Annual Report 2022

Compliance

Selvaag Bolig ASA is a Norwegian public limited liability company listed on the Oslo Stock Exchange. The company is subject to section 3, sub-section 3b of the Norwegian Accounting Act, which requires it to provide an annual statement of its principles and practice for corporate governance. This rule specifies the minimum information which the presentation must provide.

The Norwegian Corporate Governance Board (NCGB) has established the Norwegian code of practice for corporate governance (the code). Listed companies are required by the Oslo Stock Exchange to provide an annual overall presentation of their principles for corporate governance in line with the prevailing code. The current obligations for listed companies are available at www.euronext.com, and the NCGB code can be found at www.nues.no.

Selvaag Bolig observes the applicable code, published on 17 October 2018, and updated 14 October 2021, in accordance with the “comply or explain” principle. This means that the individual points in the code are observed, but possible variances are explained. The company provides an annual overall presentation of its principles for corporate governance in its annual report, and this information is available at www.selvaagboligasa.no.

The business purpose of Selvaag Bolig ASA is to “acquire and develop residential housing projects for the purpose of sale, purchase and sale of property, as well as other affiliated business, hereunder commercial property. The company may participate in other companies at home and abroad in relation to residential housing development.” This appears in article 3 of the company’s articles of association, which are available at www.selvaagboligasa.no. Selvaag Bolig’s goals and principal strategies are described in this annual report and at www.selvaagboligasa.no. The board sets clear goals for the business with the aim of creating value for the shareholders and the rest of society. Through annual strategy processes, the board considers whether the goals and guidelines derived from the strategies are unambiguous, adequate, well operationalised and communicated to employees, customers and other stakeholders.

Selvaag Bolig has formulated guidelines for corporate social responsibility (CSR) and other policy documents in accordance with the company’s values base. CSR is described in more detail in a separate section of this annual report. Selvaag’s core values are “care and creativity”, and these are well entrenched throughout the business.

The guidelines contain general principles for business practice and personal behaviour, and are intended to serve as a starting point for the attitudes and basic views which will characterise the corporate culture and day-to-day work in Selvaag Bolig.

Selvaag Bolig had an equity of NOK 2 354.9 million at 31 December 2022, including non-controlling interests. The board regards the equity as acceptable, and financing of the company is tailored to its business purpose, strategy and risk profile.

The board has a clearly communicated dividend policy tailored to the company’s goals, strategy and risk profile. Selvaag Bolig’s ambition is to pay high and stable dividends to its owners. The goal is that dividend should be a minimum of 60 per cent of net profit and paid twice a year. However, the size of the dividend must be balanced against the company’s liquidity forecasts and capital adequacy.

NOK 2.00 per share was paid in August 2022 as dividend for the first half of the year and amounted to NOK 186.5 million. The board has proposed a dividend of NOK 2.00 per share for the second half of 2022, amounting to NOK 187.5 million. That will make the total dividend for 2022 NOK 4.00 per share. This corresponds to 110 per cent of net profit.

The board has received a mandate from the general meeting which allows it to determine dividend payments continuously throughout the year, should the financial basis for these be present. Such a decision must formally be taken on the basis of the approved annual financial statements for 2022, and would in that event supplement the regular dividend approved by the general meeting. A mandate of this kind must be adopted by the general meeting and will apply until the next AGM but no later than 30 June in the following year.

It is appropriate that the board has a mandate to purchase the company’s own shares, partly to implement the group’s share savings programme and remuneration arrangements for employees, and partly to use shares as a means of settlement in connection with the possible acquisition of enterprises. The board was mandated by the AGM of 26 April 2022 to acquire the company’s own shares up to a total nominal value of NOK 18 753 137, corresponding to 10 per cent of the share capital. This mandate can be used for a possible later reduction in the share capital with the consent of the general meeting, for remuneration of the directors, for incentive programmes or as settlement for the possible acquisition of businesses, and for the purchase of shares where this is financially advantageous. The mandate can be exercised several times, and remains valid until the AGM in 2024 and in any event no longer than to 30 June 2024. The board will propose to the AGM that it be extended by one year. Selvaag Bolig owned 44 770 of its own shares at 31 December 2022.

The company has a share savings programme for employees working more than half-time. This is because co-ownership by the workforce is expected to promote value creation through increased commitment and greater loyalty. The share savings programme shall encourage broad and long-term ownership and gives employees the opportunity to acquire a direct stake in the company’s value creation.

Employees can purchase shares to a value of NOK 200 000 per year. The price per share is the stock market price (volume-weighted average price for the final 10 days of stock exchange trading before the programme opens) less a discount of 20 per cent, conditional on a two-year lock-up period. For the same incentive and reason, the company also has a share purchase programme for its executive management. The ceiling for annual investment in the share purchase programme is the individual’s annual pay. The price per share is the stock market price (volume-weighted average price for the final 10 days of stock exchange trading before the programme opens), less a discount of 30 per cent as compensation is provided for the employee’s tax disadvantage, conditional on a three-year lock-up period.

The 2022 programme was conducted from 28 November to 2 December, and the trades were done 2 December. 33 employees took advantage of the offer, and 767 163 shares were purchased at NOK 29.94 per share before the discount. Since the share programmes will continue in 2023, the board will propose to the AGM that the mandate to purchase the company’s own shares, as described in the previous section, be extended by one year.

The same AGM on 26 April 2022 mandated the board to increase the company’s share capital by up to NOK 18 753 137. This mandate can be exercised several times, and remains valid until the AGM in 2023 and in any event no longer than to 30 June 2023. It replaces earlier mandates for similar purposes, and embraces capital increases in exchange for non-monetary considerations or the right to involve the company in special obligations. The mandate has not been utilised, and the board will propose to this year’s AGM that it be extended by one year.

Deviation from the code: The NCGB believes that grounds should be given for such mandates and that they should be restricted to defined purposes. However, the board believes that some flexibility is needed. As long as the mandates are clearly limited in time and scope, the ability to take such decisions should form part of the board’s administrative authority rather than requiring the holding of an extraordinary general meeting.

Selvaag Bolig has one class of share, and all shares have equal voting rights. Emphasis is given in the work of the board and the executive management to treating all shareholders equally and to giving them the same opportunities to exercise influence. The company’s articles of association impose no restrictions on voting rights.

The company’s transactions in its own shares are conducted via the stock exchange or in other ways at the stock market price. In the event of an increase in share capital, existing shareholders will have a pre-emptive right to subscribe unless special considerations justify waiving this right. Any such waivers will be justified and published in a stock exchange announcement in connection with the increase in share capital.

Selvaag Bolig is concerned to maintain an open and cautious approach to investments on terms which could be perceived as an undesirably close transaction or relationship between the company and a large shareholder, a board member, a senior executive or related parties of these. This is outlined in the company’s ethical guidelines and instructions for the board.

Where transactions take place with related parties, they must be conducted at arm’s length and on market terms. In the event of not immaterial transactions between the company and related parties, the board will commission an independent valuation and make this known to the shareholders. Transactions with related parties are described in note 23 in the company's annual report, as well as in the quarterly reports.

The board has also established guidelines which require executive management to report to the board if they have a material interest, directly or indirectly, in a contract entered into by the company.

Selvaag AS is the principal shareholder in Selvaag Bolig ASA with 53.5 per cent of the shares as at 31 December 2022.

No restrictions are placed by the articles of association on the ability to own, sell or vote for shares in Selvaag.

Shareholders exercise the highest authority in Selvaag Bolig ASA through the general meeting. The board makes provision to ensure that the general meeting is an effective forum for shareholders. The company facilitates the appointing of proxies and for voting outside the physical meeting.

The AGM is scheduled to take place from 10.00 on 26 April 2023 in the company’s premises at Silurveien 2 in Oslo.

