Annual report 2016/2017

Annual Report 2016/17 1 April 2016 – 31 March 2017

KNI A/S Reg. no. 209.713

Contents Page

Company information

1

Management statement

7

Independent auditor’s report

8

Financial highlights and key figures

9

Management report

10

Applied accounting principles

46

Profit and loss account

53

Balance sheet

54

Equity capital statement

56

Cash flow statement

57

Notes

58

Segment accounts

68

Company information Company name: Subsidiary names:

KNI A/S

Address:

J. M. Jensenip Aqq. 2, Postbox 319 3911 Sisimiut

Registration number GER number CVR/SE number Domicile:

209.713 1660 7398 1660 7398 Qeqqata Municipality

Tel. Fax E-mail Website:

+299 86 24 44 +299 86 62 63 kni@kni.gl www.kni.gl

Pilersuisoq A/S (KNI A/S) Polaroil A/S (KNI A/S)

Shareholder: Government of Greenland, Postbox 1015, 3900 Nuuk - (ownership share: 100%)

Board of Directors:

Niels Thomsen (b. 1981) Chairman of the Board of Directors (appointed by the Government of Greenland) since 2013.

Educational background: MSc (Public Administration) Current career: Managing Director/ CEO, Halibut Greenland ApS. Also holds other directorships in companies in Greenland.

Competencies: Experienced in operations, organisation and business development, strategy formation and implementation. Also possesses a good knowledge of the political system in Greenland.

1

Høgni Hansen (b. 1961) Vice-Chairman of the Board of Directors (appointed by the Government of Greenland) since 2014.

Educational background: Commercial training.

Current career: Managing director/CEO, P/F Poul Hansen Group. Also holds other directorships in companies in the Faroe Islands.

Competencies: Experienced in operations, organisation and business development, strategy formation and implementation. Possesses a good knowledge of the retail and meat industries.

Bodil Nyboe Andersen (b. 1940) Member of the Board of Directors (appointed by the Government of Greenland) since 2014.

Educational background: MA (Political Science) and former director of the National Bank.

Current career: Holds other directorships in Denmark.

Competencies: International top management in the financial sector and board positions. Also possesses extensive experience in strategy and organisation.

2

Annette K. Sadolin (b. 1947) Member of the Board of Directors (appointed by the Government of Greenland) since 2014.

Educational background: LLM Current career: Holds other directorships in large companies in Denmark.

Competencies: International top management and board positions in large companies. In addition, extensive experience in strategy, organisation and personnel matters, legal matters, risk management, and sales and marketing.

Søren Jakobsen (b. 1963) Member of the Board of Directors (appointed by the Government of Greenland) since 2016.

Educational background: MSc (Economics and Business Administration) and MBA. Current career: Board work and consulting.

Competencies: Extensive experience in senior management, strategy, business development and sales.

3

Najaaraq Christiansen (b. 1982).

Member of the Board of Directors (appointed by the Government of Greenland) since 2016.

Educational background: Graduate Diploma in Business Administration – accounting and financial management.

Current career: Business Controller, TELE Greenland A/S. Competencies: Experienced in work with finances and statistics.

Inger Eriksen (b. 1959) Member of the Board of Directors (staff representative) since 2011.

Educational background: Commercial and office training, plus college degree in Leadership and Management.

Current career: Administrative member of staff in Pilersuisoq Service Centre, Sisimiut Competencies: Thorough knowledge of organisation and management.

4

Mikol Heilmann (b. 1975) Member of the Board of Directors (staff representative) since 2015.

Educational background: College degree in Leadership and Management.

Current career: HRD Manager in KNI A/S Competencies: Experienced in work with organisation and training.

Dorthea Isaksen (b. 1971) Member of the Board of Directors (staff representative) since 2015.

Educational background: Trained therapist, certified in JTI testing Current career: HR development consultant for KNI A/S Competencies: Experienced in work with organisation and training.

5

Management:

Peter Grønvold Samuelsen (b. 1960) Managing director / CEO, KNI A/S Educational background: MSc in Public Administration and mini-MBA – diploma degree in management.

Competencies: Experienced in operations, organisation and business development, strategy formation and implementation. Has previously held other directorships in companies in Greenland, both as chairman and as ordinary board member.

Auditors: Deloitte Certified Accountants

6

Management statement We have today presented the annual report for KNI A/S for the financial year 1 April 2016 - 31 March 2017.

The annual report is presented in conformity with the Financial Statements Act. We consider the chosen accounting policies to be appropriate, such that the annual report gives a true and fair view of the Group's and the parent company’s assets and liabilities, financial position, result and cash flow for the Group.

We recommend the annual general meeting to endorse the annual report.

Sisimiut, 27 June 2017

Management:

Peter Grønvold Samuelsen

Board of Directors:

Niels Thomsen Chairman

Høgni Hansen Vice-chairman

Bodil Nyboe Andersen

Annette K. Sadolin

Søren Jakobsen

Najaaraq Christiansen

Inger Eriksen

Mikol Heilmann

Dorthea Isaksen

7

Independent auditor’s report To the shareholder in KNI A/S We have audited the annual report of KNI A/S for the financial year 1 April 2016 - 31 March 2017, which encompasses the management statement, accounting policies, income statement, balance sheet, capital and reserves calculation and notes for both the Group and the Parent Company, plus the cash flow statement for the Group. The annual report is presented in conformity with the Financial Statements Act. Management’s responsibility for the annual report The management is responsible for drawing up an annual report which gives a true and fair view in accordance with the Financial Statements Act. The management is also responsible for such internal control as the management deems necessary in order to draw up an annual report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on the annual report on the basis of our audit. We have conducted our audit in accordance with international auditing standards and additional requirements under Greenlandic auditing legislation. This demands that we comply with ethical requirements and plan and perform the audit to obtain a high degree of assurance that the annual report is free from material misstatement.

An audit entails performing procedures to secure auditable evidence for the amounts and disclosures set forth in the annual report. The procedures selected depend on the auditor’s assessment, including assessment of risk of material misstatement in the annual report, whether due to fraud or error. With this risk assessment, the auditor reviews internal controls relevant to the preparation and presentation of an annual report which presents an accurate picture, with a view to carrying out auditing procedures which are applicable to the circumstances, but not with the intent to express a conclusion concerning the reliability of the internal controls at the company. An audit also includes an assessment of whether the accounting policies chosen by the management are appropriate, and whether the accounting estimates exercised by the management are reasonable, as well as an evaluation of the overall presentation of the annual report.

It is our view that the audit evidence obtained provides a sufficient and appropriate basis for our opinion.

The audit has not resulted in any qualification.

Conclusion In our opinion, the annual report gives a true picture of the assets, liabilities and financial position of the group and parent company as of 31 March 2017, and of the results of the operations of the group and the parent company and cash flows for the group for the financial year 1 April 2016 - 31 March 2017, in accordance with the Financial Statements Act. Nuuk, 27 June 2017

Deloitte Certified Accountants Claus Bech Chartered Public Accountant 8

Financial highlights and key figures for the Group Financial highlights

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

(DKK mill.)

2016/17

2015/16

2014/15

2013/14

2012/13

Result: Net revenue

2,367.4

2,393.9

2,452.8

2,393.4

2,468.0

Operating profit (EBIT)

142.2

142.1

138.3

82.0

43.1

Result of financial items

(38.8)

(40.9)

(52.2)

(20.0)

(3.6)

Pre-tax profit

103.4

101.2

86.1

62.3

39.6

70.6

68.5

58.1

42.3

34.7

965.8

927.4

934.3

942.4

912.8

1,015.9

969.1

911.6

943.5

854.1

61.8

78.4

76.7

82.2

77.5

Equity

1,061.2

786.9

891.3

904.9

937.2

Balance sheet total

2,209.3

2,251.5

2,271.4

2,032.4

1,967.5

102.4

74.9

69.8

108.6

188.1

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

1/4 - 31/3

2016/17

2015/16

2014/15

2013/14

2012/13

Result for the year Balance: Fixed assets Inventories Trade debtors

Investments in tangible assets

Key figures

EBIT - margin (%)

6.0%

5.9%

5.6%

3.4%

1.7%

Return on invested capital (%)

17.7%

19.0%

19.7%

16.3%

12.5%

Net revenue / Invested capital

2.1

2.2

2.3

2.4

2.7

Financial gearing

0.7

0.9

0.8

0.9

0.8

6.7%

8.7%

6.5%

4.7%

3.7%

48.0%

35.0%

39.2%

44.3%

47.4%

3.5

3.4

3.5

5.4

6.9

Return on equity (%) Solvency ratio (%) Net interest-bearing debt / EBITDA

9

Management report General The financial year 2016/17 has been an exciting one on many fronts, with a focus on new initiatives and projects. On this basis, we have managed to further develop the business and deliver results that live up to the ambitions described in the Company’s strategy, Killingusaaq.

With pre-tax profits of DKK 103.4 million, KNI has shown that it can maintain the positive financial performance that has characterised the Group since the financial year 2013/14. The result for the year is thus the best for many years, and is also one of the best results in the Group’s history.

The financial year 2016/17 was the year in which the strategy, “KNI towards 2016” was concluded, and a new strategy, “Killingusaaq”, was launched. This new strategy process will continue some of the initiatives and projects launched during the previous strategy period, but new initiatives will also see the light of day.

During the previous strategy period, KNI made considerable progress in the direction of achieving its overall vision. As a company, KNI is now more profitable, with a greater focus on customer wishes and requirements than was the case back in 2013. This has been possible because in the previous strategy period, KNI had a concrete plan for how the Group should be changed.

During the strategy period that has just concluded, KNI also acquired qualified insight into the significant challenges faced by the Group in relation to urbanisation and the renovation backlog, particularly in the Goods Division. At the same time, there are still internal processes and procedures that can be improved and strengthened, and there is potential for growth in parts of KNI’s business area that can help to strengthen KNI, to the benefit of its customers and owners.

Killingusaaq is the name of KNI’s strategy development.

Killingusaaq means horizon, but the Greenlandic word can also be translated as though the horizon resembles the ultimate goal – but only ‘resembles’. The horizon can thus never be an expression of the ultimate goal, as it is always moving further away as we move towards it.

Similarly, a company’s strategy cannot encompass a final goal, unless it is a strategy that aims only to close the Company.

A company strategy will always be dynamic, and the goal will always move, in step with the times. The same applies to the horizon. The horizon is not a terminus, but will always move in step with the times – even when you think you have almost reached its location.

10

The new strategy process encompasses four overall areas of strategic focus:    

Earnings Growth Taqqissuut – skills enhancement Investment

The contents of the four focus areas deal with developing processes and policies that will concentrate on the following areas: Earnings:  Purchasing (category management)  Logistics (goods reception)  Property  Neqi Growth:  Pilersuisoq  Wholesale  Marketing strategy Taqqissuut:  Skills enhancement, focusing on training shopkeepers, warehouse managers and oil terminal managers  Strengthening trainee education  Value implementation Investment:  Investment policy  Construction strategy  Upgrading of ERP system The work on these focus areas of action must, in turn, lead to a continued strengthening of KNI’s focus on customers and their needs, while maintaining our core business with secure supplies of fuels and groceries to all settlements in Greenland.

With a presence in almost all the villages and towns of Greenland, we play a central role in society.

That means we share a joint responsibility for the development of the country.

11

The previously-defined mission and vision will thus be retained in Killingusaaq, while the value set will in future be interpreted within the framework of the concepts of “winner mentality” and “contribution culture”.

Similarly, the element of customer focus in the vision will be qualified by KNI obtaining an even better understanding of the “inner Greenlandic life” that plays out in the villages and small towns, and which is closely linked to traditional Greenlandic culture.

The life that unfolds in the towns and cities where KNI is present provides the framework within which we must act, as the modern commercial and service business that we wish to be, both as an innovative and globally-established company, and as a company that respects the culture and lifestyle of its customers, in which the surroundings and business conditions play a crucial role.

We wish to create results on the basis of local needs, overall national requirements and the greatest possible consideration for the surrounding society and the arctic environment. The goal is to refine our service concepts, shop structure and customer contact.

In the strategy process, work is also continuing to fulfil the ambition expressed in the vision: “KNI wishes to be a dynamic and profitable company that understands its customers and their needs”.

Through the Killingusaaq strategy process we will maintain our course, and take the next steps in the direction of 2020 to realise our vision.

The current general economic trend in the Company specifically supports the growth and earnings targets contained in the strategy, which forms the basis for the strategic change. The overall goal of the strategy work is to increase earnings and, on the basis of KNI’s vision and values, to create a more customer-oriented company.

12

The year’s pre-tax profit of DKK 103.4 million demonstrates KNI’s status as a well-managed and economically viable group that is continuing to maintain momentum in satisfactory performance.

