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Lifco AB

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2022 Annual Report and Sustainability Report

CONTENTS

Lifco in Brief

Highlights of 2022

Chief executive's review

Business model

Group companies

Acquisations process

Directors' Report

Sustainability Report

Financial results

Business area Dental

Business area Demolition & Tools

Business area Systems Solutions

Share information

Acquisations in 2022

Risks and risk management

Corporate Governance Report

Board of Directors

Group management

Appropriation of retained earnings

Auditor's report

Consolidated financial statements

Income statement and balance sheet

Cash flow statement

Notes

Reconciliation to alternative

performance measures

Parent Company financial statements

Ten-year summary

Acquisitions 2006-2022

GRI Index

Management systems and certifications

Addresses

Definitions and objective

Other information to the shareholders

The Swedish Annual Report and Sustainability Report is the original document. In the event of any discrepancy between the original document and the English translation, the Swedish original shall take precedence.

LIFCO IN BRIEF

We offer secure ownership for small and medium-sized businesses. We acquire and develop profitable, market-leading, sustainable niche businesses with the potential to deliver sustained earnings growth and robust cash flows. Our ownership is very long-term and Lifco's culture is marked by decentralisation, customer focus and an emphasis on sustainability in everything we do.

HIGHLIGHTS OF 2022

Lifco performed strongly in 2022 as a result of generally favourable market conditions as well as acquisitions. During the year, Lifco consolidated twelve acquisitions with estimated total annual net sales of SEK 1,475 million at the time of acquisition.

Net sales increased

23.3%

Organic growth

11.3%

EBITA increased

25.7%

KEY PERFORMANCE INDICATORS

¹ EBITA = operating profit before amortisation of intangible assets arising on acquisitions and acquisition costs.
² EBITDA = operating profit before depreciation, amortisation and acquisition costs.

Q1

Four new businesses are consolidated with total annual net sales of approximately SEK 235 million. The new companies include:

Zenith Dental, a Danish distributor of dental products.

Cormidi, an Italian manufacturer of mini dumpers and skid loaders.

The UK firm Specialist Alarm Services, which provides staff attack and nurse call systems for the healthcare sector.

Q2

BCC Solutions of Finland, a supplier of transceivers, fibre cabling and other products, is consolidated. BCC Solutions has annual sales of around SEK 117 million.

The Estonian company Hekotek, which mainly sells sawmill equipment in Russia, is divested.

Q3

The MTN programme is increased from SEK 5 billion to SEK 6 billion. Lifco sells SEK 750 million of two-year unsecured bonds in two issues.

Four new businesses are consolidated with total annual net sales of approximately SEK 770 million. The new companies include:

EFKA Holding of the Netherlands, which manufactures customised aluminium frames for textiles.

Condale Plastics, a UK manufacturer of bespoke plastic extrusions.

The Italian company Trevi Benne, which manufactures excavator tools and attachments.

Q4

Three new businesses are consolidated with total annual net sales of approximately SEK 354 million. The companies are:

Heinz Schuller of Germany, which sells cable support systems and lightning protection products.

Medtec Medizintechnik, a German maker of equipment and consumables based on MR technology for the treatment of joints.

The UK company Prolec, a niche developer of software and hardware solutions for the construction industry.

Net sales in the consolidated companies refer to estimated annual net sales at the time of acquisition.

Chief executive's review

A CLEAR VALUE-CREATING STRATEGY

The basis for Lifco's historical performance is a clear business strategy centred around sustainable value creation, simplicity and decentralisation. A key driver behind Lifco's success is our Group companies' offerings, which contribute to increased efficiency and enhancement in a number of different areas. They often also contribute to strengthening the customers' sustainability efforts.

Lifco's primary goal is to increase its earnings every year through organic growth and acquisitions. Sales in 2022 increased 23.3 per cent to SEK 21,552 (17,480) million as a result of generally favourable market conditions, acquisitions and positive exchange rate effects. Organic growth was 11.3 per cent, acquisitions contributed 8.7 per cent and changes in exchange rates had a positive effect on net sales of 5.1 per cent. The divestment of the Estonian company Hekotek, which mainly sells sawmill equipment to Russia, impacted net sales negatively by 1.8 per cent. Lifco's average annual sales growth during the period 2006- 2022, including acquisitions, amounts to 14.1 per cent.

In 2022, EBITA increased 25.7 per cent to SEK 4,662 (3,709) million, with organic growth contributing 11.2 per cent, acquisitions 10.8 per cent and currency effects having a positive effect of 4.4 per cent. The EBITA margin improved by 0.4 percentage points to 21.6 (21.2) per cent on the back of organic growth and acquisitions. Lifco's average annual EBITA growth during the period 2006-2022, including acquisitions, is 19.2 per cent.

A SUCCESSFUL ACQUISITION MODEL

In 2022, Lifco acquired twelve businesses and 17 in the previous year. To ensure sustained earnings growth, the Group takes a long-term approach to the companies it acquires. We look for companies engaged in sustainable business activities that are profitable and have achieved stable growth over an extended period of time. Ideally, we like to buy companies that are market leaders in their niche and not overly dependent on individual suppliers and customers. The efforts to meet the UN Sustainable Development Goals (SDGs) and reduce our climate impact are strong, long-term societal trends. That's why we are keen to acquire companies which through their offering directly or indirectly increase efficiency and enhance customers' operations and can contribute to their sustainability efforts. We would like to see the existing management remain active in the company since they know the market and the business best.

We are strongly decentralised, and the companies enjoy a high degree of independence. Our goal is for decisions to be made by the local management teams in the companies where the business is conducted. A key means of implementing a decentralised business model in practice is to minimise central functions and resources.

SECURE OWNERSHIP

Lifco has a unique advantage in that the Group offers secure, long-term ownership for small and medium-sized companies. When we acquire a company it is not our goal to sell the business in the future. Nor do we strive to realise synergies and we have never relocated operations. The idea is that the companies should continue to operate as they did before becoming part of the Lifco Group and thereby deliver steady earnings growth.

Since our ownership perspective is perpetual, it is natural for the subsidiaries to combine a focus on earnings and cash flow with continuous efforts to develop new products and increase their selling power.

Lifco's decentralised business model, which allows for a high degree of autonomy in the subsidiaries, is a key factor during negotiations with potential acquisition candidates. In many of the acquisitions made by Lifco in recent years, our clear and simple corporate culture - a culture which has proved its worth over time - has been crucial in persuading entrepreneurs to sell their life's work to Lifco.

SUSTAINABILITY A KEY FACTOR IN ACQUISITIONS

Lifco is convinced that only with a sustainability perspective it is possible to build companies with sustained profitability, motivated employees and satisfied customers. That's why sustainability is an integral part of Lifco's business model. A sustainability perspective is also a key element of the acquisition process, and we only acquire companies that operate in a sustainable manner. We do not acquire companies which are considered to violate the UN Global Compact's principles on human rights, labour, environment and anti-corruption.

It is essential to the success of our decentralised business model that the Group has a clear and shared view of how to run a sustainable business. We therefore have Group policies which govern sustainability management activities. Our Code of Conduct sets forth our ethical principles, which cover our relations with employees, customers, suppliers, society, the environment and shareholders. This means, for example, that the employees need to be offered good terms and that the company's suppliers need to meet the criteria for sustainable business. Management regularly monitors compliance with the Code of Conduct and takes immediate action in case of any deviations.

CLIMATE IMPACT A FOCAL POINT

Many of Lifco's subsidiaries have for a long time conducted active sustainability work, particularly in the areas of environment and climate impact. Many initiatives are underway in the subsidiaries to reduce the companies' climate impact, for example by switching to renewable energy and reducing energy use. In 2022, we continued to enhance our sustainability reporting, placing particular emphasis on climate impact, employees and sound business practices. As of 2022, we are reporting with reference to GRI (Global Reporting Initiative) for the first time. Our prioritised sustainability topics are reduced environmental and climate impact, motivated employees and a high standard of business ethics.

In December 2016, Lifco signed up to the UN Global Compact, to show our support for internationally recognized business ethical standards and our long-term commitment to sustainability issues. As a member, we have undertaken to actively to implement the Global Compact's ten principles for sustainable development in the areas of human rights, labour, environment and anti-corruption.

STRONG CASH FLOW

A constant focus area for us is the Group's cash flow and changes in capital employed in our businesses. Cash flow from operating activities increased by 4.5 per cent in 2022 to SEK 3,069 million. Organic growth during the year affected cash flow by increasing working capital.

The long-term objective is to ensure stable dividend growth while maintaining a payout ratio of 30-50 per cent of earnings after tax. For the 2022 financial year, the Board of Directors proposes a dividend of SEK 1.80 per share, which is an increase of 20.0 per cent on 2021 and equates to 29.4 per cent of earnings after tax.

MARKET-LEADING NICHE COMPANIES

The Lifco Group encompasses many successful businesses and strong brands. Our Dental business area, which sells consumables, equipment and technical service to dentists, has long had a strong position in distribution to dentists in northern Europe. In recent years, Lifco has strengthened its positions in the dental market through acquisitions of niche companies that manufacture dental materials and dental prosthetics as well as companies that develop software. Our Demolition & Tools business area includes Brokk, a world-leading manufacturer of demolition robots, and Kinshofer, a leading supplier of crane and excavator attachments. In our Systems Solutions business area, we have many businesses with strong, niche market positions and offerings that promote sustainable development.

Lifco has built a strong European market presence and established significant positions in North America and Asia through organic growth as well as acquisitions. Over the period 2006- 2022, Lifco made 108 acquisitions.

A FINANCIALLY STRONG GROUP

Financially, Lifco still has significant scope for further acquisitions. Our target is to maintain interest-bearing net debt in a range of 2-3 times EBITDA. At year-end 2022, interest-bearing net debt stood at 1.1 times EBITDA, which means that Lifco still has significant scope for further acquisitions.

The most important factor for Lifco is our employees. We now have 6,512 employees in 30 countries. Many of our employees have worked in our companies for many years, and their collective experience is Lifco's most important success factor. I would like to thank all our employees for their fantastic contributions in 2022.

LIFCO'S MODEL FOR SUSTAINABLE VALUE CREATION

Lifco's business concept is to acquire and develop market-leading, sustainable niche businesses with the potential to deliver sustainable earnings growth and robust cash flows.

The company's strength lies in its ability to offer a safe haven for small and medium-sized businesses. Lifco is guided by a clear philosophy centred on a long-term approach, a focus on profitability and sustainability along with a strongly decentralised organisation.