Before the meeting, shareholders have good opportunities to contact the company, either to clarify issues or to obtain help in bringing issues to the general meeting. Detailed supporting documentation is posted to the company’s website 21 days before the general meeting at the latest. See article 9 in the articles of association. Shareholders who have not asked to receive the supporting documentation for the general meeting electronically will have this sent to them by post, as specified in the company’s articles of association. The supporting documentation must contain all the details required for the shareholders to form a view of every item on the agenda.

All shareholders registered in the Norwegian Central Securities Depository (VPS) will receive the notice, and have the right to submit motions and to vote directly or by proxy. A financial calendar, which includes the date of the AGM, is available on the company’s website.

Registration must be made in writing, by post, VPS account or e-mail. The board wishes to facilitate attendance by the largest possible number of shareholders at the general meeting. Shareholders who cannot attend in person are encouraged to appoint a proxy. Provision is made for the shareholder to specify separate voting instructions to their proxy for every item on the agenda. All information on the appointment of a proxy and the appropriate forms can be found on the company’s website.

The general meeting elects its own chair. The meeting is opened by the chair of the board, who also arranges for the election of a chair for the meeting. The AGM’s duties include adopting the annual financial statements and directors’ report and considering the board’s guidance and report about remuneration to leading employees.

Members of the nomination committee and its chair are elected by the general meeting. In addition, the general meeting considers such other matters as are assigned to it by legislation or the articles of association. The minutes of the general meeting are published via a stock exchange announcement and are made available on the company’s website at www.selvaagboligasa.no after the meeting.

The AGM in 2022 took place on 26 April, and 61.12 per cent of the total issued shares and votes were represented.

According to the NCGB code, provision should be made to vote for individual candidates for the board and the nomination committee.

Deviation from the code: The nomination committee believes that the board’s overall composition is important for the way it functions. For that reason, the company invites the general meeting to vote for the nomination committee’s collective recommendations for the election of the board and nomination committee.

According to the code, the board and chair of the nomination committee should attend.

Deviation from the code: The chairs of the board and the nomination committee, as well as the CEO, are always present to answer possible questions. The whole board will attend if this is considered necessary in view of items on the agenda.

Pursuant to the articles of association, the nomination committee will have three members elected for a one-year term. The majority of these members must be independent of the company’s board and executive management, and the committee must act in the interests of shareholders in general. The chair of the nomination committee is elected by the general meeting, which also determines the remuneration of the committee’s members. The nomination committee itself recommends members of the committee.

All members of the nomination committee are up for election in 2023. The nomination committee currently comprises:

• Steinar Mejlænder-Larsen (chair)
• Helene Langlo Volle
• Leiv Askvig

The duties of the nomination committee are to propose candidates for election as directors and to recommend fees for the directors, members of board sub-committees and members of the nomination committee. The report of the board’s annual self-assessment is considered by the committee.

The committee will account for its work and present its recommendations, with justifications, to the general meeting. The recommendations must encompass relevant information about the candidates and an assessment of their independence from the company’s executive management and board. The committee is in contact with shareholders, directors and the chief executive during its work on proposing candidates for the board, and anchors its recommendations with the company’s largest shareholders. The committee’s recommendations, with justifications, are made available 21 days at the latest before the general meeting takes place. Recommendations from the committee must meet the requirements for the composition of the board which derive at any given time from applicable legislation and statutory regulations.

Article 7 of the articles of association specifies that the company will have a nomination committee. Guidelines have been established on this committee’s duties and composition, and on the eligibility of candidates for election. These guidelines were adopted by the general meeting held on 30 August 2011.

Pursuant to article 5 of the company’s articles of association, the board of Selvaag Bolig will comprise three to nine members. The chair and the shareholder-elected directors are elected by the general meeting, based on recommendations from the nomination committee.

The board currently comprises seven directors, of whom three are women, and is composed in such a way that it meets the company’s need for expertise, capacity and diversity. Weight is given to the whole board being in possession of a broad business and management background as well as in-depth understanding of the housing industry and property development. An overview of each director’s expertise, background and shareholding in the company is available on the company’s website at www.selvaagboligasa.no.

Employees of the business are represented on the board, and the number of these worker directors is specified in the applicable agreement on pay and conditions. At present, two directors – one male and one female – are elected by the employees. None of the shareholder-elected directors are employed by or have carried out work for Selvaag Bolig other than work related to their board positions.

Shareholder-elected directors are elected for one-year terms. Employee-elected directors are elected for two-year terms. All directors are up for election in 2023. Directors’ fees are determined by the general meeting on the basis of a recommendation from the nomination committee.

The composition of the board ensures that it can act independently of special interests, and it must also function effectively as a collective body to the benefit of the shareholders in general.

No shareholder-elected director is involved in the executive management. Chair Olav Hindahl Selvaag and director Tore Myrvold are a director and CEO of Selvaag AS, respectively. Selvaag AS is the company’s principal shareholder and, through subsidiaries and other investments, may have business relations with Selvaag Bolig.

The other shareholder-elected directors are independent of Selvaag Bolig’s executive management and significant business relations.

See Note 22 to the annual financial statements for information on the shareholdings of directors in Selvaag Bolig at 31 December 2022. By virtue of their position, each director is subject to the regulations on primary insiders, with clear rules related to such issues as the duty to investigate and report in the event of trading in the company’s shares.

The board of directors bears the ultimate responsibility for management of the group and for supervising the chief executive and the group’s operations.

That makes the board responsible for ensuring an acceptable organisation of the business and determining strategies, plans and budgets. The board participates in important strategic discussions throughout the year and undertakes an annual audit of the company’s strategy. Furthermore, the board is responsible for establishing control systems and for ensuring that the group is operated in compliance with the established values base, the ethical guidelines and the expectations of the owners for socially responsible operation. The board has a duty to ensure that the financial statements and asset management are subject to satisfactory controls. Matters of significant strategic or financial importance are dealt with by the board. The board is responsible for appointing the chief executive, establishing the chief executive’s instructions, authorities and terms of employment, and determining the chief executive’s remuneration. In addition, the board will protect the interests of the shareholders while also having a responsibility for the company’s other stakeholders.

Each director is duty-bound to consider at all times whether conditions exist which, viewed objectively, might weaken general confidence in their impartiality or which might lay the basis for conflicts of interest. The company also follows up the various offices and so forth held by the directors to provide an information base for the company’s management in avoiding unintentional conflicts of interest.

Eleven board meetings were held in 2022, six as physical gatherings.

The board has adopted instructions which specify the rules and guidelines for its work and administrative procedures. These are reviewed annually or as required. The instructions for the board define the duties and obligations associated with its work, and its relationship with the chief executive. The chair is responsible for ensuring that the work of the board is conducted in a correct and efficient manner. The board works on the basis of an annual plan, with specified topics and issues for board meetings. The board evaluates its work and competence on an annual basis. This is done through a self-assessment which is summarised for the nomination committee. At least once a year, the board reviews the most important areas of risk as well as internal control in the company.

The CEO of Selvaag Bolig ASA is responsible for the executive management of the Selvaag Bolig group. The chief executive must also ensure that the financial statements comply with legislation and other relevant provisions, and that the group’s assets are managed in an acceptable manner. The CEO is appointed by the board of directors and reports to it. The CEO is duty-bound to keep the board continuously informed on the group’s financial position, operations and asset management. The board has also approved an authority structure for the company which clarifies the authority of the CEO and the executive management in terms of which issues must be considered by the board.

The board receives periodic reports with comments on the company’s financial status. Where interim reporting is concerned, the company observes the deadlines specified by the Oslo Stock Exchange.

The board has found it appropriate to establish sub-committees to serve as preparatory and advisory bodies for the board.

