Kirkbi Annual Report 2022

Introducing KIRKBI

KIRKBI A/S is the Kirk Kristiansen family’s private holding and investment company, which owns 75 % of the LEGO Group. KIRKBI is founded to build a sustainable future for the family ownership of the LEGO® brand through generations.

KIRKBI

– a family-owned company

Purpose

Building a sustainable future for the family ownership of the LEGO® brand through generations.

Fundamental objectives

We work to protect, develop and leverage the LEGO brand across all the LEGO branded entities.

We are committed to a long-term and responsible investment strategy to ensure a sound financial foundation for the owner family’s activities as well as contributing to a sustainable development in the world.

Founded in 1932

We are dedicated to support the owner family members as they prepare for future generations to continue the active and engaged ownership as well as supporting their private activities, companies and philanthropic work.

The LEGO Group was founded by Ole Kirk Kristiansen in 1932. Today, KIRKBI owns 75 % of the LEGO Group. KIRKBI is owned by the Kirk Kristiansen family.

75 %

~ 200

KIRKBI locations

1 Billund

2 Copenhagen

3 Baar

KIRKBI’s activities

Investment Activities

Portfolio of >100 bn DKK is split into two areas:

Support Activities

We support the owner family members in their active and engaged ownership which includes administrative services to their investment activities, private activities, companies and philanthropic work

The LEGO School is a preparational programme for the 5th generation owners of the Kirk Kristiansen family

Associated Foundations

2022 at a glance

2022 was a year with continued progress in the execution of KIRKBI’s strategy of building a sustainable future for the family ownership of the LEGO® brand, highlighted by two significant investments within digital play and learning as well as final preparation of the generational handover to the fourth generation of the owner family

In many ways, 2022 was a special year for KIRKBI. It marked the 90th anniversary of the LEGO brand, a milestone few companies get to experience. The anniversary gave us an opportunity to celebrate, reflect on the history and bring Learning-through-Play to even more children and families, among others at the World Play Day in August.

It was also a year of global instability. Not least due to the war in Ukraine sadly impacting the lives of innocent people, families, and children –combined with global economic uncertainty and continued COVID-19 restrictions in parts of the world. In March, the LEGO Foundation, Ole Kirk’s Fond, and the LEGO Group made an emergency donation of DKK 110 million to humanitarian aid as well as protection of Ukrainian children and

families impacted by the war. Later in the year, another donation from the LEGO Foundation of DKK 100 million was made for rebuilding of the Ukrainian education system.

For the year, KIRKBI granted DKK 0.2 billion to charity, while the LEGO Foundation committed total grants of DKK 3.2 billion, primarily related to Learning-through-Play initiatives. Ole Kirk’s Fond granted DKK 0.3 billion to children and families.

The performance across all business areas led to a consolidated KIRKBI result for 2022 of DKK 10.7 billion, comprising a strong performance in the LEGO Brand Group and a negative investment return impacted by the development in the financial markets. As most of the investment return comprises unrealised value adjustments with no impact on cash flows, the 2022 after tax cash inflows to KIRKBI were at DKK 11.7 billion, slightly lower than the DKK 13.5 billion realised in 2021.

Continued development of the LEGO® Brand

Resting on 90 years of legacy, 2022 was also a year of reaching important milestones for the continued development of the LEGO brand.

In April, KIRKBI announced a USD 1 billion investment in Epic Games, known for building creative experiences for large and small

KIRKBI’s investment in Epic Games and acquisition of BrainPOP accelerated the engagement in the worlds of Digital Play and Digital Learning –ensuring continued development of the LEGO® brand.

creators, accelerating the engagement in the world of Digital Play. Six months later, KIRKBI completed its first 100 % acquisition in Digital Learning with the USD 875 million acquisition of BrainPOP, supporting the ongoing global transformation of education.

KIRKBI’s investment in Epic Games was made after the LEGO Group and Epic Games entered into a long-term partnership agreement. The purpose of the partnership is to create a future metaverse, allowing for a safe, immersive, creative, and engaging digital experience for children of all ages.

Throughout the year, the LEGO Group continued to see strong engagement in LEGO play experiences from families, children, and adults across the world. The financial performance was very satisfactory with double-digit revenue and consumer sales growth, increased market shares, and a profit before tax of DKK 17.7 billion. At the same time, the LEGO Group continued to prioritise the strategic initiatives designed to drive long-term sustainable growth with investments for the future in innovation across the portfolio, new retail stores, further development of e-commerce platforms, expansion of the manufacturing capacity, digitalisation, and sustainability.

Merlin Entertainments, including the LEGOLAND ® Parks, continued investing in new attractions mainly with the opening of LEGOLAND Korea, and a new LEGOLAND Park being established in Shanghai. On the back of two years severely impacted by the COVID-19 pandemic, the activity level started to normalise in 2022 with recovery especially in the US and Europe while Asia continued to be impacted by lockdown and restrictions. In November, Merlin Entertainments announced a new CEO.

Sustainable investment activities

In a challenging market, KIRKBI maintains its focus on long-term value creation in the Core Capital portfolio and expanding the activities within Thematic Capital to drive impact for a more sustainable world. The year marks a 10-year period with an average annual return of 7.7 %, and also a year with investments in the first plots of land in Denmark with the intent to establish new forestry to create a positive impact on environment, climate, and biodiversity.

KIRKBI’s investment activities are an integral part of the sustainability strategy, which is focused on driving positive impact and reducing CO 2 emissions across own operations and the investment portfolio. KIRKBI has defined that 45 % of the listed and private equities, bonds, and debt portfolios must have validated science-based targets by 2025. At end-2022, the coverage reached 28 %, with an additional 12 % committed to the initiative. Furthermore, a Real Estate tenant strategy was implemented to optimise the sustainability profile of properties. KIRKBI’s validated science-based targets are an example of the continued support of the ten Principles of the UN Global Compact.

Final phase of generational handover

For the owner family, the year comprised final preparations for the generational handover between the third and fourth generation. A gradual handover which has been ongoing for several years and which will be completed in the spring of 2023, when Thomas Kirk Kristiansen takes over as Chairman of the Board of Directors of KIRKBI A/S from Kjeld Kirk Kristiansen.

Preparing for an exciting 2023, we want to extend a warm thank you to our dedicated and passionate employees, who once again delivered strong commitment throughout the year, also reflected in an employee engagement and leadership score well above benchmark. Also, a warm thank you to our many partners. We look forward to continuing the collaboration in 2023 executing on our strategy and building a sustainable foundation for the continued family ownership.

Kjeld Kirk Kristiansen Chairman of the Board

Søren Thorup Sørensen CEO

KIRKBI Fundamentals

The business compass

The LEGO® brand mission is ‘To inspire and develop the builders of tomorrow’. The owner family aims to fulfil the mission to help all children grow and develop to their full potential through creative play by dedicated efforts driven by the LEGO branded entities.

This foundation is reflected in the LEGO Idea Paper – a short internal document written by the Kirk Kristiansen family. It describes the family’s fundamental belief that ‘Children are our role models’ as well as the mission, the vision, the LEGO Idea, the values, and the promises.

The KIRKBI Fundamentals reflect the LEGO Idea Paper and serve as the compass in all business activities outlining how KIRKBI is contributing to enabling the owner family to succeed with the mission.

Active and engaged family ownership through generations

The LEGO Group ownership has been with the Kirk Kristiansen family for four generations. Active and engaged family ownership of the LEGO brand has always been viewed as not only a task, but also as an obligation to make a meaningful difference in children’s lives. The ownership is rooted in the family heritage, its

values, and in the greater purpose of enabling children to learn, grow, and develop through play, which is also reflected in the LEGO company name: ‘LEg GOdt’ – meaning play well.

The owner family defines being an active and engaged owner of the LEGO brand as having a deep interest and engagement in how the enterprises develop and how they engage with children of all ages as well as stakeholders in general. And also, what the company culture is like and how the values are lived across all enterprises.

In each generation, the owner family has decided that one person should take the role as the most active owner. This person will, on behalf of the whole family, be close to KIRKBI and the LEGO branded entities. Thomas Kirk Kristiansen represents the fourth generation of the family as the most active owner.

The LEGO School

The fourth generation of the owner family has established a programme for their children named ‘The LEGO School’. The purpose of the programme is to support the children in developing their own identity – as individuals, as part of a family community, and as future fifth generation owners – in a fun, safe, and playful environment.

The KIRKBI Fundamentals

Mission Inspire and develop the builders of tomorrow

Purpose Building a sustainable future for the family ownership of the LEGO brand through generations

Fundamental objectives LEGO Brand Group

We work to protect, develop and leverage the LEGO brand across all the LEGO branded entities

Investment Activities

We are committed to a long-term and responsible investment strategy to ensure a sound financial foundation for the owner family’s activities as well as contributing to a sustainable development in the world

Values Imagination — Creativity — Fun — Learning — Caring — Quality Promises

Play Promise

Joy of building, pride of creation

People Promise

Succeed together

Spirit Only the best is good enough — always strive to do better

Support Activities

We are dedicated to support the owner family members as they prepare for future generations to continue the active and engaged ownership as well as supporting their private activities, companies, and philanthropic work

Partner Promise

Mutual value creation

Planet Promise

Positive impact

The KIRKBI Group Business Model

Yield from Investment Activities Trademark

The KIRKBI Group Business Model

– Cash outflow

Operations and charity

LEGO Brand Group

• Brand development and protection

• Digital play

• Learning

Tax

Investment Activities

• Core Capital

• Thematic Capital

Dividends

The LEGO Foundation grants supporting Learning-through-Play

Financial Highlights KIRKBI Group

The consolidated financial statements of the KIRKBI Group have been prepared in accordance with IFRS and the accounting policies are unchanged from last year.

To ensure appropriate presentation of relevant information for the user of the financial statements, certain materiality judgements of content and presentation have been made. Please refer to note 10.1 Basis of reporting in the financial statements for further information.

The Financial Highlights for 2019-2022 are impacted by the implementation of IFRS 16 Leases as from 1 January 2019. Comparative figures for 2018 have not been restated. Comparative financial information for 2018 has been adjusted for reclassifications implemented in 2019 in the income statement.

Financial ratios

Financial ratios have been calculated in accordance with the ‘Guidelines and Financial Ratios’ as issued by the Danish Society of Financial Analysts.

(ROE):

Part 1

Business Areas

KIRKBI’s work is focused on three fundamental tasks all contributing to enabling the Kirk Kristiansen family to succeed with the mission to inspire and develop the builders of tomorrow.

LEGO Brand Group

Guided by the LEGO® brand strategy and vision, the LEGO Brand Group protects, develops and leverages the full potential of the LEGO brand

LEGO Brand Group is a strategically important part of KIRKBI with a dual purpose: To protect, develop and leverage the full potential of the LEGO brand across the LEGO branded entities, and to enable the active and engaged family ownership of the LEGO brand through generations.

The work of LEGO Brand Group is guided by the 2032 LEGO brand strategy and vision – to become a global force for Learning-through-Play through initiatives such as:

• Explore and build digital business activities within Digital Play and Digital Learning

• Sustainability commitment to social and environmental goals

• Strengthen the LEGO brand experience e.g. in the LEGOLAND parks and LEGOLAND Discovery Centres

Bringing Learning-through-Play to all children

The LEGO® brand vision to become a global force for Learning-through-Play is anchored in

90 years of Learning-through-Play

In 2022, the LEGO Group and the LEGO® brand could celebrate nine decades of helping children reach their full potential through play. Events and campaigns throughout the year marked the event. Among others the first ever World Play Day – a full day of play-packed global events and partnerships dedicated to helping families and communities play more.

90 years after Ole Kirk Kristiansen began crafting wooden toys in Billund, play continues to help children grow and thrive in a rapidly changing world. In the 2022 LEGO Play Well Study conducted among +55,000 parents and children in more than 30 countries, almost all children say that playing as a family makes them happy (97 %), helps them relax, takes their minds off school (95 %), and is their favorite way to learn.

the LEGO Idea and fundamental belief that playful activities help children of all ages learn and develop essential skills such as creativity, curiosity, and critical thinking. It is expressed in the name, ‘LEg GOdt’, meaning ‘play well’ in Danish, thought of by the founder of the LEGO Group, Ole Kirk Kristiansen – and closely connected to the LEGO System in play, which gives children the possibility to build whatever they can imagine – and while they play, they learn. A timeless idea, which remains universally relevant – also in the year 2022, which marked the 90 years anniversary of the LEGO brand.

Strategic investments in Digital Play and Digital Learning

While the physical play experience offered by the LEGO bricks is unique, it is not accessible for all children across the world. Development in digital capabilities such as cloud, platforms, and user-generated content unleashed a myriad of ways to evolve the LEGO® brand and shape the future of learning and play. Children are shifting towards spending more time on digital platforms with play and learning converging. Expanding beyond physical play by building footholds within Digital Play and Digital Learning is therefore an essential element in the 2032 LEGO Brand Strategy.

In 2022, two milestone investments were carried out within these two areas as part of delivering on the long-term brand vision of bringing Learningthrough-Play to even more children.

The investment in Epic Games and acquisition of BrainPOP reflect a strategic intent to invest in high-growth companies within Digital Play and Digital Learning that complements the existing LEGO branded entities as part of bringing Learning-through-Play to as many children as possible.

Investing in Epic Games

In April 2022, KIRKBI invested USD 1 billion in Epic Games, a leading interactive entertainment company that builds, distributes, and operates world-leading games and content. The investment reflects a strategic intent to accelerate the engagement in Digital Play and invest in trends which impact the future world.

The investment followed the announcement of a long-term strategic partnership between Epic Games and the LEGO Group to shape the future of the metaverse and build a safe, creative, and engaging digital experience for children of all ages.

Acquisition of BrainPOP

In October 2022, the first 100 % acquisition in Digital Learning was completed with the USD 875 million strategic acquisition of BrainPOP, a leading educational technology platform with a presence in over two thirds of U.S. school districts reaching an estimated 25 million students annually.

BrainPOP is a trusted digital education brand grounded in research with values closely aligned with the LEGO® Idea. With a digital-first learning approach in a growing edtech market, BrainPOP complements the existing LEGO branded entities.

The LEGO Group

Overall, 2022 was a milestone year for the LEGO Group, proving the continued strong appeal and endless possibilities of the LEGO® System in play

In a year where the LEGO Group celebrated its 90th anniversary it reached more children with LEGO® play than ever before.