Despite continuing tough market conditions, in which urbanisation, in particular, is impacting the sales areas of the Goods Division, the Company has managed to improve its earnings compared to previous years.

There was an improvement of DKK 2.2 million before tax on the result for the financial year 2016/17. The improvement compared to the previous financial year is mainly attributable to the following factors:   

A continuing strong focus on optimising process control Lower operational depreciation Lower financial costs

The year has also seen many successful activities, two of which were held in the months of June and July 2016.

In early June, “KNI Gathering 2016” was launched in Ilulissat, with 118 participants from all along the coast and all the different departments of the KNI Group. The management, as a united team, could be presented to a record number of employees brought together in one place, and the weeklong gathering was packed with management statements, division meetings, guest speakers, plenary meetings and group work.

The KNI Gathering culminated with a sales fair in Ilulissat Hall, where around 2,500 citizens from Ilulissat and the surrounding district visited the fair to experience great entertainment and racing events, and saw a wide range of products, including dinghies, hunting and fishing equipment, ATVs, bicycles, snowmobiles, hardware and food. The whole event proved to be a popular crowdpuller, and one which all the local citizens helped to make an exciting and unforgettable day.

Starting at the end of June, for 14 days, a delegation from KNI’s management travelled with a “road show” from Sisimiut to Aappilattoq in southern Greenland. The purpose of the long trip was to visit 26 different locations, hold meetings with employees and present the management to them. At the same time, many members of the management team were given an opportunity to see the many shops and oil terminals that KNI operates along the coast.

This summer’s trip to the south was just as successful as the similar trip the management took in 2015, but which went from Sisimiut north to Kullorsuaq.

The KNI Group now consists of four company units, all of which are managed on the basis of modern principles. We supply all of Greenland with groceries, consumer goods and fuels.

13

Polaroil – Greenland’s largest oil supply company As Greenland is a society undergoing rapid change, it is dependent on companies that are able – often under extreme conditions – to link the entire vast country together with deliveries of vital supplies.

One of these companies is Polaroil, for whom the words safety and responsibility are deeply ingrained in both the Company’s objects clause and in the minds of all of its employees.

Polaroil operates a total of 71 plants, divided between 16 oil terminals in the towns, 53 oil terminals and one depot in the villages, and one import plant. All of the towns and villages have storage facilities for lubricating oils and gases.

Pilersuisoq – Greenland's largest retail chain Pilersuisoq is a nationwide retail chain with 66 outlets scattered right across Greenland. From the northernmost to the southernmost shop, the distance is more than 2,000 km.

The company also operates the Duty-Free Shop chain at the international airport in Kangerlussuaq.

All Pilersuisoq shops are equipped with a sales terminal, where you also can shop via Pisisa.gl.

14

KNI Engros – Trading with businesses and institutions throughout Greenland KNI Engros covers the whole of Greenland, as the Company operates in both towns, villages and settlements, as well as in the area of ships’ supplies and ad hoc-established mineral exploration sites.

By making use of the extensive supplier networks and purchasing volume of the KNI Group, we can provide supplies of virtually all types of products, tailored to the needs of the individual customer – and at competitive prices. We sell and distribute products to businesses and institutions throughout the country.

Neqi A/S – Slaughterhouse in South Greenland Every year, the KNI A/S subsidiary Neqi A/S receives sheep and lambs from more than 38 sheep farms scattered throughout South Greenland. In 2016, Neqi A/S slaughtered 18,641 sheep and lambs.

The population of the villages and small towns where KNI operates its shops is declining. Since 2005, approximately 3,600 people have moved out of the sales area of the Goods Division. This 15

depopulation corresponds to two towns the size of Qasigiannguit – or four towns the size of Qaanaaq – disappearing from the Goods Division’s sales area.

For this reason alone KNI’s growth opportunities are severely limited, while the Group’s fixed costs remain unchanged, since it is not possible to simply shut down unprofitable shops, even in very sparsely populated villages. The service contract states that KNI has a supply obligation, which we of course honour.

Greenland’s demographic trends, by localities Inhabited localities Town retail outside KNI KNI 4K KNI town service contract KNI village service contract Outside town/village Inhabited localities, total Change from previous year

2005 30,387 8,190 7,330 10,608 454 56,969

2010 31,559 7,676 7,144 9,674 399 56,452 -0.9%

2011 31,943 7,745 7,145 9,403 379 56,615 0.3%

2012 32,385 7,699 7,112 9,190 363 56,749 0.2%

2013 32,492 7,497 7,152 8,930 299 56,370 -0.7%

2014 32,650 7,449 7,105 8,814 264 56,282 -0.2%

2015 32,720 7,384 7,156 8,566 158 55,984 -0.5%

2016 32,953 7,319 6,951 8,479 145 55,847 -0.2%

Difference 2017 2016-17 33,214 261 7,200 -119 6,923 -28 8,393 -86 130 -15 55,860 13 0.0%

KNI’s sales area KNI 4K KNI town service contract KNI village service contract KNI’s sales area, total Change from previous year

2005 8,190 7,330 10,608 26,128

2010 7,676 7,144 9,674 24,494 -6.3%

2011 7,745 7,145 9,403 24,293 -0.8%

2012 7,699 7,112 9,190 24,001 -1.2%

2013 7,497 7,152 8,930 23,579 -1.8%

2014 7,449 7,105 8,814 23,368 -0.9%

2015 7,384 7,156 8,566 23,106 -1.1%

2016 7,319 6,951 8,479 22,749 -1.5%

Difference 2017 2016-17 7,200 -119 6,923 -28 8,393 -86 22,516 -233 -1.0%

Source: Statistics Greenland: Population statistics, 1 January 2017

Population statistics as of 1 January 2017 show a modest increase in the total population of Greenland. However, there is still a population decline in the sales area of KNI. This year there was a drop of 233 persons, corresponding to a 1% reduction.

The depopulation trend thus represents a constant challenge to the Company’s ability to generate sufficient earnings to cover the costs of goods supply. The Company’s strategy focuses amongst other things on realising the Good Division’s full potential through the exercise of even better business acumen, increased skills enhancement and a further strengthening of the foundation, i.e. the support functions in the service centre that assist the Goods Division.

In the organisational area, an alteration has taken place in the Executive Group during the financial year: In the “Communications & Branding” department, Sofie Geisler, appointed Head of Communications in February 2017, has decided to seek new challenges. The position is currently vacant. After the balance sheet date, former Chain Director Finn Fabricius has also decided to seek new career challenges. In this case the responsibilities of the chain director have been taken over by Niels Andersen.

On the training front, work has continued over the past year on the skills enhancement project ‘Taqqissuut’. As mentioned earlier in connection with the Killingusaaq strategy, Taqqissuut is now one of the four strategic focus areas that support the overall strategy process. Taqqissuut was launched in spring 2014, and contains a concrete plan for training and skills enhancement for all employees of the Company.

16

This prioritisation has been undertaken in recognition of the fact that skills enhancement is a crucial factor in enabling KNI to fulfil its vision of being a dynamic and profitable company that understands its customers and their needs.

Taqqissuut refers to KNI´s skills enhancement programme, and thus to all KNI’s courses and training activities.

The Greenlandic word taqqissuut means the stick or branch of arctic willow that was used as fire tongs with a lard lamp, to control the light and heat from the lamp.

Taqqissuut is thus a synonym for enlightenment, and through enlightenment comes enhanced skills.

One of the major new initiatives in the skills enhancement project is the establishment of a completely new Niuertunngorniarneq (commercial training programme) which was started in 2016.

The programme aims inter alia to retain and develop skilled shopkeepers and train future shopkeepers, through a programme tailored to the Company’s strategic goals. One of several criteria for success is that recruitment challenges must in future be resolved, or at least be substantially reduced.

Niuertunngorniarneq will take place over nine months, with three internships in Sisimiut, and home assignments in the two intermediate periods. Each year, 12 trainees start the process in a new group.

In 2016, four women and eight men completed the training process with excellent examination results. In 2017 a new group has started, who are expected to complete their training in the course of the coming financial year 2017/18.

Similar to Niuertunngorniarneq, another internship process called Ikummatissasivilerisunngorniarneq (Oil Terminal Manager training) is being prepared, aimed especially at all staff of the oil terminals. Other internal courses are also being planned in the area of retail shops and staff functions.

For KNI, it is important that all employees develop their skills, so as to increase the Company’s competitiveness. Globalisation and other developments in our surroundings mean that we cannot make do with the current level of skills. Our staff must undergo ongoing training.

Annual report It is the view of the management that all essential information for evaluating the Company’s and the Group’s financial position, profit for the year and financial development are contained in the annual report and this account.

17

Main activity The activities of KNI A/S are based on Parliamentary Regulation no. 4 of 6 June 1997, Parliamentary Regulation no. 1 of 31 May 2001 and Parliamentary Regulation no. 7 of 14 November 2004.

KNI is a Greenlandic company that shows respect for Greenland’s social and cultural values, and is operated on commercial principles on the basis of solidarity towards all parts of the Greenlandic community. Quality, safety, environmental awareness and the best possible level of service must characterise the activities of KNI. The Company will strive to achieve profits that will ensure continued operation on a financially secure basis, including the provision of sufficient funds for maintenance and necessary investments, together with satisfactory solvency and liquidity.

The Company seeks to carry out its activities and achieve its goals through targeted focus on the following areas:       



KNI A/S will create a decentralised organisation, in which important decisions are made as close to the customers and employees as possible.

KNI A/S will secure high-priority training for employees at all levels to ensure that qualifications, skills and responsibility go together.

KNI A/S will undertake follow-up, evaluation and adjustment of goals, strategies and action plans, which will be achieved through documentation and measurable success criteria.

KNI A/S will develop existing business areas so that they are always characterised by business acumen, good service and efficiency.

KNI A/S will continuously maintain strict and visible cost control.

KNI A/S must be a good and attractive workplace that focuses on skills and motivation.

The administrative systems at KNI A/S must provide users with the necessary clarity, and must be simple, efficient and economical. KNI A/S prioritises operating reliability above technical innovation.

KNI A/S aims to provide clear and targeted information on the Company’s strategies to its owners and employees, and to the Greenlandic community.

The main activities of the parent company’s two primary business units in 2016/17 were: Goods Division:  Retail and wholesale sales in villages and towns.  Distribution and wholesale sales of beer and soft drinks.  Sales of service tasks for partners in villages and outlying districts.

Energy Division:  Import, distribution and sale of liquid fuels.  Import, distribution and sale of lubricants, bottled and industrial gases.

18

Some parts of KNI’s activities cannot be carried out on commercial and market terms.

Consequently, a service contract has been entered into with the Government of Greenland for payment of these tasks for society.

With effect from 1 January 2017, a new service contract has been entered into for the supply of goods. The service contract incorporates an annual procedure to ensure that the contract is continuously extended by one year, so that it continuously operates with a rolling framework over a four-year period. In essence, the service contract states the following: 

KNI has a duty of supply for all villages, including Kangerlussuaq and Narsarsuaq, as well as the towns Qaanaaq, Upernavik, Uummannaq, Qeqertarsuaq, Qasigiannguit and Tasiilaq. o The level of service is as follows: Depot

Kiosk

Service shop

Village shop

Inhabitants

1-29

30-75

76-120

121-600

Opening hours

Min. 2 hours weekly 146

Min. 10 Min. 20 Min. 20 hours weekly hours weekly hours weekly 236 294 341 Free

Basic assortment, minimum number of product codes.

Nanoq shop* More than 600 Free

*Qaanaaq, Upernavik, Uummannaq, Qeqertarsuaq, Qasigiannguit & Tasiilaq





The regulation of KNI’s prices in shops, kiosks, service shops and village shops of goods covered by the basic range must not exceed the change in Greenland’s consumer price index for the relevant categories by more than 2.2% for the full calendar year.

Total payment for the agreed services amounts to DKK 36 million annually, and covers only villages with up to 600 inhabitants.

By entering into the service contract, KNI has assumed an obligation to operate shops in villages and small towns where retail and wholesale services cannot be maintained on a profitable basis.

Similarly, a service contract has been entered into with effect from 1 January 2017 for the sale of liquid fuels in Greenland, under which the Company does not receive payment, but which sets a maximum limit on what the Company may earn on oil sold under the service contract. In addition, this service contract has been entered into under precisely the same chronological terms as the service contract for the supply of goods, which means that it operates under a rolling four-year framework.

With the new service contracts, KNI is now secured a four-year framework for the Company’s main activities.

19

In essence, the service contract for the sale of liquid fuels states the following:  



 

KNI has a supply obligation for arctic gas oil, motor gas oil, petrol, kerosene and Jet A-1.

The supply obligation for the above products encompasses civil society in Greenland, i.e. villages, towns, sheep and reindeer farms, and selected telecommunications stations on Greenland’s south and southwest coast.