The audit committee is a preparatory and advisory body for the board. It is elected by and from among the directors, and must comprise at least two directors. At least one of these should have experience from the exercise of accounting or financial management, or of auditing. Members are appointed by the board, and changes to its composition are made when the board might wish to do so or when the members cease to be directors of the company. The audit committee currently comprises the following members:

• Gisele Marchand (chair)
• Tore Myrvold

The company’s auditor also attends all the meetings.

The board has adopted separate instructions for the audit committee, which will, among others:

1. review the company's quarterly, annual and related reports, including ESG reporting, and prepare the board's follow-up of the financial reporting process.
2. maintain ongoing contact with the company's elected auditor concerning the audit of the annual financial statements.
3. assess and monitor the independence and objectivity of the auditor and particularly to what degree services other than audit are provided by the auditor.
4. assess the quality of the external audit, be responsible for preparing the company's choice of auditor and make its recommendation.
5. ensure that the company has established sufficient and suitable processes for internal control and risk management to ensure that laws and regulations closely tied to financial and non-financial reporting are followed.

The audit committee met seven times in 2022.

The remuneration committee serves as a preparatory and advisory body for the board, comprising up to three directors who are independent of the company’s executive management. The members of the remuneration committee are appointed by the board for two-year terms or until they cease to be directors of the company. The remuneration committee currently comprises:

• Olav Hindahl Selvaag (chair)
• Gisele Marchand
• Øystein Thorup

The board has adopted separate instructions for the remuneration committee. It must, among other things:

1. prepare issue for consideration by the board concerning salary and terms of the chief executive.
2. prepare the board's processing of scorecards/KPIs as a basis for the bonus assessment for senior executives.
3. prepare the board's consideration of issues of principle related to salary levels, bonus systems, pension terms, employment agreements and the like for the company's senior executives.
4. address special issues related to compensation for employees in the group to the extent that the committee finds that these affect matters of particular importance to the group's competitive position, profile, recruitment ability, reputation, etc.

The committee has held five meetings in 2022.

Risk management and internal control in Selvaag Bolig are intended to help ensure that the company takes a coherent approach to its operations, financial reporting and compliance with applicable legislation and regulations. The board regularly reviews Selvaag Bolig’s risk management and internal control, as well as its guidelines and the like on how the company integrates concern for the world at large with value creation. Internal control also embraces the company’s values base, CSR and ethical guidelines, which apply to all company employees.

An annual strategy meeting is held by Selvaag Bolig to lay the basis for the board’s consideration and decisions during the year. The most important risk areas are reviewed at this meeting.

A survey of the company’s risk factors and management is conducted regularly. This exercise plays a key role for the board’s strategy meeting, and defines the direction of further work on the company’s risk management. An overarching management model has been established for continuous follow-up, based on the group’s strategy, values base and ethical guidelines. In addition, principles have been drawn up for reporting in the key areas, as well as guidelines for central processes and activities. An authority matrix has also been established for delegating responsibilities to defined roles in the organisation. All employees have clear guidelines on the scope of their own authority and on the next level up for decisions or approvals.

Selvaag Bolig has established a set of internal procedures and systems which are intended to secure uniform and reliable financial reporting and operations. A quality assurance system has also been established to safeguard quality when executing the group’s projects. One component of this system is a review, conducted at least once a quarter, of risk in the projects and other parts of the business. This review identifies the financial development of the company’s projects and makes it possible to implement possible risk-reducing measures. Planning, management, execution and financial follow-up of construction and production processes and projects are integrated in the Selvaag Bolig group’s commercial operation. Construction projects report systematically to the group management.

Selvaag Bolig’s consolidated financial statements are prepared in accordance with the applicable IFRS standards. The board receives periodic reports on the group’s financial results as well as a description of the status of the most important individual projects. The auditor attends meetings of the audit committee and board meetings related to the presentation of the preliminary annual financial statements. The company’s key risk factors are described in the directors’ report.

The general meeting determines directors’ fees annually on the basis of a recommendation from the nomination committee.

A total of NOK 2 524 000 was paid in directors’ fees for 2022. Shareholder-elected directors are given compensation of NOK 50 000 in addition to ordinary board remuneration, where the net proceeds after tax are assumed to be used for the purchase of shares in the company. Remuneration to the individual directors in 2022 is stated in the executive remuneration report published at www.selvaagboligasa.no. Directors’ fees are not linked to the group’s performance. No options are awarded to directors, and shareholder-elected directors have no agreement on a pension plan or on payment after their period of service has ended. None of the shareholder-elected directors do work for the company in addition to their directorship.

Directors observe general insider regulations for trading in the company's shares. See the aforementioned executive remuneration report for an overview of shares owned by directors.

As mentioned in section 9, a remuneration committee comprising up to three directors has been established. The committee shall support the board’s work on the strategy for and main principles of remuneration for the company’s senior executives, including the determination of scorecards and the conditions of employment for the chief executive.

The individual components in a remuneration package must be assessed collectively, with fixed basic pay, possible variable pay and other benefits such as pension and termination payments viewed as a whole. Variable pay in the form of bonus payments will be based primarily on objective, definable and measurable criteria. Such variable pay (bonuses) cannot exceed 100 per cent of basic pay for the executive personnel. No options have been awarded to employees or elected officers of the company.

The guidelines and report about remuneration of executive personnel are presented annually to the general meeting in connection with its consideration of the financial statements.

Selvaag Bolig endeavours to ensure that all reporting of financial and other information is timely and correct, and based on openness and equal treatment of players in the securities market. The company observes the recommendations of the Oslo Stock Exchange on reporting investor information, which came into force on 1 January 2012. Information from Selvaag Bolig is published in the form of annual and interim reports, press releases, stock exchange announcements and investor presentations. All information regarded as significant for the valuation of the company is distributed and published via the Cision and Oslo Stock Exchange Newsweb messaging systems and at www.selvaagboligasa.no.

The company presents its interim annual results by the end of February. Full financial statements, together with the directors’ report and the rest of the annual report, are made available to shareholders every year at least three weeks before the AGM, and by the end of April at the latest. Interim figures are reported within 60 days of the end of the quarter, in accordance with the rules of the Oslo Stock Exchange.

The financial calendar is available on www.selvaagboligasa.no and www.newsweb.no. The primary purpose of information from the company will be to clarify the company’s long-term goals and potential, including its strategy, value drivers and important risk factors. The company’s guidelines for investor relations provide more detailed specifications of the way information is handled in the group, including defining who will act as the company’s spokesperson on various matters. The CEO and CFO of Selvaag Bolig will be the primary spokespersons to the financial market on behalf of the company.

The company’s articles of association place no restrictions on the purchase of shares in the company. In the event of a possible takeover bid, the board will help to ensure that the company’s shareholders are treated equally and that the group’s day-to-day operations are not disrupted unnecessarily. The board will seek to help ensure that the shareholders have sufficient information and adequate time to form an opinion on a takeover bid.

The instructions for the board of Selvaag Bolig ASA specify how the company will respond should an offer be made for the company’s shares. In such cases, the board will issue a statement which contains an assessment of the offer and a recommendation to the shareholders on whether they should accept it. In this assessment, the board should take account of such considerations as the way a possible takeover would affect long-term value creation in the company. A justification of the recommendation must be provided.

The group’s auditor is elected by the general meeting. In 2021, the company carried out a tender process for the election of an auditor and the board's audit committee presented its recommendation for the election of an auditor to the general meeting. Selvaag Bolig’s auditor when presenting the accounts for 2022 is PricewaterhouseCoopers.