Lifco has developed a model for sustainable value creation and development of its subsidiaries. The model is based on Lifco's philosophy, which is centred on earnings, sustainability, decentralisation and a long-term perspective. It is the fruit of many years' experience of building businesses. In simplified terms, the model can be described as follows:

By developing sustainable niche businesses, Lifco creates value and is able to give its shareholders a return on their invested capital while gaining the financial strength to acquire new businesses. The model has proved its strength, as shown by Lifco's average annual growth rate of 14.1 per cent and EBITA growth of 19.2 per cent from 2006-2022. Growth has taken place solely through self-generated capital. During this 16-year period, Lifco consolidated 108 companies with total estimated annual net sales of SEK 12.5 billion at the time of acquisition. Over the same period, the number of employees increased from 1,385 to 6,512, mostly through acquisitions.

A DECENTRALISED ORGANISATION

This decentralised organisation is one of the cornerstones of Lifco's governance philosophy. Lifco's organizational structure is based on a number of group managers - who are previously successful Managing Directors of subsidiaries - acting as board chairmen for the subsidiaries. These managers ensure that the subsidiaries are integrated into the Lifco Group from a business culture perspective.

The individual subsidiaries are given a large degree of freedom, which encourages a strong entrepreneurial spirit. As the subsidiaries are managed independently, each company is able to retain its specific culture. They can also continue to employ the methods that are used in the industries and markets in which they operate.

A strong entrepreneurial spirit is one explanation for the Lifco Group's ability to retain key personnel in the companies which it acquires. In many cases, the key personnel are attracted by Lifco's decentralised structure, which allows them to maintain a high degree of independence also after the acquisition.

A LONG-TERM APPROACH

Lifco's long-term perspective is an asset when negotiating with potential acquisition candidates and in relationships with customers and suppliers. When acquiring a company it is not Lifco's goal to sell the business in the future, nor does Lifco strive to realise synergies. That's why Lifco has never relocated any business.

With a very long-term owner, it is natural for the subsidiaries to combine a focus on earnings, cash flow and sustainability with continuous investments in product development as well as long-term customer and supplier relationships.

Average annual growth 2006-2022 14.1⁒

FINANCIAL GOALS AND DIVIDEND POLICY

Lifco's primary goal is to generate sustainable earnings growth. The Group and all subsidiaries' goal is to ensure that organic EBITA growth exceeds GDP growth in the relevant geographic markets over the course of a business cycle. Additional growth should be achieved through acquisitions.

Efficient use of capital is another important goal for Lifco. Return on capital employed excluding goodwill and other intangible assets should exceed 50 per cent for the last twelve-month period. Interest-bearing net debt should remain in a range of 2-3 times EBITDA.

The long-term objective is to ensure stable dividend growth while maintaining a payout ratio of 30-50 per cent of earnings after tax. Since its IPO on Nasdaq Stockholm's main list in 2014, Lifco's average annual dividend growth has been 16.8 per cent. Over the same period, our profit after tax has increased by an average of 22.2 percent per year.

Average annual EBITA growth 2006-2022 19.2%

LIFCO'S GROUP COMPANIES

Lifco's 211 subsidiaries operate in a large number of industries. The subsidiaries offer dental health and dental care products as well as products and services that improve the customers' resource efficiency and work environment or reduce their environmental impact.

The blue figure refers to the share of total sales. Number of employees refers to the number of employees on 31 December 2022.

Employees

6,512

Countries

30

Companies

211

Around 80 per cent of Lifco's sales occur in Europe while the rest is evenly distributed between North America and Asia. A key objective for Lifco is to establish long-term customer relationships and to focus on customers in industries with stable underlying growth and value chains that are transparent from a sustainability perspective.

Lifco's customers have a growing emphasis on sustainability, and this affects their demand. We are seeing that customers are increasingly looking for products that are resource-efficient, climate and environmentally friendly, and contribute to better working environments. Like Lifco, customers are also looking for greater insight into resource use, climate and environmental impact and working conditions throughout the value chain.

Lifco's offerings are generally aimed at customers with high quality requirements, such as high standards of patient safety, safe and secure workplaces in heavy industry, and energy saving solutions.

LIFCO'S ACQUISITION PROCESS

Value creation through acquisitions is a key element of Lifco's business concept. Lifco's approach to sustainability is integrated in all stages of the acquisition process. Lifco takes a very long-term perspective on its investments and basically owns the companies for ever.

1. IDENTIFY ACQUISITION CANDIDATES

Lifco looks actively for acquisition candidates. The searches are carried out by the group managers in the business areas and a handful of employees tasked with finding takeover candidates. Lifco's employees working specifically on acquisitions are based in various locations across Europe and report directly to the CEO. Lifco is also often contacted by corporate dealmakers or directly by entrepreneurs who are looking to sell their companies to Lifco.

Lifco acquires both new companies that can form separate divisions and companies that add to and expand its existing divisions. An acquisition must be able to generate profitable growth and good cash flows. The risk taken by Lifco must also be limited.

2. EXCLUDED COMPANIES

Lifco does not acquire companies that manufacture or sell weapons, alcohol, tobacco, fossil fuels or uranium, that sell, distribute or manufacture pornography, games or fast-moving consumer goods, or extract minerals.

3. AN OFFERING THAT PROMOTES SUSTAINABILITY

Lifco recognises that there is a strong trend in society and the business community for increased sustainability. That's why Lifco is keen to acquire companies which through their offering directly or indirectly contribute to their customers' sustainability efforts. Lifco continues to see many opportunities for acquisitions in Europe and will therefore be looking to make further acquisitions in Europe in the coming years.

4. THE ETHICS COMMITTEE REVIEWS AND APPROVES

Lifco's Ethics Committee reviews all acquisition candidates and approves candidates who have passed the previous steps and gives approval for the acquisition process to proceed. In case of doubt, the committee's principle is to refrain from the acquisition. The Ethics Committee consists of the CEO and the Chairman of the Board.

5. MUST RUN A SUSTAINABLE BUSINESS

Potential takeover candidates must meet the following criteria:

Lifco may decide to make an acquisition even where criteria 2-6 have not been met if the company offers attractive strategic or financial opportunities. Lifco never acquires companies that do not run a sustainable business.

6. SUSTAINABILITY DUE DILIGENCE

All acquisition candidates undergo a sustainability due diligence process. Lifco does not acquire companies which are considered to violate or have violated the UN Global Compact's principles on human rights, labour, environment and anti-corruption. The due diligence process includes an investigation into any possible violations or ongoing conflicts related to the environment, human rights, working conditions and business ethics, including tax issues. Lifco also investigates historical violations or conflicts and makes on-site visits to the takeover candidates in order to study the company culture, working conditions and other factors. The candidates' history with regard to managers, customers, suppliers and other factors is also examined. Lifco also looks at the company's strengths in the value chain and how it can promote its customers' sustainability performance by engaging in discussions with suppliers, customers, industry experts and other parties. Lifco naturally also analyses the company's accounts, existing contracts, etc. Lifco also considers whether the Group would be a suitable owner and what Lifco can add to the takeover candidate.

7. THE BOARD REVIEWS AND APPROVES

All acquisitions are presented to and approved by the Group's Board of Directors.

8. REPORTING AND MONITORING

Lifco acquires all shares of or a majority stake in the acquired companies. A fundamental principle is that acquired companies should have a high degree of independence, however Lifco conducts a review aimed at improving the efficiency of the acquired business. Normally, the following actions are taken:

SUSTAINABILITY REPORT

LIFCO'S SUSTAINABILITY MANAGEMENT

For Lifco, sustainable business is fundamental for longterm value creation. Sustainability is about creating companies with sustained profitability, motivated employees, satisfied customers and strong brands. Lifco has taken a stand on the climate issue and has set as its target to reduce its Scope 1-2 emissions in relation to profit every year. Lifco has begun to investigate the possibility of setting a science-based target for Scope 3 given the Group's operations.

Sustainability is an integral part of Lifco's business model and strategy. Lifco's overall sustainability goals are to reduce the Group's negative environmental impact and conserve the earth's limited resources, to create safe workplaces with fair working conditions and to adhere to a high standard of business ethics. In this way, the Group creates motivated employees, satisfied customers and strong brands, which are essential to sustainable growth with profitability.

Through its efforts to promote sustainability, Lifco influences the entire value chain in key areas such as the environment and climate, working environment and working conditions, human rights and business ethics. With a strong emphasis on sustainability throughout the value chain, Lifco can, for example, help to reduce climate and environmental impact, increase resource efficiency and promote safer working environments, both in the short and long term. At the same time, the Group's sustainability risks are reduced.

For Lifco, sustainability is also about making a positive contribution to society. Lifco contributes directly by paying taxes where value is generated and offering jobs with fair working conditions. Many of the Group's businesses operate outside the metropolitan regions and thus contribute to the development of less densely populated areas. Lifco's high standard of business ethics and respect for human rights are evident in all relationships in the value chain, which contributes positively to society in both the short and long term.

Lifco continuously develops and improves its monitoring and reporting of sustainability management activities. In 2022, the Group increased the number of targets and reported indicators and also reports with reference to GRI (Global Reporting Initiative) for the first time. Lifco is a signatory to the UN Global Compact and issues an annual Communication on Progress report. Since the climate issue is one of the most important issues of our time, Lifco's target is to reduce its Scope 1-2 emissions in relation to profit every year. Lifco has begun to investigate the possibility of setting a science-based target for Scope 3 given the Group's operations.

Lifco's sustainability management and its strategic priorities, results and governance are presented in the Sustainability Report, which comprises pages 14-65.

Lifco has grouped its most important sustainability issues in three main strategic areas: Reduced climate and environmental impact, motivated employees and safe workplaces as well as sound business practices. Progress in the three areas is monitored through quantified targets and indicators.

FOLLOW-UP OF CENTRAL SUSTAINABILITY TARGETS

LIFCO ́S VALUE CREATION IN 2022

REDUCED CLIMATE AND ENVIRONMENTAL IMPACT

Climate change is the biggest issue of our time and everyone must do their part to reduce the negative impact. Lifco's target is to reduce its Scope 1-2 emissions in relation to profit every year. The climate transition is also creating greater business opportunities for the Lifco companies.

Reduced climate and environmental impact is a prioritised sustainability area for Lifco. The Group's commitment to reduce its CO ₂ emissions and its striving to minimise its negative environmental impact are expressed in the environmental policy adopted by the Board, which is revised annually. The annual risk process covers the environmental impact of water emissions, waste management, recycling and other factors that the Lifco companies are required to assess.

Under Lifco's environmental policy, the companies are required, as a minimum, to follow environmental laws and guidelines and apply the precautionary principle. During 2022, Lifco incurred no fines or charges due to negligence in the environmental area. The larger Lifco companies have designated environmental officers tasked with monitoring the company's impact on water, for example, and for managing waste and recycling. In the other companies, the Managing Director or another member of management, such as the head of production, has the strategic and day-to-day responsibility for environmental issues. The Group's employees must receive relevant training, for example in hazardous waste management and recycling processes, as well as instructions on how to minimise water consumption and emissions from production processes. Employees who discover deviations from processes or a risk of deviations or negative impact on Lifco's operations are required to report this to their immediate supervisor or the Managing Director of the company concerned. Employees and other stakeholders can also use the whistleblowing service if the risk is serious and deviates from Lifco's policies.

