TOMRA Systems — Annual Report 2018

Apr 5, 2019

TOMRA annual report 2018

circular economy and the future of food

annual report 2018

circular economy

and

the future of food

Key Figures	3
Chief Executive Officer's Review	4
Business Overview	6
Group Management	8
Corporate Responsibility Report	10
Environmental Review	12
Social and Ethical Review	16
Corporate Governance Report	18
2018 Summary and Highlights	22
Board of Directors	24
Directors' Report	26
Financial Statements	38
Notes	56
Directors' Responsibility Statement	93
Auditor's Report	94
Alternative Performance Measures	99

Additional information about TOMRA's organization is available at www.tomra.com. Print: Vestfjorden Media | Design: TOMRA | Photos: TOMRA, Thor Jan Salte, Colourbox.com, Getty Images Tomra Systems ASA, Drengsrudhagen 2, 1385 Asker, Norway. Telephone: +47 66 79 91 00

This publication is printed on FSC certified paper.

KEY FIGURES		2018	2017	2016	2015	2014
Operating revenues	NOK million	8,596	7,432	6,610	6,143	4,749
EBITA	NOK million	1,253	1,068	1,119	1,015	737
Profit before other items	NOK million	1,078	916	988	891	628
Ordinary profit before taxes	NOK million	1,033	887	1,008	866	603
Net profit	NOK million	779	658	738	648	394
Total assets	NOK million	9,595	8,437	7,115	7,317	6,625
Equity	NOK million	5,077	4,594	4,192	3,945	3,244
Return on equity, ex. other items	%	15,3	13,9	17,3	16,9	14,1
Return on total assets, ex. other items	%	12,0	12,1	14,6	13,0	10,6
Earnings per share	NOK	5,01	4,14	4,76	4,11	2,85
Earnings per share fully diluted	NOK	5,01	4,14	4,76	4,11	2,85
Net cash flow from operating activities	NOK million	1,025	1,023	1,095	914	696
Number of employees as of 31 December		4,025	3,420	2,770	2,622	2,448
Female employees	%	20	19	18	16	18
Female managers (of all managers)	%	22	21	22	20	18
Number of reportable injuries		113	102	104	95	74
Carbon dioxide emissions	Metric tons	33,000	28,600	24,900	26,800	24,300

CONTENTS KEY

FIGURES

value, reduce costs and food loss, while enabling new market segments and more efficient handling and distribution processes.

Performance highlights

Over the past five years we have achieved approximately 14% annual growth in revenues and profitability. In parallel we drove our strategic agenda to expand into the fresh food sorting sector (acquisitions of Compac and BBC Technologies) and entered into new deposit markets in New South Wales and Queensland, Australia. Further the expansion into the Lithuania deposit market resulted in very convincing beverage bottle return levels at 92% and consumer popularity.

In 2018, we experienced a great deal of change in the political arena around the topics of marine littering, circular economy and achieving high collection targets of single use plastics in the EU. In parallel, China imposed a ban on importing waste under the National Sword initiative. The effects in most developed countries were significant, causing growing waste piles which accelerated demand for sorting solutions in recycling.

Our growth potential

Our aim is high in both the short and long-term perspectives. We strive to grow TOMRA revenues by 10-15% per year, with sound returns. Our leadership aspiration within the circular economy and the food sorting industry are

matched by ambitious targets, but we have a solid starting point:

• We are in promising sectors with good growth prospects

• We have a leading market position as the clear global number 1 in all we do • Our team capabilities, culture and experience are core assets • We are focused on maintaining our leadership in innovation, placing an increasing emphasis on the development

of digital value-added services The global food market continues to consolidate with more cross regional trade volumes. Sorting technologies enable consistent and improved quality, providing the industry with the means to improve yields (reduce losses), increase revenues and reduce costs and time to process. We anticipate a continuous increase in demand for food sorting technologies as the demand for food, and in particular high-quality branded food, continues to grow.

For TOMRA in the short term this means we need to focus on executing on the present opportunities. In the coming five-year period, we anticipate that more than 95% of the expansion will stem from core markets and adjacent areas such as new geographies, application areas and services.

In parallel we will aim at developing TOMRA further within the circular economy and food as well as enhancing our digital and people capabilities,

transforming our culture and remaining focused on servicing our customers.

We also remain committed to UN Global Compact (as a member since 2009) and strive to support the Compact's sustainable development goals (SDGs) to the best of our abilities. The 2018 Annual Report contains our ninth consecutive Communication on Progress to the UN Global Compact, reviewing the activities we are focused on as part of our Corporate Responsibility Program. Our aim is to use our business to contribute to a better environment, economy, and humanity.

In my view it seems likely we will see the following within the next 10 to 15 years:

• Increasing urbanization: More of the growing global population will be migrating to large cities, reshaping consumption patterns
• Wealth expansion: The middle class will continue to grow, driving consumption and waste generation to new heights
• Increasing impacts from global warming: This will create a wide range of environmental challenges, and is likely to increasingly shape the political agenda
• Innovation-driven improvements: Smarter, more powerful and connected computing systems will enable greater productivity and precision, versatility and intelligence within value chains -- reshaping many businesses
• Greater collaboration: We will see increasing collaboration and partnerships form to help address the issue of how we will feed the planet and transform from a linear to a circular economy

In this complex environment it is critical to be focused and have a clear direction and purpose. Therefore in 2018, TOMRA defined its future strategic direction as the Circular Economy and the Future of Food.

TOMRA and the Circular Economy

Within the waste sector, the circular

economy is about "reduce, reuse and recycle." Although the waste sector is a well-established and gigantic business sector, I dare to say that so far it is only scratching the surface as most material has yet to be addressed.

Looking at the fast-growing sector of plastic packaging waste, we note that out of the 78 million tons generated annually, 32% ends up in nature, 40% in landfills, 14% is incinerated and only 14% is collected for recycling. Out of the 14% collected for recycling, 8% is being "down-cycled" at a low value, and only 2% is re-used at an appropriate level in what we would describe as "clean loop recycling." If we could manage to transform 50% of this sector and capture the true value out of waste, we would release \$50-80 billion in material-related value each year, and dramatically reduce social and environmental costs.

As a global leader in collection and sorting solutions for recycling in connection with digital services, TOMRA is uniquely positioned to provide mission-critical technologies for the circular economy. We are now also building a circular economy division where we will combine resources across our business areas, and we expect this initiative to be a leading platform for driving significant long-term business opportunities.

The high number of new deposit markets which are now under evaluation aimed at bringing beverage containers into a closed loop system certainly

represent large business opportunities for TOMRA. Further the commitments made by 11 leading brands, retailers, and packaging companies to work towards 100% reusable, recyclable or compostable packaging by 2025 also indicate an increased demand for the solutions we offer.

Our ambitions are clear; we aim to be a shaper, collaborator and leading player in the emerging circular economy business and make a positive impact on climate change, sustainable business growth and environment protection.

TOMRA and the Future of Food

The food sector, our second strategic pillar, is a vast industry and one which is growing and becoming ever more sophisticated. Food loss and waste is a major challenge both in terms of values lost and food security, i.e. ending hunger and securing access to nutritious, safe and delicious food for all.

Our portfolio of sorting and grading solutions is the broadest in the industry, with a unique offering of mechanical platforms, sensing technologies and the number of food applications we serve. Most leading food brands use our technology and we serve them globally.

Sorting solutions make a difference in the food industry for their ability to sort food from impurities and hazardous or contaminated foreign objects, and perfectly grade food according to specified qualities. Our sorters help increase processing capacity and commodity

Knowing precisely what the future will bring is impossible. Yet we can get some idea of what to expect within the next 10-15 years if we consider the clear megatrends that are developing.

Circular economy and the future of food

Stefan Ranstrand President and CEO TOMRA Systems ASA

CEO REVIEW

LEADING THE RESOURCE REVOLUTION

For TOMRA leading the resource revolution is about creating partnerships for transforming how we obtain, use and reuse resources for sustainable economic growth and improved quality of life for all.

On May 23, 2018 TOMRA was named "Business of the Year" for companies with a turnover of €150m or higher in the 2017-18 European Business Awards —a program widely recognized as Europe's largest and most significant cross-sector business competition. More information about the program can be found at businessawardseurope.com.

More than 38 billion used beverage containers are captured by our reverse vending machines every year.

The avoided greenhouse gas emissions equal the annual emissions of over 2 million cars - each driving 10,000 kilometers.

Our metal recycling solutions recover 715,000 tons of metal every year.

That's the equivalent of 4,035 Boeing 747 airplanes.

The mining industry consumes 2%-3% of the world's energy. Our sensor-based sorters can reduce that consumption by 15%.

A 15% reduction in the mining industry's energy use is equivalent to turning off 52.8 billion CFL lightbulbs.

Our food sorting solutions inspect millions of individual produce pieces per hour, helping to divert 5-10% of this material from going to waste.

That's approximately 25,000 trucks per year in potatoes alone.

Reverse Vending Automated systems for handling the return of empty beverage containers for reuse or recycling.

Food

TOMRA's food sorting and peeling solutions are utilized to boost food processing capacity, quality, safety, yield and profit.

Material Recovery

In North America TOMRA provides logistics management and processing of the materials collected through its reverse vending systems.

Recycling

Our Recycling business stream provides sensor-based solutions for effective recovery and sorting of valuable secondary resources within the waste and metal recycling industries.

Mining TOMRA's sensor-based technology is being used by the mining industry to achieve more efficient recovery of minerals and ores, helping to extend the life of mining operations and increase the overall value of the deposit.

TOMRA COLLECTION SOLUTIONS

TOMRA SORTING SOLUTIONS

BUSINESS OVERVIEW

President and CEO TOMRA Group

M.Sc. Industrial and Management Engineering, Linköping (Sweden) and Darmstadt (Germany)

Career history: August 2009: Joined TOMRA as President & CEO; 1991–2009: ABB Ltd.; various management positions; 1988–1991: Data General AG, Sales Executive Industrial Markets; 1985-1988: Ikea Lager und Service AG

Number of TOMRA shares held: 126,910

STEFAN RANSTRAND (B. 1960)

Deputy CEO and CFO TOMRA Group

MBA, Norwegian School of Management, Oslo

CPA, Norwegian School of Economics and Business Administration, Bergen

Career history: 1999: Joined TOMRA; 1995–1999: Selmer ASA, VP Business development; 1989-1995: Arthur Andersen

Number of TOMRA shares held: 57,914

ESPEN GUNDERSEN (B. 1964)

Executive Vice President and CTO, Head of TOMRA Sorting Solutions

PhD in Computer Science, University of Koblenz, Master in Computer Science, University of Paderborn

Career history: 2013: Joined TOMRA as Group Chief Technology Officer; 2002: Joined TITECH through acquisition of Real Vision Systems; 1998–2002: Founder and Managing Director of Real Vision Systems GmbH; 1994–1998: Assistant Professor for Computer Vision at University of Koblenz

Number of TOMRA shares held: 28,050

VOLKER REHRMANN (B. 1961)

Senior VP and Head of North America Collection Solutions

MBA, Westfälische Wilhelms-Universität, Münster

Career history: 2001: Joined TOMRA as General Manager, Tomra Systems GmbH (Tomra Germany), 1999-2001: General Manager, Consumer Division Werner & Mertz Group, 1986-1999: Marketing & Sales, Procter & Gamble

Number of TOMRA shares held: 63,090

HEINER BEVERS (B. 1960)

Senior Vice President, Northern Europe Collection Solutions

Master of Science in International Business and Economics, Stockholm School of Economics. ESADE Business School, Spain.

Career history: Oct 23, 2017: Joined TOMRA as General Manager and SVP Northern Europe; 2016-2017: Senior Director Head of Customer Experience Design, Telia Company; 2003-2016: Procter & Gamble; various leadership positions across global, EMEA and Nordic organizations (Logistics & Supply Chain, Strategy, Innovation, Marketing, Commercial, Customer Experience, Transformation).

Number of TOMRA shares held: 0

ANNELI FORSMAN (B. 1977)

Collection Solutions

B.Sc. Electronics, University of Salford,

Manchester Career history: 2004: Joined TOMRA in 2004 as Senior VP Technology; 2000-2004: VP Business Unit Tactical Radio, Kongsberg

Executive VP and Head of TOMRA HARALD HENRIKSEN (B. 1963)

Defence and Communications AS; 1997-

2000: VP Product Management, VP R&D, Kongsberg Ericsson Communications ANS; 1990-1997: Technical management and project management, NFT-Ericsson ANS

Number of TOMRA shares held: 57,148

Senior VP and Head of Bulk Sorting TOMRA Food

B.Sc. Engineering, Trinity College, Dublin

Career History: 2013: Senior VP and Head of TOMRA Sorting Solutions, Food; 2010: Became Head of TOMRA Food – Americas & Oceania following TOMRA's acquisition of Odenberg; 1997-2010: President, Odenberg Inc.; 1994-97: Engineering Manager – US, Odenberg Inc.; 1987-94: Technicial Director, Lister Machine Tools Ltd.; 1983-87: Industrial Engineering Manager, Hyster Automated Handling

Number of TOMRA shares held: 28,877

ASHLEY HUNTER (B. 1959)

Senior VP and Head of TOMRA Sorting Solutions Recycling

Master of Arts in European Business, Fribourg, Switzerland

Career history: 2012: Head of TOMRA Sorting Solutions Recycling; 1998 - 2012: Marketing Manager, Sales and Marketing Manager, Sales Director Titech AS; 1995-1998: Product and Export Manager, Noral As, Norway; 1993- 1995: Marketing Manager, Noral SA, France; 1991-1992: Marketing Assistant, Cub Cadet, USA; 1983-1984: Trainee, First Wisconsin National Bank of Milwaukee, USA

Number of TOMRA shares held: 10,748

TOM ENG (B. 1965)

Senior Vice President, Head of Group Strategy

BSc in Finance, Norwegian School of Management (BI), MBA in Strategic Leadership, Norwegian School of Economics (NHH).

Career history: 2018: SVP Head of Group Strategy; 2011-2018: Head of Investor Relations, TOMRA Group; Prior: Investment banking for Alfred Berg/ABN AMRO (later RBS) in several locations, focusing on M&A transactions within the power/utilities and renewables sector.

Number of TOMRA shares held: 1,568

ELISABET SANDNES (B. 1980)

MBA, University of Bayreuth, Germany

Senior VP and Head of Central & Eastern Europe Collection Solutions FRANK HÖHLER (B. 1972)

Career history: 2016: Joined TOMRA as Vice President Sales, Tomra Systems GmbH; 2009–2015 SABMiller Brands Europe, Country Director Germany; 2006–2009 SABMiller Brands Europe, Sales Director Germany; 2002–2006 L'Oréal Germany, Key Account Director; 2001–2002 L'Oréal Germany, Logistics Manager; 1998–2001 Havi Logistics/Alpha Management, Assistant to the CEO.

Number of TOMRA shares held: 5,950

TOMRA GROUP MANAGEMENT

Beginning with the invention of the world's first reverse vending machine in 1972, all the way to providing the most innovative sensor-based sorting solutions today, TOMRA has continuously redefined what it means to be resourceful.

In 2010, as part of integrating recent acquisitions and creating a unified brand, TOMRA updated its vision and mission to better reflect its activities and business strategy. The resulting vision of leading the resource revolution within the business streams of reverse vending, material recovery, food, recycling and mining will enable better utilisation of the world's natural resources as the resource revolution is about transforming how resources are obtained, used and reused for sustainable economic growth.

TOMRA's vision and its activities fit well with several of the UN Sustainable Development Goals (SDGs) and the move towards a circular economy and the increasing focus on the growing global population and the need for efficient use and reuse of resources such as food, plastic and metals.

As part of learning more about the impact of plastic in the ocean, TOMRA was the title sponsor of the marine litter research mission: the eXXpedition(2) North Pacific voyage, sailing from Hawaii to Vancouver.

On June 25th, 14 women from all over the world with wide-ranging backgrounds and expertise set sail from Hawaii, headed straight to the heart of the Great Pacific Garbage Patch – the densest plastic accumulation zone on the planet, with an estimated 80,000 tonnes of plastic(3) (the equivalent of 500 jumbo jets) floating in the ocean.

TOMRA's Circular Economy Advisor, Kristine M. Berg, joined the voyage as part of the team focused on solutions to the problem, to provide insights and knowledge on how a circular economy mindset and land-based solutions, such as deposit schemes, are instrumental in solving this ocean-borne problem.

What the crew quickly learned out in the Pacific, as they sampled from plastic in rough conditions and strong winds, is that the biggest challenge is how small the plastic is. Pulling up samples of thousands of pieces of microplastics

as dense as soup and seeing something float by the boat every 10 seconds for weeks brought home the realization that cleaning up the oceans is near impossible. Closing the tap of litter on land is a critical solution to this global problem and TOMRA, with its technology and expertise, aims to be part of the solution.

At TOMRA, it is the role of the Board of Directors to ensure that the Group's corporate governance, environmental, social and ethical practices are sufficient. The Corporate Responsibility Committee assists the Board by monitoring and reviewing TOMRA's practices and policies in this area, including regular progress reviews.

As a member of the UN Global Compact, TOMRA aims to consistently support doing business responsibly and implement the principles of the UN Global Compact. The following pages form part of TOMRA's annual Communication on Progress.

Decent work and economic growth - SDG 8 TOMRA will promote sustained, inclusive and sustainable economic growth and decent work for all.

Industry, innovation and infrastructure - SDG 9 TOMRA will contribute to building infrastructure by supporting sustainable use of natural resources and fostering sustainable innovation in the industry.

Sustainable cities and communities - SDG 11 TOMRA will contribute to making cities and communities more sustainable by delivering sorting and recycling solutions that ensure safe waste handling.

Responsible consumption and production SDG - 12 TOMRA will contribute to ensure sustainable consumption and production patterns.

References:

(1) Circular Economy overview – Ellen MacArthur Foundation

(2) eXXpedition is a series of all-women scientific sailing voyages to various parts of the world to do research on marine litter and raise awareness about the impacts on ocean and human health. (3) https://www.theoceancleanup.com/great-pacific-garbage-patch/

TOMRA'S CR PROGRAM

SUSTAINABLE DEVELOPMENT GOALS

CORPORATE RESPONSIBILITY

Keep products and materials in use Regenerate natural systems

TOMRA's mission is to create sensor-based solutions for optimal resource productivity so that its products and services contribute to better use of the world's limited resources. Each of its business streams contributes to resource productivity in different ways.

• TCS Reverse Vending ensures efficient collection of beverage containers for high-grade recycling and reuse
• TCS Material Recovery processes empty beverage containers for recycling
• TSS Food sorts and processes fresh and processed food, increasing quality, yield, safety and efficiency
• TSS Recycling enables valuable materials to be recovered and reused from waste and metal material streams
• TSS Mining helps extend the life of mining operations by separat ing valuable mineral ores from waste rock while reducing water & energy consumption compared to traditional mining operations

The nature of TOMRA's activities means that climate change creates more business opportunities than risks as TOMRA's solutions contribute to sustainable consumption, increased recycling and reduced waste. As a result, TOMRA's strategy will focus on the circular economy so that it can contribute with its unique knowledge to solving global challenges. This includes creating a circular economy division to combine expertise and resources from across TOMRA's business areas.

In New South Wales, Australia, around one billion containers were collected during 2018, the first full year of its "Return end Earn" scheme. This has contributed to a 69% increase in collection and recycling of eligible drink containers and a 44% reduction in eligible drink container litter and is an example of how TOMRA's technology and software are making a positive contribution to the environment.

TOMRA reports environmental data from its head office in Norway and all majority-owned subsidiaries. Energy consumption and carbon emissions are primarily driven by TOMRA's vehicle fleet, which consists of trucks in the Material Recovery segment and vans for the service teams. TOMRA has implemented several initiatives in recent years to address fuel consumption. TOMRA also reports avoided emissions to illustrate the positive environmental impact that TOMRA's products contribute to.

TOMRA's environmental performance in 2018 showed a slight increase in direct and indirect emissions, partly a result of increased activities and the inclusion of Compac, BBC and NSW, and partly due to improved reporting.

Energy Consumption per unit of value added Energy Consumption per unit of value added

ACTUAL

ACTUAL

BARRELS OIL / VA

Greenhouse Gas Emissions from Operations per unit of value added Greenhouse Gas Emissions from Operations per unit of value added

ACTUAL

ACTUAL

ENVIRONMENTAL REVIEW

1. CLIMATE CHANGE ACCOUNT

CARBON DIOXIDE EMISSIONS FROM OPERATIONS

TONNES CARBON DIOXIDE		2018	2017
Emission from stationary sources Heating oil Natural gas Propane	(Scope 1)	1 900 100 1 600 200	1 600 0 1 000 600
Emission from purchased grid electric Norway Other Europe North America Rest of World Certified low-carbon or renewable	(Scope 2)	7 700 0 1 100 5 100 1 500 0	6 500 0 800 5 300 400 0
Emission from transportation Petrol vehicles Diesel vehicles LPG vehicles Employee-owned vehicles Air travel	(Scope 1) (Scope 1) (Scope 1) (Scope 3) (Scope 3)	23 400 3 400 11 800 0 300 7 900	20 500 3 700 11 300 0 200 5 300
Total direct emissions (tonnes CO2)		33 000	28 600
Emission from products during use-phase RVMs owned and operated by TOMRA and customers Scanners owned by customers	(Scope 3) 71 900	63 600 8 300	68 700 61 700 7 000
Total direct and indirect emissions		105 000	97 000

2. ENERGY CONSUMPTION

ENERGY USED IN MANUFACTURING, SALES, SERVICE AND OPERATIONAL PROCESSES

BARRELS OIL EQUIVALENT		2018	2017
Energy consumption, stationary sources Heating oil Natural gas Propane	(Scope 1)	5 800 100 5 200 500	5 000 0 3 300 1 700
Energy consumption, purchased grid electricity Norway Europe EU25 North America Rest of World	(Scope 2)	14 300 2 300 2 100 8 200 1 700	12 900 2 300 1 700 8 300 600
Energy consumption, transportation Petrol vehicles Diesel vehicles LPG vehicles Employee-owned vehicles Air travel	(Scope 1) (Scope 1) (Scope 1) (Scope 3) (Scope 3)	49 800 8 300 27 600 0 500 13 400	45 600 8 900 26 400 0 200 10 100
Total direct energy consumption		69 900	63 500
Energy consumption, products during use-phase RVMs owned and operated by TOMRA and customers Scanners owned by customers	(Scope 3)	86 100 76 100 10 000	82 300 73 900 8 400
Total direct and indirect energy consumption 156 000			145 800

4. WATER CONSUMPTION

WATER USED BY MANUFACTURING, SALES, SERVICE AND OPERATIONS

CUBIC METRES WATER	2018	2017
Water consumed Norway Europe EU25 North America	22 100 3 100 10 500 4 500	20 100 2 600 10 200 4 300
Rest of World	4 000	3 000

Scope 1: All direct GHG emissions

Scope 2: Indirect GHG emissions from purchased electricity, heat or steam Scope 3: Other indirect emissions from purchased goods or services

AVOIDED CARBON DIOXIDE EMISSIONS THROUGH PRODUCT USE

Net carbon dioxide emission/(avoidance)	(27 700 000) (27 400 000)
Total emission avoidance		27 800 000 27 520 000
Other	2 140 000	2 120 000
Non-ferrous metal		13 040 000 12 980 000
Fiber	300 000	290 000
HDPE	520 000	510 000
PET	3 000 000	2 940 000
Aluminium	4 950 000	4 850 000
Glass	110 000	110 000
from mixed sources (3)		24 060 000 23 800 000
Material sorted for recycling
Cardboard and fiber	2 000	4 000
Plastic bottles, HDPE	400	1 000
Plastic bottles, PET	110 000	110 000
Aluminium cans	640 000	650 000
Glass bottles	50 000	50 000
Packaging material transport and handling (2)	802 400	815 000
Steel cans	36 000	36 000
Aluminium cans	1 552 000	1 534 000
Glass bottles	548 000	541 000
Plastic bottles	803 000	794 000
Beverage container collection through RVMs and ARCs (1)	2 939 000	2 905 000
TONNES CARBON DIOXIDE	2018	2017

3. WASTE GENERATION

WASTE FROM MANUFACTURING, SALES, SERVICE AND OPERATIONS

	2017
4 130	3 840
90	50
350	275
750	730
130	120
75	65
360	280
25	30
2 350	2 290
	2018

Emissions have been calculated using the GHGProtocol calculation tools (www.ghgprotocol.org), and 'Waste Management Options and Climate Change' (ec.europa.eu/environment/waste/studies/pdf/climate_change.pdf).

Calculations are based on actual and estimated consumption.

1. Beverage container collection through RVMs, TOMRA Collection (Reverse Vending)

Calculated carbon dioxide savings based on the total number of beverage containers collected through TOMRA's over 80.000 RVM installations; around 38 billion units annually. All glass beverage containers are assumed to be non-refillable, giving significantly lower assumed weight. Split between packaging types is based on beverage consumption data and TOMRA estimates.

The full benefit of collecting and recycling the beverage containers into new material, versus landfill, is included in the calculation.

2. Packaging material transport and handling, TOMRA Collection (Material Recovery)

Carbon dioxide saving based on the tonnage

of beverage container material transported and handled by TOMRA in USA. The full benefit of collecting and recycling beverage containers into new material, as opposed to landfill, is included in the calculation, meaning that some of the saving is also included under 'Beverage container collection through RVMs'.

3. Material sorted for recycling from mixed sources, TOMRA Sorting (Recycling)

Estimated material throughput in TSS Recycling installations is used in the calculation of avoided carbon dioxide emission. The full benefit of sorting materials and recycling into new is included in the calculation.

The provision of information on carbon dioxide emission avoidance is illustrative only, and intended solely as an aid to illustrate the benefit to society generated by the TOMRA Group. The above information does not constitute a full Life Cycle Analysis. The methodology and assumptions used in calculating carbon dioxide avoidance are available upon request.

ENVIRONMENTAL REVIEW

NOTES

RESPONSIBLE BUSINESS

TOMRA is committed to doing business ethically and operates with zero-tolerance for corruption. As part of this, risk assessments are performed for new customers and other business partners. TOMRA respects internationally recognized human rights principles and does not accept any form of discrimination or harassment. Any potential breaches are investigated promptly and, where necessary, appropriate action is taken.

TOMRA has developed a Corporate Responsibility Statement and Code of Conduct along with other policies and guidelines that apply to TOMRA's employees and business practices worldwide. Policies that apply to TOMRA Group have been published on the company intranet and local versions of selected policies are also available.

Information on company policies, including anti-corruption and non-discrimination, is also regularly included in internal company presentations. In addition, further information sessions and/or in-depth workshops are held throughout the year.

Awareness of and compliance with TOMRA's policies is monitored as part of internal audit and the non-financial reporting process. This is part of ensuring that the TOMRA team always acts responsibly and promotes TOMRA's core values.

TOMRA's Code of Conduct details how employees can raise concerns or report violations of TOMRA's policies. Some of these channels, including

ethics@tomra.com, are also available externally and it is possible to remain anonymous. The Corporate Responsibility Committee has reviewed the 2018 cases and the actions taken by TOMRA.

TOMRA PEOPLE

TOMRA aims to be an attractive employer and promotes equal employment opportunity. In the latest employee survey, almost 80% of employees reported that they were satisfied overall with working at TOMRA, a slight increase from the previous one. In Norway, TOMRA was ranked 5th in the Great Place to Work® awards for 2018.

The safety of all workers is of utmost importance and TOMRA continuously strives to reduce the injury rate. The number of job-related injuries in TOMRA requiring medical attention beyond basic first aid was 113, up from 102 in 2017, partly due to the inclusion of new companies. Most of these instances occurred within TOMRA's material recovery activities in the USA, which involve handling crushed glass and heavy lifting. There were no serious injuries or fatalities during 2018.

