31.12.2022 Equity Deferred tax asset Tax expense Equity Deferred tax liability 10.8 10.8 11.7 -0.9 -0.9 If all the remaining aqua service vessels and wellboats in the Frøy group had entered the ordinary tax regime in 2022 Frøy estimate the follow- ing effects: 01.01.2022 Profit/loss 2022 31.12.2022 Equity Deferred tax asset Tax expense Equity Deferred tax liability 465.3 465.3 72.9 392.4 392.4 FRØY ASA | ANNUAL REPORT 2022114 6.1 CONSOLIDATED ENTITIES ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2022. 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 investee) - 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 state- ments 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 attrib- utable 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. At the end of 2022 there is no non-controlling interests in the Group. FRØY ASA | ANNUAL REPORT 2022 115 6.1 CONSOLIDATED ENTITIES The impact of the hedging instruments on the statement of financial position is, as follows: Consolidated entities 31.12.2022 Country of incorporation Business Group's ownership share Group's vot- ing owner- ship share Equity 31.12.2022 Profit before tax 2022 Frøy Akvaservice AS Norway Service Vessels 100.0 % 100.0 % 189 276 25 981 Frøy Akvaressurs AS Norway Service Vessels 100.0 % 100.0 % 194 986 17 174 Frøy Vest AS Norway Service Vessels 100.0 % 100.0 % 61 476 8 486 Frøy Nord AS Norway Service Vessels 100.0 % 100.0 % 44 585 461 Frøy Rederi AS Norway Wellboat 100.0 % 100.0 % 536 799 53 198 Fisketransport AS Norway Wellboat 100.0 % 100.0 % 6 934 -3 106 Frøy Shipping AS Norway Shipping Vessels 100.0 % 100.0 % 131 832 13 272 NTS Management AS Norway Non-allocated 100.0 % 100.0 % 12 297 552 Norsk Fisketransport AS Norway Wellboat 100.0 % 100.0 % 467 868 5 457 MS Dønnland AS Norway Wellboat 100.0 % 100.0 % 24 918 9 860 MS Havtrans AS Norway Wellboat 100.0 % 100.0 % 93 775 2 045 MS Namsos AS Norway Wellboat 100.0 % 100.0 % 94 349 -6 820 MS Novatrans AS Norway Wellboat 100.0 % 100.0 % 54 012 4 971 MS Reisa AS Norway Wellboat 100.0 % 100.0 % 129 785 -348 MS Viknatrans AS Norway Wellboat 100.0 % 100.0 % 40 484 11 770 MS Veidnes AS Norway Wellboat 100.0 % 100.0 % 14 729 242 Polarfjell AS Norway Wellboat 100.0 % 100.0 % 101 044 12 875 MS Kristiansund AS Norway Wellboat 100.0 % 100.0 % 96 971 6 900 MS Åsværfjord AS Norway Wellboat 100.0 % 100.0 % 123 829 15 313 * Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. FRØY ASA | ANNUAL REPORT 2022116 6.1 CONSOLIDATED ENTITIES The impact of the hedging instruments on the statement of financial position is, as follows: Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's vot- ing owner- ship 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 group acquired the remaining 21.5% of the voting shares for MNOK 86, increasing the group ownership to 100%. FRØY ASA | ANNUAL REPORT 2022 117 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 accord- ing 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 considera- tion classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments: Classification, is meas- ured 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. Refer- ence 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. 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. FRØY ASA | ANNUAL REPORT 2022118 6.2 BUSINESS COMBINATIONS Business combinatons in 2023 On 6 January 2023 Frøy announced that the company had entered into an agreement to acquire 100% of the shares of Marinus Aquaser- vice AS (“Marinus”). The transaction values Marinus at a total enterprise value of NOK 101 million. The acquisition is conditional upon certain customary conditions and closing was initially expected to take place during the first quarter of 2023. Before closing of the acquisition can take place, the seller of Marinus should carry out a process to carve