At year-end, 20 Lifco companies, or 9.5 per cent of the total number, had the environmental management system ISO 14001. Decisions about any certifications and management systems are made independently by each subsidiary.

The Group's minimum requirement to follow laws and guidelines in the environmental area also covers suppliers and subcontractors. Lifco should not have business relations with suppliers who violate applicable laws and ignore environmental concerns. The Lifco companies' procedures for assessing suppliers are described on pages 32-33. Lifco companies that identify deviations or risks of deviations from the Group's environmental policy must take action immediately and report this to Group management. In order to identify and manage risks, Lifco companies may collaborate with representatives of local communities, NGOs or trade associations. Lifco did not ask its Group companies in 2022 whether they had discontinued any partnership due to the supplier's environment shortcomings or inability to comply with Lifco's Code of Conduct regarding environmental matters.

As part of its efforts to reduce its climate and environmental impact, Lifco strives to choose the most environmentally friendly products and inputs, minimise the use of non-renewable materials, increase the rate of recycling and the use of recyclable materials in its processes. As guidance for making the most climate- and eco-friendly choices, the Lifco companies use recognised and established environmental and fair-trade certifications.

Lifco is seeing a strong trend of customers placing increasing importance on climate and environmental issues throughout the value chain, which is leading to increased business opportunities for the Lifco companies. These opportunities arise, for example, from increased demand for energy- and resource-efficient products that reduce dependence on fossil fuels, and products that reduce water consumption or the amount of dust particles. The Group also includes companies that sell LED lighting, electrical products for the electrification of society and greentech companies that develop and sell solutions for recycling plastics.

Lifco does not conduct tests on animals in any part of its operations and does not finance studies that include experiments on animals.

REDUCED WATER CONSUMPTION

Access to water has become an increasingly important societal issue. For Lifco, access to clean water is a business-critical factor. The Group's target is to reduce the water consumption associated with Lifco's products. All processes that carry a risk of or result in actual emissions must conform to or exceed the applicable legal requirements and guidelines. Lifco companies work with their customers and suppliers to reduce water and other resource consumption in the value chain.

In 2022, Lifco started collecting data on the Group's total water consumption. The data also covers water consumption from water-stressed areas. Using the collected data, Lifco will in 2023 deepen its knowledge of the Group's water consumption and the associated risks. Lifco intends to set targets for the Group's total water consumption.

HAZARDOUS WASTE

Lifco seeks to ensure that hazardous waste is handled in accordance with laws and guidelines and that precautions are taken to minimise the risks to the environment and employees. In 2022, Lifco began collecting data on the Group's total amount of hazardous waste. The majority of the hazardous waste consists of residual products from painting, oil, rust removal solvents, batteries and excess liquid from refilling disinfectants.

PROTECT ECOSYSTEMS AND BIODIVERSITY

Global biodiversity is rapidly decreasing and Lifco supports the EU's biodiversity strategy for 2030. Lifco's environmental policy states that the Group's operations must not damage or threaten biological diversity, ecosystems or endangered species. In 2022, three of Lifco's companies conducted operations in or near environmentally protected areas with a total of 58 employees, which represents less than 1 per cent of the total number of employees in the Group. The three companies are Swedish. BeGrips and RF-System conduct operations near water protection areas in Sosdala and Vinslöv, respectively. JH Orsing operates in the vicinity of the Raan valley, which is a nature reserve, a Natura 2000 area and of national interest for the preservation of the natural and cultural environment. Before a new operation is established, Lifco companies examine the risks of damage or threats to biological diversity, ecosystems or endangered species. During the due diligence process for acquisitions, Lifco examines the risks that the business will damage or could damage biodiversity, ecosystems or endangered species.

WATER CONSUMPTION

The data collected covers 74 (68) companies with more than 25 employees, which account for around 82 (82) per cent of all employees of the Group. The collected data has been used to estimate the water consumption of the Group as a whole. SEK of profit refers to EBITA. Per employee has been calculated based on the average number of employees in 2022.

HAZARDOUS WASTE

The data collected covers 74 (68) companies with more than 25 employees, which account for around 82 (82) per cent of all employees of the Group. The collected data has been used to estimate the amount of hazardous waste for the Group as a whole. SEK of profit refers to EBITA.

CLIMATE IMPACT

Lifco's target is to reduce the Group's emissions of greenhouse gases in scope 1-2 every year in relation to profit. Group management is responsible for ensuring that the Lifco companies have processes which aim to reduce greenhouse gases emissions and energy consumption, increase the share of renewable energy and ensure that energy and resources are used efficiently. Achieving the overall target requires that the Lifco companies engage constructively with suppliers and customers, which has a positive climate impact throughout the value chain. To reduce emissions, Lifco and its entire value chain depend on the general availability of more climate-friendly transport and energy sources.

Lifco's biggest estimated climate impact in scope 1-2 comes from energy consumption in commercial premises and production facilities. To achieve the overall climate goal, Lifco companies have, among other initiatives, signed green electricity contracts, installed solar panels and improved the insulation in the premises. Such measures continue to be implemented in the companies, which make independent decisions about which activities are appropriate for their business and when they should be carried out.

Some Lifco companies have service fleets and company cars. In the Dental business in particular, products are extensively distributed by truck, mainly in Europe. Service fleets and company cars need to be as environmentally friendly as possible. For distribution-dependent Lifco companies, emissions are a key issue in procurements and the companies are working to reduce the use of fossil fuels for transportation.

During the pandemic years, the volume of business travel in the Group was very low. As the pandemic restrictions were lifted in spring 2022, business travel increased, which affected the Group's emissions in 2022. Many of the Lifco companies have introduced digital forms of meeting in their relations with customers and suppliers, which is expected to have a continued positive effect on emissions from business travel. In 2022, emissions from business travel increased to 1,845 (798) tonnes. In 2019, emissions from business travel totalled 3,540 tonnes.

Climate change is also creating business opportunities for the Lifco companies. Many of the companies are engaged in continuous development to reduce their products' negative climate and environmental impact. Several Lifco companies offer products where the unique selling point is the product's positive contribution to the customers' climate impact and emissions. The ability to offer energy-efficient and low-emission products is often a strong competitive advantage and has a positive effect on both demand and profit margins.

Lifco has no Group-level information on the extent to which energy consumption and greenhouse gas emissions have been reduced as a result of energy-saving measures. Lifco currently has no Group-wide initiatives to offset emissions. Some of the subsidiaries have chosen to offset emissions from their own operations.

TARGET CLIMATE

In 2022, energy consumption per SEK of profit decreased. Absolute emissions of greenhouse gases increased in 2022.

In relation to EBITA, emissions in scope 1-2 were down.

Scope 1-2 emissions per employee have increased, which reflects generally high production levels.

METHOD OF CALCULATING THE CLIMATE IMPACT

Under the GHG Protocol, emissions are divided into Scope 1, 2 and 3. Scope 1 refers to direct emissions and Scopes 2-3 to indirect emissions. Broadly speaking, Lifco's presented scopes include the following:

Scope 1 includes combustion of fuel in company cars, fuel in boilers and leakage of refrigerants from cooling systems. It is assumed that boilers for which consumption is reported are used in the operations.

Scope 2 includes purchased energy such as electricity, heating and cooling.

Scope 3 includes business travel by air, upstream transport and well-to-tank emissions from fuel and energy production, i.e. maintenance of power plants, production and distribution of fuel, etc.

The emissions included in the calculations are the greenhouse gases CO ₂ , CH ₄ , N ₂ O, HFCs, PFCs, SFe and NF ₃. In its reporting, Lifco uses the term CO ₂ e to cover all these greenhouse gases. Lifco has used GWP100 (Global Warming Potential) in the calculations.

The data collected covers 74 (68) companies with more than 25 employees, which account for 82.2 (82.4) per cent of all employees of the Group. The collected data has been used to estimate the climate impact of the Group as a whole. For energy, Lifco applies a market-based approach and electricity consumption is calculated based on origin. Where a company has not been able to specify the type of electricity used, we have made a conservative estimate and assumed a residual mix as the origin of the electricity. When collecting the data, Lifco has requested data covering Scopes 1 and 2 as well as part of Scope 3.

From 2022, Lifco includes upstream transport in the calculations, which explains the significant increase in reported Scope 3 emissions. Lifco has not reported the energy consumption related to upstream transport and distribution.

In 2022, Lifco has started to investigate the possibility of setting a science-based target for Scope 3 given the Group's operations.

Lifco has no Group-level information on emissions of ozone-depleting substances, nitrogen or sulphur oxides and other significant air emissions.

ENERGY CONSUMPTION

Lifco does not collect Group-level information on sold energy.

ENERGY EFFICIENCY

Total energy consumption has gone up significantly from 2020 because the calculations have changed. The 2019-2020 data includes some electricity for cooling.

From 2021, all electricity for cooling is included. SEK of profit refers to EBITA. Consumption per employee has been calculated using the average number of full-time employees during the year.

RENEWABLE ENERGY

The renewable energy sources mainly consist of water, wind and solar power as well as bioenergy. The non-renewable energy sources mainly consist of fossil fuels. Consumption per employee has been calculated using the average number of full-time employees during the year.

CLIMATE IMPACT 2021-2022 PER SCOPE 1-3

CLIMATE IMPACT 2019-2022 TOTAL PER SCOPE

BIOGENIC EMISSIONS

Biogenic emissions are not included where input data has been reported as calculated CO ₂.

To enable comparability, Scope 3 emissions for upstream transport and distribution have been excluded from the 2022 figures in the table Climate impact 2019-2022. Tonnes CO ₂ e per employee has been calculated based on the average number of full-time employees during the year. SEK of profit refers to EBITA.

ALL TARGETS FOR THE SUSTAINABILITY TOPIC REDUCED CLIMATE AND ENVIRONMENTAL IMPACT

BROKK

The Greek island of Evia is home to Europe's first fully electric mine. Thanks to Brokk's unique, electric powered demolition robot, the mine is not only emission-free but also very safe.

Evia has one of the richest deposits in the world of magnesite, a valuable mineral. The mining company Grecian Magnesite is now mining the mineral entirely without the use of fossil fuels and without explosives.

"The Brokk robot is the most suitable machine in the world for productive mining," says George Bourmas, the engineer who designed the mining operation. "The extraction is done with surgical precision, which saves us both time and money."

George Bourmas has extensive experience in mining and safety is an area to which he gives the highest priority. At Evia, the magnesite is now mined at a depth of 200 metres.