The supply obligation does not apply to: 1) Bunkering of cruise ships, Atlantic ships and ocean-going trawlers, ships on international routes or ships engaged in the exploration or extraction of oil, gas or minerals.

2) Fishing vessels, with the exception of GR-registered vessels of less than 200 GRT. 3) Major infrastructure works outside urban areas and mines.

4) Direct deliveries to Mittarfeqarfiit’s own oil terminals.

The supply obligation is carried out at identical prices for all consumers, calculated on the basis of a profit target.

Of the profit target, an average of DKK 24 million annually is applied to service the maintenance backlog calculated in 2009 for the oil terminals of the Energy Division. It is expected that the maintenance backlog will be completed in 2025.

In addition to the activities covered by the service contracts, KNI also operates commercial retail activities in four selected towns, wholesale activities throughout Greenland and fuel supplies for ships and mining companies.

Schematically, KNI’s overall activities may be illustrated as follows: Division Goods

Segment Retail, within the service contract

Retail, outside the service contract

Energy

Market Villages, incl.

Narsarsuaq and Kangerlussuaq.

Qaanaaq, Upernavik, Uummannaq, Qeqertarsuaq, Qasigiannguit & Tasiilaq.

Nanortalik, Narsaq, Paamiut & Aasiaat.

Wholesale

Greenland.

Fuel, within the service contract

Towns and villages, as well as reindeer and sheep farms.

Activity Supply obligation for goods, with service contract payment.

Service agreements* Supply obligation for goods, without service contract payment.

Service agreements* Commercial activity in competition with Brugseni & Pisiffik.

Service agreements* Commercial activity in competition with KK Engros and Arctic Import, amongst others.

Includes beer/soft drinks distribution for Nuuk Imeq and supplies to smaller private chains, as well as catering, ships’ chandlers, etc.

Supply obligation, with requirement for identical prices.

20

Fuel, outside the service contract Neqi

Slaughterhouse

Ships and mining companies in Greenland.

Greenland

Commercial activity.

Slaughtering and processing of lamb and cattle under service contract with the Government of Greenland.

*Service agreements are commercial agreements for the provision of a number of functions on behalf of third parties, as follows: 1. Government of Greenland, money supply 2. Government of Greenland, harbour authorities 3. Air Greenland, aircraft, passenger and cargo handling 4. Mittarfeqarfiit, helistops 5. Arctic Umiaq Line, ship tickets 6. Royal Arctic Line, freight handling 7. POST Greenland, post handling 8. Polaroil, distribution

Ownership KNI A/S is 100% owned by the Government of Greenland. The Company’s share capital amounts to DKK 310 million.

The following table shows the net cash flows that have been generated between the parent company and the Government of Greenland in the period from 2008 until the end of the financial year 2016/17.

DKK mill.

2008

2009 (*)

09/10

10/11

11/12

12/13

13/14

14/15

15/16

16/17

Received via service contract: KNI A/S, total: Payments from the Government

-45.1 -45.1

-10.0 -10.0

-40.1 -40.1

-39.3 -39.3

-37.0 -37.0

-36.0 -36.0

-36.0 -36.0

-36.0 -36.0

-36.0 -36.0

-36.0 -36.0

Corporate tax: Corporate tax - KNI A/S

8.4

12.1

24.5

70.0

71.5

79.9

Personal tax: Personal taxes - KNI A/S (**)

72.8

17.6

69.7

66.5

67.4

68.4

69.3

20.0

20.0

20.0

30.0

20.0

20.0

Payments to the Government

72.8

17.6

69.7

66.5

87.4

88.4

89.3

108.4

103.6

124.4

Net cash flows to the Government

27.7

7.6

29.6

27.2

50.4

52.4

53.3

72.4

67.6

88.4

Corporate dividend: Dividend - KNI A/S

(*): This period covers only the restructuring financial year for the period 1 January to 31 March 2009.

During this period, KNI thus received DKK 351.5 million in service contract payments from the Government of Greenland, while within the same period the Company repaid DKK 828.1 million to the Government and municipalities. During the period 2008 - 2016/17, KNI thus contributed a positive net cash flow to the Government of Greenland amounting to DKK 476.6 million.

21

Group structure

Affiliates: As of the balance sheet date, KNI A/S owns 100% of the shares in Neqi A/S (share capital DKK 0.6 million) and KNI Ejendomme A/S (share capital DKK 1.0 million).

In addition, KNI A/S has, as of the balance sheet date, an ownership share in Akia Sisimiut A/S corresponding to 82.5% (share capital DKK 3.0 million).

Associates: Pitsaasut ApS, in which the ownership share is 50% (share capital DKK 80,000).

The year in brief for the Group This annual report covers the period from 1 April 2016 to 31 March 2017.

During the financial year 2016/17 revenue was realised at DKK 2,367 million, corresponding to a fall of just under DKK 27 million compared to the previous financial year.

KNI overall - net revenue (t. DKK) 2016/17 2.500.000 2.450.000 2.400.000 2.350.000 2.300.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

2.468.000

2.393.400

2.452.800

2.393.900

2.367.372

The fall is solely attributable to the Energy Division, which has realised lower revenues in its activities, both inside and outside the service contract area.

Conversely, revenue in the Goods Division has been rising, which may be attributed to its activities in both the retail and wholesale areas.

22

Pre-tax profit for the Group as a whole has been realised at DKK 103.4 million for the financial year, as against DKK 101.2 million the previous year. The result is thus an improvement of DKK 2.2 million, corresponding to 2.2%.

KNI overall - pre-tax profit (t. DKK) 2016/17 120.000 100.000 80.000 60.000 40.000 20.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

39.600

62.300

86.100

101.200

103.400

The profit and loss account after tax amounted in all to a profit of DKK 70.6 million, compared with a profit of DKK 68.5 million in the financial year 2015/16.

The improved profitability compared to the previous financial year has been achieved on the basis of the following four factors:   

A continuing strong focus on optimising process control Lower operational depreciation Lower financial costs

A strong focus continued to be maintained on cost control during the financial year. Within the cost group of other external costs, this has resulted in a realised cost level that is largely on the same level as last year, taking into account the fact that around DKK 2.7 million more was spent on training courses than in the previous financial year.

In addition, some costs have been incurred in relation to new activities launched, which have thus not been completed earlier. The activities in question encompass, inter alia, strategy costs.

Within personnel costs, there has been an increase of approximately 5%. This is partly due to an increase in retail sales, general salary adjustments and various other personnel-related one-off expenses.

Overall, the total level of costs has risen from DKK 408.1 million in the 2015/16 annual report to DKK 423.0 million in the current financial year.

23

KNI overall - costs (t. DKK) 2016/17 300.000 250.000 200.000 150.000 100.000 50.000 -

2012/13

2013/14

2014/15

2015/16

2016/17

Eksterne

221.538

188.335

163.495

168.274

171.386

Personale

238.149

246.059

237.850

239.776

251.588

Profits from affiliated companies were significantly lower in the financial year than in the financial year 2015/16. The 2016/17 result was thus a loss of DKK 0.2 million, as against a profit of DKK 1.9 million the previous financial year.

This significant fall, corresponding to DKK 2.1 million, is solely attributable to the performance of the subsidiary Neqi A/S. Reference is made to the Company’s annual report for 2016/17, which describes the specific reason for the performance of the Company.

The Company’s net financial costs have fallen from DKK 40.9 million in 2015/16 to DKK 38.8 million in 2016/17, corresponding to a drop of DKK 2.1 million.

KNI overall - net financial costs (t. DKK) 2016/17 60.000 50.000 40.000 30.000 20.000 10.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

3.570

19.696

52.167

40.939

38.842

This fall is solely due to a marginally smaller average drawing on the Company’s credits, compared to the previous financial year.

At the end of the current financial year, KNI had a registered outflow of DKK 655.7 million in credit facilities, as against DKK 647.6 million the previous year – an increase of DKK 8.1 million in the utilisation of the Company's credit facilities. Correspondingly, the Company’s mortgage debt fell from DKK 70.1 million in 2015/16 to DKK 53.0 million in 2016/17 – a decrease of DKK 17.1

24

million. Overall, the sum of credit utilisation and mortgage debt has fallen by DKK 9.1 million in the financial year 2016/17.

The drop in liquid funds of DKK 8.1 million during the financial year may thus be regarded as an almost neutral impact compared with the previous financial year.

KNI overall - change in liquid funds (t. DKK) 2016/17 200.000 100.000 -100.000 -200.000 -300.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

-219.537

-52.963

99.718

6.819

-8.135

Cash flows from the Group’s primary operating activities rose overall by DKK 37.0 million, and thus amounted to DKK 191.1 million at the close of the financial year 2016/17.

Investment activity rose by DKK 36.7 million compared to the previous financial year, amounting to DKK 98.9 million overall in 2016/17.

The liquidity impact of the changes in working capital was negative at DKK 11.5 million, as against a negative impact of DKK 57.3 million in 2015/16. The negative value of DKK 12 million for the year relates to changes in inventories in the Goods Division, the Energy Division and subsidiaries, which have risen by DKK 47 million. The level of inventories in 2016/17 is expected to decline by approximately the same amount in the 2017/18 financial year.

KNI has a business strategy to maintain a continuous, close, open and constructive dialogue in every respect with the Company’s bankers. The Company continues to have good financing potential for 2017/18 and the years ahead. The fulfilment of this potential for multi-year financing on attractive terms requires a stable framework for the Company’s operations.

This stability has been safeguarded through the four-year rolling service contracts. This has led to the opening of negotiations with the Company’s bankers following the conclusion of the financial year regarding the provision of long-term financing to replace the one-year financing to which the Company has had access in the 2016/17 financial year.

In all, the Company’s credit facilities amount to DKK 1,000 million as of the balance sheet date, secured via a joint bank agreement between the Group’s financial partners.

25

The trend in the Company’s current outflow on its credit facilities, measured at the balance sheet date, is shown in the graph below. The graph shows the trend over the past ten financial years.

Mio. DKK

Drawings on credit 1.200,0 1.000,0 800,0 600,0 400,0 200,0 0,0

Træk på kreditter Kreditmaks

Financial year

During the financial year, the Company has been operating in a market that has seen very large fluctuations in the currency and commodity markets.

The Company co-operates closely with its financial partners to hedge the risks to which the Company may be exposed as a result of the market conditions.

Organisational structure

Management During the entire financial year 2016/17, KNI A/S has been led by managing director Peter Grønvold Samuelsen.

26

The senior management at KNI has otherwise consisted of: Finances & IT: CFO Jan H. Lynge-Pedersen Goods Division: Chain Director Finn Fabricius, Pilersuisoq Energy Division: Energy Division Manager Tage Lindegaard, Polaroil

Employees At KNI, we regard our staff as our most important resource. Only through their efforts can we create the quality and efficiency that we seek. Accordingly, we constantly strive to maintain a workforce that can continue to place us among the best. We do this partly through the development and training of our existing employees, but naturally also through new appointments.

Our colleagues and employees are persevering and wish to be treated with dignity and respect. They familiarise themselves with the objectives and values of KNI and work towards a common solution that will best serve the whole.

KNI is represented in 71 different localities in Greenland, and at the end of the financial year 2016/17 the Company had around 934 employees, corresponding to 760 full-time positions.

As of 31 March Full-time employees

2013

2014

2015

2016

2017

800

779

742

747

760

The size of the workforce has not altered significantly since the end of the financial year 2014/15.

Conditions of employment will change in all parts of the Group in accordance with the strategy project “Killingusaaq�, and will not only be focused on the Goods Division. The goal is to optimise customer focus, increase competitiveness and secure earnings on the basis of employee skills, new work behaviour and technology.

Over the past five financial years, KNI has enjoyed very stable staff levels in the number of apprentices and trainees recruited for our shops and service centre. At the end of the financial year 2016/17 the total number of trainees was 50, which is on a par with the previous year.

27

As of 31 March No. of trainees

2013

2014

2015

2016

2017

62

53

53

56

50

Career planning from trainee to various levels and development possibilities in the Group, as well as the requirements towards the individual and the individual’s possibilities, must be made visible and accessible. There are requirements towards employee profile, attitude to work and skills enhancement for all employees of KNI. The requirement for skills enhancement applies to all employees – including, for example, trainees, new employees, village shopkeepers, shop managers and division managers.

KNI is characterised by a very high level of local presence and a good gender balance, as 47% of our employees are women.

KNI is an attractive workplace where skills enhancement for employees enjoys a very high priority.

We expect a lot, but at the same time we focus on the development and well-being of our staff.

Skilled, committed and proud employees are a prerequisite for KNI to perform its tasks well and professionally. The focus is therefore on the internal training of employees, so that their practical skills are supported by both internal and external courses and training.

We offer all of our employees both personal and professional development opportunities. We ensure that the individual staff member undergoes a carefully planned development process, focused on securing both the personal and professional ambitions of the employees. This development process applies to our shops, oil terminals, slaughterhouse and service centre.