out certain non-operational assets from Marinus not included in the transac- tion. This process has been delayed and closing of the transaction is now expected to take place at the end of april 2023. As a consequence of this delay, Frøy has not, as of the date of publication of this annual report, received the necessary documentation from the seller to calculate the bridge from the agreed enterprise value to the corresponding equity value. Hence, a purchase price allocation analy- sis (“PPA”) has not been finalised. Below is a summary of key information on the acquisition that is not dependent on the PPA: (a) the acquisition date: Estimated to ultimo April 2023 (b) the percentage of voting equity interests acquired: 100% (c) the primary reasons for the business combination and how Frøy obtained control of the Marinus: The strategic rationale behind the acquisition of Marinus is to strengthens Frøy’s position in the southwest region of Norway, a region where Frøy has limited foothold prior to the acquisition. Marinus operates three modern and well-maintained vessels and has a particular strong position within ROV services, a fast-growing subsegment of the aqua service industry. Frøy will obtain control of Marinus through purchase of 100% of the outstanding shares in the company. The purchase price will be settled in cash. There has been no other business combinations during 2022. Business combinatons in 2021 There was no business combinations during 2021. FRØY ASA | ANNUAL REPORT 2022 119 6.3 ASSOCIATED ENTITIES ACCOUNTING POLICIES Associated entities are entities where the Group has significant influence but no control or joint control over the financial and operating policy decisions of the investee. The considerations made in determining significant influence or joint control are similar to those necessary to deter- mine 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 investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the asso- ciate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of comprehensive income reflects the Group’s share of the results of operations of the associate. Any change in 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 equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate or joint venture. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive income 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 recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. FRØY ASA | ANNUAL REPORT 2022120 6.3 ASSOCIATED ENTITIES Associated entities 31.12.2022 Country of incorporation Ownership share Group's voting ownership share Halten AS Norway 33.4 % 33.4 % Summarized statement of financial position as per 31.12.2022 Halten AS Assets Current assets 34 266 Non-current assets 69 634 Liabilities Current liabilities 4 661 Non-current liabilities 24 608 Total equity 74 631 Summarized statement of profit and loss 2022 Halten AS Total revenue 95 375 Operating expenses -88 767 Net financial items -1 277 Profit (loss) before tax 5 331 Income tax - Profit (loss) for the period 5 331 2022 Group's share of profit (loss) from investments in associates Sikkerhetssen- tert Rørvik AS Halten AS SUM Share of profit -193 1 781 1 588 Impairment loss - - Corr. of earlier periods estimated profit (loss) - Group's share of profit 2022 -193 1 781 1 588 2022 Group's carrying amount of investments in associates Sikkerhetssen- tert Rørvik AS Halten AS SUM Carrying amount 01.01 2 193 25 860 28 053 Additions - Additions from acquisitions - Share of periods profit (loss) 1 781 1 781 Dividends -2 673 -2 673 Disposals -2 193 -2 193 Group's carrying amount of investments in associates 31.12.2022 0 24 968 24 967 The numbers in the table above are preliminary numbers for 2022. FRØY ASA | ANNUAL REPORT 2022 121 6.3 ASSOCIATED ENTITIES Associated entities 31.12.2021 