"I have seen all kinds of mines and tunnels and this is the first one where everyone feels extremely safe," says George Bourmas. "Since we started operations in December 2021, we have not had a single incident and no operator has seen anything fall down. Nor do we need to worry about someone using explosives incorrectly, and there are no diesel fumes."

MOTIVATED EMPLOYEES AND SAFE WORKPLACES

Motivated employees are a prerequisite for long-term sustained value creation and is therefore one of Lifco's prioritised sustainability issues. Creating working environments that contribute to motivation requires safe and secure workplaces, an equal gender distribution, good leadership, opportunities for personal development and stimulating tasks.

Lifco's Code of Conduct and HR policy regulate Lifco's approach to employees with the overall aim of creating motivation and safe workplaces. The Code of Conduct also covers suppliers and subcontractors. Lifco's systems and processes for supplier relations are described on page 32.

LIFCO'S EMPLOYEES

A majority of Lifco's employees are permanent full-time employees. Most, 84.3 per cent, work in Europe, where the countries with the highest number of Lifco employees are Sweden and Germany. The age distribution is satisfactory; of newly recruited employees in 2022, 40.1 per cent were younger than 30, which ensures a good supply of skilled labour for the long term. There were no significant changes in the composition of the workforce in 2022. However, Lifco has a skewed gender distribution in the workforce as a whole and among wage-setting managers, which means that the Group needs to increase its focus on recruiting female employees.

SAFE WORKPLACES

Lifco's vision is that no employee of Lifco or of a supplier or subcontractor should be injured at work. In order to achieve the vision of zero workplace injuries, the Lifco companies assign priority to preventive safety work as well as risk identification. Incidents and accidents of a serious nature must be reported to the Board and Group management, who assess and monitor the measures taken.

Lifco companies are required to conform to or exceed applicable health and safety laws and guidelines. They are also required, at least once a year, to carry out a comprehensive risk analysis of the work environment and take any necessary preventive measures. The Managing Director of each subsidiary is responsible for health and safety and for preventive measures. The Managing Director can delegate this responsibility to a health and safety officer who reports directly to the Managing Director.

A key part of health and safety management is open dialogue between the employees and managers of each company regarding health and safety and other related matter. Some Lifco companies have health and safety committees where representatives from trade unions or persons appointed by the employees work with representatives of the company to assess the work environment on a regular basis. In some cases these committees are legally prescribed functions and in others they are initiated by the Lifco company. The frequency of the meetings are decided upon independently by the health and safety committees or in consultation with the Managing Director of the subsidiary.

Communication with employees, whether permanent or temporary or engaged through third parties, is essential to minimising the risk of workplace accidents, Employees, both permanent and temporary, need to receive relevant instructions and training in how to carry out their duties. Training required to perform the duties of the job must be carried out during paid working hours. Particularly stringent processes are required for work involving hazardous tasks, such as heavy lifting or handling of substances harmful to health. In such cases Lifco must, as a minimum, follow the safety regulations specified in laws, guidelines and instructions from equipment suppliers. The employees are also responsible for keeping up to date on the applicable procedures and processes for handling machines, hazardous substances and other tasks.

Routines and processes related to work environment work also include employees and temporary employees who perform tasks at customers, suppliers or other collaboration partners.

Managers are obliged to report without delay any information they receive about risks of workplace accidents or injuries to the local health and safety officer or subsidiary company Managing Director. In dialogue with the health and safety officer, the subsidiary company Managing Director will decide whether work should be interrupted at the workplace concerned or whether other measures should be taken. No employee of Lifco, whether permanent or temporary, or of its suppliers should be subject to reprisals or discrimination because they have reported risks of injury or ill health to employees at the workplace.

The assessment of health and safety risks is based on factors such as changes in processes or equipment, incident reporting and assessments, changes in staffing or work flows, reports on employee health, and monitoring of noise, vibrations and dust.

In these assessments, potential language barriers or functional variations are also taken into account.

In 2022, 58.2 per cent of all employees were covered by occupational health and safety management systems. Of the total number of employees, 9 per cent were covered by ISO 45001/ OHSAS 18001. These systems were implemented after the companies concerned identified risks or in response to demands for certification from customers or suppliers. Under Lifco's business model, the subsidiary companies make independent decisions about management systems and certifications based on commercial decisions and risk assessments.

Lifco does not have Group-level information on the number of work-related injuries among workers who are not employees. Nor has Lifco collected data on work-related health problems.

OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEMS

Calculated as full-time employees at the end of the year (FTE).

At the Lifco companies, as at so many other companies, stress and stress-related illnesses have increased in recent years. As part of its preventive health and safety work, Lifco analyses and seeks to understand the challenges workers face in relation to stress. As part of the effort to reduce stress-related sick leave, the Lifco companies are responsible for ensuring that employees have opportunities to recover after periods of intense work. The Lifco companies have also introduced voluntary health promotion programmes designed, for example, to encourage more physical activity among employees.

OCCUPATIONAL HEALTHCARE

The Lifco companies operate in many different countries with differing access to general healthcare. The Lifco companies decide if there is a need to offer employees occupational healthcare as part of their efforts to promote health and safety. Employees must be clearly informed about how and when they will be offered access to healthcare through the company. Temporary employees must also be informed if they have access to occupational healthcare. In some companies, occupational healthcare is included in the standard employment terms for the industry.

WORKPLACE ACCIDENTS

The measurement covers all employees and operations.

¹ The calculation is based on 200,000 hours worked.

TARGET WORKPLACE ACCIDENTS

In 2022, Lifco set the target of reducing the number of workplace accidents per employee every year. In 2022, the number of workplace accidents per employee increased. The majority of accidents occur at the assembly units in Demolition & Tools. The accidents are to a large extent hand and foot injuries caused by crushing or impacts. Other more frequent accidents are back injuries from incorrect lifting and head and eye injuries caused by objects that have become detached when machinery is operated. The most common remedial measures are inspection of the equipment and reviews and analyses of safety procedures and processes.

EQUALITY AND MORE FEMALE MANAGERS

Gender-balanced teams perform better than teams with a skewed gender balance. Lifco is therefore aiming to increase the proportion of women among wage-setting managers. To reach the target, Lifco is employing a variety of methods. In the case of managerial appointments, for example when a Managing Director of a subsidiary company is appointed, there must be at least one woman among the final candidates. In 2022, eleven recruitments of new Managing Directors for subsidiary companies were made. Of the appointed candidates, four, or 36.4 per cent, were women. Other methods used include ensuring a good work-life balance and offering opportunities to work from home.

Lifco's operations are characterized by the fact that the managers are often very long-term in the Group, which is positive for the Group. Leaders who create consistently good results can only do so through a positive work climate and good customer and supplier relationships. The disadvantage is that there will be fewer opportunities to recruit new managers and thereby improve the gender distribution. Lifco's ability to increase the proportion of female salary-setting managers is also affected by the acquisitions the Group makes.

WAGE-SETTING MANAGERS BY GENDER

TARGET PROPORTION OF FEMALE MANAGERS

On 31 December 2022, 20.1 (21.1) per cent of the Group's wage-setting managers were women. The change from the previous year is not significant. In 2022, Lifco set the target of increasing the percentage of female wage-setting managers every year.

PAY GAP ANALYSES

In 2022, 24.6 per cent of all Lifco companies carried out analyses of differences in pay between women and men who perform the same tasks. The companies that identified a difference in pay have addressed the discrepancy through salary adjustments. Lifco has not collected Group-level information regarding identified pay gaps between women and men.

PAY GAP ANALYSES

EMPLOYMENT SALARY CONDITIONS

Lifco aims to pay market salaries and to differentiate the compensation offered to individual employees based on the complexity of the duties, responsibilities and performance, and in compliance with local laws, regulations and generally accepted local industry standards and/or collective bargaining agreements with local trade unions. Other forms of compensation such as pensions and any other benefits are also set in accordance with local laws, regulations and generally accepted local industry standards and/ or collective bargaining agreements with local trade unions. Legal or contractual minimum wage requirements must be followed.

Lifco pays salaries regularly, in full and on time, and does not require employees to pay work-related fees or costs. Employees receive digital or paper payslips which show their salary and any deductions they are eligible for. All employees, including temporary employees, receive their working conditions in writing. The document must be confirmed by both the employer and the employee through signatures. Lifco's policy regarding employment salary conditions also covers suppliers, subcontractors and employees employed through third parties. The Lifco companies decide when and how to carry out audits of suppliers, subcontractors and employment agencies/staffing companies regarding employment salary conditions. Such audits may be initiated in case of concerns about deviations or in response to the companies' annual risk review. Lifco has no Group-level information on benefits that are offered to full-time employees but not to temporary employees or part-time employees in significant businesses.

WORKING HOURS

In order to protect the health and safety of employees, the employees' working hours must be regulated in the terms of employment. Working hours are regulated in accordance with local regulations and guidelines and, where applicable, through collective bargaining agreements.

NON-DISCRIMINATORY WORKPLACES

Lifco's Code of Conduct is based partly on the ten principles of the UN Global Compact and the international human rights framework. Under Lifco's Code of Conduct, no one may be discriminated against, harassed or threatened on account of their sex, gender identity or expression, ethnic background, faith, functional variation, sexual orientation, age, nationality, political opinion, trade union membership, status, social background, language, state of health or marital status. This applies also to Lifco's suppliers and subcontractors.

Employees who discover or become the subject of discrimination should in the first instance address the matter with their immediate supervisor or, if the supervisor is suspected of having committed the discriminatory act, to the Managing Director of the subsidiary concerned. The suspicion can also be escalated to the chairman of the subsidiary or reported through the whistleblowing service. Suspected cases of discrimination are reported to the Board and Group management and investigated internally by an independent party. Cases reported through the whistleblowing service are investigated according to the whistleblower policy.

The measures taken are reported to Group management and the Board. The measures can consist of changes to processes, compensation, relocation or dismissal of the perpetrator.

The section on the priority sustainability topic sound business practices on page 32 describes how Lifco ensures that suppliers comply with the Code of Conduct. The same section also describes how Lifco's whistleblowing channel works, and how incoming messages are addressed. In 2022, no reports relating to discrimination were received.

PROHIBITION OF FORCED LABOUR, MODERN SLAVERY AND CHILD LABOUR

Lifco supports the UN Declaration on the Rights of the Child. Forced labour, modern slavery and child labour are strictly prohibited in all of Lifco's operations as well as among suppliers, their subcontractors and business partners. Monitoring and control of compliance by suppliers is described on page 32. In the risk analysis, Lifco places special emphasis on any use of forced labour, the occurrence of modern slavery or cases of young employees performing dangerous tasks or handling hazardous substances.