Despite the global challenges and uncertainties, revenue increased by 17 % compared to 2021, fueled by double-digit consumer sales growth in all market groups.

The significant strategic investments were continued within portfolio innovation, brand awareness, LEGO branded stores, further development of e-commerce platforms, digitalisation, and sustainability. Further, investments were made in expanding production capacity in Hungary, Mexico and China, and construction of a new factory in Vietnam was started while plans to build a new carbon-neutral factory in Virginia, USA were announced.

Within sustainability the LEGO Group continued to invest in making both business and products more sustainable towards the ambition to create a better world for future generations.

The LEGO Group ended 2022 with a result before tax of DKK 17.7 billion which is 4 % above last year.

The LEGO Group 5 years’ performance (m DKK)

About the LEGO Group

Based on the world-famous LEGO® brick and the philosophy of Learningthrough-Play, the LEGO Group provides unique play experiences for children of all ages.

Through creative play, the LEGO Group aims to inspire and develop the builders of tomorrow and nurture the skills to help future generations thrive and develop. When children play, they learn. They learn about problem-solving, communication, and collaboration. Skills that are more critical than ever. In the future, children will hold jobs that have not yet been invented. The only way children become prepared is by developing skills that can be applied universally.

Play is an effective way to develop these skills from a young age, and LEGO play is especially powerful as it offers children endless possibilities. Just six two- by-four LEGO bricks can make 915 million different combinations. And they are made with such precision that they stick together like glue, but come apart easily so they can be built, unbuilt and rebuilt into whatever a child can imagine.

Today, the LEGO Group employs +27,000 colleagues and the products are sold in more than 100 countries. Among others through 904 LEGO branded stores, which include 185 stores owned and operated by the LEGO Group, and 719 LEGO Certified Retail stores owned and operated by partners.

Production facilities are located in Denmark, the Czech Republic, Hungary, China, and Mexico, and in addition to the headquarters in Billund, Denmark, the company has main offices in USA, UK, China and Singapore.

Other LEGO® branded entities

For Merlin Entertainments – the operator of the LEGOLAND Parks and LEGOLAND Discovery Centers – the business activity started to normalise in 2022 following two years with significant negative impact from the COVID-19 pandemic. In 2022, all attractions in Europe and the U.S were open throughout peak season, whereas restrictions continued to somewhat impact activities in Asia.

During the year, Merlin continued its pilot projects, partnerships, and investments to enable a unified LEGO brand experience across the LEGOLAND Parks and other play experiences. Further, in May 2022 LEGOLAND Korea opened, while the development of LEGOLAND Shanghai, LEGOLAND Sichuan, and LEGOLAND Shenzhen continued as planned.

With 54 million visitors in 2022 compared with 35 million in 2021, revenue was up by 54 % compared to 2021 and 17 % compared to 2019. For many attractions 2022 was a record year driven mostly by visitors spending more on average per visit. KIRKBI’s share of the total net result for Merlin was DKK 0.5 billion in 2022 which is an improvement of DKK 1.1 billion compared to 2021.

In November 2022, Merlin Entertainments announced the appointment of Scott M. O’Neil as Chief Executive Officer. His appointment follows outgoing CEO Nick Varney’s decision to retire after 23 years.

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Operational

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Overview of LEGOLAND theme parks

In 2022, LEGO Education initiated a new strategy with focus on growth in the United States and key international markets, as well as core subject classrooms from kindergarten through eighth grade. The year showed strong growth in both the United States and in the European markets.

LEGO Ventures was established in 2018 as the venture capital arm of the LEGO® brand investing in the future of Education and Digital Play beyond the brick. Over time, the investment strategy of LEGO Ventures transitioned from one focused on building an early-stage venture portfolio to one focusing more on later stage investments. With the move towards later stage investments, it was decided in 2022 to integrate the venture investments into the investment portfolio of KIRKBI and phase out LEGO Ventures as a stand-alone organisation.

BrainPOP was founded in 1999 by former pediatrician and immunologist Avraham Kadar, M.D., with a mission to empower children to shape the world around them and within them.

Headed by Chief Executive Officer, Scott Kirkpatrick, BrainPOP employs nearly 300 people, and with a presence in over two-thirds of U.S. school districts BrainPOP has an estimated

reach of 25 million students annually, as well as an international presence. As a leading digital education brand, BrainPOP’s core products provide short, animated movies that spark children’s innate curiosity and build their knowledge and life skills.

BrainPOP was acquired by KIRKBI in October 2022. It is the first 100 % acquisition of this scale for KIRKBI and the first platform investment in Digital Learning, complementing the existing LEGO® branded entities.

In 2022, BrainPOP saw continued strong teacher and student usage as schools transitioned back to in-person learning. BrainPOP Science was launched, a new middle school science program that engages students in the practice of ‘doing science’ by gathering evidence from real-world data.

KIRKBI, through its subsidiary LEGO Juris A/S, owns the LEGO® and LEGOLAND® trademarks, which are licensed to the LEGO Group and Merlin Entertainments, respectively.

In 2022, investments in strengthening the LEGO brand continued with a contribution of DKK 300 million to the global brand campaign ‘Rebuild the World’.

LEGO Campus opened in 2022. With eight connected buildings covering an area of 54,313 m2, LEGO Campus is the primary workspace for approx. 2,000 colleagues.

LEGO House is owned by Koldingvej 2, Billund A/S, which is a subsidiary of the LEGO Foundation.

For LEGO House, 2022 was a record-breaking year with almost 290,000 guests and a world class guest satisfaction of 85 (net promoter score). During the year, LEGO House welcomed even more LEGO fans of all ages from all over the world, with 60 % of the guests coming from outside of Denmark, compared to 49 % in 2019.

Investment Activities

KIRKBI’s Investment activities

are based on a long-term and responsible investment strategy with an overall objective to ensure a sound financial foundation for the family’s activities and contribute to a sustainable development in the world

Investment

approach

To reflect the two strategic objectives, the investment portfolio is split into two areas: Core Capital and Thematic Capital as set out below.

Investment principles

Across all investment activities, KIRKBI aspires to create value through responsible ownership and investments characterised by:

• Long-term mindset

• Engaged, ambitious, and active ownership of the companies and properties we invest in

• Invest in defined sustainability themes and practice active ownership that lives up to high ESG standards

• Work with partners with high integrity to create mutual long-term value

• Focus on investments where rigorous due diligence can enable deep insights into the underlying risk and return factors

Strategic objective Investment Portfolio Aim

Long-term and responsible investment strategy to ensure a sound financial foundation for the family’s activities

How we engage as owners of companies

As an active owner and as representatives on the Board of Directors of companies where we own long-term equity stakes, our primary focus areas are:

1. Strategy

The company’s robustness and positioning for long-term sustainable growth as well as 3-5 year’s value creation planning

2. People and governance

Ensuring that the right people and competencies are present on the Board of Directors and in management teams as well as ensuring that the company’s systems and procedures are appropriate and supportive of its long-term development

3. Sustainability

Focusing on the company’s continuous improvements to ensure sustainable growth via continuous progress within environmental and social areas

Core Capital (Equity, Real Estate, Fixed income investment)

Contribution to a sustainable development in the world Thematic Capital (Energy Transition, Circular, Plastics, Land Sustainability, Building Billund)

Deliver a long-term, attractive risk-adjusted return, and a responsible investment strategy. Secure financial flexibility and liquidity for the owner family, the LEGO® branded entities and other strategic activities

Maximise KIRKBI’s impact and contribution towards a more sustainable development in the world

4. Financial discipline

The company’s efficiency around capital allocation and structure as well as progress on selected financial and nonfinancial KPIs

For all investment activities apply that it is essential to avoid negative spill-over effects on the LEGO ® brand and the owner family’s reputation.

Active ownership

KIRKBI’s long-term investment focus is exercised by engaging actively with the portfolio companies and investment partners. The engagement seeks to contribute positively to the strategic direction and to create sustainable long-term growth and positive impact. The engagement also includes supporting the pursuit of new business opportunities and the mitigation of material risks.

As an active owner, KIRKBI engages in several ways, including:

• Board representation

• Shareholder communication

• Voting at the annual general meetings

In companies where KIRKBI is not represented on the Board of Directors, we engage with management in case of controversies or breaches of internationally agreed conventions and norms. In such cases we seek to understand the remedies put in place and the types of enhanced controls implemented to prevent breaches.

KIRKBI applies its influence by exercising shareholder voting rights at the annual general meeting of the portfolio companies. KIRKBI voted at 100 % of annual general meetings during 2022.

Responsible investing and ownership

ESG factors are intrinsic parts of KIRKBI’s assessment of attractiveness and performance of an investment. ESG is considered both in the due diligence phase and as part of the ongoing ownership supporting a responsible behaviour both for companies, properties, and partners to protect the value and enhance long-term returns.

To fulfil the inherent responsibility, the investment activities are regularly screened for compliance with international conventions and norms while measured against high responsibility standards. KIRKBI’s guidelines have appropriate flexibility to address differences among strategies and managers.

KIRKBI assesses its potential investments and monitors its portfolio considering the following:

• Activities on the negative list

• Performance in areas of material ESG risks and ability to manage these relative to industry peers

• Involvement in notable ESG controversies related to the company’s operations and/or products, possible breaches of international norms and principles, such as the UN Global Compact, and performance with respect to these

Furthermore, investments in certain industries such as tobacco, armament, gambling, and adult entertainment are excluded.

Core Capital

KIRKBI’s Core Capital investment portfolio showed a negative return in 2022 impacted by the development in the financial markets

The Core Capital investment portfolio with a total value of DKK 90 billion at year-end 2022 delivered a negative return of DKK 3.7 billion in 2022, equal to -4.1 % (2021: 23.3 %). The return was impacted by challenging markets characterised by significant political and macroeconomic uncertainty, resulting in increased interest rates.

KIRKBI maintained focus on the long-term value creation, and the portfolio demonstrated resilience compared to the performance in most larger equity indices. So while the actual return for 2022 in itself is disappointing, it compares favourably to market benchmarks. The same applies for the 10-year average annual return of 7.7 %.

Long-term Equity

The Long-term Equity portfolio comprises significant minority stakes in listed and privately held companies as well as funds to increase KIRKBI’s exposure to investments compounding value over longer holding periods.

In 2022, KIRKBI updated its Long-term Equity investment strategy to focus on sectors that are closely aligned to KIRKBI’s mission, targeting growing companies with tailwind

from global trends. Going forward, KIRKBI intends to focus its Long-term Equity portfolio around three sectors:

• Sustainability: Companies whose products, services, or solutions contribute to limiting resource waste or reduce emissions

• Healthcare: Businesses that contribute to making healthcare and life science more efficient, of higher quality, or more accessible

• Education & Play: Companies offering playful or innovative services, software, content, and other key elements of the education ecosystem

During 2022, the existing portfolio was to a large degree negatively impacted by the war in Ukraine, increased raw material prices, high inflation rates, and rising interest rates.

Below is set out the Long-term Equity portfolio at year-end 2022.

Long-dated US equity funds focused on majority investments in primarily US based companies

Private Equity

The Private Equity portfolio is comprised by buy-out funds and co-investments with an objective to generate long-term attractive returns. In addition, the Private Equity Portfolio provides diversification across industries and geographies as well as access to opportunities in the private market that are not in the scope of the Long-term Equity portfolio.

Quoted Equity

The Quoted Equity portfolio is comprised by investments in high-quality listed companies and external managers across industries and geographies. The primary objective of the portfolio is to provide attractive long-term returns and to serve as provider of liquidity for KIRKBI and related entities as well as diversification of the overall Core Capital portfolio.

Real Estate investments

The main objective of KIRKBI’s Real Estate portfolio is to provide long-term stable returns through sound and high-quality properties as well as by looking at redevelopment opportunities with a high sustainability and long-term value potential, mainly in the office sector.

Geographically, the 27 investment properties in the portfolio are located in:

• Copenhagen, Denmark

• London, England

• Munich, Germany

• Hamburg, Germany

• German-speaking part of Switzerland

In 2022, KIRKBI took over two commercial properties in Copenhagen with a total of 13,700 sqm, one in the city centre and one in an adjacent area with strong demographic growth. The latter represents the new strategy to identify opportunities also outside the city centre. Energy optimisation measures were implemented after take-over of the buildings.

During 2022, one property in Denmark and one in Switzerland were recertified to DGNB Gold, while a property in London obtained a BREEAM.

Fixed Income

The Fixed Income portfolio serves as a source of cash management and adds less volatile and cyclical elements to the overall portfolio relative to equity investments.

New Heimeran office complex in Munich

The modern office complex at Ridlerstrasse 35B-37 in Munich, Germany was completed in November 2022 and will be handed over to KIRKBI in January 2023. Currently more than 80 % of the lettable space has been pre-let.

The complex comprises a total of 30,000 sqm. It includes 24,800 sqm of offices in the upper floors of a 14-storey tower and two low-rise buildings.

The property will be DGNB Gold certified and is expected to be inaugurated during first half of 2023.

Thematic Capital

KIRKBI continued expanding its focus on Thematic Capital in 2022, highlighted with the first investments in Land Sustainability

KIRKBI’s thematic investments are driven by the owner family’s commitment to contribute to a sustainable development in the world. To maximise impact while ensuring long-term return on investment, KIRKBI focuses on four investment themes: Energy Transition, Circular Plastics, Land Sustainability, and Building Billund.

The approach is twofold: KIRKBI invests in companies with more mature technologies, where exercise of active ownership can strengthen their performance and support them reach their full potential. At the same time, KIRKBI explores new technologies that have moved beyond the prototype phase and require risk-willing and longterm capital to reach scale.

During 2022, the building of capabilities to execute and accelerate Thematic Capital investments further advanced and experienced colleagues are now employed in all four investment categories.

Energy Transition

KIRKBI supports the LEGO Group in leveraging its climate ambitions and so far, investments have mainly been within renewable energy, where

wind and solar technologies are at a mature level. However, decarbonisation of the energy systems will also require additional initiatives such as zero emission production and new technologies for storing the energy.

Over the coming years, KIRKBI intends to expand the portfolio with new energy storage technologies, which are currently on emerging stages and lack risk-willing capital to mature.