At KNI, training and supplementary training is regarded as an investment, though not one that leads to activation in the financial year. As previously mentioned under “General remarks”, KNI has continued to work with the skills enhancement programme Taqqissuut in 2016/17.

The project aims to develop several types of skills, as it is the combination of these that creates the ideal employee. The relevant skills are divided into the following categories:   

Professional skills Personal skills Social skills

Taqqissuut will thus be the name used to refer to KNI’s skill enhancement project in the coming years, and will be a major priority in the current strategy project, Killingusaaq. Taqqissuut has connotations of enlightenment, education and increased competency.

In the financial year 2016/17 KNI devoted DKK 9.1 million to training, as against DKK 6.4 million the previous year. This increase, corresponding to DKK 2.7 million, reflects the increased priority given to skills enhancement which is part of the foundation of the current strategy.

28

KNI overall - training course spending (t. DKK) 2016/17 10.000 8.000 6.000 4.000 2.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

4.933

6.800

8.100

6.354

9.051

KNI seeks to ensure that its employees and partners have a safe working day, and are in possession of the right equipment, the right training and the knowledge necessary for them to perform their work without risk of injuries or accidents. During the financial year, much more targeted work has been performed with the working environment and workplace safety.

KNI wishes to promote awareness and knowledge of diet and healthy lifestyles among its customers, employees and partners. The goal is a healthier lifestyle with reduced illness and improved wellbeing.

At KNI, we continuously strive to create a good working environment in which our employees will thrive and enjoy their work.

Social responsibility With our activities throughout Greenland, we play a central role in society, and consequently, we naturally share a joint responsibility for the development of the country. KNI regards social responsibility as an integrated part of its activities. KNI has the goal of making the greatest possible contribution to the community, including being able to attract and develop committed employees.

KNI works actively with CSR, in which we have a particular focus on providing support for social, cultural and sporting purposes. In a country with limited resources and a challenging infrastructure, it is natural for us to contribute towards the promotion of activities that are important to society, also on a local level.

The KNI spirit is characterised by a sense of social responsibility and dedication to the fulfilment of its obligation to supply vital service tasks in sparsely-populated localities where there is not otherwise a commercial basis for operating such trading activities throughout the year. Security of supply is essential in order to enable people to enjoy a good life in the country’s villages and small towns. KNI maintains a constant focus on this responsibility.

29

It is a myth that public sector (state-owned) enterprises are backward compared to private companies when it comes to service-mindedness, i.e. the mission to put the customer first and in general keep up with global development trends in this area. But it is a hard myth to crack – even when it has no basis whatever in reality.

At KNI, we are very attentive to developing a workplace culture that is based on openness, honesty, business acumen and common sense. Our workplace culture must show respect for Greenlandic culture and society.

KNI and its employees are an important part of the community, and, through their presence, share a joint responsibility for positive development. KNI shoulders its share of this joint social responsibility in co-operation with its stakeholders, including customers, staff, other companies, organisations and the public authorities.

KNI’s values are an integral part of the way we think and carry out our tasks. They are also included in the focus areas of the current strategy process. They are the guiding principles in the way we play our roles; in relation to our tasks in the community, global trends – of which we are also a part – and the norms that we are expected to live up to in modern customer relations.

It is important to KNI that dynamic development continually takes place in our understanding of our common values, so that these dynamics come to expression in ongoing discussions among employees and managers, throughout the organisation, of how values and principles, as well as profiles and skills, must always reflect the demands necessary to realise KNI’s strategic objectives.

KNI’s values reflect a common foundation and a view of humanity that expresses what we prioritise highest in our company and in each other.

At KNI we work, think and live by the following values: Customer orientation Responsibility Innovation Co-operation

30

Our history goes back a long way, but our vision points far into the future. This makes many demands on how we run our business – it must be done with ambition and zeal, but first and foremost, it must be done with direction. That is why we have developed our values, which form the foundation for our behaviour internally, coupled with our strategy, which defines our work efforts externally.

All outward trade starts from within. Through our values, we focus on establishing the optimal framework that will enable us all to create the best results for our clients. Our working environment must be characterised by trust, respect, room for innovation and responsiveness to the customer. It must create a workplace where we feel at home, and of which we are proud.

Every year, KNI A/S, Polaroil, Pisisa.gl and Pilersuisoq sponsor a wide range of social, cultural and sporting activities.

This is primarily done through long-term agreements with a number of organisations and institutions that share our values and our vision of being an active player in the development of society.

We currently sponsor:    

Arctic Circle Race Avannaata Qimussersua Nagdlunguak´48 Arctic Sports Qaarsut

As well as our standard sponsorships, we also support a number of individual events at local or national level.

In addition, KNI awards a prize to the new Bachelor graduate who achieves the highest mark at the University of Greenland each year, and KNI will shortly enter into a similar agreement with the Greenland Business School in Qaqortoq.

Each year, KNI provides financial support to employees whose children are attending continuation school or taking language-learning trips abroad.

Similarly, KNI is very active in the national collections for children and young people, and in Neriuffiit (Combat Cancer), most recently in connection with the Nakuusa collection, in which KNI and its partners collected a record amount of money for the Nakuusa project for children.

KNI also supports activities in our market area with participation in local events, including as sponsor.

KNI has drawn up a sponsorship policy that applies to the whole group.

31

Corporate Governance At the end of 2012, the Government of Greenland introduced a catalogue of recommendations on corporate governance, with which KNI, as a publicly-owned company, aims to comply.

In this context, a self-assessment report has been published on the Company’s website with the following link: www.kni.gl/da/kni/kni-i-dag/retningslinjer-god-selskabsledelse The catalogue consists of 54 specific recommendations, of which KNI now complies with 49. The Management and Board are continuing to work on the remaining recommendations.

The management of KNI consists of a board of directors and an executive board. The board of directors has nine members, three of whom are employee representatives elected for a period of four years, while the other six are elected by the general meeting and stand for election every year. The six board members elected by the general meeting are independent, according to the definition contained in the recommendation of the “Committee for Good Corporate Governance”.

The board members represent a wide spectrum of experience from Greenlandic, Danish and international business life, and of course Greenlandic society. The board of directors is chaired by Niels Thomsen, who is appointed for a period of one year at a time.

The board has established a committee: 

The remuneration committee

The management board consists of one managing director: CEO Peter Grønvold Samuelsen. For other positions of the members of the board of directors and executive board, see note 21. There is no age limit for members of the board of directors.

The remuneration of members of the board of directors is subject to the approval of the annual general meeting, and is specified in note 4. The fee consists entirely of a basic fee. The remuneration of the executive board is negotiated with the board of directors and consists of a fixed basic salary, a performance bonus and other non-monetary benefits, such as a company car, etc. The remuneration of the executive board is specified in note 4. There are no unusual severance agreements in the employment contract of the management.

A board evaluation is undertaken annually. Every second year, this takes place on the basis of an external evaluation process.

The board of directors held four ordinary meetings during the financial year. The board meetings were held either in Greenland or in Denmark.

The Company does not purchase goods or services from board members or their relatives.

32

Internal controls and business ethics The Company has established an “internal auditing” function, which is amongst other things intended to reduce losses due to criminal actions committed by employees, customers or others.

KNI is at risk as a result of its trading in commodities, including beer, wine and tobacco, and in sales for cash.

KNI undertakes regular internal checks to detect, prevent and reduce fraud. During the financial year, these checks uncovered a small number of cases of fraud by employees, who were subsequently prosecuted.

All employees of KNI have a duty to report any suspected irregularities to the management.

Internal auditors follow up on all reports and act on their own initiative to uncover possible fraud, including unannounced auditing visits and checks of cash holdings in the shops.

Risk management KNI buys oil and oil-based products. Such products are traded at world market prices, which are highly volatile. In order to guard against the risk of price fluctuations, and to ensure stable prices for consumers, KNI undertakes hedging of the risk of fluctuations in both oil prices and the currencies used. Prices are secured with a horizon of up to one year, but have previously had longer securing periods.

The Company’s debt financing is largely subject to variable interest rates. To hedge this risk, the Company has taken out hedging contracts that convert floating interest rates to fixed rates. At the conclusion of the financial year, the interest rate risk is fully hedged.

The Company’s cash resources are assessed to be of a sufficient size to ensure the Company can meet its obligations. Contingency is available in the form of unutilised drawing rights.

In order to reduce the risk of debt financing collapse, KNI makes use of a number of reputable and solid banks and credit institutions in Greenland and abroad. No one bank may provide more than 33% of KNI’s overall loan facilities.

KNI has taken out comprehensive insurance to cover the damages and incidents for which insurance coverage is available. The Company makes use of insurance brokers in the ongoing optimisation of its insurance programme.

The board of directors and executive board work continuously to identify and hedge business risks.

During the financial year, a risk profile has been established that identifies the main risk factors.

This profile is used to identify any risks which have a higher probability or more serious potential consequences than are acceptable, for which countermeasures are then instituted.

33

Developments during the financial year Trends in revenue and profits, etc.

Financial highlights in the Group’s revenue and profit compared to last year (DKK million):

Profit and loss account – group

2016/17

2015/16

2,367.4

2,393.9

Gross profit

454.3

451.1

Profit before financial items

142.2

142.1

Pre-tax profit

103.4

101.2

70.7

68.5

(DKK mill.)

Revenue

Result for the year

The result from ordinary activities for the Group in 2016/17 is a pre-tax profit of DKK 103.4 million. The result for the financial year is thus DKK 2.2 million better than the previous year.

This performance improvement is primarily due to the following factors:   

A continuing strong focus on optimising process control Lower operational depreciation Lower financial costs

Trend in pre-tax profit – group

2016/17

2015/16

Energy Division – Polaroil

65.5

64.1

Goods Division – Pilersuisoq

38.3

34.3

0.0

0.0

-2.6

0.3

Akia Sisimiut A/S

0.9

0.7

KNI Ejendomme A/S

0.8

1.3

Change in intra-group profits

0.5

0.5

103.4

101.2

(DKK mill.)

Staff – KNI Neqi A/S

Pre-tax profit

Pre-tax profit for Polaroil, the Company’s energy division, was DKK 65.5 million for the financial year, as against DKK 64.1 million the previous year.

This improved profit of just under DKK 2 million is primarily due to the following factor: 34



Lower financial costs to finance the division’s average inventory stocks

Operating costs and staff costs have remained marginally unchanged in relation to the previous financial year.

In the Company’s Goods Division, the result of activities was a profit of DKK 38.3 million for the financial year, as against a profit of DKK 34.3 million the previous year. This rise in earnings – corresponding to DKK 4.0 million – has been achieved on the basis of the following factors:  

Greater revenue and earnings in retail activities Lower operational depreciation

The level of costs in the Goods Division, in relation to other external costs, has been kept at a marginally similar level to 2015/16. Staff costs, on the other hand, have risen by approximately 5%, due to increased turnover in retail sales, general salary adjustments and various other personnelrelated one-off costs.

In the Company’s staff functions a zero result was recorded for the financial year, which is in line with expectations, as a positive or negative result will always be channelled into the Company’s business units.

Staff Functions have also seen the introduction of efficiency measures, which have resulted in lower costs than in the previous financial year. The use of external consultants has for example been scaled back, with more of the Company’s tasks now being solved by the Company’s own employees.

Consolidated pre-tax profit for the year is DKK 103.4 million, which is regarded as satisfactory.

The outlook for the 2017/18 financial year is for a pre-tax profit on the order of DKK 108 million.

Events following the conclusion of the financial year No events have occurred after the balance sheet date that would influence the evaluation of this annual report.

Notes on the parent company’s profit and loss account Goods Division For the Company’s Goods Division, the financial year 2016/17 was characterised by continued work with implementation and following-up on the previously-launched initiatives in connection with the strategy project “KNI towards 2016”, as well as the initiatives that are now being continued under the Killingusaaq strategy.

35

The tasks have inter alia included:     

Focus on revenue growth with associated improved earnings Focus on improved inventory management with associated lower costs for waste and rejects Focus on skills enhancement and better business acumen Development of the division’s organisational structure Negotiations on service agreements.

The division’s revenue was realised at DKK 1,334.9 million, approximately DKK 58 million higher than last year – a rise corresponding to 4.5%. The contribution margin on revenue was DKK 316.7 million, as against DKK 307.9 million the previous financial year.

Goods Division (DKK mill.)

2016/17

2015/16

Retail revenue, villages

453.1

431.8

Retail revenue, towns

415.5

394.8

Wholesale revenue and online sales

466.3

449.9

Revenue, total

1,334.9

1,276.5

Gross margin

23.7%

24.1%

The rise in the contribution margin is primarily due to the rising turnover. However, consumptionregulating items have also been slightly lower than in the previous financial year.

The realised contribution margin corresponds to a realised gross margin of 23.7%, compared to 24.1% the previous financial year.

