Salmon Evolution ASA — Annual Report (ESEF) 2023

Apr 17, 2024

Salmon Evolution ASA Annual report 2023

Extending the ocean potential

Annual Report 2023

Annual report 2023

Extending the ocean potential

Table of Contents

01 THIS IS SALMON EVOLUTION

Letter from CEO ……………………………………………………………………………… 5
Company description ………………………………………………………………………. 7
Markets ………………………………………………………………………………………… 9
Business Plan and Strategy ………………………………………………………………… 11

02 ESG IN SALMON EVOLUTION

Environment ...…………………………………………………………………………………. 17
Social ....………………………………………………………………………………………… 26
Governance .……………….…………………………………………………………………. 31

03 GROUP RESULTS

Board of Directors Report …………………………………………………………………… 32
Salmon Evolution ASA Consolidated Financial Statements ………………………….. 58
Salmon Evolution ASA Financial Statements …………………………………………….. 105
Statement of Responsibility…………………………………………………………………. 129
Auditor’s Report……………………………………………………………………………… 130
Sustainability Indicators & GRI index ………………………………………………………. 134

Annual report 2023

Extending the ocean potential

This is Salmon Evolution

A Norwegian salmon farming company targeting a global leading position in sustainable production of high-quality salmon from land-based facilities.

• Global leader in land-based salmon farming
• Pioneering the hybrid flow-through system (HFS), reducing complexity and biological risk and securing optimal growth conditions at low cost
• 7,900 tonnes HOG Indre Harøy Phase 1 facility operating at full industrial scale – annual harvesting capacity of 31,500 tonnes HOG fully developed
• International expansion on back of proof of concept in Norway – clear roadmap for 100,000 tonnes
• Listed on Oslo Stock Exchange from July 2021

Annual report 2023

Extending the ocean potential

Key figures

Operational	2023	2022
Standing biomass (tonnes, LW)	2 204	733
Net growth (tonnes, LW)	3 751	1 087
Harvest volumes (tonnes, HOG)	1 874	340
All-in price realization/kg (NOK)	82,0	75,9

Financial	2023	2022
Operating revenues (NOK 1000)	168 424	47 681
Operational EBITDA ² (NOK 1000)	-83 950	-68 481
Operational EBIT ² (NOK 1000)	-130 680	-74 671
Profit (loss) before tax (NOK 1000)	-145 773	-32 726
Cash flow from operations (NOK 1000)	-124 445	-76 124

Capital structure	2023	2022
Cash flow from investment activities (NOK 1000)	-358 816	-796 132
Cash flow from financing activities (NOK 1000)	590 897	645 471
Cash and cash equivalents (NOK 1000)	386 396	278 759
Net interest-bearing debt (NOK 1000)	299 386	302 990
Equity (NOK 1000)	1 920 693	1 563 906
Equity ratio	71 %	68 %

Profitability	2023	2022
Earnings per share (NOK)	-0,37	-0,10
Market value (NOK million, Oslo Stock Exchange)	2 806	2 859

Annual report 2023

Extending the ocean potential

Letter from the CEO

In 2023 Salmon Evolution cemented its position as the global leader within land-based salmon farming. In total we harvested about 1,900 tonnes HOG of which 1,100 tonnes HOG in the fourth quarter alone, placing the Company as the world’s largest land-based salmon farmer. Furthermore, 2023 also marked a new phase in Salmon Evolution’s development as we have now entered an industrial stage with stable operations and regular harvest and sales after years of development, construction and gradual ramp up in production. As the industry leader we have also demonstrated that it is possible to produce salmon on land all the way to harvest weight, at an industrial scale and with strong biological performance. In Salmon Evolution we put biology first with very ambitious goals when it comes to mortality rates and product quality. In this context it is therefore very satisfactory to see that we are already operating within our targets.

Human capital is a key success factor in land- based salmon farming, and we have invested heavily in our organization which now totals around 70 people across the Group. We have been very fortunate in being able to recruit and retain highly skilled employees with a strong passion for their work. I am also very pleased to see all the learning and accumulation of competence and experiences, enabling us to continuously improve in all aspects of our business.

Looking ahead we have a positive view on the long-term demand for salmon and think that the need for resource efficient production of animal proteins will only increase in the years to come. This should ultimately benefit the salmon relative to many other protein sources, given its low feed conversion ratio, high nutrition content, short production cycle and low environmental footprint. There are significant challenges growing the supply side using conventional methods, from both a biological and regulatory perspective. Thus, the opportunity to sustainably produce salmon on land at an industrial scale is greater than ever. Also, the rising production cost and other challenges facing the conventional industry, has significantly improved the relative competitiveness of land-based, which we now see at parity level with the conventional industry. Looking forward we believe this trend will continue, given the unique opportunities you have in a land-based facility to control and optimize the environment.

Going into 2024 Salmon Evolution is uniquely positioned to continue to lead the development in this industry. We are now at a fully operational stage and with the strong salmon market outlook, we are very well positioned to capitalize on this and demonstrate the profitability of our business case.

Annual report 2023

Extending the ocean potential

We are also well underway with our growth plans with the key priority being phase 2 at Indre Harøy where we see substantial scaling effects on our operations. Also, having a large and successful operation at Indre Harøy will be a key enabler in our international expansion. Similar to last year we are also proud to include an integrated ESG section in our annual report. This is an area which is highly important to us and as we move forward and obtain more and more operational data, we will continuously work to improve and expand our ESG reporting. Being able to now supply our beautiful salmon to customers worldwide on a regular basis show that we have come a long way since our foundation back in 2017. We are truly grateful for all the support shown by our stakeholders and all the positive feedback from our customers on our salmon. The Salmon Evolution journey has just begun and we are confident that the best is ahead us as we look forward lead the development of this very exciting industry and define the future of sustainable salmon farming.

Trond Håkon Schaug-Pettersen
CEO, Salmon Evolution

Annual report 2023

Extending the ocean potential

Our Vision

Extending the ocean potential

We are responsible, competent, innovative and team players

Our vision is to extend the ocean potential and be the global leader within land-based salmon farming. We do this by transferring the best preconditions offered by the sea to farm fish on land through our chosen hybrid flow-through system (HFS) technology. This secures a sustainable production process with controlled and optimal growth conditions and limiting operational and biological risk.

Our concept is based on preserving and reusing marine resources and minimising our environmental footprint. We put biology first and farm fish on land using clean and fresh seawater as the primary water treatment element. This is combined with reuse of water to facilitate stable and ideal temperatures, in an energy efficient manner. Optimal water quality and stable temperatures are key to ensure excellent fish health and in turn capturing the full growth potential of the salmon. The creation of an optimal growth environment for the salmon ensures we can maximise the utilization and output of our farms, and thus keep investments and costs on par with the conventional industry. We deliberately chose to start our journey in the hearth of the global aquaculture cluster in Norway. This ensures access to the best talent in the aquaculture industry, as well as the world’s foremost suppliers and infrastructure. Ultimately it is all about the people, and in Salmon Evolution we are team players on a mission to produce salmon of the highest quality in an even better and more sustainable way.

Annual report 2023

Extending the ocean potential

Our Technology

Salmon Evolution is founded on the belief that good biology equals good economy. This belief has been essential when developing the production methods and technology applied in the Company’s land-based salmon farming facilities. Salmon Evolution’s chosen hybrid flow-through system (HFS) technology ensures rich access of fresh filtered seawater while at the same time reducing energy consumption by reusing around 65% of the water. A reusage level of around 65% is in the Company’s view a “sweet spot” balancing cost and operational risk. Higher reusage levels require the introduction of more filtration and water treatment and lead to an exponential increase in risk. On the other side, a low level of reusage leads to significantly higher energy costs in connection with pumping and heating of water. At Indre Harøy the seawater intake is based on two inlet pipes at 25 meters and 95 meters, enabling the Company to tap into ideally tempered water and hence reducing energy costs relating to heating of seawater. The water inlet is further filtered and treated with UV to eliminate parasites, sea lice, viruses, and particles. This ensures a rich flow of fresh and clean seawater into the fish tanks. To ensure optimal biological and growth conditions in the fish tanks, oxygen and CO2 levels are constantly monitored and adjusted. Each of Salmon Evolution fish tanks represents an individual biological zone, meaning that water in one tank never mixes with water in the other tanks. This again serves as a significant risk reducing measure in case of deceases etc. where a potential outbreak in one tank never can contaminate the fish swimming in the other tanks.# Annual Report 2023

Extending the ocean potential

Markets

Overall description Salmon Evolution is the global leader in land- based salmon farming and targets an annual production capacity of 100,000 tonnes. Salmon Evolution aims to be a driving force in the development of the salmon farming industry. The salmon industry is backed by several major global macro trends that have led to a significant demand growth, hereunder increased global population and a growing middle class, increased focus on eating healthy food, and resource efficient and climate friendly food production. About 20 % of the consumed protein in the world is fish, and the natural fish resources have largely been exploited. Global supply of Atlantic salmon has seen a significant increase over the last decades. In 2011 global production was 1.6 million tonnes WFE and this increased to 2.9 million tonnes WFE in 2021, representing a yearly growth of ~6%. However, the last two years global production has gone down and ended at 2.8 million tonnes WFE in 2023, a decrease of 3.5%. A primary reason for this is that the conventional salmon farming industry has reached a production level where biological constraints put limit to further growth, as well as a stricter regulatory framework in key salmon farming regions. Looking ahead for the next decade, a 3–7% yearly growth in salmon demand implies a total demand of around 3.8-5.5 million tonnes by 2033 which represents an increase of around 1.0-2.7 million tonnes WFE compared to current production.

Source: Salmon Evolution

The strong demand outlook, combined with challenges in the conventional salmon farming industry growing the supply side, have resulted in very strong salmon prices the last couple of years. It has also paved the way for development of new production methods such as land-based, offshore and ocean based closed systems. Conventional farming will play a key role in the salmon farming industry for many years to come, but new technology and other production methods, such as land-based farming, is necessary to close the supply gap and address the steadily increasing demand for Atlantic salmon.

Competitive landscape and market opportunities

Norway is by far the largest producer of Atlantic salmon today with a market share of about 50% followed by Chile at around 25%. The two main production regions share that most of the production is exported, with a significant portion of the volume being sold fresh to overseas markets requiring airfreight. Transportation of salmon via airfreight is expensive and increases the climate impact of the product. The rise of land-based salmon farming enables production closer to or in end- markets and thereby vastly reducing the need for airfreight. This creates a foundation for additional margins as pricing for in-market produced fish will likely be benchmarked with imported fish. Additionally, it reduces the climate impact. Salmon Evolution has significant international ambitions, illustrated by our North America expansion project as well as our joint venure with Dongwon Industries in South Korea. Building a land-based salmon farming facility is a complex process, which is why Salmon Evolutions first facility is being built in Norway in the middle of the aquaculture cluster with abundant access to the best people and suppliers. This creates a strong operational platform on which to scale, having achieved technological and operational proof of concept, as well as having established best practices when expanding abroad. Finally, when expanding internationally, Salmon Evolution is confident that project execution can both be fast-tracked and significantly de- risked by having a facility operational in full industrial scale, as well as teaming up with strong local partners.

Illustration: Salmon Evolution

Business plan and strategy

Goals and ambitions

Salmon Evolution’s goal is to be the global leader within land-based salmon farming. The company is focused on extending the ocean’s potential by transferring the best preconditions offered by the sea to farm fish on land through its chosen hybrid flow-through system (HFS) technology. This secures a sustainable production process with controlled and optimal growth conditions and limiting operational and biological risk.

Strategic priorities and opportunities

The Company targets a production capacity of 100,000 tonnes and although this is an ambitious target, Salmon Evolution already has an identified pipeline of projects. Over past years significant resources have been devoted to growing the organization, establishing quality and control systems as well as establishing a digital infrastructure. In sum this represents strong operational platform with deep know-how and expertise in operating a hybrid flow-through salmon farm. This again will be the foundation in our expansion plans. Our planned expansion is also strongly supported by having achieved technological proof of concept with our first farm at Indre Harøy, now operational in full industrial scale. The high degree of fresh seawater usage in our production combined with optimal growth conditions, have delivered strong results, highlighted with good growth, minimal mortality, and an industry leading superior grade share. Salmon Evolution also has ambitions as to the commercial aspect of fish farming, hereunder sale and distribution. The strong results so far, having a healthy and tasty fish with a firm texture which provides a solid foundation for establishing a good reputation in the market, all of which have been confirmed in connection with our first two years of operations. The environmental aspect of our production with a closed system production method, collection and recirculation of waste, no sea lice and minimal risk of escapes also have some very attractive attributes supporting our commercial operation.

Capital strategy/priorities and funding

The company is actively seeking to optimize its capital structure and have a balanced mix of equity and debt. Although land-based salmon farming mainly has relied on equity financing in the past, the company sees increasing appetite amongst banks for more traditional bank debt financing structures. Going forward, as more land-based salmon farming facilities commence operations and reaches profitability, the Company believes this positive trend will continue and eventually also facilitate higher leverage facilitating further growth.

Salmon Evolution also sees interesting opportunities for alternative financing structures, for example through partnerships and/or project financing structures. This and similar structures represent a capital efficient way of growing production while at the same time scaling and leveraging the organization’s competence and knowhow.

Management

General comments on experience and competence

The company has a dedicated management team with extensive experience from the aquaculture industry, and a well-developed organisation with the necessary competence and execution capabilities.

Roles and CV’s

Trond Håkon Schaug-Pettersen, CEO

Trond Håkon Schaug-Pettersen took over as our CEO in October 2022, after being our CFO since 1 January 2021. He brings extensive experience from both the salmon industry and the capital market. Prior to joining Salmon Evolution, he served over 4 years as Senior Vice President Finance and Business Development at Hofseth International. Before joining Hofseth International, Schaug-Pettersen worked for nine years as an investment banker at Swedbank/First Securities advising Norwegian and international companies on IPOs, equity and debt capital raisings, M&A, strategy, and restructurings. Schaug-Pettersen has a BSc in Economics and Business Administration from the Norwegian School of Economics (NHH). Schaug-Pettersen owns 400,000 shares and holds 2,600,000 options in Salmon Evolution (directly or indirectly through Troha Invest AS).

Trond Vadset Veibust, CFO

Trond Vadset Veibust joined Salmon Evolution as CFO in April 2023. He brings extensive industrial experience from Ekornes, where he worked 8 years, of which the last 3 years as a member of the executive management. Veibust has previously also worked 4 years at Ernst & Young as an auditor, and is a state authorized public accountant with an MSc in Accounting and Auditing from the Norwegian School of Economics (NHH). Vadset Veibust owns 55,000 shares and holds 500,000 share options in Salmon Evolution (directly or indirectly through Trollkyrkja AS).

Ingjarl Skarvøy, COO

Ingjarl Skarvøy is one of our founders and served as our first CEO. He has more than 30 years of experience from the aquaculture sector, including regional manager for Salmar Farming, CEO of Salmar Rauma and regional manager for Pan Fish Norway (now Mowi Norway). Skarvøy owns 1,800,150 shares and holds 750,000 share options in Salmon Evolution (directly or indirectly through Terra Mare AS).

Kamilla Mordal Holo, Chief Project Officer

Kamilla Mordal Holo has 16 years of experience from the construction sector, including the post as project manager at the Norwegian Public Roads Administration, responsible for the highway network in Møre og Romsdal county. She has also been project and construction manager at engineering and consultancy company, 3S Project. Mordal Holo has an MSc in civil and environmental engineering from the Norwegian University of Science and Technology (NTNU).Mordal Holo owns 160,060 shares and holds 750,000 share options in Salmon Evolution (directly or indirectly through C10 Holding AS).

Odd Frode Roaldsnes, CCO

Odd Frode Roaldsnes joined Salmon Evolution in 2021 and brings extensive experience from the salmon industry. Prior to joining Salmon Evolution, he held the position as sales director and partner at Ocean Supreme, a salmon exporter based in Ålesund. His background is within the areas of management, business development and downstream operations where he has primarily been focusing on the Asian markets the last 15 years. Roaldsnes owns 250,000 shares and holds 750,000 share options in Salmon Evolution.

Henriette Nordstrand, Technical Director

Henriette Nordstrand joined Salmon Evolution in August 2022. She holds valuable management experience from the fish farming industry, including planning for, construction and running a new large-scale hatchery plant. Prior to joining Salmon Evolution, she served five years as Hatchery Plant Manager in Hofseth Aqua AS. Nordstrand has an MSc in Aquamedicine from the University of Bergen and holds the title Aqua Medicine Biologist. She has also studied recirculating aquaculture systems (RAS) at the Norwegian University of Science and Technology (NTNU). Nordstrand owns 32,849 shares and holds 125,000 share options in Salmon Evolution (directly or indirectly through Heno Holding AS)

Tore-Jakob Reite, Director Strategic Projects

Tore-Jakob Reite joined Salmon Evolution in 2023 and has over 25 years’ experience from the aquaculture industry. Prior to joining Salmon Evolution, he was Managing Director of Entec Brimer, a manufacturer of composite tanks to land based fish farming and other industries. He has also worked as Head of Business Segment Fish Farming, Site Manager at Linde and worked several years in manager positions within sales and marketing of salmon and salmon products at Pan Fish (now Mowi). Reite holds a bachelor’s degree in business and marketing from University of Strathclyde Business School, Glasgow, Scotland. Reite owns 1,250 shares and holds 125,000 share options in Salmon Evolution.

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ESG IN SALMON EVOLUTION

Salmon Evolution is a salmon farming company focused on transferring the best preconditions offered by the sea to farm fish on land. Our hybrid flow-through system (HFS) technology secures a truly sustainable process with controlled and optimal growth conditions while limiting operational and biological risk. We are committed to ensure that we are a responsible business and that we are sustainable in our operations and in everything we do. This is enshrined in our vision: “EXTENDING THE OCEAN POTENTIAL”

We build sustainability and social responsibility into the core of our business. Our commitment is integrated into every part of Salmon Evolution’s business model and implemented through our ethical guidelines. It is our firm belief that responsible and sustainable business behaviour contributes to better environmental, social, organisational, and financial results. Salmon Evolution has a high potential to produce what the market demands: a fresh, healthy, and sustainable premium product. With the use of the HFS technology, we farm our salmon in a closed system with minimal impact on the environment, whilst providing the best conditions for optimal fish welfare. We have created a truly sustainable approach to producing the world’s best and healthiest protein.

ESG Reporting

This is our fourth annual report published and the third annual report with explicit Environmental, Social, and Governance (ESG) factors included. Our report is created with reference to the Global Reporting Initiative (GRI) Standards. We have committed to establish plans for ESG monitoring to allow for comprehensive ESG reporting. We are consistently striving to gather and transparently present our information at the highest level of quality possible, with principles of:
* Accuracy
* Balance
* Comprehension
* Timing
* Reliability

For our 2023 report, we still have limited comparative information from previous years or reporting periods due to only having one full calendar year with full operations. Going forward, we will present our information in a manner that is comparative on a year-by-year basis for our operations, to track our progress and ensure accountability to our goals.

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Stakeholders and Material Topics

The Company ran the process by conducting a materiality assessment to map and determine our sustainability priority areas. We began by identifying our most important stakeholders (see page 30) as well as their primary areas of interest related to environmental, social, and governance factors. These stakeholders and sustainability priority areas has now been verified. We have examined these areas to learn where our potential impacts are, and from this process, we established benchmarks for how we should identify and manage our sustainability risks and opportunities. This also gave clarity on how we should provide our stakeholders with material disclosures through our ESG reporting. The materiality assessment was conducted through discussions with internal employees who are in regular contact with our key stakeholders. It was carried out in accordance with GRI Standards and the Guidelines to Issuers for ESG Reporting by Oslo Stock Exchange (Euronext). To ensure the necessary independence and integrity of the process, this assessment was conducted by a third-party organisation. Our materiality assessment resulted in the following material topics being defined as priority areas:

ENVIRONMENT AND TECHNOLOGY
* Greenhouse gas (GHG) emissions
* Energy usage
* Circular economy
* Biodiversity and nature

FISH AND WATER
* Fish health and welfare
* Sustainable food production
* Product certification and traceability*
* addressed in the Governance chapter

PEOPLE AND SOCIETY
* Employee health and safety
* Local jobs, cooperation, and value creation
* Regulatory compliance
* Responsible supply chain

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Governance and ESG

Corporate responsibility is an integrated part of Salmon Evolution’s business practices. We strongly believe that we have a responsibility for the people, communities, and environment affected by our business. This is woven into our core values, responsible, competent, innovative and team player. It is the duty of the CEO to ensure that Salmon Evolution always operates according to these core values. The CEO must also ensure compliance with legislation and follow up on Salmon Evolution’s governing documents.

OUR CORE VALUES: RESPONSIBLE, COMPETENT, INNOVATIVE, TEAM PLAYER

The Board of Directors shall ensure that Salmon Evolution has sound internal control and systems for risk management. They shall also supervise Salmon Evolution’s management and general activities. This includes ensuring compliance to company core values, ethical guidelines, and guidelines for corporate social responsibility. Our governing codes, policies, and procedures ensure that all our employees carry out their activities in an ethical manner, in accordance with current legislation and Salmon Evolution standards. An overview of ESG topics covered by our governance system is presented here:
* Fish health and fish welfare policy
* Waste management policy
* HSEQ policy
* Supplier code of conduct
* Code of conduct
* Corporate governance policy
* Corporate social responsibility policy
* Anti-corruption compliance procedure

Environment

There is a growing need for sustainably farmed salmon. The Food and Agriculture Organization (FAO) of the UN predicts that the world population will reach 9.7 billion by 2050. The demand for food is set to increase by 50% and meeting this demand will require a significant increase in protein production. Seafood is quickly becoming an important contributor to meeting this demand. However, a growing demand for seafood will increase the

Protein production facts

	Carbon footprint (kg CO2/40g edible meat)	Feed conversion ratio	Edible yield	Water consumption (litres/kg)
	0.60	1.2-1.5	68 %	2,000
	0.88	1.7-2.0	46 %	4,300
	1.30	2.7-5.0	52 %	6,000
	5.92	6.0-10.0	No data	15,400

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pressure on already over-exploited wild fish stocks and ocean resources. To alleviate this pressure, aquaculture, including salmon farming, is required to efficiently manage and maintain both wild fish stocks and the ocean’s natural biodiversity. Salmon are amongst the most efficient protein sources to produce. The feed conversion ratio (FCR) for salmon, or the amount of feed an animal needs to gain one kilogram of body weight, is well below other common protein sources. Salmon has a high harvest yield in percentage (after inedible parts are removed) compared to other farmed animals. This is shown in Table 1. In the future when more data is available, Salmon Evolution intends to measure the efficiency on the production and believe that land-based salmon should be even more competitive. The global increase in food demand, combined with stronger preferences for healthy and sustainably produced proteins, has led to a high growth in demand for salmon over the last few decades. This increase has mainly been met by a continuous expansion within conventional aquaculture. However, numerous challenges inhibit sustainable future growth for fish farming:
* CLIMATE CHANGE: DUE TO THE LONG-HAUL TRANSPORT AND DISTRIBUTION OF FISH, THE CO2 FOOTPRINT FOR SEA-BASED SALMON FARMING IS HIGH. OUR RESPONSE: EXPANDING OPERATIONS CLOSER TO MARKETS
* POLLUTION AND WASTE: THE NATURE OF CONVENTIONAL SALMON NET PENS CREATES ISSUES WITH THE DISCHARGE OF UNTREATED WASTE AND POLLUTION, AS WELL AS DISEASES AND PARASITES INTO COASTAL WATERS.OUR RESPONSE: MINIMIZING POLLUTION AND TREATING WATER AND WASTE

▪ BIODIVERSITY AND NATURE: ESCAPES IN SEA-BASED SALMON FARMING ARE EXPENSIVE AND POTENTIALLY DAMAGING TO LOCAL WILDLIFE.
OUR RESPONSE: ELIMINATING THE RISK OF ESCAPE AND PROTECTING OCEAN BIODIVERSITY

▪ FISH HEALTH: DISEASES, PARASITES, AND SEA LICE ARE WIDESPREAD IN CONVENTIONAL SALMON FARMING, CAUSING CONSIDERABLE DAMAGE COMMERCIALLY. IN ADDITION, MORTALITY AND LOSSES IN PRODUCTION ARE A CHALLENGE FOR SEA-BASED SALMON FARMERS.
OUR RESPONSE: THROUGH OUR TECHNOLOGY, WATER INTAKE IS FILTERED AND UV-TREATED, AND SEPARATED BIOLOGICAL ZONES REDUCE OPPORTUNITY FOR CROSS-CONTAMINATION

▪ FISH WELFARE: CLIMATE VARIABILITY AND INCREASING WATER TEMPERATURES CAN CAUSE STRESS AND REDUCE FISH HEALTH AND WELFARE.
OUR RESPONSE: BY CONTROLLING WATER TEMPERATURE AND BY CONTINUOUS MONITORING, WE ENSURE GREATER FISH WELFARE

New methods and technologies for addressing biological and environmental challenges are continually being developed, including a shift to more land-based farming practices. Land- based farming addresses a broad range of these industry challenges and represents a viable solution for sustainably expanding the ocean’s essential resources.

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Research and development are thus central to our value chain and help create efficient operations, drive innovation, and create improvements that ensure future sustainability. Our research is based on co-operation with several research communities and promotes knowledge transfer between internal and external stakeholders.

Our Commitment

Our vision is to be the globally leading producer of land-based Atlantic salmon by ensuring sustainability and extending the ocean potential. We aim to encourage the inclusive and prosperous development of the aquaculture industry, within a stable and resilient earth system. To achieve this, we commit to promoting a culture where sustainability and profitability reinforce each other. We build sustainability into our core operations and through the use of the HFS technology, we transfer the best preconditions offered by the sea to the farming of fish on land. Through our business strategy, we are committed to the external environment and to setting a high standard for fish health and fish welfare. Our objective is to monitor and reduce the environmental impact of our business, to ensure we produce a premium salmon product with a low environmental footprint. We therefore place an emphasis on three key environmental areas:

1) climate change impacts
2) circular economy, pollution, and waste
3) biodiversity and nature

By reusing water, we optimise energy consumption related to pumping and heating, which reduces our CO 2 footprint. By filtering and treating wastewater, we reuse more marine resources. Fish sludge is also collected and recycled, contributing to a circular economy. By having a closed farming system, we also minimize the risk of escapes and thus the potential harm to local biodiversity and nature.

Photo: Salmon Evolution

Our environmental efforts should never compromise the health of our fish or our product quality. We therefore also focus on:

1) fish health and welfare
2) sustainable inputs and outputs
3) product certification and traceability*

*addressed in the Governance chapter

By using fresh seawater from the coast, we create optimal farming and environmental conditions for our fish, which result in better growth and a shorter production time. This enables a sustainable production process, with controlled and optimal growth conditions while limiting operational and biological risk.