The portfolio of investments within Energy Transition comprises the following:

• 25 % of the Burbo Bank Extension offshore wind farm with a total capacity of 258 MW, located off the coast of Liverpool, UK.

• Ownership of the solar energy developer Adapture Renewables Inc., specialised in developing, engineering, building, and operating distributed utility-scale solar photovoltaic (PV) projects in North America. During 2022, investments were made to expand the organisation and the solar power capacity through new solar parks. The company operates more than 30 solar power projects in 19 states across the USA and has a solid pipeline of development projects to be executed over the coming years. Since KIRKBI acquired the company in 2019, the operating solar portfolio capacity has grown from 70 MW to more than 260 MW by year-end 2022.

• Copenhagen Infrastructure Partners (CIP) Energy Transition Fund I which is focused on investments in next generation renewables energy infrastructure, including carbon capture and energy storage technologies. One of the first projects is Höst, constructing Europe’s largest Power-to-X-facility located on the Danish west coast.

• Minority share of Monolith, a US-based developer of hydrogen and clean materials technologies.

In 2022, KIRKBI divested its share in the Borkum Riffgrund 1 offshore wind farm after 10 years of partial ownership. The proceeds from the offshore wind farm divestment are planned to be invested in new renewable energy capacity.

Circular Plastics

Plastic plays an important role in society due to its qualities, but is also a significant problem given it is based on fossil fuels emitting greenhouse gases and not yet subject to good circular solutions. Consequently, plastic pollution has become a fundamental threat to our planet and health.

With the investment within Circular Plastics, KIRKBI wishes to contribute to converting the plastics economy from the existing linear ‘takemake-waste’ model to a circular one, where plastics are sustainable and continue to be a

resource. Circular Plastics is a relatively new thematic investment area in KIRKBI where focus is on supporting the transition towards a world where plastics never become waste and CO 2e emissions are reduced. Investments are made across the plastics value chain within alternative feedstock, plastics prevention, reduction and reuse, sorting, recycling, leakage prevention, and enabling digital technologies.

The portfolio of investments within Circular Plastics comprises the following:

• 10 % of the plastic recycling company Quantafuel, listed on the Oslo Stock Exchange. The company upgrades plastic waste to highquality synthetic fuels (recycled carbon fuels) or chemical feedstock (naphtha) for new plastic production.

• 7 % of Ambercycle – a US-based materials science company building circularity in the fashion industry to reduce plastic waste from textiles.

The investment focus is continuously being refined to provide the highest impact per invested amount.

Land Sustainability

Continued world population growth and increased demand for food and materials are increasing the risk of further deforestation, depletion of ecosystems, and increased carbon emissions. KIRKBI wishes to invest in carbon positive production alternatives, initially by establishing new production forests in combination with areas to increase biodiversity.

Production forestry allows for continued carbon sequestration and storage. By using the wood,

e.g. in building materials and furniture, the sequestered CO2 will be stored long-term and replace more CO2 heavy alternatives.

KIRKBI continues building capabilities within this new area under Thematic Capital.

During 2022, 900 hectares of land in Jutland, Denmark, were acquired with the intent to start planting trees in the spring of 2023. Furthermore, a solid pipeline has been established to further expand and create a positive impact on environment, climate, and biodiversity.

How we drive impact towards a more sustainable world

Energy Transition Contribute to the decarbonisation of the world’s energy systems through wind and solar energy and new technologies

Circular Plastics

Mainly to improve sorting, recycling, and the development of new plastic types

Land Sustainability Establish more production forestry to create a positive impact on environment, climate, and biodiversity

Building Billund Support and strengthen Billund’s unique character as the Capital of Children

Northern Europe and US

Worldwide

Denmark

Denmark

Building Billund

Billund is the founding place of the LEGO Group and KIRKBI remains dedicated to the local community by actively supporting the development of the town.

The Billund City Vision – a plan initiated by KIRKBI, Realdania, and Billund Municipality in 2015 –provides a framework for supporting and further building Billund’s unique character as the Capital of Children. For KIRKBI, the vision also serves as a frame for how we can support this development through Real Estate and other activities.

In April 2022, LEGO® Campus, a state-of-the-art campus at the LEGO Group’s headquarter in Billund, was inaugurated. The property comprises 54,000 sqm and contains 1,800 workstations for employees.

In the city centre of Billund, the construction of Butikstorvet was completed in 2022. Butikstorvet is an urban space for shops, workplaces, and everyday living, and comprises 5,200 sqm of retail and office space, as well as 30 apartments.

The City Vision also includes the development of a new, sustainable town district (Travbyen) focused on play, learning, creativity, and sustainability. In 2022, the existing structures of the ground were demolished, and interim facilities were established to accommodate activities such as play zones and communal gardens. Also, an architectural competition was launched to design the future district, which includes an ambition to achieve sustainable buildings with a strict target of maximum 8 kg CO2 emission per sqm/year, which is below current requirements. KIRKBI will continue to work on the plan for the entire area in collaboration with the local citizens.

After five years of construction, the LEGO Group celebrated the official opening of the state-of-the-art LEGO Campus in April 2022.

People & Operations

In 2022, KIRKBI further strengthened the organisational focus on leadership development and took the next steps in working systematically with diversity, equity, and inclusion

KIRKBI employs approximately 200 specialised and experienced professionals in a diverse set of fields, all dedicated to supporting the overarching purpose of building a sustainable future for the family ownership of the LEGO® brand through generations.

As a family-owned company, KIRKBI is guided by the beliefs and values in the KIRKBI Fundamentals including the four promises, which define how play, people, partner, and planet are integral for succeeding with the mission to inspire and develop the builders of tomorrow.

The People Promise is based on a fundamental belief that organisational success rests on the continued growth and development of employees and leaders. Guided by this promise, KIRKBI continued to focus on leadership development in 2022 to ensure that all leaders have the capabilities needed to act as role models. Further, initiatives were taken to work systematically with Diversity, Equity, and Inclusion (DE&I).

Strong leadership and people development

Every year, the employees’ motivation, satisfaction, and engagement are measured in a PULSE Survey. The responses are used to identify possible areas of improvement both at team and organisational level.

In 2022, the PULSE Survey showed a stable high level of loyalty and satisfaction among all employees across the organisation. Also, a key finding was continued high trust among employees in their immediate leader. During the year, KIRKBI has continued building on the KIRKBI leadership model launched in 2021. The model sets out core principles for value-based leadership and guides leaders in KIRKBI to develop leadership capabilities, which complement their personal leadership style.

Lifelong learning and development should at any time be available to all employees in KIRKBI to maintain and further build their professional and personal competencies. In 2022, KIRKBI therefore continued the organisational work with Individual Development Plans and Performance Management Programmes to foster employee motivation and performance.

The working environment policy lays down the general framework for activities relating to the working environment and aims to ensure that all activities are planned and carried out in a healthy and safe working environment and in compliance with working productivity and legislation.

KIRKBI’s EHS policy

DE&I Vision Statement: Promoting equal opportunities for all

In KIRKBI, our way of doing business is anchored in a strong set of values such as caring, quality, and creativity and an ambition of succeeding together.

We collaborate with openness and mutual respect across a broad span of competencies. We promote diversity, equity, and inclusion in our everyday practice and through our approach to active ownership and partnerships.

We allocate proper resources to build an inclusive and diverse workplace that offers fair treatment and equal opportunities for all. And we actively work to bring a diversity of thoughts, capabilities, and experiences into play.

A diverse, equal, and inclusive workplace

KIRKBI believes that a diverse organisation and an inclusive working environment represent a necessary base and an opportunity to succeed in the long term. The work culture must be a safe space with a great sense of belonging and a high degree of inclusion.

In 2022, KIRKBI continued its focus on the following four main areas:

• Engage employees

• Build inclusive culture

• Improve processes and systems

• Data insights and tracking

To provide a solid baseline for creating a diverse and inclusive working environment, a cultural assessment was conducted in the second half of 2022. The assessment showed that KIRKBI’s employees experience a high level of inclusion and belonging across gender, age, and nationality. A positive outcome as inclusion is key for establishing a diverse working environment. The survey also showed the importance of continuing to work with inclusive leadership and diverse teams.

Employee Advocacy Group (EAG)

Recognising that a change in cultural mindset has a greater chance of success when involving the organisation itself, KIRKBI established an Employee Advocacy Group (EAG) in 2021. The purpose of the EAG is to ensure that the process of exploring, learning, and adjusting our DE&I efforts is driven by employee engagement and ongoing involvement. During 2022, the EAG has been involved in creating the KIRKBI vision statement on DE&I and initiated the cultural assessment serving as a baseline for further initiatives.

Conscious inclusion training

In 2022, a conscious inclusion training was rolled out to all employees, making everyone aware of biases and how to avoid them. In 2023, this will be complemented with training in inclusive leadership to further strengthen KIRKBI’s people leaders in being role models for a diverse and inclusive culture and to ensure that every employee feels valued and able to meet his/her potential.

Gender representation

Gender is only one aspect of diversity, however it is a focal point to ensure equal opportunities for all. Looking at the total KIRKBI organisation there is a satisfactory and close to even gender distribution. However, looking at the gender balance from director level and up, KIRKBI has a lower female representation. To faciliate a balanced gender representation at all levels, the specific targets below were defined in 2022.

In 2022, Connie Hedegaard, former European Commissioner for Climate Action, joined the KIRKBI Board of Directors. She and board member Malou Aamund consititute 1/3 of the

Targets for gender distribution

Board of Directors and thereby the current target of two female board members is fulfilled.

Acknowledging that gender is only one aspect of diversity, KIRKBI will continue the efforts to ensure a diverse workforce at all levels of the organisation, including a further strengthening of the internal diversity and inclusion agenda and understanding. KIRKBI wants to ensure that every employee feels valued and enabled to release his/her full potential.

Business ethics

The Code of Conduct for employees formalises KIRKBI’s policies related to human rights, labour, environment, and anti-corruption. In the case of non-compliance with KIRKBI’s high standards for business ethics, it can be reported via the whistleblower line at KIRKBI.com.

KIRKBI assesses sustainability and business ethics risks on an ad hoc basis across own operations and other business activities. As a family-owned holding and investment company, the risk of human and labour rights breaches as well as

corruption within own operations is assessed to be low and covered by the implementation of the Code of Conduct. Within the investment activities, risks related to all areas in the UN Global Compact are managed via our approach to responsible investing and ownership.

Data ethics

The KIRKBI leadership team governs the data ethics. Our Data Ethics policy outlines the principles and what we believe is a lawful and ethical way of conducting day-to-day operation, and what employees and business partners can expect from KIRKBI when processing and procuring data.

Decisions related to individuals should always include human evaluation of data. To ensure this, KIRKBI promotes transparency towards the employees and business partners and has an approval process for the use of data.

KIRKBI only wishes to use data from trustworthy business partners and will, as part of our Code of Conduct, ensure that business partners either have a data ethics policy or conduct their business in a way that is not detriment to our Data Ethics Policy.

To ensure a high level of ethical behaviour from KIRKBI’s employees when processing personal or non-identifiable data, all employees must complete e-learning training in GDPR and personal data compliance.

Moreover, the Data Ethics Policy is part of the mandatory onboarding procedure for new employees.

Employee engagement in DE&I

Member of the EAG, Tine Heide Straarup, Communication Consultant, explains the role of the KIRKBI Employee Advocacy Group:

“The EAG acts as an employee-driven sounding board to KIRKBI’s leadership team to make sure that we introduce the right DE&I initiatives at the right time to drive the desired change and impact.”

Associated Foundations

As part of the commitment to give children better opportunities to reach their full potential, the LEGO® owner family has entrusted the LEGO Foundation with 25 % ownership of the LEGO Group and it is primarily through this ownership that the foundation funds its activities.

When children play, they experiment, work things out and develop skills to develop their full potential. Play is an essential part of child development. But not every child gets the time and chance to play that they deserve.

To address this challenge, the LEGO Foundation works internationally to make Learning-throughPlay a priority for every child through funding of research, backing of education initiatives, and support to partners, who can positively impact children’s lives. Partners include parents, teachers, caregivers, policymakers, academics, businesses, grassroot organisations, NGOs, and governments, all over the world.

On 1 February 2023, Sidsel Marie Kristensen took up the position as CEO. She took over from former CEO Anne Birgitte Albrectsen, who stepped down in October 2022.

97 199

Active grants

Record high grant level 2022 (DKK) 3.2 bn

to programmes around the world helping children and families, including those in need and crises

The LEGO Foundation aims to build a future in which Learning-throughPlay empowers children to become creative, engaged, and lifelong learners. Over the past years, the activity level in the LEGO Foundation has increased significantly, and in 2022, the LEGO Foundation went beyond previous activity levels with total grants of DKK 3.2 billion for programmes, research, and advocacy.

This included a DKK 0.1 billion donation to support the rehabilitation and rebuilding of the education system within Ukraine as well as DKK 0.9 billion awarded to five recipients of the LEGO Foundation’s global Build a World of Play challenge. The challenge was launched in relation to the 90 years anniversary of the LEGO® brand in support of organisations that make substantial contributions to the lives of children.

LEGO Foundation grants level

Build a World of Play

For the LEGO® brand’s 90th anniversary, the LEGO Foundation made a commitment to the world’s youngest children, committing grants worth DKK 0.9 billion to organisations that can help give children the best start in life. This call spurred 627 eligible applications, which were reviewed by 300+ experts. The 5 winner organisations all promote the wellbeing of children, their caregivers, and their communities using culturally relevant and sustainable approaches. With the award they will continue to give substantial contributions to the lives of children from birth to six years old and spark a global movement to prioritise early childhood development.

2022 LEGO® Prize Winner

Since 1985, the LEGO® Prize has been presented to individuals or organisations that have made an outstanding contribution to the lives of children. The 2022 LEGO® Prize was awarded to Maria Adelaida Lopez, Executive Director of the Colombian social enterprise, aeioTU. The award recognises her work advocating for, and championing Learning-through-Play in early childhood development in Colombia and Latin America and for inspiring and encouraging her wide network in this space to bring Learningthrough-Play opportunities to thousands of children.

With a history of more than 12 years of close collaboration with the Ministry of Education in Ukraine to bring Learning-through-Play to millions of children across Ukraine, the LEGO Foundation committed emergency donations during 2022 to support general humanitarian aid, education, and child protection activities in Ukraine and neighbouring countries.