Country of incorporation Ownership share Group's voting ownership share Group's share of equity Sikkerhetssenteret Rørvik AS Norway 23.0 % 23.0 % 793 Halten AS Norway 33.4 % 33.4 % 3 618 Total 4 411 Summarized statement of financial position as per 31.12.2021 Sikkerhetssent- eret 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 Sikkerhetssent- eret 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 3 630 10 804 2021 Group's share of profit (loss) from investments in associates Sikkerhetssen- tert Rørvik AS Halten AS SUM Share of profit 793 3 618 4 411 Impairment loss - - - Corr. of earlier periods estimated profit (loss) - -1 070 -1 070 Group's share of profit 2021 793 2 548 3 341 2021 Group's carrying amount of investments in associates Sikkerhetssen- tert Rørvik AS Halten AS SUM Carrying amount 01.01 1 400 23 312 24 712 Additions - Additions from acquisitions - Share of periods 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. FRØY ASA | ANNUAL REPORT 2022122 7.1 REMUNERATION TO MANAGEMENT AND THE BOARD 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 commit- ment. 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 responsibil- ity 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. FRØY ASA | ANNUAL REPORT 2022 123 7.1 REMUNERATION TO MANAGEMENT AND THE BOARD Executive management 2022 1 2 4 5 Fixed remuneration Variable remunera- tion Pension TotalYear Fixed salary Fees Benefits Tonje Foss, CEO Frøy ASA. 01.01.22 -> 2022 2 531 11 51 2 593 2021 n/a n/a n/a n/a n/a n/a Helge Gåsø, CEO Frøy ASA <-31.12.21 2022 n/a n/a n/a n/a n/a n/a 2021 1874 8 40 1914 Sondre Vevstad, Interim CFO 01.07.22 -> 2022 n/a 1650 n/a n/a n/a n/a 2021 n/a n/a n/a n/a n/a n/a Tore Helgesen, interim CFO 01.10.2021 - 30.06.22 2022 n/a 956 n/a n/a n/a n/a 2021 n/a 347 n/a n/a n/a n/a Arne J. Rødsjø*, CFO 01.01.2021 - 31.10.2021 2022 n/a n/a n/a n/a n/a n/a 2021 1950 9 39 1989 Anders Gåsø, Head of Service and Sea transport 2022 1 795 299 36 2 130 2021 1474 241 4 32 1747 Oddleif Wigdahl, Head of Wellboats 2022 1 344 95 27 1 467 2021 1184 85 13 24 1293 Svein Sivertsen, chairman of the board Frøy ASA 2022 600 2021 Morten Loktu, member of the board Frøy ASA (20.12.22 ->) 2022 2021 n/a n/a n/a n/a n/a n/a Pernille Skarstein, member of the board Frøy ASA (20.12.22 ->) 2022 2021 n/a n/a n/a n/a n/a n/a Linda Johnsen, member of the board Frøy ASA, (23.03.22->) 2022 72.5 2021 n/a n/a n/a n/a n/a n/a Rune Juliussen, member of the board Frøy ASA (20.12.22 ->) 2022 2021 n/a n/a n/a n/a n/a n/a Paul Birger Torgnes, member of the board Frøy ASA (23.03.22-19.12.22) 2022 72.5 2021 n/a n/a n/a n/a n/a n/a Ivar Sigmund Wiliksen, member of the board Frøy ASA (23.03.22-19.12.22) 2022 76.25 2021 n/a n/a n/a n/a n/a n/a Dagfinn Eliassen, member of the board Frøy ASA (<- 22.03.22) 2022 330 2021 Hege Aasen Veiseth, member of the board Frøy ASA ( <- 19.12.22) 2022 443.75 2021 Anne Sofie Utne, member oft the board Frøy ASA ( <- 22.02.23) 2022 330 2021 Harry Asmund Bøe, member of the board Frøy ASA (<- 22.03.22) 2022 305 2021 * 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 2021. Pension represent the premium paid for defined contribution plans. No loans have been granted or collateral provided to Executive Management or members of the Board. Remuneration to executive management FRØY ASA | ANNUAL REPORT 2022124 7.2 RELATED PARTY TRANSACTIONS 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 com- pany (related parties). All transactions within the group or with other related parties are based on the principle of arm’s length. The following table provides the total amount of transactions that have been entered into with related parties (outside the Group) for the relevant financial period: Sales to related parties: 2022 2021 Salmonor AS (entity under common control) 106 400 45 865 Norway