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Each of our choices is weighed against alternatives to ensure that we carry out our operations responsibly. Sustainability and fish welfare are at the core of our vision as well as our actions as a firm. They are essential to the identity of Salmon Evolution, and we commit to carry this forward as our operations grow and as we expand globally.

Environment and Technology

Climate Change Impact

Salmon Evolution’s hybrid flow-through system (HFS) technology ensures rich access to fresh filtered seawater. At Indre Harøy, the seawater intake is based on two intake pipes at 25 meters and 95 meters, respectively, enabling us to tap into water at ideal temperatures. By combining supplies of clean and fresh seawater with reuse, we minimise overall energy consumption for pumping and heating of seawater in the facility. Our energy plant has a very high output in relation to the energy used.

Estimated data for Phase 1- full run rate:

• Electricity usage (MWh): ~60,000
• Electricity usage (kWh/kg biomass (LW)): ~6.3-6.8
• Renewable energy, Norwegian energy mix

The HFS technology reuses ~65% of the water, while the remaining ~35% is fresh seawater. This ratio is our “sweet spot”, balancing cost and operational risk while ensuring maximum production output. Higher reusage levels require more filtration and water treatment which again implies higher complexity and risk. On the other hand, a lower level of reusage will lead to significantly higher energy costs in connection with pumping and heating of water.

The Company has a green power supply agreement with Statkraft, Europe's largest generator of renewable energy. Statkraft is fully owned by the Norwegian government and is Norway's largest supplier of electricity to power-intensive industries. The partnership with Statkraft and location in the heart of Norwegian hydropower production, ensures sustainable electric power with low environmental impact.

The CEO of Salmon Evolution, Mr. Trond Håkon Schaug-Pettersen, sees this as a very positive step forward: “In Norway 88 percent of electricity production is hydropower. Our customers can be certain that our salmon is produced with the lowest possible environmental footprint, setting a new benchmark for sustainably produced salmon.”

In addition to this, Salmon Evolution is pursuing international expansion closer to markets, serving as a lower-CO 2 alternative to long-haul transport and distribution.

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Key Points – Climate Change Impacts

• Salmon is already a lower environmental impact protein, but through the HFS technology, we further reduce our climate impacts.
• We have a high performance and high output in relation to our energy consumption.
• Located in Norway, most of the electricity consumed will be made of hydropower.
• Through international expansion, we put land-based facility operations closer to the market, allowing us to reduce our CO 2 footprint for long-haul transport and distribution.

The energy efficient system at Indre Harøy was given a grant of up to NOK 96.8 million from Enova. Enova is owned by the Norwegian Ministry of Climate and Environment and functions to promote the environmentally friendly production and consumption of energy. This grant has allowed us to use even more resources to reduce greenhouse gas emissions, to develop energy-saving and climate-friendly technology, and to strengthen the security of the Norwegian food supply.

Circular Economy, Pollution, and Waste

The HFS technology is built to take in and reuse large quantities of clean and fresh seawater from the ocean. We are able to create an ideal balance, where we use water with the same high quality as traditional Norwegian cage-based farming, but where we also have sufficient space and access to the necessary resources for large-scale production on land. This provides us the opportunity to commit to a truly sustainable production as well as to promote a circular economy. We plan to achieve this through collecting, treating, and filtering feed residue and wastewater. These are then transported to a recirculation plant where they are converted into short-travelled fertilizer, biogas, or similar.

In addition to the ~65% of water being reused through the HFS technology, we also reuse the fish sludge as input for biogas or natural fertilizers. We are also conducting research for future usage areas. Our wastewater from Indre Harøy, is processed through a drum filter and dried up to 20-25 % TS using a dryer from Blue Ocean Technology. The dried sludge is then delivered to local farmers, which convert the sludge into electricity and fertilizer.

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Key Points - Circular Economy, Pollution, & Waste

• ~65% of water is reused.
• Wastewater and feed residue are collected, treated, and filtered.
• We are continuing research and development to ensure the responsible reuse and recirculation of wastewater, residues, and sludge.

By reusing and treating wastewater, and reusing water and sludge, we minimise our environmental footprint. Through our research, we aim to contribute to a circular economy by making these reuse solutions into feasible practices in the future.

Biodiversity and Nature

Our core business is about preserving and reusing marine resources and minimizing our environmental impact. The HFS technology operates in a land-based and enclosed system, which means that through greater production control, there is a close to zero risk of the salmon escaping from the farm. As a significant achievement towards responsible and sustainable salmon production we achieved the prestigious Aquaculture Stewardship Council («ASC») certification after only 18 months in operation. ASC is globally renowned for its stringent aquaculture standards focused on environmental sustainability and social responsibility. Further, we are committed to minimize negative impact to the local environment. To make sure that we reach this important goal we have established a plan for monitoring local biodiversity and nature. This is done by collaborating with an external advisor.

Key Points – Biodiversity & Nature

• Our closed system ensures minimal escape risk.
• Achieved ASC certification in 2023.
• Continuously monitoring local biodiversity and nature.# Annual report 2023

Extending the ocean potential

Fish and Water

Fish Health and Welfare

At Salmon Evolution, we believe that biology is key to ensure responsible practices in the aquaculture industry and ensuring fish health and welfare. We understand fish welfare as:

• freedom from hunger, thirst, and malnutrition
• freedom from extreme cold and heat
• freedom from injuries and illnesses
• freedom from anxiety, stress, and fear
• freedom to practice normal behaviour

To ensure fish welfare, we focus on the following:

• access to fresh seawater and good nutrition
• access to optimal conditions, including space for protection and rest
• preventing and/or quickly diagnosing and treating injuries and illnesses
• providing sufficient area and excellent facilities aimed at recreating a living space for fish that is similar to their natural environment
• ensuring good conditions and treatment so that fish avoid mental or physical suffering

The HFS technology and the arrangement of our facility enable us to define each tank as an isolated biological zone. This means that water in one tank never mixes with water in another tank. Such an arrangement gives us full control of water parameters and the production environment and allows us to ensure biosecurity. A potential biological outbreak in one tank will not impact or contaminate the fish swimming in another tank.

To ensure excellent biosecurity in our operations, we have implemented a quality assurance system with dedicated personnel responsible for compliance and the training of staff. Our training program includes promoting general biosecurity knowledge and awareness, including the development of skills and the use of measures specifically relevant for Salmon Evolution’s facility.

To ensure optimal biological and growth conditions in the fish tanks, oxygen and CO 2 levels are constantly monitored and adjusted. The HFS technology engages in CO 2 stripping and oxygenation to guarantee ideal environmental conditions for our fish.

By drawing seawater from depths of 25 and 95 meters, the HFS water intake is further filtered and treated with ultraviolet (UV) rays to eliminate parasites, sea lice, viruses, infection, and additional particles. Filtering and disinfecting intake water creates a controlled environment, reducing the risk of illness, and ensuring a rich flow of fresh and clean seawater into the tanks.

By optimizing water quality parameters with ideal and stable temperatures, we can reduce the time to harvesting for each batch from approximately 16 to 11 months with a 130g smolt insert weight. This increased growth creates the basis for greater production efficiency and optimal utilization of our licensed volume.

Finally, our operations reduce the handling of fish, which create better growth conditions. Finally, our operations reduce the handling of fish, which provide better opportunities for optimal feeding and reduces loss and stress during the production cycle.

Key Points – Fish Health & Welfare

• The HFS technology creates an optimal and stable growth environment, which is less stressful for our fish.
• We ensure biosecurity through separate tanks and distinct biological zones.
• Filtered seawater further minimises the risk of bacterial and viral pathogens; minimises risk of parasites; and limits threats of infection.
• We engage in minimal handling of our fish

By maintaining control over the production environment and stable water parameters, we generate conditions for increased growth and a shorter time to harvest. Our approach ensures better fish health and well-being, including reduced mortality and losses in production.

Sustainable Inputs and Outputs

At full run rate in phase 1, we estimate a harvest volume of approximately 7,900 tonnes (HOG, or head on gutted), with a strong focus on optimising our sustainable inputs while reducing negative impacts for our outputs for this volume. Our most dominating inputs consist of seawater, power, feed, smolt, and oxygen.

Since 2021 Salmon Evolution has had a strategic feed partnership with Cargill. Salmon Evolution is Cargill’s global flagship customer for land-based full grow out production. Cargill has further committed to allocate significant resources and R&D capacity with the ambition to develop sustainable feed solutions tailored to our operational targets: securing high biological performance and premium product quality. Cargill also owns 2.3% of Salmon Evolution.

When asked about the importance of the partnership with Cargill, the CEO of Salmon Evolution stated: “Having the best possible feed is essential for every salmon farmer. Particularly, in our HFS system where we create optimal and stable living conditions for the salmon, we see a strong and untapped potential in tailoring a feed focused on maximizing biological performance and product quality.”

Estimated data for Phase 1- full run rate:

• 100 % local seawater intake
• 9,300 tonnes of feed, corresponding to GHG emissions of 14,500 tons CO2 eq. excluding land use change (GW_E_LUC) and 18,100 tons CO2 eq. including land use change (GW_I_LUC).

Another important input is smolt. Salmon Evolution has its own smolt production at Salmon Evolution Dale AS in Dalsfjorden in Volda municipality, Norway. The location has a documented track record as a high-quality smolt producer and has been producing smolt since 1995. One of the major advantages with Salmon Evolution Dale is its excellent freshwater supply. Salmon Evolution Dale has access to clean freshwater from the surrounding mountains and is guaranteed a consistent supply of freshwater from the local power station. This freshwater access enables Salmon Evolution Dale to utilize a similar production technology as Salmon Evolution uses at its grow-out facility, a hybrid flow-through system (HFS) with reuse of water, CO2 stripping and oxygenation- making it a perfect fit for Salmon Evolution.

Having an inhouse smolt production gives Salmon Evolution operational control over a critical part of the value chain.

In addition to feed and smolt, another essential input is oxygen, which is supplied by Nippon Gases. We share many of the same values, making this an ideal partnership. During our selection process, one of the most important factors was the focus Nippon Gases has on sustainability. Their efforts have led EcoVadis to awarding them a Gold Medal, and they are ranked in the top 5% for their sector. By prioritizing responsible suppliers, we can ensure that we use sustainable inputs, leading us to create a truly healthy and sustainable final product.

Social

Salmon Evolution is committed to responsible business practices. We take seriously our duty to promote human rights and ensure labour standards, equality, and non-discrimination in our workforce. We are determined to be a safe and stimulating place to work. We also aim to limit any negative impacts our operations may have on society as much as possible. Through our concentrated investments, we have seen an important ripple effect that has led to positive impacts in local communities.

To ensure we track our efforts and impacts, and act responsibly, we have several policies and plans in place regarding health and safety, working environment, stakeholder engagement, and the respectful use of local areas. As we move forward, we will continue to monitor and improve these efforts in a holistic way.

Employee Well-Being, Health & Safety

Safe and Secure Workplaces

We strive for the highest levels of safety in working conditions. Our suppliers and partners must all operate according to responsible labour standards. Going forward, we encourage contractors and other partners with operational activities to be certified according to the ISO 45001, the standard for a safe and healthy working environment.

In 2023, there was one lost time injury (LTI), one total recordable injury (TRI), zero accidents, and zero fatal accidents reported amongst Salmon Evolution employees. In total, there were 45 cases of sick leave under 16 days, and 5 cases over 16 days. Four male employees took their entitled parental leave and returned. In addition, one male and two female started their entitled parental leave and have not returned by the end of the year.

Amongst contract workers, there were 2 LTI, 2 TRI, and zero fatal accidents. There were zero fatal accidents amongst third parties.

In 2023 the workload at the site at Indre Harøy has been high, and naturally there have been many workers at site. Along with high activity and many workers, the complexity is also at a level that requires a lot from both the contractors and the workers. To ensure safe working conditions and reduce the risk of accidents, we have established a close dialogue with contractors and workers, as well as developed safety routines. We maintain a strong focus on security and sense of responsibility for our employees. We strive to consistently provide a controlled and safe project progression regardless of the complexity or difficulty of the task.

To ensure this, we have a Health, Safety & Environment (HSE) manager on site to train our workers, conduct preventive HSE tasks, and to investigate any instances of potential violations or incidents. An introduction to HSE and training are provided to everyone new to the workplace and Salmon Evolution offers HSE and first aid courses to all its employees. In addition to the HSE manager, Salmon Evolution has appointed a safety representative and chief safety representative. All HSE work is documented in our third-party systems, TQM & Interaxo, through the filing of non-conformance reports, the documentation of investigations, and any additional follow-ups necessary.# Our Employees

The quality manager prepares procedures for work tasks that everyone is obliged to familiarize themselves with. Procedures for operations are assessed for risk and hazards prior to initiation. Salmon Evolution has an Occupation Safety Agreement with Medi3. In 2021, we established a process for our employees to receive regular performance and career development reviews which have been extended and improved throughout 2023. In October 2023 we conducted an employee engagement survey across the entire organization. The survey measures how the employees score the organization on seven main drivers related to engagement. These are well-being, alignment, collaboration, development, leadership, pride, and recognition. Moving forward we are planning on conducting these surveys on a quarterly basis to gain valuable insights on the “pulse” of the organization. This data will be important when making strategic decisions in connection with organisational change. Salmon Evolution has high ambitions for employee development in the company. Target and development interviews are conducted semi-annually in Q1 and Q3, respectively. We have invested in a separate module in the HRM system, which simplifies the implementation and follow-up of the interviews. The module is implemented throughout 2022 and the first talks was conducted in 2023. Salmon Evolution aims to be an excellent and stimulating place to work, where employees are given the opportunity to use their skills and abilities to contribute both to the company’s and their own progress. Employees receive systematic training focusing on developing skills tailored to individual needs and capabilities. We are also committed to the employee well- being outside of working hours. That is why we have established a corporate sports team for promoting activities and health after hours. In 2024, we will look for new initiatives to promote worker health and well-being both during and after work hours.

Diversity and Equal Opportunity

Salmon Evolution shall be an inclusive working environment, and we believe that ensuring this is key to attract future talent and maintaining our attractiveness as an employer. We continuously work to ensure that we create a workplace that is free from discrimination or harassment based on race, sex, nationality, religion, age, colour sexual orientation, disability, political opinion or otherwise. Any recruitment, promotion, training, reward or other advancement, is based on skills, qualifications, experience and performance. We have zero- tolerance for harassment or discrimination, both of which are addressed in our Code of Conduct and Personnel Handbook. Discrimination based on ethnic background, nationality, language, gender, sexual identity, or religious faith shall not occur. We are committed to promoting equal opportunities and fair treatment of all employees. In 2023, there were one case reported relating to a personnel matter. This case was processed and resolved in accordance with our procedures.

At the end of 2023, Salmon Evolution had 69 employees excl. apprentices, all 100% employed. We had a turnover rate of 0%. We support the principles of freedom of association and collective bargaining agreements. All employees at Salmon Evolution may freely join any labour union of their choice and we strive to sustain a good relationship with employees and unions. In 2023, all employees, except for one Russian and one Islandic employee, in Salmon Evolution were Norwegian. We had 13 employees over 50 years old, 39 employees between the ages of 30-49, and 17 employees under 30 years old. There were 6 women and 7 men employed in 2023. Our management team consisted of five men and two women. We are continuously focusing on diversity and gender balance. The gender balance in Salmon Evolution as of 31.12.2023 was 70% men and 30% women. This is better than the average for the industry in Norway, which in 2022 was 82% men and 18% women according to Directorate of Fisheries.

Compensation

Our ambition is to offer competitive compensation aligned with the local market and industry. No employee in Salmon Evolution is paid less than the official national living wage. We map gender pay on a regular basis, and our overall our analysis shows no significant gender pay difference across functions. For compensation based on collective bargaining agreements we have equal pay. We have a wage gender ratio of 90% (89% in 2022), excluding management and apprentices. The average base salary in 2023 was NOK 732,099 for our female employees compared to NOK 817,060 for our male employees. The ratio for management was 75 % (62% in 2022) and the average base salary was NOK 1,799,125.

Responsible Supply Chain

Our suppliers are important contributors to the success of our business. We believe that transparent and frequent communication with both our customers and suppliers is vital for our success. We work closely with our suppliers and customers to minimise negative impact from our supply chain and we will continue to develop partnerships focusing on sustainability. Suppliers that are in breach of our basic standards for ethics and corporate social responsibilities can be disqualified for new tenders. However, if they do not comply with our standards, we first aim to work with the supplier to bring about improvements. If the supplier still does not comply, Salmon Evolution will seek to terminate the supplier relationship. Salmon Evolution suppliers shall have standards for ethics and corporate social responsibility that follow the UN Global Compact principles. This shall apply to all suppliers as well as partnerships and employees.

Stakeholder and Local Engagement

Local Value Creation

Given that our land-based facility is located on Indre Harøy in Hustadvika municipality, Norway, we decided in 2019 to move our head office from Molde municipality to Elnesvågen, Hustadvika. The physical relocation was done during the first two months of 2022. For the first phase of construction, our total investment on Indre Harøy was approx. NOK 1.7 billion. From this, we have seen a major ripple effect for both the Møre og Romsdal region and Hustadvika municipality, in the form of large contracts to local suppliers. This has led to comprehensive investments in their own companies. For example, food services are provided by local companies, many of whom have seen record growth, which has led to further investments in the municipality. Other investments our local suppliers have made include office premises and associated infrastructure, which have directly contributed to further local contracts and increased employment opportunities.

In total, Indre Harøy has employed around 200 workers daily through these contracts. Many of the contractors are also temporarily housed at local hotels while working at the construction site. The communities we impact, from the municipality to local inhabitants, have reacted positively to these developments.

Stakeholder Engagement

Dialogue and engagement with our stakeholders help us understand what is expected of us, what is most important to our stakeholders, how they are impacted by our operations, and how we can work together in solving common challenges. In 2021, we reviewed our stakeholders and identified seven groups that we have the possibility to impact or be impacted by. These are listed below:

Throughout 2023 we have been in regular contact with our employees, the local community and municipality, our customers, and our suppliers and service providers as part of our daily operations. Quarterly reports and presentations, and the latest relevant news from our company, are presented on our website. Over the next year, we commit to have a continued focus on creating arenas for systematic and open dialogue with these groups to understand our impacts. We are committed to being a responsible business through interacting with our stakeholders in both an ethical and transparent manner.

Respectful Use of Land

The site of our land-based facility was originally a disused quarry. After over 30 years of operation, the quarry was emptied, and remained vacant. Because the land was left in this state, there was very limited need for intrusive activities in the nature to complete the construction of our facility for farming salmon. Converting the disused quarry has provided an opportunity for us to engage in value-creating activities in an area where there were limited opportunities for this. We made great efforts to create an optimal balance between generating value for local people and communities, while severely limiting land- conversion and our impact on the environment.

Going Forward

Salmon Evolution will continue to prioritise local suppliers for our contracts. We will develop good relationships with local communities through creating an open dialogue and expanding our engagement efforts. We believe that our operations should have as little negative impact as possible, and as we grow, we will develop new ways to monitor and assess our efforts.

Governance

At Salmon Evolution, we believe that the foundation of good governance is built through strong and transparent relationships with our internal and external stakeholders. Our current governing principles and procedures help establish the basis of these relationships. Our principles include rules of procedure for the Board of Directors (the Board), instructions for the chief executive officer, regulations on the division of roles and responsibilities between the Board and the CEO, our investor relations policy, and manuals for the handling and disclosure of insider information.# Organisation and Governing Systems

Organisation and Ownership

Salmon Evolution ASA is a Norwegian public limited liability company and has four subsidiaries. Salmon Evolution Norway AS is the owner and operator of our facility at Indre Harøy and where most of our employees are employed. Salmon Evolution International AS is the holding company for our interests in North America and our South Korean joint venture and K Smart Farming is the joint venture between Salmon Evolution and the South Korean seafood firm Dongwon Industries. Salmon Evolution Dale AS is producing smolt and will be the main supplier of smolt to our facility at Indre Harøy. Salmon Evolution Sales AS is our sales company.

Salmon Evolution ASA
├── Salmon Evolution Norway AS (100%)
├── Salmon Evolution International AS (100%)
│ ├── K Smart Farming 49%
│ └── Salmon Evolution North America (100%)
├── Salmon Evolution Dale AS (100%)
└── Salmon Evolution Sales AS (100%)

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Board of Directors report

Introduction/summary

The Board of Directors is responsible for the overall management of Salmon Evolution and may exercise all the powers on our behalf. In accordance with Norwegian law (Norwegian Public Limited Liability Act), the Board of Directors is responsible for, among other things, supervising the general and day-to-day management of our business; ensuring proper organisation, preparing plans and budgets for our activities; ensuring that our activities, accounts, and asset management are subject to adequate controls. They also undertake investigations necessary to ensure compliance with these duties. The Board of Directors may delegate such matters to the Executive Management of Salmon Evolution. The Executive Management is responsible for ensuring that day-to-day operations are in accordance with instructions set out by the Board of Directors. Among other responsibilities, our CEO is responsible for keeping the accounts at Salmon Evolution in accordance with existing Norwegian legislation and regulations, and for managing the Salmon Evolution’s assets in a responsible manner. At least once a month, our CEO must brief the Board of Directors about Salmon Evolution’s activities, financial position, and financial results. This board of directors’ report outlines the main framework regarding the Group’s corporate social responsibility and corporate governance. For further information please refer to the ESG section of this report (page 15-31).

Board of directors – roles and CV’s

Regional and international entrenchment and industry-based expertise characterise our directors. Their common denominator and driving force are a belief in farming salmon sustainably on land, based on the board’s overall expertise and the choice of the right technology.

Tore Tønseth, Chairman of the board

Investment director at Ronja Capital and has worked in the financial market for more than 15 years. Earlier appointments include equity analyst in both Sparebank 1 Markets and Pareto Securities, with seafood, technology and industry as special fields. He was responsible for seafood analyses at SpareBank 1 Markets from 2013 to 2019. At the same time, he was in frequent demand as a speaker in Norway on seafood, finance and sustainability. Tønseth also has a background from various technology start-ups, where he has been both product manager and system developer. Tønseth has an MSc in economics and administration from the Norwegian School of Economics (NHH), specialising in finance and econometrics.

Ronja Capital II AS, a close associate of Tore Tønseth, owns 30,140,645 shares in Salmon Evolution.

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Peder Stette, Board Member

Peder Stette has been in the fishing and aquaculture industry for the last 25 years. From 1994 he developed Peter Stette AS to be an important supplier of technical solutions to the industry before merging with Optimar in 2014. Optimar was later sold to Haniel in 2017, and Peder had the position as CTO and later CCO in Optimar until 2021. He is now the CEO of Stette Holding, a family investment company. Peder Stette holds the position as director of Ably Medical, Invisible Connections, Biaton, NSP Aid and others. For the coming years he will use his knowledge and experience to build values in the companies the Stette family is invested in.

Stette Invest AS, a close associate of Peder Stette, owns 11,744,288 shares in Salmon Evolution.

Anne Breiby, Board Member

Anne Breiby holds a Cans scient degree in fisheries biology from the University of Tromsø and experience as aquaculture coordinator for the director of fisheries in Nordland county, organisation secretary for the Norwegian Fish Farmers Association, political adviser in the Ministry of Fisheries and state secretary (junior minister) in the Ministry of Trade and Industry. Over the past 20 years, Breiby has been self-employed with boardroom work as her main activity. She has board experience from inter alia Ulstein Group ASA, Rem Offshore ASA, Folketrygdfondet, Norges Sjømatråd AS, Åkerblå AS and Sparebanken Møre. She is currently chair of Tafjord Kraft As.

Breiby owns 168,935 shares in Salmon Evolution.

Ingvild Vartdal, Board Member

Ingvild Vartdal has a law degree and long experience as a corporate lawyer, and is currently a lawyer and partner in Adviso Advokatfirma AS. She specializes in corporate and international tax and has extensive experience from these areas in industries like fishing, shipping and finance. She has previously worked as a lawyer and partner in Advokatfirmaet Schjødt AS, in KPMG Law, and as a legal consultant at Bærum tax office. Vartdal has also been a member of the law committee for tax law. Vartdal holds several directorships and has experience from business management in both private and listed companies.

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Vibecke Bondø, Board Member

Vibecke Bondø has broad management and business experience, primarily from the aquaculture industry. She joined the family business Vikna Sjøfarm as CFO in 2004, a position she held until the merger with Lund Fiskeoppdrett in 2010 to create SalmoNor, and she then stepped up to become CEO. SalmoNor was developed into a top tier performer within the industry and merged with NTS owned Midt-Norsk Havbruk in 2021.Vibecke subsequently served as Chair of the board for NTS ASA until acquired by SalMar in 2022. She has held several other directorships including Seaborn, Salmon Group, the Norwegian Seafood Federation and the Norwegian Confederation of Business. Vibecke is currently focusing on own investments along with select directorships.

Bondø Invest AS, a close associate of Vibecke Bondø, owns 1,948,052 shares in Salmon Evolution.

Eunhong Min, Board Member

Eunhong Min is the CEO of Dongwon Industries, one of Korea’s leading seafood companies. He is bringing a broad international experience to the Board. Prior to joining Dongwon, Mr. Min worked 27 years for Proctor & Gamble and held various leading positions within the fields of strategy, business development and sales.

Dongwon Industries Co. Ltd, a close associate of Eunhong Min, owns 16,044,572 shares in Salmon Evolution.

Janne-Grethe Strand Aasnæs, Board Member

Janne-Grethe Strand Aasnæs is the CEO and majority owner of Strand Havfiske AS, an Ålesund based fishing vessel company mainly engaged in whitefish and pelagic business. She has prior to that been engaged in the financial industry as a financial analyst/portfolio manager and manager of client relations within asset management. She holds an MBA and is a Certified financial analyst (AFA). Janne-Grethe holds several directorships in both the private and public sector and has a long experience in managing and developing companies.

Nikaro AS, a close associate of Janne- Grethe Strand Aasnæs, owns 480,000 shares in Salmon Evolution.

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Jan-Emil Johannessen, Board Member

Jan-Emil Johannessen has over 30 years of experience in the aquaculture industry. For the past 10 years he served as Head of Benchmark Genetics, building the company into a leading global supplier of aquaculture genetics for the salmon, shrimp and tilapia industry. In his long and distinguished career, he has held many directorships in the aquaculture industry. He currently holds several, including one as chairman of the board in Sulefisk and Seagems Group AS.

Johannessen owns 40,000 shares in Salmon Evolution.

Important events in 2023

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Corporate social responsibility

Salmon Evolution is committed to responsible business practices with respect to human rights, labour standards, equality and non-discrimination, social matters, the external environment, and anti-corruption. The Group shall comply with the UN Global Compact principles and OECD guidelines for multinational companies. The Group has developed a Code of Conduct including guidelines for ethical behaviour, anti-corruption, integrity and conflicts of interest, corporate responsibility, and whistleblowing.The Code of Conduct applies to all employees, contract workers, board members and other persons acting on behalf of the company. The Code of Conduct is available from the company’s website www.salmonevolution.no. For further information about our corporate social responsibility activities, please see the ESG section of this report. In addition, the Group reports to cover the requirements of the Transparency act (Åpenhetsloven), first in June 2023. The report is available on the company web page and will be updated by June 2024.