By end of year, a total of DKK 0.1 billion has been committed from the LEGO Foundation as emergency response to support Ukrainian children and their families during the war.

CASE

A deep and long-standing partnership with Ukraine

Ole Kirk’s Fond is a charitable foundation established in 1964 in memory of the LEGO® founder to make the town of Billund an attractive place for LEGO employees and their families. The foundation still supports local communities in and around Billund, but also focuses on creating safe surroundings, wellbeing, and opportunities for children’s development throughout Denmark. On a global level, the foundation supports humanitarian aid through Danish partners.

Ole Kirk’s Fond grant level 2022 (DKK)

Foundation stone laid for Mary Elizabeth’s Hospital

A key milestone for the year was when the foundation stone was laid for ‘Mary Elizabeth’s Hospital – Rigshospitalet for Children, Teens and Expecting Families’. Since 2016, the foundation has together with the Capital Region of Denmark and Rigshospitalet worked to create the new ground-breaking hospital with the ambition to set completely innovative standards for the patients and their families.

to 253 small and large projects

Responding to an extraordinary situation

In March 2022, Ole Kirk’s Fond, The LEGO Foundation, and the LEGO Group donated DKK 110 million to support the people of Ukraine affected by the war, thousands of whom have fled to neighboring countries. Shortly hereafter, Ole Kirk’s Fond released an additional DKK 10 million. All donations have been distributed through long-term partners.

In Denmark, Ole Kirk’s Fond supported families affected by inflation and price increases. For example through support to summer camps, school start aid, Christmas aid, and financial grants to cover expenses like winter clothes and medicine for families via partners.

Ole Kirk’s Fond contributes with approximately one third of the partnership’s total budget – approx. DKK 800 million – including DKK 85 million to develop the user experience at the hospital as well as DKK 90 million granted in 2022 to stand by its partners in an extraordinary situation with high cost inflation. In addition to financial support, Ole Kirk’s Fond contributes to the project with skills and capabilities from the foundation as well as from across the LEGO® ecosystem.

Photocredit: Rigshospitalet/Nils Holm Christensen

CASE

The QATO Foundation is a charitable foundation that works to improve animal welfare by supporting the creation of long-term and sustainable solutions to fight the problems that cause poor animal welfare paying special attention to the animals that do not thrive under human care.

Since 2012, the QATO Foundation has supported more than 100 projects worldwide spanning from Iceland in the North, to the African continent in the South; however, most projects have been based in the foundation’s home country of Denmark.

Celebrating a special birthday with an anniversary grant

September 2022 marked the QATO Foundation’s 10th anniversary which was highlighted by an anniversary grant for an extraordinary project. The grant went to The Pan African Sanctuary Alliance (PASA). Together with three partners, PASA aims to create an island sanctuary for 120 chimpanzee orphans in the heart of the Democratic Republic of Congo. The sanctuary will allow for fast, life-saving treatment for confiscated apes and provide a safe, naturalistic home for orphans of the wildlife trade. The first chimpanzees are expected to arrive on the island during autumn 2023.

Qato Foundation grants (m DKK)

Photocredit: JACK Sanctuary

Part 1

Sustainability

In KIRKBI, sustainability is a foundational layer for all business activities – and defined by the KIRKBI Fundamentals which serve as our compass.

Approach to Sustainability

KIRKBI signed up to UN Global Compact in 2019 and has embedded its 10 principles in the fundamental approach to sustainability

The approach to sustainability is rooted in KIRKBI’s Fundamentals and Promises, and codified in the Code of Conduct which sets minimum requirements, for good corporate citizenship related to human rights, labour, environment, and anti-corruption.

The Code of Conduct is applicable to all activities – both own operations and investment activities. Further, it applies to suppliers and other business partners.

Priorities, risks, and impact vary by Business Area; therefore each Business Area has developed an individual sustainability approach tailored to their activities:

• The LEGO Brand Group entities have their own programs that are rooted in an overarching Sustainability Ambition

• The KIRKBI Investment Activities’ actions are governed by the Responsible Ownership framework and the Sustainable Real Estate strategy

• The Support Activities as well as our operations are guided by the priorities designated by KIRKBI’s Executive Leadership Team

Planet Promise

Partner Promise

We optimise our real estate portfolio

The sustainable Real Estate strategy outlines the sustainability topics most relevant for the management of the related portfolios. These include CO2 emissions and natural resources. At the KIRKBI headquarters in Billund, a building certified DGNB Gold, total energy use was reduced by 20 % in 2022 with on-site solar panels producing almost half of the electricity consumed. Increased focus and better sorting facilities improved waste recycling rates from a 2020 baseline of 50 % to 79 % in 2022. Finally, KIRKBI embarked on an extensive project to improve the biodiversity around the headquarters and biologists will measure the changes in levels of plants and insects.

We exercise active ownership

KIRKBI creates mutual long-term value by practicing active ownership that lives up to high ESG standards. As an example, in Armacell, one of the Long-term Equity investments, KIRKBI is actively driving the sustainability agenda as chairperson of the company’s Sustainability Committee set by the Supervisory Board. The committee is the governing body of Armacell’s sustainability efforts and supports the internal Sustainability Steering Committee in fulfilling its strategic direction and prioritising efforts related to the topics of social and environmental aspects.

People & Play Promises Our people engage in local community

In September, we launched the opportunity for KIRKBI employees to dedicate up to two working days per year to participating in the Local Community Engagement program developed by the LEGO Group, the LEGO Foundation and local charities. Employees can participate in events aimed at inspiring and developing children through play and that allows us to be inspired by our most important stakeholders, children.

Performance and targets

On an annual basis, KIRKBI sets targets to guide our sustainability efforts and to ensure continuous improvement. These include ‘evergreen’ targets such as employee engagement and near-term targets such as developing carbon reduction roadmaps. The outcomes of the targets are included in the Annual Report

2022 Target

People & Play Conscious inclusion training for all employees by end 2022

Maintain PULSE score on ‘immediate leader’

Obtain PULSE score 5 points above GELx benchmark

Define KIRKBI approach to community engagement with a focus on Play

Planet Develop Science Based Target (SBT) roadmaps

Improve environmental footprint of the KIRKBI office by 10 %

Utilise 20 % Sustainable Aviation Fuel

Achieved 2022 Performance Highlights

• Participation rate of 85 % impacted by employees on parental leave, etc.

• PULSE score decreased by 1 point to 84 (benchmark: 79 points)

• PULSE score decreased by 2 to 84 - 8 above benchmark at 76 points

• Local Community Engagement program launched

• Carbon reduction activities identified, mapped, and translated into near-term targets

• Energy use reduced by 20 % compared to 2021; Recycling rates increased by 29 percentage points compared to 2020

• Due to difficulties in procuring SAF, we were only able to procure volumes equal to 8 % of total fuel use. See case on page 43 for more details

Develop and trial the KIRKBI Real Estate tenant strategy

Automate collection of use data from Real Estate portfolios

Partner Further refine and adapt responsible ownership model

Review ESG performance of the equity portfolio, including external managers

• Strategy trialed with tenants of Copenhagen properties

• 80 % data automation across Real Estate portfolios, including 98 % automation for Danish properties. Improved data automation allows for efficient operations of properties

• Responsible ownership model refined with scoring criteria for sustainability performance specified for companies in the Long-term Equity portfolio and the managers of the Private Equity portfolio

• 100 % of Private Equity funds engaged on emissions and reduction targets. All non-low risk companies engaged on Science-Based Targets

People & Play

2023 and long-term targets

Maintain PULSE score 5 points above benchmark

Maintain gender balance of 45 %/55 % in organisation

Reach gender balance of 45 %/55 % at Director+ level by 2027

Maintain gender balance of 45 %/55 % among people leaders

Planet Reduce CO2e emissions in Own Operations by 5 % compared to 2022

Reduce CO2e emissions in Real Estate by 5 % in a like-for-like portfolio compared to 2022

Increase portfolio SBT coverage by 5 percentage points compared to 2022

Certify 5 properties to sustainable building standards

Sustainable Aviation Fuel

Partner Engage all General Partners (private equity) on ESG and Climate management

With focus on reducing emissions from private aviation activities, KIRKBI defined an ambitious target to replace 20 % of the aviation fuel used with the lessemitting Sustainable Aviation Fuel (SAF). In August, KIRKBI accepted the first truckloads of SAF ever to be delivered to Billund Airport; however, due to a surge in global demand, as well as interruptions to the supply, we were only able to secure a volume equal to approx. 8 % of our total usage, resulting in a saving of 125t CO2e. We continue to work with partners and suppliers to secure the delivery of SAF to Billund Airport.

Climate Inventory

Climate change is a central sustainability topic that affects and is affected by all KIRKBI’s Business Areas. To manage this impact across everything that KIRKBI does, an ambitious carbon reduction target has been set, approved by the Science Based Targets initiative as one of the first in Denmark under their new financial sector guidance. Efforts in 2022 focused on developing carbon reduction roadmaps across all Business Areas.

Recognising that each employee shares the responsibility to meet KIRKBI sustainability commitments, from 2023, all employees with bonus schemes will have part of their compensation linked to the annual carbon reduction goals.

Limiting KIRKBI’s own negative impact is necessary but not sufficient for solving the climate challenge. As such, KIRKBI is committed to contributing to the sustainable development of the world through an active and responsible ownership role in the companies and funds that are part of the investment portfolio and especially within the Thematic Capital activities by investing in solutions that:

• decarbonise the world’s energy system

• limit lifecycle carbon emissions of plastics by improving circularity and sustainable materials

• deliver carbon removal through afforestation

Performance in 2022

KIRKBI’s carbon footprint is calculated every year. As illustated in the table on page 45, KIRKBI’s own operations saw an increase in emissions in 2022 largely attributed to an increase in travel activity following the end of COVID restrictions in many parts of the world. Emissions from business travel via external commercial flights (Scope 3) increased 26 % since 2019, partly explained by travelers shifting from private aviation (Scope 1), which decreased by 50 % over the same period, to external commercial flights. Combined the resulting net saving is more than 1,600t CO2 per year. Responsible travel will continue to be a focus area in 2023.

Overall emissions from own operations have been reduced by 46 % since the 2019 baseline. Part of this reduction is explained by the conversion of all electricity supply to renewable sources and the use of district heat generated by Billund Varmeværk.

Emissions from the Real Estate portfolio fell by 39 % compared to 2021. The focus on improved quality of energy use data over recent years has provided a more accurate overview of emissions, while providing the insights necessary to reduce energy consumption. Energy consumption decreased 7 % in 2022, despite growth in the portfolio. We will continue to strategically reduce energy use and related emissions from the real estate area.

For the emissions from holdings and investments, the reduction in CO2 emissions amounts to 14 % since the baseline year 2019. As changes in these emissions arise from both company-level factors and portfolio-level factors, focus is mainly on individual company emissions and management of climate-related risks and opportunities, including the setting of reduction targets aligned with science-based targets.

KIRKBI Group CO2e emissions 2022

2022 total Own operations: 4,013 t CO2e

2

2022 total Holding and investment activities:

456,799t CO2e

Science Based Targets

KIRKBI has committed to a carbon emission reduction target in line with the Paris Agreement’s most ambitious 1.5 °C trajectory.

This means that KIRKBI commits to reduce its absolute carbon emissions to ensure that we play our part in

limiting the effects of climate change. The target has been approved by the Science Based Targets initiative (SBTi).

KIRKBI’s targets cover both emissions from own operations as well as holding and investment activities.

Reduce absolute scope 3 emissions from fuel and energy related activities, business travel, employee commuting, and assets leased to other parties by 55 % by 2032 from a 2019 base year.

Ensure that 45 % of listed equities, bonds, private equity and debt portfolios are setting SBTi validated targets by 20251)

Through several initiatives to reduce carbon emissions and improved data quality, KIRKBI is well on the way to deliver on scope 1 and 2 target and has reached scope 3 target well ahead of the plan.

New reduction targets for validation by the SBTi in 2025 will be submitted in line with the required recalculation of the holdings and investments target, or as per SBTi guidance.

28 % 28 % of emissions from the investments and holdings were covered by SBTi-verified reduction targets at the end of 2022. An additional 12 % of emissions come from companies that have committed to setting a science-based target over the next two years, which would bring us to 40 % coverage. As such solid progress is made towards the portfolio coverage target of 45 %. We will continue to engage with those companies without science-based targets.

1) Meaning that of the total emissions from our holding and investment activities (calculated as the sum of the scope 1 and 2 emissions times our ownership share of the individual holding or investment), 45 % should have set SBTi validated targets by 2025.

SUSTAINABILITY

CASE

In 2022, Nilfisk A/S became the first of the companies in KIRKBI’s Long-term Equity portfolio to have their carbon reduction target validated by the Science Based Targets initiative (SBTi). In addition, ISS A/S, Falck A/S, and Landis+Gyr have all committed to setting SBTi-approved targets. Having a science-based reduction target is a key sustainability topic of KIRKBI’s active ownership model.

CASE

Funding climate and biodiversity efforts in Brazil

In 2021, KIRKBI established the philanthropic fund, Fundo Ambiental Sul Baiano (FASB) to restore and sustain the Atlantic Forest in Southern Bahia, Brazil. The fund was launched in collaboration with New Generation Plantations and Forum Florestal da Bahia.

The Atlantic Forest has a high biodiversity and endemism with more than 20,000 plant species. However, less than 8 % of the original forest remains, putting pressure on the ecosystem, locally and globally.

In addition to restoring and sustaining the forest, the fund activates and engages with local NGOs and communities. The aim is to foster an understanding of economic and socially sustainable agriculture and forestry. The collaboration creates a network where competences and knowledge are shared to create new and viable projects to accelerate the restoration.

The ambition is to restore 1,500 ha of forest and establish 1,500 ha of sustainable land-use by end2023. At the end of 2022, 23 local projects were activated and approx. 1,200 families had directly or indirectly benefitted from the progress.

Financial Review 2022

KIRKBI’s financial strategy is to create longterm value to support the purpose of building a sustainable future for the family ownership of the LEGO® brand through generations.

2022 Financial Review

Focus on long-term value creation

KIRKBI’s financial strategy is to create long-term value to support the company’s purpose of building a sustainable future for the family ownership of the LEGO® brand through generations. The long-term value creation is supported by a continuous focus on delivery of strong stable cash flows.