The result for the year in the Goods Division was a profit of DKK 38.3 million, as against a loss of DKK 34.3 million the previous financial year.

Goods Division overall - pre-tax profit (t. DKK) 2016/17 50.000 40.000 30.000 20.000 10.000 -10.000 -20.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

-12.737

2.677

22.173

34.339

38.271

36

In the financial year 2015/16, a provision for obsolescence on inventories was made amounting to DKK 5.0 million. This provision level was increased in 2016/17 to DKK 8.5 million. The product groups responsible for this increase have been identified, and in the coming financial year, efforts will be made to bring the provision back to a level corresponding to approximately DKK 5.0 million.

The pro forma cash flow for the year in the Goods Division may be seen in the following table.

Goods Division (DKK mill.)

Cash flows from operations Cash flows from investment activities Cash flows from financing Corrections: Deferred taxes Alterations in liquid funds

2016/17

2015/16

54.3

56.8

-38.4

-20.9

-

-

-

-

15.9

35.9

It is important to note that the cash flow statement is based on a number of assumptions and preconditions, the most important of which are:   

Working capital (receivables, payables, inventory levels, etc.) remains unaltered over time The Energy Division is burdened by dividend payments Corporate tax falls due for payment immediately.

The table shows that the change in cash and cash equivalents has fallen significantly compared to the previous financial year – corresponding to DKK 20.0 million. This is primarily due to the rise in investment activities in the Goods Division.

KNI has entered into a service contract with the Government of Greenland to operate shops in villages, outlying districts and smaller towns. Payment for this service contract during the financial year amounted to DKK 36 million, which is on a par with the previous financial year.

Total staff costs for the financial year were DKK 164.0 million, as against DKK 156.3 million the previous year. This is due to increased revenue and thereby increased retail activity, ordinary salary adjustments and various other personnel-related one-off costs.

During the financial year, structured and focused work was continued to realise the optimisation potential offered by the implementation of the strategy project. One of the areas that has once again been given considerable attention this year is category management. The initiative has created new processes and better organisation of business procedures between purchasing and sales, as well as positive added value through the decline in realised rejections and shrinkage.

37

Continuing work to optimise category management will be crucial in future in order to ensure a good and stable earnings base in the Goods Division.

During the financial year, work was also continued in the Goods Division to identify the resources required for the division to plan and remedy the current backlog in renovation work in the division’s properties and warehouses.

The Goods Division’s building stock amounts to more than 400 buildings, many of which are rundown and outdated in relation to retail and warehouse operations. There is a considerable renovation backlog for the buildings, which has now been calculated at around DKK 300 million.

DKK 35-40 million is currently allocated each year for investments in the Goods Division. To reduce the renovation backlog over, for example, a 15-year period, another DKK 20 million will need be allocated each year for investments.

This backlog could be reduced by deactivating buildings that are not in use. During the financial year, sales of property were again undertaken through open tender, and this process will also continue in the coming financial year. Those buildings that are not or cannot be sold will be deactivated by other means, so that they do not burden KNI with ongoing operating costs.

The building stock can be further reduced by working to achieve a more appropriate structure. In some villages, storage facilities are located in several buildings which could be advantageously combined into a single warehouse with lower maintenance and operating costs.

Normally, the above expenses to remedy the renovation backlog could be financed by taking out loans from banks and/or mortgage-credit institutions. However, as KNI primarily operates outside those towns where there is access to mortgage financing, the Company must itself provide the funding through earnings in the Goods Division. This places a natural limit on the rate at which new construction can take place.

It is remarked that, all else being equal, reduction of the renovation backlog will ultimately increase costs in the Goods Division going forward, as depreciation will increase more than the operating savings that can be achieved through, for example, the introduction of energy-efficient solutions.

This will put further pressure on the earnings of the Goods Division in the long term.

Energy Division Revenue in the Energy Division for the financial year 2016/17 was realised at DKK 1,015.8 million, compared to DKK 1,095.6 million the previous financial year – a fall of DKK 79.8 million, corresponding to 7.3%. The contribution margin on revenue was DKK 177.1 million, as against DKK 178.6 million for the same period last year.

38

Energy Division (DKK mill.)

2016/17

Sales of liquid fuels – mill. litres Revenue, sales of liquid fuels – DKK mill.

209.0

208.6

1,086.4

1,145.0

23.5

24.3

212.0

216.5

17.4%

16.3%

Revenue, other energy products – DKK mill.

Import of liquid fuels – mill. litres Gross margin

2015/16

The overall contribution margin has thus generally been maintained at roughly the same level as in the past financial year, but compared to 2015/16 the margin is now composed of lower earnings within the service contract, and improved earnings outside the service contract.

The realised contribution margin corresponds to a gross margin of 17.4%, compared to 16.3% the previous year.

The result for the year in the Energy Division was a profit of DKK 65.5 million, as against DKK 64.1 million the previous financial year.

Energy Division overall - pre-tax profit (t. DKK) 2016/17 80.000 60.000 40.000 20.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

73.128

54.144

61.456

64.096

65.477

The pro forma cash flow for the year in the Energy Division may be seen in the following table.

Energy Division (DKK mill.)

Cash flows from operations Cash flows from investment activities Cash flows from financing Corrections: Deferred taxes Alterations in liquid funds

2016/17

2015/16

71.1

72.3

-55.2

-40.2

-20.0

-30.0

-

-

-4.1

2.1

39

It is important to note that the cash flow statement is based on a number of assumptions and preconditions, the most important of which are:   

Working capital (receivables, payables, inventory levels, etc.) remains unaltered over time The Energy Division is burdened by dividend payments Corporate tax falls due for payment immediately.

The table shows a change in liquid funds of DKK 6.2 million less than the previous financial year, mainly due to a rise in investment activity, corresponding to a decline in dividend payments to the owners. It can also be seen that the liquidity created through the profit for the year has been specifically applied to investments and dividend payments, which supports the conclusion that there are no cross-subsidies between the Energy Division and the Goods Division.

A service contract has been entered into with the Government of Greenland. The division does not receive payment for the service contract, and the earnings of the division from oil under the service contract are subject to a maximum limit.

On the basis of the agreed level of income, the division must allocate the necessary resources for the renovation and maintenance tasks that are necessary to maintain the Energy Division’s production apparatus in a responsible condition with regard to production and safety. A comprehensive renovation plan has been drawn up which will involve investments of approximately DKK 190 million over the next 8 years.

As a consequence of the very large investment requirements in the division, the annual estimated current cash flow – during the period of the service contract – will be largely neutral when tax and dividend payments have been calculated.

Overall consumer prices were adjusted once during the period: 

As of 1 November 2016, a price reduction of DKK 0.18 per litre was introduced.

Continuous efforts are made to undertake the necessary product and currency hedges to keep the prices of oil products stable in Greenland.

The Energy Division possesses a total of 432 tanks for liquid fuels: 151 tanks in the towns, and 281 in the villages. The capacity of the village tanks is 64 million litres of fuel, and in the towns 219 million litres. The total tank capacity is 283 million litres.

The division’s challenges remain:   

To increase and maintain sales revenue Correct positioning in relation to oil and mineral exploration activities Increasing environmental requirements, with greater demands towards employee skills and the physical installations 40

Notes on the parent company’s balance sheet Intangible fixed assets As of the balance sheet date, intangible assets amounted to DKK 34.4 million, as against DKK 42.5 million in the financial year 2015/16. Investments worth DKK 1.4 million have been undertaken in the financial year, compared to the previous year’s DKK 7.5 million.

Property, plant and equipment As of the balance sheet date, property, plant and equipment amounted to DKK 783.2 million, as against DKK 734.2 million in the financial year 2015/16. Investments worth DKK 99.0 million have been undertaken in the financial year, compared to the previous year’s DKK 61.2 million.

Financial fixed assets Investments in affiliated undertakings consist of:   

DKK 3.8 million in Neqi A/S DKK 5.2 million in Akia Sisimiut A/S DKK 2.7 million in KNI Ejendomme A/S

Financial fixed assets fell during the financial year from DKK 12.5 million to DKK 12.3 million.

The fall is solely attributable to the change in profit share in the subsidiaries.

Inventories At year-end, inventories amounted to DKK 995.4 million, as against DKK 956.9 million last year; a rise of DKK 38.5 million or approximately 4%.

The rise is primarily attributable to inventories in the Goods Division, which increased by DKK 31.9 million. This rise is primarily for strategic reasons, due to sales within new activities – for example goods within the hunting and fishing equipment category. It is expected that in the coming financial year, inventories will be reduced by an amount at least equal to the stated increase in 2016/17.

In the Energy Division, inventories rose by approximately DKK 7.0 million compared to the previous financial year.

The composition of the inventories may be seen in the following table:

41

Inventories (DKK mill.)

2015/16

2015/16

Goods Division

562.6

530.7

Energy Division

430.9

423.9

Consumables

1.9

Total

995.4

2.3 956.9

Equity The Company’s equity rose from DKK 786.9 million as of 31 March 2016 to DKK 1,061.2 million as of 31 March 2017 – an overall rise corresponding to DKK 274.3 million, or 34.9%.

KNi overall - equity (t. DKK) 2016/17 1.200.000 1.000.000 800.000 600.000 400.000 200.000 Realiseret

2012/13

2013/14

2014/15

2015/16

2016/17

937.200

904.900

891.300

786.900

1.061.155

The change in equity is composed of the value of retained earnings for the period and changes in the market value of financial instruments, after deduction of deferred tax.

The market value of the financial instruments rose by DKK 318.6 million in the period from 31 March 2016 to 31 March 2017. The value at the end of the financial year 2016/17 was negative by DKK 89.2 million, compared to a negative value of DKK 407.8 million at the end of the financial year 2015/16.

The financial instruments are established by entering into a number of product and currency hedges on an ongoing basis, with the aim of ensuring stable consumer prices for liquid fuels. The market value of these hedges is calculated on the balance sheet date and is recognised directly in equity.

The Company also enters into interest rate hedging contracts to guard against fluctuations in market interest rates.

42

The market value of these hedges is calculated on the balance sheet date and is also directly recognised in equity, to the extent that the hedges are assessed to be effective in relation to the Company’s exposure.

The negative market value of the financial instruments also has a slight negative impact on the Company’s solvency ratio. In the statement of key figures on page 9, it may be seen that the solvency ratio – including the value of the negative market values – comprises 48.0%.

If the same calculation is made, but excluding the negative market values of all positions, the solvency ratio is 52.2%.

KNi overall - solvency (%) 2016/17 60,0 50,0 40,0 30,0 20,0 10,0 -

2012/13

2013/14

2014/15

2015/16

2016/17

47,4

44,3

39,2

35,0

48,0

Realiseret

It is important to stress in this connection that the negative market values of product and currency hedges will not have a negative impact on the Company’s financial development, as these values will be implicitly recognised in consumer prices.

Outlook for KNI A/S The coming financial year, covering the period 1 April 2017 - 31 March 2018, will be the year in which the new strategy process, called Killingusaaq, will be launched throughout the Company's organisation.

The outlook for the financial year 2017/18 reflects the management’s continued belief that the KNI group can deliver results that meet the ambitions described in the Company’s strategy material, i.e.:   

Continued growth in pre-tax profits Continued growth in return on equity Continued positive development in solvency ratio.

The developments in return on equity and solvency ratio will be based on their values, excluding developments in the market values of financial instruments.

43

It will be exciting and challenging to launch and follow another new strategy period, in which KNI, with all its talented people, will once again demonstrate the ability to develop the Company towards new goals and results.

KNI A/S does not anticipate any major changes in its basic business activities during the financial year 2017/18, for which reason the Company, on the basis of its strategy, expects pre-tax profits in the next financial period on the order of DKK 105-110 million.

Goods Division The primary focus in the Goods Division remains to increase earnings in both the wholesale and retail sectors. These improved earnings must ensure that the demands of the owners can be met, but must also create some leeway, so that the Goods Division can remedy the renovation backlog in the division’s capital assets.

During the financial year, the division will maintain its focus on growth and on optimising its organisation and business processes, as these are essential in relation to securing stability in daily operations, and will thereby contribute to maintaining the crucial focus on customers and securing earnings.

In KNI Engros, the focus in the coming year will remain on creating even more customer relations and thereby optimising sales and earnings to the benefit of the division’s overall result.

In retail activities, the continued focus will also be on strengthening earnings, through the following overall tracks:     

Generating revenue growth Reducing the number of suppliers Strengthening earnings on the individual products Reducing inventories and the associated liquidity binding Sharpening the focus of shopkeepers on sales and cost control in the shops.

On the basis of the above, intensive work must at the same time be done to improve the internal lines, including education, training, securing better purchasing terms from suppliers, and cost management, which is an implicit part of the strategy project.