Environment

Salmon Evolution’s ambition and aim are an inclusive and prosperous development of the aquaculture industry within a stable and resilient earth system. The company’s business strategy and objective are to be a leader in producing and selling salmon with lower environmental footprint. Salmon Evolution strives to reduce the environmental impact of its business. By having a closed system, the company eliminates the risk of escapes. Further, energy consumption relating to pumping and heating of water is reduced through reusage of water while at the same time not compromising on fish welfare. Also, the wastewater is filtered, sludge collected and recycled and hence contributing to a circular economy. The company’s sustainability strategy is further described in separate section under Company description.

Working environment

Salmon Evolution aims to be a good, stimulating place to work, where employees are given the opportunity to use their skills and abilities to contribute both the company’s and their own progress. Employees shall receive systematic training and Salmon Evolution can contribute to develop skills on individual basis. All employees in Salmon Evolution shall enjoy a high level of safety in their work. Salmon Evolution aim for all suppliers and partners to operate to responsible labour standards, and the company encourage contractors and other partners with operational activities to be certified according to the ISO standard for the working environment and safety. The company continuously collaborate with suppliers to make improvements. There were one injury and zero accidents reported or investigated amongst Salmon Evolution employees in 2023. Total sick leave for the group in 2023 was 2%, compared to 0.8% in 2022.

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Diversity and equal opportunity

Salmon Evolution shall have an inclusive working environment. Discrimination or harassment based on ethnic background, nationality, language, gender, sexual identity or religious faith shall not occur. The group shall promote equal opportunities and fair treatment of all employees. At the end of 2023, Salmon Evolution had 69 employees excl. apprentices, of whom 21 women. This is better than gender balance in The Industry Sector in Norway, which in 2022 was 82% men and 18% women according to the Directorate of Fisheries. The executive management group consists of 5 men and 2 women. The board consists of 4 men and 4 women. Employees of Salmon Evolution may freely join any labour union of their choice. Salmon Evolution shall work to sustain a good relationship with employees and unions.

Anti-corruption and anti-bribery

Salmon Evolution’s anti-corruption policy and anti-bribery policy are developed in compliance with the U.S. Foreign Corrupt Practices Act, the U.K Bribery Act and other applicable anti-corruption laws, and states that Salmon Evolution will not engage in, or otherwise tolerate, any form of bribery or corruption in the business dealings of any member of the Salmon Evolution group. No corruption or bribery cases were reported or investigated in 2023.

Whistleblowing

Salmon Evolution wishes to sustain open communication about responsible and ethical conduct at Salmon Evolution. We have set out guidelines for giving notice of breaches of the law, rules, ethical guidelines, and other unacceptable circumstances. Employees are encouraged to follow the procedures contained in the whistle-blowing guidelines. In 2023, there were one case reported relating to a personnel matter. This case was processed and resolved in accordance with our procedures.

Product Certifications and Traceability

With stable growth conditions and high biological input from roe to harvest-ready fish, we meet the highest quality standards- as well as the market’s requirements for high and uniform harvest weight. We aim to always have full control of the biomass. Modern monitoring systems track the fish and their welfare indicators at individual level, which allows us to sort and register the fish effectively. A land-based farm is protected from many of the challenges faced in the sea. This is combined with the best possible fish health, optimal water quality, and high-quality sustainable feed to give our customers first-class salmon. To make sure we deliver on our promises, we focus on two programs to be certified within. First, we are certified according to the Global G.A.P. Aquaculture standard. The standard covers the entire production chain from brood stock, seedlings and feed suppliers to farming, harvesting and processing. The program ensures Good Agricultural Practices. Second, we are certified according to the Aquaculture Stewardship Council (ASC), an

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organisation that establishes strict protocols for labelling farmed seafood through sustainable aquaculture, to get the certifications. Our aim is to have;
A sustainable food chain with traceability from roe to plate

These programs set strict requirements for responsible farming, which encourage seafood producers to track and minimise the environmental and social impacts of their business. The standards addressed in these schemes cover the production process from roe stage to fish slaughter. Through these two certifications, we commit ourselves to transparency in our operations and to safeguarding and documenting traceability and food safety.

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Corporate governance at Salmon Evolution ASA

Salmon Evolution depends upon good relations with its stakeholders to succeed. Good corporate governance is important to build and maintain trust and confidence in the company and to ensure long-term value creation in the best interest of the Company’s shareholders.

Corporate governance principles and practices

Current principles and procedures include rules of procedure for the board of directors, instruction for the chief executive officer, regulating the division of roles and responsibilities between the board and the CEO, investor relations policy and manuals for handling and disclosing insider information. The Board has also adopted a Code of Conduct including guidelines for anti-corruption, conflicts of interests and whistleblowing routines, stipulating the main principles for ethical business conduct applying to all employees, contract workers, board members and other persons acting on behalf of the company. The company’s governance documents and practices will be subject to annual reviews and discussions by the board of directors. Risk management and internal control are given high priority by the board of directors ensuring that adequate systems for risk management and internal control are in place. The control system consists of independent areas which include risk management, control environment, control activities, information and communication and monitoring. The board of directors shall conduct an annual organisational risk review in order to identify real and potential risk that have and/or can occurred.

Shares and Negotiability, Equal Treatment of Shareholders, and Transactions with Close Associates

Salmon Evolution has one class of shares, carrying equal voting rights. There are no restrictions on owning, trading, or voting for shares in Salmon Evolution’s Articles of Association. Any transactions in own shares will be carried out either through Oslo Stock Exchange or otherwise at prevailing market prices. If there is limited liquidity in our shares, we will consider other ways to ensure equal treatment of all shareholders. For major transactions between Salmon Evolution, our shareholders, subsidiaries, members of the board, leading employees or other close related parties, an evaluation will be performed by an independent third party and treated by the general meeting.

Transactions with Related Parties

During the ordinary course of business, the Group engages in certain transactions with related parties. The following is a summary of related party transactions carried out in the period:
The Group has a consultancy agreement with Peder Stette (board member) and Frode Kjølås (chair nomination committee) relating to assistance in certain projects on an ad-hoc basis. The Group has during 2023 purchased legal services from Adviso Advokatfirma AS in the amount of NOK 77,000 in its ordinary course of business. Board member Ingvild Vartdal is a

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partner at Adviso Advokatfirma AS but has not had any role in the services rendered to Salmon Evolution. In Addition, the Group have purchased well boat services from Rostein AS in the amount of NOK 1.7 million. Rofisk AS owns Rostein AS (100%), and former board member (until 2023) Glen Allan Bradley is the chair of the Board in Rofisk AS. There were no other material transactions with related parties during 2023. For information on transaction with close associates, see Note 24 in the annual accounts.

Board of Directors, Nominations and Committee, and Board Authorisations

On 18 March 2021, Salmon Evolution was converted into a public limited liability company. The Articles of Association for the Company stipulate that the Board of Directors shall include five to nine directors. They also stipulate that the Company shall have a nomination committee consisting of minimum three members. The Board of Directors and the chair are elected by the general meeting.# Directors and Management

As of 31 December 2023, the following directors were represented on the Board:

Name	Role	Elected until	Independent of management and material business associates? (yes/no)	Independent of major shareholder? (yes/no)	Board meeting attendance 2023	Comment
Tore Tønseth	Chair	2024	Yes	Yes	14/14	Closely associated with Ronja Capital II AS
Anne Breiby	Director	2025	Yes	Yes	14/14
Peder Stette	Director	2025	Yes	Yes	13/14	Closely Associated with Stette Invest AS
Janne-Grethe Strand Aasnæs	Director	2024	Yes	Yes	13/14
Ingvild Vartdal	Director	2024	Yes	Yes	13/14
Vibecke Bondø (from June 2023)	Director	2025	Yes	Yes	5/5
Jan-Emil Johannessen (from June 2023)	Director	2025	Yes	Yes	5/5
Eunhong Min	Director	2024	No	Yes	6/14	Closely associated with Dongwon Industries
Håkon Andre Berg (until June 2023)	Director	2023	Yes	Yes	8/9
Glen Allan Bradley (until June 2023)	Director	2023	Yes	Yes	9/9	Closely associated with Rofisk AS

The composition of the Board is based on representation of Salmon Evolution’s shareholders, as well as the company’s need for competence, experience, capacity, and ability to form balanced decisions.

The Nomination Committee are elected for a period of two years and is responsible for proposing candidates to the Board and the Nomination Committee, and remuneration to the members of these bodies. The Nomination Committee operate with the following Instruction for the Nomination Committee.

The Group has a board of directors’ and officers’ liability insurance policy, covering covers defence costs, legal representation expenses and losses arising from claims for the group’s board of directors and officers. The insurance policy has an aggregate limit of liability of NOK 100 million.

Compensation approach

Salmon Evolution does not have a remuneration committee as this is not considered necessary in the light of the composition of the Board of Directors. Remuneration of the board is decided by Salmon Evolution’s general meeting, and reflects the board’s responsibility, expertise, time commitment and the complexity of Salmon Evolution’s activities. Note 4 of the financial statement provides details of all elements of the remuneration and benefits for each member of the board. The remuneration for the board is not linked to the Group’s performance.

Remuneration of the Executive Management is decided by the board in accordance with the Norwegian Public Limited Liability Companies Act. The board has the responsibility to ensure convergence of the financial interest of the Executive Management and the stakeholders. The board aims to ensure that performance- related remuneration of the Executive Management in the form of share options, annual bonus programs or the like, if used, are linked to value creation for shareholders or Salmon Evolution’s earnings performance over time. Note 4 of the financial statement provide details of all elements of the remuneration and benefits for each member of the Executive Management.

Compliance

As a Norwegian public limited liability company listed on Oslo Stock exchange, Salmon Evolution bases its corporate governance structure on Norwegian legislation and recommended guidelines. The Company is subject to The Norwegian Corporate Governance Board’s (NUES) recommendation on corporate governance. Salmon Evolution complies with the current Code of Practice for Corporate Governance, published 14 October 2021, with the following exceptions:

General Meeting:

• The general meeting is chaired by the chairman of the board of directors or an individual appointed by the chairman of the board of directors. Having the chairman of the board of directors or a person appointed by him chairing the general meetings simplifies the preparations for the general

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meetings significantly. In the Company’s experience, its procedures for the chairmanship and execution of general meetings have proven satisfactory.
* The shareholders are invited to vote on the composition of the board of directors proposed by the nomination committee as a group, and not on each board member separately, as it is important to the Group that the board of directors of the Company works in the best possible manner as a team and that the background and competence of the board members complement each other.
* The Company encourages shareholders to attend the general meeting. It is also the intention to have representatives of the board of directors and the chairman of the nomination committee to attend the general meeting. The Company will, however, normally not have the entire board attend the meeting as this is considered unnecessary. This represents a deviation from the Code of Practice which states that arrangements shall be made to ensure participation by all directors.

The work of the Board of Directors:

• The Company does not currently have a remuneration committee as this is not considered necessary in the light of the composition of the board of directors. The Company will however consider establishing a remuneration committee going forward.

Takeovers:

• The Company does not have separate guidelines on how to respond in the event of a takeover bid. The Norwegian Code of Practice recommends the adoption of such guidelines.

In addition, the Group has focus on risk management and internal control systems and have implemented routines to track which risks the organization is exposed to and what consequences this could have.

Investor Relations Policy

Salmon Evolution’s Investor Relations Policy sets the basic principles for our communication and dialogue with capital markets participants, including guidelines for contact with shareholders outside general meetings. We are committed to providing our shareholders with accurate, clear, relevant, and complete information on our performance and market position. Communication with stakeholders shall be based on the principles of equal treatment and transparency, and we aim to continually ensure trust and stakeholder confidence.

The responsibility for Salmon Evolution’s investor relations activities lies with our CFO. Salmon Evolution provides quarterly reports in line with Oslo Stock Exchange’s recommendations. Presentations are given in connection with the disclosure of the interim results to provide an overview of operational and financial developments. The presentations are open to the public and made available through a webcast. All information is provided in English and distributed to our shareholders through Oslo Stock Exchange’s news channel www.newsweb.no and our website at: https://salmonevolution.no/investor/reports/.

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Inside a fish tank (December 2023) Photo: Salmon Evolution

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Shareholder Information

Salmon Evolution was successfully listed on Merkur Market (now Euronext Growth) on 18 September 2020. Further, the Company was listed on Oslo Stock Exchange (Oslo Børs) 9 July 2021, the last day of trading of the shares on Euronext Growth (Oslo) was 8 July 2021.

As per 31 December 2023 Ronja Capital II AS was the Group’s largest shareholder with 30,140,645 shares, corresponding to 7.3% of the total number of shares outstanding. The 20 largest shareholders held 55.0% of the shares in the Group. The Group carried out NOK 525 million private placement on 18th April 2023 as part of the Indre Harøy phase 2 financing. The closing price for the Company’s share was NOK 6.78 per share as per 31 December, which corresponded to a market capitalization of NOK ~2.8 billion.

20 largest shareholders

31 December 2023

Source: VPS, Company

Shareholder	# of shares	% share
Ronja Capital II AS	30 140 645	7,3 %
The Bank of New York Mellon SA/NV	26 128 070	6,3 %
Farvatn Private Equity AS	18 939 433	4,6 %
Dongwon Industries Co. Ltd	16 044 572	3,9 %
Rofisk AS	14 537 897	3,5 %
Kjølås Stansekniver AS	12 506 439	3,0 %
J.P. Morgan SE	11 761 639	2,8 %
Stette Invest AS	11 744 288	2,8 %
Verdipapirfondet Dnb Norge	11 113 276	2,7 %
Ewos AS	9 480 984	2,3 %
Verdipapirfondet DNB SMB	9 302 408	2,2 %
Jakob Hatteland Holding AS	8 758 786	2,1 %
Mevold Invest AS	8 141 141	2,0 %
Lyngheim Invest AS	8 049 252	1,9 %
Bortebakken AS	7 856 330	1,9 %
VPF DNB Norge Selektiv	7 424 509	1,8 %
J.P. Morgan SE	4 652 771	1,1 %
Salmoserve AS	4 000 000	1,0 %
Verdipapirfondet Nordea Avkastning	3 578 295	0,9 %
Clearstream Banking S.A.	3 377 732	0,8 %
Total 20 largest shareholders	227 538 467	55,0 %
Other shareholders	186 398 173	45,0 %
Total number of shares	413 936 640	100,0 %

Operational development

In 2023, being the first full year in operation, the Company stocked six batches of smolt, had a net biomass growth of 3,751 tonnes and harvested 1,874 tonnes (HOG). Throughout the year Salmon Evolution was steady approaching full run-rate in production. In 2023 Salmon Evolution has steadily been building the biomass at Indre Harøy. Entering 2023 the Company had three batches containing approximately 0.7 million individuals and representing 637 tonnes of biomass. Exiting 2023 Salmon Evolution had about 1.4 million individuals at Indre Harøy. In 2023 the Company harvested 1,874 tonnes (HOG). Overall, in 2023 the Company has had good biological performance, ending the year with more than 2,200 tonnes of standing biomass.

Salmon Evolution experienced increased mortality in selected fish groups in Q2. It has been determined that this was triggered by AGD, causing problems with gill health. Several actions were taken to remedy the situation, including instalment of on-site freshwater production capabilities enabling freshwater treatment as an integrated part of the fish grading operation when fish is transferred to new tanks, implemented as a standard operating procedure since June 2023. Since then, Salmon Evolution has had minimal mortality, and in the last four months of 2023 had an average mortality within the targeted 3-5 % p.a. range.# Biomass growth

Biomass growth increased steadily quarter by quarter in 2023, with Q2 being impacted by the abovementioned AGD incident. Steadily increasing biomass production will set the stage for a substantial increase in harvest volumes from Q2 and onwards. In 2023 Salmon Evolution had 22 harvest days yielding a total of 1,874 tonnes (HOG) with an average weight around 4.0 kg (LW). The accumulated superior grade share was 92 % in 2023. The average superior grade share and average harvest weights in 2023, was impacted by the harvest of batch 3 and 4 in Q4. These two groups were affected by the AGD event in Q2. Overall, in 2023 the harvest results where strong, with good feedback on the quality and an industry leading superior grade share with significant positive price implications.

	Q1-23	Q2-23	Q3-23	Q4-23	Total
Total biomass (tonnes, LW)	0	300	600	900	1200
Net biomass growth (tonnes, LW)	0	200	400	600	800
Net biomass growth (l.a.)
Total biomass (r.a.)

Indre Harøy phase 1

Phase 1 of Indre Harøy was finalized in April 2023 with the last two remaining tanks of a total of twelve tanks handed over from the contractor. The facility has an expected yearly production volume of 7,900 tonnes HOG.

Indre Harøy Phase 1 (January 2024) Photo: Salmon Evolution

Indre Harøy phase 2

In Q2 of 2023 the Group announced contracts with Artec Aqua and HENT. Indre Harøy phase 2 is split in two parts, with HENT taking responsibility for civil design and construction, and Artec Aqua for design, construction, and commissioning of the process facility. Phase 2 represents a major milestone in the roadmap to 100,000 tonnes, by adding another 7.9kt HOG of annual production volume at Indre Harøy and bringing the total up to 15.8 kt HOG per annum. During in the second half of 2023 the Company has completed the initial groundworks for the grow-out section as well as preparations for the intake station. Design and engineering activities for phase 2 kicked off following the contracts with Artec Aqua and Hent, and in the second half of 2023 these activities proceeded according to plan. Throughout 2023, the Company has been working with the contractors to identify cost savings and efficiency gains compared to phase 1, this work also includes relevant functional improvements. Although phase 2 will benefit from the substantial infrastructure investments taken in phase 1, the Company is seeing inflationary pressure on capex. Hence, the Company has a strong focus on cost optimization and reducing uncertainty as part of the work to establish the final project target price.

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The project is subject to final investment decision upon completion of the initial project phase, expected in Q2 2024. This is planned followed by construction start shortly thereafter. Capex the first 6-9 months is expected to be relatively moderate.

Illustration: Salmon Evolution

As part of the project, Salmon Evolution is also developing a plan to cover the smolt needs for phase 2. This could potentially include an expansion of our current smolt facility, where we hold a license to produce up to 5 million smolt. This project is ongoing but as it is interlinked with our Indre Harøy phase 2 project, no investment decision has been taken.

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North America

Project overview and status

The North America expansion is an integral part of Salmon Evolution’s strategy towards a production capacity of 100,000 tonnes. Salmon Evolution is currently advanced negotiations on a high-potential site in North America. The initial site verification processes, including fatal flaws analyses of both water, biological, technical, and regulatory aspects, points to this being an ideal site for a hybrid flow-through system. As previously communicated the focus with respect to sites is centred around areas with an established salmon farming industry, mirroring the Group’s approach for Indre Harøy in Norway. Salmon Evolution sees a significant value in leveraging existing aquaculture infrastructure and value chains, enabling both scale and cost leadership, as well as reducing operational and biological risk. It is expected that site verification and relevant regulatory approval processes will take about two to three years, allowing for construction start during 2026, upon which the plan is to build a full scale 31.5 tonnes HOG “Indre Harøy” facility drawing on the experiences learned from Norway. To facilitate this expansion, the Group has established a dedicated team of both in-house and external resources and is currently in the process of ramping this team up. The Group’s strategy of pursuing accretive project financing structures in overseas markets remains unchanged. As the project develops, Salmon Evolution seeks to engage in such discussions, leveraging the human capital in our Company and maximizing shareholder value.

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Korea

Project overview

The Group has a joint venture, K Smart Farming, with the South Korean seafood giant Dongwon Industries where the plan is to develop, construct and operate a 16,800 tonnes HOG land-based salmon farming facility in South Korea, using Salmon Evolution’s technology approach and competence. This is planned completed in two stages, each phase aiming for an annual capacity of 8,400 tonnes HOG. The project consists of a smolt facility at Jeongseon, a grow-out site at Yangyang and certain other infrastructure. At the site for the planned smolt facility at Jeongseon, there has been freshwater trout production for many years. The planned site for the grow-out facility at Yangyang, is located on the northeast coastline of South Korea.

Project status

As previously communicated the primary focus towards the end of 2023 was centred around cost optimization Completion of design and engineering activities for the grow-out facility at Yangyang and permitting work had good progress in the last quarter of 2023. The Company currently sees the overall project economics as challenging, primarily driven by site specific circumstances at the Yangyang grow-out site, in particular related to the intake and discharge water solution due to a relatively long and shallow shoreline. Additionally, given that Korea has no existing salmon farming industry, certain other infrastructure items and regulatory framework are impacting the project cost as well as operating cost. The project is currently engaging with relevant authorities in South Korea to shore up government financial support, to improve project economics. Clarification around this is expected during Q2 2024.

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Events after balance sheet date

No material subsequent events.

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Financial performance

Going concern

The consolidated financial statement is prepared in accordance with International Financial Reporting Standards (IFRS). The Board confirms that it is appropriate to prepare the Annual Report based on a going concern assumption. The Group believes it is adequately funded and has access to additional capital if required.

Income statement

Total revenues for 2023 accumulates to NOK 168.4 million for the Group. Apart from revenues linked to harvest, the Group have some revenues from sale of services and related to insurance settlement following the mortality incident during the second quarter. Personnel expenses and other operating expenses amounted to NOK 204.7 million. This is an increase from last year which reflects the higher activity level in the Group, continued operating expenses at Indre Harøy and South Korea, the establishment in North America and other administration expenses. After fair value adjustment related to the biomass of NOK 20.1 million, the Group recorded an operating loss of NOK 110.5 million in 2023

The Group recorded depreciations of NOK 46.7 million, mostly related to the facility at Indre Harøy. Depreciations for the Indre Harøy facility commenced in May 2023. The Group recorded no tax cost in 2023, and the loss ended at NOK 145.7 million compared to NOK 32.7 million in 2022.

Cash flow

The net cash flow from operating activities in 2023 was negative NOK 124.4 million. Having completed the grow-out facility at Indre Harøy in April 2023, the net cash flow from investing activities was significantly reduced in 2023 and ended at negative NOK 358.8 million. Cash flow from financing activities came in relatively similar in 2023 compared to 2022 at NOK 590.9 million (NOK 645.5 million in 2022). In 2023 the cash flow from financing activities is primarily related to the private placement of NOK 525 million done in April. The net change in cash and cash equivalents for 2023 was NOK 107.6 million, and at year end 2023 cash and cash equivalents amounted to NOK 386.4 million and total available liquidity of NOK 645 million including available committed undrawn credit facilities. This excludes the construction facility of NOK 775 million for phase 2.

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Financial position

On 31 December the book value of the Group’s assets was NOK 2,709.6 million. The fixed assets in the Group mostly relate to the facility at Indre Harøy, comprising land, buildings, and production equipment, as well as the Dale smolt facility and other smaller items. The current assets in the Group are primarily biological assets, other current receivables, and cash & cash equivalents. Total equity amounted to NOK 1,920.7 million. This corresponds to an equity ratio of 71%. Consolidated interest-bearing liabilities totalled NOK 685.8 million which mainly relates to the financing of Indre Harøy phase 1. Received grants are recognized in the financial accounts as a reduction of fixed assets.As of end 2023 the Group has recognized NOK 14.3 million in Skattefunn grants and NOK 96.8 million in Enova grants of which NOK 14.3 million is not received and NOK 96.8 million have been received by 31 December 2023, respectively. In relation to its long-term financing the Group have financial covenants. These are described in detail in note 22.

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Risk exposure and risk management

Salmon Evolution’s business activities entail exposure to various types of risks and uncertainty, that may prevent us from reaching our goals and deliver our strategy. Through our risk management process we identify, quantify, and define actions to manage the risks we face. We split our defined risks into relevant subcategories, and efforts to reduce risk are addressed by our most capable people within each business area.

Operational risk

The greatest operational risk relates to biological incidents within the Group’s aquaculture operations. Although Salmon Evolution has been in operations for more than two years, land-based salmon farming is still a relatively young industry and is subject to inherent risk by being an industry in a development phase. The Company is vulnerable to errors in technology, production equipment and maintenance routines as well as diseases which may have a material adverse effect. Further, challenges or incidents in connection with the ongoing production ramp up could also have adverse effects for the Group’s ability to realize its business plan.

Project risk

Successful project execution and construction are decisive for the Group’s business and comes with numerous risks, including risk for delays or cost overruns. Due to the size of these construction projects, any material delay or cost overrun could have adverse effects for the Group’s ability to realize its business plan. In the current contract structure for phase 2 there are moderate risk sharing elements to incentivise realization of the project at target price and on-time.

Market risk

The Company is exposed to the fluctuations and overall development of the salmon prices. Through 2023 salmon prices have remained strong, supported by strong demand. As of 31 December 2023, the Group has not entered any hedging programs to reduce its exposure to the salmon price. Furthermore, the Group is exposed to changes in market prices for the input factors used in the production process, in particular feed prices and electricity prices. As to the latter, the Group has hedged about half of its expected electricity needs for 2024-2026, with a gradually declining hedging profile.

Interest Rate risk

The Group's interest rate risk relates primarily to borrowings from financial institutions with floating interest rates. Currently, the Group has entered into hedging programs to reduce this risk for parts of its planned borrowings. As of 31 December 2023, outstanding loans from credit institutions amounted to NOK 673.2 million (excluding financial leasing). The term loan, which represents the vast majority of the Groups loan with financial institutions, has an interest rate of NIBOR 3M plus an agreed margin. In order to reduce exposure to fluctuations in the interest rate the Group has entered interest rate swap contracts with Nordea and Sparebanken Vest, of respectively NOK 150 million and NOK 50 million. For further information see note 22.

Foreign Currency risk

The Group's foreign currency risk relates to the Group's operating, investing, and financing activities denominated in a foreign currency. This includes the Group's revenues, expenses, and capital expenditures. From time to time the group utilizes financial instruments to hedge its currency exposure. The Group are hedging for fluctuations in currency by doing forward contracts on most of its currency sales contracts. The Group did not have any material exposure in foreign currency contracts at the end of the year. The Group's presentation currency is Norwegian Kroner ("NOK").

Credit risk

With respect to credit risk arising from the financial assets of the Group, which comprise cash and cash equivalents, and other receivables, the Group's exposure to credit risk arises from default of the relevant counterparty, with a maximum exposure equal to the carrying amount of these instruments. In 2023 all produced fish was sold through Salmon Evolution Sales AS. The Group has procedures in place to ensure that products are only sold to customers with satisfactory creditworthiness, and in all material respect use credit insurance. The credit risk is not considered to be material on 31 December 2023.

Liquidity risk

A lack of liquidity will entail a risk that the Group will not be able to pay its obligations on maturity. Management monitors rolling forecasts of the Group's liquidity reserve (comprising cash and cash equivalents) based on expected cash flows. The Group's business plan and growth strategy is capital intensive, and the Group may be dependent upon future equity issues and/or debt financing to finance its current and long- term plans.