As part of preparing for growth and future opportunities, TOMRA is increasing the resources available in key functions and locations. Linked to this, TOMRA has expanded its training and leadership programs during 2018 to ensure that its people are prepared for the challenges ahead.

The total number of employees at the end of 2018 includes BBC Technologies, which was acquired on 1st March 2018. The relatively low number of female

employees at 20% reflects the significant proportion of positions within service. In countries such as China, Norway and the Nordic region, the percentage is around 30%.

The continuation of the work described above contributes to UN SDG 8 – Decent Work and Economic Growth as part of TOMRA's Corporate Responsibility Program.

ECONOMIC IMPACT

TOMRA reports the value distributed to different stakeholder groups as a means of measuring the impact of its activities. These stakeholders include employees, shareholders and society in general.

In 2018, TOMRA created added value of over 3,000 MNOK, an increase of almost 14% compared to 2017. This was distributed to stakeholders as shown in the chart below.

IMPACT ON PEOPLE WITHIN TOMRA GROUP

2018 2017 2016

4,025	3,420	2,770
20	19	18
22	21	22
113	102	104
3.0	3.1	3.9

VALUE DISTRIBUTED 2018

The safety of all workers is of utmost importance and TOMRA continuously strives to reduce the injury rate.

SOCIAL AND ETHICAL REVIEW

IMPLEMENTATION AND REPORTING OF CORPORATE GOVERNANCE

At TOMRA, corporate governance is defined as the processes and control features that have been established to protect the interests of TOMRA's shareholders and other stakeholders such as employees, suppliers and customers.

TOMRA's Corporate Governance Policy has been approved by the Board of Directors and is available on TOMRA's corporate website (www.tomra.com).

The Board of Directors has decided that TOMRA will comply with the Norwegian Code of Practice for Corporate Governance. As a result, this section is structured in the same way as the Code of Practice (which is available on www. nues.no.) The only known deviation from the Code is described under "General Meetings" below.

TOMRA's values are described in its corporate vision, mission, core values and policies, which can be found on the TOMRA website.

TOMRA aims to lead the resource revolution, enabling better utilization of the world's natural resources, and is committed to doing business ethically and with zero tolerance for corruption. To support these aims, TOMRA has developed and implemented a Code of Conduct and Corporate Responsibility Statement. These and further information on TOMRA's CR program can be found under "ABOUT US / Corporate Responsibility" on the TOMRA website.

BUSINESS DESCRIPTION

TOMRA is a leading global creator of sensor-based solutions for optimal resource productivity within the business streams of reverse vending, material recovery, recycling, mining, and food. The Directors' Report describes the Group's activities in more detail, including goals and main strategies, and the market is kept informed through investor presentations in connection with the quarterly reports and other events.

EQUITY AND DIVIDENDS

As of 31 December 2018, Group equity totaled NOK 5,236 million, an increase of 11 percent from last year. The equity percent was 53 percent. TOMRA's policy is to distribute 40 to 60 percent of the Group's earnings per share as dividend. When deciding the annual dividend level, the Board takes into consideration expected cash flows, capital expenditure plans, financing requirements and the need for appropriate financial flexibility. For 2017, a dividend of NOK 2.35 was paid out per share. For 2018, the Board has proposed an ordinary dividend of NOK 2.50 and an extraordinary dividend of NOK 2.00 per share.

The Board's authorizations to increase share capital and to buy back shares are limited to specific purposes and are granted for a period no longer than the next general meeting. The authorization is given by the Annual General Meeting. At the 2018 Annual General Meeting, the Board was granted the right to acquire and dispose of up to 0.5 million treasury shares, for the purpose of fulfilling the employee share purchase program. In addition, the Board was granted the right to issue up to 14.8 million shares in connection with any mergers and acquisitions.

EQUAL TREATMENT OF SHAREHOLD-ERS AND TRANSACTIONS WITH CLOSE ASSOCIATES

TOMRA has only one class of shares and each share entitles the holder to one vote. All transactions in own shares are performed on the market at market price, in accordance with good stock exchange practice in Norway.

Related party transactions are covered by TOMRA's Code of Conduct, which also applies to Board members. Any member of the Board or Group Management should immediately notify the relevant person if a potential conflict of interest occurs. There were no material transactions between the company and related parties that required a third-party evaluation during 2018.

FREELY TRADED SHARES

The shares of TOMRA Systems ASA are listed on the Oslo Stock Exchange and are freely negotiable.

GENERAL MEETINGS

In accordance with TOMRA's Articles of Association, the AGM shall be held no later than the end of June each year, with at least 21 days written notice given to each shareholder. The 2018 AGM was held on 24th April.

The Norwegian Code of Practice for Corporate Governance also recommends that appropriate arrangements are made for the annual general meeting to vote separately on each candidate nominated for election to the company's corporate bodies. The Nomination Committee and the Board have decided (in line with most Norwegian companies) not to follow this recommendation, as the composition of these bodies is meant to cover an appropriate range of skills and backgrounds, and a separate election of each member could interfere with this intention. In addition, according to Norwegian law, the Board has to comprise of at least 40% female directors.

NOMINATION COMMITTEE

The Nomination Committee consists of three members elected for one year at a time by the General Meeting, as required by the Articles of Association. The charter for the Nomination Committee was last approved by the General Meeting in April 2011. The membership of the committee and details of how to submit proposals for new board members are available on TOMRA.com under "TOMRA Leadership."

BOARD OF DIRECTORS

The TOMRA Board is composed of five shareholder elected, and two employee elected directors (who are not part of senior management). The shareholder elected directors are proposed by the Nomination Committee based on a number of criteria to ensure a broad range of abilities and experience.

The shareholder elected directors are ultimately selected by the shareholders. Four of the five shareholder elected directors are independent. The fifth is Jan Svensson, CEO of Latour, TOMRA's largest shareholder. The Board Committees consist of members of TOMRA's Board, chosen by the Board to reflect a balance of abilities and interests.

The Board meets at least four times a year. In 2018, six board meetings were held, of which one was by phone, and the attendance at the meetings was 100 percent. Instructions for the Board and charters for each of the Board committees have been prepared and duly approved by the relevant body. An Audit Committee, a Compensation and Organizational Development Committee and a Corporate Responsibility Committee have been established to assist the Board of Directors in fulfilling its responsibilities. The Audit Committee held four meetings during 2018, and the Corporate Responsibility Committee and the Compensation and Organizational Development Committee both met twice during the year.

RISK MANAGEMENT AND INTERNAL CONTROL Internal Control Environment and Risk Management Systems

The Board is ultimately responsible for TOMRA's systems of internal control and for reviewing their effectiveness. Responsibility for individual areas of control has been allocated through the CEO down to the respective member of Group Management. The system is designed to manage, rather than eliminate, the risk of failing to achieve business and financial reporting objectives. The system can therefore only provide a reasonable, but never absolute, assurance against material errors, flaws or losses.

Processes exist for identifying, evaluating and managing material risks. Methods used by the Board and the Audit Committee to evaluate the quality of the company's internal control include:

• Review of the auditing plans for both the external and internal audit
• Review of reports from manage ment as well as internal and external auditors on the systems of internal control and any weaknesses identified
• Discussions with management concerning the actions to be taken to address problem areas

The Audit Committee includes two Board members and all Board members receive minutes from each Audit Committee meeting. The main features of the risk and control framework are outlined below:

Risk Management

The Board is responsible for approving the Group's strategy, its principal markets and the level of acceptable risk. It has ensured that appropriate risk management processes to identify the key risks facing the business have been implemented and that those risks are managed effectively.

Control Environment

An organizational structure with defined levels of responsibility and delegation of authority to appropriately qualified management has been established. A chart of authority documents each level of authority throughout the organization. Matters reserved for the Board are clearly defined and appropriate authorization limits and reporting procedures have been implemented.

TOMRA's quality and environmental management systems are based on the international ISO 9001 and ISO 14001 management systems standards. TOMRA's primary R&D and production units have been certified according to these standards. This ensures that its internal systems and procedures are aligned with international "best practice" and that responsibility and authority for all important tasks are appropriately allocated.

Control Activities

Internal control procedures have been tailored to the requirements of individual business activities. Controls for areas possessing particularly high inherent risk include clear guidelines for delegation of authority, segregation of duties, and requirements for regular reporting and reviews. The Audit Committee assists the Board in monitoring the process for identifying, evaluating and managing risks, considering internal and external

CORPORATE GOVERNANCE REPORT

audit reports, and reviewing the Group's financial statements.

Monitoring Systems

Line management is responsible for the operation of internal control routines and these routines are subject to independent review by internal audit and, where appropriate, by the company's external auditor and external regulators. The reports of all these bodies on internal control are reviewed by the Audit Committee on behalf of the Board. The Audit Committee ensures that, where necessary, appropriate corrective action is taken.

Internal audits are performed by the Group Controller and the Group Accounting Manager. In their roles as internal auditors they report directly to the Audit Committee. The internal audit team carries out independent assessments of risk and the adequacy of related internal controls within the corporation. Findings and recommendations for strengthening the control framework are agreed with local management and the implementation of agreed changes is monitored by the internal audit team. The Audit Committee reviews the internal audit findings and proposals concerning improvements to material areas, coverage and performance, and considers significant findings and recommendations.

The internal audit team has unrestricted access to all records, personnel and property of the corporation to collect such information as is necessary for the performance of its work.

The Audit Committee, on behalf of the Board, has reviewed the effectiveness of the corporation's systems of internal control for 2018 and the period leading up to the presentation of the 2018 financial statements. As might be expected in a corporation of TOMRA's size and complexity, a small number of deviations were identified during the period under review. Actions to rectify identified inconsistencies have been taken.

FINANCIAL REPORTING

TOMRA Group prepares and presents its financial statements in accordance with current standards and interpretations under IFRS as adopted by the EU. Each company prepares monthly accounts and the financial data is consolidated and checked at several levels before being presented for review by senior management. Additional reporting is required for the preparation of quarterly and annual financial statements. Information and training on accounting issues and TOMRA's reporting process is provided through TOMRA's Finance seminar and local events.

As part of preparing for IFRS 16 Leases reporting from January 2019, TOMRA successfully implemented and tested a new reporting process for lease obligations in its consolidation system during 2018.

REMUNERATION TO MEMBERS OF THE BOARD

The General Meeting sets the Board's annual remuneration based on a proposal from the Nomination Committee. Note 14 of the Financial Statements discloses all remuneration to board members and senior executives.

PRINCIPLES FOR REMUNERATION OF SENIOR EXECUTIVES

The term "senior executives" applies to the CEO and other members of Group Management. Salary and other employment terms for senior executives shall be competitive to ensure that TOMRA can attract and retain skilled leaders. Salary should include both fixed and variable elements. The fixed salary should reflect the individual's area of responsibility and performance over time. Principles for remuneration shall be allowed to vary in accordance with local conditions. The remuneration structure shall be based on such factors as position, expertise, experience, conduct and performance. The variable salary shall not exceed 50% of the fixed annual salary and be based on the achievement of specific performance targets by TOMRA Group and/or the respective manager's unit.

The Board has appointed a Compensation and Organizational Development Committee, headed by the Chairman of the Board, to monitor decisions on matters regarding remuneration, terms and conditions for senior executives. The performance goals for the CEO are proposed by the Chairman of the Board and approved by the Board. Goals for the other senior executives are determined by the CEO and reviewed by the Compensation Committee. The goals are operational and related to financial targets, such as improvement in profit, return on capital employed and market related performance objectives.

The CEO's remuneration package, and any adjustments thereof, are agreed between the CEO and the Chairman and approved by the Board. The remuneration packages for the other senior executives, including adjustments of these, are agreed between the CEO and the respective manager. The terms of these agreements are reviewed first by the Compensation Committee and finally by the Board of TOMRA.

The Board established in 2014 a new Long Term Incentive Plan (LTIP) to replacing the prior plan, which was based on the TOMRA share price development measured against NASDAQ. The new plan is based on improvements in the Group's reported EPS. The rationale for changing the plan in 2014 was to make the performance metric more relevant for management by measuring success based upon improvements in profit (which management can influence),

instead of share price development (which is less influenced by individual performance, particularly when measured against NASDAQ).

The targets are established as intervals, where the participants can earn from 30 percent (if the minimum target is met) up to 100 percent (if the maximum target is met) of one year's salary. The plan is consequently capped at one year's salary. Twenty-five percent of earnings before tax (approx. fifty percent of earnings after tax) has to be invested in TOMRA shares and must be kept for at least three years. If sold earlier, all proceeds from the sale belong to TOMRA.

For 2018, the actual performance for the fiscal year 2016, 2017 and 2018 was measured against the combined targets for the three years and management gained full earnings under the LTIP-plan in 2018. A detailed calculation of the 2018 performance is included in disclosure note 14.

The targets for 2019, 2020 and 2021 were established by the end of 2016, 2017 and 2018 respectively and each target is a combination of the EPS for actual year plus the two previous years. A detailed calculation of the 2019 performance will be included in the 2019 annual report.

In addition to fixed and variable salary, other benefits such as company car, health insurance, interest- and installment free loans, newspaper and telephone might be provided. The total value of these benefits should be modest and only account for a limited part of the total remuneration package.

Senior executives participate in the same pension plans as other employees within the unit in which they are employed. No special pension plans have been established for senior executives. The notification period for senior executives shall be three to six months, with the exception of members employed in the US, where fixed length contracts may be utilized.

The CEO is entitled to 12 months' severance pay following termination by the company. No agreements shall be established that provide members of senior executives any automatic right to more than 24 months of severance pay. A detailed account of the remuneration of each senior executive is available in note 14 in the financial statements.

The principles and guidelines for management remuneration for 2019 have not changed materially from those approved in 2018, which were presented to the general assembly in April 2018. The policies concerning remuneration of senior executives and the setting of salaries have been in line with the established guidelines throughout 2018.

INFORMATION AND COMMUNICATION

TOMRA provides investors with financial

and other information in the quarterly reports and other presentations. This information is freely available to interested parties in the "Investor Relations" section of the TOMRA website along with the financial calendar for 2019.

TAKEOVERS

TOMRA's guidelines and practices are in line with the Norwegian Code of Practice for Corporate Governance.

AUDITOR

The independent auditor is elected by the general meeting and is responsible for auditing the Group accounts. The independent auditor attends the meetings of the Audit Committee and presents a plan for each year's audit. The independent auditor also meets with the Board of Directors at least once each year without the presence of TOMRA senior management.

Revenues

EBITA and margin

1200 1000

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

3,00

Ordinary EPS Adjustment for discontinued operations and EU penalty

Revenues in 2018 of NOK 8,596 million represent a growth of 16 percent compared to 2017.

Revenues in 2018 of NOK 8,596 million represent a growth of 16 percent compared to 2017. Adjusted for currency and acquistions, revenues were

• Gross margin was 43 percent, up from 42 percent in 2017
• Stable margins in TOMRA Collection Solutions
• Improved margins in TOMRA Sorting Solutions

Operating expenses were NOK 2,429 million for the year, up from NOK 2,073 million in 2017

• Higher activity in both business areas
• Acquisition of BBC Technologies

EBITA of NOK 1,253 million, up 20 percent from 2017, adjusted for currencies

EPS up from NOK 4.14 in 2017 to NOK 5.01 in 2018, an increase of 21 percent

• Earnings per share - Adjusted for dividend, TOMRA stock provided a shareholder return of positive 50 percent in 2018, following a positive 48 percent in 2017
• 3,50 - 57 million shares traded at Oslo Stock Exchange in 2018, up from 29 million in 2017

Cash flow from operations of NOK 1,025 million in 2018, up from NOK 1,023 million in 2017

2,50 The Group ended 2018 with a strong balance sheet and a solid foundation for further growth

1,50 2,00 - 53% equity

TOMRA Collection Solutions

• 1,00 - 0.7x Net Interest-Bearing Debt / EBITDA (increase from 0.5x at the end of 2017)
• 0,00 0,50 2009 2010 2011 2012 2013 2014 - The Board has proposed an ordinary dividend of NOK 2.50 for 2018, in addition to an extraordinary dividend of NOK 2.00. The dividend for 2017 was NOK 2.35.
• TOMRA maintained a strong position in all traditional markets
• Ramp-up in New South Wales concluded during third quarter 2018
• Deposit introduced 1st November 2018 in Queensland
• Several new initiatives identified

TOMRA Sorting Solutions

• Order intake increased from NOK 3,708 million in 2017 to NOK 4,345 million in 2018 (excl. BBC)
• Order backlog increased during the year from NOK 1,147 million to NOK 1,346 million (excl. BBC)
• BBC contributed an additional NOK 238 million to the order intake and NOK 53 million to the backlog
• Positive momentum in all business streams
• Closing and inclusion of BBC accounts from March 2018

Share price increased from NOK 131.50 to NOK 194.80 during 2018

2018 SUMMARY AND HIGHLIGHTS

CEO of Investment AB Latour

Board member since 2012.

M.Sc. Economics and Business Administration, Stockholm School of Economics, 1981.

Previous experience: Various positions within the Stenberg Group, CEO (1986-2003).

Number of TOMRA shares: 7,000 (In addition Investment AB Latour holds 39,000,000 shares)

Other board memberships: Publicly listed: Nederman Holding AB (Chairman), Fagerhult AB (Chairman), Troax AB (Chairman), Alimak Group (Chairman), Assa Abloy AB (member), Loomis AB (member), Investment AB Latour (member) Not listed: Hultafors Group (Chairman), Latour Industries (Chairman), Nord-Lock (Chairman), Swegon (Chairman), Oxeon (member).

Senior VP Supply Chain TINE SA

Board member since 2008.

Master of Science in Industrial Organization & Management, Silesian University of Technology, and BI Norwegian School of Management.

Previous experience: CEO at Ontime Logistics AS (2008-2013), Project Director at South-Eastern Norway Regional Health Authority (2008-2008), SVP Supply Chain and Operations, Norway Post (2002-2008), Managing Director Logistics, Ringnes/Carlsberg (1996-2002)

Number of TOMRA shares: 12,500

Production support assistant - Employee elected.

Board member since 2008.

Qualified Automatic Systems Technician, apprenticeship in Automatic Systems at Håndverkerskolen Sønderborg in Denmark.

Previous experience: 2E Ellgard Equipment and Automatic Systems Denmark

Number of TOMRA shares: 1,538

Other board memberships: None.

President & CEO of AB Fagerhult

Board member since 2013.

Master's degree in International Finance, University of Lund and Konstanz University in Germany.

Previous experience includes VP Global Sales at Axis Communication and employment with Lars Weibull AB.

Number of shares in TOMRA: 0

Other board memberships: The Swedish Chamber of Commerce in Paris

Project manager - Employee elected.

Board member since 2017.

M.Sc. in Engineering Cybernetics from the Norwegian University of Science and Technology in Trondheim

Previous experience: Process Engineer in REC Mono Wafer and consultant in SPT Group

Number of TOMRA shares: 905 Other board memberships: None.

Groupe Euralis

Board member since 2014.

Engineering degree, Ecole Nationale Superieure des Mines de Paris

Previous experience: Several management positions within the Danone Group (1987 to 2008) including Executive General Manager at Jose Cuervo (2008-09), General Manager Asia Pacific (2005-08), General Manager Danone Mexico (2004-05), and General Manager Danone Argentina (2002-04).

Number of TOMRA shares: 500

Other board memberships: Non-listed CIC Bank S.O

CEO of Mirico

Board member since 2015

Doctor of Philosophy, Inorganic Chemistry (Oxford University), MBA (Open University), BA Natural Sciences (Oxford University).

Previous experience: CEO of PhosphonicS Ltd. (2013-17), Managing Director Liquid Packaging and Dispensing, DSSmith Plc (2012-13), CEO, Inca Digital Printers Ltd. (2009-12), Managing Director, Hadham Associates Ltd. (2008), Managing Director, Servomex Group Ltd. (2001-07), ICI Plc (1983-2000)

Number of TOMRA shares: 1,931

Other board memberships: Non-Executive Director, Downing Strategic Micro Cap Investment Trust; Trustee of charitable organization

JAN SVENSSON (B. 1956) ANIELA GABRIELA GJØS (B. 1959)

DAVID WILLIAMSON (B. 1959)

BODIL SONESSON (B. 1968)

BENTE TRAA (B. 1979)

PIERRE COUDERC (B. 1959) DR. LINDA BELL (B. 1957)

BOARD COMMITEES

Compensation and Organizational Development: Jan Svensson, Linda Bell

Audit: Pierre Couderc, Aniela Gabriela Gjøs

Corporate Responsibility: Bodil Sonesson, David Williamson

TOMRA BOARD OF DIRECTORS

FINANCIAL PERFORMANCE

Revenues amounted to NOK 8,596 million in 2018, an increase of 16 percent in relation to 2017. Adjusted for currency effects and acquisitions, revenues were up 11 percent for TOMRA Group; up 9 percent in TOMRA Collection Solutions and up 14 percent in TOMRA Sorting Solutions.

Gross margin improved from 42 percent in 2017 to 43 percent in 2018, with stable margins in TOMRA Collection Solutions and improved margins in TOMRA Sorting Solutions.

Operating expenses were NOK 2,429 million, up from NOK 2,073 million in 2017, due to higher activity in both business areas and the acquisition of BBC.

EBITA was NOK 1,253 million in 2018, up 20 percent adjusted for currencies.

Net financial items were negative NOK 34 million in 2018, compared to negative NOK 24 million in 2017, due to loss on currency forward contracts and higher gearing.

Taxes increased from NOK 229 million in 2017 to NOK 254 million in 2018, a result of higher earnings. The Group's average tax rate decreased by 1.2 percentage points to 24.6 percent.

EPS was NOK 5.01 in 2018, up from NOK 4.14 in 2017, representing an increase of 21 percent.

Cash flow from operations totalled at NOK 1,025 million in 2018, compared to NOK 1,023 million in 2017. Cash flow from investments was negative NOK

1,077 million compared to negative NOK 930 million last year, influenced by investments in New South Wales and Queensland and the acquisition of BBC. Cash flow from financing was negative NOK 148 million, including dividend payments of NOK 347 million.

Total assets as of 31 December 2018 were NOK 9,595 million, compared to NOK 8,437 million as of 31 December 2017. The increase is explained by the acquisition of BBC, investments in New South Wales and Queensland, currencies and higher activity.

The equity ratio decreased from 54% to 53% during 2018, positively influenced by 2018 earnings and translation difference, and offset by the acquisition of BBC, investments in New South Wales and Queensland and the dividend payment of NOK 347 million.

Net Interest-Bearing Debt / EBITDA (rolling 12 months' basis) increased from 0.5x at the end of 2017 to 0.7x at the end of 2018.

DIVIDEND

TOMRA aims to distribute 40 percent to 60 percent of the Group's earnings per share. When deciding the annual dividend level, the Board has taken into consideration expected cash flows, capital expenditure plans, financing requirements and the need for appropriate financial flexibility. Given TOMRA's strong recurring cashflow and low gearing, the Board of Directors recommends an extraordinary dividend of NOK 2.00, in addition to an ordinary

dividend distribution of NOK 2.50 per share (50 percent of EPS), up from NOK 2.35 in 2017.

TOMRA SYSTEMS ASA

Reverse Vending Machines (RVMs) are developed in Norway and mainly produced by third parties in Poland and at the wholly owned subsidiary Tomra Production AS in Norway, combined with a sourcing model that includes high focus on low cost countries such as China, Taiwan and Eastern Europe. The machines are sold via the parent company to subsidiaries and distributors, primarily in Europe, North America and Australia. Activity within the parent company reflects therefore the level of sales of machines and parts to end-customers within the RVM segment. The number of RVMs sold in 2018 was stable compared to 2017.

Tomra Systems ASA reported revenues of NOK 1,352 million in 2018 compared to NOK 1,347 million in 2017.

Operating profit in Tomra Systems ASA decreased from NOK 304 million in 2017 to NOK 241 million in 2018, mainly due to higher activity within the TOMRA Group.

Net financial items amounted to NOK 210 million, positively influenced by dividend from subsidiaries of NOK 240 million and negatively influenced by exchange rate losses of NOK 38 million.

Profit after taxes was NOK 401 million in 2018, compared to NOK 426 million in 2017.

The Board of Directors recommends an extraordinary dividend of NOK 2.00, in addition to an ordinary dividend distribution of NOK 2.50 per share (50 percent of EPS), up from NOK 2.35 in 2017.

DIRECTORS' REPORT 2018

Allocation of 2018 profit

The 2018 net profit should be allocated as follows:

Profit after tax: NOK 400.7 million
From retained earnings:	NOK 264.1 million
Dividend:	NOK 664.8 million

The Board of Directors believes that there is no reasonable cause to question the ability of TOMRA Group and the parent company to continue its operations in the foreseeable future and hence confirms that the accounts have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU for TOMRA Group and Norwegian accounting principles (NGAAP) for Tomra Systems ASA, and that the Group, after the dividend payment, has sufficient equity and liquidity to fulfill both its short term and long term obligations.

Positioning TOMRA in a world with scarce resources: The transformative move into sorting solutions

TOMRA was founded on an innovation in 1972 that began with the design,

manufacturing and sale of reverse vending machines (RVMs) for automated collection of used beverage containers.

TOMRA's reverse vending technology provides an efficient collection and handling system for deposit of beverage containers. The driver for growth in Collection Solution is mainly implementation of beverage container deposit systems in new markets, either through legislatively or voluntary enforced arrangements.

Shortly thereafter, TOMRA expanded in 2006 into metal recycling, and further in 2008 into mining (ore-sorting), where TOMRA technology now increases the efficiency and lifetime of mines. In 2011 and 2012, based on the strategy of resource productivity, industry automation and targeting a leading position in sensor-based sorting, TOMRA took a further step forward with its entry into the food sorting industry. In food sorting, the recognition technology is utilized to sort food based on quality, size and other characteristics, as well as identifying and removing foreign material.

TOMRA has consequently gone through several stages of transformation, where the recycling industry is now only one of several industries where TOMRA has a presence. Today, TOMRA continues to innovate and provide cutting-edge solutions for optimal resource productivity within two main business areas: Collection Solutions (reverse vending and material recovery) and Sorting Solutions (food, recycling, and mining).

TOMRA Sorting Solutions (TSS):

• Food (sorting and processing technology for the fresh and processed food industries)

• Recycling (sorting systems for waste and metal material streams)

• Mining (ore sorting systems for the mining industry)

The revenue contribution from TSS has continued to increase from 5 percent in 2004 on the back of the focused strategy of expanding TOMRA's sorting technology and competence. The latest addition to inorganic growth was the acquisition of BBC in 2018 and the TSS business area now accounts for 50 percent of the Group's operating revenue.

To maximize synergies among the acquired entities and meet its customers' and the world's challenges and opportunities, TOMRA has merged the existing brands under one strong and unified brand – One TOMRA, under the mission to create sensor-based solutions for optimal resource productivity, focused on the optimization of customers' resource use.

Waste generation rates are influenced by economic development, the degree of industrialization and urbanization, and public habits. Generally, the higher the economic development and rate of urbanization, the greater the amount of waste produced.

Despite all the documented advantages of a deposit system, only a limited number of markets have implemented deposit schemes. The recognition that political processes were hard to influence, and it could take time before new markets accepted deposit as an effective system for recycling, led in 2004 to the decision that TOMRA would expand its operations by moving into other areas within the value chain for collecting and processing waste. Consequently, TOMRA acquired Titech, which provided efficient industrial solutions for recognizing and sorting of waste, mainly for efficient recycling of paper and plastic. This was the first step into sensor-based sorting and the foundation of TOMRA Sorting Solutions. Business area revenue split 0% 40% 50% 20% 10% 30% 60% 80% 90% 90% 70% 100% 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014

According to researchers from the World Bank, global solid waste generation is expected to increase by 70% from 2016 levels to 3.40 billion tonnes in 2050, exceeding 9 million tons per day.