Royal Salmon ASA (entity under common control) 90 530 25 956 Frøy Sjøtransport AS 711 Mnh Rederi AS 4 SalMar AS * 100 SalMar Farming AS * 40 010 SalMar Aker Ocean AS * 10 Refsnes Laks AS * 1 590 Salmosea AS 11 621 Gåsø Næringsutvikling AS 30 NTS ASA 500 18 Purchases from related parties 2022 2021 NTS ASA (parent company) 7 930 7 024 Siholmen 1 905 1267 Frøy SjøTransport AS 7 336 100 Frøy Utvikling AS 304 350 Mnh Rederi AS 23 SS Invest AS 845 Salmonor AS 75 * = just November and December 2022 FRØY ASA | ANNUAL REPORT 2022 125 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 conditions 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 report- ing period and update 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. Ongoing tax case with Norwegian Tax Authorities See note 5.1 Aqusition of Marinus Aquaservice AS: See note 6.2 Management is not aware of any other subsequent events at the date of the release of this annual report. FRØY ASA | ANNUAL REPORT 2022126 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 amend- ments. Preliminary assessment indicates that the amendments will not have a significant impact on the Group’s consolidated financial statements. FRØY ASA | ANNUAL REPORT 2022 127 CONTENT FRØY ASA 2022 FINANCIAL STATEMENTS Income Statement 129 Balance Sheet 130 Cash Flow Statement 132 Notes to the Financial Statements 133 Accounting principles 133 1 Revenues 135 2 Related Party Transactions 135 3 Personnel Expenses, Number of Employees, Remuneration, Loan to Employees 136 4 Non-current assets 137 5 Specification of Other Expenses 138 6 Specification of Financial Income and Financial Expenses 138 7 Taxes 139 8 Equity 140 9 Subsidiaries 140 10 Debtors, Liabilities, Pledged Assets and Guarantees etc. 141 11 Intercompany Balances 141 12 Restricted Bank Deposits, Cash in Hand etc. 141 13 Shareholders 142 14 Other Current Liabilities 142 FRØY ASA | ANNUAL REPORT 2022128 Amounts in NOK Note 2022 2021 Operating income and operating expenses Revenue 1, 2 67 392 087 60 595 434 Total income 67 392 087 60 595 434 Employee benets expense 3 56 868 775 49 496 300 Depreciation and amortisation expenses 4 387 332 233 333 Other expenses 2, 3, 5 50 546 476 32 486 721 Total expenses 107 802 583 82 216 354 Operating prot/loss -40 410 496 -21 620 920 Financial income and expenses Share dividends and group contributions 278 812 602 19 593 937 Interest income from group companies 20 770 153 3 858 791 Other interest income 2 011 640 373 579 Other nancial income 840 158 0 Interest expense to group companies 0 608 277 Other interest expenses 2 372 1 680 186 Other nancial expenses 730 842 203 503 Net nancial items 6 301 701 339 21 334 342 Result before tax 261 290 843 -286 579 Tax expense 7 4 572 870 -34 586 Result for the year 256 717 973 -251 993 Allocation of result for the year Dividends 129 522 905 129 522 905 Transfer from Share premium -104 402 836 Transfer to/from Retained earnings 127 195 068 25 372 061 Total brought forward 8 256 717 973 -251 993 INCOME STATEMENT FINANCIAL STATEMENTS - FRØY ASA FRØY ASA | ANNUAL REPORT 2022 129 BALANCE SHEET as at 31 December Amounts in NOK Note 2022 2021 ASSETS Non-current assets Intangible assets Licenses, patents etc. 4 250 000 250 000 Deferred tax assets 7 1 703 404 6 276 274 Total intangible assets 1 953 404 6 526 274 Property, plant and equipment Plant and machinery 4 7 354 576 330 556 Total property, plant and equipment 4 7 354 576 330 556 Non-current nancial assets Investments in subsidiaries 9, 10 1 620 184 775 1 620 184 775 Loan to group companies 11 361 900 000 188 126 776 Investments in shares 0 1 860 348 Total non-current nancial assets 1 982 084 775 1 810 171 899 Total non-current assets 1 991 392 755 1 817 028 729 Current assets Receivables Accounts receivables 11 9 303 032 18 177 121 Other short-term receivables 