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Summary and outlook

2023 marked a significant step towards achieving the goal of profitable farming of salmon on land with excellent biological results. In 2023 Salmon Evolution ended with over 2,200 tonnes of standing biomass and over 1.4 million individuals at Indre Harøy. The stocking of the last part of batch 10, completed in early January, set the conditions for steady state production, and streamlined operations. We have gradually been ramping up production in 2023. A total of six batches was stocked, and batch 2, 3 and 4 was harvested in full. The strong operational track record builds on impressive biological results. In the second half of 2023 the mortality rate was 2.6%, equalling a yearly run-rate of 5.2%, and in the fourth quarter 1.2 % equalling a yearly run-rate of 4.8%. This highlights that a running average annual mortality rate of between 3-5 % is within reach. This just after a mere two years in operation, of which the last six months of 2023 at full industrial scale. The target of 3-5 % on an annual basis is ambitious, and depend on a number of factors, but primarily stocking quality of smolt and maintaining excellent conditions at Indre Harøy. Salmon Evolution will not rest on this topic, biology comes first.

Salmon Evolution harvested a total of 1,874 tonnes (HOG) in 2023, of which 1,104 tonnes (HOG) in the fourth quarter. The superior share on harvested fish in 2023 was 92%. This compares to our target of 95% which we deem fully realistic based on historical performance where for several quarters have achieved this goal. Additionally, we have seen that the spread in weight distribution on the harvested fish is very tight, underlining that grading the salmon when it is split is yielding the expected results. Going forward gradually increasing harvest weights are expected, which together with further biomass build-up will set the stage for a substantial increase in harvest volumes from Q2 and onwards.

Overall, we are very satisfied with the biological results seen in 2023 and see the achieved results as a clear proof of concept to our approach to land-based salmon farming. In the fourth quarter another milestone was reached as well, with the farming segment reaching EBITDA breakeven, underlining that farming costs are decreasing on back of higher biomass production. It also underlines the value of being able to tap into a highly efficient value chain. Access to an existing value chain is a key reason why Salmon Evolution is targeting areas with an established salmon farming industry for its North America expansion. Mirroring the approach for Indre Harøy in Norway, Salmon Evolution sees a significant value in leveraging existing aquaculture infrastructure and value chains, enabling both scale and cost leadership, as well as reducing operational and biological risk.

Over the last three years global production of Atlantic salmon has been decreasing. New technology and production methods are required to bridge the supply gap. According to Kontali Analyse global supply growth in 2024 is forecasted to be a moderate 2 %. This in turn indicates a tight market, supporting a scenario with strong salmon prices going forward. This is evidenced with the Fishpool forward price at around NOK 100/kg on average for 2024. Going into 2024 with a full farm, and on the verge significantly increasing harvest volumes, Salmon Evolution is in a solid position to benefit on this over the coming quarters and years.

Salmon Evolution continues to see a significant demand growth potential for salmon and

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believes that land-based farming will need to play an important role, alongside conventional farming, for the industry to be able utilize the demand potential. With phase 1 at Indre Harøy in full operation and having a strong financial platform, Salmon Evolution is in a unique position to continue to lead and shape the development of this industry.

Photo: Salmon Evolution

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Statement from the Board of Directors and the CEO

Today, the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Director’s report and the consolidated and separate financial statements for Salmon Evolution ASA for the year ended 31 December 2023 (“Annual report 2023”). Salmon Evolution ASA’s consolidated financial statements have been prepared in accordance with IFRSs and IFRICs as adopted by the EU and applicable additional disclosure requirements in the Norwegian Accounting Act. The separate financial statements for Salmon Evolution ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian accounting standards as of December 31, 2023.# The Board of Directors’ report

The Board of Directors’ report for the Group and the parent company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian accounting standard no 16, as of December 31, 2023. To the best of our knowledge:
1. The annual financial statements for 2023 have been prepared in accordance with applicable financial reporting standards
2. The annual financial statements give a true and fair view of the assets, liabilities, financial position and profit as a whole as of 31 December 2023 for the Group
3. The Board of Directors’ report for the Group includes a fair review of:
a. the development and performance of the business and the position of the Group, and
b. the principal risks and uncertainties the Group face

The Board of Directors of Salmon Evolution ASA
Elnesvågen/Ålesund 16 April 2024

Tore Tønseth Chair
Janne-Grethe Strand Aasnæs Director
Anne Breiby Director
Peder Stette Director
Vibecke Bondø Director
Eunhong Min Director
Ingvild Vartdal Director
Jan-Emil Johannessen Director
Trond Håkon Schaug-Pettersen CEO

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Group consolidated financial statements (IFRS)

Consolidated statement of income (NOK thousands)

	Note	2023 Consolidated	2022 Consolidated
Sales revenues from farming	4,5	153 325	46 107
Other revenue	4,5	15 099	1 574
Total operating revenue		168 424	47 681
Change in inventory	6,7	78 476	34 077
Cost of materials	7	-126 180	-34 706
Personnel Expenses	8,9	-76 052	-49 996
Other Operating expenses	8,10	-128 619	-65 538
Operational EBITDA		-83 950	-68 481
Depreciations	11	-46 730	-6 190
Operational EBIT		-130 680	-74 671
Fair value adjustment of biomass	6	20 149	11 740
Operating Profit (EBIT)		-110 532	-62 931
Financial income	12	21 481	35 322
Financial expense	12	-49 624	-4 170
Share of net income from associated companies	13	-7 098	-947
Net financial		-35 241	30 205
Profit/loss before tax		-145 773	-32 726
Income tax expense	14	0	0
Profit/loss for the period		-145 773	-32 726
Basic earnings per share (NOK)	15	-0.37	-0.10
Diluted earnings per share (NOK)	15	-0.37	-0.10

Consolidated statement of comprehensive income

NOK thousands

	Note	2023 Consolidated	2022 Consolidated
Profit/loss for the period		-145 773	-32 726
Items that are or may be reclassified to profit or loss:
Currency translation differences	13	-861	1 363
Total comprehensive income for the period, net of tax		-146 634	-31 362

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Consolidated statement of financial position (NOK thousands)

	Note	31 Dec 2023 Consolidated	31 Dec 2022 Consolidated
Assets
Intangible assets	11,16	72 347	65 149
Deferred tax asset	14	415	2 077
Assets under construction	11	70 781	1 713 490
Assets in use, not allocated	11	54 019	0
Property, plant & equipment	11	1 848 190	30 541
Right-of-use assets	17	12 084	13 001
Investments in associated companies	13	18 676	26 635
Total non-current assets		2 076 513	1 850 894
Inventory	6	8 369	1 941
Biological assets	6	153 790	58 927
Trade receivables	3	40 496	23 080
Other current receivables	18	31 121	66 951
Financial derivatives	3,19	12 900	25 622
Cash and cash equivalents	3,20	386 396	278 759
Total current assets		633 072	455 281
Total assets		2 709 585	2 306 174
Equity and liabilities
Share capital	21	20 697	17 288
Share premium	21	2 124 647	1 627 073
Other reserves	9,21	10 758	8 320
Other equity		0	0
Uncovered losses		-235 408	-88 774
Total equity		1 920 693	1 563 906
Long-term interest-bearing debt	3,22	569 969	513 169
Lease liabilities - long term	3,17,22	8 189	9 676
Other long-term liabilities	8	702	8 549
Total non-current liabilities		586 859	531 393
Short-term interest-bearing debt	3,22	103 275	55 353
Trade payables	3,23,24	71 499	135 098
Social security and other taxes	23	8 273	7 086
Lease liabilities - short term	3,17,22	4 350	3 553
Other short-term liabilities	23	14 635	9 783
Total current liabilities		202 032	210 873
Total liabilities		788 892	742 267
Total equity and liabilities		2 709 585	2 306 174

Annual report 2023 Extending the ocean potential 60

The Board of Directors of Salmon Evolution ASA
Elnesvågen/Ålesund 16 April 2024

Tore Tønseth Chair
Janne-Grethe Strand Aasnæs Director
Anne Breiby Director
Peder Stette Director
Vibecke Bondø Director
Eunhong Min Director
Ingvild Vartdal Director
Jan-Emil Johannessen Director
Trond Håkon Schaug-Pettersen CEO

Annual report 2023 Extending the ocean potential 61

Consolidated statement of cash flow (NOK thousands)

	Note	2023 Consolidated	2022 Consolidated
Cash flows from operating activities
Profit/loss for the period		-145 773	-32 726
Adjustments for:
Depreciation, amortisation, and impairment loss	10	46 730	6 190
Net financials	11	35 241	-30 205
Share based payment expenses	21	2 438	3 201
Changes in working capital:
Change in trade receivables	23	-15 605	-22 698
Change in other current receivables	17	33 785	37 774
Change in inventory and biological assets	5	-81 143	-34 077
Change in fair value of biomass	5	-20 149	-11 740
Change in trade payables	12	330	2 047
Change in social security and other taxes		772	2 139
Change in other current liabilities	6	6 928	3 971
Cash (outflow) from operating activities		-124 445	-76 124
Cash flow from investment activities
Payments for fixed assets net of government grants	10,15	-275 686	-763 498
Payments for intangible assets	10	-7 201	-3 614
Change in trade payables investments	23	-75 929	-29 020
Net cash (outflow) from investment activities		-358 816	-796 132
Cash flow from financing activities
Proceeds from issue of equity, net of paid transaction costs	20	500 982	294 538
Proceeds from new borrowings	3,22	104 875	356 253
Repayment of borrowings	3,22	0	-13 337
Net change in right of use assets and liabilities	16	227	210
Financial expenses paid		-35 568	-15 079
Financial income received		20 381	22 886
Net cash (outflow) from financing activities		590 897	645 471
Net change in cash and cash equivalents		107 636	-226 785
Cash and cash equivalents at the beginning of the period	19	278 759	505 545
Cash and cash equivalents at the end of the period	19	386 396	278 759

Annual report 2023 Extending the ocean potential 62

Consolidated statement of changes in equity (NOK thousands)

	Share capital	Share premium	Other reserves	Other equity	Uncovered losses	Total equity
Balance at 1 January 2022	20 15	1 334 282	5 118	0	-57 411	1 297 530
Profit/loss for the period	0	0	0	0	-32 726	-32 726
Currency translation differences	0	0	0	0	1 363	1 363
Total comprehensive income	0	0	0	0	-31 362	-31 362
Private placement, 5 April 2022	1 129	202 041	0	0	0	203 170
Private placement, 2 May 2022	538	96 293	0	0	0	96 831
Private placement, transaction cost	0	-13 267	0	0	0	-13 267
Share options issued	21	0	3 201	0	0	3 201
Share options exercised	21	81 7 724	0	0	0	7 805
Transactions with owners	20	1 748 292	3 201	0	0	297 739
Balance at 31 December 2022	20 17	1 627 073	8 320	0	-88 774	1 563 906
Profit/loss for the period	0	0	0	0	-145 773	-145 773
Currency translation differences	0	0	0	0	-861	-861
Total comprehensive income	0	0	0	0	-146 634	-146 634
Private placement, April 2023	3 409	521 591	0	0	0	525 000
Private placement, transaction cost	0	-24 017	0	0	0	-24 017
Share options issued	21	0	2 438	0	0	2 438
Share options exercised	0	0	0	0	0	0
Transactions with owners	20	3 409 497 574	2 438	0	0	503 421
Balance at 31 December 2023	20 20	2 124 647	10 758	0	-235 408	1 920 693

Annual report 2023 Extending the ocean potential 63

Notes to the Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES…………………………….…… 64
NOTE 2 - CRITICAL ESTIMATES AND JUDGMENTS ………………………………………………. 73
NOTE 3 - FINANCIAL RISK AND CAPITAL MANAGEMENT …………………………….………… 75
NOTE 4 - OPERATING INCOME ………………….…………………………………………… 78
NOTE 5 – SEGMENT ……………………………………………….…………………….……. 79
NOTE 6 – BIOLOGICAL ASSETS AND INVENTORY ………………….…………………….………80
NOTE 7 – COST OF GOODS SOLD …………………………………………………………… 83
NOTE 8 – PERSONNEL EXPENSES, REMUNERATION TO THE BOARD AND AUDITOR'S FEE …………. 83
NOTE 9 - SHARE BASED PAYMENTS…… ………………………………………………………. 86
NOTE 10 - OTHER OPERATING EXPENSES …………………………………………….….…….. 87
NOTE 11 - PROPERTY, PLANT & EQUIPMENT …………………………………………………… 88
NOTE 12 - FINANCE INCOME & FINANCE COST .……………………………………………… 90
NOTE 13 - INVESTMENT IN ASSOCIATED COMPANIES .………………………………………….. 91
NOTE 14 – TAX ……...……………………………………………………………………….. 92
NOTE 15 - EARNINGS PER SHARE ……………..………………………………………………. 93
NOTE 16 - GOVERNMENT GRANTS …………………………………………………………… 93
NOTE 17 - LEASES …………………………………………………………………………….. 94
NOTE 18 - OTHER CURRENT RECEIVABLES ……….……………………………………………. 96
NOTE 19 – DERIVATIVE FINANCIAL INSTRUMENTS……………………………………………… 97
NOTE 20 – CASH AND RESTRICTED CASH……………………………………………………… 98
NOTE 21 – SHARE CAPITAL & CAPITAL HISTORY………………………………………………. 98
NOTE 22 – INTEREST BEARING DEBT ..……………………..…………………………………. 100
NOTE 23 – TRADE AND OTHER CURRENT LIABILITIES…………………………………………… 102
NOTE 24 – RELATED PARTY BALANCES AND TRANSACTIONS…..……………………………… 103
NOTE 25 - EVENTS AFTER THE REPORTING DATE ………………………………………………. 104

Annual report 2023 Extending the ocean potential 64

Note 1 Summary of significant accounting policies

General information

Salmon Evolution ASA and its subsidiaries, Salmon Evolution Norway AS, Salmon Evolution International AS, Salmon Evolution Dale AS and Salmon Evolution Sales AS (the “Company”, "SE" or "the Group") is a Norwegian business headquartered in Hustadvika kommune in Møre og Romsdal. SE is building a land-based salmon farming facility at Indre Harøy, with a planned annual production of 31,500 tons HOG fully developed of which phase 1 has a planned annual production of 7,900 tons HOG. The build-out consists of three phases, with the first phase consisting of 12 large grow out tanks with corresponding infrastructure. SE will operate a hybrid flow-through (HFS) system, utilizing fresh seawater from the Norwegian coast. Construction start of phase 1 was in Q2 2020 and was completed mid April 2023.# Consolidated Financial Statements

Consolidation

These consolidated statements for the period ended 31 December 2023 include Salmon Evolution ASA together with its subsidiaries Salmon Evolution Norway AS, Salmon Evolution International AS, Salmon Evolution Sales AS and Salmon Evolution Dale AS. In 2022 the Group established two new companies – Salmon Evolution North America Holdings LLC and Salmon Evolution North America LLC. Both companies are wholly owned by Salmon Evolution, but the legal entities had no activity during 2022 nor in 2023.

Consolidation principles

Subsidiaries are all entities over which the Group has control. The Group controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. The accompanying consolidated financial statements include the accounts of the subsidiaries mentioned above. When necessary, adjustments are made to the local financial statements of the Group subsidiaries to conform with the consolidated Group’s accounting policies presented under IFRS. All intercompany balances, transactions, and unrealized gains from intercompany transactions are eliminated upon consolidation. Unrealized losses from intercompany transactions are also eliminated upon consolidation unless the transaction provides evidence of an impairment of the transferred asset. The 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 in which the Group gains control until the date in which the Group ceases to control the subsidiary.

Basis of preparation

The consolidated financial statements of the Group for the year ended 31 December 2023 is prepared in accordance with IFRS® Accounting Standards as adopted by the EU. The consolidated financial statements ended 31 December 2023 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.

Extending the ocean potential 65

Going concern

The Group has prepared the consolidated financial statement on a going concern basis. When assessing this assumption, management has assessed all available information about the future. After making such assessments, management has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future.

Accounting policies

Adoption of new and revised standards

The following standards and amendments was mandatory application for the first time for the reporting period commencing 01.01.2023:
* Disclosure of Accounting Policies (Amendment to IAS 1 and IFRS Practice Statement 2)
* Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
* IFRS 17 Insurance Contracts
* Definition of Accounting Estimates (Amendment to IAS 8)

None of the amendments listed above have had any material impact on the financial statements.

Standards and amendments issued but not yet effective

The following standards and amendments was mandatory application for the first time for the reporting period commencing after 01.01.2023:
* Lease Liability in a Sale and Leaseback (Amendment to IFRS 16)
* IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-Current

None of the amendments listed above is expected to have any material any impact on financial statements.

Basis of measurement

The financial statements have been prepared under the historical cost basis, except for the following items:
* Financial derivatives, measured at fair value through profit or loss.
* Biological assets, measured at fair value through profit or loss.

Use of estimates
Critical accounting judgments and estimates are disclosed in note 2.

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Functional and presentation currency

Items included in the financial statements are presented in the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Norwegian kroner (NOK), which is the Parent company, and material subsidiaries, functional and presentation currency.

Transactions and balances

Transactions in currencies other than the entity's functional currency (foreign currency) are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other financial items. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not subsequently revalued.

Revenue

Revenue from contracts with customers as defined in IFRS 15 is recognised when control of the goods 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. Revenue for the Group derives both from the sale of smolt from contract with customer and sale of whole and processed salmon in the spot marked. It has not been made any sales contracts. The Group recognised revenue at the point in time when control of the goods is transferred to the customer at an amount that reflects the expected amount that the group is entitled to have for the goods. The sales price is based on available market price where the price will vary with both quality and size. Normal credit term of the sales transactions is 30 days. If the delivered products has discrepancies compared to the agreed sales contract, cash refunds are given to the customer. Up until now, refunds are not material.

Government grants

Government grants are recognized when there is reasonable assurance that the grant will be received and when the Company is compliant with all conditions attached. When the grant relates to an expense item, it is recognized as income over the period that the costs it is intended to compensate are expensed. When the grant relates to an asset, it is deducted from the carrying amount of the asset - the grant is then recognized in profit or loss over the useful life of a depreciable asset by way of a reduced depreciation charge. Government grants are presented in the accompanying statements of profit and loss as other income.

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Employee benefits

Liabilities for wages and salaries, including equity settled share based payments, non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

Share based payments

Information relating to the Company's employee stock option scheme is set out in note 9. The fair value of options granted under the scheme is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
* including any market performance conditions (eg the entity’s share price)
* excluding the impact of any service and non-market performance vesting conditions (eg profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
* including the impact of any non-vesting conditions (eg the requirement for employees to save or holdings shares for a specific period of time).

Total fair value is expensed over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Current and change in deferred tax for the year

Income Tax

The tax expense represents the sum of the tax currently payable and change in deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.# Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realized based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current tax and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Deferred tax benefit has not been recognized in the balance sheet as the Group is in its start- up phase and does not have any historical results to refer to when assessing whether future taxable profits will be sufficient to utilize the tax benefit.

Leases

All leasing agreements with a duration exceeding 12 months are capitalized. The Group assesses whether a legally enforceable contract is or contains a lease at the inception date of the contract. The assessment includes several criteria to be determined based on judgment that includes whether there is an identifiable asset in connection to the lease, whether the Group has the right to control the use of the identifiable asset, and whether the Group can obtain substantially all economic benefits from the identifiable asset. The Group recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. The lease liability is calculated based on the present value of the contractual minimum lease payments using the incremental interest rate of the lease. The contractual minimum lease payments consist of fixed payments based on contractual amount at the time of conclusion of the agreement. The lease liability is subsequently measured at amortized cost under the effective interest rate during the lease term and may also be adjusted to management’s reassessment of future lease payments based on options exercised, renegotiations, or changes of an index rate. The ROU asset is calculated based on the lease liability, plus initial direct costs towards the lease, and less any incentives granted by the lessor. The ROU asset is subsequently amortized under the straight-line method under the shorter of the lease term or the useful life of the underlying asset and is included as part of depreciation and amortization in the accompanying statements of other comprehensive income. Leases that fall under the IFRS 16 short-term exception are recognized on a straight-line basis over the lease term.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.

Interest rate swap

The Group has entered into interest rate swap to hedge its risk exposure to interest-bearing debt. Changes in fair value of those derivates is recognized as unrealized profit/loss under financial income/loss and allocated to, an unrealized profit/loss as other current receivables in the balance sheet.

Currency hedging

Salmon Evolution Sales AS make use of forward currency contracts to hedge against fluctuations in exchange rates that arises during the period between when Salmon Evolution Sales enters into a sales contract and when the product is paid for. Changes in fair value of those contracts is recognized as unrealized profit/loss under financial income/loss and to other current receivables in the balance sheet.

Power contracts

The Group has entered into power supply contract with Statkraft in order to secure stabile and predictable fluctuations in the power prices. The Group only secures power that is intended for own use. Due to changes in the construction and production plan, a significant part of the power contract made for 2023 has not been used for internal purposes. Hence, the contract was not considered as own use, and therefore measured at fair value. Changes in fair value in these derivates is recognized as unrealized profit/loss under financial income/loss and allocated to, an unrealized profit/loss as other current receivables in the balance sheet. The contract period for this contract ended 31.12.2023.

Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.

Trade receivables, loans and other receivables

Trade receivables, loans and other receivables are recognized at invoiced amount and subsequently measured at amortized cost using the effective interest method, less provision for impairment. See note 3, 17 and 18 for further information about the Group’s accounting for trade receivables, loans, other receivables and credit risk.

Property, plant & equipment

Property, plant, and equipment is measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and costs include expenditures that are directly attributable to the acquisition and placement of fixed assets in service ready for intended use. This includes capitalized costs such as personnel expenses, rent of premises and equipment and other project related costs to be part of the production facility expenditures. Costs of major replacements and renewals that substantially extend the economic life and functionality of fixed asset are capitalized. Costs associated with normal maintenance and repairs are expensed as incurred. Assets are normally considered property, plant, and equipment if the useful economic life exceeds one year. Straight-line depreciation is applied over the useful life of property, plant, and equipment based on the asset’s historical cost. If a substantial part of an asset has an individual and different useful life, that portion is depreciated separately. The asset’s residual value and useful life are evaluated annually. Gains or losses arising from the disposal or retirement of an asset are determined as the difference between the sales proceeds and the carrying amount of the asset and recognized as part of other income in the accompanying statements of other comprehensive income. Depreciation is charged to expense when the property, plant or equipment is ready for intended use. The group considered the test- and verification phase for first phase of its Indre Harøy facility ready for intended use from April 2023, and started depreciations from that time.

Intangible assets

Expenses related to research activities are expensed as incurred. Expenses related to development activities are capitalized if the product or process is technically and commercially feasible, and the Group has adequate resources to complete the development. Patents are capitalized and measured at cost less accumulated amortization and any accumulated impairment losses, if any.

Goodwill

When the Group assumes control over a separate business entity for a consideration that exceeds the fair value of the individual assets and liabilities assumed, the difference is entered as goodwill in the statement of financial position. Goodwill is not depreciated but is tested for impairment annually if there are indications that its value is lower than the carrying amount.See note 11 for further information. Impairment Management reviews long-lived assets for impairment annually, or more frequently, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. When such assets are identified, with certain indicators, an impairment test will be carried out. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an adjustment for impairment to such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and it’s carrying value. Non-financial assets that suffered Annual report 2023 Extending the ocean potential 71 an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Biological assets

Biological assets are, in accordance with IAS 41, measured at fair value unless the fair value cannot be measured reliably. For salmon in the grow-out facility, a present value model is applied to estimate the fair value. For roe, fry and smolt, historical cost is deemed to provide the best estimate of fair value, and hence applied. For further information, please refer to note 6.

Classification of current and non-current items

Assets are classified as current when it expected to be realized or sold, or to be used in the Group's normal operating cycle, or falls due or is expected to be realized within 12 months after the end of the reporting date. Assets that do not fall under this definition is classified as non- current. Liabilities are classified as current when they are expected to be settled in the normal operating cycle of the Group or are expected to be settled within 12 months after the reporting date, or if the Group does not have an unconditional right to postpone settlement for at least 12 months after the reporting date. Liabilities that do not fall under this definition are classified as non-current.

Trade and Other Receivables

Trade receivables are initially recognized at amortized cost, less a provision for expected credit losses. Credit loss provisions are based on individual customer assessments over each reporting period and not on a 12-month period. The Group has procedures to ensure that products are only sold to customers with satisfactory creditworthiness, where credit insurance is used when deemed necessary. This risk is, per 31.12.2023, not considered to be material. In 2023 all produced fish was sold to Salmon Evolution Sales AS, which in turn sold it to external customers. The sales company secures the bulk of its sales through credit insurance.

Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Borrowings derecognized when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in consolidated statement of profit or loss within the line other financial items, net. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Borrowings cost

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In accordance with IAS 23, the Group’s loan agreements are subject to the following principles relating to borrowing costs: General and specific borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred.

Trade and Other Payables

Trade and other payables represent unpaid liabilities for goods and services provided to the Group prior to the end of the financial year and are presented as current liabilities unless payment is not due within 12 months after the reporting period. Trade and other payables are recognized initially at their fair value and are subsequently measured at amortized cost using the effective interest method.

Pensions

The Group offers a defined contribution plan to its employees and pays contributions to privately administered pension insurance plans on a contractual basis. The Group has no further payment obligations once the contributions have been paid. Contributions are recognized as employee benefit expense when they are incurred and are included as part of salary and personnel costs in the statement of profit and loss. Prepaid contributions are recognized as an asset to the extent in which a cash refund or a reduction in the future payments is available.

Statement of cash flows

The accompanying statements of cash flows are prepared in accordance with the indirect method.

Annual report 2023 Extending the ocean potential 73

Note 2 Critical estimates and judgements

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies. In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the Group's financial statements:

1) Capitalised costs as assets under construction
As part of the construction of the Group's production facilities, the Group has capitalized certain costs (such as personnel expenses, rent of premises and equipment and other project related costs), as "assets under construction" in accordance with IAS 16 based on an allocation key. The allocation key is employee-based and has been calculated based on the employees that are directly involved in the assets under construction's share of the total salary in the Group. Reference is made to note 11 for details of additions to "assets under construction".

2) Biological assets
Biological assets comprise of eggs, smolt and live fish in each tank at the grow-out facility at Indre Harøy. These assets are accounted for in accordance with IAS 41, and me measured at fair value unless the fair value cannot be measured reliably. The estimation of the fair value relies on a series of uncertain assumptions, e.g., biomass volume, quality, size, market prices, expected future costs, remaining time to harvest. All deviations in biomass volume compared to estimates, is measured when a tank is harvested out. The deviations are normally relatively minor. Similarly, the quality if the fish can normally be estimated with a relatively high degree of certainty, based on historic data and regular controls, given that the fish is kept in a controlled environment in each tank. Categorization of quality is set at facility level. Given that Salmon Evolution split and grade each batch two times in each production cycle, the size distribution in each batch harvested out is normally minor. The accumulated production cost of is based on an allocation of cost to each batch at tank level. The accumulated production cost per kg will normally only deviate from the estimate if the biomass volume is different from the estimate. For estimation of future production costs, there is uncertainty with regards to feed prices, other input costs and biological development. Salmon Evolution tracks and measures cost development vs. expectation for all batches as part of the normal monthly financial closing process. The estimation of future production costs influences the biomass value through the fair value adjustment. A key estimate in the estimation of fair value is the assumed market price, which is the price that Salmon Evolution expect to receive at a future date when the live fish is harvested. Given that Salmon Evolution harvest salmon in Norway, Fish Pool is used with relevant adjustments (see note 6 for more information). For further information, please refer to note 6.