(Reference: http://www.worldbank.org/ en/topic/urbandevelopment/brief/solid-waste-management)

The European Union's Environment Action Program (EAP) is focused on stepping up efforts to protect natural capital, stimulate resource-efficient,

low-carbon growth and innovation, and safeguard people's health and wellbeing – all while respecting the earth's natural limits.

The long-term vision of the program is that, by 2050, the population will live well, within the planet's ecological limits, with prosperity and a healthy environment stemming from an innovative and circular economy. The circular economy will need a shift in mindset when it comes to use of the planet's scarce resources: nothing is wasted and that natural resources are managed sustainably, with biodiversity being protected, valued and restored in ways that enhance society's resilience. Or in other words, waste needs to be viewed as a resource to build a sustainable future.

In 2018, TOMRA operated within two business areas and five business streams: Order intake 600

TOMRA Collection Solutions (TCS): Sorting 500

• Material Recovery (pick-up, transportation and processing of empty beverage containers on behalf of beverage producers/fillers on the US East Coast and in Canada) - 100 1Q.09 2Q.09 3Q,09 4Q,09 1Q,10 2Q,10 3Q,10 4Q,10 1Q,11

• Reverse Vending (development, production, sales and service of reverse vending machines and related data management systems) Collection 200 300 400 m

As the world's population heads towards higher consumption levels, resource productivity must increase on a global scale to ensure sustainable development. Focusing on resource optimization, process efficiency, and interconnectivity of systems will help customers improve financial results and reduce environmental impact. Order backlog 500 600

TOMRA's path forward is to improve the world's understanding of the benefits of creating and investing in solutions that can move us past the false choice between earth and economy (change mindsets to act and move), producing new work opportunities to ensure competitiveness, growth and work with purpose while fostering a culture that both inspires and motivates its people and customers. 2Q,14 3Q,14 4Q,14 1Q.09 2Q.09 3Q,09 4Q,09 1Q,10 2Q,10 - 100 200 300 400 m

ward and TOMRA is uniquely positioned as the need for sustainable infrastructure grows.

TOMRA Collection Solutions

be a decoupling from resource use, which sets the pace for a sustainable global society. This is where TOMRA can add value: to provide sensor-based solutions for optimal resource productivity. It has been a transformative journey over the last decade to bring TOMRA to where it is today to position the company to deliver sustainable solutions to deal with the challenges that the global population faces. We have only seen the beginning of the development of the new sustainable infrastructure. Rethinking how we use our resources is the only way forward and companies that can clearly define their role in the circular economy will have a competitive advantage in the future. There will be a demand for companies that deliver solutions to solve our global challenges. The circular economy is not another buzzword – it is a tangible business opportunity where the market is being shaped rapidly as we speak. It will require innovation and strategic partnerships beyond what we have seen before. With the limited resources we have available this is the only way for-1Q,112Q,11 3Q,11 4Q,11 1Q,12 2Q,12 3Q,12 4Q,12 1Q,13 2Q,13

A key factor in low-carbon growth will 3Q,13 4Q,13 1Q,14 2Q,14 3Q,14 4Q,14

Compared to last year, gross contribution was stable at 41 percent. EBITA increased from NOK 706 million to NOK 726 million, positively influenced by higher revenues but somewhat offset by cost related to preparation for new markets.

TOMRA's activities within this business area include primarily the development, production, sale, lease and service of automated recycling systems in Europe, North America and Australia, including data administration systems that monitor the volume of collected materials and associated deposit transactions. TOMRA is positioned as the world leader in the RVM business. Every year TOMRA facilitates the collection of more than 35 billion empty cans and bottles and provides retailers and other customers with an effective and efficient way of collecting, sorting and processing these containers. Revenues 200 300 400 500 600 m

TOMRA's customers within this segment are primarily in the food retail industry in Europe and USA. This is an industry that is relatively unaffected by financial downturns as the consumption of food and beverages usually remains stable through economic cycles. Food retail chains in general consider a well-functioning container return system to be an important competitive advantage, as consumers tend to choose which store they visit based on the convenience and reliability of a store's return facilities.

In 2018 revenues within this business area amounted to NOK 4,265 million, up from NOK 3,871 million in 2017. Adjusted for currency changes, revenues increased by 9 percent, with increased activity in all geographies. - 100 1Q.09 2Q.09 3Q,09 4Q,09 1Q,10 2Q,10 3Q,10 4Q,10 1Q,11

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TOMRA share price

Norway Great Britain

Finland Others

Sweden

USA Luxembourg

Total foreign ownership 72.5 %

Shareholders by country of residence

2009 2010 2011 2012 2013 2014 2015

30%

27%

14% 9% 6% 5% 8%

TC S EBITA and margin

TCS - Dividend

1 500

2009 2010 2011 2012 2013 2014

This applies both in times of econom ic upturn and downturn. With almost 50 percent of the segment's revenues originating from service, and a signifi cant part of new machine sales being replacements, the year over year change in activities will normally be limited.

While the traditional models have his torically been focused around sale and service of machines, TOMRA recognizes that the latest new deposit models in troduced in Lithuania, New South Wales and Queensland invites the machine producer into the system. In these models, the machine suppliers act as an operator that invests and maintains the ownership in the machine park and gets paid for the recycled volume collected through the installed infrastructure. This entails an investment for TOMRA in equipment but generates a good recurring topline when infrastructure is fully ramped up.

Europe

In Germany, which introduced depos it legislation in 2006, retail started replacing RVMs installed during the first years after the deposit introduction in 2015. TOMRA has been well positioned to serve German customers with eco nomical and technically versatile RVM solutions and the number of machines sold in the German market increased from ~2,300 machines in 2014 to ~3,500 machines per year in 2015 and 2016, when the peak in the replacement cycle was reached. The number of machines sold to Germany in 2017 and 2018 was ~2,800 per year.

The development in the other European markets was stable in 2018 and TOMRA has maintained its market share.

North America

Within Reverse Vending, TOMRA operates with two different business models in North America. One is a sales model, where machines are sold to the food retail stores in the same way as in Europe; the other is a through-put lease model, where TOMRA maintains ownership of the installed machines and receives payment based on the number of containers handled by the machines. The installed base at the end

of 2018 was close to 9,000 machines on operational lease and close to 6,000 for machines sold. The installed base decreased slightly during 2018.

In addition to the Reverse Vending business, TOMRA picks up, transports, processes, and sells used beverage con tainers on behalf of beverage producers in the North-Eastern United States and in Canada (Material recovery). In 2018, this business segment contributed total revenues of USD 126 million, compared to USD 116 million in 2017.

The volume of drinking containers handled by TOMRA's Material Recovery infrastructure was slightly up in 2018, but the throughput volumes in the Reverse Vending machines were slightly down. The lower volume through RVMs is explained by more containers being redeemed at conventional sites that do not utilize standard reverse vending technology. The North American orga nization has launched a volume builder project to offset these effects. TOMRA is also capturing a higher share of conventional volumes by leveraging the recently developed depot solution. As part of this plan, TOMRA has acquired or opened 21 redemption centers in 2018, which over time are being automated with the TOMRA depot solution. In 2018, the Redemption Center business seg ment contributed total revenue of USD 12 million, compared to USD 7 million in 2017.

Australia

New South Wales

In 2017, the TOMRA-Cleanaway joint venture secured a state-wide sole

operator role in New South Wales. The scheme commencement date was 1st December 2017 and during 2018 more than 1,200 RVMs were placed at more than 300 Collection Points across the state.

The contract awarded has a duration of 5 years with an option to extend for another 4 years. In the joint venture, Cleanaway provides logistics, sort ing of collected material and acts as broker for the related commodities. TOMRA provides technology, software and financing for the investment for installations. TOMRA is paid a fee per beverage container collected through the machine park network. The contract generated only 1 month of revenues on low volumes in 2017. In 2018 volume has gradually increased as the infrastructure was rolled out. The complete infrastruc ture was in place during third quarter 2018.

Queensland

In August 2018 TOMRA entered into an agreement with the Queensland scheme operator, Container Exchange (CoEx), for the operation of 10 Collec tion Refund Points and the Queensland container deposit system went live 1st November 2018. TOMRA Collection Refund Points are modern depots equipped with ~10 RVMs, located in the Greater Brisbane, Gold Coast, Sunshine Coast and Toowoomba areas. The con tract length is 5 years.

New markets

The existence of deposit systems is a

crucial driver for most of the activities within TOMRA Collection Solutions. The creation of new systems, and changes to existing, will consequently impact TOMRA's performance significantly. In recent years, an emerging driver for the discussion around deposit schemes has been the public-driven push to see reduced littering.

In particular, increased marine littering has been a concern that is current ly driving several initiatives, like the EU Single use plastic directive, which establishes a recycling target of 77% on beverage containers made of plastic by 2025, increasing to 90% in 2029. As a response to the increased recycling targets, several EU members are cur rently evaluating deposit introduction as deposit systems are viewed as the most efficient way to significantly increase recycling rates.

Following the deposit introduction in New South Wales and Queensland, Western Australia has also confirmed a commitment to implementing a deposit scheme. In addition, Scotland and En gland have also communicated a clear intention to introduce deposit. TOMRA will consider the commercial opportuni ties in these markets when the regulato ry framework has been decided upon.

Technology

In 2014, TOMRA launched the T-9, the first of a new generation of reverse vending machines (RVM) based on TOMRA Flow Technology. T-9 features the first ever 360-degree recognition system (flow technology) applied inside an RVM and enables faster and clean er collection of beverage containers, including containers that previously

0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 1,60 1,80 2,00 TSS Order intake TSS Order backlog

TOMRA share price

Norway USA

Others France

Sweden

Great Britain Belgium Luxembourg

Shareholders by nationality

0 50 100

200 150

2009 2018

33%

23%

14% 12% 7% 6%3% 2%

MNOK

TSS

TSS

EBITA and margin

could not be collected in RVMs. The T-9 has improved consumer experience due to its increased capacity, which leads to shorter queues during peak hours in the stores. The product range has later been further broadened with the introduction of the T-90 and T-70, fully operational stand-alone machines with internal sorting and optional compaction. The flow technology continues to be rolled-out as the standard feature in all new product launches.

TOMRA is currently investing significantly in developing its digital platform, building a framework around the RVM systems, using and reusing the data collected through the installed infrastructure. The product offerings include the "myTOMRA" app (making it easier for consumers to plan their recycling trips and redeem deposit refund), "Notify+Assist" (digital platform providing real-time insight into in-store reverse vending activities) and "Analytics" (aggregates date, visualizing relevant information around the performance and usage of the RVMs).

TOMRA Sorting Solutions

Sorting solutions offer significant economic and environmental benefits for major industries such as food processing, recycling and mining by increasing their productivity, yield, access to resources and reducing their costs. The business unit is well positioned to respond to short and long-term increases in the resource demands required to construct living and working spaces for an ever growing and increasingly urbanized global population, the expectations for more and higher quality food products and requirements for a less carbon intense society. TOMRA is positioned as worldwide leader in all the segments it serves.

Revenues within TSS were up 22 percent in 2018, compared to 2017. Adjusted for acquisitions and currency, the increase was 14 percent. The overall market situation remained favorable, across all business streams.

Food sorting is the largest business stream within Sorting, and it had a strong performance in 2018 with higher revenues, order intake and order backlog. The market is driven by more stringent food safety and quality requirements, consumption of more packaged food products, plus a general demand for more healthy food such as berries, fruits and nuts. Several new product launches have fueled growth, and the acquisition of BBC has consolidated TOMRA's market leadership.

The recycling business experienced continued positive momentum, with increases in revenues, order intake and backlog compared to last year. The development has been driven by improved recycling rates, higher commodity prices and a general focus on waste reduction and reuse of resources around the world. In particular, the Chinese National Sword policy, which for practical purposes bans import of waste into China, has generated significant opportunities around the world, as countries now to a larger extent need to handle waste within their own borders.

In Mining, low mineral and metal prices have affected the mining industry in recent years, negatively influencing

TOMRA's sales. In 2018 the order intake and order backlog improved materially compared to a slower period two years ago. The current activity is however still dependent upon sales to the diamond industry, where TOMRA has proven technology for identifying diamonds at the diamond mines processing lines.

Order intake increased from NOK 3,708 million in 2017 to NOK 4,345 million in 2018 (excl. BBC) and order backlog increased from NOK 1,147 million to NOK 1,346 million (excl. BBC). In addition, BBC contributed NOK 238 million in order intake and NOK 53 million in backlog.

Leveraging technology leadership

Leveraging technology synergies, increasing adaptability and shortening the time-to-market are core elements of TOMRA's strategy to merge several sensor-based sorting activities under one brand. This will enable TOMRA to better serve global markets and respond to the variations in needs and crossbreed sensor technologies, allowing for new cutting-edge solutions and sorting capabilities. The common sorting platform (CSP) is the strategy TOMRA applies to leverage synergies between the business segments Food, Recycling and Mining. The basic sorting principles are conceptually the same across the segments, enabling TOMRA to develop a set of building blocks that are used again and again. Benefits include increased productivity and speed in product development, reduced development and after-market costs and more efficient use of human resources. The development phase of the CSP has been

completed and all new products are now launched on this platform.

As the food business expands into new geographic areas, new requirements are encountered that are driven by differences in market structure and customer requirements. The North-American market, for example, is driven by large scale farming, distribution and processing channels, while many Asian markets, on the contrary, are structured with smaller farms and processors.

Several new products based on CSP have been launched, including:

• Food Bulk sorting: The TOMRA 3C sorting machine is the first sorter developed by the Chinese R&D team. It brings TOMRA's differentiating technologies into market segments where TOMRA was not previously present.

• Food Bulk sorting: The TOMRA 5A infeed belt sorting machine, which discards a wide range of foreign materials, such as stones, corn cobs and roots, wood, glass, plastics and metals. This process minimizes the risk of food contamination further down the line and leads to improved product quality.

• Food Lane sorting: The Inspectra2, which uses a spectrometer to measure the internal properties of fresh produce ensuring a quality eating experience for consumers. Inspectra2 delivers improved consistency and ease-of-use.

• Recycling: The LOD (Laser Object Detection) to detect black objects (invisible for NIR) and non-metals + SHARP EYE Technology to distinguish between e.g. PET bottles & trays.

(PET separation)

• Mining: The COM XRT 2.0, an x-ray sorter with higher throughput and selective ejection system

BBC

TOMRA signed 26 February 2018 an agreement to acquire 100 per cent of the shares in BBC Technologies Ltd.

BBC Technologies is headquartered in Hamilton, New Zealand and is a leading provider of precision grading systems for blueberries and other small fruits and complements TOMRA's own fruit inspection and grading technology portfolio. Most of BBC Technologies' sales have been in the blueberry segment, but the company also offers solutions for cherries, cherry tomatoes and other small soft fruits.

BBC Technologies' origins go back to 2000 and it employs around 150 people across locations in New Zealand, Chile, Europe and USA. About 2,400 BBC Technologies machines have been sold worldwide.

TOMRA paid a consideration corresponding to a value of NZD 66.9 million, free of cash and interest-bearing debt. Closing of the transaction took place 1st March 2018.

Research and development activities

Research and development activities are a high priority at TOMRA. R&D has a central role in the development of the individual technology units and is closely connected to the local markets to ensure that TOMRA maintains its

technological advantage. Research and development activities, including other future oriented projects, were expensed at NOK 389 million in 2018. The comparative figure for 2017 was NOK 276 million. In addition, NOK 56 million was capitalized (2017: NOK 49 million). These activities were directed primarily toward the development of automated return systems in TOMRA Collection Solutions in addition to further development of recognition and sorting technology in TOMRA Sorting Solutions.

Financial risk

The Board of Directors is focused on ensuring that there is a systematic and considered approach to managing risk within all segments of the corporation, and views this as a prerequisite for longterm value creation for the company's shareholders, employees and other stakeholders. Opportunities for growth shall always be assessed against the associated risks. TOMRA faces normal business risks related to contractual agreements with, for example, customers and suppliers. In addition, there are several macro trends that can affect the industry in which TOMRA operates. A reduction in recycling targets and ambitions, as well as falling material commodity prices, would negatively influence TOMRA as the need for advanced recycling technology would become less obvious.

TOMRA's operations are also influenced by political decisions, specifically regarding deposit legislation. If a country or state decides to remove its existing deposit system, there will be limited incentives for TOMRA's customers to

maintain current or invest in new TOMRA equipment. In some markets, like for example in the United States, an elimination of the deposit legislation would immediately dissolve the founda tion for TOMRA's daily operations. On the other hand, the implementation or expansion of deposit systems in a coun try or state would create new growth opportunities for TOMRA.

Responsibility for financing, cash man agement and financial risk management is handled by the Finance Department within Tomra Systems ASA. Histori cally, TOMRA has seldom experienced losses on accounts receivable, and the corporation's routines concerning credit approval are considered satisfactory. TOMRA's surplus cash is placed primar ily in NOK with duration of less than six months. Interest-bearing debt is nor mally denominated in EUR, at interest rates fixed for a period of less than six months.

TOMRA is exposed to fluctuations in currency exchange rates. With more than 95 percent of its income in foreign currencies, a strengthening of NOK will lead to reduced earnings for the Group when measured in this currency. Most of the risk is connected to fluctuations in EUR and USD. TOMRA takes advantage of forward exchange contracts to hedge future cash flows in foreign currencies.

With almost 90 percent of the balance sheet denominated in foreign curren cies, TOMRA's equity will also be ex posed to changes in currency exchange rates (most importantly EUR). To partly offset this effect, TOMRA aims to place external bank debt in the same curren cies. In addition, TOMRA has imple mented the financial risk management systems expected given the size and complexity of the company's operations. A more extensive description of TOMRA's internal control procedures and systems for evaluating financial risk is provided on pages 19-20 in this report.

Corporate responsibility and gover nance - our social and environmental engagement

TOMRA makes a significant contribution

to a cleaner and more sustainable world through its products and services.

As a result, TOMRA has always had a significant focus on the environment, measuring and reporting its environ mental performance since 1998. As TOMRA expands its focus to address the other corporate responsibility (CR) areas, the Board supports TOMRA's membership of the UN Global Compact, which provides a recognized framework for integrating CR principles into opera tions and strategies. This annual report forms the basis of TOMRA's Communi cation on Progress, required annually by the UN Global Compact.

Tomra Systems ASA is also certified according to the ISO 14001 standard for environmental leadership. TOMRA expanded its environmental program back in 2010 to include other topics associated with corporate responsibility, with particular focus on corruption and other risk areas. Further details of TOMRA's corporate responsibility pro gram and impact on the environment are presented in TOMRA's Corporate Responsibility report on pages 10 and 11 of this report.

Organization, health and safety

The number of employees in the TOMRA Group was 4,025 at the end of 2018, up from 3,420 at the end of 2017. In Nor way the number of employees increased from 283 at year-end 2017 to 292 at the end of 2018.

TOMRA facilitates equal opportunity for professional and personal development for all employees and does not discrimi nate on the basis of race, color, religion, gender, natural origin, age, disability, sexual orientation or veteran status.

These are important principles that are firmly anchored in the company's Corporate Responsibility Statement and Code of Conduct and communicated to all employees.

TOMRA uses an international survey coordinated by the organization "Great Place to Work" that rates how well em ployees consider that the company lives up to its principles. The participation

rate has been above 85% and the feed back from employees is encouraging. In the last survey, 78% of the partici pating employees stated that TOMRA is a "Great Place to Work", confirming an overall workplace satisfaction at TOMRA.

The Board of Directors considers the principles and guidelines the company has in place for discrimination and equal access to be sufficient, and that no further actions are necessary to satisfy legal requirements.

Female employees made up 20 percent of TOMRA's work force and held 22 percent of its management positions at the end of 2018, a change from 19 and 21 percent respectively in 2017. Four out of TOMRA's seven board directors are women.

The number of job-related injuries in TOMRA requiring medical attention beyond basic first aid was 113, up from 102 in 2017, partly due to the inclusion of new companies. Most of these instanc es occurred within TOMRA's material recovery activities in the USA, which in volve handling crushed glass and heavy lifting. TOMRA continuously strives to reduce the injury rate and has imple mented further preventative measures after identifying more contributing fac tors. The absence rate due to illness in Tomra Systems ASA decreased from 2.2 percent in 2017 to 1.8 percent in 2018.

Tomra Systems ASA is certified accord ing to ISO 9001 and this standard is used to guide the company's quality as surance procedures. TOMRA also applies an internal management system that incorporates goal- and result-orienta tion throughout the entire organization, including performance and leadership evaluation.

Corporate governance - Board developments

TOMRA defines corporate governance as those processes and control struc tures that have been established to protect the interests of the company's shareholders and other stakeholder groups. TOMRA's guidelines for cor -

porate governance, core values and leadership principles are aligned to ensure sustainable development of the company. These guidelines include the role of the Board and its various com mittees, requirements concerning the impartiality of its Board members, and Board compensation. TOMRA's corpo rate governance report can be found on pages 18 to 21 in this report. TOMRA's corporate governance policy can be found on www.tomra.com.

At the ordinary general meeting 24 April 2018, all Board members were re-elected.

The Board held six Board meetings in 2018 and the attendance at the meet ings was 100 percent. Five meetings were physical meetings and one by teleconference. In addition, the audit committee held four meetings, and the corporate responsibility committee and the compensation and organizational development committee met twice during the year. All meetings were attended 100 percent.

Prospects for the future

As the world's population increases and the pressure on available resources continues, the challenges the global population faces are more visible every day. These trends include increased population, higher food prices, in creased focus on food safety, limited resources, increasing per capita waste levels, higher energy prices, stricter waste recycling regulations, greater environmental awareness, and rising demand for commodities.

A fast-growing global population, which is getting wealthier and more urbanized, demands more food and more conve nience. However, this is to be sourced from a constant or even decreasing area of farmland. We see trends that people require higher quality and more conve nient food. Further they expect to be able to purchase what are traditionally labelled as seasonal food types, such as strawberries and blue berries, all year round. This requirement leads to the need for highly advanced and integrated food supply chain systems and global sourcing.

position to continue to see growth in revenues in 2019 compared to 2018.

Balance sheet

TOMRA will, starting first quarter 2019, implement IFRS 16 "Leases". It's expected that the implementation will increase the balance sheet by approximately 1,200 MNOK, as the right to use assets and the corresponding lease obligation must be reflected in the balance sheet. There will also be some minor reclassification effects between the different line items in the income statement, but the EPS is expected to be relatively unaffected as a consequence of the implementation.

For a broader review of currency sensitivities, refer to note 19.

The TOMRA share

The number of TOMRA shareholders increased from 5,543 at the end of 2017 to 7,975 at the end of 2018. The number of shares held by Norwegian residents at the end of 2018 was 23 percent, unchanged from 2017. The TOMRA share price increased from NOK 131.50 at the end of 2017 to NOK 194.80 at the end of 2018. Adjusting for the dividend of

NOK 2.35 paid out in May 2018, the total return on the TOMRA share was 50 percent in 2018, following a 48 percent return in 2017. In comparison, the return on the Oslo Stock Exchange in 2018 amounted to negative 2 percent (and positive 19 percent in 2017).

A total of 57 million TOMRA shares were traded on the Oslo Stock Exchange in 2018, up from 29 million shares the year before. TOMRA's largest shareholder, Investment AB Latour held 26.3 percent of the shares at the end of 2018, unchanged from the end of 2017.

TOMRA aims to provide timely, relevant and accurate information to the capital market to provide a basis for trading and fair pricing of the TOMRA share. TOMRA values a good dialogue with the capital market and has repeatedly in recent years been named the best Nordic and/or Norwegian IR-company in its class in the annual awards presented by REGI. The ranking is based on interviews with sell side and buy side analysts.

Financing

At year-end TOMRA had committed credit lines of NOK 2,190 million, of which NOK 1,513 million was utilized. EUR 60 million of the loan facilities expires in April 2019. At the end of 2018, TOMRA had a gearing ratio equal to 0.7x (Net interest-bearing debt/EBITDA, measured on 2018 performance).

Taking the company's relatively stable cash flow, solid balance sheet and unrealized credit facility into consideration, it is the Board of Directors opinion that the company has the necessary financial flexibility to take advantage of possible growth opportunities.

Currency Order backlog

health impacts of single use plastic in our oceans. A TOMRA employee also joined the voyage through the plastic accumulation zone to gain first-hand experience of the state of plastic pollution in our oceans.

A stronger NOK is negative for TOMRA, both because the Group has significant activities abroad that are denominated in foreign currencies and appears therefore less profitable measured in NOK, and because TOMRA has a certain cost base in NOK tied to development activities and headquarter functions. For TOMRA Sorting, a weaker USD is negative, due to significant revenues nominated in USD, and with a cost base more nominated in EUR and NZD. 4Q,12 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18

The nominal value of each share is NOK 1. The total number of outstanding shares at year-end 2018 was 148,020,078, including 284,628 treasury shares held by TOMRA. The Board wishes to encourage the company's employees to invest in the company's shares and a share purchase program was therefore established in 2008 that offers employees the opportunity to buy shares at current market rates, and for every five shares held for at least one year, one share is given free of charge. The Board will recommend at the general assembly that the program should be continued, limited to a total of 500,000 shares per year. TOMRA share price

TOMRA Collection Solutions

Germany introduced deposit in 2006, a record year for TOMRA, with 8,800 machines installed in the German market. After several years with lower sales activity in Germany, a new wave of installations started in 2015, as the machines from 2006 were due to be replaced. Going into 2019, this replacement wave is no longer as visible, and Germany is consequently expected to be a more stable market with less fluctuation year over year on installations going forward.

We will need to produce some 70% more food by 2050 but we will not be able to notably expand the landmass used for agriculture. We will also need to find ways to reduce food waste – it is estimated that today 30 to 50% of all food produced is being wasted. In the developing world, most of the losses occur early in the food supply chain as result of poor processes, transportation, and storage systems, while in the developed world the clear majority of losses occur at the end of the value chain. In emerging markets, many farms and processing plants are small scale and labour intensive. The high degree of manual labour and its associated costs, as well as in many cases insufficient access to labour, poses significant challenges to productivity and competitiveness. TSS Revenues

Every year 8 million tons of plastic ends up in the oceans heavily disrupting marine life. E-commerce, beyond its infancy, and general consumer behavior brings major challenges when it comes to packaging waste and discarded products. As a result, the need for TOMRA's solutions is higher than ever before and demand for TOMRA's products is steadily increasing. As a part of our constant advocating for preventive solutions and sustainable infrastructure to reduce inflow of plastic into our oceans, TOMRA was the title sponsor for the UK based initiative "eXXpedition" in 2018. This all-female scientific research mission through the North Pacific Garbage Patch aimed to raise awareness of, and solutions for, the environmental and Order intake 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18 - 200 400 1 200 1 000 1 600 1 400 800 600 4Q,11 MNOK

The concept of the Circular Economy is about looking beyond the take-makedispose mindset. Resources are limited and there is a need for a shift in mindset both in terms of how we reuse existing materials like plastic, paper and metals, but also that we make sure that farming is efficient, so that good food does not go to waste. The Circular Economy is shaping rapidly and TOMRA is in a good position to benefit from these megatrends that create the need for investment in sustainable infrastructure. TSS - 200 400 1 200 1 000 1 600 1 400 800 600 4Q,11 MNOK 4Q,12 Organic Inorganic 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18 Generally, deposit markets are viewed as infrastructure and to date no deposit market has been abolished after introduction. In addition, new markets introducing deposit schemes will from time to time materialize. Timing is however difficult to predict, as new markets are heavily dependent upon the outcome of political processes.