KIRKBI’s financial result is mainly influenced by the performance of the LEGO Group and the financial return from the Investment Activities. Total assets end of 2022 amounting to DKK 166 billion (DKK 155 billion end of 2021) are as illustrated below mainly related to LEGO Brand Group and Investment Activities.

Assets within LEGO Brand Group increased by DKK 22 billion in 2022 following the investments within Digital Play (Epic Games) and Digital Learning (acquisition of BrainPOP). These LEGO Brand Group investments are made to support the 2032 brand vision to become a global force within Learning-throughPlay and to reach more children in the world. The investments have been funded with KIRKBI’s free cash flow for the year and reallocation of capital from the investment portfolio resulting in a reduction of the total assets within the Investment Activities by DKK 10 billion to DKK 100 billion year-end 2022.

At the end of 2022, KIRKBI’s equity amounted to DKK 140 billion which is an increase of DKK 9 billion or 7 % compared to the year-end 2021. Given the

Allocation of KIRKBI assets (m DKK) Total assets and Equity (m DKK)

relative size of the investment portfolio, the shortterm annual value creation is to a high degree impacted by the development of the global financial markets at any given time and therefore, in the short-term, to a large extent outside the control of the company. KIRKBI’s strategic focus is therefore on the long-term value creation illustrated below by an increase in Equity over the last 5 years of DKK 58 billion or 71 %.

High profit from LEGO Brand Group

The financial year 2022 showed a profit after tax of DKK 10.7 billion (2021: DKK 27.0 billion).

The profit for the year was driven by continued strong performance in the LEGO Group and a

significant rebound in Merlin Entertainments after a couple of years with low activity due to the COVID-19 pandemic. Consolidated, the LEGO Brand Group activities contributed with a profit for the year of DKK 18.4 billion (2021: DKK 17.9 billion), negatively impacted by the new investments in Digital Play and Digital Learning.

For the Investment Activities, focus has been on steering the portfolio through an unprecedented eventful year impacted by the war in Ukraine, supply chain challenges, energy crisis in Europe, inflationary pressure, continued COVID-related lock downs in China, and significant interest rate increases. Factors that have contributed to volatility and challenged financial markets throughout 2022. For KIRKBI, the Investment Activities contributed negatively to profit for the year with DKK 4.1 billion vs. a positive contribution of DKK 15.6 billion in 2021 (negative delta of DKK 19.7 billion between 2021 and 2022). Compared to benchmarks, the financial performance of the Investment Activities is considered satisfactory.

The profit for the year was overall lower than the expectations for 2022 disclosed in the annual report for 2021. The LEGO Group and Merlin Entertainments delivered a financial performance above expectations which however was more than offset by the negative investment return.

As illustrated in the 5-year overviews below, the annual net profit for KIRKBI has been volatile mainly impacted by the effect from fluctuations in the financial markets on the Investment Activities. It should be noted that the vast majority of the contribution to net profit from the Investment Activities comprises unrealised value adjustments with no impact on cash flows.

Continued strong cash flows

The KIRKBI Group continues to deliver strong cash flows with the majority coming from the strong financial performance in the LEGO Group. For 2022, the cash inflow from operating activities to KIRKBI (after capex investments in the LEGO Group) amounted to DKK 14.7 billion before tax

(2021: DKK 19.5 billion), impacted by significant capex investments in the LEGO Group to increase production capacity.

Within the Investment Activities, cash flow from interests and dividends is in line with last year. In 2022, the KIRKBI Group paid taxes of DKK 2.9 billion compared to DKK 6.0 billion in 2021. The lower tax payment was driven by the negative financial return from the Investment Activities in 2022.

Over the last 5 years, the after-tax cash inflows to KIRKBI have shown a solid development.

LEGO Brand Group

The LEGO Group

The LEGO Group continued its outstanding performance in 2022 with another year of doubledigit growth in revenue and consumer sales. The LEGO Group’s consumer sales grew 12 % which outpaced the industry’s growth and thereby led to the LEGO Group increasing its market share. The growth was driven by a strong product portfolio, resilient global supply chain, strong retail partnerships, and strong e-commerce platform.

Operating profit split by LEGO Brand Group activities and Investment Activities (m DKK)

Cash flows before and after tax payments (m DKK)

Revenue for the year increased by 17 % to DKK

64.6 billion and the profit before tax ended at DKK 17.7 billion compared to DKK 17.0 billion in 2021. The profit for 2022 was impacted by cost pressure on raw materials, services, and labor as well as impact from the cease of all shipments to the Russian market since February 2022 and COVID-19 lockdowns in China. The LEGO Group continued to invest into initiatives supporting long-term growth, including product innovation, digitalisation and sustainability. Further, the LEGO Group made substantial investments in increasing production capacity at three out of four factories and started construction of new factories in Vietnam and Virgina, US.

Merlin Entertainments Ltd.

On the back of two years severely impacted by the COVID-19 pandemic, Merlin Entertainments started to see a normalised activity level in 2022 with an increased number of visitors especially in the US and Europe while Asia continued to be impacted by lockdown and restrictions. Overall, the recovery was significantly stronger than planned mainly due to visitors spending more on average per visit. This led to higher revenue, improved operating result, and solid cash flows.

Revenue for 2022 amounted to GBP 2.0 million compared to GBP 1.3 million in 2021 and profit for the year amounted to GBP 89 million compared to a loss of GBP 140 million in 2021. KIRKBI’s share of profit was DKK 492 million in 2022 compared to negative DKK -588 million in 2021.

Royalties and other LEGO Brand Group activities

Royalties from the LEGO® and LEGOLAND® trademarks increased by 20 % to DKK 2.5 billion (2021: DKK 2.0 billion). The higher royalty income was driven by the strong revenue growth in the LEGO Group.

Other LEGO Brand Group activities comprising costs and investments to protect, develop, and leverage the full potential of the LEGO brand continued in 2022. In addition to costs centered around the global LEGO brand campaign ‘Rebuild the World’, costs for IPR and legal compliance, the LEGO brand activities were impacted by the significant investments in Digital Play (Epic Games) and Digital Learning (acquisition of BrainPOP). The two new investments impacted profit negatively in 2022 due to impact from purchase price allocation as well as transaction and advisor costs, etc.

Investment Activities

The investment Activities are separated into a Core Capital and a Thematic Capital portfolio.

The Core Capital portfolio was throughout 2022 impacted by the challenging global financial markets with war in Ukraine, supply chain challenges, energy crisis in Europe, inflationary pressure, continued COVID-related lock downs in China, and significant interest rate increases.

The financial return for 2022 was negative with DKK 3.7 billion equal to a return of -4.1 %. Compared to market performance and taking the global financial conditions into consideration, the financial return is considered satisfactory. Especially the Long-term Equity and the Real Estate portfolios showed relative strong returns, while on the other hand, the Quoted Equity portfolio was influenced by declining global financial markets as was the Fixed Income portfolio negatively affected by inflation and increasing interest rates.

As a consequence of the negative financial return and allocation of capital to the investments within LEGO Brand Group, the Core Capital portfolio declined from DKK 98.1 billion in 2021 to DKK 89.6 billion in 2022.

For the Thematic Capital portfolio , the return for 2022 was negative with DKK 0.4 billion, corresponding to -3.4 %. The journey to build-u p organisational capabilities continued in 2022 in line with the strategic direction set out in 2019. In addition to continued investments within Energy Transition and Circular Plastics the highlights for the year comprised the first acquisitions of more than 900 hectares of land within Land Sustainability.

At the end of 2022, the value of the Thematic Capital portfolio amounted to DKK 10.5 billion, which is DKK 1.1 billion lower than the DKK 11.6 billion in 2021. In addition to the negative return, the portfolio value was in 2022 impacted by disposal of ownership stake in the offshore windfarm Borkum Riffgrund.

Support Activities including donations and sponsorships

Costs to operate KIRKBI’s support functions such as HR, IT, Legal, Strategy, and Finance as well as the support for the Investment Activities, including Real Estate, amounted to DKK 0.5 billion in 2022 (2021: DKK 0.5 billion).

Donations and sponsorships totaling DKK 201 million in 2022 (2021: DKK 159 million) comprise donations to, among others, Ole Kirk’s Fond, Danmarks Idrætsforbund (DIF), QATO Foundation, World Nature Fund and Billund Church. KIRKBI has since 2017 supported the Danish athletes striving for the Olympic and Paralympic Games and for the run-up to the 2024 Paris Olympic and Paralympic Games, KIRKBI has committed a donation of DKK 50 million.

Risks

The KIRKBI Group’s risks primarily relate to the development within the global toy markets where the LEGO Group operates, the market for family entertainment where Merlin Entertainments operates as well as the financial markets where KIRKBI has a significant exposure of investments. Please refer to note 4.1 in the consolidated financial statements for a description of the financial risks as well as an overall risk assessment.

Events after the reporting date

No events have occurred after the balance sheet date that would have a significant influence on the annual report for 2022.

Outlook 2023

Expectations for the KIRKBI Group’s financial performance for 2023 are subject to uncertainties related to the global economy impacting the Investment Activities. The overall expectations set out below are therefore to a large extent subject to uncertainties and risks which are beyond KIRKBI’s control and may cause the actual development and results to differ materially from expectations.

LEGO Brand Group activities

KIRKBI expects a result before tax from LEGO Brand Group activities in the level around the 2022 result.

The LEGO Group expects single-digit growth in 2023, staying ahead of the global toy market with further investments within product innovation, digitalisation, sustainability, retail channels, and production capacity.

Merlin Entertainments expects growth in 2023 in both number of visitors, revenue, and earnings compared to 2022, driven by both organic growth as well as the opening of new attractions.

Royalties are expected to increase in line with expected growth of revenue in the LEGO Group and in the LEGOLAND® parks, offset by continued investments in brand protection and development.

Investment Activities

KIRKBI is a long-term investor and a one-year view on the Investment Activities is highly dependent on the development in the financial markets. A normalised return from Investment Activities would be an annual return around 5 % of the investment portfolio.

Cash flows

KIRKBI has high focus on cash flows. For 2023, stable cash flows expect to continue, however with a slower pace than prior years driven by planned significant investments within the LEGO Group increasing capacity as well as higher corporate tax contributions assuming a positive investment return.

Part 1

Governance

KIRKBI is the Kirk Kristiansen family’s private holding and investment company. Our way of working is anchored in a strong set of values.

Board of Directors

Kjeld Kirk Kristiansen

Chairman and member of the Board since 1974

Majority shareholder of KIRKBI A/S

President and CEO of the LEGO Group 1979-2004

Chairman of the Board of Ole Kirk’s Fond

Board Member in CoC Playful Minds A/S and four fully-owned subsidiaries of KIRKBI A/S

Michael Halbye

Deputy Chairman and member of the Board since 2020

Chairman of the Board of Ludvig & Co. and Generation.org

Member of the Board of the Mary Foundation, 7N, Maternity Foundation, One Life Foundation, and Penda Paper

Malou Aamund

Member of the Board since 2019

Member of the Board of LEGO Foundation, DSV A/S, and WS Audiology A/S

Chairperson, Thinkproject GmbH

Member of the Board since 2008

CEO of Maj Invest Holding A/S

Chairman of the Board of Haldor Topsøe A/S, Emlika Holding ApS, and JEKC Holding ApS

Member of the Board of Novo Nordisk A/S, Novo Holdings A/S, Pluto Naturfonden, Randers Regnskov, and BellaBeat Inc. (USA)

Member of the executive management of Maj Invest Equity A/S and Det Kgl. Vajsenhus

Thomas Kirk Kristiansen

Member of the Board since 2022

Chairman of the Board of the EU Commission’s Mission Board on Adaptation to Climate Change, KR Foundation, CONCITO, OECD’s Round table for Sustainable Development, and Grønnegårdsteatret

Member of the Board of BBVA, Cadeler A/S, and European Climate Foundation

Member of the Supervisory Board of Danfoss and Cadeler

Member of the Sustainability Council of Volkswagen

Member of the Board since 2007

Shareholder of KIRKBI A/S and representing the fourth generation of the owner family

Chairman of the Board of LEGO A/S, The LEGO Foundation, and Koldingvej 2, Billund A/S

Board member in one fully-owned subsidiary of KIRKBI A/S

Executive Manager of Kirk og Kirk Holding ApS and management roles in four subsidiaries

Connie Hedegaard

Jeppe Christiansen

Executive Leadership Team

Søren Thorup Sørensen Chief Executive Officer

Employed in KIRKBI

since 2010

Born: 1965

Education: MSc in Accounting and Audit.

State Authorised Public Accountant

Other management positions

Deputy Chairman of the Board of Directors of LEGO A/S, Member of the Board of Directors of ISS A/S, Merlin Entertainments Ltd. and 4 affiliated companies, Landis+Gyr AG, Ole Kirk’s Fond, ATTA Fonden, Koldingvej

2 Billund A/S, and six fully owned subsidiaries of KIRKBI A/S. Executive position in four subsidiaries of KIRKBI A/S

Irene Dahl-Hansen Head of HR and Family Office

Employed in KIRKBI

since 2014

Born: 1975

Education: Master of Law, Aarhus University, 2003. Attorney-at-law

Jesper Ridder Olsen Chief Financial Officer

Employed in KIRKBI

since 2021

Born: 1970

Education: MSc in Accounting and Audit.

State Authorised Public Accountant

Other management positions Chairman of the Board of Directors of Adapture Renewables inc. and three fully-owned subsidiaries of KIRKBI A/S

Member of the Board of Directors of KK-Group A/S and BrainPOP Group, Inc.

Steen Pedersen Head of Global Real

Employed in KIRKBI

since 2013

Born: 1960

Estate

Thomas Lau Schleicher Chief Investment Officer

Employed in KIRKBI

since 2010

Born: 1973

Education: BSc in Civil Engineering, Technical University of Denmark, 1986. Executive MBA, Scandinavian International Management Institute, 2003. Executive education at INSEAD, Wharton, and London Business School

Other management positions

Member of the Board of Directors of ten fully-owned subsidiaries of KIRKBI A/S

Education: MSc in Finance and Accounting, Aarhus School of Business, 1998

Other management positions Member of the Board of Nilfisk A/S, Falck A/S, Adapture Renewables Inc., Topsøe Holding A/S, and one fully-owned subsidiary of KIRKBI A/S

Part 2

Financial Statements

The financial statements for 2022 show strong financial performance from LEGO Brand Group activities, satisfactory results from investment activities compared to benchmarks, stable cash flows and continued long-term value creation.