Annual report 2023 Extending the ocean potential 74

3) Financial derivatives
The purpose of the Group's risk management activities is to establish an overview of financial risks that exists at any given time. As of this date the Group has chosen to employ both interest rate swap agreements to create interest rate stability and power hedging contracts to create stable power supply prices. The derivative financial assets relate to hedging contracts for the Company’s interest rate exposure and consist of an interest rate swap contract of NOK 50 million in Sparebanken Vest and a similar contract of NOK 150 million in Nordea. Both contracts are due January 2028, and has to a swap fixed interest of 1.79 %. Changes in Market Value is registered as unrealized profit/loss under financial income and allocated to, an unrealized profit/loss as other current receivables in the balance sheet. Salmon Evolution Norway AS had a power supply contract with Statkraft AS. In 2022, due to changes in construction timeline and production plan, resulting in secured volume under the contract not being used for own use and hence sold in the spot market, the contract was no longer considered as for own use, and therefore measured at fair value.# Note 3 Financial risk and capital management

The Group's financial assets and liabilities include trade and other receivables, trade and other payables, cash, and borrowings necessary for its operations. The Group's risk management is carried out by the Group's finance department. The Group is exposed to market risk, credit risk, and liquidity risk.

Market risk

Market risk is linked to both interest rate- and currency fluctuations.

Interest Rate

The Group's interest rate risk relates primarily to borrowings from financial institutions with variable interest rates. Currently, the Group has made two interest rate swap contracts of NOK 50 million in Sparebanken Vest and NOK 150 million in Nordea. The Group does not have any fixed-interest rates loans. As of 31 December 2023, outstanding long-term loans from credit institutions amounted to NOK 525.0 million and is subject to an interest rate of NIBOR 3M plus an agreed margin. The Group also have drawn NOK 90.1 million of the overdraft facility. This loan is part of a financing package consisting of the following:

• NOK 525 million non-amortizing Term Loan Facility which will refinance the Company’s existing NOK 525 million construction loan relating to phase 1 (the “Term Loan”)
• NOK 250 million RCF Capex Facility available for general corporate purposes including Indre Harøy phase 2 capex (the “RCF Facility”)
• NOK 775 million Construction Facility available for financing of capex relating to phase 2 at Indre Harøy (the “Construction Facility”)

The loans are floating interest rate loans denominated in NOK with an interest charge based on NIBOR 3M plus an agreed margin. Incurred interest expenses and establishing fees during construction period are capitalized as part of assets under construction, see note 11 for further details. In addition, the Group has a debt financing package of NOK 60 million in relation to Salmon Evolution Dale. As per 31 December 2023 NOK 58 million of the NOK 60 million debt financing package was drawn.

Foreign Currency

The Group's foreign currency risk relates to the Group's operating, investing, and financing activities denominated in a foreign currency. This includes the Group's revenues, expenses and capital expenditures. As 31 December 2023 the Group had made some currency forward contracts to hedge the effect of fluctuations in currency from the sales contracts. Value changes in forward contracts affect profit and loss. The Group's presentation currency is Norwegian Kroner ("NOK").

Interest rate sensitivity (NOK thousands)	2023	2022
Interest expense effect of a 1% increase on floating interest rate	6 730	5 560

Credit risk

With respect to credit risk arising from the financial assets of the Group, which comprise cash and cash equivalents, and other receivables, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group has procedures to ensure that products are only sold to customers with satisfactory creditworthiness, where credit insurance is used when deemed necessary. This risk is, per 31.12.2023, not considered to be material. In 2023 all produced fish was sold to Salmon Evolution Sales AS, which in turn sold it to external customers. The sales company secures the bulk of its sales through credit insurance. Credit-insured share of trade receivables as of 31.12.2023 was NOK 28.2 million.

Liquidity risk

A lack of liquidity will entail a risk that the Group will not be able to pay its obligations on maturity. Management monitors rolling forecasts of the Group's liquidity reserve (comprising cash and cash equivalents) on the basis of expected cash flows. The Group's business plan and growth strategy is capital intensive, and the Group may be dependent upon future equity issues and/or debt financing in order to finance its current long-term plans. The table below presents the maturities on the Group's financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Trade receivables(NOK thousands)	2023	2022
Trade receivables	40 763	23 080
Provision for loss on claims	-267	0
Total financial liabilities	40 496	23 080

31 December 2023 (NOK thousands)

	Less than 3 months	3-12 months	1-5 years
Borrowings	0	103 275	569 969
Interest (Long term debt)	13 005	40 017	213 426
Lease liabilities	1 088	3 263	8 189
Trade payables	71 499	0	0
Total financial liabilities	85 592	146 554	791 584

31 December 2022 (NOK thousands)

	Less than 3 months	3-12 months	1-5 years
Borrowings	0	55 353	513 169
Interest	10 451	26 351	147 208
Lease liabilities	935	2 618	9 676
Trade payables	135 098	0	0
Total financial liabilities	146 483	84 323	670 053

Financial instruments – assessment of fair value

The table below shows financial instruments at fair value according to valuation method. The different levels are defined as follows:
Level 1: Price listed in an active market for identical assets or liabilities.
Level 2: Valuation is based on other observable inputs either directly or indirectly than listed price (used in level 1) for the asset or liability.
Level 3: Valuation based on inputs not derived from observable markets (non-observable assumptions)

31 December 2023 (NOK thousands)

	FVPL*	Level 1	Level 2	Level 3	Amortized cost	Fair value	Carrying amount
Financial assets:
Trade receivables	-	-	-	-	40 496	40 496	40 496
Financial derivatives	-	-	12 900	-	-	12 900	12 900
Energy contract	-	-	-	-	0	0	0
Other current receivables	-	-	-	-	31 121	31 121	31 121
Cash and cash equivalents	-	-	-	-	386 396	386 396	386 396
Total financial assets	-	12 900	-	458 013	-	470 913	470 913
Financial liabilities:
Deferred tax	-	-	-	-	-	-	-
Long-term interets bearing debt	-	-	-	569 969	569 969	569 969	569 969
Other long term liabilites	-	-	-	8 702	8 702	8 702	8 702
Short-term interest bearing debt	-	-	-	103 275	103 275	103 275	103 275
Trade payables	-	-	-	71 499	71 499	71 499	71 499
Social security and other taxes	-	-	-	8 273	8 273	8 273	8 273
Other current liabilities	-	-	-	14 635	14 635	14 635	14 635
Total financial liabilities	-	-	-	776 353	776 353	776 353	776 353

*FVPL: Fair value through profit or loss

31 December 2022 (NOK thousands)

	FVPL*	Level 1	Level 2	Level 3	Amortized cost	Fair value	Carrying amount
Financial assets:
Trade receivables	-	-	-	-	23 080	23 080	23 080
Financial derivatives	-	-	11 719	-	-	11 719	11 719
Energy contract	-	-	13 903	-	-	13 903	13 903
Other current receivables	-	-	-	-	66 951	66 951	66 951
Cash and cash equivalents	-	-	-	-	278 759	278 759	278 759
Total financial assets	-	25 622	-	368 790	-	394 412	394 412
Financial liabilities:
Deferred tax	-	-	-	-	-	-	-
Long-term interets bearing debt	-	-	-	513 169	513 169	513 169	513 169
Other long term liabilites	-	-	-	8 549	8 549	8 549	8 549
Short-term interest bearing debt	-	-	-	55 353	55 353	55 353	55 353
Trade payables	-	-	-	135 098	135 098	135 098	135 098
Social security and other taxes	-	-	-	7 086	7 086	7 086	7 086
Other current liabilities	-	-	-	9 783	9 783	9 783	9 783
Total financial liabilities	-	-	-	729 038	729 038	729 038	729 038

*FVPL: Fair value through profit or loss

Note 4 Operating Income

Operating income in the Group for 2023 derives from sales of farmed salmon from Salmon Evolution Sales AS (who bought the salmon from Salmon Evolution Norway AS). Salmon Evolution Sales AS has in 2023 sold 1,865 tonnes Atlantic Salmon, and the distribution is as illustrated below. Other income in 2023 was mostly related services to K Smart Farming Co., Ltd. in South Korea. Our land-based salmon have been distributed through Salmon Evolution Sales to a vast number of customers, across different segments and channels. The initial batch has been launched locally, nationally in Norway and internationally, in close collaboration with our partners, and has proven to be meet the highest standards, for both raw, heated and smoked products.

(NOK thousands)	2023	2022
Sales revenues	153 325	46 107
Smolt	0	19 293
Atlantic Salmon (hog)	152 767	26 073
Atlantic Salmon (trimmed)	558	741
Other income	15 099	1 574
Total operating revenue	168 424	47 681

2023		2022
Sales quantity	tonnes	%	tonnes
Norway	1 306	70 %	220
EU ex. Norway	557	30 %	115
Asia	2	0 %	6
Total	1 865	100 %	340

Sales revenue atlantic salmon	2023	2022
Norway	105 743	16 538
EU ex. Norway	47 379	9 527
Asia	203	749
Total	153 325	26 814

Note 5 Segment

Operating segments are reported in a manner consistent with internal reporting to the chief operating decision-maker, which is responsible for allocating resources and assessing performance. The chief operating decision-maker has been identified as the Group management. The Group has implemented segment reporting which consists of production of farmed salmon in Norway (Farming Norway), other activities (Other), and eliminations. The segment performance is monitored to assess performance and profitability at a strategic level. Farming Norway consists of Salmon Evolution Norway AS (grow-out facility), Salmon Evolution Dale AS (smolt facility) and Salmon Evolution Sales AS. Additionally a portion of the Group overhead costs is allocated to the segment. Other consist of both revenue and costs not attributable to the farming segment. The same accounting principles as described in Note 1 have been applied for the segment reporting, where internal transactions are entered into under normal commercial terms and conditions. Sales revenue from contracts with customers comes from both Continental Europe, UK, USA, Asia and other markets.# Annual report 2023 Extending the ocean potential

Note 6 Biological assets and inventory

Biological assets and inventory

Biological assets comprise of live fish at Indre Harøy (grow-out facility) and smolt and the Dale smolt facility. Live fish is recognized at fair value. Other inventory primarily comprises of feed, packaging materials, spare parts and finished goods. Inventories are measured at the lowest of cost and net realizable value.

Biological assets

Live fish are accounted for in accordance with IAS 41 Agriculture, and IFRS 13, Fair value measurement. Live fish is measured at fair value unless the fair value cannot be measures reliably. For live fish in the grow-out facility, a present value model is applied to estimate the fair value. Changes in fair value are recognized and classified under fair value adjustments in the Consolidated statement of profit and loss. For roe, fry and smolt are valued at historic cost. Historic costs are deemed to provide the best estimate of fair value for these assets.

The fair value of live fish held at the Group's grow-out facility is calculated using a present value model based on estimated future cash flow. The present value is calculated based on estimates revenues, less estimated remaining production cost until the fish is ready for harvest. The Company considers that fish greater than 4.6 kg is ready for harvest (about 3.8 kg gutted weight), and such fish is thus classified as harvestable fish. Fish that have not achieved this weight are classified as non-harvestable.

Estimated revenues are calculated as the estimated harvestable biomass at expected harvest dates, multiplied by the price expected to be achieved at the same time. The price is calculated using the Fish Pool forward price at reporting date, less adjustments for expected differences in quality and size, as well as market specific adjustments.

For 2024 the Group have FY 2022
External revenue 46 054 1 627 0 47 681
Internal revenue 0 13 665 -13 665 0
Operating revenue 46 054 15 292 -13 665 47 681
Operational EBITDA N/A N/A -68 481 -68 481
Operational EBIT N/A N/A -74 671 -74 671
Fair value adjustment of biomass 11 740
Net financial 30 205
Profit/loss before tax -32 726
Harvested volum (tonnes, HOG) 340
Operational EBITDA/kg (NOK) N/A
Operational EBIT/kg (NOK) N/A
Total assets 1 820 004 13 495 -11 318 1 822 182

applied a forward price of 88.3 per kg, where the applicable Fish Pool price is adjusted to reflect the discrepancy between Fish Pool and relevant market expectations. Estimated harvestable biomass at harvest date is calculated based on the standard growth model, production plan and expected number of harvestable individuals at harvest dates on batch level. The growth model details the expected growth per month, and is a standard model given that the hybrid flow-through concept delivers the same growth environment year- round and between batches. The production plan details the expected harvest dates for each batch. The expected number of harvestable individuals at harvest dates is based on the number of individuals at reporting date, less expected mortality until harvest.

Estimated remaining production cost are estimated as the necessary costs for the farming of fish up until harvest date, including harvest and sales cost. The estimated remaining production cost is adjusted for unutilized production capacity for indirect production cost, which consists of personnel costs at the grow-out facility, depreciations, and other indirect production costs. directly attributable to the fish. In determining the applicable capacity adjustment, the Company considers several factors including number of tanks in operation, amount of standing biomass and biomass production.

The fair value of the biomass is calculated using a present value model, applying a monthly discount rate of 5.9% on the expected cash flow generated. The discount rate is intended to reflect the risk of incidents that affects the cash flow, cost of capital and the time value of money. The discount rate is based on standard model and thus identical between batches at the grow-out facility. The risk adjustment takes into account the biological risks of farming. The number of months left until harvesting will affect the risk and cash flow. Biological risk, the risk of increased costs and price risk will be the most important elements to be recognized.

Incident based mortality

Incident based mortality is recognized when the smolt or grow-out facility experiences elevated or substantial mortality. In such cases, mortality expense is included as part of cost of materials in the consolidated financial statements, and the fair value associated with the affected biomass is adjusted under fair value adjustments. Incident based mortality is calculated at tank level, and an assessment is made as to whether there is basis from a write- down, in the event of an incidents exceeding 3 % mortality in a period based on a single event.

BOOK VALUE OF INVENTORY	FY 2023	FY 2022
Equipment	2 667	0
Raw materials	4 433	1 941
Biological assets	153 790	58 927
Finished goods	1 270	0
Total	162 159	60 867

TONNES BIOLOGICAL ASSETS	FY 2023	FY 2022
Biological assets beginning of period	733	0
Biological assets end of period	2 204	733

The Group is still in a ramp-up phase for the grow-out facility at Indre Harøy, and hence the facility's production capacity is not fully utilized. Cost of production is therefore adjusted for unutilized production capacity. Year-to-date 2023 this adjustment amounted to NOK 41.3 million (compared to NOK 13.6 million in 2022) which has been expensed directly in the profit and loss statement.

(NOK 1000) BIOLOGICAL ASSETS	FY 2023	FY 2022
Biological assets beginning of period	58 927	14 939
Increase due to production	218 496	70 238
Reduction due to harvest/sale	-130 880	-37 990
Reduction due to incident based mortality	-12 901	0
Fair value adjustment beginning of period	-11 740	0
Fair value adjustment end of period	31 889	11 740
Biological assets end of period	153 790	58 927

Specification of biological assets

Biological assets per 31.12.2023	Number of fish (1000)	Biomass (tonnes)	Cost of production (NOK 1000)	Fair value adjustment (NOK 1000)	Carrying amount (NOK 1000)
Smolt	2 311	133	16 018	0	16 018
Non-harvestable fish (<4.6 kg)	1 367	2 092	105 883	31 889	137 772
Harvestable fish (>4.6 kg)	0	0	0	0	0
Total	3 678	2 225	121 901	31 889	153 790

Biological assets per 31.12.2022	Number of fish (1000)	Biomass (tonnes)	Cost of production (NOK 1000)	Fair value adjustment (NOK 1000)	Carrying amount (NOK 1000)
Smolt	2 305	96	12 681	0	12 681
Non-harvestable fish (<4.6 kg)	695	637	34 506	11 740	46 246
Harvestable fish (>4.6 kg)	0	0	0	0	0
Total	3 000	733	47 187	11 740	58 927

Note 7 Cost of Goods Sold

(NOK thousands)	2023	2022
Change due to production	218 496	70 238
Change due to harvest/sale	-130 880	-37 990
Change due to incident based mortality	-12 901	0
Change inventory raw material	3 762	1 829
Sum	78 476	34 077

Composition - change due to production:

	2023	2022
Raw material cost	122 419	32 877
Salaries	17 670	10 260
Depreciations	22 778	1 592
Other operating expenses	55 629	25 509
Sum	218 496	70 238

Frozen Fair value Inventory	Feed	Smolt	Salmon products	Total at cost	adjustment	Value
01.01.2023	1 941	12 681	34 506	0	49 127	11 740
Change	2 492	3 338	71 377	1 270	78 476	20 149
31.12.2023	4 433	16 018	105 882	1 270	127 603	31 889

Note 8 Personnel expenses, remuneration to the board and auditor's fee

During the ordinary course of business, the Group capitalizes portions of total salary and personnel costs towards assets under construction. In addition, a portion of the salaries related to the production are recognised as part of the biomass value in the balance sheet. Salary allocated to biomass in 2023 was NOK 17.7 million (NOK 10.3 million in 2022). Norwegian entities are obligated to establish a mandatory company pension. This obligation is fulfilled under the current pension plan. No loans or guarantees have been given to the members of the board of directors or executive management.

(NOK thousands)	2023	2022
Salaries	67 102	50 969
Social security	11 054	8 682
Pensions	3 458	2 529
Other benefits	5 507	9 363
Share-based payments	2 441	3 328
Gross personnel expenses	89 562	74 871
- Capitalized costs	-13 511	-18 496
Total personnel expenses recognized in P&L	76 052	56 375
Number of full-time employment equivalents	69	49

Remuneration and compensation to members of the board

(NOK thousands)	2023	2022
Tore Tønseth (Chairman of the Board)	500	500
Janne-Grethe A.
:--------------------------------------------	:--------------	:--------
Strand (Member of the board)	500	500
Glen Bradley (Member of the Board)	375	375
Peder Stette (Member of the Board)	250	250
Anne Breiby (Member of the Board)	250	250
Eunhong Min (Member of the board)	250	0
Ingvild Vartdal (Member of the Board)	250	250
Håkon Andrè Berg (Member of the Board)	146	0
Kristofer Reiten (Member of the Board)	0	250
Yun Ki Yun (Member of the board)	0	250
Frode Kjølås (Nomination committee)	75	75
Berit Rogne (Nomination committee)	50	50
Trond Svinø (Nomination committee)	50	0
Total board of Directors	2 696	2 750

Remuneration and compensation to executive management 2023 (NOK thousands)

Name	Salary	Bonus	Pension	Other	Total
Trond Håkon Schaug-Pettersen (CEO)	2 740	500	71	272	3 583
Trond Vadset Veibust (CFO from 01.04.2023)	1 243	0	71	120	1 434
Ingjarl Skarvøy (COO)	1 946	0	71	206	2 223
Kamilla Holo Mordal (Project Director)	1 623	0	71	15	1 709
Odd Frode Roaldsnes (CCO)	1 729	0	71	168	1 968
Henriette Nordstrand (Technical Director)	1 108	0	64	23	1 194
Tore-Jakob Reite (Director Strategic Projects from 17.04.2023)	807	0	67	29	903
Total executive management	11 196	500	486	833	13 014

Remuneration and compensation to executive management 2022 (NOK thousands)

Name	Salary	Bonus	Pension	Other	Total
Håkon Andrè Berg (CEO until oct 2022)	2 722	0	67	208	2 997
Trond Håkon Schaug-Pettersen (CEO from oct 2022, CFO)	2 228	0	67	246	2 541
Ingjarl Skarvøy (COO)	1 844	0	67	162	2 073
Kamilla Holo Mordal (CPO)	1 482	100	67	8	1 657
Odd Frode Roaldsnes (CCO)	1 533	0	67	17	1 617
Henriette Nordstrand (Technical Director from sept-22)	380	0	29	22	431
Total executive management	10 190	100	364	663	11 316

Compensation to executive management related to options 2023 (NOK thousands)

Name	Options
Trond Håkon Schaug-Pettersen (CEO)	871
Trond Vadset Veibust (CFO from 01.04.2023)	197
Ingjarl Skarvøy (COO)	351
Kamilla Holo Mordal (Project Director)	328
Odd Frode Roaldsnes (CCO)	363
Henriette Nordstrand (Technical Director)	50
Tore-Jakob Reite (Director Strategic Projects from 17.04.2023)	50
Total executive management	2 210

Compensation to executive management related to options 2022 (NOK thousands)

Name	Options
Trond Håkon Schaug-Pettersen (CEO from oct 2022, CFO)	1 399
Ingjarl Skarvøy (COO)	600
Kamilla Holo Mordal (CPO)	567
Odd Frode Roaldsnes (CCO)	615
Henriette Nordstrand (Technical Director from sept-22)	0
Håkon Andrè Berg (CEO until oct 2022)	20
Total executive management	3 201

Annual report 2023 Extending the ocean potential 85

Trond Håkon Schaug-Pettersen (CEO) is entitled to 6 months’ severance pay if the employment agreement is terminated by the Company. Selected key employees also have a non-compete clause in their employment agreement giving them right to 3-6 months’ pay if such clause is triggered by the Company. The CEO received a bonus of NOK 500 thousand as compensation for holding both the CEO and CFO position until a new CFO was appointed in April 2024.

Auditor's remuneration (NOK thousands)

	2023	2022
Statutory audit	1052	943
Service in relation to tax return	17	36
Service in relation to annual accounts	0	27
Other services	87	6
Total	1 156	1 011

Annual report 2023 Extending the ocean potential 86

Note 9 Share based payments

In August 2021 the Board of the directors established a share option program for members of the Company's executive management where total of 6,900,000 share options were granted, in November 2021 this was updated to 7,650,000 share options. These options were issued on an annual basis with 1/3 each year, with issue dates being 31 August 2021, 1 June 2022 and 1 June 2023. Issued options vest 50% after year one and 50% after year two, with a strike price equal to the closing price of the Company's shares on Oslo Børs on the last trading day prior to the respective to the issue date + 15%. In 2023, 700,000 share options were granted to executive management in January, 250,000 in June as well as 960,000 to key employees in June. These options were issued with issue date 1 June 2023. Issued options vest 50% after year one and 50% after year two, with a strike price equal to the closing price of the Company's shares on Oslo Børs on the last trading day prior to the respective to the issue date + 15%. The strike price for the share options issued 31 August 2021 was NOK 9,00 per share, 1 June 2022 NOK 10,06 per share and 1 June 2023 NOK 8,30 per share. To account for the issued share options, an adjusted Black & Scholes option-pricing model is used by applying a weighted expected average life of 18 months. The fair value of the options is set on the grant date and is expensed over its lifetime. The fair value of the options has been calculated using the adjusted Black & Scholes option-pricing model, which considers the exercise price, the term of the option, the share price at the grant date, expected price volatility of the underlying share, expected dividend and risk-free rates. Given the recent listing and lack of historical price and volatility data, the expected volatility is based on historical volatility for a selection of comparable companies listed on Oslo Stock Exchange ("Oslo Børs"). The risk-free interest rate is set to equal the interest on Norwegian government bonds with the same maturity as the option. Average key assumptions are listed below.

Outstanding options (in thousands)

	2023	2022
Outstanding options 1 January	5 150	9 275
Options granted	1 910	0
Options exercised	0	1 625
Options forfeited	0	2 500
Outstanding options at end of period	7 060	5 150

Annual report 2023 Extending the ocean potential 87

Note 10 Other operating expenses (NOK thousands)

Name	2023	2022
Håkon André Berg (CEO until oct 22)	0	20
Trond Håkon Schaug-Pettersen (CEO)	871	1 399
Ingjarl Skarvøy (COO)	351	600
Kamilla Mordal Holo (Project Director)	328	567
Odd Frode Roaldsnes (CCO)	363	615
Trond Vadset Veibust (CFO)	197	0
Henriette Nordstrand (Technical Director)	50	0
Tore-Jacob Reite (Director Strategic Projects)	50	0
Salmon Evolution ASA - Other Key Personel	137	0
Salmon Evolution Norway AS - Other Key Personel	73	0
Salmon Evolution Dale AS - Other Key Personel	18	0
Total charges	2 438	3 201
Charges to income statement	2 438	2 259
Charges to Asset under Construction	0	942

Key assumptions

	2023	2022
Average fair value (NOK)	0,83	1,47
Average exercise price (NOK)	8,30	10,35
Weighted expected average life (in years)	3,21	2,33
Estimated dividend per share (NOK)	0,00	0,00
Expected average volatility	19,6 %	29,2 %
Risk-free rate	3,31 %	0,86 %

Group management have the following holdings

Name	Holding 01.01	Awarded	Exercised	Forfeitet	Holding 31.12
Håkon André Berg (CEO until oct 22)	500	0	0	0	500
Trond Håkon Schaug-Pettersen (CEO from oct 22 & CFO)	2 400	200	0	0	2 600
Ingjarl Skarvøy (COO)	750	0	0	0	750
Kamilla Mordal Holo (Project Director)	750	0	0	0	750
Odd Frode Roaldsnes (CCO)	750	0	0	0	750
Trond Vadset Veibust (CFO)	0	500	0	0	500
Henriette Nordstrand (Technical Director)	0	125	0	0	125
Tore-Jacob Reite (Director Strategic Projects)	0	125	0	0	125
Total	5 150	950	0	0	6 100

*Numbers in thousand (NOK thousands)

	2023	2022
Cost of premises (not defined as RoU)	3 506	2 647
Rented equipment	5 565	633
Insurance	5 425	1 775
Consultancy fees	24 859	21 012
Other operating expenses	55 629	25 509
Other administrative expenses	33 635	13 963
Total other operating expenses	128 619	65 538

Annual report 2023 Extending the ocean potential 88

Note 11 Property, plant & equipment

Straight-line depreciation is applied over the useful life of property, plant, and equipment (PPE) based on the asset’s historical cost and estimated residual value at disposal. Depreciation is charged to expense when the property, plant or equipment is ready for use or placed in service. From April 2023 the Group considered the main test- and verification phase for its Indre Harøy facility over and started depreciation of the facility. There are some projects going on improving the facility and some cost regarding phase 2. These are not deemed ready for intended use. As such, assets under construction are not depreciated. Earned grants that goes in the balance sheets is included in new additions and is netted against the related asset’s acquisition. See note 16 for further information. Most intangible asset is ongoing development cost related to FOU and Skattefunn projects and are not amortized. Capitalization of costs as asset under construction: Costs incurred recognised as part of "Other operating expenses" in the "Statement of Profit or Loss" during 2023 has been capitalized as of 31 December 2023 as these costs are deemed to be part of the ongoing assets under construction and qualify for capitalization in accordance with IAS 16. As a result, the reported "Other operating expenses" in 2023 reflects the incurred costs during this period, net of such capitalized costs related to the entire 12 months period ending 31 December 2023 which amounted to approximately NOK 39 million.