18 707 596 19 834 143 Receivables from group companies 11 421 582 476 131 765 325 Total receivables 449 593 103 169 776 589 Bank deposits, cash and cash equivalents Bank deposits, cash and cash equivalents 12 117 231 085 457 889 316 Total bank deposits, cash and cash equivalents Total current assets 566 824 188 627 665 904 TOTAL ASSETS 2 558 216 943 2 444 694 633 FRØY ASA | ANNUAL REPORT 2022130 Amounts in NOK Note 2021 2020 EQUITY AND LIABILITIES EQUITY Paid-in equity Share capital 8, 13 86 348 603 86 348 603 Share premium reserve 8 2 185 603 469 2 185 603 469 Total paid-up equity 2 271 952 072 2 271 952 072 Retained earnings Other equity 8 127 195 068 0 Total retained earnings 127 195 068 0 TOTAL EQUITY 2 399 147 140 2 271 952 072 LIABILITIES Current liabilities Trade payables 5 647 186 3 124 019 Public duties payable 3 756 735 5 400 480 Dividends 129 522 905 129 522 905 Liabilities to group companies 11 15 000 000 30 000 019 Other current liabilities 14 5 142 977 4 695 137 Total current liabilities 159 069 803 172 742 560 TOTAL LIABILITIES 159 069 803 172 742 560 TOTAL EQUITY AND LIABILITIES 2 558 216 943 2 444 694 633 Frøya, 28 April 2023 Board of Directors Frøy ASA Svein Sivertsen Chairman Pernille Christensen Board Member Rune Juliussen Board Member Morten Loktu Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Officer FRØY ASA | ANNUAL REPORT 2022 131 CASH FLOW STATEMENT Amounts in NOK 2022 2021 Cash ows from operating activities Prot or loss before tax 261 290 843 -286 579 Income taxes paid 0 0 Gain/loss on disposal of nancial assets -840 158 0 Depreciation and impairment 387 332 233 333 Changes in inventories, trade receivables, trade payables and other current liabilities 11 327 898 -90 496 263 Change in intercompany balances -478 590 394 -373 735 568 Net cash ows from operating activities -206 424 479 -464 285 077 Cash ows from investment activities Purchase of property, plant and equipment -7 411 353 -250 000 Purchase of nancial assets 0 -60 011 Proceeds for sales of nancial assets 2 700 506 0 Acquisition of a subsidiary, net of cash acquired 0 0 Net cash ow from investing activities -4 710 847 -310 011 Cash ows from nancing activities Proceeds from borrowings 0 0 Repayment of borrowings 0 -50 000 000 Repayments of equity 0 0 Payment of dividends -129 522 905 0 Issue of Share Capital 0 999 998 741 Transaction cost 0 -28 432 635 Net cash ows from nancing activities -129 522 905 921 566 106 Net change in cash and cash equivalents 457 889 316 456 971 018 Cash and cash equivalents, beginning of period -340 658 231 918 298 Cash and cash equivalents, end of period 117 231 085 457 889 316 FRØY ASA | ANNUAL REPORT 2022132 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. Classification and assessment of balance sheet items Assets intended for long term ownership or use are classified as fixed assets. Assets relating to the operating cycle have been classified as current assets. Other receivables are classified 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 classified 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 fixed assets Tangible fixed 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 difference 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 fixed are reviewed at each financial year end and adjusted prospectively, if appropriate. Costs related to leases of fixed assets are expensed over the lease period. Prepayments are reflected in the balance sheet as a prepaid expense and are distributed over the rental period. Impairment of fixed 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 fixed assets at which independent ingoing cashflows can be identified. 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 reflected as financial 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 2022 133 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 unspecified provision is made to cover expected losses. Pensions The company 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”). 