The auditor gives the board an account of its work and provides an assessment of the company’s financial reporting and internal control in connection with the annual financial statements. At this meeting, the board is briefed on which services in addition to auditing have been provided during the year. The auditor meets the board at least once a year without the executive management being present. The auditor has the right to attend Selvaag Bolig’s general meeting. Written confirmation must be provided once a year by the auditor to the board that the specified requirements for the independence of the auditor have been met.

The auditor attends the meetings of the audit committee. Once a year, the auditor must present the committee with the main features of the plan for conducting the audit work. The auditor will review possible significant changes in Selvaag Bolig’s accounting principles, assessments of significant accounting estimates and all significant conditions where disagreement has occurred between the auditor and the executive management. At least once a year, the auditor must review Selvaag Bolig’s internal control system with the audit committee – including identifiable weaknesses and proposals for improvement. The board briefs the general meeting on the auditor’s fee, broken down between audit work and other services in addition to auditing.

The board proposes a dividend of NOK 2.00 per share for the second half of 2022, giving a total ordinary dividend of NOK 4.00 per share for 2022.

Selvaag Bolig is one of Norway’s leading housing developers. It buys and develops new housing land, and manages the whole value chain from acquisition of land to completion and sale of homes. The group concentrates on the areas in and around Greater Oslo, Bergen, Stavanger and Trondheim as well as Stockholm. The development business embraces wholly owned projects as well as projects pursued as joint ventures with external investors. Selvaag Bolig manages all the projects, with the exception of one joint venture with AF Gruppen in Ski. The Selvaag Pluss Service AS subsidiary offers services related to Selvaag Bolig’s Pluss concept.

Selvaag Bolig does not build itself, but awards construction contracts on a project-by-project basis. That gives it the opportunity to select the best and most competitive contractor for each project. Subjecting construction contracts to competitive tendering increases flexibility and reduces market risk, while helping to tie up less capital and cut execution risk during the construction phase.

The group possesses a high level of expertise on project development. With a modern and industrial approach to housebuilding, this helps to ensure lower construction costs, competitive prices for buyers and increased profits for the company and its owners.

Selvaag Bolig continues Selvaag’s historical social commitment, where value creation is combined with socially useful measures. The company builds large projects with a broad array of housing types, and works to develop homes which as many people as possible can afford to buy. Furthermore, Selvaag Bolig seeks to be a driver in the public debate in order to secure operating parameters which make it possible to achieve this objective while simultaneously ensuring good and sustainable housing and urban development. By building good and durable projects, which take account of social and aesthetic properties, in established urban and residential areas and near public transport hubs, the company contributes to more people being able to live a more environment-friendly daily life in walking and cycling distance of shops and services, and close to public transport. Selvaag Bolig also supports culture, mass-participation sports and educational institutions, particularly in the neighbourhoods where the company has projects.

With effect from January 2020, large parts of Selvaag Bolig’s available land portfolio is owned by Urban Property. These two companies intend to pursue a long-term strategic collaboration which offers them both a number of advantages. Where Selvaag Bolig is concerned, the collaboration’s benefits include increased competitiveness in land purchases and a reduction in tied-up capital. See the description of the business elsewhere in this report for further information.

(Figures for 2021 are presented in brackets)

Selvaag Bolig had operating revenues of NOK 2 896.4 million (NOK 3 402.7 million) in 2022. Revenues from units delivered accounted for NOK 2 791.9 million (NOK 3 227.8 million) of the total. In addition, four land plots were sold by the group for a total of NOK 38.9 million. In 2021, land plots and a land contract were sold by the group for a total of NOK 113.8 million. During the year, a total of 585 units (894) were delivered, including 513 (716) from consolidated project companies and

72 (178) from joint ventures.

Operating costs totalled NOK 2 559.7 million (NOK 2 864.1 million), of which project costs for the year totalled NOK 2 313.7 million (NOK 2 617.4 million). Project costs are primarily construction costs for units delivered. Payroll costs accounted for NOK 139.0 million (NOK 136.2 million) of the operating costs.

Other operating costs came to NOK 97.2 million (NOK 100.3 million), including NOK 29.2 million (NOK 39.9 million) for sales and marketing.

The share of profit from associates and joint ventures came to NOK 85.7 million (NOK 109.7 million).

Consolidated operating profit for the year came to NOK 422.4 million (NOK 648.3 million).

Net financial income amounted to NOK 2.7 million (NOK 3.0 million in expense).

Pre-tax profit for the year was NOK 425.1 million (NOK 645.3 million). Net tax expense was NOK 86.3 million (NOK 140.4 million). Consolidated tax expense does not include tax liability for tax objects which are not part of the Selvaag Bolig group. Tax on non-controlling shareholders’ share of profit for the period is included in the non-controlling share of profit and equity.

Comprehensive income for 2022 came to NOK 338.9 million (NOK 504.9 million). NOK 338.9 million of the profit was attributable to the shareholders of Selvaag Bolig ASA (NOK 504.9 million), and NOK 0.0 million to non-controlling shareholders (NOK 0.0 million).

Consolidated cash flow from operational activities was NOK 63.4 million (NOK 392.6 million). The decline from last year primarily reflected fewer delivered units and the effect of the net change in inventory.

Cash flow from investing activities was NOK 239.8 million (NOK 167.1 million). The change from 2021 primarily reflected dividends received from joint ventures in 2022.

Net cash flow from financing activities was negative at NOK 218.0 million (negative at NOK 917.6 million). The change from 2021 primarily reflected less net repayment of construction loans in 2022.

The group’s holding of cash and cash equivalents at 31 December totalled NOK 612.7 million (NOK 527.4 million), an increase of NOK 85.2 million from a year earlier.

Assets in Selvaag Bolig at 31 December 2022 totalled NOK 5 949.6 million (NOK 5 782.0 million). The carrying amount of consolidated inventories (land, housing under construction and completed homes) at 31 December was NOK 4 273.2 million (NOK 4 072.5 million).

Equity at 31 December was NOK 2 345.9 million (NOK 2 468.8 million), corresponding to an equity ratio of 39.4 per cent (42.7 per cent). The board proposes that a dividend of NOK 2.00 per share, corresponding to NOK 187.5 million, be paid to shareholders in Selvaag Bolig ASA for the second half of 2022. NOK 2.00 per share, corresponding to NOK 186.5 million (minus own shares), was paid in August 2022 based on profit for the first half-year. The total dividend for 2021 will be NOK 4.00 per share, corresponding to NOK 374.0 million. That represents 110 per cent of consolidated net profit for 2022.

The group held cash and cash equivalents of NOK 612.7 million (NOK 527.4 million) at 31 December. Selvaag Bolig ASA, the parent company, held cash and cash equivalents of NOK 352.6 million (NOK 283.4 million) at 31 December.

At 31 December, consolidated interest-bearing debt amounted to NOK 2 485.8 million (NOK 2 147.7 million), of which NOK 1 400.4 million (NOK 777.2 million) was non-current and NOK 1 085.4 million (NOK 1 370.5 million) was current. NOK 582.3 million of the current liabilities related to buyback agreements and seller credits to Urban Property (NOK 682.1). See note 26 for more information.

Other current non-interest-bearing debt amounted to NOK 541.9 million (NOK 552.4 million) at 31 December, of which advance payments by customers accounted for NOK 152.1 million (NOK 233.6 million).

Consolidated interest-bearing debt can largely be divided into four categories: 1) top-up loans from parent company Selvaag Bolig ASA, 2) land loans, 3) buyback agreements with Urban Property and 4) construction loans. At 31 December 2022, the group had no top-up loans, land loans of NOK 226 million, buyback agreements with Urban Property of NOK 582 million and total construction loans of NOK 1 678 million.