Material growth consequently needs to come from new deposit markets. There are currently several processes ongoing and deposit introduction is being discussed in many markets. Which markets finally materialize, and what role TOMRA can play in each market is currently uncertain. As the clear global market leader within reverse vending, TOMRA should however be in a good position to monetize on the opportunities, when they arise. In preparation for these opportunities, TOMRA will need to invest in people and capabilities more than ever, and this could in the short run have a negative effect on profitability.

On the back of a focused expansion, the Group's operations today are more diversified and robust and hence less dependent on individual markets than in the past. Even if short-run fluctuations in the demand for TOMRA's solutions may occur, the company will in the long run be able to capitalize on strong favorable macro trends in the food value chain, enforcing the need for innovation and technology, and in the recycling universe, where excess waste and pressure on general resources is accelerating the need for automation. TSS Order intake

TOMRA Sorting Solutions

In New South Wales, the rollout concluded during third quarter 2018. In 2019 we will consequently experience a yearover-year improvement in the financial performance for the first half of the year. In addition, we expect a positive contribution from Queensland, which introduced deposit 1st November 2018. - 200 400 1 200 1 000 800 600 4Q,11 MNOK

Almost all supermarkets in the established deposit markets have automated their return of bottles and cans. These markets therefore represent mainly replacement opportunities and after-markets for service. The global installed base of more than 80,000 machines generates a steady income stream with a high percentage of recurring revenues. 4Q,12 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18

The order backlog at the end of 2018 was significantly up compared to the backlog at the end of 2017. Based on the current activity level and market sentiment, the Board consequently assumes that TOMRA should be in a good

Asker, 20 February 2019

Jan Svensson	Aniela Gjøs	Bodil Sonesson	Pierre Couderc
Chairman	Board member	Board member	Board member

Linda Bell David Williamson Bente Traa Stefan Ranstrand

Board member Employee elected Employee elected President & CEO

Sorting Collection

Dividend

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2009 2010 2011 2012 2013

Business area revenue split

0%

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20% 10% 30%

This segment sells sorting and processing solutions and important customer groups include leading food production and processing companies, waste management companies and various types of industries (including mining). With food sorting being by far the largest business stream, the volatility in the segment is now less cyclical than before the presence of food sorting. The demand for food will in general be fairly stable through economic cycles, and consequently not significantly influencing TOMRA customers, although margins can fluctuate between the markets and product lines within this business stream. Emerging markets are assumed to provide the strongest growth opportunities. TSS Order backlog 4Q,11 4Q,12 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18 4Q,12 4Q,13 4Q,14 4Q,15 4Q,16 4Q,17 4Q,18

60% 80% 90% 90% 70%

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TSS Revenues

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TSS

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Shareholders by nationality

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4Q,11

MNOK

NGAAP				IFRS
2018 2017	Amounts in NOK million	Note	2018	2017
1,352.3 1,347.3	Operating revenues	1,23	8,595.8	7,432.1
683.8 703.5	Cost of goods sold	2	3,613.8	3,243.2
248.4 191.0	Employee benefits expenses	3,17	2,564.2	2,198.5
26.6 21.2	Ordinary depreciation	9,10	452.9	374.2
152.5 127.4	Other operating expenses	7	886.5	700.7
1,111.3 1,043.0	Total operating expenses		7,517.4	6,516.6
241.0 304.2	Operating profit		1,078.4	915.5
240.0 258.1	Dividend from subsidiaries		-	-
40.9 51.8	Financial income		11.2	32.8
70.7 133.1	Financial expenses		45.2	56.5
210.2 176.8	Net financial items	4	(34.0)	(23.7)
- -	Profit from associates	16	(11.7)	(4.7)
451.2 481.0	Result before taxes		1,032.7	887.1
50.5 54.7 Taxes		11	253.8	229.3
400.7 426.3	Profit for the period		778.9	657.8
	Attributable to:
	Shareholders of the parent		740.2	610.7
	Non-controlling interest		38.7	47.1
	Profit for the period		778.9	657.8
	Allocated as follows:	21
664.8 346.8 Dividend
(264.1) 79.5 Other equity
400.7 426.3	Total allocated
	Earnings per share, basic (NOK)	21	5.01	4.14
	Earnings per share, diluted (NOK)	21	5.01	4.14

INCOME STATEMENT OTHER COMPREHENSIVE INCOME

		Group IFRS
Amounts in NOK million	2018	2017
Profit for the period	778.9	657.8
Other comprehensive income that may be reclassified to profit or loss
Foreign exchange translation differences	90.4	138.5
Other comprehensive income that will not be reclassified to profit or loss
Remeasurements of defined benefit liability (assets)	(10.8)	(41.8)
Tax on remeasurements of defined benefit liability (assets)	3.0	6.1
Change in estimate of put/call option	8.2	-
Total comprehensive income for the period	853.3	760.6
Attributable to:
Shareholders of the parent company	806.5	721.4
Non-controlling interest	46.8	39.2
Total comprehensive income for the period	853.3	760.6

FINANCIAL STATEMENTS

BALANCE SHEET AS OF 31 DECEMBER

		Tomra Systems ASA NGAAP			Group IFRS			Tomra Systems ASA NGAAP				Group IFRS
	2018	2017	Amounts in NOK million	Note	2018	2017		2018	2017	Amounts in NOK million	Note	2018	2017
ASSETS	38.5	50.9	Deferred tax assets	11	296.9	282.2	LIABILITIES	148.0	148.0	Share capital		148.0	148.0
							AND EQUITY	(0.3)	(0.5)	Treasury shares		(0.3)
	-	-	Goodwill	10	2,903.9	2,604.8		918.3	918.3	Share premium reserve		918.3	918.3
	-	-	Development costs	10	185.4	187.1		1,066.0	1,065.8	Paid-in capital		1,066.0	1,065.8
	84.3	55.1	Other intangible assets	10	434.6	337.9
	84.3	55.1	Total intangible non-current assets		3,523.9	3,129.8		512.5	750.2	Retained earnings		4,010.9	3,528.3
	29.0	25.1	Property, plant and equipment	9	755.3	627.4		-	-	Non-controlling interest		159.3	143.3
	-	-	Leasing equipment	9	521.0	370.5
	29.0	25.1	Total tangible non-current assets		1,276.3	997.9		1,578.5	1,816.0	Total equity	21	5,236.2	4,737.4
								-	-	Deferred tax liabilities	11	155.5	114.2
	3,368.7	3,368.7	Investment in subsidiaries	15	-	-		41.8	42.2	Pension liabilities	17	111.7	111.2
	1,490.3	764.9	Loan to subsidiaries	15	-	-		865.5	1,269.4	Interest-bearing liabilities	6	874.0	1,280.1
	9.6	9.6	Investment in associates	15,16	62.8	78.9		-	-	Other long-term liabilities	5	151.9	149.0
	-	-	Other investments		1.2	1.3		206.9	157.4	Loan from subsidiaries		-
	13.6	20.4	Long term receivables	8	275.4	268.7		1,114.2	1,469.0	Total non-current liabilities		1,293.1	1,654.5
	4,882.2	4,163.6	Total financial non-current assets		339.4	348.9
								647.2	-	Interest-bearing liabilities	6	650.8
	5,034.0	4,294.7	Total non-current assets		5,436.5	4,758.8		-	-	Contract liabilities	23	589.2
								43.9	27.3	Trade payables		628.9	552.8
	10.1	6.5	Inventory	2	1,447.5	1,197.2		1,127.3	1,215.1	Intra-group debt		-
								37.0	47.7	Income tax payable	11	87.4
	-	-	Contract assets	23	407.8	-		13.1	18.6	Provisions	13	149.5	147.4
	9.9	9.1	Trade receivables		1,513.6	1,468.6		785.4	490.4	Other current liabilities	12	959.7	1,268.0
	237.9	682.7	Intra-group receivables		-	-		2,653.9	1,799.1	Total current liabilities		3,065.5	2,045.2
	42.1	19.8	Other short-term receivables		392.4	419.0		3,768.1	3,268.1	Total liabilities		4,358.6	3,699.7
	289.9	711.6	Total receivables	7	1,906.0	1,887.6
								5,346.6	5,084.1	Total liabilities and equity		9,594.8	8,437.1
	12.6	71.3	Cash and cash equivalents	18	397.0	593.5
	312.6	789.4	Total current assets		4,158.3	3,678.3
	5,346.6	5,084.1	Total assets		9,594.8	8,437.1	Asker, 20 February 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CASH FLOW STATEMENT

			Remeasurements		Total equity
GROUP IFRS Amounts in NOK million	Paid-in capital	reserve	of defined Translation benefit liability (assets)	earnings	attributable to Retained the owners of the company	Non controlling Interest	Total Equity
Balance per 1 January 2017	1,065.8	484.6		(40.4) 2,682.3	4,192.3	177.7	4,370.0
Profit for the period				610.7	610.7	47.1	657.8
Changes in translation differences		146.4			146.4	(7.9)	138.5
Remeasurements of defined
benefit liability (assets)			(35.7)		(35.7)		(35.7)
Total comprehensive income for the period 0.0		146.4	(35.7)	610.7	721.4	39.2	760.6
Transactions with shareholders
Dividend non-controlling interest				(9.0)	(9.0)	(52.9)	(61.9)
Reclassification Tomra Baltic						(22.2)	(22.2)
Purchase of own shares	(0.2)			(24.4)	(24.6)		(24.6)
Own shares sold to employees	0.2			23.7	23.9		23.9
Minority new consolidated companies					0.0	1.5	1.5
Dividend to shareholders				(309.9)	(309.9)		(309.9)
Total transactions with shareholders	0.0	0.0	0.0	(319.6)	(319.6)	(73.6)	(393.2)
Balance per 31 December 2017	1,065.8	631.0		(76.1) 2,973.4	4,594.1	143.3	4,737.4
Profit for the period				740.2	740.2	38.7	778.9
Changes in translation differences		82.3			82.3	8.2	90.5
Change in estimate of put/call option Remeasurements of defined				(8.2)	(8.2)		(8.2)
benefit liability (assets)			(7.8)		(7.8)		(7.8)
Total comprehensive income for the period 0.0		82.3	(7.8)	732.0	806.5	46.9	853.4
Transactions with shareholders
Dividend non-controlling interest				(9.0)	(9.0)	(31.4)	(40.4)
Own shares sold to employees	0.2			31.9	32.1		32.1
Minority new consolidated companies					0.0	0.5	0.5
Dividend to shareholders				(346.8)	(346.8)		(346.8)
Total transactions with shareholders	0.2	0.0	0.0	(324.0)	(323.7)	(30.9)	(354.6)
Balance per 31 December 2018	1,066.0	713.3		(83.9) 3,381.5	5,076.9	159.3	5,236.2

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	Note	2018	2017
		CASH FLOW FROM OPERATING ACTIVITIES
451.2	481.0	Ordinary profit before taxes		1,032.7	887.1
(47.7)	(102.9)	Income taxes paid		(235.4)	(348.4)
26.6	21.1	Depreciation	9,10	452.9	374.2
(3.6)	1.0	Net change in inventory		(188.0)	23.6
(16.2)	8.2	Net change in receivables		(289.1)	20.9
16.9	(14.7)	Net change in payables		254.9	(7.5)
		Difference between booked costs on pension
(7.1)	(26.5)	funds and actual cash payments to these funds		(11.4)	(7.9)
-	-	Exchange rate effects		8.1	36.7
-	-	Profit before tax from affiliated companies	16	11.7	4.7
-	-	Dividend from affiliated companies	16	6.2	5.1
(8.2)	115.1	Changes in other balance sheet items		(34.7)	23.7
(18.6)	(19.0)	Interest expense/(income)		17.4	10.3
393.3	463.3	Net cash flow from operating activities		1,025.3	1,022.5
		CASH FLOW FROM INVESTING ACTIVITIES
-	-	Proceeds from sales of non-current assets		24.2	50.5
-	(190.1)	Share issues subsidiaries		-	-
-	-	Acquisition of subsidiary, net of cash acquired 1)	24	(362.6)	(423.6)
(59.7)	(30.6)	Investment in non-current assets		(738.5)	(556.4)
(59.7)	(220.7)	Net cash flow from investing activities		(1,076.9)	(929.5)
		CASH FLOW FROM FINANCING ACTIVITIES	25
(319.1)	(424.7)	Loan payments (to)/from subsidiaries		-	-
(1,396.1)	(837.6)	Repayment of long-term loans		(1,394.0)	(837.5)
1,619.0	1,272.7	Proceeds from issuance of long term debt		1,619.0	1,308.6
-	-	Dividend non-controlling interest	21	(40.5)	(62.0)
-	(24.6)	Purchase of treasury shares	21	-	(24.6)
32.1	23.9	Sale of treasury shares	21	32.1	23.9
40.9	29.6	Interest received		11.2	4.6
(22.3)	(10.6)	Interest paid		(28.6)	(15.0)
(346.8)	(309.9)	Dividend paid	21	(346.8)	(309.9)
(392.2)	(281.2)	Net cash flow from financing activities		(147.6)	88.1
-	-	Currency effect on cash		2.7	13.2
(58.6)	(38.6)	Net change in cash and cash equivalents		(196.5)	194.3
71.3	109.9	Cash and cash equivalents per 1 January	18	593.5	399.2
12.6	71.3	Cash and cash equivalents per 31 December	18	397.0	593.5

1) Includes purchase of BBC in 2018 at NOK 362.6 million and Compac in 2017 at NOK 405.3 million, see disclosure note 24.

CONSOLIDATION AND ACCOUNTING PRINCIPLES

GROUP - IFRS

GENERAL

Business concept and customers

Tomra Systems ASA (the "Company") is a company domiciled in Norway. The registered office is Drengsrudhagen 2, Asker.

TOMRA's goal is to create sensor-based solutions for optimal resource productivity, making sustainability profitable – with increased relevance and meaning. In parallel, TOMRA fosters a culture that inspires and motivates its people and customers.

Added value is created for each customer through excellence in service and innovation.

TOMRA's customers are located in all five continents.

Significant accounting policies

The consolidated financial statements of the Company for the year ended 31 December 2018 comprise the Company and its subsidiaries and joint ventures (together referred to as the "Group") and the Group's interest in associates. The financial statements consist of the income statement, other comprehensive income, balance sheet, cash flow statement, consolidated statement of changes in equity and notes to the accounts.

The financial statements were authorized for issue by the Directors on 20 February 2019 and will be presented for final approval at the general meeting on 6 May 2019. Until the final approval by the general meeting, the board can authorize changes to the financial statements.

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU, and the additional disclosure requirements of the Norwegian accounting act as at 31 December 2018.

(b) Basis of preparation

The financial statements are presented in NOK, rounded to the nearest one hundred thousand.

The financial statements are prepared based on historical cost, except for the following material items:

• Derivative financial instruments recognized at fair value through profit and loss.
• Defined benefit obligation recognized as the net total of the plan assets and the present value of the defined benefit obligation.
• financial liabilities recognized due to anticipated acquisitions at the present value of the expected redemption amount.

The financial statements are prepared on a going concern basis.

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of determining carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

The accounting policies have been applied consistently by each Group entity.

Tomra Systems ASA

Europe Tomra Europe AS (NO) Tomra Butikksystemer AS (NO) Tomra Systems AB (SE) OY Tomra AB (FI) Tomra Systems AS (DK) Tomra Holding OÜ (EN) Tomra Service OÜ (EN) Tomra Systems UAB (LH) Tomra Systems BV (NL) Tomra Systems GmbH (DE) Retail Services GmbH (DE) Tomra Leergutsysteme GmbH (AT) Tomra Systems SA (FR) Tomra Systems NV (BE) Tomra s.r.o (CZ) (40 %) Tomra Systems D.O.O (HR) (70%) Tomra Production AS (NO) Tomra Sorting AS (NO) Tomra Sorting GmbH (DE) Tomra Sorting S.L. (ES) Tomra Sorting Ltd. (UK) Tomra Sorting Sp. Z.o.o. (PL) Tomra Sorting S.a.r.l. (FR) Tomra Sorting SRO (SK) Tomra Sorting Ltd (IE) Tomra Sorting SRL (IT) Odenberg Engineering BV (NL) Tomra Sorting NV (BE) Tomra Sorting BV (NL) Belgian Electronic Sorting Technology TR Mak. San. Tic. A.S. (TR) Best Vastgoed (NL) Compac Sorting Eq. Europe (UK) BBC Technologies BV (NL)

Tomra Collection Ltd. (UK)

North-America Tomra of North America Inc. (DE) Tomra of North America Finance Company LLC (DE) Tomra Metro LLC (CT) Western New York Beverage Industry Collection and Sorting LP (74%) (NY) Tomra New York Recycling LLC (64,63%) (NY) Upstate Tomra LLC (55%) (NY) Tomra Mass. (55%) (MA) Tomra Canada Inc. (CA) Tomra Pacific Inc. (DE) UBCR (51%) (MI) UltrePET LLC (49%) (NY) Tomra Compaction LLC (DE) Returnable Services LLC (DE) Synergistics LLC (51%) (MI) Tomra Sorting (CA) Tomra Sorting, Inc. (US) Compac Sorting Eq. Ltd. (US) Tomra Claims Resolution Company (US) BBC Technologies Ltd. (US) BBC Technologies LLC (US) Rest of the world Tomra Sorting Japan KK (JP) Tomra Japan Ltd. (50%) (JP) Tomra Sorting Co, Ltd. (KP) Tomra Sorting (Pty) Ltd. (ZA) Tomra Sorting (Pty) Ltd. (AU) Tomra Sorting Technology (Xiamen) Co. Ltd. (CN) Tomra (Xiamen) Imp. & Exp. Co. Ltd. (CN) Tomra Brasil Solucoes EM segregacao LTDA (BR) Tomra Sorting JLT (AE) Tomra Sorting Chile SpA (CL) Tomra Sorting India Private Limited (IN) Tomra Sorting OOO (RU) Tomra Recycling Technology (Xiamen) Co. Ltd (51%) (CN) Incom Tomra Recycling Technology (Beijing) Co. Ltd (49%) (CN) Bottlecycler Australia Pty Ltd (60%) (AU) Tomra Collection Pty Ltd (AU) Tomra Cleanaway Pty Ltd (50%) (AU) Tomra Collection Solutions Taiwan (51%) (TW) Compac Holding Ltd. (NZ) Compac Inter Ltd. (NZ) Lenz Equipment Ltd. (NZ) Compac Sorting Eq. Ltd. (NZ) Compac Sorting Eq. Ltd. (AU) Compac Sorting Eq. Ltd. (CN) Compac Sorting Eq. Latin America (CL) Compac Tech Ltd. (NZ) Compac Kunshan (CN) Compac International Trade China (Kunshan) Co. Ltd. (CN) Taste Tech Ltd. (NZ) Taste Tech Install Ltd. (NZ) Tastemark Ltd. (NZ) BBC Technologies Ltd. (NZ) BBC Technologies Agricola Ltd. (CL) Bottlecycler Australia Pty Ltd. was aquired in 2016, and Tomra Cleanaway Pty Ltd was founded in 2017. CBSI LLC was merged with Tomra North America Inc. in 2017. Compac Holding Ltd. including subsidiaries was aquired in 2017. BBC Technologies Ltd including subsidiaries was aquired in 2018. Best Sorting Span S.L. was liquidated in 2018. Tomra Collection Ltd. and Tomra Collection Solutions Taiwan were founded

Best Hong Kong Int. Ltd. (HK) in 2018.

REPORTING STRUCTURE

The Group's consolidated amounts comprise the following units:

CONSOLIDATION PRINCIPLES

(a) Consolidated companies

The consolidated accounts include the parent company Tomra Systems ASA and companies in which the parent company has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries acquired or sold during the course of the year are included in the income statement as of the date that control commenced until the date that control ceased.

(b) Elimination of shares in subsidiaries

Shares in subsidiaries are eliminated on the basis of the past equity method. The difference between the book value of shares in subsidiaries and book value of the subsidiaries' equity at the time such shares were acquired is analyzed and posted to the balance sheet items to which the excess amounts relate. Goodwill represents the excess of the purchase price paid for acquisitions above net assets acquired and is tested for impairment at least annually.

(c) Currency translation for foreign subsidiaries

The profit and loss statements for foreign subsidiaries prepared in foreign currencies are translated on the basis of average exchange rates for the year. The balance sheet is converted on the basis of the exchange rates on December 31. Translation differences are shown as a separate item and charged to other comprehensive income (OCI)

When foreign subsidiaries are sold, completely or partially, the associated translation difference is recognized in the profit and loss.

(d) Non-controlling interest

The non-controlling interest's share of the net profit and equity are classified as separate items in the income statement and balance sheet.

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result of such transactions. Adjustments to noncontrolling interests are based on a proportionate amount of the net assets of the subsidiary.

Previously, goodwill was recognized on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.

(e) Business Combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date when control is transferred to the Group.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognized in profit and loss.

For accounting of goodwill see Valuation and Classification principles (f) Goodwill.

TOMRA has entered into put and call options for the remaining non-controlling interests (NCI) in some of its subsidiaries. The Group accounts for such agreements using "the anticipated-acquisition method". Under this method, the interest subject to the option is deemed to have been acquired at the date of acquisition. Accordingly, the financial liability arising from the option is included in the consideration transferred. Under the anticipated acquisition method, the interests of the non-controlling shareholders that hold the options are derecognized when the financial liability is recognized. This is because the recognition of the financial liability implies that the interests subject to the options are deemed to have been acquired already. Therefore, the underlying interests are presented as already owned by the Group, both in the statement of financial position and in the statement of profit and loss and other comprehensive income. The financial liability is recognized at the present value of the expected redemption amount. Changes in the carrying amount of the liability will be recognized within equity. If the option expires unexercised, then the liability is derecognized and NCI are recognized, consistent with a decrease in ownership interests in a subsidiary while retaining control.

(f) Internal transactions/intercompany items

All purchases and sales between Group companies, intra Group expenses, as well as receivables and liabilities have been eliminated in the consolidated statements.

(g) Joint Ventures

Joint Ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Jointly controlled entities are accounted for using the equity method, see note 16.

(h) Associates

Associates, in which TOMRA has an ownership interest of 20-50% and significant influence over operational and financial decisions, are included in the consolidated accounts based on the equity method. The Group's share of the profit from associates is reported under financial items in the income statement and as operating activities in the statement of cash flow.

VALUATION AND CLASSIFICATION PRINCIPLES Estimations

The preparation of the annual accounts of TOMRA involves the use of estimates. The estimates are based on a number of assumptions and forecasts that, by their nature, involve uncertainty. Various factors could cause TOMRA's actual results to differ materially from those projected in the estimates. This includes, but is not limited to, 1) cash flow forecast from business units supporting the carrying amount of goodwill and deferred tax assets, 2) provisions for warranty and 3) assumptions for calculation of pension obligations.

In performing the impairment test of goodwill, the recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates including, but not limited to, estimates of future performance of the CGU's, assumptions of the future market conditions, and discount rate. Changes in circumstances and in management's evaluations and assumptions may give rise to changes in the outcome of impairment testing.

(a) Revenue recognition

Revenue is measured based on the consideration specified in the contract with a customer. The TOMRA Group recognizes revenue when it transfers control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the TOMRA Group generates its revenues.

TOMRA Collection Solutions

The Collection Solutions segment principally generates revenue from sales or lease of reverse vending machines (RVMs) and sales of service on the RVMs. RVMs and service may be sold separately or in bundled packages. Leasing of RVMs is considered to fall outside of IFRS 15 according to point 5.a.

For bundled packages TOMRA accounts for individual RVMs and services separately, since they are considered distinct. The consideration is allocated between separate products and services in a bundle based on their standalone selling prices.

The Collection Solution segment also generates revenue from material recovery, which consists of pick-up, transportation, processing and sales of empty beverage containers on the US East Coast and in Canada. For material recovery, revenue consists of a processing & handling fee.

The last revenue source for the Collection Solution segment is the commodity revenue. This is sale of the collected material, alumina, plastic and glass.

Sales of RVMs

For the sale of RVMs, revenue is recognized when the customer obtains control over the goods. TOMRA's assessment is that the customer obtains control over the RVM when it is delivered, and revenue is recognized at that point in time.

Rendering of service

TOMRA sells both ad-hoc service and service contracts. For ad-hoc service, revenue is recognized at a point in time when the service is performed. For service contracts, revenue is recognized over the service contract period, since it is considered a performance obligation satisfied over time where the customer simultaneously receives and consumes the benefits.

Processing & handling fee

The processing & handling fee is recognized as revenue at month end based on number of containers collected. The revenues are recognized when the service is performed (container has been collected and processed).

Commodity revenues

The commodity revenues are recognized when the material is sold. Then the service of selling the commodity is performed.

TOMRA Sorting Solutions

The Sorting Solutions segment principally generates revenue from sale and installation of sorters and sale of service on the sorters.

If sale of machine, installation, freight and service are sold as one contract, the transaction price is allocated to performance obligations according to pricelist of the machine, quotation from freight company and installation costs.

Any discounts are allocated between the different performance obligations, if they are not specified to one specific performance obligation in the contract.

Sales of Sorters

For the sale of sorters, revenue is recognized when the customer obtains control over the goods. TOMRA's assessment is that the customer obtains control over the sorter when it is delivered (based on agreed incoterms) and revenue is recognized at that point in time.

Rendering of service

TOMRA sells both ad-hoc service and service contracts. For ad-hoc service, revenue is recognized at a point in time when the service is performed. For service contracts, revenue is recognized over the service contract period, since it is considered a performance obligation satisfied over time where the customer simultaneously receives and consumes the benefits.

Construction contracts

For some projects, machines are built to a specific customer order or built only for one specific customer to use. These machines have no alternative use for TOMRA, and there is an enforceable right to payment (incl. mark-up) for performance completed to date. The revenue is recognized over time as the performance obligation is satisfied. TOMRA uses an output method by measuring the value to the customer transferred to date. The progress is assessed by reference to results achieved and milestones reached for the satisfaction of that performance obligation.

Contract expenses are recognized as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognized immediately in profit and loss.

Financing component

Very few contracts are sold with payments terms exceeding one year, and the finance component of these contracts is considered immaterial.

Warranty

RVMs are normally sold with a warranty period between 12 and 24 months. Sorters are normally sold with a warranty period of 12 and 24 months. Warranty is recognized as an expense and the liability is accrued as TOMRA did previously according to IAS 37.

TOMRA has no other material obligations for returns, refunds or similar.

(b) Cost recognition

Costs are expensed in the period that the income to which they relate is recognized. Costs that can not be directly related to income are expensed as incurred.

(c) Expenses

Operating lease payments

Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease expense.

Finance lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term to produce a constant periodic rate of interest on the remaining balance of the liability.

Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognized in the income statement.

Interest income is recognized in the income statement as it accrues, using the effective interest method. Dividend income is recognized in the income statement on the date the entity's right to receive payments is established. The interest expense component of finance lease payments is recognized in the income statement using the effective interest rate method.

Hedge of a net investment in foreign operation

The Group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the Group's currency (NOK).

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective, and are presented in the translation reserve within equity. The tax effect is charged to other comprehensive income. To the extent that the hedge is ineffective, such differences are recognized in profit and loss. When the hedged net investment is disposed of, the relevant amount in the translation reserve is transferred to profit and loss as part of the gain or loss on disposal.

(d) Derivative financial instruments

Financial instruments are recognized initially at cost and are subsequently stated at fair value. The gain or loss on remeasurement to fair value is recognized immediately in profit and loss.

(e) Property, plant and equipment Owned assets

Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation is recognized in profit and loss on a straight-line basis over the estimated useful life of each component of an item of property, plant and equipment. Land is not depreciated.