PERFORMANCE REVIEWS AND PAID TRAINING

One of Lifco's fundamental values is openness. Open dialogue combined with good leadership based on clear and immediate feedback are fundamental to creating a motivating work climate. Lifco attaches great importance to leadership and the leaders' personal qualities, such as the ability to create a work climate that is appreciated by the employees. Good leadership includes engaging in continuous dialogue with the employees and fostering a culture that allows the employees to grow and develop. Lifco does not believe in structures where the employee/manag- er dialogue is conducted through formal, standardised processes at particular times during the year.

Lifco believes that many employees are stimulated by learning and new knowledge. In Lifco, employees are offered opportunities to learn and acquire new knowledge primarily by taking on new tasks or responsibilities. The Lifco companies themselves decide if, when and for whom there is a need for company-sponsored training. Such training is usually linked to the need for new knowledge about new or changed regulations or new operating procedures.

Part of creating a motivating work climate involves enabling employees to take on new challenges and receive opportunities for advancement. Such opportunities are offered within the companies and between companies that are part of the same division. The Lifco companies must have procedures in place for replacing employees who leave the company or take on new duties within the company.

STAFF TURNOVER

Staff turnover is an indicator of how much the employees enjoy working in the Lifco companies. The Lifco Group has a high staff turnover outside the Nordic region, which refers to individual assembly units. The Group's operations in China and North America normally have a higher staff turnover than the European operations.

STAFF TURNOVER

TARGET STAFF TURNOVER

Staff turnover declined from 17.2 per cent to 16.2 per cent in 2022. The number of employees leaving the organisation has remained stable over the years, which means that staff turnover has gone down as the total number of employees has increased. In 2022, Lifco set the target of reducing staff turnover every year.

SICK LEAVE

Sick leave is a key indicator for Lifco and is regularly analysed in the Lifco companies. A high level of sick leave or an increasing trend is followed up and appropriate measures are taken in the entity concerned. When identifying and analysing the problem and deciding on measures to take, the Lifco company may consult health and safety experts such as ergonomists or specialists in stress-related diseases.

SICK LEAVE

¹ Calculated based on the number of full-time employees at the end of the year (FTE).

Sick leave increased in 2022 as a result of employees spending more time at the workplace than in the previous two pandemic years. Lifco has chosen not to set targets for sick leave in order to reduce the risk of incorrect incentives in the organisation that could potentially be harmful in the long term.

PARENTAL LEAVE

Lifco takes a positive view of parental leave and encourages both fathers and mothers to use their statutory parental leave where it exists. Lifco does not permit discrimination against employees on parental leave, who must be offered the opportunity to take up equivalent duties when returning to work. Lifco does not have Group-level information on the number of employees entitled to parental leave.

NUMBER OF EMPLOYEES ON PARENTAL LEAVE BY GENDER

COLLECTIVE BARGAINING

Lifco takes a positive view of collective bargaining and the Code of Conduct regulates the employees' right to freedom of association and the right to bargain collectively. Prior to major organisational changes, the Lifco companies must consult with the relevant trade union or trade unions. In the event of cutbacks, the employees must be notified in advance with a prior notice period equal to or longer than what is consistent with local practice or provided for in local regulations or collective bargaining agreements. For employees not covered by collective bargaining agreements, working and employment terms are usually determined based on collective bargaining agreements covering other employees or from other organisations or on industry practice.

EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS

Calculated as the number of full-time employees at the end of the year (FTE).

WORKERS WHO ARE NOT EMPLOYEES

At the end of the year, Lifco had 302 (315) workers who are not employees, which is a non-significant decrease from 2021. The majority of these are consultants, apprentices and trainees. Lifco uses consultants for specific, time-limited projects that require specialist knowledge or to relieve the workload of employees during periods of intense activity. These may receive project-based compensation or hourly compensation. Lifco also has workers who are employed by organisations such as Samhall. In this case, Samhall pays the salaries and other benefits of the workers. Samhall is a Swedish state-owned limited company with the mission of creating meaningful and stimulating work for people with disabilities that entail a reduced capacity to work. Apprentices and trainees carry out their duties as part of their training programmes. Apprentices and trainees are remunerated in accordance with local practice and agreements with the training institutions.

EMPLOYED WORKERS BY REGION

Calculated as the number of full-time employees at the end of the year (FTE).

EMPLOYED WORKERS BY REGION AND GENDER

Calculated as the number of full-time employees at the end of the year (FTE).

PERMANENT EMPLOYEES BY REGION AND GENDER

Calculated as the number of full-time employees at the end of the year (FTE).

TEMPORARY EMPLOYEES BY REGION AND GENDER

Calculated as the number of full-time employees at the end of the year (FTE).

FULL-TIME EMPLOYEES BY REGION AND GENDER

Calculated as the number of full-time employees at the end of the year (FTE).

PART-TIME EMPLOYEES BY REGION AND GENDER

Calculated as the number of full-time employees at the end of the year (FTE).

EMPLOYEES BY AGE GROUP

Calculated as the number of full-time employees at the end of the year (FTE).

WORKERS WHO ARE NOT EMPLOYEES

Calculated as the number of full-time employees at the end of the year (FTE).

EMPLOYEES WITH CONTRACTS WITHOUT A GUARANTEE PERIOD

NEW EMPLOYEES BY GENDER AND REGION

Calculated as the number of full-time employees at the end of the year (FTE).

EMPLOYEES BY AGE GROUP AND REGION

Calculated as the number of full-time employees at the end of the year (FTE). The proportion is calculated in relation to the total number of new hires.

ALL TARGETS FOR THE SUSTAINABILITY TOPIC MOTIVATED EMPLOYEES AND SAFE WORKPLACES

Staff turnover is calculated based on the number of people. Workplace accidents in relation to the number of employees are calculated on the average number of employees. The percentage of female salary-setting managers is calculated based on the number of people.

RUSTIBUS

Rustibus is a leading Norwegian supplier of surface preparation and safety equipment for ships. The company offers products that reduce waste in the oceans from cleaning boat decks. Rustibus also manufactures SafeEdge, which prevents falls associated with open manholes on vessels and platforms. SafeEdge is specially designed to allow ventilation while still covering the hole and protecting the crew.

SOUND BUSINESS PRACTICES

A high standard of ethics and professionalism are fundamental to Lifco and essential to maintaining the Group's good reputation among customers, employees, suppliers, potential acquisition candidates and other stakeholders.

Lifco's governance is based on the Group's Code of Conduct, which is revised and adopted annually by the Board. The Code of Conduct establishes the Lifco Group's basic principles on human rights, working conditions, environmental considerations, business ethics and other matters.

Lifco has been a signatory to the UN Global Compact since 2016 and has thereby committed to actively promote the Global Compact's ten principles of sustainable development in the areas of human rights, labour, environment and anti-corruption. The principles of the UN Global Compact form the basis for the governance of Lifco and the Code of Conduct includes the international human rights framework, the ILO Declaration on Fundamental Principles and Rights at Work, the OECD's principles and standards on responsible business for multinational enterprises, the UN Declaration on the Rights of the Child and the UN Convention against Corruption.

EMPLOYEES

The Code of Conduct applies to all Lifco employees, the Board of Directors, temporary employees and workers who are not employed. All employees in the Lifco Group must be informed about the Code of Conduct. New employees must be informed within one month of their first day of employment and employees of companies acquired by Lifco must be informed within 30 days of the transfer date.

100% of employees have been informed about the Code of Conduct

Assessing the risk of violations of the Code of Conduct in all its aspects is part of Lifco's risk process. Based on their individual risk assessments, the Lifco companies decide on the need for local training activities to clarify the content, scope and consequences of the Code of Conduct for employees and suppliers. The assessments can also lead to the Lifco company changing its processes and procedures to reduce the risks. Lifco companies may have company-specific guidelines covering matters such as business ethics. The Lifco companies' management teams are responsible for investigating incidents and taking measures relating to possible violations of the Code of Conduct.

Lifco does not collect Group-level information on the number of employees who have completed anti-corruption training as decisions about training activities are made in the subsidiaries.

TARGET INFORMATION ABOUT THE CODE OF CONDUCT

In 2022, all Lifco employees were informed about the Code of Conduct.

SUPPLIERS

In order to deliver with high quality and effectively manage risks in the value chain, Lifco needs to collaborate with suppliers and other business partners who share the Group's views on business ethics, environmental and climate impacts, social issues and human rights. The basis for these partnerships is Lifco's Code of Conduct, which is based on the principles of the UN Global Compact and the ILO Declaration on Fundamental Principles and Rights at Work as well as other standards. Lifco's major suppliers are required follow the Code of Conduct and are expected to make reasonable efforts to ensure that their own suppliers follow the same principles. The Code of Conduct covers matters such as working conditions and wage conditions, health, safety, human rights and business ethics.

Lifco's business model is based on the subsidiaries having a high degree of independence, which means that they formulate detailed requirements for the suppliers, including procedures, and define frameworks for supplier assessments, reviews and audits. The subsidiaries can, for example, demand that suppliers have management systems for quality, health and safety and other areas. Larger subsidiaries have central purchasing functions tasked with carrying out these assessments, reviews and audits. Suppliers are assessed on the basis of price, quality and their ability to deliver, and in the assessments account is also taken of risks related to the country or market, processes, raw materials and other factors.

Risks linked to the environment, climate impact, working conditions and wage conditions, the right to collective bargaining as well as human rights and other social risks may also be considered in the assessments and be subject to follow-up reviews and audits. Reviews and monitoring are more frequent and more often take the form of site visits for significant suppliers that operate in markets or regions where the risk of bribery, violations of human rights, working conditions or wage conditions and negative environmental impacts is considered to be higher. In 2020 and 2021, essentially no on-site supplier reviews and audits took place due to the pandemic. In 2022, reviews and audits in the form of site visits to suppliers were resumed. In 2022, Lifco has not asked the Group companies whether they have terminated any supplier cooperation due to corruption or suspicions of corruption. Lifco does not collect Group-level information on which types of suppliers have been informed about and agreed to follow the Code of Conduct and in which regions.

In case of deviations from or an identified risk of deviations from the Code of Conduct or another policy, such as the Group's environmental policy, Lifco takes immediate measures. The measures taken are determined based on an assessment of the potential significance and extent of the impact. Suppliers who deviate from the requirements may be asked to take corrective measures that will be followed up by the Lifco company after an agreed period of time. The Lifco company may also follow up or take proactive measures by conducting mandatory training activities for its suppliers and/or subcontractors. In serious cases, such as violations of human rights or serious environmental crimes, the business relationship may be terminated. Where necessary, Lifco companies may work with organisations and industry peers to address social issues, environmental risks or other issues in the supply chain.