Selvaag Bolig has a credit facility of NOK 300 million with DNB, maturing in December 2025. This facility was expanded from NOK 150 million in 2022. In addition, the company also has a credit facility of NOK 150 million in the same bank which is renewed annually. At 31 December, no drawings had been made against either of these facilities. An earlier credit facility of NOK 300 million for financing infrastructure expired in 2022.

Each project in Selvaag Bolig is organised as a single purpose vehicle (SPV). In addition to financing in the parent company, this means that each company seeks its own external capital financing for the development of a project. Land loans are converted to construction loans as the projects start up. Building costs are wholly financed by loans, and increased activity in the companies will accordingly mean that construction loans rise in line with progress. In Sweden, Selvaag Bolig guarantees the implementation of the projects through a self-debtor surety.

Pursuant to section 3-3a of the Norwegian Accounting Act, the board confirms that the going concern assumption is realistic and that the financial statements for 2022 have been prepared on that assumption. This view rests on the group’s good capital adequacy and financial position.

There have been no events after the balance sheet significantly affecting the Group's financial position.

Operating revenues for Selvaag Bolig ASA, the parent company, came to NOK 79.6 million (NOK 128.1 million), and the operating loss for the year was NOK 115.5 million (loss NOK 80.8 million). Ordinary net profit for the year was NOK 391.0 million (NOK 637.3 million). Profit for 2022 included NOK 356.3 million (NOK 801.2 million) in group contributions received from subsidiaries. These internal items are eliminated in the consolidated financial statements.

The parent company, Selvaag Bolig ASA, made a net profit of NOK 391.0 million (NOK 637.3 million). The parent company’s equity amounted to NOK 1 932.2 million (NOK 1 910.7 million) at 31 December.

The board participates in important strategic discussions during the year and conducts an annual revision of the company’s operational and financial strategy together with the executive management.

Selvaag Bolig worked actively in 2022 to manage the business in accordance with the approved strategy and to ensure that the company capitalises on the competitive advantages that this provides.

To ensure that Selvaag Bolig is a driving force in forward-looking housing and urban development, the annual revision of its strategy includes detailed analyses of changes and trends in such areas as urban development, housing concepts, sustainability, the residential environment, housing preferences, demographics, the sharing economy and digitalisation.

For more information on the group’s strategy, see the description of the businessin this report.

As a housing developer, the group is exposed to risk related to land development, sales and the execution of construction projects. These factors can affect the group’s business activities and financial position. The board of Selvaag Bolig accordingly gives a high priority to dealing with and managing risk, and has established routines and control systems to limit overall risk exposure to an acceptable level.

Regular risk surveys contribute to raising awareness of the most significant risk conditions which could affect the business goals defined in the company’s strategy and how to deal with them.

The primary risk factors can be categorised as market, operational, financial and climate risk.

Housing demand is influenced by a large number of factors at both micro and macro level. It may be affected by substantial fluctuations in the general level of interest rates and/or significant changes in other financial variables to which potential housebuyers might be exposed. Changes in housing demand could furthermore affect Selvaag Bolig’s opportunities to sell homes at budgeted prices within the planned time frames. Were the pace of sales to be lower than expected because of changes in market conditions, planned developments could be postponed. The company accordingly has internal requirements related to advance sales, where the general rule is that construction does not begin until homes corresponding to 60 per cent of the value of each building stage in the respective projects, or of the overall project, have been sold.

Selvaag Bolig draws on external construction companies and service providers in connection with developing and building new projects. As a result, it is exposed to the risk of loss and additional project cost if a contractor/supplier finds itself in financial difficulties. To reduce this risk, the company mainly enters into construction contracts with large, well-established players who have a solid financial position and experience, and who can document quality work. In addition, standardised and detailed construction plans developed by Selvaag Bolig are used to reduce the risk of errors, misunderstandings and delays by the contractor.

Furthermore, Selvaag Bolig is exposed to increases in the level of prices for construction contracts and to cost overruns. For projects built on site, the company mainly enters into turnkey contracts. In this way, costs are fixed before sales and construction begin. In the event of high building costs, the company also has the expertise required to implement projects on the basis of subcontracts managed by the construction client. Capacity and risk nevertheless mean that this is not the preferred approach on any scale.

Changes to operational parameters or planning decisions by the relevant public authorities could affect both the progress and the viability of Selvaag Bolig’s various projects, and might thereby limit opportunities to continue developing its properties. That could lead to delays and increased costs. In order to reduce this risk, the company performs a thorough analysis before buying land, and works systematically to keep in touch with regulators during the whole life of the project.

The group’s credit risk relates largely to the settlement of its accounts receivable, which primarily involve private customers as housebuyers. Buyers are primarily required to pay a 10 per cent deposit in advance when a sale is agreed, and to document satisfactory financing for the property. Credit risk is regarded as low because payment must be made to the client account at the settlement agent before transfer of the residence.

The vast majority of the group's activities are based in Norway. The company also has operations in Sweden where project development is financed with capital from the Norwegian operations, and profit repatriation entails a capital transfer from Sweden to Norway. No currency hedging arrangements have been established yet. The company considers the exposure to currency risk to be limited as the Swedish operations make up a low proportion of the total project portfolio and the company has therefore not yet formed a foreign exchange policy.

Changes in interest rates affect the group’s borrowing costs and could affect the valuation of its assets. The company has opted not to enter into any form of hedging contract. Furthermore, interest rate levels affect the company’s return on free liquidity.

Selvaag Bolig depends on access to capital in order to acquire sites and realise projects. In order to finance construction, the company maintains good and close relations with its principal banks, which are well-capitalised Nordic institutions. Competition between the banks is perceived to be satisfactory, and the company has thereby been able to secure the financing required for its projects. Financing of land purchases is primarily channelled through the collaboration with Urban Property AS. In Sweden, land plots are financed with equity and bank financing. Land purchase models are described in the business description in this report.

Conservative liquidity management means having sufficient liquid assets and available financing through lines of credit to meet the group’s obligations. Selvaag Bolig administers liquidity actively and pays special attention to maintaining adequate liquidity at all times. The company continuously monitors forecast and actual cash flows.

The board takes the view that the group had a well-balanced exposure to financial and liquidity risk at 31 December. Cash and cash equivalents in the Selvaag Bolig group amounted at 31 December to NOK 612.7 million (NOK 527.4 million) for the group and NOK 352.6 million (NOK 283.4 million) for the parent company. Liquid assets consisted primarily of cash and bank deposits. Selvaag Bolig has a credit facility of NOK 300 million with DNB, maturing in December 2025. The company also has a credit facility of NOK 150 million in the same bank which is renewed annually. At 31 December, no drawings had been made against either of these facilities. An earlier credit facility of NOK 300 million for financing infrastructure, was ended in 2022. Further reference is made to the comments on financing above and to note 16 in the consolidated financial statements for an overview of loans, maturities and loan terms.

Climate risk consists of physical climate risk and transition risk. Physical risk is associated with increased extreme weather and ecosystem changes. Transition risk is associated with changes in regulations, technology and the market situation in connection with the transition to a low-emission society.

The company has a relatively low exposure to physical climate risk. In this area, there are strict legal and regulatory requirements, and Selvaag Bolig's housing also has its own management systems that reduce risk. Selvaag Bolig, on the other hand, is exposed to transition risk. As the real estate sector has significant greenhouse gas emissions, there are increased demands for transparency, non-financial reporting and emission cuts from especially financial stakeholders and authorities. Selvaag Bolig has therefore implemented a number of risk-reducing measures in 2022 and will continue this work in 2023. These are discussed in the ESG report.

Selvaag Bolig ASA was established in 2008. It is the parent company for the underlying group subsidiaries, which are responsible for operations. At 31 December 2022, the Selvaag Bolig group had 86 employees, with a total of 84.6 full-time equivalents, including 67 in the parent company and 17 in the subsidiaries. The company is led by CEO Sverre Molvik and chief operating officer (COO) Øystein Klungland.