Energy Division The Energy Division’s service contract is formulated to take account of the fact that the division has a renovation backlog that must be addressed in the period leading up to 2025. This goal will be met by defining a surplus target in the service contract, and by determining the share of the profits to be used to alleviate the renovation backlog.

There is no expectation of significant changes in earnings for the Energy Division, in either an upward or a downward direction.

44

Growth in Polaroil depends very much on the progress of activities outside the service contract – primarily in the area of oil and mineral exploration. No increase in activity is currently expected in this area in the coming years. In that part of the business that is operated within the service contract, and in other trading under market conditions, a relatively stable development is expected.

Neqi The company faces significant challenges in future in relation to its ability to create efficient operations and correspondingly satisfactory earnings. In parallel, the Company must also be able to generate a cash flow to secure a basis to reduce its interest-bearing debt.

The company cannot currently generate revenue that will enable profitable operations, which means that it is still dependent on receiving service contract payments from the Government of Greenland.

At present, an agreement on service contract payment has been entered into covering the period from 2016 to 2019. The service contract payment amounts to DKK 2.0 million, which is around DKK 4.0 million less than the Company received in 2015. The company is currently in dialogue with the Government of Greenland concerning the need for the current service contract to be reevaluated again.

It is the Company’s assessment that the current payment of the above-mentioned DKK 2.0 million annually is insufficient for the Company, within the current business basis, to generate the necessary profits and cash flows to reduce the Company’s bank debt.

45

Accounting principles applied The annual report for the KNI group is presented in conformity with the provisions of the Financial Statements Act for class D companies.

The annual report is presented in accordance with the same accounting policies as last year.

General remarks on inclusion and valuation Assets are recognised in the balance sheet when, as the result of a past event, it is likely that future financial advantages will accrue to the group, and when the value of the assets can be reliably measured.

Liabilities have been recognised in the balance sheet when the Group, as the result of a past event, has acquired a legal or constructive obligation, and it is probable that future financial benefits will be deducted from the Group, and the value of the liability can be reliably measured.

On initial recognition, assets and liabilities are valued at cost price. Subsequently, assets and liabilities are valued as described below for each item of the accounts.

In recognition and measurement, account is taken of predictable losses and risks that arise before the presentation of the report, and which confirm or deny conditions that existed at the balance sheet date.

In the profit and loss account, revenues are recognised as they are earned, while costs are recognised at the amounts relating to the financial year.

Consolidated accounts The consolidated group accounts encompass KNI A/S (the parent company) and those companies (affiliated undertakings) that are controlled by the parent company.

Such control is achieved when the parent company directly or indirectly possesses more than 50% of the voting rights, or in any other manner can exercise or actually exercises a controlling influence. Companies in which the Group directly or indirectly possesses between 20% and 50% of the voting rights and exercises significant influence, but not control, are regarded as associated companies.

Principles of consolidation The consolidated financial statements are prepared on the basis of the financial statements of KNI A/S and its subsidiaries. The consolidated statements are prepared by combining entries of a uniform nature. On consolidation, intra-group income and expenses, internal accounts, and gains and losses on transactions between the consolidated companies are eliminated. The accounts used for consolidation are prepared in accordance with the Group’s accounting policies.

46

Capital interests in subsidiaries are offset against the proportionate share of the subsidiaries’ net assets at the acquisition date, calculated at market value.

Minority interests The entries of the subsidiaries are recognised at 100% in the consolidated accounts.

The share of the subsidiaries’ annual profit/loss and equity attributable to minority interests is recognised under separate items in the profit and loss account and balance sheet.

Conversion of foreign currencies Transactions conducted in foreign currencies have been calculated on first recognition according to the rate on the date of the transaction. Receivables, liabilities other than provisions and other monetary entries in foreign currency which are not settled on the balance sheet date are converted at the exchange rate of the balance sheet date. Any exchange rate differences occurring between the exchange rate prevailing on the transaction day and the rate prevailing on the balance sheet date are recognised in the profit and loss accounts as financial items. Tangible and intangible fixed assets, inventories and other non-monetary assets acquired in foreign currencies are converted at historic rates.

Derivatives Derivative financial instruments are initially recognised in the balance sheet at cost price, and subsequently at market value. Derivatives are recognised under Other receivables and Other debt, respectively.

Alterations in the market value of derivatives that are designated and qualify as hedges of future transactions are recognised directly in equity. When the hedged transactions are realised, the cumulative alterations are recognised as part of the cost price of the relevant entries.

Alterations in the market value of derivative financial instruments that do not qualify as hedging instruments are recognised on an ongoing basis in the profit and loss account as financial items.

Profit and loss account Net revenue Net revenue comprises net cash and invoiced sales for the year, less returns and discounts directly related to sales.

Payment from the national treasury for social tasks This includes payments from the Government of Greenland for community tasks, in the amounts approved in the annual state budget.

47

Other operating income Other operating income encompasses income and costs of a secondary character in relation to the Group’s main activities.

Other external costs Other external costs encompass costs relating to distribution, sales, advertising, administration, premises, bad debts, etc.

Staff costs Staff costs encompass wages and salaries as well as social costs, pensions, etc., for the Group’s personnel.

Depreciation and write-downs Depreciation and write-downs of property, plant and equipment consists of depreciation and writedowns during the financial year, calculated on the basis of the residual values and useful lives of the individual assets and implemented impairment tests, and gains and losses on the sale of property, plant and equipment.

Financial items Financial items include interest income and expenses, realised and unrealised gains and losses on securities, payables and transactions denominated in foreign currencies.

Tax The tax for the year, which consists of the current tax for the year and any changes in the deferred tax, is recognised in the profit and loss account in the proportion attributable to the net profit for the year, and directly in equity capital in the proportion attributable to entries recognised directly in equity.

In Greenland, dividends are tax-deductible. The taxable value of the allocated dividend in the annual report is therefore recognised directly in equity, in accordance with the above.

Current tax liabilities and tax receivables are recognised in the balance sheet as the calculated tax on the year’s taxable income.

Deferred tax is recognised on all temporary differences between accounting and tax values of assets and liabilities, where the tax value of the assets is calculated on the basis of the planned use of the individual asset.

Deferred tax assets, including the tax value of tax losses allowed for carry-forward, are recognised at the value at which the asset is expected to be realised, either by offsetting in deferred tax liabilities or as net tax assets.

48

Balance sheet Intangible fixed assets Software is valued at cost price after deduction of accumulated depreciation and write-downs.

The cost price comprises the price of acquisition and expenses directly attributable to the acquisition, plus the preparation costs for the asset until such time as the asset is ready to be placed in service.

The depreciation is based on the cost price, amortised linearly over an estimated useful life of from three to ten years.

Intangible assets are written down to the recoverable amount, if this is lower than the book value.

Property, plant and equipment Land and buildings, production equipment and machinery, as well as other plant, operating fittings and fixtures, are measured at cost price less accumulated depreciation and impairment. Land is not depreciated.

The cost price comprises the price of acquisition and expenses directly attributable to the acquisition, plus the preparation costs for the asset until such time as the asset is ready to be placed in service.

The basis of depreciation is the cost price less the estimated residual value at the end of its useful life. Linear depreciation is conducted, based on the following assessment of the estimated useful lives of the assets: Buildings Plant and machinery Other infrastructure, operating plant and fixtures

20-50 years 10-40 years 3-10 years

Tangible fixed assets are written down to the recoverable amount, if this is lower than the book value.

Gains and losses on disposal of property, plant and equipment are calculated as the difference between the sales price minus sales costs and the book value at the time of sale.

Gains or losses are recognised in the profit and loss account as an adjustment of depreciation and impairment, or under other operating income if the sales price exceeds the original cost.

Capital interests in subsidiaries and associated companies Capital interests in subsidiaries and associates are recognised and valued under the equity method, which implies that capital interests are valued at the proportionate share of the companies’ book 49

equity value, plus or minus unamortised positive or negative group goodwill, plus or minus unrealised intra-group profits and losses.

In the profit and loss account, the parent company’s share of the companies’ results is recognised after the elimination of unrealised intra-group profits and losses, plus or minus the amortisation of positive or negative Group goodwill.

Subsidiaries and associates with negative book equity value are valued at zero, and any receivables from these enterprises are written down by the parent company’s share of the negative equity, to the extent that they are assessed to be irrecoverable. If the negative equity exceeds the amount owed, the remaining amount is recognised under provisions to the extent that the parent has a legal or constructive obligation to cover the liabilities of the company in question.

The net revaluation of capital interests in subsidiaries and associates is transferred to the revaluation reserve for capital interests, to the extent that the book value exceeds the cost price.

Inventories Inventories are valued at cost price using the FIFO method, or at the net realisable value, if this is lower. The cost price of commodities, raw materials and consumables consists of the purchase price plus transportation costs. The cost price of finished goods and work in progress consists of the cost of raw materials, consumables, direct wages and indirect production costs.

Indirect production costs consist of indirect materials and wages, maintenance and depreciation costs for production machinery, factory buildings and equipment, plus costs for factory management and administration. Financial costs are not included in the cost price.

The net realisable value of inventories is calculated as the anticipated sales price, less completion costs and sales expenses.

Receivables Receivables are assessed at the amortised cost price, which usually corresponds to the nominal value, less write-downs to counter expected losses.

Accruals Accruals recognised under assets include costs incurred for subsequent financial years. Accruals are valued at cost price.

Cash holdings Cash holdings comprise cash and bank balances.

Equity Dividends are recognised as a liability at the time of adoption by the general meeting. The proposed dividend for the financial year is shown as a separate item under equity.

50

Mortgage debt Mortgage debt is valued at the time of borrowing at cost price, corresponding to the proceeds received after deduction of transaction costs.

Mortgage debt is subsequently valued at amortised cost price. This means that the difference between the proceeds and the nominal amount to be repaid is recognised in the profit and loss account over the term of the loan as a financial expense, using the effective interest method.

Other financial liabilities Other financial liabilities are valued at amortised cost price, which usually corresponds to the nominal value.

Prepayments received from customers Prepayments received from customers comprise amounts received from customers prior to the delivery time.

Accruals Accruals recognised under liabilities include receivables recognised in subsequent financial years.

Accruals are valued at cost price.

Cash flow statement The cash flow statement is presented on the basis of the indirect method, and indicates cash flows associated with operations, investments and financing, as well as liquid funds at the beginning and end of the year.

Cash flows from operations are calculated as operating profit for the year adjusted for non-cash operating items, changes in working capital and paid corporate tax.

Cash flows relating to investment activities encompass outgoing payments in connection with the purchase and sale of companies, activities and financial assets, as well as the purchase, development, improvement and sale, etc., of intangible and tangible assets, including acquisition of assets under finance leases.

Cash flows relating to financial activities encompass alterations in the size or composition of the Group’s share capital and associated costs, as well as the raising of loans, entering into financial leasing agreements, instalments on interest-bearing debt, acquisition of own shares and the payment of dividends.

Cash and cash equivalents include cash at bank and in hand and short-term securities with insignificant price risk, less short-term bank debt.

Segment information Information is provided on business segments. The segment information accords with the Group’s accounting policies, risks and internal financial management. Fixed assets in the segments comprise 51

assets used directly in the operation of each segment, including intangible assets, property, plant and equipment, and capital interests in associates. Segment liabilities include debt liabilities and other provisions that are derived from the operation of each segment, including trade payables and other debt. Deferred tax is not included in segment liabilities.

Financial highlights and key figures The financial highlights and key figures have been defined and calculated in conformity with the ‘Recommendations and Financial Ratios 2015’ of the Danish Society of Financial Analysts.