If the recoverable amount of an item of property, plant and equipment is lower than carrying amount, the asset will be written down to fair value.

Leased assets

Leases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. The owner-occupied property acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.

Subsequent costs

The Group recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognized in the income statement as an expense as incurred.

(f) Intangible assets

Intangibles consist of goodwill, development cost, entitlement to trademarks and non-competition agreements.

Goodwill

Goodwill represents amounts arising on acquisition of subsidiaries, associates and joint ventures.

For acquisitions, the Group measures goodwill at the acquisition date as the fair value of the consideration transferred plus the recognized amount of any non-controlling interests in the acquisition less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognized immediately in profit and loss.

Goodwill is allocated to cash-generating units and is tested annually at 31 December for impairment. With respect to associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

Adjustments to estimated contingent consideration are included in the income statement.

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the income statement as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalized includes the cost of materials, direct labour and overhead costs directly attributable to preparing the asset for use. Other development expenditure is recognized in the income statement as an expense as incurred. Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Straight-line depreciation is applied over the economic life of the asset.

The Group has not received any material government grants.

Other intangibles

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization and impairment losses. Other intangibles are amortized over the term of the contract. Impairment-testing was performed at year end where there were indications of impairment, see note 10.

Expenditure on internally generated goodwill and brands is recognized in profit and loss as an expense as incurred.

Subsequent expenditure

Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(g) Shares

Shares intended for long-term ownership are recorded in the balance sheet under long-term investments. These are valued at acquisition cost, unless circumstances, which cannot be regarded as of a temporary nature, exist which necessitate a lower valuation.

(h) Inventory

Inventories of raw materials are valued at the lower of cost of acquisition and fair value. Work in progress and finished products are valued at the lower of cost to manufacture or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Spare parts and parts held by service agents are valued at cost. A deduction is made for obsolescence where necessary.

The cost of inventories is based on the weighted average cost principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

(i) Transactions, receivables and liabilities in foreign currencies

Receivables and liabilities are booked at the exchange rate at the date of the balance sheet. Transactions in profit and loss are booked at monthly average exchange rates.

Material single transactions are booked at the transaction date exchange rate.

j) Trade receivable - IFRS 9

Loss on receivables is to be assessed based on quantitative and qualitative information on historical experience, credit risk assessment and forward-looking information (including macro-economic factors) of the receivables at balance date. Loss allowance is recognized based on lifetime expected credit losses, i.e. the credit loss that results from all possible default events over the expected life of the receivable. A default occurs if there's over 50% chance that the obligor will not be able to repay its debt.

(k) Cash and cash equivalents

Cash and cash equivalents include cash in hand, bank deposits, money market funds, and other short-term investments with original maturity of three months or less. The parent company presents total bank deposits in the international cash pool, while the subsidiaries present their share of the international cash pool as intra-group balances.

(l) Pension obligations Defined contribution plans

Obligations for contributions to defined contribution plans are recognized as employee benefits expenses in profit and loss as the related service is provided.

Tomra Systems ASA's defined contribution plan also included the right to a paid up policy, an element of which was a defined benefit. This part of the defined contribution plan was accounted for as a defined benefit plan as described below. From 1 January 2017 the right to a paid up policy was closed, and no accounting as a defined benefit plan is done in 2017 for this plan.

Defined benefit plans

The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.

Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit and loss and presented as a financial item.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit and loss. TOMRA Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(m) Warranty allocations

A general provision has been made for future warranty costs based on the previous year's turnover in all Group companies.

(n) Taxes

The tax charge in the income statement includes both taxes payable for the period and the change in deferred taxes. The change in deferred taxes reflects future taxes payable resulting from the year's activities. Deferred taxes are determined based on the accumulated result, which falls due for payment in future periods. Deferred taxes are calculated on net positive timing differences between accounting and tax balance sheet values, after offsetting negative timing differences and losses carried forward under the liability method. See Note 11.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(o) Earnings per share

Earnings per share has been computed based upon the weighted average number of common shares and share equivalents outstanding during each period. Common share equivalent recognizes the potential dilutive effects of future exercises of common share warrants and employee incentive programs payable in company shares.

(p) Cash flow statement

The cash flow statement is compiled using the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term investments with terms not exceeding three months that can immediately, and with no material exchange rate exposure, be exchanged for cash.

(q) Impairment

The carrying amounts of the Group's assets, other than inventory and deferred tax assets (see separate accounting policies), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated on an annual basis, see note 10.

An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the profit and loss.

Impairment losses recognized in respect of cashgenerating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets in the unit (group of units), on a pro rata basis.

Calculation of recoverable amount

The recoverable amount of assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs.

Reversals of impairment

An impairment loss relating to goodwill can not be reversed.

With respect to other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(r) Dividends

Dividends are recognized as a liability in the period in which they are declared.

(s) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss over the period of the borrowings on an effective interest basis.

(t) Provisions

A provision is recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Expected incremental legal costs where there is a past obligation event with respect to the underlying claim are accrued for as provisions.

(u) Trade and other payables

Trade and other payables are stated at cost.

(v) Segment reporting

A segment is a distinguishable component of the Group that is engaged in providing products or services that is subject to risks and rewards that are different from those of other segments.

Segment information is presented in the format used by TOMRA Group's management to manage the business.

(w) Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify.

On initial classification as discontinued operations, non-current assets are classified as held for sale and recognized at the lower of carrying amount and fair value less costs to sell.

Impairment losses on initial classification as held for sale are included in profit and loss, even when there is a revaluation. The same applies to gains and losses on subsequent remeasurement.

(x) Share Capital Ordinary shares

Incremental costs directly attributable to issue of ordinary shares and share options are recognized as a deduction from equity.

Repurchase of share capital

When share capital recognized as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity.

(y) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations were not effective for the year ended 31 December 2018 and have not been applied in preparing these consolidated financial statements. Those that may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. These will be adopted in the period that they become mandatory unless otherwise indicated.

IFRS 16 Leases

IFRS 17 Insurance Contracts

IFRIC 23 Uncertainty over Income Tax Treatments Amendments to IAS 28: Long-term interests in Associates and Joint Ventures

Amendments to IAS 19: Plan Amendment, Curtailment or Settlement

Amendments to IFRS 9: Prepayment Features with Negative Compensation

Annual improvements to IFRS Standards 2015-2017 Cycle – various standards

Amendments to References to Conceptual Framework in IFRS standards

TOMRA is considering the effects of the future adoption of these standards.

IFRS 16 leases was issued in January 2016 with effective date 1 January 2019. IFRS 16 specifies how to recognize, measure and disclose leases.

TOMRA has assessed the estimated impact that initial application of IFRS 16 will have on its consolidated financial statements, as described below. The actual impacts of adopting the standard on 1 January 2019 may change because:

TOMRA has not finalised the testing and assessment of controls over its new IT systems; and the new accounting policies are subject to change until TOMRA presents its first financial statements that include the date of initial application.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognizes a rightof-use asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.

IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

Leases in which TOMRA is a lessee

TOMRA Group will recognize new assets and liabilities for its operating leases of Buildings, Vehicles, Fixtures, Production equipment and Land.

The nature of expenses related to those leases will now change because TOMRA Group will recognize a depreciation charge for right-of-use assets and interest expense on lease liabilities.

Previously, the TOMRA Group recognized operating lease expense on a straight-line basis over the term of the lease, and recognized assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expenses recognized.

In addition, the TOMRA Group will no longer recognize provisions for operating leases that it assesses to be onerous. Instead, the Group will include the payments due under the lease in its lease liability.

No significant impact is expected for the TOMRA Group's finance leases.

Based on the information currently available, TOMRA Group estimates that the implementation will increase the balance sheet by approximately 1,200 MNOK, as the right to use asset and the corresponding lease obligation must be reflected in the balance sheet. There would also be some minor reclassification effects between the different line items in the profit and loss statement, but the EPS is expected to be unaffected as a consequence of the implementation.

The Group does not expect the adoption of IFRS 16 to impact its ability to comply with the revised maximum leverage threshold loan covenant described in Note 6.

Leases in which TOMRA is a lessor

No significant impact is expected for other leases in which the TOMRA Group is a lessor.

Transition

The TOMRA Group plans to apply IFRS 16 initially on 1 January 2019, using the modified restrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information.

The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019, and identified as leases in accordance with IAS 17 and IFRIC 4.

Other Standards

The current assessment of other new and revised standards is that TOMRA does not expect any material effects in the financial statements.

ACCOUNTING PRINCIPLES

TOMRA SYSTEMS ASA - NGAAP

GENERAL

BASIC PRINCIPLES

The financial statements, which have been presented in compliance with the Norwegian Companies Act, the Norwegian Accounting Act and Norwegian generally accepted accounting principles, consist of the income statement, balance sheet, cash flow statement and notes to the accounts.

The financial statements have been prepared based on the fundamental principles governing historical cost accounting, comparability, continued operations and congruence. Transactions are recorded at their value at the time of the transaction. Income is recognized at the time of delivery of goods or services sold. Costs are expensed in the period that the income to which they relate is recognized.

Estimates and assumptions that may affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the period, are prepared by management based upon their best knowledge at reporting date. Actual results may differ from those estimates.

VALUATION AND CLASSIFICATION PRINCIPLES

REVENUE RECOGNITION

Revenues for machines and parts are recognized when risk is transferred to the customer. Other service revenue is recognized when services are provided.

Dividend income is recognized in profit and loss when the entity's right to receive payments is established.

COST RECOGNITION

Costs are expensed in the period that the income to which they relate is recognized. Costs that can not be directly related to income are expensed as incurred.

START-UP AND DEVELOPMENT COSTS

Start-up and research and development costs are expensed as they are incurred.

TANGIBLE FIXED ASSETS

Fixed assets are entered in the accounts at original cost, with deductions for accumulated depreciation and write-down. If the fair value of a fixed asset is lower than book value, and the decline in value is not temporary, the fixed asset will be written down to fair value.

Based on the acquisition cost, straight-line depreciation is applied over the economic life of the fixed assets.

SHARES

Shares intended for long-term ownership are recorded in the balance sheet under long-term investments. These are valued at acquisition cost unless circumstances, which cannot be regarded as of a temporary nature, exist which necessitate a lower valuation.

RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES

Receivables and liabilities are booked at the exchange rate at the date of the balance sheet.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, bank deposits, money market funds, and other short-term investments with original maturity of three months or less.

Tomra Systems ASA presents total bank deposits in the international cash pool, while subsidiaries present their share of the international cash pool as intra-group balances.

PENSION OBLIGATIONS Defined contribution plans

Obligations for contributions to defined contribution plans are recognized as employee benefits expenses in profit and loss as the related service is provided.

Tomra Systems ASA's defined contribution plan also included the right to a paid up policy, an element of which was a defined benefit. This part of the defined contribution plan was accounted for as a defined benefit plan as described below. From 1 January 2017 the right to a paid up policy was closed, and no accounting as a defined benefit plan was done in 2017 and 2018 for this plan.

Defined benefit plans

Tomra Systems ASA's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to Tomra Systems ASA, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.

Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in Equity. Tomra Systems ASA determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit and loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit and loss. Tomra Systems ASA recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

TAXES

The tax charge in the profit and loss account includes both taxes payable for the period and the change in deferred taxes. The change in deferred taxes reflects future taxes payable resulting from the year's activities. Deferred taxes are determined based on the accumulated result, which falls due for payment in future periods. Deferred taxes are calculated on net positive timing differences between accounting and tax balance sheet values, after offsetting negative timing differences and losses carried forward under the liability method in accordance with the rules set out in the Norwegian Accounting Standard.

CASH FLOW STATEMENT

The cash flow statement is compiled using the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term investments with terms not exceeding three months that immediately, and with no material exchange rate exposure, can be exchanged for cash.

NOTE 1 SEGMENT INFORMATION

TOMRA GROUP - IFRS

	Collection	Sorting	Group
Amounts in NOK million	Solutions	Solutions	Functions	TOTAL
2017
Northern Europe	614			614
Rest of Europe 1)	1,671			1,671
North America 2)	1,520			1,520
Rest of the world	66			66
Europe 1)		1,182		1,182
North America 2)		1,282		1,282
South America		140		140
Asia		419		419
Oceania		329		329
Africa		209		209
Operating revenues	3,871	3,561	0	7,432
Sale of RVMs / Sorters	1,391	2,788		4,178
Lease of RVMs / Sorters	359	53		412
Service	1,177	721		1,898
Material Handling	944	0		944
Operating revenues	3,871	3,561	0	7,432
Gross contribution	1,601	1,540		3,141
- in %	41 %	43 %		42 %
Operating expenses	895	1,114	64	2,073
EBITA	706	426	(64)	1,068
- in %	18 %	12 %		14 %
Amortizations	57	95		152
EBIT	649	331	(64)	916
- in %	17 %	9 %		12 %
Share of profit from associates	(5)	0	0	(5)
Investments	463	517	0	980
Investments in associates	79	0	0	79
Assets 3)	3,019	4,542	876	8,437
Liabilities	973	1,101	1,626	3,700
Depreciation and amortization	233	141	0	374
Impairment losses recognized in P&L	0	0	0	0
Other significant non-cash expenses	0	0	0	0

TOMRA is organized as two business areas, TOMRA Collection Solutions and TOMRA Sorting Solutions. The split is based upon the risk and return profile of the Group's different activities, also taking into consideration TOMRA's internal reporting structure to the Board and Management Group.
Compac Group (acquired in 2017) and BBC Group (acquired in 2018) are reported as part of TOMRA Sorting Solutions.
Collection Solutions - two business streams:
Reverse Vending - development, production, sale and service of reverse vending machines and related data management systems.

Material Recovery - pick-up, transportation and processing of empty beverage containers on behalf of beverage producers/fillers on the US East Coast and in Canada.

Sorting Solutions is a provider of advanced optical sorting systems with three business streams; Food, Recycling and Mining.

Group Functions consists of corporate functions at TOMRA's head office.

Assets and liabilities are distributed to the different reporting segments. Cash, interest-bearing debt and tax positions are allocated to Group Functions.

There is no material segment revenue from transactions between the business areas.

NOTES

	Collection	Sorting	Group
Amounts in NOK million	Solutions	Solutions	Functions	TOTAL
2018
Northern Europe	611			611
Rest of Europe 1)	1,710			1,710
North America 2)	1,605			1,605
Rest of the world	339			339
Europe 1)		1,508		1,508
North America 2)		1,466		1,466
South America		253		253
Asia		491		491
Oceania		383		383
Africa		230		230
Operating revenues	4,265	4,331	0	8,596
Sale of RVMs / Sorters	1,331	3,432		4,762
Lease of RVMs / Sorters	381	67		448
Service	1,532	832		2,365
Material Handling	1,021	0		1,021
Operating revenues	4,265	4,331	0	8,596
Gross contribution	1,751	1,931		3,682
- in %	41 %	45 %		43 %
Operating expenses	1,025	1,324	80	2,429
EBITA	726	607	(80)	1,253
- in %	17 %	14 %		15 %
Amortizations	69	105		174
EBIT	657	502	(80)	1,079
- in %	15 %	12 %		13 %
Share of profit from associates	(12)	0	0	(12)
Investments	584	516	0	1,101
Investments in associates	63	0	0	63
Assets 3)	3,517	5,384	694	9,595
Liabilities	1,128	1,311	1,920	4,359
Depreciation and amortization	294	159	0	453
Impairment losses recognized in P&L	0	0	0	0
Other significant non-cash expenses	0	0	0	0

1) Includes revenues from Germany of NOK 1,654 million in 2018 (NOK 1,537 million in 2017) 2) Includes revenues from USA of NOK 2,478 million in 2018 (NOK 2,357 million in 2017) 3) NOK 854 million of the assets was located in Norway in 2018 (NOK 997 million in 2017)

NOTE 1 SEGMENT INFORMATION (CONT.)

NOTE 4 FINANCIAL ITEMS

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
240.0	258.1	Dividend from subsidiaries	-	-
240.0	258.1	Dividend from subsidiaries	-	-
40.9	29.6	Interest income 1)	11.2	10.6
- 40.9	22.2 51.8	Other financial income 2) Total financial income	- 11.2	22.2 32.8
22.3	10.6	Interest expenses 1)	28.6	19.1
10.6	0.7	Other financial expenses	6.5	6.4
37.8	121.8	Foreign exchange loss 3)	10.1	31.0
70.7	133.1	Total financial expenses	45.2	56.5

1) Interest income and expenses for Tomra Systems ASA include interest income and expenses from subsidiaries of NOK 37.2 million (2017: NOK 28.7 million) and NOK 0.7 million (2017: NOK 0.1 million) respectively.

2) Other financial income (2017) includes a reversal of a write-down of loan to associated company Revive Recycling Pty Ltd of 22.2 MNOK.

3) The foreign exchange loss in Tomra Systems ASA relates mainly to loans in EUR. At Group level, the loans are hedged against the net assets in EUR exposed subsidiaries.

Borrowing costs are recognized as an expense in the period in which they are incurred.

NOTE 2 INVENTORY/COST OF GOODS SOLD

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
387.4	702.5	COST OF GOODS SOLD Cost of goods sold, gross	3,538.4	3,196.2
(3.6) 683.8	1.0 703.5	Change in inventory Cost of goods sold, net	75.4 3,613.8	47.0 3,243.2

Cost of goods sold includes adjustment of inventory write-down of NOK 0.0 million

(2017: NOK 0.0 million) for the Parent Company and NOK 22.2 million (2017: NOK 5.4 million) for the Group..

		INVENTORY
-	-	Raw materials	743.1	568.2
-	-	Work in progress	78.7	120.8
10.1	6.5	Finished goods	397.3	327.5
-	-	Spare parts	228.4	180.7
10.1	6.5	Total inventory	1,447.5	1,197.2
-	-	Inventory stated at fair value less costs to sell	-	-

Inventories are not subject to retention of title clauses.

NOTE 5 CONTINGENT LIABILITIES

Warranty liabilities

TOMRA has warranty liabilities of NOK 78.8 million (2017: NOK 58.5 million) for the Parent Company and NOK 144.5 million (2017: NOK 198.7 million) for the Group.

Options

TOMRA owns 57.5% of Tomra Holding OÜ (Baltics) and 80% of Tomra Collection Australia Pty Ltd (Australia). The minority owners in the respective two companies hold rights to sell their shares to TOMRA (put options) and TOMRA holds the right to buy their shares (call options), from 2024 and 2022 respectively. The sales price is determined based upon the performance of the companies.

The anticipated acquisition method is used in presenting these subsidiaries and the respective obligation, even though still legally being non-controlling interests.

German Patent Litigation Case

Envipco Holding N.V. owns a granted German patent related to security marks used on bottles and cans within the German deposit system. Envipco has taken legal action in the German courts against various users of the German security mark system claiming that these users (including a TOMRA customer) are infringing their patent rights. TOMRA has taken appropriate defensive actions against Envipco's claims of patent infringement, as it believes that the patent is not valid and no infringement has taken place. TOMRA has consequently not made any accruals for the case as of yearend 2018. Tomra Systems ASA has issued a letter of indemnity toward Tomra Systems GmbH in relation to this case.

Warranty

Tomra Systems ASA has issued a warranty toward Tomra Europe AS, to cover Tomra Europe AS's obligations as owner of the Tomra-Cleanaway J/V in Australia.

NOTE 3 EMPLOYEE BENEFITS EXPENSES

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
182.4	157.7	Salaries	2,007.2	1,764.2
36.4	32.7	Social security tax	278.1	238.3
15.5	(6.9)	Pension cost	61.3	40.1
14.1	7.5	Other labor cost	217.6	155.9
248.4	191.0	Total employee benefits expenses	2,564.2	2,198.5
170	152	Number of man-years	3,800	3,250

All Norwegian companies within the Tomra Group utilize bank guarantees instead of restricted accounts for employee tax deductions.

C	2018	2017
	7.0	5.7
	134.0	151.3
	2.0	2.3
bles	132.4	109.4
	275.4	268.7

NOTE 7 SHORT TERM RECEIVABLES

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
11.6	9.6	Trade receivables, gross	1,590.3	1,545.9
237.9	682.7	Intra group short-term receivables	-	-
42.1	19.8	Other short-term receivables, gross 1)	392.4	419.0
(1.7)	(0.5)	Provision for bad debt	(76.7)	(77.3)
289.9	711.6	Total receivables	1,906.0	1,887.6
0.5	0.2	Provision for bad debt per 1 January	77.3	64.8
1.2	0.3	Provisions made during the year	5.2	0.3
-	-	Provision in acquired companies	-	16.5
-	-	Provisions used during the year	(5.8)	(4.3)
1.7	0.5	Provision for bad debt per 31 December	76.7	77.3

1) Other short-term receivables includes forward contracts of NOK 1.3 million.

Bad debt written-off is reported as other operating expenses.

Receivables with due dates more than one year after the balance date are reported as non-current assets.

NOTE 6 INTEREST-BEARING LIABILITIES

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
865.5 - 865.5	1,269.4 - 1,269.4	NON-CURRENT LIABILITIES Unsecured bank loans 1) Other non-current interest-bearing liabilities Total non-current interest-bearing liabilities	865.5 8.5 874.0	1,269.4 10.7 1,280.1
0.0	0.0	Due more than 5 years after balance sheet date	0.0	0.0
647.2 -	- -	CURRENT LIABILITIES Current portion of unsecured bank loans Other current interest-bearing liabilities	650.8 -	- -
647.2	0.0	Total current interest-bearing liabilities	650.8	0.0

1) Tomra Systems ASA has a six-year revolving credit facility of EUR 50 million, or NOK/USD equivalent, established in December 2015. In January 2018 this facility was increased by 20 MEUR by exercising an accordion option. Tomra Systems ASA also has a five-year and a seven-year revolving credit facility, each of EUR 60 million, or NOK/SEK/USD equivalent, established in April 2014. As of 31 December 2018, EUR 147 million was drawn on these three facilities, including the current portion. The loans have floating interest and negative pledge commitment. The loan agreements are conditional upon an equity covenant of at least 30 percent of total assets, measured at the end of each quarter. See also disclosure note 19.

NOTE 8 LONG TERM RECEIVABLES

Tomra Systems ASA Group NGAAP IFRS 2018 2017 Amounts in NOK million 2018 2017 - - Deposits 7.0 5.7 - - Capital lease 134.0 151.3 1.8 2.1 Loans to employees 2.0 2.3 11.8 18.3 Other long term receivables 132.4 109.4 13.6 20.4 Total receivables 275.4 268.7

Capital lease relates to machines (mainly RVMs in USA and Germany) sold to customers on financial lease contracts.

	2018
Trade receivables fall due:	Allowance	Gross Carrying	Loss	Net Carrying
Amounts in NOK million	in %	Amount	Allowance	Amount
Not due yet	0 %	1,062.8	1.0	1,061.8
0 - 30 days	0 %	272.6	0.6	272.0
31- 60 days	2 %	68.0	1.1	66.9
61 - 90 days	9 %	37.1	3.2	33.9
Older than 90 days	47 %	149.8	70.8	79.0
Total trade receivables	5 %	1,590.3	76.7	1,513.6

For further information about credit risk, see note 19.

NOTE 7 SHORT TERM RECEIVABLES (CONT.)

GROUP - IFRS Amounts in NOK million	Land & Buildings3)	Machinery & Fixtures	Vehicles	Leasing Equipment	Total
Cost
Balance at 1 January 2017	341.2	597.4	143.7	692.5	1,774.8
Acquisitions through business combinations	20.5	20.2	6.6	9.0	56.3
Other acquisitions	16.7	100.2	32.6	238.1	387.6
Disposals	(6.9)	(54.1)	(16.9)	(88.9)	(166.8)
Transferred between categories	59.4	0.0	0.0	(59.4)	0.0
Effect of movements in foreign exchange 1)	14.7	55.6	5.1	19.5	94.9
Balance at 31 December 2017	445.6	719.3	171.1	810.8	2,146.8
Balance at 1 January 2018	445.6	719.3	171.1	810.8	2,146.8
Acquisitions through business combinations	0.0	1.6	1.1	6.6	9.3
Other acquisitions	23.0	175.1	50.0	306.8	554.9
Disposals	(0.7)	(11.8)	(12.4)	(94.7)	(119.6)
Effect of movements in foreign exchange 2)	11.9	23.6	12.3	41.4	89.2
Balance at 31 December 2018	479.8	907.8	222.1	1,070.9	2,680.6
Depreciation and impairment losses
Balance at 1 January 2017	116.2	375.7	84.5	397.7	974.1
Depreciation charge for the year	28.1	78.6	20.8	94.0	221.5
Disposals	(6.3)	(37.7)	(13.2)	(59.0)	(116.2)
Transferred between categories	6.0	0.0	0.0	(6.0)	0.0
Effect of movements in foreign exchange 1)	4.6	45.9	5.5	13.5	69.5
Balance at 31 December 2017	148.6	462.5	97.6	440.2	1,148.9
Balance at 1 January 2018	148.6	462.5	97.6	440.2	1,148.9
Depreciation charge for the year	28.7	84.9	23.1	142.0	278.7
Disposals	(0.7)	(11.1)	(12.0)	(71.7)	(95.5)
Effect of movements in foreign exchange 2)	8.2	16.3	8.3	39.4	72.2
Balance at 31 December 2018	184.8	552.6	117.0	549.9	1,404.3
Depreciation rate 4)	2-4%	10-33%	15-33%	10-20%
Useful life	50 yrs	10 yrs	7 yrs	5-10 yrs
Carrying amounts
31 December 2017	297.0	256.8	73.5	370.6	997.9
31 December 2018	295.0	355.2	105.1	521.1	1,276.3
Finance lease carrying amounts (as included in total carrying amounts)
31 December 2017	0.0	0.0	0.0	0.0	0.0
31 December 2018	0.0	0.0	0.0	0.0	0.0

1) Exchange rates as of 31 December 2017 were used in calculating tangible assets of foreign subsidiaries. 2) Exchange rates as of 31 December 2018 were used in calculating tangible assets of foreign subsidiaries. 3) Including land of NOK 40.3 million as of 31 December 2018. 4) All depreciation plans are linear.

Minimum lease payments under operational lease 2018 2017

421.8	164.3
522.8	411.9
242.4	448.9

TOMRA does not have any major property, plant and equipment purchase commitments as of 31 December 2018.

NOTE 9 PROPERTY, PLANT AND EQUIPMENT NOTE 9 PROPERTY, PLANT AND EQUIPMENT (CONT.)

Minimum lease income from operating leasing equipment	2018	2017
Not later than one year	225.8	224.3
Between one and five years	633.4	591.4
More than five years	76.8	130.4
TOMRA SYSTEMS ASA - NGAAP	Machinery
Amounts in NOK million	& Fixtures	Vehicles	Total
Cost
Balance at 1 January 2017	46.3	2.1	48.4
Acquisitions	7.5	0.0	7.5
Disposals	0.0	0.0	0.0
Balance at 31 December 2017	53.8	2.1	55.9
Balance at 1 January 2018	53.8	2.1	55.9
Acquisitions	11.1	0.3	11.4
Disposals	0.0	0.0	0.0
Balance at 31 December 2018	64.9	2.4	67.3
Depreciation and impairment losses
Balance at 1 January 2017	22.1	0.9	23.0
Depreciation charge for the year	7.4	0.4	7.8
Disposals	0.0	0.0	0.0
Balance at 31 December 2017	29.5	1.3	30.8
Balance at 1 January 2018	29.5	1.3	30.8
Depreciation charge for the year	7.2	0.3	7.4
Disposals	0.0	0.0	0.0
Balance at 31 December 2018	36.7	1.6	38.2
Depreciation rate 1)	10-33%	15-33%
Useful life	10 yrs	7 yrs
Carrying amounts
31 December 2017	24.3	0.8	25.1
31 December 2018	28.2	0.8	29.0

1) All depreciation plans are linear.