72.4% percentage of subsidiaries whose main suppliers have signed the Code of Conduct

TARGET CODE OF CONDUCT AND SUPPLIERS

Lifco's suppliers and their subcontractors are required to follow the Code of Conduct. In order to monitor compliance with the policy, the subsidiaries must ensure each year that their main suppliers have undertaken in writing to follow the Code of Conduct and report this to the Group. Since measurements began in 2021, the percentage has decreased from 78.3 to 72.4 per cent. The decrease is due to the fact that several Lifco companies have chosen to wait to send out the Code of Conduct for signature until their local whistleblowing channel is up and running so that they can inform their suppliers about this function at the same time. Four companies mainly have large global listed companies as suppliers, which have communicated that their own codes of conduct are in line with Lifco's Code of Conduct, and in other cases the Lifco company has made the assessment that the supplier's code of conduct is in line with Lifco's Code. The target is for all subsidiaries to ensure that their main suppliers have committed to follow the Code of Conduct.

In 2022, Lifco conducted a review to determine from which countries the majority of purchases are made. It was found that in 2022 European suppliers accounted for 91 per cent of the purchases. As these may have subcontractors on other continents, it is important for Lifco to identify the risks down the entire value chain. For more information about Lifco's suppliers, see the section Lifco's value chain on page 44.

ANTI-CORRUPTION

Lifco has zero tolerance for bribery, corruption, fraud, acceleration of payment, money laundering or attempts at any of these. This rule is included in the Code of Conduct, which is based on the UN Global Compact's ten principles of corporate sustainability and the UN Convention against Corruption as well as other standards.

Lifco's zero tolerance stance is based on the Group's desire to operate in a business environment that is fair and efficient. Lifco is convinced that sound, high business ethics and a clear stand against corruption and money laundering help to strengthen the Group's and subsidiaries' brands and positions in the value chain.

The risk of corruption and money laundering is included as an element in Lifco's overall risk analysis. Lifco has mapped the origin of its revenue using the Global Corruption Index and established that 94.1 (93.1) per cent of the Group's revenue came from countries with a very low or low risk of corruption in 2022. Countries with a high or very high risk of corruption accounted for 0.6 (0.2) per cent of revenue.

To ensure that all employees are aware of the Group's position on business ethics, the subsidiaries are required regularly to report the extent to which this information has been passed on to employees and suppliers. See the sections Employees and Suppliers above. Lifco companies are required to maintain systems, approval procedures and processes that enable them to detect and prevent risks of bribery, corruption and money laundering. Where necessary, the companies' management teams should provide guidelines and advice to employees and suppliers regarding gifts, other compensation, acceptable behaviour and related matters. Each company makes an assessment of whether and to what extent special training activities regarding the Code of Conduct should be carried out among its employees and suppliers. The assessment is based on factors such as country, market, history and risk classification according to international standards.

Lifco's Code of Conduct also takes a stand against conflicts of interest, which means that employees may not be involved in activities or hold positions outside Lifco that conflict with the company's business interests. Such conflicts of interest can also include directorships, significant shareholdings or a family member's employment. Employees are required to consult with their immediate supervisor about any assignments or other interests that could potentially conflict with the company's business interests or create a risk of bias.

Under the Code of Conduct, Lifco's employees may only offer gifts, entertainment, compensation and personal benefits to outside parties if they are of small value and consistent with existing practice and legislation. Gifts that do not meet these criteria must be reported to the management of the company concerned.

Lifco companies are responsible for ensuring that any sponsorships, contributions to charities and similar arrangements are not to be regarded as disguised bribes. Lifco does not tolerate cartels or other anti-competitive behaviour.

TARGET ANTI-CORRUPTION

In 2021 and 2022, there were no confirmed cases of corruption among employees in the Group and no business relationships were terminated or not renewed due to corruption. No employee was involved in any corruption-related legal dispute in 2021 or 2022 and the Group incurred no corruption-related losses during those years.

CONSOLIDATED NET SALES BROKEN DOWN BASED ON THE GLOBAL CORRUPTION INDEX

The Global Corruption Index is produced by Global Risk Profile. In 2022, the following countries were classified as high risk: Andorra, Angola, Albania, Bosnia and Herzegovina, Bangladesh, Belarus, Algeria, Iraq, Iran, Kenya, Cambodia, Pakistan, Uganda and several African countries.

In 2021, the following countries were classified as high risk: Angola, Bangladesh, Cambodia, Kenya, Nigeria, Pakistan, Tanzania, Uganda, Uzbekistan, Vietnam, Zambia and several African countries.

TAX POLICY

Lifco's tax policy has been adopted by the Board of Directors and is revised annually. Under the tax policy, Lifco and its subsidiaries pay tax in the countries where value is generated in accordance with local tax laws and regulations. For Lifco, compliance with tax regulations is about good commercial practice and a desire to contribute to society in the countries where the Group operates.

Lifco does not engage in aggressive or artificial transactions whose sole or main purpose is to create a tax advantage. If there is more than one way to structure a transaction, the Group reserves the right to optimise its tax situation by choosing the option that achieves the company's commercial objectives with the lowest tax expense.

Lifco's tax returns must be submitted on time and comply with relevant tax laws and regulations. Any material errors or omissions that are discovered in tax declarations must immediately be reported to the relevant tax authorities. Taxes must be paid when due. Tax inquiries and audits by the authorities must be answered openly and honestly and in a timely manner. All Group companies must have an updated transfer pricing policy that follows OECD guidelines. Lifco's tax cost is reviewed by the external auditors every year.

CURRENT TAX EXPENSE BY COUNTRY

LOCAL COMMUNITIES

For Lifco and its subsidiaries, it is important to be involved in and contribute to the communities where the Group operates. A key factor behind Lifco's often strong local ties is the Group's business model, under which Lifco does not seek synergies between its companies. Lifco, for example, has never relocated a business. For Lifco, it is also important to contribute to the local communities where it operates by paying taxes where value is generated. Lifco is convinced that by being good citizens Lifco companies strengthen their brands in the eyes of customers, suppliers and employees.

Some of the Lifco companies are members of national or local trade and interest organisations. In 2023, Lifco will collect information about industry and interest organizations where Lifco companies have a more significant influence by, for example, holding a board position.

PRODUCT QUALITY

Satisfied and loyal customers are fundamental to the Lifco companies' ability to create sustainable earnings growth. Under the Code of Conduct, Lifco companies are required to provide customers with correct product information and only make promises about products and services that the company can live up to. The products must be of consistently high value, quality and reliability. Product safety is of the utmost importance and Lifco's products and services must comply with relevant rules and regulations in this regard. As part of their commitment, Lifco companies are required to ensure that their customers receive information and are offered training regarding the handling of the products and safety procedures.

Lifco's commitment and dedication to customer satisfaction also includes providing high-quality after-sales service as well as prompt and efficient handling of customer concerns. Through close dialogue with customers and customer surveys, Lifco companies gain insights into customer satisfaction, strong points in their offering and weaknesses in the relationship that need to be addressed. Responsibility for the surveys normally rests with the Lifco companies' sales and marketing organisations, which decide on any measures to take in consultation with other management functions.

TARGET PRODUCT QUALITY

In 2021 and 2022, Lifco did not identify any cases of and received no fines for non-compliance with regulations and/or voluntary industry guidelines on quality, product information or marketing.

CUSTOMER PRIVACY AND DATA SECURITY

A high level of IT security, including protection of personal data, is business-critical and is therefore a focus area for Lifco companies. For Lifco, customer privacy and data security are fundamental to responsible business.

Lifco's IT policy governs the Group's IT security and processing of personal data. Under the policy, Lifco companies are required to ensure that relevant and up-to-date data protection systems are implemented. Lifco companies must have adequate back-up functions in place and verify this on a quarterly basis. Lifco only collects personal data in accordance with statutory processes and with the expressed consent of the data subject when required. The data collected is limited to the stated purpose. The transfer of data to third parties must be subject to clear terms regarding collection, use, sharing and storage. Third parties must undertake to follow the Group's policy regarding data security and data management. Lifco companies must have systems in place to manage IT security issues as well as the ability to monitor and react to data breaches and cyber attacks. Lifco's risk process includes regular assessments of IT security and the risk of cyber attacks. Lifco companies make independent decisions regarding the need for regular security audits of the company's systems, products and methods linked to user data. Lifco companies are required to ensure that all employees have received relevant and up-to-date training in cyber security issues and data management. In the event of loss of customer data or changed policies regarding data management, the registered data subjects must be informed.

TARGET CUSTOMER PRIVACY AND DATA SECURITY

In 2021 and 2022, Lifco received no customer complaints relating to breaches of customer confidentiality and/or loss of customer data that was confirmed by the organisation. Nor did Lifco receive any criticisms from regulatory authorities regarding the handling of personal data.

In 2022, Lifco identified a data breach in a subsidiary. The breach has been addressed and followed up. No damage was observed as a result of the breach.

WHISTLEBLOWING CHANNEL

Lifco's whistleblowing channel is available through the lifco.se website to all stakeholders, including employees, customers, suppliers, subcontractors and representatives of local communities. Employees, suppliers and subcontractors are informed about the whistleblowing channel in the Code of Conduct as well as in other materials. The whistleblowing channel is an early warning system designed to reduce risks and enable all parties to report suspected cases of serious misconduct.

The whistleblowing channel can be used to report concerns about something that is not in line with Lifco's values and ethical principles and that could seriously affect the organisation or pose a threat to the life or health of an individual.

The channel is managed by an independent external party, Whist- leB, Whistleblowing Centre, https://whistleb.com. The communication channel is encrypted and password-protected. All messages are treated confidentially and the whistleblower remains anonymous in the dialogue with the organisation's whistleblowing team. To guarantee anonymity, WhistleB does not save IP addresses or other metadata. A report is followed up with a follow-up question or answer within a maximum of seven days. The whistleblowing channel is available in Swedish, English, German, Italian and Chinese. All cases have been reported to the Group CEO and Board as regards the nature of the case and the measures taken.

THE INVESTIGATION PROCESS

Incoming messages are forwarded only to designated individuals who are authorised to handle whistleblower cases. These individuals are the Group's CEO and the head of the Systems Solutions business area. All actions are logged and cases are handled confidentially. If necessary, experts may be called in to assist in the investigation process. Persons authorised to handle cases and any experts engaged may access relevant information and are bound by confidentiality. If an individual raises a concern directly with a supervisor, manager or by personally contacting the whistleblowing team, the message is inserted into the communication channel and dealt with in accordance with these guidelines.

No one from the whistleblowing team, or anyone involved in the investigation process, will attempt to identify the whistleblower. If necessary, the whistleblowing team may ask follow-up questions through the anonymous communication channel. A message will not be investigated by anyone who may be involved in or connected to the suspicion.

The whistleblowing team decides whether and how a whistleblower report should be escalated. Whistleblower messages are handled confidentially by the parties involved.