Intangible Assets under Assets in use, Fixtures and Right-of-use (figures in NOK 1000) assets construction not allocated Buildings fittings assets Total

	Cost 1 January 2022	Additions	Disposals	Cost 31 December 2022	Accumulated depreciation 1 January 2022	Depreciation for the period	Net book value 31 December 2022	Estimated lifetime	Depreciation method
Intangible Assets	62 586	2 564		65 149	0	0	65 149	n/a	n/a
Assets under construction	971 122	742 368		1 713 490	0	0	1 713 490	n/a	n/a
Fixtures and fittings	0	0		0	-302	-649	-951	10-50 years	Linear
Right-of-use assets	7 607	17 453		26 419	-670	-1 864	-2 534	3-50 years	Linear
Total	8 966	776 951		28 151	-1 885	-3 676	-5 561	3-5 years	Linear

	Cost 1 January 2023	Additions	Completed constructions	Cost 31 December 2023	Accumulated depreciation 1 January 2023	Depreciation for the period
Intangible Assets	65 149	7 201		72 350	0	0
Assets under construction	1 713 491	269 490	-1 912 199	54 019	0	-26 760
Fixtures and fittings	7 607	2 157	54 019	1 582 996	-951	-15 450
Right-of-use assets	26 419	438	1 573 232	310 888	-2 534	-4 518
Total	18 562	282 887	284 031	2 113 198	-9 046

	01.01.2023	Additions	Grants	Depreciations	31.12.2023
"Skattefunn"-projects*	0	5 929	-764	0	5 165
Other research and development projects	1 250	1 752	0	0	3 002
Trademark	3 068	283	0	-3	3 349
Water rights	16 597	0	0	0	16 597
Goodwill	44 235	0	0	0	44 235
Total	65 149	7 965	-764	-3	72 347

*See note 16 for more information

Impairment testing of goodwill

Annual report 2023 Extending the ocean potential 89

Contractual and financial commitments

Construction of phase 1 was completed medio April 2023 and remaining capital expenditures for phase 1 as per 31 December 2023 was moderate, consisting of improvements and adaptations. At year-end the Group is working to reach an agreement on the final settlement for the construction of phase 1 at Indre Harøy. Negotiations are still ongoing, and consequently the Group have adjusted the balance to reflect this.

As to phase 2 at Indre Harøy, the Group has started engineering and development work and expect the construction process to start in 2024. As per 31 December there are no financial commitments made in relation to phase 2 at Indre Harøy.

Impairment testing of goodwill

Goodwill with undefined economic lives is subject to an annual impairment test. The Group did not recognize any impairment of goodwill in 2023.

In 2023 the Group has one asset that need to be impairment tested. The Group has defined the smolt production as a cash generating unit. The impairment is done using the Groups rolling projections which is based on financial budgets where cash generating activities forms the basis of the valuation. This is done over a five-year period. Budgeted EBITDA margin is set to be stable in the future as well as production of smolt, only adjusted for expected inflation. Further, the annual reinvestment is assumed to be equal to annual depreciations. Cash flow forecasts are estimated after tax, and weighted average cost of capital is set to be 9%.

Capitalized internal cost

	01.01.2023	Additions	31.12.2023
Salary	51 127	13 511	64 638
Rental/equipment	7 618	266	7 618
Interest	30 561	25 219	55 780
Total	89 306	38 997	128 036

Annual report 2023 Extending the ocean potential 90

Note 12 Finance income & finance cost

Interest income is mainly related to interest on cash deposits held with Norwegian financial institutions. TNOK 25 219 in Incurred interest expenses and establishing fees are capitalized as part of assets under construction in accordance with IAS 23.

The negative impact from share of net income from associated companies are related to a loss at K Smart Farming.

(figures in NOK 1000)

Finance income

	2023	2022
Interest income	15 591	8 730
Net change in value of financial derivatives	947	25 547
Foreign exchange gains	4 937	1 035
Other finance income	6	10
Financial income	21 481	35 322
Share of net income from associated companies	-7 098	-947
Total financial income	14 383	34 375

Finance expenses

	2023	2022
Interest on debts and borrowings	33 914	3 012
Realized loss/-gain on interest derivative	-3 027	0
Foreign exchange losses	4 195	554
Reduced value of contract related to power supply	13 903	0
Other finance expenses	640	604
Total financial expenses	49 624	4 170

Net financial income/- expenses | -35 241 | 30 205 |

Fair value adjustments - financial assets (N OK thousand)

	2023	2022
Unrealised changes in the value of interest rate swap	947	10 455
Unrealised changes in the value of contract related to power supply	-13 903	13 629
Realised profit (loss) related to power supply contract	0	1 463
Fair value adjustments recognised in profit and loss	-12 956	25 547

Annual report 2023 Extending the ocean potential 91

Note 13 Investment in associated companies

The Group has the following investments in associated companies:

Investments in associated companies are recognized using the equity method. The primary focus on the project towards the end of 2023 was centred around cost optimization. The Company currently sees the overall project economics as challenging, primarily driven by site specific circumstances at the Yangyang grow-out site, related to the intake and discharge water solution due to a relatively long and shallow shoreline Additionally, given that Korea has no existing salmon farming industry, certain other infrastructure items and regulatory framework are impacting the project cost as well as operating cost. The project is currently engaging with relevant authorities in South Korea to shore up government financial support, to improve project economics. Clarification around this is expected during Q2 2024.

(figures in NOK 1000)

	K Smart Farming Co., Ltd
Location and place of business	Gangwangnak-ro, South Korea
Ownership	49 %
Voting share	49 %
Investment cost 31.05.21	27 413
Share of net income 2021	-634
Foreign currency translation gain/(loss) 2021	-560
Net book value 31 December 2021	26 219
Share of net income YTD 2022	-947
Foreign currency translation gain/(loss) YTD 2022	1 363
Net book value 31 December 2022	26 635
Share of net income YTD 2023	-7 098
Foreign currency translation gain/(loss) YTD 2023	-861
Net book value 31 December 2023	18 676

Annual report 2023 Extending the ocean potential 92

Note 14 Tax

Calculation of current and deferred tax/deferred tax benefit (NOK thousands)

	2023	2022
Intangible assets	13 487	13 487
Fixed assets	145 389	19 712
Accounts receivable	-267	0
Inventories	153 790	58 927
Right-of-use assets	19 886	20 803
Lease liabilities	-21 240	-21 777
Other current liabilities	0	14
Net temporary differences	311 045	91 165
Tax losses carried forward	-642 780	-281 632
Change due to unrealized financial instruments	12 900	25 623
Basis for deferred tax (deferred tax asset)	-318 835	-164 845
Deferred tax (22%)	-70 144	-36 266
Deferred tax benefit not recognized in the balance sheet*	69 728	34 189
Deferred tax in the balance sheet	-415	-2 077

*Deferred tax benefit has historically not been recognized in the balance sheet as the Group is in its start-up phase and does not have any historical results to refer to when assessing whether future taxable profits will be sufficient to utilize the tax benefit.

As of 31.12.2023 there is a basis for payable tax in the subsidiary Salmon Evolution Sales AS. This will be offset with a group contribution from Salmon Evolution ASA. The tax effect of the group contribution is recognized as a deferred tax asset.

Basis for income tax expense, changes in deferred tax and tax payable (NOK thousands)

	2023	2022
Result before taxes	-145 773	-32 727
Permanent differences in relation to skattefunn	-2 037	-4 750
Other permanent differences	23 008	-7 383
Basis for the tax expense	-124 802	-44 860
Change in temporary differences	-219 880	-64 211
Change due to equity transactions	-24 018	0
Result Kraft Laks AS to payable tax	0	0
Result Kraft Laks AS before acquisition	0	0
Change in tax losses carried forward	-368 700	-109 071
Basis for payable taxes in the income statement	1 887	9 439

Components of the tax expense (NOK thousands)

	2023	2022
Payable tax on this year's result	415	2 077
Total payable tax	415	2 077
Change in deferred tax	-33 878	-10 919
Change in deferred tax due to previous year group contribution	-2 077	-1 027
Change in deferred tax not capitalized in the balance sheet	35 539	9 869
Tax expense	0	0

Reconciliation of the tax expense with the nominal tax rate (NOK thousands)

	2023	2022
Result before taxes	-145 773	-32 727
Calculated tax (22%)	-32 070	-7 200
Tax expense	0	0
Difference	32 070	7 200

Annual report 2023 Extending the ocean potential 93

Note 15 Earnings per share

Basic earnings per share are based on the weighted average number of common shares outstanding during the period.

FY 2023: The Group had 345,754,822 shares for the first four months of the year. In April the Group made an issue of 68,181,818 new shares in a capital raise. Therefor the weighted average number of shares outstanding YTD 2023 has been calculated by applying a weight of 4/12 of the number of shares before the capital raise, and 8/12 of the total number of shares after the capital raise (413,936,640 shares).

FY 2022: The Group started the year with 310,796,489 shares. In the end of March shares options to the employees were exercised increasing the total number of shares with 1,625,000, followed by an issue of 33,333,333 new shares in a capital raise in April. Therefor the weighted average number of shares outstanding YTD 2022 has been calculated by applying a weight of 1/4 of the number of shares before the capital raise in Q1 2022 (310,796,489 shares), and 3/4 of the total number of shares after the capital raise (345,754,822 shares).

Note 16 Government grants

The Group has received a commitment from The Norwegian Research Council (Norsk Forskningsråd) for two projects started in 2023. The grant is given for one period of three years and is related to the tax incentive scheme "SkatteFUNN" which is a government program designed to stimulate research and development (R&D) in Norwegian trade and industry. The receivable is accounted for as a short-term receivable from the tax authorities. In the financial accounts, the receivable related to the grant is netted partly against the related asset's acquisition cost and partly against expenses recognized in the income statement. Grants for 2023 amounted to NOK 2,037.## Note 16 Earnings per share

The difference consists of:
Tax on permanent differences -670 -2 669
Change in deferred tax not shown in the balance sheet 35 539 9 869
Change due to unrealized financial instruments -2 799 0
Sum explained differences 32 070 7 200

(NOK thousands)	2023	2022
Loss attributable to the equity owners of the Parent company	-145 773	-32 726
Loss for calculation of diluted earnings per share	-145 773	-32 726
Weighted average number of shares outstanding	391 209 367	337 015 239
Dilutive options	0	0
Average number of shares and options used in calculation for diluted EPS	391 209 367	337 015 239
Basic earnings per share (NOK)	-0,37	-0,10
Diluted earnings per share (NOK)	-0,37	-0,10

Annual report 2023 Extending the ocean potential 94

Further, the Group has received a commitment from Regional Research Councils (RFF) for the project "Analysis and strategy for management of microbiological environment in land-based farming", and from Fisheries and Aquaculture Industry Research Funding (FHF) for the project "Realization of the potential sensor data for improved efficiency and fish welfare”. In the financial accounts, these grants are recognized as income in the P&L. Total grants for 2023 amounted to NOK 2,255 thousand.

Note 17 Leases

(NOK thousands)	P&L 2023	Balance sheet 2023	Total
Systems for data input, handling and analytics	2 514	4 378	6 892
Grants	-768	-542	-1 310
Landbased Salmon	2 278	1 551	3 829
Grants	-505	-222	-727
Total "SkatteFUNN" project costs	3 519	5 165	8 684

(NOK thousands)	2023
RFF	500
FHF	1 755
Total grants received	2 255

Amounts recognised in the balance sheet

(NOK thousands)	31 Dec 2023	31 Dec 2022
Right-of-use assets
Rent of premises	6 153	8 211
Car	2 639	1 079
Office supply	3 292	3 711
Total right-of-use assets	12 084	13 001
Lease liabilities
Current	4 350	3 553
Non-current	8 189	9 676
Total lease liabilities	12 539	13 228

Amounts recognised in the statement of profit or loss

(NOK thousands)	31 Dec 2023	31 Dec 2022
Depreciation right-of-use assets
Rent of premises	2 058	2 082
Car	988	619
Office supply	1 472	975
Gross depreciation	4 518	3 676
- Capitalized as assets under construction	0	0
Net depreciation	4 518	3 676
Interest expense lease liability	633	577

The total cash outflow for leases in 2023 was NOK 5,092 thousand.

Annual report 2023 Extending the ocean potential 95

Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Company, which does not have recent third-party financing, and
• makes adjustments specific to the lease, e.g term, country, currency and security.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentive received
• any initial direct costs, and
- restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The Group has entered into several lease agreements that are considered to qualify as short- term and/or low value in accordance with IFRS 16. Payments associated with such short-term and low-value leases are recognised on a straight-line basis as an expense in profit or loss.

Short-
Term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT- equipment and small items of office furniture.

	Rent of premises	Vehicles	Equipment
Right-of-use assets 01.01.2023	8 211	1 079	3 711
Additions	0	2 548	1 053
Depreciations	-2 058	-988	-1 472
Right-of-use assets 31.12.2023	6 153	2 639	3 292
Lease liabilities 01.01.2023	8 175	1 119	3 934
Additions	0	2 548	1 053
Repayments	-1 782	-1 674	-835
Lease liabilities 31.12.2023	6 393	1 993	4 152
Leasing period	3-5 years	3-5 years	3-5 years

Annual report 2023 Extending the ocean potential 96

Note 18 Other current receivables

As of 31 December 2023, and 2022, the Group’s other current receivables were due within one year and considered fully collectible. Accordingly, the fair value of the Group’s other current receivables was equal to nominal value, no bad debt was recognized for the years then ended, and management did not consider a provision for uncollectible accounts necessary. Receivables denominated in foreign currencies are valued at the daily rate. Due to the short-term nature of current receivables, their carrying amount is considered equal to their fair value. As of 31 December 2023, and 2022, the Group's other current receivables, specified by currencies, consisted of the following:

(NOK thousands)	31 Dec 2023	31 Dec 2022
Prepaid expenses	24 684	9 022
VAT receivable	0	17 475
Other receivables	4 400	16 332
Government grant ("Enova")	0	19 373
Tax incentive scheme ("Skattefunn")	2 037	4 750
Total other current receivables	31 121	66 951

	0-3 months	4-12 months	Total
Current receivables pr 31.12.23
Prepaid expenses	17 235	7 449	24 684
Other receivables	2 912	1 488	4 400
Tax incentive scheme ("Skattefunn")	0	2 037	2 037
Total other current receivables	20 147	10 974	31 121

(NOK thousands)	31 Dec 2023	31 Dec 2022
NOK	31 121	66 951
Other	0	0
Total other current receivables	31 121	66 951

Annual report 2023 Extending the ocean potential 97

Note 19 Derivative financial instruments

The derivative financial assets relate to hedging contracts for the Group’s interest rate exposure and consist of an interest rate swap contract of NOK 50 million in Sparebanken Vest and a similar contract of NOK 150 million in Nordea. Both contracts are due January 2028, and has a swap fixed interest of 1.79 %. Changes in Market Value is registered as unrealized profit/loss under financial income and allocated to, an unrealized profit/loss as other current receivables in the balance sheet. Due to changes in construction and production plan a significant part of the energy contract originally was done to hedge the energy usage, the contract was not considered as own use, and therefor measured at fair value. The power hedging contract with Statkraft was valued to NOK 13.9 million at end of 2022. The fair value was calculated by using contracted volumes to until 31.12.2023, and calculating net present value of these volumes by using relevant forward prices in the energy market (adjusted for EURNOK forward prices). The agreement period expired on 31.12.2023 and the value is zero at the end of the year. See note 3 for further description and more details on valuation method.

Note 20 Cash and restricted cash

Restricted cash are related to tax withholdings for employees (NOK 3,570 thousand).

(NOK thousands)	31 Dec 2023	31 Dec 2022
Derivative financial assets
Derivatives not designated as hedging instruments
Interest rate swaps	12 666	11 719
Currency hedging	234	0
Total financial assets	12 900	11 719
Derivatives designated as hedging instruments
Power hedging contract	0	13 903
Total derivatives not designated as hedging instruments	0	13 903
Total derivative financial assets	12 900	25 622

(NOK thousands)	31 Dec 2023	31 Dec 2022
Cash in bank	382 826	275 944
Restricted bank deposits	3 570	2 815
Total cash and cash equivalents	386 396	278 759

Annual report 2023 Extending the ocean potential 98

Note 21 Share Capital & Capital history

The number of shares issued in the Group on 31 December 2023 was 413,936,640 with a nominal value of NOK 0.05 each. All shares carry equal voting rights.

	Nominal value	31 Dec 2023	31 Dec 2022
Ordinary shares	0,05	413 936 640	345 754 822
Average number of shares	0,05	395 531 302	337 015 239

(NOK thousands)	31 Dec 2023	31 Dec 2022
Share capital	20 697	17 288
Share premium	2 124 647	1 627 073
Total	2 145 344	1 644 361

20 largest shareholders as of 31.12.23

No of shares	Percentage share
Ronja Capital II AS	30 140 645
The Bank of New York Mellon SA/NV	26 128 070
Farvatn Private Equity AS	18 939 433
Hongkong and Shanghai Banking Corp	16 044 572
Rofisk AS	14 537 897
Kjølås Stansekniver AS	12 506 439
J.P. Morgan SE	11 761 639
Stette Invest AS	11 744 288
Verdipapirfondet DNB Norge	11 113 276
Ewos AS	9 480 984
Verdipapirfondet DNB SMB	9 302 408
Jakob Hatteland Holding AS	8 758 786
Mevold Invest AS	8 141 141
Lyngheim Invest AS	8 049 252
Bortebakken AS	7 856 330
VPF DNB Norge Selektiv	7 424 509
J.P. Morgan SE	4 652 771
Salmoserve AS	4 000 000
Verdipapirfondet Nordea Avkastning	3 578 295
Clearstream Banking S.A.
Total 20 largest shareholders 227 538 467 54,9 %
Other shareholders 186 398 173 45,1 %
Total number of shares 413 936 640 100,0 %

Annual report 2023 Extending the ocean potential 99

As of 31 December 2023, shares held directly or indirectly by members of the Board of Directors, Chief Executive officer, and Executive Management consisted of the following:

Capital history

The Group entered into an investment agreement with Dongwon Industries and completed a NOK 50 million private placement towards Dongwon Industries in July 2020. The Group raised NOK 500 million in a private placement in connection with its initial public offering related to the admission on Merkur Market (now Oslo Børs) in September 2020. Further, the Group also raised another NOK 500 million in a private placement in March 2021. In August 2021 the Group acquired 100% of the shares in Kraft Laks AS. As part of the settlement the Group issued 2,190,694 new shares of NOK 7.5775 per share, and thereby increased its equity by NOK 16.6 million. In October 2021 the Group carried out a private placement of USD 5m (NOK ~43m) towards Cargill. Further, in April 2022 the Group carried out a private placement raising gross proceeds of NOK 300 million at a subscription price of NOK 9.00 per share, bringing total raised equity to more than NOK 1.7 billion. In April 2023 the Group carried out a private placement raising gross proceeds of NOK 525 million at a subscription price of NOK 7.7 per share, bringing total raised equity to more than NOK 2.2 billion.

No of shares	Percentage share
Peder Stette, Member of the board - Stette Invest AS 11 744 288	2,8 %
Vibecke Bondø, Member of the board - Bondø Invest AS 1 948 052	0,5 %
Ingjarl Skarvøy, COO - Terra Mare AS and private 1 800 150	0,4 %
Janne-Grethe Strand Aasnæs, Member of the board - Nikaro AS 480 000	0,1 %
Trond Håkon Schaug-Pettersen, CEO - Troha Invest AS 400 000	0,1 %
Odd Frode Roaldsnes, CCO - Anno Invest AS 250 000	0,1 %
Anne Breiby, Member of the board 168 935	0,0 %
Kamilla Mordal Holo, Project Director - C10 Holding AS & private 160 060	0,0 %
Trond Vadset Veibust, CFO - Trollkyrkja AS 55 000	0,0 %
Jan-Emil Johannessen, Member of the board - Jawendel AS 40 000	0,0 %
Henriette Nordstrand, Technical Director - Heno Holding AS 32 849	0,0 %
Tore-Jakob Reite, Director Strategic Projects 1 250	0,0 %
Total 17 080 584	4,1 %

Date	Increase Change	Subscription Capital (figures in NOK 1000) Share CapitalpriceTotal no. of New shares	Par Value	per share	outstanding shares
Opening balance 1 July 2020		5 375 159	0,05		107 503 182
Share options exercised 10 July 2020	30 000	5 405 159	0,05	3,33	600 000
Private placement 23 July 2020	581 395	5 986 554	0,05	4,30	11 627 906
Private placement 11 September 2020	5 000 000	10 986 554	0,05	5,00	100 000 000
Private placement 23 March 2021	4 166 667	15 153 221	0,05	6,00	83 333 333
Acquisition Kraft Laks 16 August 2021	109 535	15 262 756	0,05	7,58	2 190 694
Private placement 12 October 2021	277 068	15 539 824	0,05	7,71	5 541 374
Share options exercised 26 March 2022	81 250	15 621 074	0,05	4,80	1 625 000
Private placement 5 April 2022	1 666 667	17 287 741	0,05	9,00	33 333 333
Private placement 18 April 2023	3 409 091	20 696 832	0,05	7,70	68 181 818

Annual report 2023 Extending the ocean potential 100

Note 22 Interest bearing debt

In Q1 2023 the Group signed a NOK 1,550 million green debt financing package with DNB and Nordea relating to phase 1 and 2 at Indre Harøy, thus refinancing the existing senior secured debt financing package. The new package consisted of a NOK 525 million non-amortizing term loan facility to the existing NOK 525 million construction loan relating to phase 1, a NOK 250 million revolving credit facility available for general corporate purposes including Indre Harøy phase 2 capex and a NOK 775 million construction facility available for financing of capex relating to phase 2 at Indre Harøy. Additionally, the Group has a NOK 100 million Overdraft Facility with Nordea. The refinancing was completed in April 2023. As per 31 December 2023, NOK 525 million was drawn of the secured green debt financing package. In addition, the Group has drawn NOK 90 million of the Overdraft Facility. The Group has also entered into loan agreements for a total of NOK 60 million relating to Salmon Evolution Dale AS of which around NOK 58 million was drawn as per 31 December 2023. This financing is for financing of working capital, investments in Salmon Evolution Dale as well as refinancing of the seller’s credit from the acquisition of Salmon Evolution Dale AS. The above table does not include other long-term liabilities of NOK 8.7 million related to property and water rights in Salmon Evolution Dale AS.

Financial covenants

The most important financial covenants for the long-term financing of the Group are, respectively, a solvency requirement that the borrower’s (Salmon Evolution Norway AS) book equity ratio (including intra-group loans) shall be minimum 45%. Further, there is a profitability requirement linked to the borrower’s EBITDA which shall be greater than NOK 150 million on a last 12-month basis from Q4 2025. Quarterly EBITDA figures shall be measured from Q4 2023 with set minimum EBITDA levels reflecting the company’s gradual ramp up of production volumes

Long-term interest bearing debt (NOK thousand)	31.12.2023	31.12.2022
Debt to credit institutions	569 969	513 169
Other long-term interest bearing debt	0	0
Leasing liabilities	8 189	9 676
Total long-term interest-bearing debt	578 158	522 845

Short-term interest bearing debt (NOK thousand)	31.12.2023	31.12.2022
Debt to credit institutions	103 275	42 512
Other short-term interest bearing debt	0	12 841
Leasing liabilities	4 350	3 553
Total short-term interest-bearing debt	107 625	58 906

Total interest-bearing debt | 685 783| 581 750|
Cash & cash equivalents | 386 396| 278 759|
Net interest-bearing debt | 299 387| 302 991|

Annual report 2023 Extending the ocean potential 101

and profitability. In anticipation of not being able to meet its minimum EBITDA requirement for Q4 2023, the loan agreement was amended from lender dated 19 December 2023. First test of EBITDA requirement will be Q1 2024. Finally, there is a minimum cash requirement that stipulates that the obligors (Salmon Evolution Norway AS, Salmon Evolution Sales AS and Salmon Evolution ASA) cash balance shall be greater than NOK 100 million at any time. Any undrawn and available amounts under the revolving facility and the overdraft is included in the calculation of the cash balance.

Security

The Group’s bank debt facilities are fully guaranteed by Salmon Evolution ASA. The respective lenders also have a pledge over 100% of the shares in the borrower, Salmon Evolution Norway AS and Salmon Evolution Dale AS. Furthermore, the respective lenders have a pledge over all material operating assets of the Group, hereunder inter alia, land, plant and machinery, operating licenses, inventory and receivables.

Information supporting the cash flows

Interest bearing debt (NOK thousand)	Short term	Long term
Balance at January 1, 2022	14 322	221 221
Repayment of loans and borrowings	-13 086	0
Proceeds from new bank loan	42 512	313 169
Seller credit Kraft Laks	12 841	-12 352
Obligations due to land and water rights	0	573
Change in obligations under leases	2 316	8 784
Balance at Dec 31, 2022	58 906	531 394
Repayment of loans and borrowings	-12 841	0
Proceeds from new bank loan	60 763	56 800
Obligations due to land and water rights	0	153
Change in obligations under leases	797	-1 487
Balance at Dec 31, 2023	107 625	586 859

Annual report 2023 Extending the ocean potential 102

Note 23 Trade and other current liabilities

(NOK thousands)	31 Dec 2023	31 Dec 2022
Accrued employer's social security contribution	0	0
Shareholder loan	0	0
Accrued salaries, holiday pay and bonus provisions	10 410	6 869
Severance pay accrual	0	0
Accrued interest expense	4 225	2 915
Other current liabilities	0	0
Total other current liabilities	14 635	9 783

(NOK thousands)	31 Dec 2023	31 Dec 2022
Trade payables operation	33 812	21 483
Trade payable constructions	37 687	113 616
Total trade payables	71 499	135 098

(NOK thousands)	31 Dec 2023	31 Dec 2022
Tax payable	415	2 077
Payroll withholding tax	3 563	2 810
Employer's national insurance contributions	3 329	2 199
VAT payable	966	0
Total social security and other taxes	8 273	7 086

Annual report 2023 Extending the ocean potential 103

Note 24 Related party balances and transactions

During the ordinary course of business, the Group engages in certain transactions with related parties. The following is a summary of related party transactions carried out in the period:

The Group has a consultancy agreement with Peder Stette (board member) and Frode Kjølås (chair nomination committee) relating to assistance in certain projects on an ad-hoc basis. The Group has during 2023 purchased legal services from Adviso Advokatfirma AS in the amount of NOK 77,000 in its ordinary course of business. Board member Ingvild Vartdal is a partner at Adviso Advokatfirma AS but has not had any role in the services rendered to Salmon Evolution. In Addition, the Group have purchased well boat services from Rostein AS in the amount of NOK 1.7 million. Rofisk AS owns Rostein AS (100%), and former board member (until June 2023) Glen Allan Bradley is the chair of the Board in Rofisk AS. There were no non-current liabilities to related parties as of 31.12.2023.