EBIT margin (%)

=

EBIT x 100 Net revenue

Return on invested capital (%)

=

EBITA x 100 Invested capital

Net revenue / Invested capital

=

Net revenue Invested capital

Financial gearing

=

Net interest-bearing debt Equity

Return on equity capital (%)

=

Result for the year x 100 Equity

Solvency ratio (%)

=

Equity x 100 Total assets

52

Income statement 1. april 2016 - 31. marts 2017 Parent Company Note

Net revenues Income from the Governments payment for service contract Other operating income Consumables Other external costs

1

2 3

Gross earnings

Group

2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

2.350.623

2.372.087

2.367.372

2.393.880

36.000 79.803 (1.856.784) (172.242)

36.000 80.724 (1.885.599) (169.861)

38.000 79.795 (1.859.468) (171.386)

41.000 80.684 (1.896.209) (168.274)

437.400

433.352

454.313

451.081 (239.776) (69.195) 142.111

Costs of employment Depreciation and write-down Earnings before financials

4 9,10

(242.327) (56.100) 138.973

(232.385) (65.048) 135.919

(251.588) (60.528) 142.197

Results of affiliates Result of associate company Financial income Financial expenses

5

(191) (40) 2.531 (37.756)

1.938 0 2.393 (39.877)

(40) 1.277 (40.079)

0 1.136 (42.075)

103.517

100.374

103.355

101.171

(32.919)

(31.919)

(32.651)

(32.634)

70.598

68.455

70.704

68.538

-

-

(106)

(83)

Earnings for the year

70.598

68.455

70.598

68.455

Proposed distribution of earnings Proposed dividends for the financial year Provision for reserve for net revaluation under the equity method Retained earnings Total

20.000 (191) 50.789 70.598

20.000 1.938 46.517 68.455

20.000 50.598 70.598

20.000 48.455 68.455

6 7

Pre-tax earnings for the year Tax on earnings for the year After-tax earnings for the year Minority interests 'share of associated companies' profit after tax

8

-

53

Balance Sheet 31. marts 2017 Parent Company

Group

Assets Note

Software Intangible fixed assets

2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

9

34.400 34.400

42.467 42.467

34.400 34.400

42.467 42.467

10

335.537 296.334 73.782 77.518 783.171

318.181 297.982 81.937 36.092 734.193

472.952 298.547 81.810 77.518 930.828

458.579 300.558 89.074 36.092 884.304

11

11.660 0 609 12.269

11.851 40 609 12.499

0 609 609

40 609 649

Total fixed assets

829.840

789.159

965.837

927.419

Consumables Raw materials and consumables Retail/wholesale goods Liquid fuels etc Inventories

1.899 0 562.634 430.905 995.437

2.243 0 530.744 423.886 956.874

1.899 13.654 569.395 430.905 1.015.852

2.243 7.436 535.489 423.886 969.056

Receivables from sales and services Receivables from affiliated companies Deferred tax asset Forward contracts USD Other accounts receivable Accruals Receivables

60.580 0 0 114.169 8.447 38.014 221.210

74.313 2.589 74.225 141.530 13.263 36.189 342.108

61.796 4.847 114.169 8.589 38.033 227.434

78.408 78.266 141.530 14.163 36.225 348.592

215

205

215

6.391

Total current assets

1.216.862

1.299.187

1.243.501

1.324.038

Total assets

2.046.702

2.088.346

2.209.338

2.251.457

Property Plant and machinery Other fixtures and fittings Tangible fixed assets under construction Tangible fixed assets Holdings in affiliates Holdings in associated company Deposits Financial fixed assets

Cash and cash equivalents

14

54

Balance Sheet 31. marts 2017 Parent Company

Group

Liabilities Note

Share capital Reserve for net revaluation under the equity method Special reserve Retained profit Proposed dividends for the financial year Total equity

12

13

Total minority interests Provision for deferred tax Total provisions Mortgages Other credit institutions Long-term debt Short-term part of long-term debt Credit institutions Suppliers of goods and services Payables to affiliated companies Prepayments from customers Company tax Other debt Interest hedging Product hedging Accruals Short term debt

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

310.000 7.585 283.163 440.407 20.000 1.061.155 -

14

15

16

Total current liabilities Total liabilities

Contingent / guarantees Fee to the General Assembly elected auditor Derivative financial instruments Related party transactions and ownership Business Management

2017

310.000 7.776 283.163 165.995 20.000 786.934 -

310.000

310.000 -

-

283.163 447.992 20.000 1.061.155

283.163 173.772 20.000 786.934

1.094

988

28.631 28.631

0 0

30.925 30.925

1.755 1.755

0 0 0

0 0 0

50.416 0 50.416

68.186 0 68.186

0 556.597 114.345 3.035 0 25.007 43.856 57.373 146.035 10.667 956.916

0 575.571 97.751 0 0 24.520 43.992 75.413 473.923 10.242 1.301.412

2.623 655.958 115.499 19 25.007 45.397 57.373 146.035 17.839 1.065.749

1.922 653.999 100.892 34 24.520 45.521 75.413 473.923 17.369 1.393.594

956.916

1.301.412

1.116.165

1.461.780

2.046.702

2.088.346

2.209.338

2.251.457

17 18 13 20 21

55

Equity 31 March 2015

Share capital

Reserve for net revaluation under the equity method

Retained profit

Special reserve

Proposed dividends for the financial year

Total

Equity statement for the parent company

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

310.000

5.838

262.253

283.163

30.000

891.254

0 0 0 0 0

1.938 0 0 0 0

46.517 0 0 6.360 (149.134)

0 0 0 0 0

0 20.000 (30.000) 0 0

48.455 20.000 (30.000) 6.360 (149.134)

310.000

7.776

165.995

283.163

20.000

786.934

0 0 0 0 0

(191) 0 0 0 0

50.789 0 0 6.360 217.263

0 0 0 0 0

0 20.000 (20.000) 0 0

50.598 20.000 (20.000) 6.360 217.263

310.000

7.585

440.407

283.163

20.000

1.061.155

After-tax earnings for the year Proposed dividends for the financial year Dividends paid Tax value of dividends Adjustments - derivatives Equity 31 March 2016 After-tax earnings for the year Proposed dividends for the financial year Dividends paid Tax value of dividends Adjustments - derivatives Equity 31 March 2017

Equity 31 March 2015 After-tax earnings for the year Proposed dividends for the financial year Dividends paid Tax value of dividends Adjustments - derivatives Equity 31 March 2016 After-tax earnings for the year Proposed dividends for the financial year Dividends paid Tax value of dividends Adjustments - derivatives Equity 31 March 2017

Share capital

Reserve for net revaluation under the equity method

Retained profit

Special reserve

Proposed dividends for the financial year

Total

Equity statement for the group

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

310.000

0

268.092

283.163

30.000

891.254

0 0 0 0 0

0 0 0 0 0

48.455 0 0 6.360 (149.134)

0 0 0 0 0

0 20.000 (30.000) 0 0

48.455 20.000 (30.000) 6.360 (149.134)

310.000

0

173.772

283.163

20.000

786.934

0 0 0 0 0

0 0 0 0 0

50.598 0 0 6.360 217.263

0 0 0 0 0

0 20.000 (20.000) 0 0

50.598 20.000 (20.000) 6.360 217.263

310.000

0

447.992

283.163

20.000

1.061.155

56

Cash flow statement for the group 1. april 2016 - 31. marts 2017

Note

Earnings before financials Depreciation and write-down Minority interests

2017

2016

(tkr.)

(tkr.)

142.197 60.528 (106)

142.111 69.195 (83)

(11.480) 191.139

(57.253) 153.970

1.277 (17.556) (22.523) (24.520) 127.817

1.136 (16.292) (25.783) (12.119) 100.912

(102.363) 3.440

(74.891) 12.698

0 40

(36) 0

Cash flows from investing activities

(98.883)

(62.229)

Dividends paid Instalments on long-term liabilities other than provisions Cash flows from financing activities

(20.000) (17.069) (37.069)

(30.000) (1.864) (31.864)

Increase/decrease in cash and cash equivalents

(8.135)

6.819

(647.608) (655.743)

(654.427) (647.608)

215 (655.958) (655.743)

6.391 (653.999) (647.608)

Working capital changes Cash flows from ordinary operating activities Interest income and similar income Interest expenses and similar income Interest hedging Company tax Cash flows from operating activities Acquision of property, plant and equipment Sale of property, plant and equipment Lending, fixed asset investments Result of associate company

Cash funds primo Cash funds ultimo

Cash funds ultimo Cash funds ultimo Credit institutions

19

57

Notes Parent Company

Group

2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

1 Net revenues Goods Liquid fuels etc Pisisa Neqi Rental income

1.332.967 1.015.762 1.893 0 0

1.273.988 1.095.590 2.509 0 0

1.332.967 1.015.762 1.893 16.345 404

1.273.988 1.095.590 2.509 21.388 405

2.350.623

2.372.087

2.367.372

2.393.880

25.753 27.976 17.194 5.040 300 3.540

25.354 28.952 19.122 4.288 0 3.008

25.753 28.357 17.194 5.040 (0) 3.451

25.354 29.006 19.122 4.288 0 2.914

79.803

80.724

79.795

80.684

12.108 9.051 14.819 10.495 6.921 20.905 5.412 56.928 20.756 14.605 241

10.406 6.354 9.955 10.918 6.588 26.543 5.698 58.358 20.231 14.147 662

12.143 9.061 14.822 10.663 7.231 21.465 5.418 60.534 21.145 8.782 123

10.499 6.354 9.955 11.014 6.735 27.597 5.709 60.895 20.865 8.105 546

172.242

169.861

171.386

168.274

214.562 14.596 13.170 242.327

207.368 14.426 10.591 232.385

223.417 15.032 13.139 251.588

214.321 14.864 10.590 239.776

KNI A/S only operates in a single geographic market

2 Other operating income Service contracts Rental income Fee income Rental of equipment Group contribution Miscellaneous

3 Other external costs Service travel Course - expenses Marketing costs, net Office expenses Insurance External services Acquisitions Operation and maintenance of equipment Repairs and maintenance costs Rent - expenses Miscellaneous

4 Costs of employment Wages and salaries Pensions Other costs of employment

Salaries and remuneration og Directors and Board Board and directors Executive board: Fixed salary including pension Variable salary

Avarage number of employees

1.401

1.401

2.990 251 3.241

2.663 210 2.873

731

719

760

747

The executive board does not hold any speciel or unusual condition with respect to notice period or pension scheme.

58

Notes Parent Company

Group

2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

5 Holdings in affiliated companies Akia Sisimiut A/S Neqi A/S KNI Ejendomme A/S Internal gains - timing differences Regulatory earlier years

499 (1.736) 551 495 0 (191)

391 180 867 500 0

0 0 0 0 0

0 0 0 0 0

1.938

0

0

6 Financial income Interest income - contract of sale Interest income - bank Product hedgings Net forex gains/losses Intra-Group interest

471 691 0 0 1.370

564 567 0 0 1.262

471 806 0 0 0

564 571 0 0 1

2.531

2.393

1.277

1.136

9.877 0 0 22.523 5.356

9.864 0 0 25.783 4.230

9.890 1.776 450 22.523 5.439

9.882 2.168 8 25.783 4.233

37.756

39.877

40.079

42.075

25.007 7.912

24.520 7.399

25.007 7.644

24.520 8.114

32.919

31.919

32.651

32.634

7 Financial expenses Interest charges - banks Interest charges - mortgages Other bank charges Interest hedging Other bank charges

8 Tax on earnings for the year Current tax year Adjustment of deferred tax

59

Notes 9 Intangible fixed assets

Software

Parent Company

(tkr.)

Cost 1. april 2016 Additions during the year Transferred from investment in progress Disposals during the year

123.249 0 1.350 0

Cost 31. March 2017

124.599

Depreciations and write-downs 1. april 2016 Depreciations and write-downs of the year Depreciations at write-downs divested assets

80.782 9.417 0

Depreciations and write-downs 31. March 2017

90.199

Book value 31. March 2017

34.400

Book value 1. april 2016

42.467

9 Inangible fixed assets (continue)

Software

Group

(tkr.)

Cost 1. april 2016 Additions during the year Transferred from investment in progress Disposals during the year

123.249 0 1.350 0

Cost 31. March 2017

124.599

Depreciations and write-downs 1. april 2016 Depreciations and write-downs of the year Depreciations at write-downs divested assets

80.782 9.417 0

Depreciations and write-downs 31. March 2017

90.199

Book value 31. March 2017

34.400

Book value 1. april 2016

42.467

60

Notes 10 Tangible fixed assets

Property

Plant and machinery

Other fixtures and fittings

Tangible fixed assets under construction

Total

Parent Company

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

Cost 1. april 2016 Additions during the year Transferred from investment in progress Disposals during the year

609.337 0 26.409 (4.155)

611.293 0 18.742 (1.045)

370.128 0 12.461 (4.511)

36.092 100.388 (58.962) 0

1.626.850 100.388 (1.350) (9.711)

Cost 31. March 2017

631.591

628.990

378.078

77.518

1.716.177

Depreciations and write-downs 1. april 2016 Depreciations and write-downs of the year Depreciations at write-downs divested assets

291.156 7.070 (2.172)

313.310 20.390 (1.045)

288.190 20.616 (4.511)

0 0 0

892.658 48.076 (7.728)

Depreciations and write-downs 31. March 2017

296.054

332.655

304.295

0

933.006

Book value 31. March 2017

335.537

296.334

73.782

77.518

783.171

Book value 1. april 2016

318.181

297.982

81.937

36.092

734.193

Depreciation and write-down Depreciation and write-downs for the year: 2017 (tkr.)

2016 (tkr.)

Property Plant and machinery Other fixtures and fittings Loss/gain on sale of fixed assets

7.070 20.390 20.616 (1.393)

18.709 19.308 21.395 (5.067)

Depreciation and write-downs total

46.683

54.346

61

Notes 10 Tangible fixed assets (continue)

Property

Plant and machinery

Other fixtures and fittings

Tangible fixed assets under construction

Total

Group

(tkr.)