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 differences 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 differences, which are reversed or may be reversed in the same period, have been offset and netted. The disclosure of deferred tax benefits on net tax reducing differences which have not been eliminated, and tax losses varied forward losses, is based on estimated future earnings. Deferred tax and tax benefits which may be shown in the balance sheet are presented net. Cash Flow statement The cash flow 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 2022134 1 REVENUES Amounts in NOK 2022 2021 Activity distribution Revenues from services performed 67 392 087 60 595 434 Total 67 392 087 60 595 434 Geographical distribution Norway 67 392 087 60 595 434 Total 67 392 087 60 595 434 2 RELATED PARTY TRANSACTIONS Related-party transactions Amounts in NOK 2022 2021 Sales of goods / services: Subsidiaries 67 392 087 60 595 434 Purchase of goods / services: Subsidiaries 124 683 134 124 Associated companies 4 606 111 0 FRØY ASA | ANNUAL REPORT 2022 135 3 PERSONNEL EXPENSES, NUMBER OF EMPLOYEES, REMUNERATION, LOAN TO EMPLOYEES Amounts in NOK 2022 2021 Salaries/wages 48 813 555 43 139 147 Social security fees 3 660 833 2 421 336 Pension expenses 3 959 565 3 193 602 Other remuneration 434 823 742 216 Total 56 868 775 49 496 300 Average number of employees during the nancial year 50 52 Remuneration to executive management Amounts in Total NOK thousands Position Fees Fixed salary Benets Pension remuneration Tonje Foss CEO 2 531 11 51 2 593 Sondre Vevstad Interim CFO 1 650 0 01.07.2022 -> Tore Helgesen Interim CFO 956 0 - 30.06.2022 Head of Service and Anders Gåsø sea transport 1 795 299 36 2 130 Oddleif Wigdahl Head of Wellboats 1 344 95 27 1 466 Total 2 606 5 670 405 114 6 189 Remuneration to the Board of Directors Amounts in Time of Audit Remuneration Nomination Total NOK thousands service The Board Committee Committee Committe Total Svein Sivertsen 1 yr. 3 m. 563 37 600 Hege Veiseth 1 yr. 3 m. 363 81 444 Paul Birger Torgnes 9 m. 73 73 Linda Johnsen 9 m. 73 73 Ivar Sigmund Williksen 9 m. 73 3 76 Anne Soe Utne 1 yr. 1 m. 314 16 330 Dagnn Eliassen 1 yr. 1 m. 314 16 330 Harry Bøe 1 yr. 1 m. 305 0 305 Are Brekk 1 yr. 3 m. 75 75 Solveig Gaasø 1 yr. 3 m. 50 50 Hans Martin Storø 1 yr. 3 m. 50 50 Morten Loktu 1 m. 0 Pernille Skarstein 1 m. 0 Rune Juliussen 1 m. 0 Total 2 078 113 40 175 2 406 FRØY ASA | ANNUAL REPORT 2022136 3 PERSONNEL EXPENSES, NUMBER OF EMPLOYEES, REMUNERATION, LOAN TO EMPLOYEES (CONTINUED) 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. 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. 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 2022 amount to NOK 1 376 378 excl. VAT. Amounts in NOK Fees Statutory audit fee 781 800 Other assurance services 302 553 Other assistance 292 025 Total audit fees 1 376 378 4 NON-CURRENT ASSETS Other machines Under and Amounts in NOK construction equipment Trademark Total Purchase cost as of 01.01.2022 0 700 000 250 000 950 000 Inow purchased xed assets 5 323 246 2 088 107 0 7 411 353 Acquisition cost 31.12.2022 5 323 246 2 788 107 250 000 8 361 353 Accumulated depreciation 31.12.2022 -756 743 369 411 Book value 31.12.2022 5 323 246 2 031 364 250 000 7 604 610 This year’s ordinary depreciations 387 332 387 332 Economic life 3 years FRØY ASA | ANNUAL REPORT 2022 137 5 SPECIFICATION OF OTHER EXPENSES Amounts in NOK 2022 2021 Rent and other housing expenses 5 466 154 4 024 250 Travel expenses 5 025 256 1 260 327 Consulting expenses and insourcing 20 254 170 19 953 606 Marketing expenses 1 442 831 2 336 436 Insurance 511176 342 727 Other 17 846 889 4 569 375 