Financial Statements

Part

59 Consolidated Income Statement

59 Consolidated Statement of Comprehensive Income

60 Cash Flow Statement 1 January – 31 December

62 Balance Sheet at 31 December

Part 3

Part 4

Part

Consolidated Income Statement Consolidated Statement of Comprehensive Income

Please refer to note 8.1 for a Standard Consolidated Income Statement for the KIRKBI Group.

Cash Flow Statement

1 January – 31 December

Accounting policies

The consolidated cash flow statement shows cash flows for the year broken down by operating, investing and financing activities and cash and bank deposits at the beginning of the year and at year-end.

Cash flows from operating activities are calculated indirectly as profit before tax adjusted for non-cash items, income taxes paid and changes in working capital.

Cash flows from investing activities comprise payments relating to acquisitions and disposals of securities, intangible assets, property, plant and equipment, fixtures and fittings as well as fixed asset investments.

Cash flows from financing activities comprise proceeds from borrowings, repayment of interest-bearing debt and dividend paid to shareholders and non-controlling interests.

Cash and cash equivalents comprise cash and bank deposits.

Cash Flow model in line with KIRKBI’s business model

The cash flow model below shows the cash flow in line with KIRKBI’s business model presented on page 12-13, split by cash inflow from KIRKBI’s main

actitivites before and after tax and cash outflows to investment activities, support activities and charity as well as distributions.

Balance Sheet at 31 December Balance Sheet at 31 December

Statement of Changes in Equity

Notes – the KIRKBI Group

Notes – The KIRKBI Group

Section 1 – Allocation of assets

1.1. Allocation of KIRKBI’s assets

KIRKBI is a private holding and investment company founded to build a sustainable future for the family ownership of the LEGO® brand through generations. The activities are focused on three fundamental objectives: LEGO Brand Group, Investment activities and Support activities.

Allocation of KIRKBI assets (m DKK)

Below is set out a split of KIRKBI’s assets of DKK 166 billion (2021: DKK 155 billion), into LEGO Brand Group, Investment activities and Other assets.

Section 2 – LEGO Brand Group

2.1. Definition of LEGO Brand Group activities

LEGO Brand Group activities are defined as activities related to the LEGO® brand, which inlude ownership of the LEGO Group and Merlin Entertainments Ltd. owner of the LEGOLAND® parks and LEGOLAND® Discovery

Accounting policies

Profit before tax from LEGO A/S and BrainPOP LLC, companies where the KIRKBI Group has controlling influence, is fully consolidated in the income statement and included in the line items Operating profit from the LEGO Group and Trademark, business development and related costs, respectively.

Merlin Entertainments Ltd., in which KIRKBI owns 47.5 %, is accounted for using the

Centres as well as trademark royalties. Further investments in LEGO Brand Group activities include activities within education, learning and digital play through ownership of BrainPOP LLC and investment in Epic Games. equity method. Changes to the carrying amount of the investment are in the income statement included in the line item Operating profit from Merlin activities together with income from assets leased to Merlin Entertainments Ltd.

The investment in Epic Games, a company where KIRKBI owns 3 %, are valued at fair value through the income statement in the line item Trademark, business development and related costs.

2.2. The LEGO Group

the Annual Report for the LEGO Group:

Accounting policies

The KIRKBI Group controls, through its 75 % ownership of LEGO A/S, the LEGO Group. Hence the LEGO Group is fully consolidated into the income statement and balance sheet of the KIRKBI Group.

The non-controlling share of the LEGO Group is presented as non-controlling interest in the income statement and as non-controlling interests under equity. See note 9.2 for details.

2.3. Merlin activities

Operating profit from Merlin activities

Entertainments and hence the investment is classified as an investment in associates. Merlin Entertainments Ltd. is located in the UK using GBP as its functional currency. (m DKK) 2022 2021 Cost at 1 January 3,330 3,330 Additions -Cost at 31 December 3,330 3,330 Value adjustment at 1 January (835) (667) Exchange adjustment to year-end rate (134) 180 Share of profit 492 (588) Share of comprehensive income 4 240 Value adjustment at 31 December (473) (835) Carrying amount at 31 December 2,857 2,495

The carrying amount of Merlin Entertainments Ltd./Motion JVCO Ltd. can be specified as follows:

Total value of assets related to Merlin activities

In addition to the 47.5 % shareholding in Merlin Entertainments Ltd., KIRKBI has other assets related to Merlin Entertainments Ltd. in the

balance sheet including bonds and term-loans issued by Merlin Entertainments Ltd. and assets leased to Merlin Entertainments Ltd.

Total value of assets related to Merlin activities (m DKK)

Financial information of Merlin Entertainments Ltd./Motion JVCO Ltd.

Accounting policies

Merlin Entertainments Ltd. is accounted for using the equity method. Under the equity method, investments in associates are initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the

share of the net assets of the associate since the acquisition date.

The carrying amount of associated companies allocated to LEGO Brand Group activities is presented in the balance sheet under Other non-current assets.

Section 3 – Investment activities

3.1. Definition of investment activities

The KIRKBI Group’s investment activities are divided into Core Capital and Thematic

Capital investments with different purpose and risk profiles.

Investment Activities

3.2. Core Capital

Through Core Capital, KIRKBI seeks to obtain attractive risk-adjusted returns and capital preservation for the long term, while ensuring high environmental, social and governmental standards.

The core capital portfolio has been designated as financial assets at fair value through the income statement as the portfolio is managed and evaluated on a fair value basis in accordance with the KIRKBI Group’s investment strategy.

Core Capital

Investing to ensure a sound financial foundation for the owner family’s activities through generations.

Focused on long-term risk adjusted returns.

Split of Investment activities

Thematic Capital

Investing to ensure a financial return and significant contribution to a sustainable development in the world inspired by the owner family’s interests.

Focused on theme-based investing.

Valuation method for Core Capital

2022 (%)

2021 (%)

Significant accounting estimates and judgements

Core Capital investments are valued at fair value. By nature, uncertainties exist regarding fair value assessment of investments not based on observable market data. Consequently, preparation

Asset class

Listed equity shareholdings

Private equity

of the financial statements requires the application of certain estimates and judgements.

The material area of estimates and or judgements is set out below:

Valuation method

Observable market data

Reported Net Asset Value by the respective Private Equity funds in line with IPEV (International Private Equity and Venture capital) valuation guidelines

Please refer to note 9.4 for more information on fair value estimates and fair value hierarchies.

Accounting policies

Core capital investments are valued at fair value through the income statement. Fair value is the price that would be received by selling an asset between market participants at the measurement date.

Associates and other financial assets that fall into the category of core capital investments are recognised in accordance with IFRS 9 at fair value through the income statement.

Investments are initially recognised at cost and subsequently adjusted to fair

value. Please refer to note 11 for a list of associates valued at fair value through the income statement.

Investments in real estate are measured at fair value through the income statement according to IAS 40. Initially real estate investments are measured at cost and subsequently adjusted to fair value.

Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise.

Unquoted Long-term equity shareholdings

Investment properties

Bonds and corporate debt

Management reviews and assesses the value of the individual investments on an ongoing basis. For more information

Trading multiples for comparable companies in combination with discounted cash flows analysis

Cash flow estimates and analysis of required rate of return (yield)

Observable market data

on significant accounting estimates and judgements please refer to note 10.2.

3.3. Thematic Capital

Through Thematic Capital, KIRKBI seeks to contribute to a sustainable development in the

world by investing in impact focused themes inspired by the owner family’s interests.

Management reviews and assesses the value of the individual investments on an ongoing basis. For more information on significant

Allocation of Thematic Capital (m DKK)

accounting estimates and judgements by management please refer to note 10.2.

Accounting policies and significant estimates and judgements

The Thematic Capital investments are valued either at cost less depreciation or fair value through the income statement depending on the nature of the investment. For controlled entities and joint operations the underlying assets are

valued at cost less depreciation through full or partial consolidation in the income statement and balance sheet.

The offshore windfarm Burbo Extension Ltd. is classified as joint operations, as there is a contractual arrangement that secures the parties control over the output from the joint arrangement.

Valuation method for Thematic Capital (m DKK)

Please refer to note 9.4 for more information on fair value estimates and fair value hierarchies.

Section 4 – Risk management

4.1. Financial risks

The financial risks of the KIRKBI Group are set out in the overall risk management guidelines approved by the Board of Directors. The guidelines include the KIRKBI Group’s treasury and investment policy including definition of appropriate risk limits and controls to monitor the risks and ensure adherence to limits.

The overall purpose of the core capital investment portfolio is to create long-term economical value based on the KIRKBI Fundamentals, i.e. to:

• Protect the investment portfolio to ensure a sustainable future for the family ownership of the LEGO Brand

• Deliver a stable growth of capital with an attractive risk-adjusted return

• Avoid negative spill-over effects on the LEGO brand and the LEGOLAND brand

• Contribute to a sustainable development in the world

• Ensure high ethical standard in investments and engagements

To reflect the above, the investment policy includes guidelines and ranges for which investments are considered to be eligible investments and which investment parameters are to be applied such as limits on issuer, duration, credit rating, country, or economic sector.

The guidelines are reviewed regularly to reflect changes in market conditions, the KIRKBI Group’s activities and financial

position. A separate and independent risk management function reviews managers’ compliance with the mandates and the adequacy of the mandates.

Investment approach and asset allocation

The KIRKBI Group’s activities consist of holdings in LEGO Brand Group assets such as the LEGO Group, Merlin Entertainments Ltd., BrainPOP Inc. and Epic Games as well as investments within the areas of equities, real estate, fixed income and thematic investment areas such as energi transition, circular plastic and land sustainability.

The overall purpose implies a portfolio strategy based on firm and conservative investment principles and beliefs. Combined with the financial strength of KIRKBI and continued success of the LEGO Group, it allows KIRKBI to have an asset allocation focused on long-term ownership.

Financial risk management

For the KIRKBI Group, the concept of risk is divided into two areas:

• Short-term risk of temporary loss of capital

– i.e. quotation risk

• Long-term risk of permanent loss of capital

– i.e. capital loss risk

As a long-term investor, the most important risk to avoid is the permanent loss of capital.

Risk assesment

Below is set out an overall risk assesment related to business risks, credit risks and risks related to interest and foreign exchange rates.

Risk levels (yearly financial impact on the income statement):

Low DKK 0 m - DKK 1,000 m

Moderate DKK 1,000 m - DKK 2,000 m

High above DKK 2,000 m

Type Risk level Description

Consumer demand in the LEGO Group

Commodity risk in the LEGO Group

Number of visitors in Merlin Entertainments

Development in global equity markets

High The impact of consumer demand in the LEGO Group has a significant effect on the profitability and cash flows in the KIRKBI Group.

Low The LEGO Group is exposed to commodity risks related to production and distribution, where the largest exposure relates to energy costs.

Moderate With a significant ownership share in Merlin Entertainments, the KIRKBI Group is impacted by the number of visitors in the attractions of Merlin.

High The KIRKBI Group has significant equity exposure and the financial result is impacted by the development in the global Equity markets.

Risk of bankrupties at customers Low The KIRKBI Group has no significant credit risk concentration, but has some single significant trade debtors.

Risk of bankrupties at counterparts Low Financial instruments and engagement with insurance companies are entered into with counterparts with investment grade level ratings.

Risk for loss due to lack of liquidity

Low The KIRKBI Group has a significant portion of quoted bonds and equities that are relative liquid in a liquidity stress situation.

Foreign exchange exposure High The foreign exchange risk for the KIRKBI Group is mostly related to net inflows in the LEGO Group and investments denominated in foreign currencies. The highest risk is related to USD, where the KIRKBI Group has assets measured at fair value of around DKK 31 billion. The exchange rate risk for other currencies than USD are considered low.

The LEGO Group hedges a proportion of forecasted transactions and balance sheet items for a period of up to 12 month, mainly USD. Total contract amounts for which hedge accounting applies is DKK 12.4 billion with a net positive fair value of DKK 0.2 billion.

Interest rate exposure

Low The KIRKBI Group’s interest rate risk relates mainly to the portfolio of core fixed income and corporate debt instruments. With the current composition of the portfolio, the KIRKBI Group’s interest rate risk is considered low.

4.2. Contingent liabilities and other obligations

Contingent liabilities and other obligations

Section 5 – Taxes

5.1. Income tax expense

Obligations to private equity funds and long-term equity reflects outstanding commitments to funds and commited purchase agreements of equities. Commitments to private equity funds are expected to have a liquidity effect within the next 1-7 years.

Remaining liabilities in real estate projects mainly consists of costs to complete ongoing projects including two new factories within the LEGO

Group, with expected liquidity effect within 5 years. Guarantees mainly relate to bank guarantees for commitments.

Other obligations comprise purchase, service and licence agreements.

Security has been given in land, buildings and installations at a net carrying amount of DKK 3,489 million (DKK 3,202 million in 2021) for mortgage loans with a carrying amount of DKK 794 million (DKK 841 million in 2021).

Accounting policies

The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement,

except to the extent that it relates to items recognised in other comprehensive income. In this case, tax is also recognised in other comprehensive income.

Section 6 – Intangible assets and property, plant and equipment

6.1. Intangible assets and property, plant and equipment

The carrying amount of intangible assets and property, plant and equipment is split into the following groups:

Carrying amount of Intangible assets and property,

equipment

The increase in 2022 in intangible assets relates to the acquisition of BrainPOP Inc. For more information please refer to note 9.5.

The increase in 2022 in property, plant and equipment is driven by expanding production capacity within the LEGO Group.

No impairment has been identified for 2022.

Accounting policies

Intangible assets

Goodwill and trademarks are initially recognised in the balance sheet at cost and are not amortised.

Acquired patents and other intangible rights are capitalised on the basis of the costs incurred. These costs are amortised over the shorter of their estimated useful lives and the contractual duration.

The carrying amount of goodwill, trademarks, patents and other intangible rights is allocated to their respective cash generating units at the acquisition date and is tested for impairment at that level.