2018	2017
225.8	224.3
633.4	591.4
76.8	130.4
Machinery
& Fixtures	Vehicles	Total
46.3	2.1	48.4
7.5	0.0	7.5
0.0	0.0	0.0
53.8	2.1	55.9
53.8	2.1	55.9
11.1	0.3	11.4
0.0	0.0	0.0
64.9	2.4	67.3
22.1	0.9	23.0
7.4	0.4	7.8
0.0	0.0	0.0
29.5	1.3	30.8
29.5	1.3	30.8
7.2	0.3	7.4
0.0	0.0	0.0
36.7	1.6	38.2
10-33%	15-33%
10 yrs	7 yrs
24.3	0.8	25.1
28.2	0.8	29.0

2018	2017
8.4	8.2
33.7	35.2
26.0	50.3

Minimum lease payments under operational lease of offices 2018 2017

Not later than one year 8.4 8.2 Between one and five years 33.7 35.2 More than five years 26.0 50.3

NOTE 10 INTANGIBLE ASSETS

GROUP - IFRS	Development
Amounts in NOK million	Goodwill	costs 6)	Other 4)	Total
Cost
Balance at 1 January 2017	2,288.9	457.9	827.4	3,574.2
Acquisitions through business combinations	379.1	74.9	27.1	481.1
Other acquisitions / internally developed	0.0	48.6	96.7	145.3
Disposals	0.0	0.0	(1.1)	(1.1)
Effect of movements in foreign exchange 2)	112.4	13.4	22.3	148.1
Balance at 31 December 2017	2,780.4	594.8	972.4	4,347.6
Balance at 1 January 2018	2,780.4	594.8	972.4	4,347.6
Acquisitions through business combinations 7)	272.3	0.0	76.0	348.3
Other acquisitions / internally developed	0.0	55.7	127.9	183.7
Disposals	0.0	0.0	(1.2)	(1.2)
Effect of movements in foreign exchange 3)	32.7	2.5	27.7	62.9
Balance at 31 December 2018	3,085.4	653.0	1,202.8	4,941.3
Depreciation and impairment losses
Balance at 1 January 2017	180.8	348.1	513.1	1,042.0
Depreciation charge for the year 5)	0.0	47.1	105.6	152.7
Impairment losses	0.0	0.0	0.0	0.0
Disposals	0.0	0.0	(1.1)	(1.1)
Effect of movements in foreign exchange 2)	(5.2)	12.5	16.9	24.2
Balance at 31 December 2017	175.6	407.7	634.5	1,217.8
Balance at 1 January 2018	175.6	407.7	634.5	1,217.8
Depreciation charge for the year 5)	0.0	57.5	116.7	174.2
Impairment losses	0.0	0.0	0.0	0.0
Disposals	0.0	0.0	(0.6)	(0.6)
Effect of movements in foreign exchange 3)	6.0	2.3	17.6	25.9
Balance at 31 December 2018	181.6	467.5	768.2	1,417.3
Depreciation rate 1)	0 %	14-33%	5-33%
Useful life	Indefinite	3-7 yrs	3-20 yrs
Carrying amounts 31 December 2017	2,604.8	187.1	337.9	3,129.8
31 December 2018	2,903.9	185.4	484.6	3,523.9

1) All depreciation plans are linear except for customer relations and technology from the purchase price allocation of BEST that have a declining depreciation profile.

• 2) Exchange rates as of 31 December 2017 were used in calculating intangible assets of foreign subsidiaries.
• 3) Exchange rates as of 31 December 2018 were used in calculating intangible assets of foreign subsidiaries.
• 4) Other intangibles comprises patents, software and other intangibles + purchase price allocations from acquisitions (including customer relations, agent network and trademarks).
• 5) Amortization of intangibles is classified as depreciation in the profit and loss statement.
• 6) Capitalized development costs comprises mainly salaries to engineers and parts utilized in development projects related to new sorters and reverse vending machines. The carrying amount at 31 December 2018 was NOK 106.9 million for TOMRA Sorting and NOK 78.5 million for TOMRA Collection.
• 7) Acquisitions of NOK 379.1 million in Goodwill in 2017 is mainly related to acquiring the Compac Group, and acquisition of NOK 272.3 in Goodwill in 2018 is mainly related to acquiring the BBC Group, see note 24.

Impairment tests for cash-generating units containing goodwill The following units have significant carrying amounts of goodwill (each area comprises several CGU.

Impairment tests are performed at CGU level):

Amounts in NOK million	2018	2017
TOMRA COLLECTION SOLUTIONS
- Reverse vending	238.8	234.8
- Material recovery	112.6	106.3
TOMRA SORTING SOLUTIONS
- Tomra Sorting ex. Compac and BBC	1,936.4	1,926.4
- Compac	336.9	337.3
- BBC	279.2

Amounts in NOK million	2018	2017
TOMRA COLLECTION SOLUTIONS
- Reverse vending	238.8	234.8
- Material recovery	112.6	106.3
TOMRA SORTING SOLUTIONS
- Tomra Sorting ex. Compac and BBC	1,936.4	1,926.4
- Compac	336.9	337.3
- BBC	279.2
Total	2,903.9	2,604.8

TOMRA tests goodwill and other intangible assets with infinite useful life annually or more frequently if there are impairment indicators. As of 31 December 2018 and 2017 the Group had no intangible assets with infinite useful life, other than goodwill. Property, plant and equipment and other tangible assets with finite useful life are tested if there are indicators that assets might be impaired.

The recoverable amount of the cash-generating units is based on value in use calculations. These calculations use cash flow projections based on actual operating results (EBITA) and a five-year business plan including a residual value.

Significant assumptions

Based on an overall assessment, TOMRA has identified the following assumptions as most sensitive to the value in use calculations.

Growth rate

Operating profit (EBITA)

The future operating profit is dependent on a number of factors, but primarily volumes/market growth and operating expenses/cost of production. In the impairment tests, TOMRA has estimated EBITA based on management's experience, expectations of future market development and the already implemented cost saving initiatives.

TOMRA has experienced significant growth for several years, and both the Sorting segment and the Collection segment have grown revenues organically by ~10 percent per year the last 5 years on average, excluding acquisitions. The growth used in the impairment tests is consequently significantly lower than those experienced historically. In prediction of cash flows, management has utilized a conservative approach, and the predicted development is in general lower than what has been utilized in the strategic plan, approved by the Board in 2018. It is also lower than the financial targets (more than 10 percent yearly revenue growth for the five year period starting 2018). The growth in the terminal year is set to 1.5 percent in the analysis. terminal value as it is assumed depreciation equals capital expenditure in the long run. Below is a further description of the different cash generating units and consideration around the impairment tests. Reverse Vending The business stream comprises the development, production, sale and service of reverse vending machines and related data management systems in the deposit markets in Europe and USA, in total 20 markets. The main

Discount rates

The discount rates are based on the Weighted Average Cost of Capital (WACC) formula derived from the CAPM model. When calculating the WACC (which has been done individually for each CGU) rates of 7.00 percent to 7.50 percent after tax have been used for the different CGUs.

Capital expenditure and capital employed

Capital employed is generally assumed to develop in line with revenues, and sales prices are in general assumed to be stable, following inflation. Capital expenditure is generally equal to depreciation in the calculation of

customer group is food retail chains. With a high market share and significant service business, the business stream represents a steady recurring cashflow, with limited risk, as TOMRA has been the global market leader in this business stream for more than 40 years. Terminal growth rate is assumed to be 1.5 percent, and a WACC of 7.0 percent has been utilized.

NOTE 10 INTANGIBLE ASSETS (CONT.)

NOTE 10 INTANGIBLE ASSETS

(CONT.) NOTE 10 INTANGIBLE ASSETS (CONT.)

Material Recovery

The business stream comprises the pick-up, transportation and processing of empty beverage containers on behalf of beverage producers/fillers on the US East Coast and in Canada. The activity in the business stream mirrors the drinking consumption in the US deposit states, which is usually stable year over year. TOMRA is the market leader in this business stream in regions where it is present, and has been so for over 20 years. Terminal growth rate is assumed to be 1.5 percent, and a WACC of 7.0 percent has been utilized.

TOMRA Sorting

The business area comprises the development, production, sale and service of sorting and processing technology for different customer segments.

In the food business stream, the customers are the fresh and processed food industries. TOMRA is the global market leader in sorting mid-sized objects. With main customers being food producing companies, the cyclicality in the business stream is low, due to the global dependency on a steady stream of food. Recurring revenue is however low (as for all sorting entities), as the installed base is rather new (less replacements sales) and service only accounts for a smaller fraction of revenues. The business has however been growing for many years, and has still significant untapped potential, as many sorting tasks are still performed manually and new technology enables sorting of fragments / sorting with a quality that previously was not possible.

In the recycling business stream, the customers are waste management companies or plant builders operating on behalf of them, where TOMRA provides sorting systems for waste and metal material streams. TOMRA is the global market leader in the business stream and has been so for more than 10 years. The business stream experiences some cyclicality due to fluctuations in material prices.

In the mining business stream, the customers are mining companies, where TOMRA provides ore sorting systems. Current penetration in the mining industry is more limited, but with significant potential, as the acceptance of optical sorting solutions is increasing within the industry.

A terminal growth of 1.5 percent and a WACC of 7.5 percent has been used for TOMRA Sorting.

Due to reorganizations, where synergies are taken out by merging units and technology is cross utilized between previously separate business streams and companies, the allocation of assets and cash flow within TOMRA Sorting has been difficult and in many cases arbitrary. The impairment test in 2013 was the last performed as a bottom up exercise per business stream, where the allocated goodwill was tested. Further integration and restructuring in 2014 added to this complexity and it is no longer possible to follow the cashflow from each of the initial acquisitions within TOMRA Sorting. Consequently TOMRA Sorting from 2014 was treated as one CGU. With the acquisition of Compac in 2017 and BBC in 2018 (ref. disclosure note 24), TOMRA Sorting now consists of three CGUs, one for the initial acquisitions in TOMRA Sorting, one for Compac and one for BBC. TOMRA Collection has not been influenced by the restructuring and cross utilization of technologies, and the number of cash generating units has consequently not been changed within this business area.

Sensitivity analysis

In connection with the impairment testing of CGU's containing goodwill, a sensitivity analysis has been performed. A reasonably possible change in key assumptions on which management has based its determination of the unit's recoverable amount would not cause the unit's carrying amount to exceed its recoverable amount.

Neither an interest rate increase of 2 percentage points, nor a reduction in forecasted cashflow of 10 percent would trigger a write-down of goodwill.

Exchange rates as of 31 December 2018 were used in calculating carrying values (see note 19). In calculating the predicted cash flows, the following exchange rates were used EUR/NOK: 9.60 USD/NOK: 8.10.

Research and development expense

Research and development cost of NOK 389.5 million has been recognized as an expense (2017: NOK 276.4 million) and NOK 55.7 million has been capitalized (2017: NOK 48.6 million).

Amounts in NOK million

Cost

TOMRA SYSTEMS ASA - NGAAP Amounts in NOK million	Other	Patents	Total
Cost
Balance at 1 January 2017	52.6	4.4	57.0
Other acquisitions -internally developed	23.2	0.0	23.2
Balance at 31 December 2017	75.8	4.4	80.2
Balance at 1 January 2018	75.8	4.4	80.2
Other acquisitions -internally developed	48.4	0.0	48.4
Balance at 31 December 2018	124.2	4.4	128.6
Depreciation and impairment losses
Balance at 1 January 2017	10.3	1.5	11.8
Depreciation charge for the year	12.5	0.8	13.3
Balance at 31 December 2017	22.8	2.3	25.1
Balance at 1 January 2018	22.8	2.2	25.0
Depreciation charge for the year	18.4	0.8	19.2
Balance at 31 December 2018	41.2	3.1	44.3
Depreciation rate	20 %	20 %
Useful life	5 yrs	5 yrs
Carrying amounts
31 December 2017	53.0	2.1	55.1
31 December 2018	83.0	1.4	84.3

Carrying amounts

Other consists of investments in ERP systems and website.

NOTE 12 OTHER CURRENT LIABILITIES

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
30.4 - 664.8 90.1 785.3	28.2 - 346.8 115.4 490.4	Tax deductions, social security tax, holiday pay Advances from customers Dividend accruals Non interest-bearing debt 1) Total other current liabilities	453.4 - - 506.3 959.7	310.8 407.7 - 549.5 1,268.0

1) Non interest-bearing debt includes forward contracts of NOK 0.8 million (NOK 27.9 million in 2017).

NOTE 11 TAXES

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK miliion	2018	2017
		TAX BASIS
451.2	481.0	Profit before taxes
(240.0)	(258.1)	Dividend from subsidiaries
(4.0)	(13.3)	Permanent differences
(46.1)	(10.8)	Change in temporary differences
161.1	198.8	Basis for taxes payable
		TAXES
37.0	47.7	Taxes payable	220.6	249.2
-	0.5	Tax over-accrued last year	-	-
1.1	1.8	Tax effect of equity transactions	6.7	27.9
12.4	4.7	Net change in deferred taxes	26.5	(47.8)
50.5	54.7	Tax expense	253.8	229.3
		Effective tax rate
		Taxes based upon actual tax rates	237.3 23.0 %	210.5 23.7 %
		Tax effect from permanent differences	16.5 1.6 %	18.8 2.1 %
		Actual tax expense	253.8 24.6 %	229.3 25.9 %

NOTE 11 TAXES (CONT.)

Deferred tax represents the net change in deferred tax assets and liabilities through changes in timing differences and loss carried forward. Deferred tax assets and liabilities are presented net of their respective tax effect using tax rate of the applicable jurisdiction applied to amounts representing future tax deductions or taxes payable and consist of the following as of 31 December.

	Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK miliion	2018	2017
		DEFERRED TAX ASSETS
-	-	Inventory	142.0	130.4
(0.1)	6.4	Other current assets	4.3	29.8
19.9	21.6	Intangible non-current assets	75.6	43.0
0.7	0.7	Tangible non-current assets	7.8	(28.7)
-	-	Financial non-current assets	1.4	7.7
2.9	4.3	Provisions	32.3	28.0
6.0	8.2	Other current liabilities	23.7	46.1
9.2	9.7	Pension reserves	9.3	24.9
-	-	Loss carried forward	0.5	1.0
38.5	50.9	Total deferred tax assets	296.9	282.2
		DEFERRED TAX LIABILITIES
		Inventory	(3.7)	-
		Other current assets	(20.6)	-
		Intangible non-current assets	173.0	108.0
		Tangible non-current assets	52.5	2.5
		Financial non-current assets	(5.0)	1.1
		Provisions	0.7	2.6
		Current liabilities	(27.0)	-
		Pension reserves	(14.5)	-
		Total deferred tax liabilities	155.5	114.2

Negative and positive timing differences, which reverse or may reverse in the same period, are offset. Deferred taxes are calculated on the basis of timing differences and losses carried forward that are offset. Timing differences between different subsidiaries have not been offset. During the period that these differences reverse, the companies will have a taxable net income that is sufficient to realize the deferred tax allowance. The losses carried forward are all in countries where future taxable profits are expected.

The change in tax rates in the US has slightly reduced tax expenses in 2018.

NOTE 13 PROVISIONS

TOMRA SYSTEMS ASA - NGAAP

Amounts in NOK million	Warranty	Other	Total
Balance at 1 January 2018	18.6	0.0	18.6
Provisions made during the year	1.3	0.0	1.3
Provisions used during the year	(1.0)	0.0	(1.0)
Provisions reversed during the year	(5.8)	0.0	(5.8)
Balance at 31 December 2018	13.1	0.0	13.1
GROUP - IFRS
Amounts in NOK million	Warranty	Other	Total
Balance at 1 January 2018	138.9	8.5	147.4
Provisions from acquisitions	13.1	0.0	13.1
Provisions made during the year	123.9	1.1	125.0
	(100.9)	0.0	(100.9)
Provisions used during the year
Provisions reversed during the year	(35.1)	0.0	(35.1)

Warranty provisions relate to accruals for service expenses assumed to occur during the period sold machines are covered by warranties given to the customer.

Other provisions comprise of provisions for contractual obligations with business partners.

NOTE 14 RELATED PARTIES

GROUP - IFRS

Amounts in NOK, unless stated otherwise

Identification of related parties

The Group has a related party relationship with its subsidiaries and associates (see disclosure note 15 and 16) and with its directors and executive officers. All transactions with related parties are based on arms length principles.

The tables in this note show all benefits that were received by Board members and Group Management for the stated years.

2018	Share-	Board	Committee		Variable	Other
Board members	holding 1)	fees 4)	fees 4) 5)	Salary 6)	salary 7)	benefits 9)
Jan Svensson (Chairman and
Compensation & Organizational
Development Committee) 10)	7,000	629,000	49,500
Aniela Gabriela Gjøs (Board member
and Audit Committee)	12,500	448,000	34,500
Pierre Couderc (Board member
and Audit Committee)		448,000	49,500
Bodil Sonesson (Board member
and Corporate Responsibility Committee)		448,000	49,500
Linda Bell (Board member and
Compensation & Organizational
Development Committee)	1,931	448,000	34,500
Bente Traa (Employee elected)	905	234,000		799,780	131,530	31,824
David Williamson (Employee
elected and Corporate
Responsibility Committee)	1,538	234,000		456,269	37,667	24,263
Jon Hindar (Nomination Committee)			69,000
Eric Douglas (Nomination Committee) 11)			44,500
Hild Kinder (Nomination Committee)			44,500
Rune Selmar (Nomination Committee,
from April 2018) 10)			22,000

2018	Share-			Variable	Pension	Other
Group Management	holding 1)	Loan 3)	Salary 6)	salary 7)		premiums 8) benefits 9)
Stefan Ranstrand (President & CEO) 2)	126,910		5,526,811	2,442,439	837,040	923,795
Espen Gundersen (Deputy CEO & CFO)	57,914		2,776,425	1,326,125	924,114	977,361
Volker Rehrmann (EVP and CTO,
Head of Business Area Sorting Solutions) 28,050 Harald Henriksen (EVP, Head of Business			EUR 332,883 EUR 141,480		EUR 25,527	EUR 14,863
Area Collection Solutions)	57,148	1,400,000	2,498,781	1,133,836	802,826	1,039,180
Anneli Forsman (SVP, Head of Northern
Europe Collection Solutions)			SEK 2,011,146	SEK 950,000	SEK 428,002	SEK 129,193
Heiner Bevers (SVP, Head of North
America Collection Solutions)	63,090		USD 493,231 USD 139,564			USD 171,369
Frank Höhler (SVP, Head of Central and
Eastern Europe Collection Solutions)	5,950		EUR 256,250	EUR 44,844	EUR 5,125	EUR 12,401
Tom Eng (SVP, Head of Tomra Sorting
Solutions, Recycling)	10,748		1,531,503	610,086	600,291	551,799
Ashley Hunter (SVP, Head of Tomra
Sorting Solutions, Food)	28,877		EUR 290,712 EUR 317,886		EUR 9,319	EUR 31,943
Mike Riley (CEO Compac)			EUR 278,641	EUR 87,076	EUR 8,359	EUR 352
Elisabet Sandnes (SVP, Head of Group
Strategy) 12)	1,568		1,064,189	522,500	114,911	55,012
2017	Share-	Board	Committee		Variable	Other
Board members	holding 1)	fees 4)	fees 4) 5)	Salary 6)	salary 7)	benefits 9)
Jan Svensson (Chairman and Compensation Committee) 10)	7,000	612,500	48,500
Aniela Gabriela Gjøs
(Board member and Audit Committee)	12,500	435,000	33,500
Pierre Couderc
(Board member and Audit Committee)		435,000	48,500
Bodil Sonesson (Board member and
Corporate Responsibility Committee)		435,000	48,500
Linda Bell (Board member and
Compensation Committee)	1,674	435,000	33,500
Ingrid Solberg (Employee elected,
until April 2017)		112,500		1,056,064	230,103	48,087
Bente Traa (Employee elected,
from April 2017)	744	112,500		776,535 13)	127,452	37,523
David Williamson (Employee elected
and Corporate Responsibility Committee) 1,137		225,000		446,472 13)		13,971
Tom Knoff (Nomination Committee,
until April 2017)			34,000
Jon Hindar (Nomination Committee,
from April 2017)			33,000
Eric Douglas (Nomination Committee) 11) Hild Kinder (Nomination Committee)			43,500 43,500
2017	Share-			Variable	Pension	Other
Group Management	holding 1)	Loan 3)	Salary 6)	salary 7)		premiums 8) benefits 9)
Stefan Ranstrand (President & CEO) 2)	115,637		5,253,324	1,069,788	797,690	668,511
Espen Gundersen (Deputy CEO & CFO)	53,081		2,674,391	580,843	808,239	813,875
Volker Rehrmann (EVP and CTO,
Head of Business Area Sorting Solutions) 22,502			EUR 320,080 EUR 105,466		EUR 2,221	EUR 17,069
Harald Henriksen (EVP, Head of Business
Area Collection Solutions)	51,844	1,400,000	2,381,497	226,540	720,345	883,101
Fredrik Nordh (SVP, Head of Nordic
Collection Solutions) 12)			SEK 1,182,223	SEK 474,001	SEK 318,744	SEK 746,495
Anneli Forsman (SVP, Head of Northern
Europe Collection Solutions) 12)			SEK 362,634	SEK 180,082	SEK 70,062	SEK 11,539
Heiner Bevers (SVP, Head of North
America Collection Solutions)	56,260		USD 409,731 USD 139,564			USD 175,258
Frank Höhler (SVP, Head of Central
and Eastern Europe Collection Solutions) 1,770			EUR 250,000	EUR 55,325	EUR 5,000	EUR 4,620
Tom Eng (SVP, Head of Tomra Sorting
Solutions, Recycling)	7,828		1,424,923	423,871	457,596	357,981
Ashley Hunter (SVP, Head of Tomra
Sorting Solutions, Food)	23,686		EUR 303,895	EUR 84,165	EUR 9,542	EUR 18,516
Mike Riley (CEO Compac)			NZD 458,654 NZD 270,000		NZD 13,759	NZD 612

Loans to employees as of 31 December amounted to NOK 1.8 million (2017: NOK 2.1 million) for the parent company and NOK 2.0 million (2017: NOK 2.3 million) for the Group.

NOTE 14 RELATED PARTIES (CONT.)

1) Shareholding

The column shows number of shares owned by the Board members, officers and companies controlled by them and their families.

2) Remuneration CEO

Stefan Ranstrand could in 2018 earn a variable salary up to 50 percent of his fixed salary, based upon the Group's performance. He also participated in the Long Term Incentive Plan (see below). The CEO is entitled to 12 months salary as severance pay, in the case of dismissal.

3) Loans to management

Loans in NOK as of 31 December 2018 and 2017. The loans are secured by mortgages in real estate, motor vehicles or securities and are interest and installment free.

4) Board fees

The Board receives 50 percent of the estimated fees after six months, and the remaining after an additional six months, when the fees have been formally approved by the annual general assembly. The column shows actual payout in the year.

5) Committee fees

Fees related to participation in the Audit, Compensation & Organizational Development, Corporate Responsibility and Nomination Committees.

6) Salary

Ordinary salary received in the year.

7) Variable salary

Estimated bonus payments for the current year, based upon the performance in the current year. The amounts do not include payments from the LTIP-program described below

8) Pension premiums

Group Management members participated in the same pension plans as other employees in the jurisdiction they are employed. The CEO does not participate in the defined benefit plan and receives a fixed compensation instead. For further description of the pension plan, see note 17.

9) Other benefits

The value of other benefits received by Group Management and Board members during the year, including value of interest-free loans, car allowance, health insurance etc.

10) Shareholding Board member

Board member Jan Svensson holds the position of CEO in Investment AB Latour that had a holding of 39,000,000 shares in TOMRA at 31 December 2018. Board member Rune Selmer holds the position as CEO in Odin Forvaltning that had a holding of 1,417,485 shares in TOMRA at 31 December 2018.

11) Shareholding Committee member

Committee member Eric Douglas' family controls Investment AB Latour that had a holding of 39,000,000 shares in TOMRA at 31 December 2018.

12) Change in positions

Elisabet Sandnes joined TOMRA's Group Management as Senior Vice President, Head of Group Strategy in April 2018. Fredrik Nordh, SVP and Head of Nordic Collection Solutions, left TOMRA in September 2017.

Anneli Forsman joined TOMRA as Senior Vice President, Head of Northern Europe Collection Solutions in October 2017.

Extract from principles for remuneration of Group Management

Salary and other employment terms for senior executives shall be competitive to ensure that TOMRA can attract and retain skilled leaders. Salary should include both fixed and variable elements. The fixed salary should reflect the individual's area of responsibility and performance over time. Principles for remuneration shall be allowed to vary in accordance with local conditions. The remuneration structure shall be based on such factors as position, expertise, experience, conduct and performance. The variable salary shall not exceed 50 percent of the fixed annual salary and be based on the achievement of specific performance targets by TOMRA Group and/or the respective manager's unit.

Long Term Incentive Plans (LTIP)

The Board established in 2014 an LTIP-plan, where management is incentivized based upon improvements in the Group's reported EPS.

The targets are established as intervals, where the participants can earn from 30 percent (if the minimum target is met) up to 100 percent (if the maximum target is met) of one year's salary. The plan is consequently capped at one year's salary. Twenty five percent of earnings before tax (~fifty percent of earnings after tax) must be invested in TOMRA shares and kept for at least three years. If sold earlier, all proceeds from the sale belong to TOMRA.

For 2018, the actual performance for the fiscal year 2016, 2017 and 2018 was measured against the combined targets for the three years. The range where management could gain earnings was from 11.20 NOK (min) to 13.00 NOK (max). As the actual EPS for 2016, 2017 and 2018 combined was 13.83 NOK, management gained consequently full earnings under the LTIP-plan in 2018.

The targets for 2018 were established by the end of 2015 (which is a combination of the EPS for the years 2016, 2017 and 2018).

The targets for 2019 were established by the end of 2016 (which is a combination of the EPS for the years 2017, 2018 and 2019).

The targets for 2020 were established by the end of 2017 (which is a combination of the EPS for the years 2018, 2019 and 2020).

The targets for 2021 were established by the end of 2018 (which is a combination of the EPS for the years 2019, 2020 and 2021).

		To be invested in
	Earned in 2018	shares in 2019
Stefan Ranstrand (President & CEO)	5,200,000	1,300,000
Espen Gundersen (Deputy CEO & CFO)	2,758,340	689,585
Volker Rehrmann (EVP and CTO, Head of Business Area Sorting Solutions) EUR 332,883		EUR 83,221
Harald Henriksen (SVP, Head of Business Area Collection Solutions)	2,482,506	620,627
Anneli Forsman (SVP, Head of Northern Europe Collection Solutions)	SEK 950,000	SEK 237,500
Heiner Bevers (SVP, Head of North America Collection Solutions)	USD 420,250	USD 105,063
Frank Höhler (SVP and Head of Central and Eastern Europe
Collection Solutions)	EUR 256,250	EUR 64,063
Tom Eng (SVP and Head of Tomra Sorting Solutions, Recycling)	1,541,451	385,363
Ashley Hunter (SVP and Head of Tomra Sorting Solutions, Food)	USD 319,300	USD 79,825
Elisabet Sandnes (SVP, Head of Group Strategy & Investor Relations)	366,667	91,667

The collective compensation for key management personnel was as follows (22 managers in 2018 and 2017):

(CONT.)

Amounts in NOK million	2018	2017
Short-term employee benefits	81.8	70.1
Severance payments	0.0	0.0
Post-employment benefits	4.1	3.4
Total	86.0	73.5

Total remuneration is included in "employee benefit expenses" (see note 3).