MESSAGE PROTECTION FOR NON-ANONYMOUS WHISTLEBLOWERS

A person who raises a genuine suspicion or concern under the whistleblowing channel guidelines will not risk losing their job or suffer any form of sanction or personal disadvantage as a result. It does not matter if the whistleblower is wrong, provided that they are acting in good faith.

Subject to considerations of the privacy of those against whom allegations have been made, and other matters of confidentiality, a non-anonymous whistleblower will be kept informed of the outcome of the investigation. In cases of alleged crimes, the whistleblower will be informed that their identity may need to be disclosed during legal proceedings.

PROTECTION OF, AND INFORMATION TO, A PERSON NAMED IN A WHISTLEBLOWER NOTIFICATION

The rights of the individuals named in a whistleblower report are governed by relevant data protection laws. Those affected will have the right to access data concerning themselves and, if the information proves to be incorrect, incomplete or out of date, the right to demand changes to or erasure of data. These rights may be subordinated to mandatory protective measures that are necessary to prevent the destruction of evidence or other obstacles to the processing and investigation of the case.

ERASURE OF DATA

Personal data included in a message and investigation documentation is erased on completion of the investigation, with the exception of personal data that must be maintained in accordance with other applicable laws. Data is erased 30 days after completion of the investigation. Investigative documentation and whistleblower messages that are archived should be anonymised: they should not include personal data by which individuals may be directly or indirectly identified.

REPORTED MESSAGES IN 2022

In 2022, seven reports were received through the whistleblowing channel, three of which related to the same matter. Of the five cases, three were assessed as personnel cases, which were passed on to the Managing Director or chairman of the board of the company concerned for continued dialogue. The other two cases have been closed after investigation. Having been investigated, neither of these cases were considered to be whistleblower cases and therefore did not result in measures being taken.

NUMBER OF REPORTS SUBMITTED THROUGH THE WHISTLEBLOWING CHANNEL

ALL TARGETS FOR THE SUSTAINABILITY TOPIC SOUND BUSINESS PRACTICES

RAPID GRANULATOR

Rapid Granulator is a world-leading company that manufactures equipment for plastics recycling. With Rapid's mills essentially all production waste can be turned into new raw material that is fed back into the production process. The company was founded 80 years ago by Harry Johansson, an entrepreneur in Bredaryd in Småland, Sweden. His vision was for Rapid's products to make a difference to everyone who used them and for society.

LIFCO'S CONTRIBUTION TO THE UN SUSTAINABLE DEVELOPMENT GOALS

The value Lifco creates and its operations are linked to the UN Sustainable Development Goals. Lifco most clearly contributes to seven of the 17 UN Sustainable Development Goals.

GOAL 3 GOOD HEALTH AND WELL-BEING

According to the UN, good health is fundamental to people's ability to achieve their full potential and contribute to the development of society. Investments in health through preventive measures and modern and effective care for all benefit the general development of society and create conditions for ensuring people's fundamental right to well-being.

Lifco contributes mainly to Goal 3 through its dental business, which promotes modern and effective dental care and dental health, thus improving human well-being. The dental business also includes medical technology companies. Within Lifco's contract manufacturing division, which is part of the Systems Solutions business area, there are companies that produce medical equipment.

Target 5.5

Ensure women's full participation in leadership and decision-making

Lifco's target:

Increase the percentage of female wage-setting managers every year

GOAL 5 GENDER EQUALITY

According to the UN, equality between women and men is a necessary foundation for a peaceful and sustainable world. Gender equality is about a fair distribution of power, influence and resources.

Lifco contributes to Target 5.5 Ensure women's full participation in leadership at all levels of decision-making by working to increase the proportion of female employees and the proportion of female wage-setting managers in the Group.

Target 7.2

Increase global percentage of renewable energy

Target 7.3

Double the improvement in energy efficiency

Lifco's targets:

Reduce the energy consumption per SEK of profit every year Increase the share of renewable energy every year

GOAL 7 AFFORDABLE AND CLEAN ENERGY

Goal 7 aims to change the way we produce and consume energy to ensure access to electricity and energy services for all without harming our planet. Lifco contributes directly to Target 7.2 through its goal of an increased share of renewable energy and increased energy efficiency.

Lifco also contributes to Goal 7 through its range of products and services that help customers increase their energy efficiency and reduce their carbon footprint. This applies to many of the subsidiaries in all three business areas.

The use of resource- and energy-intensive inputs in some parts of the Group has a negative impact on Goal 7.

Target 8.8

Protect labour rights and promote safe and secure working environments for all

Lifco's targets:

Reduce staff turnover every year

Every year, reduce the number of workplace accidents per employee leading to more than three sick days

GOAL 8 DECENT WORK AND ECONOMIC GROWTH

Decent working conditions promote sustainable economic growth and are a positive force for the planet as a whole. Goal 8 aims to protect workers' rights and stop modern slavery, human trafficking and child labour. By creating good conditions for innovation and entrepreneurship and ensuring decent working conditions for all, Lifco promotes sustainable economic growth that includes the whole of society.

Lifco contributes to Target 8.8 Protect labour rights and promote safe and secure working environments for all through its activities in its priority sustainability topic employees. The Group also works to ensure decent working conditions and safe workplaces at its suppliers. Lifco does not tolerate forced labour, modern slavery, human trafficking or child labour in any part of its value chain.

Lifco's business concept is to acquire and develop market-leading niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. A strong part of Lifco's culture is its decentralised organisation where decisions are made in the subsidiaries. This ensures that the subsidiaries retain their entrepreneurial spirit and innovative power. Lifco does not acquire companies to realise synergies and has never relocated a company. This ensures that the acquired companies continue to contribute to the local economy and to create safe and secure jobs in the local community.

The Group has a large number of subsidiaries that contribute to Goal 8 by offering products that improve health and safety in the workplace. Some examples are Brokk, whose demolition robots help to reduce occupational injuries, Cleveland Cascades, which reduces the presence of dust during loading, Cramaro Tarpaulin, whose systems reduce risks associated with truck transport, ErgoPack, which prevents stress injuries during pallet packing, and Silvent, whose products improve the working environment for those working with compressed air equipment.

GOAL 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE

According to the UN, innovation and technological progress are the key to finding sustainable solutions to economic as well as environmental challenges. It also helps to create new markets and jobs that can contribute to efficient and equitable use of resources. Investing in sustainable industries, research, environmentally friendly technology and innovation are all important ways to promote sustainable development.

Lifco has implemented the sustainability perspective in its acquisition process and only acquires companies that operate in a sustainable manner. Sustainability is a parameter in the evaluation of takeover candidates and Lifco does not acquire companies that are considered to violate the principles of the UN Global Compact.

Target 13.2

Integrate climate change measures into policies and planning

Target 13.3

Build knowledge and capacity to meet climate change

Lifco's target:

Reduce Scope 1 -2 emissions per SEK of profit every year

GOAL 13 CLIMATE ACTION

The UN states that education, innovation and compliance with our climate commitments can enable us to implement the necessary changes to protect the planet. A priority sustainability topic for Lifco is to reduce its climate impact and thus contribute to Target 13.2 Integrate climate change measures into policies and planning and Target 13.3 Build knowledge and capacity to meet climate change.

The Group also has subsidiaries that have identified climate impact as a business opportunity by offering products and solutions that reduce their customers' carbon footprint. Examples include Cormidi, which manufactures electric mini dumpers, NorDesign, which supplies LED lighting, and TMC, whose compressors for the marine industry reduce diesel consumption.

Target 16.5

Substantially reduce corruption and bribery

Target 16.6

Develop effective, accountable and transparent institutions

Lifco's targets:

All employees to be informed about the Code of Conduct each year

Increase the percentage of subsidiaries where major suppliers have committed to following the Code of Conduct every year

No cases of corruption

GOAL 16 PEACE, JUSTICE AND STRONG INSTITUTIONS

According to the UN, the key to peaceful, inclusive and sustainable societies is to strengthen the rule of law and promote human rights. A fundamental value for Lifco is that everyone should be treated equally and fairly and that no one should be discriminated against. Lifco has zero tolerance for corruption and bribery. The Group also requires its suppliers to sign and comply with Lifco's Code of Conduct. Lifco thereby contributes to Target 16.5 Substantially reduce corruption and bribery.

By taking a broad approach, working internally and through its suppliers, to eliminate corruption and ensure that everyone is treated equally, Lifco contributes to Target 16.6 Develop effective, accountable and transparent institutions.

28.4%

of sales contribute to UN Sustainability Development Goal 3

50.2%

of sales come from sustainability-related products and services

SHARE OF SUSTAINABILITY-RELATED SALES

Lifco's operations which directly contribute to the UN Sustainability Development Goal 3 Good Health and Well-being, account for 28.4 per cent of consolidated net sales. Lifco calculates that sustainability-related products and services account for 50.2 per cent of the Group's sales. The business that contributes to goal 3 is the entire Dental business area and the companies within the Contract Manufacturing division that produce medical technology products. Lifco has defined sustainability-related products and services as those for which health and safety improvements, positive environmental effects or energy efficiency and reduced energy consumption, for example, are clear competitive advantages or where the products are part of circular business models. In the calculation, Lifco has included the Dental business, demolition robots, the Environmental Technology division, the businesses within the Contract Manufacturing division that refers to the production of medical technology products, and the company Cramaro Tarpaulin in the Service and Distribution division. Companies whose sales can only be partially related to products with sustainability as a competitive advantage have not been included. Examples of companies not included in the calculation are Kinshofer, which specialises in excavator equipment used in the recycling industry, and Cormidi, whose business includes electrically powered mini dumpers. Lifco therefore considers that the share of sales from sustainability-related products and services is higher than the reported figure.

THE UN SUSTAINABILITY DEVELOPMENT GOALS TO WHICH LIFCO'S ACQUISITIONS IN 2022 CONTRIBUTE

GOAL 3 GOOD HEALTH AND WELL-BEING

Share of all acquired companies' totalnet sales 11%.

GOAL 8 DECENT WORK AND ECONOMIC GROWTH

Share of all acquired companies' total net sales 89%

LIFCO'S VALUE CHAIN

Lifco's business concept is to acquire and develop market-leading sustainable, niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. The cornerstones of Lifco's governance philosophy are a strongly decentralised organisation and very long-term ownership. Lifco's central governance is clear and the focus is on profitability and sustainability. Sustainability governance, control and monitoring are described on pages 50-53.

Lifco has 211 operating subsidiaries that operate in 30 countries and in a wide range of industries and niches. The majority of the Group's revenue, 80 per cent, is generated in Europe. Most of Lifco's employees work in Europe and the Group also has employees in Asia and North America. Due to the spread and scope of Lifco's operations, the Group has a large number of suppliers and customers in various industries.

The largest customer groups are dental clinics and industrial companies in the engineering, infrastructure, building and construction industries.