Selvaag Bolig will create value for society by building good homes, and by working actively to ensure sustainable housing and urban development. This means in part that the company gives priority to urban areas experiencing expansion pressures, develops site-efficient homes with the greatest volume in lower price categories, seeks to be cost-effective and works to ensure positive official policies through a clear presence in the public debate. Ethical, social and environmental considerations are integrated in its day-to-day operations. The company’s goal is to be a good and secure workplace, and requires that it and its suppliers pursue their operations in compliance with applicable legislation and statutory regulations. Furthermore, Selvaag Bolig will be a responsible social player and minimise emissions/ discharges and damage to the natural environment. The company has ethical guidelines which are described at www.selvaagboligasa.no.

Continuous efforts are made to ensure that employees are familiar with and observe all the company’s guidelines related to CSR and ESG. In 2022, the company has, among other things, updated the materiality matrix, prepared its first complete climate statement, defined KPIs and set targets for reducing greenhouse gas emissions, improved systems for data collection and made preparations for the Transparency Act. The work will continue in 2023 and the company is preparing for further non-financial reporting in connection with new legal requirements and expectations from various stakeholder groups.

See the separate section on ESG in this annual report.

The company was listed on the Oslo Stock Exchange on 14 June 2012. It had 5 784 shareholders (4 746) at 31 December 2022, of whom 205 were foreign (236). See note 13 to the consolidated financial statements for Selvaag Bolig ASA for detailed shareholder information.

Transactions with related parties

Urban Property (UP) is a related party with the company according to accounting rules, which means that payments of option premiums and repurchasing land are considered related transactions. During 2022, the company repurchased two land plots from UP for NOK 160 million.

Refer to note 23 for further information about the company’s transactions with related parties.

Selvaag Bolig ASA is committed to maintaining a high standard of corporate governance. A healthy corporate culture is essential for safeguarding confidence in the company, securing access to capital and ensuing good value creation over time. All shareholders will be treated equally, and a clear division of labour will exist between the board and the company’s executive management. Selvaag Bolig complies with the Norwegian code of practice for corporate governance.

A detailed statement on the way Selvaag Bolig implements the sections of the code can be found on the company’s website at www.selvaagboligasa.no and in this annual report.

Pay and other remuneration of senior executives in the group are presented in note 22 to the consolidated financial statements. This note also outlines the principles on which executive remuneration is based. Selvaag Bolig introduced a share savings programme for all employees and a share purchase programme for the executive management in 2015. These programmes are described in the chapter on corporate governance in this report.

The AGM will take place on 26 April 2023.

Selvaag Bolig is well-positioned with large projects centrally located in and near Greater Oslo, Stavanger, Bergen, Trondheim and Stockholm. According to Statistics Norway, urbanisation and population growth create a large and long-term need for new homes in Selvaag Bolig’s core areas. The demand for new homes is, however, negatively affected by reduced purchasing power in households as a result of geopolitical uncertainty with subsequent high inflation, increased energy prices and rising interest rates. However, some easing of the mortgage regulations from the beginning of 2023 will likely contribute positively to housing demand as more people have the opportunity to buy their home.

Overall sales activity in the Norwegian housing market for existing dwellings was normal at the end of 2022. In some regions, however, more homes were offered for sale or fewer homes than usual were sold. This led to an increase in inventory in several areas. The relative increase in inventory compared to earlier years has however not continued after the year end.

The pandemic and the war in Ukraine have led to increased construction costs, resulting in postponed sales and construction starts. Over time, the situation could affect the number of homes the company has under construction. Selvaag Bolig sees signs that the price of building materials and transport is falling, which could be positive for the price level of new construction contracts.

As a pure housing developer, the company puts all construction out to competitive tender and accordingly has a sensible staffing level which can easily be adjusted to the level of activity in the market. In the board’s view, this has given and will continue to give Selvaag Bolig competitive advantages. Its strategic collaboration with Urban Property, as well as its successful establishment in Sweden could provide substantial benefits for the company over time.

Selvaag Bolig is well equipped organisationally, operationally and financially to support and strengthen its market position going forward. The company has a solid order reserve, upcoming first sales from new projects and capital to buy new land plots.

Notes to the consolidated financial statements for the year ended 31 December 2022.

Selvaag Bolig ASA (the company) and its subsidiaries (together the group) is a housing development group involved in the construction of residential property for sale in the ordinary course of business.

Selvaag Bolig ASA is listed on the Oslo Stock Exchange.

The company’s ultimate controlling party is Selvaag AS. The registered office of the company is Silurveien 2, NO-0380 Oslo.

The principal accounting policies are set out below, and have been consistently applied to all accounting periods presented unless otherwise stated.

The group's consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board (IASB) and endorsed by the EU.

These consolidated financial statements were authorised for issue by the board of directors on 20 March 2023.

The consolidated financial statements have been prepared on a going concern and historical cost basis, except for derivatives which are recognised at fair value through profit or loss.

Items included in the individual financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in NOK, which also is the parent company’s functional currency.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items which are measured in terms of historical cost in a foreign currency are not retranslated in subsequent periods.

The consolidated financial statements include the financial statements of the company and entities (including special purpose entities) controlled by the company (its subsidiaries). Control is achieved where the company is exposed, or has rights, to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. This is generally presumed to exist when the company holds more than 50 per cent of the voting rights. The existence and effect of potential voting rights which are currently exercisable or convertible are also considered when assessing whether the company controls another entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. A negative comprehensive income in the subsidiaries is attributed to the owners of the parent company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, restatements are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the group's ownership interests in subsidiaries which do not result in the group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the group's controlling and non- controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Such transactions do not impact the profit or loss statement.

When the group loses control of a subsidiary, the profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, these are accounted for as if the company had directly disposed of the relevant assets (ie, reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRS rules). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, when applicable, at the cost on initial recognition of an investment in an associate or a jointly controlled entity using the equity method.

Operating segments are reported in a manner consistent with the internal reporting provided to the CEO and management group. This group is responsible for allocating resources and assessing the performance of the operating segments.

For the purposes of internal reporting, the group utilises the percentage of completion method for revenues and cost of goods sold, where the degree of completion is estimated on the basis of expenses incurred relative to total estimated cost multiplied by the sales rate. Operating profit (loss) under the percentage of completion method also includes an estimated profit element. The segment results are reconciled to the operating results for the group in the note.

An associate is an entity over which the group has significant influence, and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is neither control nor joint control over those policies. Significant influence is generally presumed to exist when the company holds between 20 per cent and 50 per cent of the voting rights.

Associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost and adjusted thereafter to recognise the group's share of the profit or loss and other comprehensive income of the associate. If the group's share of losses of an associate exceeds the group's carrying amount of that associate, the group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

If there are loans to an associated company, and the loan is considered to be part of the net investment, any accumulated negative share of the results which exceed the acquisition cost is recognised as a reduction of the carrying amount of the receivable.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the group' consolidated financial statements only to the extent of interests in the associate which are not related to the group.

Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group.

Share of income (loss) from associated companies is included in operating profit (loss) since the investments are considered to be an integral part of the group’s operations.

A joint arrangement is a contractual arrangement whereby the group and other parties undertake an economic activity which is subject to joint control (ie, when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control). Joint arrangements are classified as joint operations or joint ventures, depending on the rights to the assets and obligations for the liabilities of the parties to the arrangements. If the parties have rights to the net assets of the arrangement, the arrangement is a joint venture. If the parties have rights to the assets and obligations for the liabilities relating to the arrangement, the arrangement is a joint operation.

The group does not have any interests in joint arrangements classified as joint operations.