(tkr.)

(tkr.)

(tkr.)

(tkr.)

Cost 1. april 2016 Regulation primo Additions during the year Transferred from investment in progress Disposals during the year Cost 31. March 2017

767.650 0 0 26.709 (4.155) 790.204

630.120 (41) 0 18.742 (1.045) 647.776

379.964 41 0 14.136 (4.514) 389.627

36.092 0 102.363 (60.937) 0 77.518

1.813.827 0 102.363 (1.350) (9.714) 1.905.126

Depreciations and write-downs 1. april 2016 Regulation primo Depreciations and write-downs of the year Depreciations at write-downs divested assets Depreciations and write-downs 31. March 2017

309.072 0 10.353 (2.172) 317.253

329.564 (41) 20.753 (1.045) 349.231

290.886 41 21.398 (4.511) 307.814

0 0 0 0

929.523 0 52.504 (7.728) 974.299

Book value 31. March 2017

472.952

298.547

81.810

77.518

930.828

Book value 1. april 2016

458.579

300.558

89.074

36.092

884.304

Depreciation and write-down Depreciation and write-downs for the year: 2017 (tkr.)

2016 (tkr.)

Property Plant and machinery Other fixtures and fittings Loss/gain on sale of fixed assets

10.353 20.753 21.398 (1.393)

21.936 19.702 22.001 (5.147)

Depreciation and write-downs total

51.111

58.493

62

Notes 11 Financial fixed assets

Total

Deposits

Holdings in affiliates

Holdings in associated company

Kapitalandele i øvrigt

Parent Company

Cost 1. april 2016 Additions during the year Disposals during the year Cost 31. March 2017

0 0 0 0

40 0 0 40

8.792 0 0 8.792

1.145 0 0 1.145

9.977 0 0 9.977

Adjustments 1 april 2015 Additions during the year Disposals during the year Profit share Adjustments 31. March 2016

0 0 0 0 0

0 0 0 (40) (40)

3.176 0 0 (686) 2.490

(536) 0 0 0 (536)

2.640 0 0 (726) 1.914

Internal profits early 1. april 2015 Displacement of internal profits Internal profits 31. March 2016

0 0 0

0 0 0

(118) 495 377

0 0 0

(118) 495 377

Book value 31. March 2017

0

0

11.660

609

12.269

Book value 1. april 2016

0

40

11.851

609

12.499

Equity in % Home

2017

2016

Kommuneqarfik Kujalleq Qeqqata Kommunea Qeqqata Kommunea

100 82,5 100

100 82,5 100

50

50

Subsidiaries companies are followings: Neqi A/S Akia Sisimiut A/S KNI Ejendomme A/S

Company capital (tkr.)

Equity 31/3 2017 (tkr.)

600 3.000 1.000

3.457 6.251 2.668

80

(427)

Associated company consists of the following Pitsaasut ApS

NĂŚstved Kommune

63

Notes 11 Financial assets (continue)

Holdings in associated company

Deposits

Total

Group

(tkr.)

(tkr.)

(tkr.)

Cost 1. april 2016 Additions during the year Disposals during the year Cost 31. March 2017 Adjustments 1 april 2015 Additions during the year Disposals during the year Profit share Adjustments 31. March 2016 Book value 31. March 2017 Book value 1. april 2016

40 0 0 40

1.145 0 0 1.145

1.185 0 0 1.185

0 0 0 (40) (40)

(536) 0 0 0 (536)

(536) 0 0 (40) (576)

0

609

609

40

609

649

2017

2016

(tkr.)

(tkr.)

12 Share capital Company´s share capital consists of shares in the amount of 1.000 DKK or multiples thereof.

No shares are granted special rights. There have been no changes in share capital during the last 5 years

310.000

310.000

13 Retained profit Adjustments - derivatives Parent Compagny / Group

Open positions: Product hedging Interest hedging Forward contracts USD Closed positions: Product hedging

2017

2016

Change in total

(tkr.)

(tkr.)

(tkr.)

(146.035) (57.373) 114.169 (89.239)

(473.923) (75.413) 141.530 (407.806)

327.888 18.040 (27.361) 318.567

0

0

0

0

0

0

28.378

129.682

(101.304)

(60.861)

(278.124)

217.263

Value of inefficient hedgings: Interest hedging Deferred tax: Deferred tax on financial instruments

64

Notes 14 Deferred tax Parent Company

Book value

Property Plant and machinery Other fixtures and fittings Financial fixed assets Inventories Receivables Basis

335.537 296.334 108.182 12.269

752.322

Value for tax purposes

Difference in the balance

216.831 260.958 67.139 9.977 8.500 9.639 573.044

118.706 35.376 41.043 2.292 (8.500) (9.639) 179.278

Deferred tax 31. marts 2017, 31,8% Deferred tax on equity items, see note 13 Provisions deferred tax 31. marts 2017

57.010 (28.378) 28.631

Group

Book value

Property Plant and machinery Other fixtures and fittings Financial fixed assets Inventories Receivables Accruals Basis

472.952 296.334 118.423 12.269

19 899.997

Value for tax purposes

Difference in the balance

356.304 260.958 83.359 9.977 8.500 9.653 0 728.751

Deferred tax 31. marts 2017, 31,8% Deferred tax on equity items, see note 13 Provisions deferred tax 31. marts 2017

116.648 35.376 35.064 2.292 (8.500) (9.653) 19 171.246 54.456 (28.378) 26.076

The change in the deferred tax is put together as follows: Parent Company 2017 (tkr.)

Deferred tax beginning Deferred tax on year profit Change in deferred tax on equity items, see note Regulatory deferred tax earlier years Tax value of dividends Deferred tax end Recognized as follows: Assets Liabilities

Group

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(74.225) 7.912 101.304 0 (6.360) 28.631

(5.727) 7.399 (69.537) 0 (6.360) (74.225)

(76.511) 7.644 101.304 0 (6.360) 26.078

(8.727) 8.114 (69.537) 0 (6.360) (76.511)

0 (28.631) (28.631)

74.225 0 74.225

4.847 (30.925) (26.078)

78.266 (1.755) 76.511

65

Notes 15 Long-term debt Parent Company

Credit institutions

Due within 1 year

Due after 1 year

Amortized debt in total

Nominel debt in total

(tkr.)

(tkr.)

(tkr.)

(tkr.)

556.597 556.597

Due after more than 5 years Credit institutions

0 0

556.597 556.597

556.597 556.597

0 50.416 50.416

655.958 53.039 708.996

655.958 53.039 708.996

0 0

Group

Credit institutions Mortgages Due after more than 5 years Credit institutions Mortgages

655.958 2.623 658.581 0 39.671 39.671

Parent Company

Group

2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

16 Other debt Accrued vacation pay Accrued tax and pensions Other debts

18.427 6.692 18.737 43.856

17.583 6.272 20.137 43.992

18.998 6.913 19.486 45.397

18.042 6.494 20.985 45.521

17 Contingent liabilities, other financial commitments and guarantees Residual benefits of rents and lease obligations represent For collateral guarantees payment of 0,4 mio. DKK The parent company has guaranteed the subsidiaries Neqi A/S, Akia Sisimiut A/S and KNI Ejendomme A/S´s debts to the bank of Greenland.

According to instructions from the Government of Greenland KNI operates in locations where there is a risk that operations may be discontinued following a governmental decision to close certain settlements. According to the land use legislation in Greenland the licensee is charged with the duty to clean up and restore the area before handing it back to the society. However since the obligation to secure supplies and the decision power to determine in which settlements and towns KNI operates at any particular time remains with the Govenment of Greenland, KNI is at present not able to estimate this liability reliably, neither with respect to the actual need for cleanup and restoration, the monetary extent or the timing of the actualization, if any.

66

Notes 2017

2016

2017

2016

(tkr.)

(tkr.)

(tkr.)

(tkr.)

18 Fee to the General Assembly elected auditor Audit fee Other assistance

610 673

595 466

711 692

675 489

1.283

1.061

1.403

1.164

(46.796) 20.378 14.938

(57.419) (21.581) 21.747

(11.480)

(57.253)

19 Working capital changes Change in inventories Change in receivables Change in trade payables and other payables, etc

20 Related party transactions and ownership for the parent company Dominant influence Government of Greenland

Grundlag Basis Hovedaktionær Sole shareholder

Other related parties Neqi A/S Akia Sisimiut A/S KNI Ejendomme A/S Pitsaasut ApS

Affiliated company in KNI-group Affiliated company in KNI-group Affiliated company in KNI-group Associated company in KNI-Group

Niels Søren Thomsen Høgni Hansen Bodil Nyboe Andersen Annette K. Sadolin Søren Jakobsen Najarak Christiansen Inger Eriksen Mikol Heilmann Dorthea Isaksen

3952 3800 1270 2900 2950 3905 3911 3911 3911

Ilulissat Thorshavn København K Hellerup Vedbæk Nuussuaq Sisimiut Sisimiut Sisimiut

Peter Grønvold Samuelsen

3911 Sisimiut

Chairman Board member Board member Board member Board member Board member Board member Board member Board member CEO

Transactions There has not during the year - apart from intragroup transactions that are eliminated in the consolidated financial statements of KNI been completed transactions with board, directors, executives, shareholders, affiliated companies or other related parties, there has not been implemented on market terms There have been trade with the associate Pitsaasut which constituted 61,2 million. DKK

21 Board positions Board members have the following board positions in other companies Peter Grønvold Samuelsen

Neqi A/S - chairman Akia Sisimiut A/S - chairman KNI Ejendomme A/S - chairman

Niels Søren Thomsen

North Atlantic Seafood A/S - chairman Enoksen Seafood A/S - bestyrelsesformand Uummannaq Seafood A/S

Bodil Nyboe Andersen

Kirstein Holding A/S - chairman Kirstein A/S - chairman

Annette K. Sadolin

Skodsborg Sndhedscenter A/S - board member Topdanmark A/S - board member Kurhotel Skodsborg A/S - board member Topdanmark forsikring A/S - Vice Chairmann DSV A/S - board member DSB - Vice Chairmann

Søren Jakobsen

Thuesen Jensen A/S - chairman Johansson A/S - chaitman

67

Income statement 1. april 2016 - 31. marts 2017 Goods Division 2017

2016

1.334.861

1.276.497

36.000 69.251 (1.018.150) (175.284)

36.000 70.749 (968.598) (174.045)

246.678

240.602

Costs of employment Depreciation and write-down

(164.030) (25.292)

(156.268) (30.877)

Earnings before financials

57.357

53.458

467 (2.952) (16.601)

356 (2.088) (17.387)

38.271

34.339

919.109

882.625

77.989

62.311

Net revenues Income from the Governments payment for service contract Other operating income Consumables Other external costs Gross earnings

Financial income Financial expenses Intra-Group interest Pre-tax earnings for the year

Balance Sheet 31. marts 2017 Goods Division For the segment accounts of the goods division, the following assets and liabilities can be directly attributed: Total assets Total liabilities

68

Income statement 1. april 2016 - 31. marts 2017 Energy Division 2017

2016

1.015.762

1.095.590

2.631 (838.634) (43.497)

2.485 (917.001) (41.671)

Gross earnings

136.262

139.403

Costs of employment Depreciation and write-down

(33.239) (21.458)

(32.158) (23.912)

Earnings before financials

81.565

83.333

0 (138) (15.951)

0 (128) (19.109)

65.477

64.096

Total assets

967.676

967.846

Total liabilities

164.504

491.914

Net revenues Other operating income Consumables Other external costs

Financial income Financial expenses Intra-Group interest Pre-tax earnings for the year

Balance Sheet 31. marts 2017 Energy Division For the segment accounts of the energy division, the following assets and liabilities can be directly attributed:

69

Income statement 1. april 2016 - 31. marts 2017 Staffs 2017

2016

Other operating income Other external costs

7.622 46.838

7.491 46.815

Gross earnings

54.460

54.306

Costs of employment Depreciation and write-down

(45.058) (9.351)

(43.960) (10.259)

Earnings before financials

51

88

34.616 (34.667)

38.534 (38.621)

0

0

Financial income Financial expenses Pre-tax earnings for the year

Balance Sheet 31. marts 2017 Staffs For the segment accounts for staffs, the following assets and liabilities that are not directly related to the goods division or the energy division may be attributed to: Total assets

159.917

237.875

Total equity

1.061.155

786.934

743.054

747.187

Total liabilities

70

Income statement 1. april 2016 - 31. marts 2017 Affiliated companies 2017

2016

Results of affiliates Provision for losses at affiliates

(191) 0

1.938 0

Pre-tax earnings for the year

(191)

1.938

Balance Sheet 31. marts 2017 Affiliated companies For the segment accounts of affiliates, the following assets and liabilities can be directly attributed: Total assets Equity minority interests Total liabilities

162.636

163.111

1.094

988

161.542

162.123

71