Research expenses are charged to the income statement as incurred. Software and development projects that are clearly defined and identifiable and which are expected to generate future economic profit are recognised as intangible non-current assets at historical cost less accumulated amortisation and any impairment loss. Amortisation is provided on a straight-line basis over the expected useful life which is normally 5–10 years. Other development costs are recognised in the income statement. An annual impairment test of the intangible fixed assets under construction is performed.

Property, plant and equipment

Land and buildings comprise mainly factories, warehouses and offices.

Property, plant and equipment are measured at cost, less subsequent depreciation and impairment, except for land, which is measured at cost less impairment.

Cost comprises acquisition price and expenses directly related to the acquisition until the time when the asset is ready for use. The cost of self-constructed assets comprises direct expenses for wage consumption and materials. Borrowing costs related to financing self constructed assets that take a substantial period of time to complete are included in the cost price.

Depreciation is calculated using the straight-line method or the degressive method to allocate the cost of each asset to its residual value over its estimated useful life as follows:

Buildings

Installations

Plant and machinery

Section 7 – Working capital

7.1. Inventories

Inventories comprises inventory from the LEGO Group.

25-50 years

5-20 years

2-25 years

Other fixtures, fittings, 3-10 years tools and equipment

The residual values and useful lives of the assets are reviewed and adjusted, if appropriate, at each balance sheet date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.

Inventories recognised as an expense during 2022 amounted to DKK 13,354 million (DKK 10,978 million in 2021). Write-down of inventories is recognised as a cost of DKK 144 million (DKK 75 million income in 2021).

Accounting policies

Inventories are measured at the lower of cost and net realisable value. Cost is accounted for on a first-in, first-out (FIFO) method. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure (indirect production costs), the latter being allocated on the basis of normal production capacity. Costs of purchased inventory are determined after decucting rebates and discounts. Net realisable value is the estimated selling price in the ordianry course of

All figures were in the income statement reported in the reporting line LEGO Group.

business less the estimated costs of completion and the estimated costs necessary to make the sale.

The LEGO Group applies a standard cost model that is defined by estimated production capacity. Cost and capacity can vary during the year and therefore adjustments for indirect production costs and purchase price variances are made to reflect the actual cost of inventories.

When the net realisable value is lower than cost, inventory items are impaired and measured at net realisable value.

7.2. Trade receivables

Trade receivables mainly consist of receivables within the LEGO Group and the

Trade receivables

age distribution can be specified as follows:

7.3. Other receivables

Realised losses for 2022 amounted to DKK 319 million compared to DKK 156 million in 2021.

The KIRKBI Group has no significant trade receivable risk in specific countries, but has some

Accounting policies

Trade receivables are initially recognised at fair value equal to the transaction price, and subsequently measured at amortised cost less allowance for lifetime expected credit losses.

Trade receivables are written off when all possible options have been exhausted and there are no reasonable expectations of recovery.

single significant trade debtors. The exposure for trade receivables is managed globally through fixed procedures, and credit limits are set as deemed appropriate for the customer, taking current local market conditions into account.

Accounting policies

Other receivables are measured at cost unless specifically stated otherwise.

The KIRKBI Group applies the IFRS 9 simplified approach to measure expected credit loss and a lifetime expected loss allowance for all trade receivables.

Exposure to credit risk on trade receivables is guided by the KIRKBI Group’s policies. Credit limits are set based on the customer’s financial position and current market conditions.

7.4. Other liabilities

Specified as follows:

Section 8 – Other notes Income Statement

8.1. Standard consolidated income statement

and relate to:

Other current and non-current liabilities mainly relates to the LEGO Group and comprises wage related debt, VAT, other indirect taxes and sales incentives.

Accounting policies

Other liabilities are measured at amortised cost unless specifically stated otherwise.

Borrowings are initially recognised at fair value, net of transaction expenses incurred. Borrowings are subsequently measured at amortised cost. Any differences between the proceeds and the redemption value are recognised in

the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the KIRKBI Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

The KIRKBI Group presents its consolidated income statement, as an alternative performance measure (APM) as management believes that a standard consolidated income statement does not give the most accurate picture of the company’s holding and investment activities. KIRKBI’s activites includes ownership of LEGO branded entities as well as operation of a large diversified investment portfolio. Management does not believe that a standardised consolidated

income statement will give a transparent and clear picture of profitability, development and direction of the KIRKBI Group’s activities. The income statement presented is therefore based on the internal management reporting for the KIRKBI Group presented as an APM.

To fulfill IFRS requirements of presenting a standardised consolidated income statement, it is presented below without further descriptions or notes.

8.2. Group revenue

8.3. Group expenses by nature

Accounting policies

Expenses by nature discloses information about expenses arising from the main inputs that are consumed in order to accomplish the KIRKBI Group’s activities.

Accounting policies

Revenue is recognised when the KIRKBI Group fulfils its contractual performance obligations towards the buyer, at the transaction price to which the

KIRKBI Group expects to be entitled. Transaction price includes rebates, sales incentives and provisions for returned products.

8.4. Group employee expenses

Since the Executive Management only consists of one member, the remuneration of the Executive Management and the Board of Directors is disclosed collectively with reference to § 98b (3) of the Danish Financial Statements Act.

Accounting policies

Wages, salaries, social security cost, leave and sick leave, bonuses and non-monetary employee benefits are recognised in the financial year in which

Incentive plans comprise a short-term incentive plan based on yearly performance and a long-term incentive plan related to long-term goals regarding value creation.

8.5. Auditor’s fee

the services are rendered. Whenever the KIRKBI Group provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees.

Fee to Deloitte included under Other services comprises primarily IT consultancy services to the LEGO Group audited by PWC.

Section

9

– Other notes Balance sheet

9.1. Share capital

The share capital consists of:

1,408 A-shares of DKK 1,000 or multiples thereof

198,592 B-shares of DKK 1,000 or multiples thereof

200,000 Total shares

Each ordinary A share of DKK 1,000 gives 1,000 votes, while each ordinary B share of DKK 1,000 gives 1 vote.

Dividend has been distributed at DKK 2,250 per share (2021 DKK 3,000) per share.

Within the last 5 years, there have been no changes in the share capital.

9.2. Non-controlling interests

The non-controlling interest of the KIRKBI Group mainly relates to Koldingvej 2, Billund A/S’ 25 % ownership of the LEGO Group.

Financial information about LEGO A/S:

Accounting policies

Dividends are recognised as a liability in the period in which they are adopted at the Annual General Meeting.

9.3. Related party transactions

KIRKBI A/S’ related parties comprise its owners Kjeld Kirk Kristiansen, Sofie Kirk Kristiansen, Thomas Kirk Kristiansen, Agnete Kirk Kristiansen as well as its Board of Directors and Executive Management of KIRKBI A/S. Related parties also comprise subsidiaries and associates. Related parties further comprise companies where the mentioned shareholders have significant influence.

Kjeld Kirk Kristiansen, Sofie Kirk Kristiansen, Thomas Kirk Kristiansen and Agnete Kirk Kristiansen have as owners significant influence in KIRKBI A/S.

In the financial year, a certain number of transactions related to services took place between the owners of KIRKBI A/S and the KIRKBI Group. These services were paid on normal market terms and the total fee paid to KIRKBI A/S amounted to DKK 50

million (2021: DKK 32 million). In the financial year interests paid to owners of KIRKBI A/S amounted to DKK 3 million (2021: DKK 8 million).

Transactions related to sales of products and services between associates and the KIRKBI Group amounted to DKK 966 million (2021: DKK 616 million), which was paid on normal market terms.

There were no transactions with the Board of Directors or the Executive Management besides transactions related to the employment. For information about remuneration to the Board of Directors and the Executive Management, see note 8.4.

Loans, receivables and commitments related to associates are specified in the KIRKBI Group’s balance sheet or related notes.

9.4. Financial assets and liabilities

Financial assets and liabilities by valuation category

The table below shows which financial assets and liabilities that are measured at either fair value through the income statement or at amortised cost.

Due to the short term nature of financial assets and liabilities measured at amortised

cost their carrying amount is considered to be approximately the same as their fair value.

Fair value hierarchy for financial assets measured at fair value through the income statement:

Investments measured at fair value are classisfied according to a fair value hierarchy depending on the inputs used in the valuation method. The fair value hierarchy distinguishes between observable and unobservable inputs, which are classified at one of the following levels:

2022 (billion DKK)

Level 1 Unadjusted quoted market prices for identical assets in an active market Level 2 Inputs other than quoted market prices included within level 1 that are observable for the assets either directly or indirectly Level 3 Inputs for the asset or liability that are not based on observable market data

Change in value for level 3 in 2022

There have not been transfers between fair value hierarchies in the last two years.

2021 (billion DKK)

Accounting policies

The KIRKBI Groups investment activities are meassured at fair value through the income statement, which equals listed prices (level 1), valuation techniques with observable market data (level 2) or internationally accepted valuation

models (level 3). All other recognised financial assets and liabilities are measured at cost less depreciation. For description of significant accounting estimates and judgements please see note 3.2, note 3.3 or note 10.2.

9.5. Acquisition of subsidiaries

BrainPOP Inc.

On 7 October 2022, the KIRKBI Group acquired 100 % of the shares in BrainPOP LLC, a US-based pioneer in developing online educational learning solutions for use in schools and at home. The acquisition is a strategic investment within LEGO Brand Group in the educational space as Playful Learning.

Total enterprise value of DKK 7.0 bn consisted of a total purchase price of DKK 6.8 bn on a cash and debt-free basis and assumed purchase price liabilities of DKK 0.2 bn. The purchase price mainly relates to intangible assets such as the BrainPOP brand, product technology, customer lists and goodwill.

From the acquisition date to year-end 2022, BrainPOP LLC. contributed with a revenue of DKK 0.2 bn and a minor contribution to net profit.

If the acquisition had occurred on 1 January 2022, the impact on the KIRKBI Group’s revenue would have been DKK 0.6 bn and a minor negative contribution to net profit after amortisation of purchase price allocated assets.

The accounting for the business combination is considered provisional as of 31 December 2022 due to certain contingencies etc.

Section 10 – Basis for preparation

10.1. Basis of reporting

The consolidated financial statements of the KIRKBI Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements.

This section introduces the overall basis for the KIRKBI Groups accounting policies. A more detailed description of accounting policies for the various areas is presented in the respective notes.

The accounting policies are unchanged from last year. Comparative figures in the balance sheet and in the notes have been restated to align with this year’s presentation. The adjustment of comparative figures have no effect on total assets.

Applying materiality

To ensure appropriate presentation of relevant information for the user of the financial statements, management has made materiality judgements of content and presentation.

From a quantitative perspective, the following classifications are applied:

• Clearly immaterial. Information has no effect to the users decision making

• In between. Information that are above the clearly immaterial threshold but below the material threshold. The information requires a further assesment of qualitative

factors to determine whether a disclosure should be included or not

• Material. Information that is quantitative significant to the users decision making

Based on these classifications the following thresholds have been applied:

• Clearly immaterial information is set to the lowest of 1 % of equity or 7 % of profit before tax

• In between information is set to between 1-4 % of equity and between 7-35 % of profit before tax

• Material information is set to above 5 % of equity or 35 % of profit before tax

Besides the quantitative threshold on the financial statements a separate thresholds is made for risk and control disclosures. As such the threshold for risk and control disclosures is set at 0.1 % of equity and 0.7 % of profit before tax.

Consolidation practice

Subsidiaries are fully consolidated from the date on which control is transferred to the KIRKBI Group. They are de-consolidated from the date on which control ceases.

The KIRKBI Group’s share in joint operations is recognised in the consolidated balance sheet through recognition of the KIRKBI Group’s relative share of assets, liabilities, income and expenses.

Intercompany transactions, balances and unrealised gains on transactions between

group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Subsidiaries’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the KIRKBI Group.

Non-controlling interests include third-party shareholders’ share of equity and the results for the year in subsidiaries which are not 100 % owned. The part of the subsidiaries’ results that can be attributed to non-controlling interests forms part of the income statement for the year. Non-controlling interests’ share of equity is stated as a separate item in equity.

Associates are entities, where the KIRKBI Group has significant influence but which it does not control, generally represented by a shareholding of between 20 % and 50 % of the voting rights. Associates classified as LEGO Brand Group actitivities are accounted for using the equity method of accounting and are initially recognised at cost. Assoicates classified as investments are valuated using fair value through the income statement (IFRS 9).

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the KIRKBI Group’s entities are measured using the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Danish kroner (DKK), which is the functional and presentation currency of the Parent Company.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as reserve for exchange rate adjustments.

Group companies

The results and financial position of subsidiaries that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each subsidiary are translated into DKK at the closing rate at the balance sheet date.

• Income and expenses for each subsidiary are translated at average exchange rates.

• Differences deriving from translation of the foreign subsidiaries’ opening equity to the exchange rates prevailing at the balance sheet date, and differences deriving from the translation of the income statements of the foreign subsidiaries from average exchange rates to balance sheet date exchange rates are recognised in other comprehensive income.

Effects of new and amended accounting standards

All amended standards and interpretations issued by IASB and endorsed by the EU effective as of 1 January 2022 have been adopted by the KIRKBI Group. None of the newly adopted or amended standards impacted the Consolidated Financial Statements. None of the amendments that are issued, but not yet effective, are likely to impact the Consolidated Financial Statements.

10.2. Significant accounting estimates and judgements

When preparing the financial statements, it is necessary that management makes a number of accounting estimates and judgements that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses.

Estimates and judgements used in the determination of reported results are continuously evaluated. Management bases the judgements on historical experience and other assumptions that management assesses are reasonable under the given circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The following accounting estimates and judgements are those which management assesses to be material for the KIRKBI Group’s financial statements.

Investment in associates

The KIRKBI Group’s investment in entities in which it has significant influence, is accounted for using either the equity method or fair value through the income statement depending on the classification of each single entity.

Entities, in which the KIRKBI Group has significant influence and which are

considered a LEGO Brand Group activity are accounted for using the equity method.

Entities, in which the KIRKBI Group has significant influence, which are defined as an investment activity are accounted for using fair value through the income statement and accounted for in accordance with IFRS 9.

Financial information about associated companies classified as investment activities is not disclosed, as these investments are meassured at fair value.

Please refer to the KIRKBI Group Structure (note 11) for a complete overview of which companies are accounted for using the equity method and which companies are accounted for using fair value through the income statement.

It is management’s assessment that the assumptions applied are reasonable.