The group reports its interests in joint ventures using the equity method, as described in note 2.6 Investments in associates above, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. See note 2.10 below.

Share of income (loss) from joint ventures is included in operating profit (loss), since this is considered integral to the group’s operations.

Where property is acquired through the acquisition of entities, management considers the substance of the assets and activities acquired. When acquiring a group of assets or net assets which do not constitute a business, the cost price is allocated between the individual identifiable assets and liabilities acquired on the basis of their relative fair values at the acquisition date.

Business combinations are accounted for using the acquisition method. The acquisition is recognised at the aggregate of the consideration transferred, measured at acquisition-date fair value, and the amount of any non- controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Part of goodwill is due to the recognition of deferred tax obligation at nominal value. Nominal value is higher than fair value, and the difference is included in the goodwill.

When a business combination is achieved in stages, the group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (ie, the date when the group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of any contingent consideration classified as liability is recognised in profit or loss.

1. Goodwill

Goodwill arising on an acquisition of a business is recognised in the balance sheet at the date of acquisition of the business (see note 2.8 above). Goodwill is not amortised but is tested for impairment annually. For the purposes of impairment testing, goodwill is allocated to each of the group's cash-generating units (or collections of cash-generating units) expected to benefit from synergies of the business combination.

Goodwill is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill will not be reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

1. Other intangible assets

Other intangible assets acquired through a business combination are initially recognised at fair value, and otherwise at acquisition cost. The asset’s residual value and expected useful life are reviewed on an annual basis and adjusted if necessary. If an asset’s carrying value exceeds the recoverable amount, the asset will be written down to the recoverable amount. Any gain or loss arising from the disposal of an asset will be determined as the difference between the asset’s sales price and carrying value, and recognised in the consolidated statement of comprehensive income as other net profit (loss).

The group’s main activity is to develop residential properties, and revenue is derived primarily from the sale of residential properties. Properties are usually sold to private customers, but there are some professional customers as well.

The group also has some lease revenue and revenue from other services.

Revenue from the sale of residential property (including any sale of projects under development and undeveloped land) is recognised when the control is transferred to the customer. Control is considered transferred at the time of delivery of the property to the customer.

Customer contracts related to sale of residential properties are in accordance with the Norwegian standard, and will normally include a condition that a minimum percentage of sales in the project is reached. Before commencing the construction phase of a project, the general rule is that the group requires 60 per cent of a project to be sold.

According to Norwegian regulations, the customer is entitled to withdraw from the contract until the property is transferred to them. In such a case, however, the customer is responsible for covering any loss incurred by the group as consequence of their withdrawal. This includes covering the price difference if a lower price is achieved, plus transaction costs.

The customer normally pays 10 per cent of the selling price when signing the contract. This prepayment is paid into an escrow account held by the estate agent. The group does not have a right to the advance payment until it provides financial security in accordance with the Housing Construction Act. Once such security is provided, the advance payment is released from the escrow account and recognised as received cash and other short-term debt (advance payment).

The remaining part of the selling price is paid into the escrow account prior to delivery. The amount is not released from the escrow account until security is provided or all formalities related to the transfer of the property to the customer are finalised. In the period between physical transfer of the property and finalising the formalities by the estate agent, the consideration (reduced by advance payments) is recognised as a trade receivable. Once the right of ownership has been publicly notarised, the remaining consideration is released from the escrow account.

Property may be sold with a degree of continuing involvement by the seller, which may involve commitments to complete construction of the property, or a seller guarantee of occupancy to a housing cooperative for a specific period.

Rental income from leasing property (operating leases in which the group is a lessor) is recognised on a straight-line basis over the term of the relevant lease and included in other revenues.

Control over services is considered to be transferred to the customer as the service is delivered. Revenue from sale of services is recognised when the service is performed. Estate agent services directly associated with the sale of property are included in sales revenue. Other services are included in other revenue.

IAS 2 Inventories defines inventories as assets held for sale in the ordinary course of business, in the process of production for such sale, or as materials or supplies to be consumed in the production process or in the rendering of services.

The group has property which is land and buildings intended for sale in the ordinary course of business or which is in the process of construction or development for such sale. Inventories thus comprise land, property held for resale, property under development and construction and unsold finished units which are not sold. Inventories are measured at the lower of cost and net realisable value.

The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present condition. The cost of conversion includes costs directly related to the construction of the property (such as amounts paid to sub-contractors for construction) and an allocation of fixed and variable overheads incurred during development and construction. Borrowing costs directly attributable to the acquisition, construction or production of property are added to the cost of those assets until the assets are substantially ready for their intended use or sale. Capitalisation of borrowing costs commences when the plot acquires planning permission. Capitalisation of other directly attributable costs commences when it is more likely than not that the project will be realised. Other costs are included in the cost of inventories only to the extent that they are directly attributable to bringing the inventories to their present location and condition, including planning and design costs, for example. The option premium in plot option contracts with Urban Property is recognised at acquisition cost in inventory as they are incurred when it is probable that the project will be realised.

Net realisable value is the estimated selling price in the ordinary course of business, based on market prices at the reporting date and discounted for the time value of money (if material), less the estimated costs of completion and the estimated costs necessary to make the sale.

When properties are sold, the carrying amount is recognised as a project expense in the income statement in the period in which the related revenue is recognised.

The group has entered into agreements to purchase land in the future (forwards and purchase options) for use in the ordinary course of business. The land is first capitalised when the cost is incurred or the control is transferred from the seller. If a contract to purchase land in the future is a loss contract, a provision is made for the estimated loss.

Property, plant and equipment are recognised at acquisition cost less accumulated depreciation and impairment losses. Acquisition cost includes expenditure which is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as an expense during the period in which they are incurred. Depreciation is calculated on a straight-line basis, generally over three to 10 years.

The asset's residual value and useful life are reviewed annually and adjusted if appropriate. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount exceeds its estimated recoverable amount. The assessment is made for each cash-generating unit.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement as Other gain/(loss) net.

Financial assets are initially recognised at fair value. Subsequent measurement depends on the classification of the assets. Financial assets held within the group’s business model where the objective is to collect the contractual cash flows, and where the cash flows are solely payments of principal and interest, are measured at amortised cost. Financial assets not held in this business model are measured at fair value through profit or loss. The group does not have any material financial assets measured at fair value through profit or loss or other comprehensive income.

Trade receivables are amounts due from customers in the group’s ordinary housing development business and related services. Where the trade receivables do not include a significant financing component, they are recognised initially at the amount of the consideration. Impairment is recognised if there is evidence that the estimated future cash flow has been impacted. The risk of impairment is low owing to the practice of requiring advance payments into escrow accounts.

Loans and other receivables are held in the group’s normal business model where the objective is to collect payment and interest when due, and measured at amortised cost using the effective interest method, less any impairment. The receivables are classified as current unless they are due more than 12 months from balance sheet date.

Financial liabilities are recognised initially at fair value and subsequently measured at amortised cost.

Borrowings are recognised initially at the received amount, net of transaction expenditures incurred, and subsequently measured at amortised cost. Any difference between the proceeds (net of transaction expenditures) and the nominal value is recognised in the income statement over the period of the borrowings using the effective interest method.

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

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest-method. If the interest element is insignificant, trade payables are carried at the original invoice amount.

Cash and cash equivalents presented in the statement of cash flows include cash in hand, bank deposits and other highly liquid investments with original maturities of three months or less.

The cash flow statement is prepared using the indirect method. Interest payments are classified as operational cash flows.

An equity instrument is any contract which evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the group are recognised as the proceeds received, net of direct issue expenditures (net of income tax).

Repurchase of the company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the company's own equity instruments. On subsequent disposal of own shares, any consideration received (net of any directly attributable incremental transaction expenditures and the related income tax effects) is included in equity.