Income from related parties: (NOK thousands)	2023	2022
K Smart Co Ltd	9 765	1 560
Total income from related parties (incl.VAT)	9 765	1 560

Expenses to related parties: (NOK thousands)	2023	2022
Rofisk AS (100% owner of Rostein AS)	4 291	1 686
Adviso Advokatfirma AS	77	206
Kjølås Stansekniver AS	1 081	936
Stette Eiendom AS	15
Total expenses to related parties (Incl.

No material subsequent events.

Parent company Financial Statement

Income Statement (NOK thousands)

Note	2023	2022
Other revenue	29 376	15 215
Total operating revenue	29 376	15 215
Personnel expenses	-49 403	-21 973
Depreciation	-3 119	-1 938
Other operating expenses	-38 838	-27 603
Operating profit (EBIT)	-61 984	-36 300
Financial income	76 850	58 436
Financial expenses	-11 497	-4 332
Net financials	65 353	54 104
Profit/loss before tax	3 369	17 804
Income tax expense	-763	-486
Profit/loss for the period	4 132	18 290

Statement of Comprehensive Income (NOK thousands)

Note	2023	2022
Profit/loss for the period	4 132	18 290

Statement of Financial Position (NOK thousands)

Note	31 Dec 2023	31 Dec 2022
Assets
Intangible assets	5 835	2 564
Deferred tax asset	3 891	5 205
Property, plant & equipment	835 1091
Right-of-use assets	8 309	9 841
Group non-current receivables	1 429 342	1 057 808
Investment in subsidiaries	359 288	359 197
Total non-current assets	1 807 501	1 435 705
Other current receivables	120 512	43 711
Cash and cash equivalents	377 427	254 610
Total current assets	497 940	298 321
Total assets	2 305 440	1 734 026
Equity and liabilities
Share capital	20 697	17 288
Share premium	2 103 467	1 605 894
Other reserves	9 978	7 540
Other equity	0	0
Retained earnings	30 335	26 202
Total equity	2 164 476	1 656 923
Long-term interest bearing debt	25 000	12 500
Lease liabilities - long term	5 790	7 602
Total non-current liabilities	30 790	20 102
Short-term interest bearing debt	90 069	43 174
Trade payables	2 836	5 415
Current liabilities to Group Companies	3 476	37
Lease liabilities - short term	2 797	2 390
Other current liabilities	10 995	5 984
Total current liabilities	110 174	57 001
Total liabilities	140 964	77 103
Total equity and liabilities	2 305 440	1 734 026

Statement of Cash Flow (NOK thousands)

Note	2023	2022
Cash flow from operations
Profit before income taxes	3 369	17 804
Adjustments for:
Depreciation	3 119	1 938
Net financials	-65 353	-53 078
Share based payment expenses	2 438	3 201
Changes in working capital:
Change in trade receivables	-13 439	-2 797
Change in other current receivables	-64 262	-38 533
Change in trade payables	-2 579	4 846
Change in current liabilities to Group companies	3 440	37
Change in other current liabilities	-5 753	3 602
Cash generated from operations	-139 020	-62 980
Cash flow from investment activities
Investment in Group Companies	-1 156	-2 419
Payments for intangible assets	-3 271	-2 564
Payments for fixed assets and other capitalizations	-41	-1 193
Dividend income from group companies	0	12 000
Net cash flow from investment activities	-4 467	5 823
Cash flow from financing activities
Proceeds from issue of equity, net of paid transaction costs	500 982	294 538
Change in intercompany borrowings	-309 638	-409 968
Proceeds from new borrowings	72 236	42 833
Repayment of borrowings	0	-12 841
Net change in right of use assets and liabilities	-2 697	-1 685
Interest paid	-11 497	-1 924
Interest received	16 918	45 410
Net cash flow from financing activities	269 713	-41 888
Net change in cash and cash equivalents	122 817	-100 792
Cash and cash equivalents at the beginning of the period	254 610	355 403
Cash and cash equivalents at the end of the period	377 427	254 610

Statement of Changes in Equity

	Share capital	Share premium	Retained Earnings	Other Reserves
Balance at 1 January 2022	15 540	1 313 104	7 912	4 338
Profit/loss for the period	0	0	18 290	0
Other comprehensive income	0	0	0	0
Total comprehensive income	0	0	18 290	0
Share options exercised	81	7 724	0	0
Private placement 5. April 2022	1 129	202 041	0	0
Private placement, 2. May 2022	538	96 293	0	0
Private placements, transaction costs	0	-13 267	0	0
Share options issued	0	0	0	3 201
Transactions with owners	1 748	292 790	0	3 201
Balance at 31 December 2022	17 288	1 605 894	26 202	7 540
Balance at 1 January 2023	17 288	1 605 894	26 202	7 540
Profit/loss for the period	0	0	4 132	0
Other comprehensive income	0	0	0	0
Total comprehensive income	0	0	4 132	0
Share options exercised	0	0	0	0
Private placement, April 2023	3 409	521 591	0	0
Private placements, transaction costs	0	-24 018	0	0
Share options issued	0	0	0	2 438
Transactions with owners	13	3 409	497 573	0
Balance at 31 December 2023	20 697	2 103 467	30 335	9 978

Total equity (NOK thousands)

Share capital	Share premium	Retained Earnings	Other Reserves	Note

Note 1 Summary of significant accounting policies

General information

Salmon Evolution ASA is a Norwegian business headquartered in Hustadvika, Møre og Romsdal and listed on the Oslo Børs with the ticker symbol "SALME". Salmon Evolution ASA owns the following subsidiaries (collectively "the Group" or "SE");
- Salmon Evolution Norway AS, headquartered and located in Elnesvågen, Norway
- Salmon Evolution International AS,
- Salmon Evolution Dale AS,
- Salmon Evolution Sales AS

SE is in the process of constructing a land-based salmon farming facility with a planned annual harvesting capacity of 31,500 tonnes HOG. The build-out is expected to be in three phases, with the first phase expected to consist of build out of land acquisition, building of foundation, water pumps supporting all three phases and build out of 12 grow out tanks and hatchery.

SE operates a hybrid flow-through system ("HFS"), replacing the water every four hours with clear and fresh water from the Norwegian coast. Construction start of phase I was in Q1 2020 with completion in Q2 2023. Production started in the end of Q1 2022 when the first smolt was entered the first tank with first harvest late Q4 2022. Phase II consists of build out of an additional 12 grow out tanks with first smolt expected entered in H2 2024. The last construction phase, phase III, consists of build-out of an additional 24 grow out tanks.

Basis of preparation and accounting principles

The financial statements of the Company have been prepared in accordance with the Norwegian Accounting Act § 3-9 and Finance Ministry’s prescribed regulations from 21 January 2008 on simplified IFRS. Principally this means that recognition and measurement comply with IFRS® International Accounting Standards and presentation and note disclosures are in accordance with the Norwegian Accounting Act and generally accepted accounting principles. Any exceptions from measurement and recognition according to IFRS is disclosed below.

Accounting period

The company was incorporated on 3 July 2020. The accounting period for the financial statements are 1 January 2022 - 31 December 2023.

Going concern

The Company has adopted the going concern basis in preparing its financial statements. When assessing this assumption, management has assessed all available information about the future. This comprises information about net cash flows from existing customer contracts and other service contracts, debt service and obligations. After making such assessments, management has a reasonable expectation that the Company has adequate resources to continue its operational existence for the foreseeable future.

Basis of measurement

The financial statements have been prepared under the historical cost basis.

Investments in subsidiaries

Investments in subsidiaries are valued at cost in the company accounts. The investment is valued as cost of acquiring shares, providing they are not impaired. An impairment loss is recognised for the amount by which the carrying amount of the subsidiary exceeds its recoverable amount. The recoverable amount is the higher of fair value less cost to sell and value in use. The recoverable amount of an investment in a subsidiary would normally be based on the present value of the subsidiary's future cash flow.

Dividends and group contributions

The Company has applied simplifications in regard to the Directives specified by the Norwegian Ministry of Finance on 21. of January 2008, related to accounting treatment of dividends and group contributions: Dividends and group contributions will be treated in accordance with the Norwegian Accounting Act and deviates from IAS 10 no. 12 and 13.

Classification of current and non-current items

Assets are classified as current when it is expected to be realized or sold, or to be used in the Company's normal operating cycle, or falls due or is expected to be realized within 12 months after the end of the reporting date. Assets that do not fall under this definition is classified as non-current.# Liabilities

Liabilities are classified as current when they are expected to be settled in the normal operating cycle of the Company or are expected to be settled within 12 months after the reporting date, or if the Company does not have an unconditional right to postpone settlement for at least 12 months after the reporting date. Liabilities that do not fall under this definition are classified as non-current.

Employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

Share based payments

Information relating to the Company's employee option scheme is set out in note 5. The fair value of options granted under the scheme is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
- including any market performance conditions (eg the entity’s share price)
- excluding the impact of any service and non-market performance vesting conditions (eg profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
- including the impact of any non-vesting conditions (eg the requirement for employees to save or holdings shares for a specific period of time).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Pensions

The Group offers a defined contribution plan to its employees and pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual, or voluntary basis. The Group has no further payment obligations once the contributions have been paid. Contributions are recognized as employee benefit expense when they are due and are included as part of salary and personnel costs in the statement of profit and loss. Prepaid contributions are recognized as an asset to the extent in which a cash refund or a reduction in the future payments is available.

Current and change in deferred tax for the year

Income Tax

The tax expense represents the sum of the tax currently payable and change in deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realized based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current tax and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

Leases

All leasing agreements with a duration exceeding 12 months are capitalized. The Group assesses whether a legally enforceable contract is or contains a lease at the inception date of the contract. The assessment includes several criteria to be determined based on judgment that includes whether there is an identifiable asset in connection to the lease, whether the Group has the right to control the use of the identifiable asset, and whether the Group can obtain substantially all economic benefits from the identifiable asset.

The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. The lease liability is calculated based on the present value of the contractual minimum lease payments using the incremental interest rate of the lease. The contractual minimum lease payments consist of fixed payments based on contractual amount at the time of conclusion of the agreement. The lease liability is subsequently measured at amortized cost under the effective interest rate during the lease term and may also be adjusted to management’s reassessment of future lease payments based on options exercised, renegotiations, or changes of an index rate. The ROU asset is calculated based on the lease liability, plus initial direct costs towards the lease, and less any incentives granted by the lessor. The ROU asset is subsequently amortized under the straight- line method under the shorter of the lease term or the useful life of the underlying asset and is included as part of depreciation and amortization in the accompanying statements of other comprehensive income.

Leases that fall under the IFRS 16 short-term exception are recognized on a straight-line basis over the lease term.

Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.

Trade and Other Receivables

Trade receivables are initially recognized at amortized cost, less a provision for expected credit losses. Credit loss provisions are based on individual customer assessments over each reporting period and not on a 12-month period.

Trade and other payables

Trade and other payables represent unpaid liabilities for goods and services provided to the Company prior to the end of the financial year and are presented as current liabilities unless payment is not due within 12 months after the reporting period. Trade and other payables are recognized initially at their fair value and are subsequently measured at amortized cost using the effective interest method.

Statement of cash flows

The accompanying statements of cash flows are prepared in accordance with the indirect method.

Note 2 Financial risk and capital management

The Company's financial assets and liabilities include trade and other receivables, trade and other payables, cash, and borrowings necessary for its operations. The Company's risk management is carried out by the Company's finance department. The Company is exposed to market risk, credit risk, and liquidity risk.

Market risk

Market risk is linked to both Interest Rate- and Currency fluctuations.# Note 3 Intercompany balances and intercompany transactions

Investments in Salmon Evolution Norway AS and Salmon Evolution International AS is partly financed with loan from Salmon Evolution ASA. The interest rate on these loans is set at an interest rate of 4 %. Intercompany receivables to Salmon Evolution Norway AS are unsecured. The bank loans have security in all material assets of Salmon Evolution Norway AS, including but not limited to land and plant and machinery. Salmon Evolution ASA as parent company of the Group has also fully guaranteed the Group's bank loans. Carrying value of the investment property pledged as security is NOK 1,981 million. Salmon Evolution ASA also requires an administration fee from Salmon Evolution Norway AS. This fee covers administration, advice, and development of the company, and is invoiced based on time spent by the employees of the parent company in the various areas. Total amount in 2023 was NOK 19.3 million. In addition, the company has required refund of costs from K Smart Farming Co., Ltd to expats posted in Korea, and apprentices from Korea who have had residency in Norway. There were no other transactions with group companies and related parties in 2023.

	Non-current receivables	Current receivables	Non-current liabilities	Current liabilities
Salmon Evolution Norway AS	1 395 187	89 736	0	3 310
Salmon Evolution International AS	31 190	0	0	0
Salmon Evolution Dale AS	0	3 075	0	166
Salmon Evolution Sales AS	1 000	27	0	0
Salmon Evolution North America	1 964	0	0	0
K Smart Farming Co., Ltd	0	11 326	0	0
Total intercompany balances	1 429 342	104 164	0	3 476

Intercompany and related party transactions:

	Revenue	Interest
Salmon Evolution Norway AS	19 286	48 783
Salmon Evolution International AS	0	1 234
Salmon Evolution Dale AS	0	0
Salmon Evolution Sales AS	0	0
K Smart Farming Co., Ltd	10 054	0
Total intercompany transactions	29 340	50 017

Note 4 Personnel expenses, remuneration to the board and auditor's fee

Norwegian entities are obligated to establish a mandatory company pension. This obligation is fulfilled under the current pension plan. No loans or guarantees have been given to the members of the board of directors or executive management.

Personnel expenses, remuneration to executives and accrued liabilities to be paid in 2023

	2023	2022
Salaries	35 240	12 880
Social security	6 074	2 184
Pensions	1 859	512
Other benefits	695	1 894
Share-based payments	2 347	1 782
Director's fee (both paid in 2023 and liabilities to be paid 2024)	3 188	2 721
Gross personnel expenses	49 403	21 973
Number of full-time employment equivalents	30	9

Remuneration and compensation to members of the board

	2023	2022
Tore Tønseth (Chairman of the Board)	500	500
Janne-Grethe A. Strand (Member of the board and leader of audit committee)	500	500
Glen Bradley (Member of the Board and audit committee)	375	375
Peder Stette (Member of the Board)	250	250
Anne Breiby (Member of the Board)	250	250
Eunhong Min (Member of the board)	250	0
Ingvild Vartdal (Member of the Board)	250	250
Håkon Andre Berg (Member of the Board)	146	0
Kristofer Reiten (Member of the Board)	0	250
Yun Ki Yun (Member of the board)	0	250
Frode Kjølås (Nomination committee)	75	75
Berit Rogne (Nomination committee)	50	50
Trond Svinø (Nomination committee)	50	0
Total board of Directors	2 696	2 750

Remuneration and compensation to executive management 2023

	Salary	Bonus	Pension	Other	Total
Trond Håkon Schaug-Pettersen (CEO)	2 740	500	71	272	3 583
Trond Vadset Veibust (CFO from 01.04.2023)	1 243	0	71	120	1 434
Ingjarl Skarvøy (COO)	1 946	0	71	206	2 223
Kamilla Holo Mordal (Project Director)	1 623	0	71	15	1 709
Odd Frode Roaldsnes (CCO)	1 729	0	71	168	1 968
Henriette Nordstrand (Technical Director)	1 108	0	64	23	1 194
Tore-Jakob Reite (Director Strategic Projects from 17.02.2023)	807	0	67	29	903
Total executive management	11 196	500	486	833	13 014

Remuneration and compensation to executive management 2022

	Salary	Bonus	Pension	Other	Total
Trond Håkon Schaug-Pettersen (CFO/CEO/Chairman)	2 228	0	67	246	2 541
Håkon Andrè Berg (CEO until Oct 22)	2 722	0	67	208	2 997
Ingjarl Skarvøy (COO)	1 844	0	67	162	2 073
Kamilla Holo Mordal (Project Director)	1 482	100	67	8	1 658
Odd Frode Roaldsnes (CCO)	1 533	0	67	17	1 617
Henriette Nordstrand (Technical Director, from 15.08.22)	380	0	29	22	431
Total executive management	10 190	100	363	663	11 316

Compensation to executive management related to options 2023

	Options
Trond Håkon Schaug-Pettersen (CEO)	871
Trond Vadset Veibust (CFO from 01.04.2023)	197
Ingjarl Skarvøy (COO)	351
Kamilla Holo Mordal (Project Director)	328
Odd Frode Roaldsnes (CCO)	363
Henriette Nordstrand (Technical Director)	50
Tore-Jakob Reite (Director Strategic Projects from 17.04.2023)	50
Total executive management	2 210

Compensation to executive management related to options 2022

	Options
Trond Håkon Schaug-Pettersen (CEO from oct 2022, CFO)	1 399
Ingjarl Skarvøy (COO)	600
Kamilla Holo Mordal (CPO)	567
Odd Frode Roaldsnes (CCO)	615
Henriette Nordstrand (Technical Director from sept-22)	0
Håkon Andrè Berg (CEO until oct 2022)	20
Total executive management	3 201

Auditor's remuneration

	2023	2022
Statutory audit	568	440
Service in relation to tax return	6	8
Other services	19	0
Total	593	448

Note 5 Share based payments

In August 2021 the Board of the directors established a share option program for members of the Company's executive management where total of 6,900,000 share options were granted, in November 2021 this was updated to 7,650,000 share options. These options were issued on an annual basis with 1/3 each year, with issue dates being 31 August 2021, 1 June 2022 and 1 June 2023. Issued options vest 50% after year one and 50% after year two, with a strike price equal to the closing price of the Company's shares on Oslo Børs on the last trading day prior to the respective to the issue date + 15%. In 2023, 700,000 share options were granted to executive management in January, 250,000 in June as well as 960,000 to key employees in June. These options were issued with issue date 1 June 2023. Issued options vest 50% after year one and 50% after year two, with a strike price equal to the closing price of the Company's shares on Oslo Børs on the last trading day prior to the respective to the issue date + 15%. The strike price for the share options issued 31 August 2021 was NOK 9,00 per share, 1 June 2022 NOK 10,06 per share and 1 June 2023 NOK 8,30 per share. To account for the issued share options, an adjusted Black & Scholes option-pricing model is used by applying a weighted expected average life of 18 months. The fair value of the options is set on the grant date and is expensed over its lifetime. The fair value of the options has been calculated using the adjusted Black & Scholes option-pricing model, which considers the exercise price, the term of the option, the share price at the grant date, expected price volatility of the underlying share, expected dividend and risk-free rates. Given the recent listing and lack of historical price and volatility data, the expected volatility is based on historical volatility for a selection of comparable companies listed on Oslo Stock Exchange ("Oslo Børs"). The risk-free interest rate is set to equal the interest on Norwegian government bonds with the same maturity as the option. Average key assumptions are listed below.# Outstanding options (in thousands)

	2023	2022
Outstanding options 1 January	5 150	9 275
Options granted	1 910	0
Options exercised	0	1 625
Options forfeited	0	2 500
Outstanding options at end of period	7 060	5 150

Annual report 2023 Extending the ocean potential 119

(NOK thousands)

	2023	2022
Håkon André Berg (CEO until oct 22)	0	20
Trond Håkon Schaug-Pettersen (CEO)	871	1 399
Ingjarl Skarvøy (COO)	351	600
Kamilla Mordal Holo (Project Director)	328	567
Odd Frode Roaldsnes (CCO)	363	615
Trond Vadseth Veibust (CFO)	197	0
Henriette Nordstrand (Technical Director)	50	0
Tore-Jacob Reite (Director Strategic Projects)	50	0
Salmon Evolution ASA -Other Key Personel	137	0
Salmon Evolution Norway AS - Other Key Personel	73	0
Salmon Evolution Dale AS - Other Key Personel	18	0
Total	2 438	3 201
Charges to income statement, Salmon Evolution ASA	2 347	1 782
Charges to the shares in Salmon Evolution Norway AS	73	1 419
Charges to the shares in Salmon Evolution Dale AS	18	0

Key assumptions

	2023	2022
Average fair value (NOK)	0,83	1,47
Average exercise price (NOK)	8,30	10,35
Weighted expected average life (in years)	3,21	2,33
Estimated dividend per share (NOK)	0	0
Expected average volatility	19,6 %	29,2 %
Risk-free rate	3,31 %	0,86 %

Group management have the following holdings

	Holding 01.01	Awarded	Exercised	Forfeitet	Holding 31.12
Håkon André Berg (CEO until oct 22)	500	-	-	-	500
Trond Håkon Schaug-Pettersen (CEO from oct 22 & CFO)	2 400	200	-	-	2 600
Ingjarl Skarvøy (COO)	750	-	-	-	750
Kamilla Mordal Holo (Project Director)	750	-	-	-	750
Odd Frode Roaldsnes (CCO)	750	-	-	-	750
Trond Vadseth Veibust (CFO)	-	500	-	-	500
Henriette Nordstrand (Technical Director)	-	125	-	-	125
Tore-Jacob Reite (Director Strategic Projects)	-	125	-	-	125
Total	5 150	950	-	-	6 100

*Numbers in thousand

Annual report 2023 Extending the ocean potential 120

Note 6 Property, plant and equipment

Straight-line depreciation is applied over the useful life of property, plant, and equipment based on the asset’s historical cost and estimated residual value at disposal. Depreciation is charged to expense when the property, plant or equipment is ready for use or placed in service. Capitalised development costs are related to building strategy and purchase of rights for sale and development of own branding. The company has also activated costs for a research project with grants (Skattefunn) from The Research Council of Norway to improve the quality of landbased salmon. Total cost for this project in 2023 was NOK 3,829 thousand. The receivable is accounted for as a short-term receivable from the tax authorities. In the financial accounts the receivable related to the grant is netted partly against the related asset's acquisition cost and partly against expenses recognised in the income statement. Grants for 2023 amounted to NOK 728 thousand.

(figures in NOK 1000)

Intangible assets	Total Cost	Fixtures and fittings	Right-of- use assets	Total
Cost
1 January 2023	2 564	1 193	11 682	15 439
Additions	6 059	41	1 291	7 391
Disposals	-2 788	0	0	-2 788
Cost 31 December 2023	5 835	1 234	12 973	20 042
Accumulated depreciation
1 January 2023	0	103	1 841	1 944
Depreciation for the period	0	296	2 823	3 119
Net book value 31 December 2023	5 835	835	8 309	14 980
Estimated lifetime	n/a	3-5 years	3-5 years
Depreciation method	n/a	Linear	Linear

Intangible Assets	01.01.2023	Additions	Grants	Disposals	31.12.2023
"Skattefunn"-project	0	1 551	-222	0	1 329
Other research and development projects	1 250	2 788	0	-2 788	1 250
Protection rights	1 314	1 942	0	0	3 256
Total	2 564	6 281	-222	-2 788	5 835

Annual report 2023 Extending the ocean potential 121

Note 7 Leases

The total cash outflow for leases in 2023 was NOK 3,148 thousand. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Company:
* where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received
* uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Company, which does not have recent third-party financing, and
* makes adjustments specific to the lease, eg term, country, currency and security.

Amounts recognised in the balance sheet (NOK thousands)

	31 Dec 2023	31 Dec 2022
Right-of-use assets
Rent of premises	6 153	8 101
Car	938	427
Office supply	1 218	1 313
Total right-of-use assets	8 309	9 841
Lease liabilities
Current	2 797	2 390
Non-current	5 790	7 602
Total lease liabilities	8 587	9 993

Amounts recognised in the statement of profit or loss (NOK thousands)

	31 Dec 2023	31 Dec 2022
Depreciation right-of-use assets
Rent of premises	-1 948	-1 417
Car	-473	-187
Office supply	-395	-231
Gross depreciation	-2 816	-1 836
- Capitalized as assets under construction
Net depreciation	-2 816	-1 836
Leasing period	3-5 years	3-5 years
Interest expense lease liability	434	409

Annual report 2023 Extending the ocean potential 122

The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following:
* the amount of the initial measurement of lease liability
* any lease payments made at or before the commencement date less any lease incentive received
* any initial direct costs, and
* restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The Company has entered into several lease agreements that are considered to qualify as short-term and/or low-value in accordance with IFRS 16. Payments associated with such short-term and low-value leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture.

Note 8 Other operating expenses (NOK thousands)

	2023	2022
Cost of premises (not defined as RoU)	781	568
Other operating and administrative expenses	14 820	7 723
Insurance	699	151
Consultancy fees	21 305	17 991
Other fees (Oslo Børs, VPS)	1 233	1 170
Total other operating expenses	38 838	27 603

Annual report 2023 Extending the ocean potential 123

Note 9 Interest bearing debt

The Group has entered into a senior secured NOK 1,550 million debt financing package relating to its phase 1 and 2 build out at Indre Harøy. The new debt financing package consists of the following facilities:
- NOK 525 million non-amortizing Term Loan Facility which will refinance the Company’s existing NOK 525 million construction loan relating to phase 1 (the “Term Loan”)
- NOK 250 million RCF Capex Facility available for general corporate purposes including Indre Harøy phase 2 capex (the “RCF Facility”)
- NOK 775 million Construction Facility available for financing of capex relating to phase 2 at Indre Harøy (the “Construction Facility”)

Per 31.12.23 the Group had made drawdowns of NOK 525 million under the Construction Facility. In addition, the Company has drawn NOK 90 million on the Overdraft Facility. The loans are floating interest rate loans denominated in NOK with an interest charge based on NIBOR 3M plus an agreed margin. Incurred interest expenses and establishing fees during construction period are capitalized as part of assets under construction in accordance with IAS 23.