Long-term equity

Valuation of unlisted long-term equity investments is based on estimates and assumptions as regards the fair value of each individual company. The fair value is estimated using a valuation model based on relevant multiples of a set of comparable companies, pro-forma adjusted operating

income and adjusted net interest bearing debt in combination with discounted cash flow analysis. The valuation is performed by internal portfolio managers.

The most subjective parameter in the valuation model is the multiples from comparable companies. If the multiples were reduced by 1.0x point, it would have a negative effect on profit before tax of around DKK 0.8 billion.

It is management’s assessment that the assumptions applied are reasonable.

Real Estate investments

Valuation of investments in real estate requires estimates and judgements on future cash flows, yields and market values for similar properties. The most subjective parameter is the yield used in the calculation which varies from 3.75 % to 5.5 % based on individually assesment of each property. If the yield in the calculations increases by 1 % point, the impact on profit before tax would be negative with around DKK 1.8 billion.

It is management’s assessment that the assumptions applied are reasonable.

10.3. Greenhouse gas accounting principles

Introduction

The KIRKBI greenhouse gas (GHG) accounts cover those emissions resulting from activities related to the KIRKBI Group, comprising its own operations and its investment activities, including those of the LEGO Brand Group.

Scope 1: Direct emissions

Direct emissions generated by KIRKBI’s own combustion of fuels for heating and transportation and measured based on use data from providers and relevant emissions factors.

Scope 2: Indirect emissions

Emissions from electricity, district heat, and district cooling calculated based on use data and utility-supplied emission factors. Market-based emissions from electricity use are calculated based on the statements from electricity providers.

Scope 3: Other indirect emissions

Included in the GHG accounts are emissions from the following scope 3 categories: Category 3 Fuel- and energyrelated activities; Category 6 Business travel; Category 7 Employee commuting; Category 13 Downstream leased assets; and Category 15 Investments. Other scope 3 categories have been assessed to have limited or no applicability and are therefore omitted.

Category 3:

Fuel- and energy-related activities

Emissions related to the production of fuels and energy purchased and consumed by KIRKBI are calculated using the relevant well-to-tank and transmission-and-distribution losses conversion factors.

Category 6: Business travel

Emissions from travel in employee cars is based on mileage claims and the emission factor for an unknown average car. Emissions from commercial flights, hotels, and rental cars are based on data received from KIRKBI’s corporate travel management service provider and calculated by a third-party provider. Emissions from business travel booked outside of the corporate travel management provider are calculated based on travel distance.

Category 7: Employee commuting

Employee commuting is based on average daily commuting distance and the emission factor for an unknown average car.

Category 13: Downstream leased assets

Emissions from downstream leased assets, including the KIRKBI real estate portfolio, is based on a combination of primary and estimated use data and calculated based on country or fuel specific emissions factors.

Category 15: Investments

Emissions from investments are calculated using ownership share as of year-end and applying the latest available emissions data. Included in KIRKBI’s Greenhouse Gas accounts are the proportional scope 1 & 2 emissions, using investment-specific approach, when possible, and average-data method, when investee company does not provide scope 1 and 2 data. Emissions for the LEGO Group are based on location-based emissions factors. In total, approximately 25 % of the category 15 emissions have been estimated.

Out of scope emissions

Emissions from biofuels are labelled ‘out of scope’ because the fuel source itself absorbs an equivalent amount of CO2 during the growth phase as the amount of CO2 released through combustion.

SBT portfolio Coverage

KIRKBI-owned emissions from companies with a verified Science Based Target are used to calculate KIRKBI’s portfolio coverage as a percentage of the total KIRKBI-owned emissions.

Section 11 – Group Structure

11.1. Group Structure

LEGO A/S, 75 % (Denmark)

and all subsidiaries of LEGO A/S

KIRKBI Invest A/S, 100 % (Denmark)

Denmark KIRKBI Anlæg A/S

Denmark KIRKBI Operationel Support ApS

Denmark KIRKBI Real Estate Investment A/S

Denmark LEGO Juris A/S

Denmark Mølholm-Klinikken Ejendom ApS

Denmark Neue Flora Invest A/S

Denmark K & C Holding A/S

Denmark Blue Hors ApS

Denmark Schelenborg Gods ApS

Denmark Privathospital Mølholm P/S, 90 %

Denmark Privatmedicinsk Klinik Mølholm A/S

Denmark Light Brick A/S

Germany Blue Hors GmbH

Germany KIRKBI Real Estate Investment GmbH

Germany Einsteinstrasse GmbH, 90 %

Germany Elsenheimerstrasse GmbH

Germany Maxor 4 GmbH, 94 %

Japan LLJ Investco KK

Switzerland KIRKBI AG

Switzerland KIRK AG

Switzerland Valbella Resort AG

USA Adapture Renewables Inc.

USA BrainPOP Holdco US, Inc. and all subsidiaries hereof

Joint Operations (accounted for using pro-rata consolidation)

United Kingdom KIRKBI Burbo Extension Holding Ltd.

United Kingdom Burbo Extension Holding Ltd., 25 %

United Kingdom Burbo Extension Ltd., 25 %

Associates (accounted for using the equity method)

Denmark Anpartsselskabet af 7.11.2022, 33.3 %

United Kingdom Merlin Entertainments Ltd., 47.5 %

United Kingdom Motion JVCO Ltd., 47.5 %

China Shanghai LEGOLAND CO. Ltd., 26 %

Associates within investment activities (accounted for using fair value through the income statement)

Denmark Falck A/S, 28.6 %

Denmark Nilfisk A/S, 20.3 %

Luxembourg Armacell International S.A, 43.5 %

Sweden Välinge Group AB, 48.6 %

Associates within digital play and learning (accounted for using fair value through the income statement)

United Kingdom Eedi Ltd., 23.9 %

KIRKBI Estates Ltd., 100 % (United Kingdom)

Subsidiaries (fully consolidated into the KIRKBI Group)

Part 4 Parent Company

Income Statement & Comprehensive Income 1 January – 31 December Balance Sheet at 31 December

Balance Sheet at 31 December parent company Statement of Changes in Equity

Cash Flow Statement

1 January – 31 December

Note 1 Significant accounting policies Note 2 Employee expenses

The financial statements of the Parent Company KIRKBI A/S has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional requirements of the Danish Financial Statements Act. for reporting class C enterprises (Large).

The accounting policies for the Parent Company and for the KIRKBI Group are identical except for the following:

Dividend from investments in subsidiaries

Dividend from investments in subsidiaries is recognised in the income statement of the parent company in the year the dividends are declared. If the dividend

distributed exceeds the comprehensive income of the subsidiaries in the period the dividend is declared, an impairment test is performed.

Investments in subsidiaries

Investments in subsidiaries are measured at cost. Cost includes the fair value of the purchase consideration plus direct purchase costs.

If there is an indication of impairment, impairment testing is carried out as described in the accounting policies for the consolidated financial statements. Where the carrying value exceeds the recoverable amount, it is written down to the recoverable amount.

Since the Executive Management only consists of one member, the remuneration of the Executive Management and the Board of Directors is disclosed collectively with reference to § 98b (3) of the Danish Financial Statements Act.

Incentive plans comprise a short-term incentive plan based on yearly performance and a long-term incentive plan related to long-term goals regarding value creation.

Note

3 Tax

on profit for the year

Note 4 Property, plant and equipment

Note 5 Investments in subsidiaries

Note 7 Contingent liabilities and other obligations

Security has been given in land, buildings and installations at a net carrying amount of DKK 186 million (DKK 153 million in 2021) for the company’s mortgage loans.

The Parent Company is the KIRKBI Group’s administration company in relation to the Danish tax authorities in as far as national, joint taxation is concerned.

Note 6 Non-current liabilities

Note 8 Related party transactions

KIRKBI A/S´ related parties comprise Kjeld Kirk Kristiansen, Sofie Kirk Kristiansen, Thomas Kirk Kristiansen, Agnete Kirk Thinggaard and the Board of Directors and the Executive Management of KIRKBI A/S. Related parties also comprise subsidiaries and associates and Boards of Directors and Executive Management in these companies. Related parties further comprise companies where the mentioned shareholders have significant influence.

Kjeld Kirk Kristiansen, Sofie Kirk Kristiansen, Thomas Kirk Kristiansen and Agnete Kirk Thinggaard have as shareholders significant influence in KIRKBI A/S.

In the financial year a certain number of transactions related to services took place

between the owners of KIRKBI A/S and KIRKBI A/S. These services have been paid on normal market conditions and the total fee paid to KIRKBI A/S amounts to DKK 34 million (2021 DKK 20 million).

There were no transactions in the financial year with the Board of Directors or the Executive Management besides transactions related to employment, except from the circumstances described above.

For information of remuneration to the Board of Directors and the Executive Management, see note 2.

Transactions with subsidiaries and associates have included the following:

Loans, receivables and commitments related to subsidiaries and associates are specified in the balance sheet or in the notes.

Additional Information

Management’s Statement

Today, the Board of Directors and Executive Management have discussed and approved the annual report of KIRKBI A/S for the financial year 1 January – 31 December 2022.

The annual report is prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act.

In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2022 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January – 31 December 2022 in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act.

In our opinion, the management’s review includes a fair review of the development in the Group’s and the Parent Company’s operations and economic conditions, the results for the year and the financial position of the Group and the Parent Company, as well as a review of the most significant risks and elements of uncertainty facing the Parent Company and the Group, in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act.

We recommend the adoption of the annual report at the annual general meeting of shareholders.

Billund, 2 March 2023

Executive Management

Søren Thorup Sørensen CEO Board of Director

Kjeld Kirk Kristiansen Chairman

Michael Mogens Halbye Deputy Chairman

Jeppe Christiansen

Connie Hedegaard Koksbang

Thomas Kirk Kristiansen

Marie-Louise Aamund

Independent Auditor’s Report

To the shareholders of KIRKBI A/S Opinion

We have audited the consolidated financial statements and the parent financial statements of KIRKBI A/S for the financial year 01.01.2022 – 31.12.2022, which comprise the income statement, balance sheet, statement of changes in equity and notes, including a summary of significant accounting policies, for the Group as well as the Parent, and the statement of comprehensive income and the cash flow statement of the Group. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act, and the parent financial statements are prepared in accordance with the Danish Financial Statements Act.

In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31.12.2022, and of the results of its operations and cash flows for the financial year 01.01.2022 – 31.12.2022 in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements under the Danish Financial Statements Act.

Further, in our opinion, the parent financial statements give a true and fair view of the Parent’s financial position at 31.12.2022, and of the results of its operations for the financial year 01.01.2022 – 31.12.2022 in accordance with the Danish Financial Statements Act.

Our opinion is consistent with our audit book comments issued to the Audit Committee and the Board of Directors.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe

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

Statement on the management’s commentary

Management is responsible for the management commentary.

Our opinion on the consolidated financial statements and the parent financial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act.

Based on the work we have performed, we conclude that the management commentary is in accordance with the consolidated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the management commentary.

Management’s responsibilities for the consolidated financial statements and the parent financial statements

Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act as well as the preparation of parent financial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the Parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Group or the Entity or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements

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

As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.

• Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements and the parent financial statements, including the disclosures in the notes, and whether the consolidated financial statements

and the parent financial statements represent the underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Aarhus, 2 March 2023

Deloitte Statsautoriseret Revisionspartnerselskab Business Registration No 33 96 35 56

Thomas Rosquist Andersen

State-Authorised Public Accountant

Identification No (MNE) 31482

Søren Marquart Alsen

State-Authorised Public Accountant

Identification No (MNE) 40040

The Independent Auditor’s Assurance Report

To the Management and broader stakeholders of KIRKBI A/S

We have reviewed KIRKBI’s Greenhouse Gas Statement comprising Scope 1, 2 and 3 CO2e emissions for 2022 presented in the table ‘KIRKBI CO2e Emissions’. The statement covers KIRKBI’s activities from 1 January 2022 to 31 December 2022.

We express a conclusion providing limited assurance.

Management’s responsibility

The Management of KIRKBI is responsible for collecting, analysing, aggregating and presenting the statement of Scope 1, 2 and 3 CO2e emissions, ensuring that the data are free from material misstatement, whether due to fraud or error. KIRKBI GHG Accounting Principles contain Management’s defined reporting scope for each data type. The accounting principles can be found in note 10.3.

Auditor’s

responsibility

Our responsibility is to express a limited assurance conclusion based on our engagement with Management and in accordance with the agreed scope of work. We have conducted our work in accordance with ISAE 3410 Assurance Engagements on Greenhouse Gas Statements (as amended), and additional requirements under Danish audit regulations to obtain limited assurance about our conclusion.

Deloitte Statsautoriseret Revisionspartnerselskab is subject to International Standard on Quality Control (ISQC) 1 and, accordingly, applies a comprehensive quality control system, including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

We have complied with the requirements for independence and other ethical requirements of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, and ethical requirements applicable in Denmark.

A limited assurance engagement is substantially less in scope than a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Considering the risk of material misstatement, we planned and performed our work to obtain all information and explanations necessary to support our conclusion.

We performed our review from September 2022 to January 2023. Our work has included

interviews with key functions in KIRKBI and review of procedures and methods for ensuring that the reported data are stated in accordance with the accounting principles. We have assessed processes, tools and controls for gathering, consolidating and aggregating the data and performed analytical review procedures and testing of data against underlying documentation. We have reviewed the data (some measured, some calculated and some estimated) as well as evaluated and given feedback on the reliability and validity of the underlying sources, especially for estimated data.

We have not carried out site visits or interviewed external stakeholders.

Conclusion

Based on our work, nothing has come to our attention causing us not to believe that, in all material respects, the Greenhouse Gas Statement for Scope 1, 2 and 3 CO2e emissions for 2022 within the scope of our work is reported in accordance with the accounting principles described.

Aarhus, 2 March 2023

Deloitte Statsautoriseret Revisionspartnerselskab

Business Registration No. 33 96 35 56

Thomas Rosquist Andersen State-Authorised Public Accountant Identification No (MNE) 31482

Helena Barton Lead

Reviewer

Koldingvej 2

DK-7190 Billund

Tel: +45 75 33 88 33

Website: www.kirkbi.com

E-mail: kirkbi@kirkbi.com

© 2023 The LEGO Group

© 2023 KIRKBI A/S

Production: Stibo Complete

IDEA AND DESIGN: KIRK & HOLM