Income tax expense represents current tax expense and changes in deferred tax expense.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense which are taxable or deductible in other years and items which are never taxable or deductible. The group's liability for current tax is calculated using tax rates which have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit. Deferred tax is not recognised when property is purchased through shares in a legal entity.

Deferred tax is also recognised for temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The group recognises deferred tax for associated companies and jointly controlled entities subject to partnership taxation.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates which are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) which have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences which would follow from the manner in which the group expects to recover or settle the carrying amount of its assets and liabilities.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

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

Provisions, such as for warranties or investments in infrastructure, are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that a net outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

In accordance with IFRS 16 Leases, leases are recognised as a right-of-use asset and a lease obligation from the time the right-of-use assets is available for use by the lessee (the commencement date).

Right-of-use assets are measured at acquisition cost, which comprises the amount of the initial measurement of the lease liability, adjusted for any lease payments made before the commencement date, less any lease incentives received and any costs necessary to restore the asset to the condition required by the lease.

Liabilities arising from a lease are initially measured on a present value basis using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used.

Lease liabilities include the net present value of the following elements of the lease:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date
• the exercise price of a purchase option if the group is reasonably certain to exercise that option
• payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.

When adjustments to lease payments based on an index or rate take effect, or the management makes changes in the evaluation of options to extend or terminate the lease, the lease liability is reassessed and recognised as an adjustment to the right-of-use asset.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the statement of comprehensive income.

The company has a general share purchase programme for employees working more than halftime and a share purchase programme for the company's management. In the general programme, employees can buy shares for up to NOK 200 000 per year with a 20 percent discount, conditional on a two-year lock-up period. In the share purchase program for the company's management, the ceiling for annual investment is the individual's annual salary. The purchases have a 30 percent discount, conditional on a three-year lock-up period. The price per share is set at the market price (volume-weighted average price for the final 10 trading days before the programme opens) for both programs. In the general programme, financing of up to NOK 50 000 is offered through an interest-free loan from the company. The loan is amortised over 12 months.

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.

Obligations related to early retirement pensions (AFP) are part of a multi-employer defined benefit plan. However, the company’s share of the liability cannot be reliably measured, and the plan is therefore accounted for as if it were a defined contribution plan.

New accounting standards and amendments

The group implemented no new standards or changes to standards with a significant impact for the group in 2022.

The IASB has adopted an amendment to IAS 37 which specifies that the direct costs of fulfilling a contract include both incremental costs of fulfilling the contract and the allocation of other costs which are directly linked to fulfilling the contract. Before a loss provision is made for a loss contract, any write-downs from asset impairment must be taken. The change came into force from 1 January 2022. This is relevant to contracts for future land purchases but it has not had a significant effect on the consolidated financial statements.

The IASB has adopted changes to IAS 1 that require companies to disclose information about significant accounting principles instead of important accounting principles. It has been made clearer which principles are significant enough to be disclosed in the accounts. The discussion of accounting principles should focus to a greater extent on the company's specific choices and assessments, rather than general standards and other generic text. Other than that, the change in IAS 1 will have little effect on the consolidated accounts. These changes will come into effect for annual accounts beginning on or after 1 January 2023.

No other forthcoming changes are expected to have a significant impact for the group.

The preparation of financial statements in accordance with the IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies.

Estimates and assumptions about the carrying amounts of assets and liabilities which are not readily apparent from other sources will be required. The estimates and associated assumptions are based on historical experience and other factors which are considered to be relevant. The estimates may, by definition, differ from the actual outcome.

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

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Housing development projects are classified as inventory in accordance with IAS 2. Inventories comprise undeveloped land, work in progress and finished units, and are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. In determining the net realisable value, management assesses important factors relevant for the valuation, including macroeconomic factors such as expected housing prices and rental levels as well as expected yields, approvals from the authorities, construction costs and project progression. When considered appropriate, management uses reports from external valuation experts to estimate property values or to corroborate the company’s own estimates. Changes

in circumstances and in management’s assessments and assumptions will result in changes in the estimated net realisable value. See also note 5.

Management has determined the operating segments based on reports reviewed by the CEO and management group, and which are used to make strategic decisions. The figures below were reported to the CEO and the management group at the end of the reporting period. The main segment is defined as property development ("Boligutvikling"). The income in the other segment comes mainly from services and project management, see also note 25. The costs in the other segment mainly relate to salary costs for administration and management which cannot be directly attributed to the projects and thus are not allocated to the housing development segment, see also note 6.

The group utilises the percentage of completion method in its internal reporting, where the degree of completion is estimated on the basis of expenses incurred relative to total estimated costs and the sales rate. Operating revenues under the percentage of completion method also include an estimated profit element for sold units. The consolidated income statement is based on the completed contract method, in which revenue is recognised at the time of transfer of risk and control, being the point of delivery of the property. A reconciliation of this effect (from percentage of completion to completed contract) can be found in the segment reporting under "Reconciliation EBITDA to operating profit (loss)". In addition, the operating profit from IFRS contains items from IFRS 16 Leases, which are not included in the segment reporting. Effects are specified in the table below.

Group management considers segment results based on the percentage of completion method for determining EBITDA. The measurement method is defined as operating profit (loss) before “Depreciation and amortisation”, “Other gain (loss), net”, and “Share of income (losses) from associated companies”. Financial income and expenses are not allocated to operating segments since this type of activity is managed by a central finance function focused on managing the group’s liquidity.

Operating revenues from outside Norway in 2022 are from the sale of flats and a land plot in Spain.

Capitalisation rates utilised to determine the amount of borrowing costs eligible for capitalisation were between 3.6 per cent and 5.9 per cent during 2022. Corresponding rates were between 2.3 per cent and 3.8 per cent during 2021.

Land loans are normally converted to construction loans in line with the progress of the respective construction projects. They are capitalised against the site from the day the project secures planning permission and recognised in profit and loss as part of the cost of sales when the units are delivered. Interest charges of NOK 19.7 million related to land loans were capitalised in 2022, compared with NOK 13.5 million in 2021. Interest charges on construction loans are capitalised during the construction period and recognised under cost of sales in the same way. Capitalised interest on construction loans is included in additions to capitalised project expenses in the table above. Interest charges of NOK 87.0 million related to construction loans were capitalised in 2022, compared with NOK 68.4 million in 2021.

At 31 December 2022, 85 employees were included in the defined contribution plan. In addition, one employee was included in a defined benefit plan which is closed to new members. The defined benefit plan carries a net asset of NOK 0.4 million. Seventy-two current employees were included in the early retirement (AFP) plan. See also note 3 for Selvaag Bolig ASA.

Companies in Norway are required to offer an occupational pension plan in line with the Act on mandatory occupational pensions, and the group's companies have a pension plan which meets these requirements. The basis for earned pension rights under the defined contribution plan is 5 per cent of salary between 0 and 7.1 times the National Insurance base amount (G) and 10.5 per cent between 7.1 and 12G.

Other operating expenses include expenses related to operation of the group headquarters, in addition to NOK 2.1 million (2021: NOK 3.2 million) in services purchased from Selvaag AS and group companies. See also note 23 on related-party transactions for further specification.

The group as lessee

Right-of-use assets

Leased assets in the group are mainly office buildings. Right-of-use assets related to these are presented in the table above. The group has opted to not recognise leases for assets with low values. Lease payments related to assets with low values are expensed when they occur. A number of the lease contracts include an extension option which can be activated during the last term of the current contract. When entering a new lease contract, the group evaluates whether the extension option is likely to be activated or not.

The carrying amounts of trade and other receivables are denominated in NOK.

Losses on receivables have historically been minimal. There is no provision for losses on receivables as the expected credit loss is insignificant.