Transactions with subsidiaries

Transactions between Group companies, which are related parties, have been eliminated in the consolidation and are

not disclosed in this note.

Auditors' fees

		2018	2017
Amounts in NOK million	Parent	Group	Parent	Group
Statutory audit	1,2	10,1	1,2	9,5
Other attestation services	0,0	0,7	0,0	0,5
Tax consulting	0,4	3,6	0,0	2,8
Other services	0,2	0,9	0,1	1,1
Total	1,8	15,3	1,3	13,9

Statutory audit fees to KPMG for the Group were NOK 8.8 million (NOK 8.2 million in 2017), and fees to other auditors were NOK 1.3 million (NOK 1.3 million in 2017).

Non-audit fees to KPMG for the Group were NOK 4.4 million (NOK 3.9 million in 2017), and non-audit fees to other auditors were NOK 0.8 million (NOK 0.5 million in 2017).

NOTE 14 RELATED PARTIES (CONT.) NOTE 14 RELATED PARTIES

NOTE 16 INVESTMENTS IN ASSOCIATES

	Incom
GROUP - IFRS			Tomra Recycling Tomra
	Ultre-	Tomra	Tomra	Technology Cleanaway
NOK million	PET	s.r.o.	Japan Ltd.	Co. Ltd. 1)	Pty Ltd.	Total
Book value 31 December 2017	50.7	-	2.2	2.8	23.2	78.9
Profit 2018	-	4.2	-	(1.1)	(14.8)	(11.7)
Dividend	(2.0)	(4.2)	-	-	-	(6.2)
Currency translation difference	2.8	-	0.2	(0.1)	(1.1)	1.8
Book value 31 December 2018	51.5	0.0	2.4	1.6	7.3	62.8
Equity at date of acquisition	41.0	0.0	0.0	0.0	0.0
Country	USA	Czech Republic	Japan	China	Australia
Year of acquisition	1999	1998	2008	2016	2017
Vote and share ownership	49 %	40 %	50 %	49 %	50 %

Summary financial information for associates on 100% basis:

2018						Total
Assets	171.7	15.5	141.4	4.1	209.3	542.0
Liabilities	53.9	0.1	109.8	0.8	194.7	359.3
Equity	117.8	15.4	31.6	3.3	14.6	182.7
Revenues	219.4	38.5	123.8	1.6	629.8	1,013.1
Profit/(loss)	-	11.7	2.4	(2.3)	(29.5)	(17.7)
2017						Total
Assets	146.7	13.8	140.2	6.0	89.7	396.4
Liabilities	47.7	0.4	112.1	0.3	43.3	203.8

Liabilities	47.7	0.4	112.1	0.3	43.3	203.8
Equity	99.0	13.4	28.1	5.7	46.4	192.6
Revenues	191.2	25.3	124.7	0.9	9.4	351.5
Profit/(loss)	(8.4)	10.3	7.1	(2.0)	(4.8)	2.2

/UI/
Assets	146.7
Liabilities	47.7
Equity	99.0
Revenues	191.2
Profit/(loss)	(8.4)

TOMRA SYSTEMS ASA - NGAAP

Tomra Systems ASA's transactions with related parties

Tomra Systems ASA has several transactions with related parties. All transactions are performed as part of ordinary business and executed at arms length principles.

The significant transactions are as follows:

Sales of RVMs, spare parts and service manuals/support of NOK 1,328 million in 2018 (NOK 1,328 million in 2017) to:

Tomra Butikksystemer AS Tomra Systems AB Tomra Systems AS OY Tomra AB Tomra Systems GmbH Tomra Systems BV Tomra Sorting Technology (Xiamen) Co. Ltd. Tomra Leergutsysteme GmbH Tomra of North America Inc. Tomra Canada Inc Tomra Service OÜ Tomra Systems NV Tomra Systems SA Tomra Systems UAB Tomra Systems d.o.o Tomra Collection Pty Ltd Tomra Collection Solution Taiwan Tomra Collection Ltd.

Purchase of RVMs and spare parts from Tomra Production AS of NOK 413 million in 2018 (NOK 404 million in 2017).

Management fee of NOK 8.1 million in 2018 (NOK 7.7 million in 2017).

Interest income on loans of NOK 37.2 million in 2018 (NOK 28.7 million in 2017), and interest expenses on loans of NOK 0.7 million in 2018 (NOK 0.1 million in 2017).

The Balance sheet includes the following amounts from transactions with related parties:

Amounts in NOK million	2018	2017
Loans to subsidiaries	1,490.3	764.9
Intra-group receivables	237.9	682.7
Loan from subsidiaries	(206.9)	(157.4)
Intra-group debt	(1,127.3)	(1,215.1)
Total	394.0	75.1

NOTE 15 SHARES AND INVESTMENTS

TOMRA SYSTEMS ASA - NGAAP

		Year of	Vote and
Amounts in NOK million	Country	acquisition	owner share	Book value
Tomra North America Inc	USA	1992	100.0 %	1,166.2
Tomra Europe AS	Norway	1998	100.0 %	10.0
Tomra Production AS	Norway	1998	100.0 %	15.0
Tomra Canada Inc	Canada	2000	100.0 %	79.8
Tomra Sorting Japan KK	Japan	2000	100.0 %	7.0
Tomra Sorting AS	Norway	2004	100.0 %	1,817.6
Tomra Sorting Technology
(Xiamen) Co. Ltd.	China	2010	100.0 %	81.4
Tomra Collection Pty Ltd.	Australia	2017	80.0 %	191.7
Total shares in subsidiaries				3,368.7
Tomra Japan Ltd.	Japan	2008	50.0 %	9.6
Total shares in associates				9.6

NOTE 14 RELATED PARTIES (CONT.)

NOTE 17 PENSION AND PENSION OBLIGATIONS

Total Pension costs and pension liability for TOMRA Group	GROUP IFRS
Amounts in NOK million	2018	2017
Net pension cost Norwegian plans	6.6	14.1
Net pension cost US plans	(2.8)	27.7
Net pension cost Belgian plans	7.0	-
Taxes	(3.0)	(6.1)
Net pension costs in Other Comprehensive Income	7.8	35.7
Pension liability Norwegian plans	41.8	42.2
Pension liability Belgian plans	5.0	-
Pension liability US plans	64.9	69.0
Total Pension liability	111.7	111.2

Norwegian plans

Tomra Systems ASA NGAAP			GROUP IFRS
2018	2017	Amounts in NOK million	2018	2017
		EXPENSE RECOGNIZED IN THE INCOME STATEMENT
7.8	7.1	Current service cost	7.8	7.1
-	(17.4)	Past service cost - plan amendment 2)	-	(17.4)
0.9	0.4	Interest cost (income)	0.9	0.4
1.2	(0.1)	Social security tax included in pension cost	1.2	(0.1)
9.9	(10.0)	Net pension costs in Income Statement	9.9	(10.0)
		EXPENSE RECOGNIZED IN OTHER COMPREHENSIVE INCOME
(11.5)	-	Actuarial loss (gain) - change in discount rate	(11.5)	-
12.5	11.9	Actuarial loss (gain) - change in other financial assumptions	12.5	11.9
3.1	2.5	Actuarial loss (gain) - experience DBO	3.1	2.5
(0.2)	(3.7)	Loss (gain) - experience Assets	(0.2)	(3.7)
1.9	1.7	Investment management cost	1.9	1.7
0.8	1.7	Social security tax included in pension cost	0.8	1.7
6.6	14.1	Net pension costs in Other Comprehensive Income	6.6	14.1
		FINANCIAL STATUS AS OF 31 DECEMBER
212.9	199.3	Present value of funded pension obligations	212.9	199.3
(171.1)	(157.1)	Fair value of plan assets	(171.1)	(157.1)
41.8	42.2	Pension liability	41.8	42.2
		BASIS FOR CALCULATION
2.60 %	2.30 %	Discount rate	2.60 %	2.30 %
2.75 %	2.50 %	Expected wage increase	2.75 %	2.50 %
2.50 %	2.25 %	Expected increase of base amount	2.50 %	2.25 %
2.60 %	2.30 %	Expected return on plan assets 31 December	2.60 %	2.30 %
10 yrs	11 yrs	Average remaining service period	10 yrs	11 yrs
		MOVEMENTS IN NET LIABILITY FOR DEFINED BENEFIT
		OBLIGATIONS AS RECOGNIZED IN THE BALANCE SHEET
42.2	54.6	Net liability at 1 January	42.2	54.6
(16.9)	(16.5)	Contributions received	(16.9)	(16.5)
6.6	14.1	Remeasurement recognized in Other Comprehensive Income	6.6	14.1
9.9	(10.0)	Expense recognized in the Income Statement (*)	9.9	(10.0)
41.8	42.2	Net liability at 31 December	41.8	42.2
		(*) The expense is recognized in the following line item in the income statement
9.9	(10.0)	Employee benefits expenses defined benefit plan	9.9	(10.0)
5.6	3.1	Employee benefits expenses defined contribution plan	51.4	50.1
15.5	(6.9)	Total employee benefits expenses 1)	61.3	40.1

1) NOK 5.8 million of total employee benefits for Tomra Systems ASA was charged to subsidiaries in 2018 (2017: NOK 6.3 million), and the interest of NOK 0.9 million is classified as employee benefits.

2) Past service cost - plan amendment is a one time effect from closing the right to a paid up defined contribution policy and changing the defined contribution plan to adapt to the change in State benefits.

Total employee benefits expenses for the Group is split as NOK 16.3 million in the Sorting Solutions segment (2017 NOK 24.5 million) and NOK 45.0 million in the Collection Solutions segment (2017 NOK 15.6 million).

TOMRA's best estimate of contributions expected to be paid into the plan for 2019 is NOK 12.8 million.

The discount rate is in accordance with guidelines from Norsk Regnskapsstiftelse at 31 August 2018, which was the best estimate of the rate at the time the basis for the calculation was set in October 2018. There were no changes in the long term interest rates towards the end of this year and the new guidelines at 31 December 2018. Due to the financial turmoil in Europe, the 10 year state bond interest has been unnaturally low. For this reason, Norsk Regnskapsstiftelse (NRS) in their 2017 and 2018 guidelines has recommended that the interest used for pension calculations should be set based upon preference bonds with sufficient liquidity (known as OMF-bonds). Over time it's assumed that the wage increase should not exceed the discount rate. TOMRA has consequently since 2013 calculated its pension liabilities based upon the implicit interest in OMF-bond.

GROUP - IFRS

Until the end of 2006 all employees in Norway were covered by a collective pension plan, where the insured pension plans covered employees in permanent positions of at least 50 percent of full time employment and below an age of 57 years at the employment date. The pension plan was structured as a retirement net agreement in that it guaranteed a supplement to the State benefits. There have not been any agreements for compensation of reductions in State benefits. The plan gives a right to defined future benefits (defined benefit plan). The benefit is mainly dependent upon years within the plan, salary at date of retirement and compensation from the State. The obligations are covered through Storebrand insurance company. The plan should ensure that the employees would get a pension of about 65 percent of salary, if they had full contribution time, limited upwards to 12G.

In 2007, TOMRA established a defined contribution plan, where TOMRA contributed 5% of salary between 1 and

6G and 8% of salary between 6 and 12G. The old defined benefit plan for salary up to 12G was at the same time closed for new members, so all new employees from January 2007 are members of the defined contribution plan instead.

Employees that were members of the defined benefit plan, could choose if they wanted to stay in this plan or join the new defined contribution plan. Employees that chose to change pension plan got a paid up policy for the benefit they had earned under the old plan. In total 65 employees chose to change pension plan.

From 1 January 2017 the defined contribution plan was changed to adapt to the change in State benefits. Under the new plan TOMRA contributes 6% of salary between 1 and 7.1G and 16 % of salary between 7.1 and 12G. The right to a paid up defined contribution policy was also closed from 1 January 2017.

In addition TOMRA had a separate pension plan for benefits over 12G, with the same coverage as the plan up to 12G. Until the end of 2006 the pension premium for such plans was not taxable for the receiver, but it would be taxable when the pension was paid out. The pension premium was not tax deductible for the company.

Due to changes in the tax regulations the pension premium paid is taxable from 1 January 2007 for the employee, while only the return of the pension is taxable when it is paid out. The pension premium is also tax deductible for the company.

To eliminate the effect of the changes in tax regulation for employees, the pension plan was adjusted to keep the benefit after tax unchanged for the employee. This was done by adjusting the pension premium down to a level where the employee would get the same benefit after tax as under the former pension plan. In addition TOMRA compensates the employee's tax on the pension premium.

The pension plans have been treated for accounting purposes in accordance with IAS 19. The parent company's plan, which also covers employees in Tomra Butikksystemer AS, Tomra Production AS and Tomra Sorting AS included 88 employees and 46 retirees at year-end 2018.

Actual return on plan assets was NOK 8.4 million in 2017.

NOTE 17 PENSION AND PENSION OBLIGATIONS (CONT.)

NOTE 18 CASH AND CASH EQUIVALENTS

Tomra Systems ASA NGAAP			Group IFRS
2018	2017	Amounts in NOK million	2018	2017
12.6	71.3	Cash and cash equivalents	397.0	593.5
12.6	71.3	Cash and cash equivalents in the statement of cash flows 1)	397.0	593,5

1) Includes restricted bank deposits totaling NOK 8.3 million for the Parent company and NOK 16.8 million for the Group.

Tomra Systems ASA and its fully owned subsidiaries participate in an international multi-currency cash-pool, operated by DNB Bank. All the subsidiaries deposit to and withdraw from the pool through the cash-pool agreement as an Intra-Group receivable/payable against Tomra Systems ASA, and the transactions are classified as such in the financial statements.

Life expectancy

Assumptions regarding future mortality have been based on published statistics and mortality tables K2013BE. The current life expectancy underlying the values of the defined benefit obligation at the reporting date were as follows.

	Men	Women
Life expectancy currently aged 65	21.0	24.1
Life expectancy at 65 currently aged 40	23.2	26.5

Plan assets comprise of

	2018	2017
Shares	15.4 %	14.9 %
Short-term bonds	9.5 %	19.9 %
Credit	16.1 %	14.1 %
Long-term bonds	35.7 %	32.3 %
Property	13.7 %	12.1 %
Other	9.6 %	6.7 %
Total	100.0 %	100.0 %

Change in plan assets

Amounts in NOK million	2018	2017
Fair value of assets at beginning of year 157.0		177.2
Expected return on plan assets	3.4	3.4
Remeasurement	(1.7)	2.0
Acquisition	-	-
Employer contribution	14.9	14.4
Benefits paid	(2.5)	(2.8)
Fair value of assets at end of year	171.1	157.0

SENSITIVITY ANALYSIS

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would change the amounts shown below.

Basis for calculation	tions 2018	Assump- Assump- Discount Discount tions 2017	rate +0.5	rate -0.5	Wage +0.5	Wage -0.5	Pension increase increase regulation +0.10
Discount rate	2.60 %	2.30 %	3.10 %	2.10 %	2.60 %	2.60 %	2.60 %
Expected wage increase	2.75 %	2.50 %	2.75 %	2.75 %	3.25 %	2.25 %	2.75 %
Expected increase of base amount	2.50 %	2.25 %	2.50 %	2.50 %	2.50 %	2.50 %	2.50 %
Expected pension regulation	0.80 %	0.40 %	0.80 %	0.80 %	0.80 %	0.80 %	1.30 %
Expected return on plan assets	2.60 %	2.30 %	2.60 %	2.60 %	2.60 %	2.60 %	2.60 %

Results
Amounts in NOK million
Service costs	7.4	7.4	6.7	8.3	8.0	6.9	6.9
Accumulated benefit obligation	169.7	171.4	155.3	186.0	169.7	169.7	167.1
Present benefit obligation	207.7	206.7	189.0	229.0	219.4	196.8	202.8
Total benefit obligation	290.2	289.2	261.8	322.6	309.8	271.7	278.7
Plan assets	171.1	157.0	171.1	171.1	171.1	171.1	171.1

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

The Metro-plan

Tomra North America participates in a multi-employer pension plan, the "Metro-plan". The plan is a Defined Benefit plan (DB) under IAS 19. As there was limited financial information available for the plan, TOMRA applied Defined Contribution plan (DC) accounting for the plan up until 31 December 2012. The Metro plan comprises 48 TOMRA employees. In 2013 the Metro-plan was restructured, and the fund provided TOMRA with information about TOMRA's net liabilities under the plan. TOMRA entered into an agreement with the fund to settle the underfunding in the plan though annual payments of USD 0.2 million per year over 25 years period. Consequently, a net pension liability of USD 3.5 million (net present value) was recognized in other comprehensive income as a change in estimate in 2013. The agreement with the fund also included a re-entry into the restructured DB-plan based on direct attribution, where TOMRA is responsible for funding of liabilities directly attributable to TOMRA employees only. The premium paid under this plan was USD 164,139 in 2017 and USD 165,125 in 2018.

TOMRA SYSTEMS ASA - NGAAP

From 1 January 2006 Tomra Systems ASA was obliged to have a pension plan for its employees, and its pension plan meets this requirement.

TOMRA has applied IAS 19 under NRS 6 since the Group's conversion to IFRS in 2004. Tomra Systems ASA changed to IAS 19R in 2013 following the same approach and consideration as described above for the Group.

NOTE 17 PENSION AND PENSION OBLIGATIONS (CONT.) NOTE 17 PENSION AND PENSION OBLIGATIONS (CONT.)

The responsibility for funding, cash management and financial risk management is handled centrally by the finance department in Tomra Systems ASA. Guidelines for the finance activities are determined by the financial strategy, which is reviewed and approved by the Board. The central treasury department acts as the corporate bank and is responsible for all external borrowing and hedging transactions in interest rates and currencies. TOMRA aims to limit its exposure to financial risk.

Interest rate risk

TOMRA's surplus cash is primarily used to reduce the loan amount on the revolving credit facilities. It may also be placed in securities with short maturities. In accordance with the adopted financial strategy, the duration of the portfolio should not exceed six months.

Non-current and current interest-bearing liabilities relates to a seven-year revolving credit facility of EUR 50 million or NOK/USD equivalent (established in December 2015), increased by the exercising of an accordian option of EUR 20 million (in January 2018) and one five- respectively seven-year revolving credit facility of each EUR 60 million, or NOK/SEK/USD equivalent (both established in April 2014). On the EUR 70 million revolving credit facility, interest is payable at a rate of NIBOR/EURIBOR/LIBOR plus a margin, dependent on TOMRA's NIBD/EBITDA ratio. On the two EUR 60 million credit facilities, interest is payable at a rate of NIBOR/EURIBOR/LIBOR/STIBOR plus a margin dependent on TOMRA's leverage ratio (NIBD/EBITDA). In addition TOMRA has an overdraft facility of NOK 300 million. A change in the interest rate of 100 basis points, calculated on the loan amount as per 31 December 2018, increases/decreases the annual financial costs by NOK 15.6 million. At year end cash and cash equivalents had a duration of zero (mainly bank holdings), and the duration of the three loan facilities was 1.9 years.

Capital management

TOMRA's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. TOMRA monitors return on capital as well as the level of dividends to shareholders. TOMRA seeks to maintain a balance between the higher returns that might be possible with higher level of borrowings and the advantage and security afforded by a sound capital position. TOMRA's target is to achieve a high return on capital and an equity ratio above 30 percent.

Credit risk

Credit risk is the risk of loss that may arise on outstanding contracts should a counterparty default on its obligations. The IFRS 9 Financial instrument standard, effective as of 1 January 2018, has had limited impact on TOMRA's consolidated balance sheet, statement of income and statement of cash flow due to TOMRA's limited use of complex financial instruments, in addition to the Group's immaterial historical credit losses. TOMRA's credit assessment includes quantitative and qualitative information based on historical experience, credit risk assessment and forward-looking information (including macro-economic factors) calculated on different groups of trade receivables with the same credit risk characteristics. Loss allowance is recognized based on lifetime expected credit losses, i.e. the credit loss that results from all possible default events over the expected life of the receivable. A default occurs if there's over 50% chance that the obligor will not be able to repay its debt. The credit risk is not considered to be significant on outstanding receivables as of 31 December 2018. The Group expensed NOK 5.2 million in bad debt in 2018 (NOK 0.3 million in 2017). However, TOMRA's customers include the largest retail chains in the world, as well as large scrap material processors and food producers, where outstanding receivables globally can be significant. In a situation where one of these systems collapses, TOMRA could be exposed. The maximum exposure to credit risk at year-end equalled total receivables in the balance sheet plus any unrealized gain on financial contracts.

In accordance with the Group's financial strategy, placement of surplus cash requires the counterpart to have a strong rating, with investments limited to NOK 100 million per bank. Surplus liquidity can also be placed in certificates issued by states or municipalities, as well as in short term security markets that require a safe investment structure.

TOMRA's main bank is DNB Bank, where TOMRA's EUR 70 million, or NOK/USD equivalent, credit facility is located in addition to the international cash pool with an overdraft facility of NOK 300 million. The two EUR 60 million credit facilities are provided by DNB and SEB. In order to have a full cash management solution, TOMRA has additional banks in some local markets. The tables below show TOMRA's outstanding loan per 31 December and respective counterpart's credit rating.

	31 December 2018			31 December 2017
		Rating Moody/				Rating Moody/
	Credit limit	Loan balance	S&P	Credit limit	Loan balance	S&P
DNB Bank ASA	EUR 70 million 1)	EUR 67 million	A+	EUR 50 million 1)	EUR 34 million	A+
DNB Bank ASA & SEB	EUR 60 million 2)	EUR 60 million	A+	EUR 60 million 2)	EUR 60 million	A+
DNB Bank ASA & SEB	EUR 60 million 2)	EUR 20 million	A+	EUR 60 million 2)	EUR 35 million	A+

1) or NOK/SEK/USD equivalent 2) or NOK/USD equivalent

Liquidity risk

Liquidity risk is the risk that TOMRA will not be able to meet its financial obligations as they fall due. TOMRA has a limited exposure to liquidity risk on the basis of a strong cash flow in addition to a solid balance sheet, 55 percent equity ratio at 31 December 2018, that will enable a higher debt ratio if necessary. The liquidity reserve (cash and unused credit lines) was NOK 1,058 million per 31 December 2018.

Commodity risk

The volatility of raw materials impacts both TOMRA's income and costs.

Income

TOMRA is indirectly exposed to fluctuations in commodity prices in the business area Sorting Solutions; for customers within waste-management, the value of the material that TOMRA scanners sort out is a source of income.

When commodity prices increase, the income to customers in this segment is affected, which affects the willingness to invest positively. The same applies in the mining segment, where customers are very exposed to fluctuations in commodity prices, which again influences their willingness to invest.

Costs

The increase in fuel prices is negative for TOMRA due to higher transportation costs. First and foremost, this applies to material handling operations, where an increase of USD 1 per gallon diesel decreases operating profit by USD 1.3

million a year. TOMRA uses a variety of raw materials in production, however, the volume of material components is not so significant that it has a material impact on profitability.

Foreign currency risk

TOMRA is exposed to changes in the value of NOK relative to other currencies. With ~98 percent of its income in foreign currencies, a strengthening of NOK will lead to reduced earnings for the Group when measured in NOK. The most significant risk is associated with fluctuations in EUR and USD. In accordance with the financial strategy, TOMRA can secure up to 12 months of expected future net cash flow. TOMRA primarily uses forward contracts as an economic instrument to hedge the cash flow. TOMRA has not applied hedge accounting in accordance with IAS39 for the cash flow.

Hedge accounting under IAS 39

In order to reduce the profit and loss volatility arising from currency fluctuations, TOMRA's EUR denominated debt amounting to EUR 147 million is designated as hedge of the net investment in European subsidiaries. The fair value of the borrowing at 31 December 2018 was EUR 147 million (NOK 1,462 million), which represents less than the net investment. The hedge has been highly effective for the period (100%). The foreign exchange loss of NOK 15.9 million on translating the borrowing to functional currency at the end of the reporting period is recognized in retained earnings, in shareholders' equity.

The split of revenues and the balance sheet as of 31 December in currencies, was distributed as follows:

	Revenues		Assets
	2018	2017	2018 2017
USD	47 %	45 %	17 % 20 %
EUR	43 %	43 %	50 % 52 %
NOK	2 %	2 %	14 % 14 %
OTHER	8 %	10 %	19 % 14 %

The split of the balance sheet as of 31 December in currencies was distributed between the balance lines as follows:

2018
USD	EUR	NOK	OTHER

	USD	EUR	NOK	OTHER
Total intangible non-current assets	9 %	61 %	2 %	28 %
Total tangible non-current assets	40 %	27 %	7 %	26 %
Total financial non-current assets	1 %	1 %	64 %	34 %
Inventory	18 %	56 %	10 %	16 %
Total receivables	22 %	56 %	19 %	3 %
Cash and cash equivalents	0 %	0 %	100 %	0 %
Total assets	17 %	50 %	14 %	19 %
Total non-current liabilities	14 %	81 %	0 %	5 %
Total current liabilities	14 %	53 %	27 %	6 %
Total liabilities	14 %	61 %	19 %	6 %

NOTE 19 FINANCIAL INSTRUMENTS NOTE 19 FINANCIAL INSTRUMENTS (CONT.)

	2017
	USD	EUR	NOK	OTHER
Total intangible non-current assets	9 %	73 %	2 %	16 %
Total tangible non-current assets	42 %	36 %	7 %	15 %
Total financial non-current assets	58 %	7 %	22 %	14 %
Inventory	25 %	46 %	13 %	16 %
Total receivables	28 %	49 %	10 %	13 %
Cash and cash equivalents	0 %	0 %	100 %	0 %
Total assets	21 %	52 %	14 %	14 %
Total non-current liabilities	10 %	83 %	5 %	1 %
Total current liabilities	14 %	31 %	36 %	19 %
Total liabilities	12 %	54 %	22 %	11 %

A 10 percent weaker/stronger NOK would normally lead to a 10-14 percent increase/decrease in operating profit. Currency fluctuations would in addition affect the book value of assets and liabilities in TOMRA's foreign subsidiaries. A 10 percent weakening/strengthening in the value of the NOK would have increased/decreased equity by ~NOK 467 million as per balance 31 December 2018. (This analysis assumes all other variables remain constant). Such changes in value would however only have limited P/L impact as they are mainly booked as translation differences against equity.

Sensitivity analysis - isolated currency rate changes' impact on operating profit before other items:

2018			2017
Amounts in NOK million	Income	Cost	Income	Cost
10% currency change USD/NOK	370	(198)	323	(197)
10% currency change EUR/NOK	404	(352)	337	(293)

Sensitivity analysis - isolated currency rate changes' impact on equity:

		2018		2017
Amounts in NOK million	Increase	Decline	Increase	Decline
10% currency change USD/NOK	104	(104)	236	(236)
10% currency change EUR/NOK	210	(210)	128	(128)

The following exchange rates were applied during the year 1):

		Average rate (P/L rate)		Reporting date rate (Balance rate)
	2018	2017	2018	2017
USD/NOK	8.133	8.271	8.689	8.205
EUR/NOK	9.600	9.330	9.948	9.840
SEK/NOK	0.936	0.968	0.970	1.000
AUD/NOK	6.079	6.336	6.133	6.412
NZD/NOK	5.631	5.877	5.833	5.840

1) Exchange rates distributed by the Norwegian Central Bank

The fair value of forward contracts is calculated at the end of each period, and at 31 December 2018 the value was recognized in other current liabilities at NOK 0.8 million (2017: NOK 27.9) and NOK 1.3 MNOK in other short-term receivables. Changes in fair value of forward contracts were recognized in the income statement in 2018. Change in fair value of spot and forward contracts and currency effect on cash flows in 2018 amounted to a loss of NOK 10.1 million (2017: a loss of 31.0 MNOK), see note 4. Currency contracts are accounted for at fair value according to IFRS 7, level 2. IFRS 13 has been applied effective 1 January 2013.