Total other expense 50 546 476 32 486 721 6 SPECIFICATION OF FINANCIAL INCOME AND FINANCIAL EXPENSES Amounts in NOK 2021 2020 Financial income Share dividend 278 812 602 19 593 937 Interest income from group companies 20 770 153 3 858 791 Interest income 2 011 640 373 579 Other nancial income 840 158 0 Total nancial income 302 434 553 23 826 307 Financial expenses Interest expenses to group companies 0 608 277 Interest expenses 2 372 1 680 186 Other nancial expenses 730 842 203 503 Total nancial expenses 733 214 2 491 966 FRØY ASA | ANNUAL REPORT 2022138 7 TAXES Amounts in NOK 2022 2021 Current income tax expense: Entered tax on ordinary prot/loss: Tax payable 0 0 Changes in deferred tax assets 4 572 870 34 586 Total income tax expense 4 572 870 34 586 Amounts in NOK 2022 2021 This year’s tax expense: Reconciliation of income tax expense: Prot before tax 261 290 843 -286 579 Permanent dierences -240 505 071 -28 303 268 Changes in temporary dierences -209 178 86 333 Allocation of loss to be brought forward -20 576 593 0 Basis for income tax expense 0 -28 503 513 Amounts in NOK 31.12.2022 31.12.2021 Current tax liabilities consist of: Income tax payable for the period as above 0 0 Current tax liabilities 0 0 The tax effect of temporary differences and loss for to be carried forward that has formed the basis for deferred tax and deferred tax assets, specified on type of temporary differences Amounts in NOK 31.12.2022 31.12.2021 Deferred tax assets : Property, plant and equipment 196 734 -12 444 Losses carried forward (including tax credit) -7 939 479 -28 516 073 Basis for deferred tax assets -7 742 745 -28 528 517 Deferred tax assets recognised in balance sheet -1 703 404 -6 276 274 FRØY ASA | ANNUAL REPORT 2022 139 8 EQUITY 9 SUBSIDIARIES Share Share Retained Total Amounts in NOK capital premium earnings equity Equity as at 01.01.2021 69 955 181 1 328 578 441 25 372 061 1 423 905 683 Prot or loss for the period -251 993 -251 993 Issue of Share Capital 16 393 422 983 605 319 999 998 741 Transaction cost -22 177 455 -22 177 455 Suggested dividends -129 522 905 -129 522 905 Share premium reserve -104 402 836 104 402 837 0 Equity as at 31.12.2021 86 348 603 2 185 603 469 0 2 271 952 071 Share Share Retained Total Amounts in NOK capital premium earnings equity Equity as at 01.01.2022 86 348 603 2 185 603 469 0 2 271 952 072 Received shareholders contribution 0 0 Prot or loss for the period 256 717 973 256 717 973 Suggested dividends -129 522 905 -129 522 905 Equity as at 31.12.2022 86 348 603 2 185 603 469 127 195 068 2 399 147 140 Owner Share of Purchase Share of Share of Amounts in NOK Municipality share votes cost equity result Subsidiaries Frøy Akvaservice AS FRØYA 100% 100% 501 408 618 189 276 289 20 264 817 Frøy Nord AS SENJA 50% 50% 67 888 653 44 584 899 360 657 Frøy Rederi AS FRØYA 100% 100% 831 843 382 536 799 436 53 198 380 Frøy Shipping AS FRØYA 98.20% 98.20% 68 506 040 132 722 051 14 211 753 Norsk Fisketransport AS NÆRØYSUND 100% 100% 149 944 082 379 926 184 4 386 020 NTS Management AS NÆRØYSUND 100% 100% 594 000 12 296 739 388 651 Total 1 620 184 775 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 2022140 10 DEBTORS, LIABILITIES, PLEDGED ASSETS AND GUARANTEES ETC. Frøy ASA has provided a surety bond (“Selvskyldnerkausjon”) of NOK 532,000,000 to Nordea Bank for all current and future debts. This includes a credit facility related to Fisketransport AS’ construction of Frøy Odin. Amounts in NOK 2022 2021 Liabilities in group companies secured by surety bonds Liabilities to Nordea Bank 7 203 242 7 205 000 Liabilities to Nordea Bank 107 083 335 48 500 000 Frøy ASA has provided warranties of NOK 55 705 000 to Danske Bank and NOK 932 000 000 to DNB for debt to subsidiaries. 