Financial covenants

The most important financial covenants for the long-term financing of the Group are, respectively, a solvency requirement that the borrower’s (Salmon Evolution Norway AS) book equity ratio (including intra-group loans) shall be minimum 45%. Further, there is a profitability requirement linked to the borrower’s EBITDA which shall be greater than NOK 150 million on a last 12-month basis from Q4 2025. Quarterly EBITDA figures shall be measured from Q4 2023 with set minimum EBITDA levels reflecting the company’s gradual ramp up of production volumes and profitability. In anticipation of not being able to meet its minimum EBITDA requirement for Q4 2023, the loan agreement was amended from lender dated 19 December 2023. First test of EBITDA requirement will be Q1 2024.# H1

Note 10 Taxes

Calculation of deferred tax/deferred tax benefit (NOK thousands)

	2023	2022
Fixed assets	-38 206
Right-of-use assets	8 309	9 841
Lease liabilities	-8 587	-9 993
Net temporary differences	-315 54
Tax losses carried forward	62 453	53 995
Basis for deferred tax	62 769	53 941
Deferred tax (22%)	13 809	11 867
Deferred tax benefit not recognised in the balance sheet*	-9 918	-6 662
Deferred tax in the balance sheet	3 891	5 205

Basis for income tax expense, changes in deferred tax and tax payable (NOK thousands)

	2023	2022
Result before taxes	3 369	17 804
Permanent differences*	-21 635	-23 610
Basis for the tax expense	-18 266	-5 806
Change in temporary differences	370	-55
Basis for payable taxes in the income statement	-17 897	-5 861

*Deferred tax benefit has not been recognised in the balance sheet as the Company is in its start- up phase and does not have any historical results to refer to when assessing whether future taxable profits will be sufficient to utilize the tax benefit. However, there is payable tax in the subsidiary Salmon Evolution Sales AS and deferred tax liability in the subsidiary Salmon Evolution Dale AS. The group assumes to utilize tax losses carried forward against tax positions in its

Components of the tax expense (NOK thousands)

	2023	2022
Payable tax on this year's result	0	0
Change in deferred tax	-1 942	-251
Change in deferred tax due to previous year group contribution	-2 077	0
Change in deferred tax not capitalized in the balance sheet	3 255	-234
Tax expense	-764	-486

Annual report 2023 Extending the ocean potential 125

Note 11 Investments in subsidiaries

Investments in subsidiaries are valued at cost in the company accounts. The investment is valued as cost of acquiring shares, providing they are not impaired. An impairment loss is recognised for the amount by which the carrying amount of the subsidiary exceeds its recoverable amount. The recoverable amount is the higher of fair value less cost to sell and value in use. The recoverable amount of an investment in a subsidiary would normally be based on the present value of the subsidiary's future cash flow. As of 31.12.2023 no impairment indicators was assessed to be present for the Company’s investments.

Reconciliation of the tax expense with the nominal tax rate (NOK thousands)

	2023	2022
Result before taxes	3 369	17 804
Calculated tax (22%)	741	3 917
Tax expense	-764	-486
Difference	-1 505	-4 403
The difference consists of:
Tax on permanent differences	-4 761	-5 194
Change in deferred tax not shown in the balance sheet	3 255	-234
Change due to group contribution from previous year (tax wise)	0	1 025
Sum explained differences	-1 505	-4 403

(NOK thousands)

Location and place of business	Ownership/ voting right	Equity 31.12.23 (100%)	Result 2023 (100%)	Balance sheet value
Salmon Evolution Norway AS	100 %	105 374	-131 025	281 212
Salmon Evolution International AS	100 %	-10 959	-9 189	1 000
Salmon Evolution Dale AS	100 %	20 120	1 224	76 077
Salmon Evolution Sales AS	100 %	2 535	1 855	1 000
K Smart Farming Co., Ltd*	49 %	32 988	-14 485	0
Balance sheet value as of 31 December 2023				359 288

*K Smart Farming Co., Ltd is owned through Salmon Evolution International AS

Movement in investment in subsidiaries during 2023 is analysed in the following way:

(NOK thousands)

Opening balance 01 January 2023	359 197
Share options issued (Salmon Evolution Norway)	73
Share options issued (Salmon Evolution Dale)	18
Closing balance 31 December 2023	359 288

Annual report 2023 Extending the ocean potential 126

Note 12 Cash and restricted cash

Restricted cash are related to tax withholdings for employees (NOK 2,050 thousand).

Note 13 Share capital

The number of shares issued in the company at 31 December 2023 was 413,936,640 with a nominal value of NOK 0.05 each. All shares carry equal voting rights.

(NOK thousands)

	31 Dec 2023	31 Dec 2022
Cash in bank	375 377	355 126
Restricted bank deposits	2 050	2 229
Total cash and cash equivalents	377 427	254 610

Nominal value

	31 Dec 2023	31 Dec 2022
Ordinary shares	0.05	0.05

	413 936 640	345 754 822
Average number of shares	395 531 302	337 015 239

(NOK thousands)

	31 Dec 2023	31 Dec 2022
Share capital	20 697	17 288
Share premium	2 103 467	1 605 894
Total	2 124 164	1 623 182

20 largest shareholders as of 31.12.23

No of shares	Percentage share
30 140 645	7,3 %
26 128 070	6,3 %
18 939 433	4,6 %
16 044 572	3,9 %
14 537 897	3,5 %
12 506 439	3,0 %
11 761 639	2,8 %
11 744 288	2,8 %
11 113 276	2,7 %
9 480 984	2,3 %
9 302 408	2,2 %
8 758 786	2,1 %
8 141 141	2,0 %
8 049 252	1,9 %
7 856 330	1,9 %
7 424 509	1,8 %
4 652 771	1,1 %
4 000 000	1,0 %
3 578 295	0,9 %
3 377 732	0,8 %
227 538 467	54,9 %
186 398 173	45,1 %
413 936 640	100,0 %

Ronja Capital II AS
The Bank of New York Mellon SA/NV
Farvatn Private Equity AS
Hongkong and Shanghai Banking Corp
Rofisk AS
Kjølås Stansekniver AS
J.P. Morgan SE
Stette Invest AS
Verdipapirfondet DNB Norge
Ewos AS
Verdipapirfondet DNB SMB
Jakob Hatteland Holding AS
Mevold Invest AS
Lyngheim Invest AS
Bortebakken AS
VPF DNB Norge Selektiv
J.P. Morgan SE
Salmoserve AS
Verdipapirfondet Nordea Avkastning
Clearstream Banking S.A.
Total 20 largest shareholders
Other shareholders
Total number of shares

Annual report 2023 Extending the ocean potential 127

As of 31 December 2023, shares directly or indirectly held by members of the Board of Directors, Chief Executive officer, and Executive Management consisted of the following:

| | Capital History The Company’s bank debt facilities are fully guaranteed by Salmon Evolution ASA. The respective lenders also have a pledge over 100% of the shares in Salmon Evolution Norway AS and Salmon Evolution Dale AS. Furthermore, the respective lenders have a pledge over all material operating assets of the Group, hereunder inter alia, land, plant and machinery, operating licenses, inventory and receivables.

Long-term interest bearing debt (NOK thousand)

	31.12.2023	31.12.2022
Debt to credit institutions	25 000	12 500
Other long-term interest bearing debt	0	0
Leasing liabilities	5 790	7 602
Total long-term interest-bearing debt	30 790	20 102

Short-term interest bearing debt (NOK thousand)

	31.12.2023	31.12.2022
Debt to credit institutions	90 069	30 333
Other short-term interest bearing debt	0	12 841
Leasing liabilitites	2 797	2 390
Total short-term interest-bearing debt	92 866	45 565

| Total interest-bearing debt | 123 656 | 65 667 |
| Cash & cash equivalents | 377 427 | 254 610 |
| Net interest-bearing debt | -253 771 | -188 943 |

Annual report 2023 Extending the ocean potential 124

Finally, there is a minimum cash requirement that stipulates that the obligors (Salmon Evolution Norway AS, Salmon Evolution Sales AS and Salmon Evolution ASA) cash balance shall be greater than NOK 100 million at any time. Any undrawn and available amounts under the revolving facility and the overdraft is included in the calculation of the cash balance.

Security

The Company’s bank debt facilities are fully guaranteed by Salmon Evolution ASA. The respective lenders also have a pledge over 100% of the shares in Salmon Evolution Norway AS and Salmon Evolution Dale AS. Furthermore, the respective lenders have a pledge over all material operating assets of the Group, hereunder inter alia, land, plant and machinery, operating licenses, inventory and receivables.

Note 10 Taxes

Calculation of deferred tax/deferred tax benefit (NOK thousands)

	2023	2022
Fixed assets	-38 206
Right-of-use assets	8 309	9 841
Lease liabilities	-8 587	-9 993
Net temporary differences	-315 54
Tax losses carried forward	62 453	53 995
Basis for deferred tax	62 769	53 941
Deferred tax (22%)	13 809	11 867
Deferred tax benefit not recognised in the balance sheet*	-9 918	-6 662
Deferred tax in the balance sheet	3 891	5 205

Basis for income tax expense, changes in deferred tax and tax payable (NOK thousands)

	2023	2022
Result before taxes	3 369	17 804
Permanent differences*	-21 635	-23 610
Basis for the tax expense	-18 266	-5 806
Change in temporary differences	370	-55
Basis for payable taxes in the income statement	-17 897	-5 861

*Deferred tax benefit has not been recognised in the balance sheet as the Company is in its start- up phase and does not have any historical results to refer to when assessing whether future taxable profits will be sufficient to utilize the tax benefit. However, there is payable tax in the subsidiary Salmon Evolution Sales AS and deferred tax liability in the subsidiary Salmon Evolution Dale AS. The group assumes to utilize tax losses carried forward against tax positions in its

Components of the tax expense (NOK thousands)

	2023	2022
Payable tax on this year's result	0	0
Change in deferred tax	-1 942	-251
Change in deferred tax due to previous year group contribution	-2 077	0
Change in deferred tax not capitalized in the balance sheet	3 255	-234
Tax expense	-764	-486

Annual report 2023 Extending the ocean potential 125

Note 11 Investments in subsidiaries

Investments in subsidiaries are valued at cost in the company accounts. The investment is valued as cost of acquiring shares, providing they are not impaired. An impairment loss is recognised for the amount by which the carrying amount of the subsidiary exceeds its recoverable amount. The recoverable amount is the higher of fair value less cost to sell and value in use. The recoverable amount of an investment in a subsidiary would normally be based on the present value of the subsidiary's future cash flow. As of 31.12.2023 no impairment indicators was assessed to be present for the Company’s investments.

Reconciliation of the tax expense with the nominal tax rate (NOK thousands)

	2023	2022
Result before taxes	3 369	17 804
Calculated tax (22%)	741	3 917
Tax expense	-764	-486
Difference	-1 505	-4 403
The difference consists of:
Tax on permanent differences	-4 761	-5 194
Change in deferred tax not shown in the balance sheet	3 255	-234
Change due to group contribution from previous year (tax wise)	0	1 025
Sum explained differences	-1 505	-4 403

(NOK thousands)

Location and place of business	Ownership/ voting right	Equity 31.12.23 (100%)	Result 2023 (100%)	Balance sheet value
Salmon Evolution Norway AS	100 %	105 374	-131 025	281 212
Salmon Evolution International AS	100 %	-10 959	-9 189	1 000
Salmon Evolution Dale AS	100 %	20 120	1 224	76 077
Salmon Evolution Sales AS	100 %	2 535	1 855	1 000
K Smart Farming Co., Ltd*	49 %	32 988	-14 485	0
Balance sheet value as of 31 December 2023				359 288

*K Smart Farming Co., Ltd is owned through Salmon Evolution International AS

Movement in investment in subsidiaries during 2023 is analysed in the following way:

(NOK thousands)

Opening balance 01 January 2023	359 197
Share options issued (Salmon Evolution Norway)	73
Share options issued (Salmon Evolution Dale)	18
Closing balance 31 December 2023	359 288

Annual report 2023 Extending the ocean potential 126

Note 12 Cash and restricted cash

Restricted cash are related to tax withholdings for employees (NOK 2,050 thousand).

Note 13 Share capital

The number of shares issued in the company at 31 December 2023 was 413,936,640 with a nominal value of NOK 0.05 each. All shares carry equal voting rights.

(NOK thousands)

	31 Dec 2023	31 Dec 2022
Cash in bank	375 377	355 126
Restricted bank deposits	2 050	2 229
Total cash and cash equivalents	377 427	254 610

Nominal value

	31 Dec 2023	31 Dec 2022
Ordinary shares	0.05	0.05

	413 936 640	345 754 822
Average number of shares	395 531 302	337 015 239

(NOK thousands)

	31 Dec 2023	31 Dec 2022
Share capital	20 697	17 288
Share premium	2 103 467	1 605 894
Total	2 124 164	1 623 182

20 largest shareholders as of 31.12.23

No of shares	Percentage share
30 140 645	7,3 %
26 128 070	6,3 %
18 939 433	4,6 %
16 044 572	3,9 %
14 537 897	3,5 %
12 506 439	3,0 %
11 761 639	2,8 %
11 744 288	2,8 %
11 113 276	2,7 %
9 480 984	2,3 %
9 302 408	2,2 %
8 758 786	2,1 %
8 141 141	2,0 %
8 049 252	1,9 %
7 856 330	1,9 %
7 424 509	1,8 %
4 652 771	1,1 %
4 000 000	1,0 %
3 578 295	0,9 %
3 377 732	0,8 %
227 538 467	54,9 %
186 398 173	45,1 %
413 936 640	100,0 %

Ronja Capital II AS
The Bank of New York Mellon SA/NV
Farvatn Private Equity AS
Hongkong and Shanghai Banking Corp
Rofisk AS
Kjølås Stansekniver AS
J.P. Morgan SE
Stette Invest AS
Verdipapirfondet DNB Norge
Ewos AS
Verdipapirfondet DNB SMB
Jakob Hatteland Holding AS
Mevold Invest AS
Lyngheim Invest AS
Bortebakken AS
VPF DNB Norge Selektiv
J.P. Morgan SE
Salmoserve AS
Verdipapirfondet Nordea Avkastning
Clearstream Banking S.A.
Total 20 largest shareholders
Other shareholders
Total number of shares

Annual report 2023 Extending the ocean potential 127

As of 31 December 2023, shares directly or indirectly held by members of the Board of Directors, Chief Executive officer, and Executive Management consisted of the following:

No of shares	Percentage share
11 744 288	2,8 %
1 948 052	0,5 %
1 800 150	0,4 %
480 000	0,1 %
400 000	0,1 %
250 000	0,1 %
168 935	0,0 %
160 060	0,0 %
55 000	0,0 %
40 000	0,0 %
32 849	0,0 %
1 250	0,0 %
17 080 584	4,1 %

Peder Stette, Member of the board - Stette Invest AS
Vibecke Bondø, Member of the board - Bondø Invest AS
Ingjarl Skarvøy, COO - Terra Mare AS and private
Janne-Grethe Strand Aasnæs, Member of the board - Nikaro AS
Trond Håkon Schaug-Pettersen, CEO - Troha Invest AS
Odd Frode Roaldsnes, CCO - Anno Invest AS
Anne Breiby, Member of the board
Kamilla Mordal Holo, Project Director - C10 Holding AS & private
Trond Vadset Veibust, CFO - Trollkyrkja AS
Jan-Emil Johannessen, Member of the board - Jawendel AS
Henriette Nordstrand, Technical Director - Heno Holding AS
Tore-Jakob Reite, Director Strategic Projects
Total

Capital History

The Company entered into an investment agreement with Dongwon Industries and completed a NOK 50 million private placement towards Dongwon Industries in July 2020. The Company raised NOK 500 million in a private placement in connection with its initial public offering related to the admission on Merkur Market (now Oslo Børs) in September 2020. Further, the Company also raised another NOK 500 million in a private placement in March 2021. In August 2021 the Company acquired 100% of the shares in Kraft Laks AS (now Salmon Evolution Dale AS). As part of the settlement the Company issued 2,190,694 new shares of NOK 7.5775 per share, and thereby increased its equity by NOK 16.6 million. In October 2021 the Company carried out a private placement of USD 5m (NOK ~43m) towards Cargill. Further, in April 2022 the Company carried out a private placement raising gross proceeds of NOK 300 million at a subscription price of NOK 9.00 per share, bringing total raised equity to more than NOK 1.7 billion.

(NOK thousands)

Date	Capital Increase	Share Capital After Change	Par Value	Subscription price per share	New shares	Total no.
Opening balance 1 July 2020		5 375	0,05		107 503 182
Share options exercised 10 July 2020	30 000	5 405	0,05	3,33	600 000	108 103 182
Private placement 23 July 2020	581 395	5 986	0,05	4,30	11 627 906	119 731 088
Private placement 11 September 2020	5 000 000	10 986	0,05	5,00	100 000 000	219 731 088
Private placement 23 March 2021	4 166 667	15 153	0,05	6,00	83 333 333	303 064 421
Acquisition Kraft Laks 16 August 2021	109 535	15 262	0,05	7,58	2 190 694	305 255 115
Private placement 12 October 2021	277 068	15 539	0,05	7,71	5 541 374	310 796 489
Share options exercised 26 March 2022	81 250	15 621	0,05	4,80	1 625 000	312 421 489
Private placement 5 April 2022	1 666 667	17 287	0,05	9,00	33 333 333	345 754 822
Private placement 18 April 2023	3 409 091	20 696	0,05	7,70	68 181 818	413 936 640

In April 2023 the Company carried out a private placement raising gross proceeds of NOK 525 million at a subscription price of NOK 7,7 per share, bringing total equity raised to more than NOK 2.2 billion.

Note 14 Trade and other current liabilities

(NOK thousands)	31 Dec 2023	31 Dec 2022
Trade payables	2 836	5 415
Total trade payables	2 836	5 415

(NOK thousands)	31 Dec 2023	31 Dec 2022
Payroll withholding tax, VAT and other taxes	2 049	109
Employer's national insurance contributions	1 822	605
Accrued salaries, holiday pay and bonus provisions	7 084	2 373
Total other current liabilities	10 995	5 984

Note 15 Events after the reporting date

No material subsequent events.

Annual report 2023 Extending the ocean potential

Directors responsibility statement

Today, the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Director’s report and the consolidated and separate financial statements for Salmon Evolution ASA for the year ended 31 December 2023 (“Annual report 2023”). Salmon Evolution ASA’s consolidated financial statements have been prepared in accordance with IFRSs and IFRICs as adopted by the EU and applicable additional disclosure requirements in the Norwegian Accounting Act. The separate financial statements for Salmon Evolution ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian accounting standards as of December 31, 2023. The Board of Directors’ report for the Group and the parent company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian accounting standard no 16, as of December 31, 2023.

To the best of our knowledge:

1. The annual financial statements for 2023 have been prepared in accordance with applicable financial reporting standards
2. The annual financial statements give a true and fair view of the assets, liabilities, financial position, and profit as a whole as of 31 December 2023 for the Group
3. The Board of Directors’ report for the Group includes a fair review of:
   c. the development and performance of the business and the position of the Group, and
   d. the principal risks and uncertainties the Group face

The Board of Directors of Salmon Evolution ASA

Elnesvågen/Ålesund 16 April 2024

Tore Tønseth Chair
Janne-Grethe Strand Aasnæs Director
Anne Breiby Director
Peder Stette Director
Vibecke Bondø Director
Eunhong Min Director
Ingvild Vartdal Director

Trond Håkon Schaug-Pettersen CEO

BDO AS
Nøisomhed Serviceboks 15
6405 Molde

BDO AS, et norsk aksjeselskap, er deltaker i BDO International Limited, et engelsk selskap med begrenset ansvar, og er en del av det internasjonale nettverket BDO, som består av uavhengige selskaper i de enkelte land. Foretaksregisteret: NO 993 606 650 MVA.

page 1 of 4

Independent Auditor's Report

To the General meeting of Salmon Evolution ASA

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Salmon Evolution ASA. The financial statements comprise:

• The financial statements of the parent Company, which comprise the balance sheet as at 31 December 2023, income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including material accounting policy information, and
• The financial statements of the Group, which comprise the balance sheet as at 31 December 2023, and income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including material accounting policy information.

In our opinion:

• The financial statements comply with applicable statutory requirements,
• The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU.
• The accompanying financial statements give a true and fair view of the financial position of the Group as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU.

Our opinion is consistent with our additional report to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of Salmon Evolution ASA for 4 years from the election by the general meeting of the shareholders on 3 July 2020 for the accounting year 2020 (with a renewed election on the 7 June 2023).

BDO AS, et norsk aksjeselskap, er deltaker i BDO International Limited, et engelsk selskap med begrenset ansvar, og er en del av det internasjonale nettverket BDO, som består av uavhengige selskaper i de enkelte land. Foretaksregisteret: NO 993 606 650 MVA.

page 2 of 4

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

| Description of the key audit matter | How the key audit matter was addressed in the audit # Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

For further description of Auditor’s Responsibilities for the Audit of the Financial Statements reference is made to: https://revisorforeningen.no/revisjonsberetninger

BDO AS, et norsk aksjeselskap, er deltaker i BDO International Limited, et engelsk selskap med begrenset ansvar, og er en del av det internasjonale nettverket BDO, som består av uavhengige selskaper i de enkelte land. Foretaksregisteret: NO 993 606 650 MVA.

page 4 of 4

Report on compliance with requirement on European Single Electronic Format (ESEF)

Opinion

As part of the audit of the financial statements of Salmon Evolution ASA we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name salme-2023-12-31-en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements.

In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF Regulation.

Management’s responsibilities

Management is responsible for the preparation of the annual report in compliance with the ESEF Regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary.

Auditor’s responsibilities

For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger.

Molde, 16 April 2024

BDO AS

Roald Viken
State Authorized Public Accountant

Annual report 2023

Extending the ocean potential

134 Sustainability Indicators and GRI Index

Being transparent in our reporting and operation have been important factors for us from the start. Therefore, we have chosen to report on our environmental, social, and governance factors in 2022. Due to the fact that we are still growing and there is still a lot of uncertainty on actual impact, we have chosen to report with reference to the Global Reporting Initiative (GRI) Standards (2021) in the 2022 reporting. We have ambitions for reporting in accordance with from next year and have plans in place to extend and enhance our reporting process going forward.

GRI DISCLOSURE	LOCATION
GRI 2: General Disclosures 2021
2-1 Organizational details	p. 5-8, 11-14
2-2 Entities included in the organization’s sustainability reporting	Salmon Evolution ASA with subsidiaries, p. 110
2-3 Reporting period, frequency and contact point	01.01.2023-31.12.2023 Annual reports from 2023 Contact point: CFO
2-4 Restatements of information	p. 15
2-5 External assurance	N/A – no external assurance of ESG reporting for the 2023 report
2-6 Activities, value chain and other business relationships	p. 5-7, 24, 25
2-7 Employees	p. 26-29
2-8 Workers who are not employees	N/A – only employees or subcontractors
2-9 Governance structure and composition	p. 31
2-10 Nomination and selection of the highest governance body	p. 40-41
2-11 Chair of the highest governance body	p. 41
2-12 Role of the highest governance body in overseeing the management of impacts	p. 41
2-13 Delegation of responsibility for managing impacts	p. 30
2-15 Conflicts of interest	p. 29, 39
2-16 Communication of critical concerns	p. 39
2-17 Collective knowledge of the highest governance body	p. 33-36
2-19 Remuneration policies	p. 41
2-20 Process to determine remuneration	p. 41
2-22 Statement on sustainable development strategy	p. 19-20
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2-23 Policy commitments	p. 19-20
2-24 Embedding policy commitments	p. 19-20
2-27 Compliance with laws and regulations	p. 32
2-28 Membership associations	p. 40
2-29 Approach to stakeholder engagement	p. 30
2-30 Collective bargaining agreements	p. 28-29
GRI 3: Material Topics
3-1 Process to determine material topics	p. 16
3-2 List of material topics	p. 16
3-3 Management of material topics	p. 16
GRI 201: Economic Performance
201-1 Direct economic value generated and distributed	See financial statements and notes p. 58-104
201-2 Financial implications and other risks and opportunities due to climate change	p. 19-21
201-3 Defined benefit plan obligations and other retirement plans	See financial statements and notes p. 58-104
201-4 Financial assistance received from government	See financial statements and notes p. 58-104
GRI 205: Anti-corruption
205-2 Communication and training about anti-corruption policies and procedures	p. 37
205-3 Confirmed incidents of corruption and actions taken	Zero (0) incidents
GRI 301: Materials
301-1 Materials used by weight or volume	p. 25
301-2 Recycled input materials used	p. 19
GRI 302: Energy
302-1 Energy consumption within the organization	pp. 19-20
302-2 Energy consumption outside of the organization	pp. 19-20
GRI 303: Water and Effluents
303-1 Interactions with water as a shared resource	pp. 19-24
303-2 Management of water discharge-related impacts	pp. 19-24
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303-3 Water withdrawal	pp. 19-24
303-4 Water discharge	pp. 19-24
303-5 Water consumption	pp. 19-24
GRI 304: Biodiversity
304-2 Significant impacts of activities, products and services on biodiversity	p. 22
GRI 305: Emissions
305-1 Direct (Scope 1) GHG emissions	p. 25
305-2 Energy indirect (Scope 2) GHG emissions	p. 20 – 100% renewable energy
305-5 Reduction of GHG emissions	p. 25
GRI 306: Waste
306-1 Waste generation and significant waste-related impacts	pp. 21-22
GRI 401: Employment
401-1 New employee hires and employee turnover	p. 28
401-3 Parental leave	p. 26
GRI 403: Occupational Health and Safety
403-1 Occupational health and safety management system	pp. 26-27
403-2 Hazard identification, risk assessment, and incident investigation	pp. 26-27
403-3 Occupational health services	pp. 26-27
403-4 Worker participation, consultation, and communication on occupational health and safety	pp. 26-27
403-5 Worker training on occupational health and safety	Health and safety training for all employees
403-6 Promotion of worker health	pp. 26-27
403-9 Work-related injuries	pp. 26-27
403-10 Work-related ill health	Zero (0) incidents
GRI 404: Training and Education
404-1 Average hours of training per year per employee	p. 26
404-2 Programs for upgrading employee skills and transition assistance programs	p. 26
404-3 Percentage of employees receiving regular performance and career development reviews	p. 26
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GRI 405: Diversity and Equal Opportunity
405-1 Diversity of governance bodies and employees	pp. 13-14, 27, 32-35 (BoD)
405-2 Ratio of basic salary and remuneration of women to men	p. 27
GRI 406: Non-discrimination
406-1 Incidents of discrimination and corrective actions taken	Zero (0) incidents reported
GRI 413: Local Communities
413-1 Operations with local community engagement, impact assessments, and development programs	pp. 30
Annual report 2023	Extending the ocean potential
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Important of abbreviations used in this report

• LW: Live weight
• HOG: Head on gutted
• HFS: Hybrid flow-through system
• ESG: Environmental, Social and Governance
• CAGR: Compounded Annual Growth Rate

ABOUT SALMON EVOLUTION

Salmon Evolution is the global leader within land-based salmon farming with a clear roadmap for 100,000 tonnes HOG annual production capacity. Pioneering the hybrid flow-through system (HFS), Salmon Evolution is Extending the Ocean Potential by creating optimal growth conditions in a controlled environment on land. This approach, capturing the benefits of both land-based and sea-based farming, puts biology first and limits operational and biological risk. Salmon Evolution is strategically located the heart of the global aquaculture industry on the west coast of Norway, where the Company has its first facility and global centre of excellence fully operational at industrial scale. Enabled by the proof of concept in Norway, Salmon Evolution targets significant international expansion. Salmon Evolution is listed on Oslo Børs under the ticker SALME. To learn more, please visit www.salmonevolution.no.OFFICE ADDRESS Torget 5, 6440 Elnesvågen, Norway
PRODUCTION SITE Indre Harøyvegen 88, 6430 Bud, Norway
BUSINESS REGISTRATION NUMBER NO 925 344 877 MVA
E-mail: post@salmone.no
Web: salmonevolution.no

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