Outstanding forward foreign exchange contracts, as of 31 December:

		2018			2017
	Currency			Currency
Amount forward (sold) / bought					(million) 1) Exch.rate Due date (million) 1) Exch.rate Due date
EUR/NOK	(61.0)	9.866	2019	(72.0)	9.616	2018
GBP/NOK				0.1	10.722	2018
JPY/NOK				(286.0)	0.072	2018
SEK/NOK	9.0	0.963	2019	(22.5)	0.992	2018
AUD/NOK	(59.0)	6.201	2019	(9.2)	6.209	2018
ZAR/NOK				0.9	0.617	2018
USD/NOK	25.0	8.676	2019	(40.5)	8.294	2018
DKK/NOK				8.5	1.285	2018
KRW/NOK				-	-	2018
PLN/NOK	(5.0)	2.308	2019	(7.2)	2.234	2018
CAD/NOK	(4.0)	6.376	2019	(1.9)	6.347	2018
NZD/NOK	(9.5)	5.962	2019	0.7	5.734	2018

1) Face value

TOMRA had not entered into any commodity contracts as of 31 December 2018.

Overview of financial assets and liabilities - carrying and fair values:

	2018		2017
	Carrying	Fair	Carrying	Fair
Amounts in NOK million	amount	value	amount	value
Long term receivables	275.4	275.4	268.7	268.7
Receivables	1,513.6	1,513.6	1,468.6	1,468.6
Cash and cash equivalents	397.0	397.0	593.5	593.5
Forward exchange contracts	0.5	0.5	(27.9)	(27.9)
Finance lease liabilities	0.0	0.0	0.0	0.0
Unsecured bank facilities	(1,512.7)	(1,512.7)		(1,269.4) (1,269.4)
Other interest-bearing liabilities	(8.2)	(8.2)	(10.7)	(10.7)
Payables	(655.0)	(655.0)	(552.8)	(552.8)
Total	10.6	10.6	470.0	470.0

The following summarizes the major methods and assumptions used in estimating the fair values of financial instruments in the table:

Cash and cash equivalents

The carrying amounts of cash and cash equivalents equalled the fair value due to their short maturities.

Financial derivatives

The fair value of forward currency contracts represented quoted market price, i.e. the exchange rate at 31 December 2018 and the interest points obtained from the different market institutions.

Interest-bearing loans and borrowings

The fair value of the unsecured bank loan was based on loan amounts and accrued interest per 31 December 2018. Future interest payments and repayments with a time to maturity of more than one year are discounted.

Receivables/payables

For receivables/payables with a remaining life of less than one year, the notional amount was deemed to reflect the fair value. All other receivables/payables were discounted to determine the fair value.

There has not been any transfer of assets between the different valuation levels in 2018 compared to 2017.

NOTE 19 FINANCIAL INSTRUMENTS (CONT.) NOTE 19 FINANCIAL INSTRUMENTS (CONT.)

Interest rates used for determining fair value	2018	2017
Loans and borrowings	1.8 %	1.8 %
Receivables/payables	1.3 %	1.3 %

Financial assets and liabilities per 31 December 2018 - maturity analysis (discounted values):

	Carrying	Quarter 1	Quarter 2-4
Amounts in NOK million	amount	2019	2019	2020	2021
Long term receivables	275.4			110.2	165.3
Receivables	1,513.6	1,513.6
Cash and cash equivalents	397.0	397.0
Forward exchange contracts	0.5	(4.7)	5.3
Unsecured bank facilities	(1,512.7)	(647.2)	(199.0)		(666.5)
Other interest-bearing liabilities	(8.2)		(8.2)
Payables	(655.0)	(655.0)
Total	10.6	603.6	(201.9)	110.2	(501.3)

NOTE 20 SHARE-BASED PAYMENTS

GROUP - IFRS

Share Purchase Program

In 2008 TOMRA established a share purchase program for permanent employees. In this program TOMRA invites employees to buy shares in TOMRA at market price and receive one bonus share per five invested shares, provided the shares are kept for at least one year and the employee is still employed by TOMRA. The employee can buy shares up to a maximum of 30 percent of his/her gross salary. The share purchase program uses treasury shares acquired by TOMRA as authorized by the Annual General Meeting. The shares are purchased on the Oslo Stock Exchange.

	2018	2017
Number of shares purchased by employees	131,625	199,587
Share price (closing market share price, the day before the allotment date) 1) 187.00 / 190.40		98.67
Number of bonus shares, distributed one year after investment	40,087	43,019
Total expenses recognized	4.0 million	4.1 million

1) 129,638 shares were sold at NOK 187.00 on 31 May 2018 and 1,987 shares were sold at NOK 190.40 on 8 June 2018.

NOTE 21 EQUITY

TOMRA SYSTEMS ASA - NGAAP

Amounts in NOK million	capital	Share Treasury	Share shares premium	Paid-in capital	Retained earnings	Total equity	Number of shares
Balance per 1 January 2017	148.0	(0.5)	918.3	1,065.8	683.8	1,749.6	148,020,078
Profit for the period					426.3	426.3
Pensions					(12.3)	(12.3)
Purchase of own shares		(0.2)		(0.2)	(24.4)	(24.6)
Own shares sold to employees		0.2		0.2	23.7	23.9
Dividend to shareholders					(346.9)	(346.9)
Balance per 31 December 2017	148.0	(0.5)	918.3	1,065.8	750.2	1,816.0	148,020,078
Profit for the period					400.7	400.7
Pensions					(5.5)	(5.5)
Purchase of own shares
Own shares sold to employees		0.2		0.2	31.9	32.1
Dividend to shareholders					(664.8)	(664.8)
Balance per 31 December 2018	148.0	(0.3)	918.3	1,066.0	512.5	1,578.5	148,020,078

Share par value is 1 NOK.

Total shareholding of treasury shares was 284,628 as of year end 2018.

NOTE 19 FINANCIAL INSTRUMENTS (CONT.) NOTE 21 EQUITY (CONT.)

GROUP - IFRS

Amounts in NOK million	Paid-in capital	reserve	Remeasurements of defined (assets)		Total equity attributable to Translation benifit liability Retained the owners of controlling earnings the company	Non Interest	Total Equity
Balance per 1 January 2017	1,065.8	484.6	(40.4)	2,682.3	4,192.3	177.7	4,370.0
Profit for the period				610.7	610.7	47.1	657.8
Changes in translation differences		146.4			146.4	(7.9)	138.5
Remeasurements of defined
benefit liability (assets)			(35.7)		(35.7)		(35.7)
Total comprehensive income
for the period	0.0	146.4	(35.7)	610.7	721.4	39.2	760.6
Transactions with shareholders
Dividend non-controlling interest				(9.0)	(9.0)	(52.9)	(61.9)
Reclassification Tomra Baltic						(22.2)	(22.2)
Purchase of own shares	(0.2)			(24.4)	(24.6)		(24.6)
Own shares sold to employees	0.2			23.7	23.9		23.9
Minority new consolidated companies					0.0	1.5	1.5
Dividend to shareholders				(309.9)	(309.9)		(309.9)
Total transactions with shareholders	0.0	0.0	0.0	(319.6)	(319.6)	(73.6)	(393.2)
Balance per 31 December 2017	1,065.8	631.0	(76.1)	2,973.4	4,594.1	143.3	4,737.4
Profit for the period				740.2	740.2	38.7	778.9
Changes in translation differences		82.3			82.3	8.2	90.5
Change in estimate of put/call option 2)				(8.2)	(8.2)		(8.2)
Remeasurements of defined
benefit liability (assets)			(7.8)		(7.8)		(7.8)
Total comprehensive income
for the period	0.0	82.3	(7.8)	732.0	806.5	46.8	853.4
Transactions with shareholders
Dividend non-controlling interest				(9.0)	(9.0)	(31.4)	(40.4)
Own shares sold to employees	0.2			31.9	32.1		32.1
Minority new consolidated companies					0.0	0.5	0.5
Dividend to shareholders 1)				(346.8)	(346.8)		(346.8)
Total transactions with shareholders	0.2	0.0	0.0	(324.0)	(323.7)	(30.9)	(354.6)
Balance per 31 December 2018	1,066.0	713.3	(83.9)	3,381.5	5,076.9	159.3	5,236.2

1) Dividend payment was NOK 2.35 per share in 2018, as proposed in the 2017 financial statements. 2) See note 5 for more details.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations that are not integral to the operations of the company.

See also comment on IAS 39 Hedge accounting under disclosure note 19.

Dividends

After the balance sheet date the following dividends were proposed by the directors:

Amounts in NOK million	2018	2017
NOK 2.50 in ordinary dividend and NOK 2.00 in extraordinary
dividend per qualifying share (2017: NOK 2.35)	664.8	346.8

The dividend has not yet been provided for and there are no income tax consequences.

Earnings per share - Group	2018	2017
Average number of shares	148,020,078	148,020,078
Average number of shares, adjusted for own shares	147,663,865	147,650,899
Average number of shares, adjusted for own shares, fully diluted	147,663,865	147,650,899
Majority equity 31 December (MNOK)	5,076.9	4,594.0
Equity per share (NOK)	34.38	31.11
Net profit attributable to the shareholders of the parent (MNOK)	740.2	610.6
Earnings per share	5.01	4.14
Earnings per share, fully diluted	5.01	4.14

Purchase of own shares

TOMRA was granted authority to acquire treasury shares at the annual general meeting 24 April 2018, limited to a total of 500,000 shares. At the end of 2018, 0 shares had been purchased under this proxy.

NOTE 22 SHAREHOLDERS

The amounts shown are based upon information from Verdipapirsentralen and IPREO. On nominee accounts, information regarding beneficial ownership has been collected and presented where possible.

Registered at 31 December 2018	Number of shares	Ownership
1 Investment AB Latour	39,000,000	26.35 %
2 Folketrygdfondet	11,735,490	7.93 %
3 APG Asset Management N.V.	7,845,000	5.30 %
4 Nordea Investment Management AB (Sweden + Denmark)	3,821,401	2.58 %
5 Danske Capital AS (Norway + Denmark + Finland)	3,194,563	2.16 %
6 The Vanguard Group, Inc.	2,958,348	2.00 %
7 Capital Research Global Investors (U.S.)	2,887,234	1.95 %
8 Fidelity Management & Research Company	2,781,955	1.88 %
9 Impax Asset Management, LTD	2,255,946	1.52 %
10 Storebrand Asset Management AS (Norway + Sweden)	2,086,118	1.41 %
11 Lannebo Fonder AB	1,843,304	1.25 %
12 Templeton Investment Counsel, LLC	1,576,507	1.07 %
13 SEB Investment Management AB	1,482,846	1.00 %
14 Odin Forvaltning AS	1,417,485	0.96 %
15 Statoils Pensjonskasse	1,414,398	0.96 %
16 Handelsbanken Asset Management (Sweden + Norway)	1,294,405	0.87 %
17 J.P. Morgan Asset Management (UK), LTD	1,260,542	0.85 %
18 Alfred Berg Kapitalforvaltning AS (Norway + Sweden)	1,216,076	0.82 %
19 Jupiter Asset Management, LTD (U.K.)	1,083,082	0.73 %
20 Fidelity International Limited - FIL Investissements SAS	1,079,128	0.73 %
Total 20 largest shareholders	92,233,828	62.31 %
Other shareholders	55,786,250	37.69 %
Total (7,975 shareholders)	148,020,078	100.00 %
Shares owned by Norwegian residents	33,532,363	22.65 %
Shares owned by others	114,487,715	77.35 %
Total	148,020,078	100.00 %

NOTE 23 REVENUES

Transition

IFRS 15 establishes a comprehensive framework for determining whether, how much and when, revenue is recognized. It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. TOMRA has adopted IFRS 15 using the modified retrospective method, with the effect of initially applying this standard recognized at the date of initial application (i.e. 1 January 2018). IFRS 15 is applied retrospectively only to contracts that were not completed as of 1 January 2018. As a result, TOMRA will not apply the requirements of IFRS 15 to the comparative period presented, and i.e. the information for 2017 is as previously presented under IAS 18 and IAS 11. The revenues presented for 2018 would have been the same if reported under IAS 18 and IAS 11.

The Group has reviewed its contracts to consider if they have any effects of changing accounting principles to IFRS 15 1 January 2018. No effects have been identified based on this review.

Contract balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

Amounts in NOK million	2018	2017
Receivables from sales/contracts, included in receivables	1,327.2	1,260.3
Contract assets	407.8	200.6
Contract liabilities	589.2	395.5

Receivables from sales/contracts, included in receivables 1,327.2 1,260.3 Contract assets 407.8 200.6 Contract liabilities 589.2 395.5 Capitalized contract costs - -

For information about credit risk and loss allowance on receivables see note 19 and 7.

The contract assets primarily relate to the Group's right to consideration for work completed but not invoiced at the reporting date regarding service and process and handling fee.

The contract liabilities primarily relate to the advance consideration received from customers for service contracts and sale of Sorters.

NOTE 21 EQUITY (CONT.)

Amounts in NOK million	2018	2017
Projects under construction	(2.2)	1.9
Advances from customers	(110.1)	(126.3)
Net Projects under construction	(112.3)	(124.4)
Reported revenue (not invoiced) included in customer receivables	70.9	41.8
Share of outstanding receivables withheld in accordance with contract terms	59.4	54.7
Remaining production on loss-making projects	-	-
Revenue from projects in period	221.2	337.8
Costs from projects in period	119.8	208.9
Net result from projects in progress	101.5	128.8

NOTE 23 REVENUES (CONT.)

Significant changes in the contract assets and the contract liabilities balances during the period are as follows:

Amounts in NOK million

Contract assets
Opening balance 2018	200.6
Net Transfer from contract assets to receivables	(54.6)
Sales / service performed not yet invoiced	256.7
Business combinations	-
Currency effect	5.2
Closing balance	407.8

Amounts in NOK million

Contract liability
Opening balance 2018	395.5
Revenue recognized from contract liability	(505.7)
Cash/prepayments received, excluding amounts recognized as
revenues during the period	694.0
Transfer from contract asset to contract liability	1.0
Currency effect	4.5
Closing balance	589.2

Transaction price allocated to the remaining performance obligations

The following table includes revenues expected to be recognized in the future related to performance obligations that are unsatisfied at the reporting date.

Amounts in NOK million	2019	2020	2021	Total
Revenues from sale of Sorters	1,380.0	11.9	7.2	1,399.1

The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Revenues over time

Part of TOMRA's activities consists of developing and manufacturing products and systems to order. All projects are

accounted for in accordance with IFRS 15 as performance obligations satisfied over time.	Accounting year ended December Amounts in NZD million	FY15	FY16	FY17	FY18*
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably.	Profit and loss Revenues EBITDA	23 5	28 8	36 10	45 13
Contract revenue is recognized in profit or loss over time by measuring the progress towards complete satisfaction. The progress is assessed by reference to results achieved and milestones reached for the satisfaction of the performance	EBIT	4	6	8	11
obligation.	Balance sheet	FY15	FY16	FY17	FY18
	Intangible non-current assets	1	-	-	1
Contract expenses are recognized in line with completion milestones achieved.	Tangible non-current assets	2	4	2	2
	Inventory	6	7	7	6
Projects under construction is the amount of work in progress presented as inventory in the balance sheet.	Receivables	9	9	9	20
	Cash	3	2	5	4
Advances from customers is the net amount of accumulated earned revenue minus accumulated billing for all ongoing contracts where accumulated billing exceeds cumulative revenue. It is presented as other current liabilities in the	Total assets	17	22	23	33
balance sheet.	Equity	5	8	14	20
	Interest bearing debt	7	6	-	-
There were several construction contracts open at year end 2018.	Other liabilities	5	8	9	13
	Total debt and equity	17	22	23	33

Intangible non-current assets
Tangible non-current assets
Inventory
Receivables
Cash
Total assets

Unaudited numbers. Not harmonized with TOMRA Group accounting principles. *10 months. If the acquisition had occurred on 1 January 2018, revenues in 2018 for the TOMRA Group would have increased by approximately 2 MNZD and EBIT would have decreased by approximately 1 MNZD.

The figures for FY15, FY16 and FY17 are extracted from management accounts and adjusted for one-off income and expenses, and are not harmonized with TOMRA accounting principles.

NOTE 24 ACQUISITIONS

Acquisition of BBC

On 26 February 2018, TOMRA Systems ASA, through its fully owned subsidiary TOMRA Sorting AS, signed an agreement with the owners of BBC Technologies Ltd (New Zealand) and BBC Technologies Limited (USA) (together "BBC") to acquire 100 per cent of the shares in BBC.

BBC is headquartered in Hamilton, New Zealand and is a leading provider of precision grading systems for blueberries and other small fruits. The company complements TOMRA's own fruit inspection and grading technology portfolio. The majority of BBC Technologies sales have been from the blueberry segment, but the company also offers solutions for cherries, cherry tomatoes and other small soft fruits.

BBC origins go back to 2000, currently employing around 145 people across locations in New Zealand, Chile, Europe and USA. About 2,350 BBC Technologies machines have been sold worldwide. With year-end in December the company generated a 2017 EBITDA of approximately 10 MNZD on total revenue of approximately 36 MNZD.

Closing of the transaction took place 1 March 2018, and TOMRA paid a consideration of 363 MNOK corresponding to a value of 63.8 MNZD, free of cash and interest-bearing debt. TOMRA acquisition was settled in cash, and the transaction was financed through existing drawing rights.

NOTE 24 ACQUISITIONS (CONT.)

TOMRA has expensed NOK 5.7 million in acquisition related costs in the 2018 consolidated financial statements as other operating expenses.

Total goodwill as of acquisition date equals 48.0 MNZD and is not tax deductible. The acquired goodwill is assumed to mainly relate to synergies to be realized over time, possibilities for efficiency improvements and a positive market development.

There is no contingent consideration relating to this acquisition. No significant gain or loss has been recognized in BBC or in TOMRA Group, related to the acquisition of BBC in 2018.

BBC's activities are reported as part of TOMRA Sorting Solutions (Food).

The gross contractual amounts receivable as of 1 March 2018 was estimated to be NZD 9.4 million, all assumed to be collectable.

Preliminary Purchase Price Allocation

NZD million	Carrying amount	Fair value adjustment	Fair value
Goodwill	-	48.0	48.0
Other intangible non-current assets	0.9	9.6	10.5
Tangible non-current assets	1.6		1.6
Inventories	7.1	-	7.1
Receivables	9.4	-	9.4
Non-interest-bearing liabilities	(10.8)	(2.0)	(12.8)
Total consideration satisfied by cash	8.2	55.6	63.8

Net cash outflow:
Cash consideration paid	66.9
Cash acquired	3.1
Net cash outflow	63.8

NOTE 24 ACQUISITIONS (CONT.)

Acquisition of Compac

On 11 October 2016, TOMRA Sorting AS (a wholly owned subsidiary of Tomra Systems ASA) signed an agreement with the owners of Compac Holdings Ltd (Compac) for 100 per cent of the shares in the company. Closing of the transaction took place on 31 January 2017, after obtaining approval from the New Zealand Overseas Investment Office.

Compac is a New Zealand-based provider of post-harvest solutions and services to the global fresh produce industry. The company designs, manufactures, sells and services packhouse automation systems that sort fresh produce based on weight, size, shape, color, surface blemishes and internal quality. The main purpose with the acquisition of Compac is for TOMRA to reinforce its leading position within the food segment and TOMRA is the first player to offer its customers both lane and bulk sorting of fresh and processed food.

TOMRA paid a consideration of NZD 67.3 million (NOK 405.3 million), free of cash and interest-bearing debt. The amount is final, with no additional earn-out related to future performance.

Accounting year July-June Amounts in NZD million	FY14	FY15	FY16	FY17*	CY17**
Profit and loss
Revenues	75	105	152	72	133
EBITDA	8	(1)	3	(3)	11
EBIT	7	(2)	(1)	(5)	10
Balance sheet	June14	June15	June16	Dec16	Dec17
Intangible non-current assets	1	8	14	11	15
Tangible non-current assets	6	10	12	14	8
Inventory	17	17	24	23	10
Receivables	8	22	19	17	20
Cash	4	4	4	9	18
Total assets	36	61	73	74	71
Equity	5	5	4	(5)	11
Interest bearing debt	8	23	29	39	16
Other liabilities	23	23	38	40	44
Total debt and equity	36	61	73	74	71

* 6 months (July to December 2016)

** 11 months (February to December 2017). If the acquisition had occurred on 1 January 2017, revenues in 2017 for the TOMRA Group would have increased by approximately NZD 6 million and EBIT would have decreased by approximately NZD 2 million.

FY14, FY15, FY16 and FY17 (6 months) are extracted from management accounts and adjusted for one-off income and expenses, and are not harmonized with TOMRA accounting principles. CY17 (11 months) is in accordance with IFRS and TOMRA's accounting principles

TOMRA expensed NOK 8 million in acquisition related costs in the 2017 consolidated financial statements

The acquired goodwill is assumed to mainly relate to synergies to be realized over time, possibilities for efficiency improvements and a positive market development. There is no liability for contingent consideration in the Purchase Price Allocation. The gross contractual amounts receivable as of 1 February 2017 was estimated to be NZD 50 million, all assumed to be collectable.

No significant gain or loss has been recognized in Compac or in TOMRA Group, related to the acquisition of Compac in 2017. Total goodwill as of acquisition date equals NOK 348.1 million. The goodwill is not tax deductible.

Purchase Price Allocation

NZD million	Carrying amount	Fair value adjustment	Fair value
Goodwill	1.9	55.9	57.8
Other intangible non-current assets	13.6	7.1	20.7
Tangible non-current assets	9.1		9.1
Inventories	8.0	-	8.0
Receivables	26.8	-	26.8
Non-interest-bearing liabilities	(53.1)	(2.0)	(55.1)
Total consideration satisfied by cash	6.3	61.0	67.3
Net cash outflow:
Cash consideration paid			54.6
Interest bearing debt acquired			12.7
Net cash outflow			67.3

NOTE 25 CASH FLOW FROM FINANCIAL ACTIVITIES

Amounts in NOK million
Reconciliation of movements of liabilities to	Interest-	Other	Non-	Majority	Interest	Total
cashflows arising from financial activities	bearing	long-term	controlling	equity
	liabilities	liabilities	interest
Balance 31 December 2017	1,280.1	149.0	143.3	4,594.1
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of long-term loans	(1,394.0)					(1,394.0)
Proceeds from issuance of long term debt	1,624.3	(5.3)				1,619.0
Dividend non-controlling interest			(31.3)	(9.0)		(40.5)
Sale of treasury shares				32.1		32.1
Interest received					11.2	11.2
Interest paid					(28.6)	(28.6)
Dividend paid				(346.8)		(346.8)
Net cash flow from financing activities	230.3	(5.3)	(31.3)	(323.7)	(17.4)	(147.6)
Exchange rate fluctuations	14.4	0.0	8.2	82.3
Acquired via business combination		0.0
Change accrual put/call option		8.2		(8.2)
Minority new consolidated companies			0.5
Remeasurement of defined benefit liability				(7.8)
Profit for the period			38.6	740.2
Other changes	14.4	8.2	47.3	806.5
Balance 31 December 2018	1,524.8	151.9	159.3	5,076.9

Today, the Chief Executive Officer and the Board of Directors reviewed and approved the Board of Directors' Report and the consolidated and separate annual financial statements for Tomra Systems ASA as of 31 December 2018 (annual report 2018).

To the best of our knowledge;

• the consolidated financial statements are prepared in accordance with IFRS and IFRIC as adopted by the EU and additional Norwegian disclosure requirements in the Norwegian Accounting act that were effective as of 31 December 2018.
• the separate financial statements are prepared in accordance with the Norwegian Accounting Act and Norwegian accounting standards as of 31 December 2018.
• the Board of Directors' Report for the Group and the Parent Company is in accordance with the requirements of the Norwegian Accounting Act and Norwegian accounting standard no. 16, as of 31 December 2018.
• the consolidated and separate annual financial statements give a true and fair view of the assets, liabilities, financial position and profit as a whole as of 31 December 2018 for the Group and the Parent Company.
• the Board of Directors' Report for the Group and the Parent Company includes a true and fair view of; - the development and performance of the business and the position of the Group and the Parent Company.
• the principal risks and uncertainties the Group and the Parent Company face.

Asker, 20 February 2019

Jan Svensson	Aniela Gjøs	Bodil Sonesson	Pierre Couderc
Chairman	Board member	Board member	Board member
Linda Bell	David Williamson	Bente Traa	Stefan Ranstrand
Board member	Employee elected	Employee elected	President & CEO

DIRECTORS' RESPONSIBILITY STATEMENT

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The Key Audit Matter	How the matter was addressed in our audit
As of 31 December 2018, the Group carries NOK 2 904 million of goodwill on the balance sheet. NOK 2 553 million of the goodwill relates to the Sorting Solutions segment. Due to the size and risk of non-recoverability, goodwill impairment is considered a key audit matter. There is	We critically assessed management's key assumptions forming the basis for the Group's value in use calculation. Our procedures included: evaluating management's assessment and determination of cash generating units
an inherent uncertainty of whether future cash flows are sufficient to support the carrying value of goodwill. Our focus in the audit of the goodwill impairment assessment have been the key judgments applied by	· evaluating the historical accuracy of management's budgets and forecasts and challenging management on the current year cash flow forecasts as well as the timing of future cash flows; · challenging management on the growth
management in the impairment testing: future financial performance; growth rate; 0 profitability; and discount rate.	assumptions and management's future business plan assumptions with reference to current market conditions; · engaging KPMG valuation specialists to assess the mathematical and methodological integrity of management's impairment models and the discount rates applied with reference to market data; · obtaining and evaluating management's sensitivity analysis to determine the impact of reasonably possible changes including performing our own independent sensitivity calculations to quantify the downside changes to management's models required to result in impairment.
	We have also assessed whether the disclosures regarding key assumptions and sensitivities adequately reflected the underlying assets' impairment assessments.

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ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures used in this report are defined in the following way:

• EBITA is the calculated profit (loss) for the period before (i) income tax expenses, (ii) finance income and expenses and (iii) amortization.
• EBIT is the calculated profit (loss) for the period before (i) income tax expenses and (ii) finance income and expenses.
• Net interest-bearing debt is calculated as the difference between interest-bearing debts and cash and cash equivalents. Interest-bearing debts include loans from financial institutions (current and non-current loans) and cash and cash equivalents include short-term deposits, cash funds and bank accounts.
• Currency adjusted revenues is the revised revenues after adjusting for estimated currency effect.
• Order backlog is defined as the value of orders received within Tomra Sorting that has not yet been delivered (and consequently not yet taken to P/L).
• Order intake is defined as Order backlog at the end of a period minus Order backlog at the beginning of a period plus revenues for the relevant period
• Cost of goods sold refers to the direct costs attributable to the production of the goods sold.
• Gross contribution is defined as Revenues minus Cost of goods sold
• Gross margin is defined as Gross contribution divided by Revenues in percent.
• EBITA margin is defined as EBITA divided by Revenues in percent.
• EPS (Earnings per share) is defined as Profit for the period attributable to the shareholders of the parent divided by weighted average of outstanding shares

ALTERNATIVE PERFORMANCE MEASURES

LEADING THE RESOURCE REVOLUTION

Tomra Systems ASA Drengsrudhagen 2 1385 Asker NORWAY Tel: +47 66 79 91 00 info@tomra.com www.tomra.com

circular economy and the future of food

TOMRA annual report 2018