11 INTERCOMPANY BALANCES Amounts in NOK 2022 2021 Receivables Long term receivables 361 900 000 188 126 776 Accounts receivables 9 303 032 18 177 121 Other receivables 351 984 978 149 065 325 Total receivables 723 188 010 355 369 222 Liabilities Short term liabilities 15 000 000 30 000 019 Total liabilities 15 000 000 30 000 019 12 RESTRICTED BANK DEPOSITS, CASH IN HAND ETC. Amounts in NOK 2022 2021 Bank deposits, restricted in Frøy ASA 2 515 219 2 413 935 FRØY ASA | ANNUAL REPORT 2022 141 13 SHAREHOLDERS Share capital in Frøy ASA at 31.12: Amounts in NOK Total Par value Share capital 86 348 603 1 86 348 603 Total 1 86 348 603 All shares are fully paid and have the same rights. Shareholders with more than 1 % holding at 31.12.2022: Number of Owner Share of shares interest votes NTS AS 62 269 112 72.11% 72.00% Gåsø Næringsutvikling AS 5 373 304 6.95% 6.95% HSBC Bank Plc 1 185 494 1.53% 1.53% Riiber Holding AS 800 000 1.04% 1.04% Verdipapirfondet Fondsnans Norge 772 744 1.00% 1.00% The members of the board and management had the following share holdings at 31.12.2022: Number of Member of board / management Shares Svein Sivertsen 20 000 Linda Johnsen 0 Morten Loktu 0 Karen Pernille Skarstein Christensen 0 Rune Andre Juliussen 0 Tonje Eskeland Foss 10 000 Sondre Vevstad 8 196 Anders Gåsø 819 672 Gåsø Næringsutvikling AS, a close associate to Anders Gåsø owns 819 672 shares in Frøy ASA and 45 516 416 shares in NTS ASA. 14 OTHER CURRENT LIABILITIES Amounts in NOK 2022 2021 Others 21 550 0 Holiday pay 5 121 428 4 695 137 Total 5 142 978 4 695 137 FRØY ASA | ANNUAL REPORT 2022142 AUDITORS REPORT FRØY ASA | ANNUAL REPORT 2022 143 FRØY ASA | ANNUAL REPORT 2022144 FRØY ASA | ANNUAL REPORT 2022 145 FRØY ASA | ANNUAL REPORT 2022146 FRØY ASA | ANNUAL REPORT 2022 147 Frøya – Hovedkontor Siholmveien 34 7260 Sistranda T: 40 00 72 60 E: [email protected] W: froygruppen.no ANNUAL REPORT 2022 Bilde? 549300U4W5TODHJ1RL142022-01-012022-12-31549300U4W5TODHJ1RL142021-01-012021-12-31549300U4W5TODHJ1RL142022-12-31549300U4W5TODHJ1RL142021-12-31549300U4W5TODHJ1RL142020-12-31549300U4W5TODHJ1RL142021-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142022-01-012022-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142022-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142021-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142022-01-012022-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142022-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142021-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142022-01-012022-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142022-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142021-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142022-01-012022-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142022-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142021-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142022-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142021-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142022-01-012022-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142022-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142021-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142022-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142020-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142020-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142020-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142021-01-012021-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142020-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142020-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142020-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142021-01-012021-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142020-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:NOKiso4217:NOKxbrli:shares
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