A hallmark of Lifco's subsidiaries is a high degree of specialisation as well as high product quality and service level, which requires good working environments and working conditions. The customers are B2B businesses, many of which profile themselves through high quality and good working environments. They are therefore usually willing to pay a premium to get access to the Lifco companies' products. There is a strong trend towards a growing awareness of sustainability issues among the customers, who are increasingly demanding that Lifco's subsidiaries offer environmentally and climate-friendly products and that they guarantee a value chain with low risks in areas such as health safety, human rights and corruption.

The description of Lifco's value chain covers the most essential features of the subsidiaries' value chains. There are individual subsidiaries or groups of subsidiaries with value chains that differ from the following general description. No significant changes have taken place in Lifco's value chain during 2022.

PURCHASES

Lifco buys the majority of its inputs from suppliers in Europe. The summary of purchases includes Lifco companies with more than 25 employees, 74 companies in total. These companies reported purchases per country in excess of EUR 750,000 in 2022.

Purchases from Asia, i.e. Hong Kong, Japan and China, accounted for 8 per cent of the total purchase cost. The remainder, 91 per cent, refers to purchases from Europe and 1 per cent to US purchases. In Dental, the majority of purchases refer to medical consumables and products. In Demolition & Tools and Systems Solutions, most of the purchases refer to finished components which the subsidiaries assemble in their own facilities.

The choice of supplier is generally governed by quality requirements, delivery capacity and price, and for larger suppliers the ability to comply with Lifco's Code of Conduct. The companies' relationships with their main suppliers are often of a long-term nature, involving close collaboration on product development, performance, delivery reliability and other areas.

THE TEN LARGEST COUNTRIES WHERE LIFCO MADE PURCHASES IN 2022

ASSEMBLY AND MANUFACTURE

In Dental, distribution accounts for 60 per cent of revenue, manufacturing 23 per cent, dental technology 14 per cent and sales of software to dental clinics 3 per cent. In Demolition & Tools and Systems Solutions there are mainly assembly units. The high proportion of assembly makes Lifco dependent on the suppliers' delivery capacity and product quality.

Of Lifco's 211 subsidiaries, 78 are assembly and/or manufacturing companies. Lifco has five assembly/manufacturing units with more than 150 employees: the dental company MDH in China with 380 employees, Brian James Trailer in Birmingham, UK with 269 employees, the toolmaker Kinshofer in Munich, Germany with 200 employees, the dental company InteraDent Zahntechnik in Manila, Philippines with 184 employees and the contract manufacturer Leab in Saku, Estonia with 152 employees.

PRODUCTS AND DISTRIBUTION

Lifco's subsidiaries use a wide variety of distribution methods. In Dental, the subsidiaries deliver directly to dental clinics in Europe. In Demolition & Tools, excavator attachments are delivered to resellers who mount the tools on new machines or sell them directly to the owners of existing machines. In Systems Solutions, a variety of distribution methods are used ranging from direct sales to deliveries to retailers. The subsidiaries use external carriers and do not own their own transport for distribution.

Lifco has a strong focus on capital employed and strives to minimise inventory. In Dental, certain subsidiaries collaborate on inventory management by sharing warehouses in Denmark, Sweden and Germany. In Demolition & Tools, excavator attachments are delivered to resellers while demolition robots are generally manufactured to order and delivered directly to the customer. In Systems Solutions, most of the subsidiaries have their own warehouses.

SALES AND MARKETING

Lifco's subsidiaries only sell to B2B customers using a variety of sales channels. Sales are made through direct sales where contacts are made at trade fairs and industry events, through advertising in both traditional and online media, at meetings and by telephone. An increasing share of sales is made online through e-commerce stores.

Lifco does not sell products or services that are banned in certain markets or are the subject of stakeholder concerns or public debate.

SERVICE AND AFTER-MARKET

Lifco's subsidiaries strive to maintain a high level of customer service throughout the product life cycle. A high level of service, even after the purchase has been completed, strengthens customer relationships and the buying experience. Some subsidiaries have service fleets for repairs and maintenance. Activities such as training of customers and sales of spare parts are important parts of the after-market where the subsidiaries strengthen customer relationships and make additional sales.

TYPICAL SUPPORT FUNCTIONS IN THE SUBSIDIARIES

As Lifco's subsidiaries vary in size and operate with a high degree of independence, the companies themselves choose how to organise their support functions. In smaller companies, for example, the HR function may be handled by the Managing Director, while larger companies have a dedicated HR department. Another example is product development, which in smaller companies is handled by the sales department, while larger companies may have dedicated resources.

All data on income, employees, costs and more refer to the 2022 financial year.

MATERIALITY ANALYSIS

In order to identify Lifco's most significant sustainability topics, the Group engages in continuous dialogue with both internal and external stakeholders. Through this dialogue, Lifco gains an understanding of how its stakeholders view various issues and how they perceive Lifco's impact and ability to manage risks and opportunities. Lifco's operations and business environment are constantly changing, as are the needs of its stakeholders, and this affects how the Group develops its sustainability management.

In 2021, Lifco completed its first materiality analysis based on its stakeholder dialogues and the framework of SASB (Sustainability Accounting Standards Board). Lifco assessed the feedback from its stakeholder dialogues against its own analysis of the Group's position, strategy and risks and opportunities. In 2022, the materiality analysis was revised and supplemented with a review based on standards established by GRI (Global Reporting Initative). Lifco has used a double materiality analysis which takes into account the impact of the Group's operations as well as the impact of different areas on Lifco. The review is based on the overall value chain described on page 44. A description of how sustainability issues affect Lifco and the opportunities identified by the Group is provided in the section Risks, management and opportunities on page 56. The sections on the priority sustainability topics on pages 18-38 and the sections Impact on stakeholders on page 47 and Stakeholder dialogues on page 48 describe how Lifco exerts influence on sustainability issues.

The central working group that coordinated the work on the materiality analysis was led by the Group's CEO. The materiality analysis and the underlying material and conclusions have been discussed and adopted by the Board. The analysis took account of feedback from the stakeholder dialogues, identified risks and opportunities and the extent of the external impact and the impact on the business. The impact and probability of each risk were also considered. Some risks, for example in the area of human rights, are considered to have a low probability of occurring but would cause considerable harm if they did occur.

In the assessment, Lifco took into account risks and impacts that occur in the industries in which the Lifco companies operate. Lifco is a conglomerate, which means that the business includes operations in several industries. The 2022 analysis resulted in the decision to maintain the three overall priority areas from 2021.

As part of Lifco's efforts to develop its sustainability management and internally clarify the Group's ambitions in its priority areas, the reporting from 2022 onwards has been supplemented with additional quantitative targets and performance measures. In the stakeholder dialogues in 2022, the stakeholders, primarily investors, also expressed a desire to see expanded qualitative descriptions of Lifco's sustainability management as well as additional quantitative data in the reporting, including expanded Scope 3 calculations, a climate analysis and the linking of the emissions target to the Paris Agreement. In response, Lifco has expanded its qualitative descriptions and quantitative data and started work on investigating the possibility to set a scientifically based target regarding its scope 3 emissions taking into account the Group's operations. A description of the changes made in the report can be found in the section About the Sustainability Report on page 63.

PRIORITY SUSTAINABILITY TOPICS

IMPACT ON STAKEHOLDERS

Lifco's work in the areas of sustainability affects its stakeholders in different ways. The table shows which sustainability topics affect the various stakeholders. The stakeholder group comprising shareholders, investors, analysts, sustainability analysts and creditors is not included in the table as the impact on this group is different than for other stakeholders. In this group, all stakeholders are affected by Lifco's financial results and a growing share are affected by Lifco reporting, setting targets for and monitoring its sustainability management in a transparent and consistent manner in the below areas.

STAKEHOLDER DIALOGUES

Lifco engages in a large number of dialogues with stakeholders on a daily basis. These dialogues form part of the analysis where Lifco assesses which sustainability issues are most important for the Group to focus on, report and monitor. In the following, a description is given of the stakeholders that are considered to have the greatest impact on the business, in which contexts dialogues are held, which issues the stakeholders prioritised in 2022 and how Lifco manages these issues. An important feature of the dialogues is feedback on issues raised in previous discussions and how Lifco has handled the issues. In 2022, Lifco added local communities in which the subsidiaries operate as a stakeholder group.

RESOURCE-EFFICIENT AND ERGONOMIC DENTAL INSTRUMENTS

Luxator is a series of dental instruments for tooth extractions invented by a Swedish dentist. The instruments are ergonomically designed for comfort, control and minimisation of the force needed for the extraction. The instruments are made of Swedish special stainless steel and are extremely durable. Luxator is manufactured in Sweden by Lifco's subsidiary Directa Dental.

SUSTAINABILITY GOVERNANCE

Environment and climate as well as social and ethical sustainability aspects are integrated into Lifco's overall strategy and business model.

Ultimate responsibility for the Group's strategy, including its sustainability management covering financial performance, environment, climate, social and ethical aspects, rests with the Board of Directors and CEO. The Board adopts central Group policies and targets in the area of sustainability. The CEO is responsible for conducting, monitoring and continuously reporting the Group's sustainability management, including related risks and opportunities, to the Board. The CEO leads an internal working group that monitors, follows up and evaluates sustainability issues in the Group.

Lifco's business model is based on a decentralised organisation where the subsidiaries have a high degree of independence. The Managing Director of each company is responsible for ensuring that the operations are conducted in accordance with the Group's policies and for assessing and managing sustain- ability-related risks and opportunities. The operations of the Parent Company and subsidiaries, including their sustainability management, are controlled through internal reporting and monitoring.

Lifco companies report monthly, quarterly or annual sustainability data, including compliance with the policies, to the Group's CEO, who in turn reports this to the Group's Board of Directors. As part of the business planning process, the subsidiaries conduct an annual risk analysis that includes sustainability- related risks and opportunities. Business plans and risk analyses are reported to the division managers,who in turn report to the Group's CEO. The CEO reports the consolidated results to the Group's Board of Directors.

Lifco's risk process focuses on preventive measures. Lifco companies are required to identify, analyse and take measures to minimise risks in the business or be able to create business benefits from new opportunities. If risks or incidents occur that could lead to environmental damage, injuries to employees or violations of human rights or put at risk Lifco's high standard of business ethics, immediate measures must be taken and the situation must be analysed, controlled, reported to Group management and followed up to ensure that the risk is minimised or completely eliminated. Climate-related risks, for example physical risks for operating units or suppliers as well as market risks linked to the subsidiary's products, are included in the risk process if the subsidiary considers it relevant.

UN GLOBAL COMPACT

Lifco has been a signatory to the UN Global Compact since 2016. As a member, Lifco undertakes to actively implement the Global Compact's ten principles for sustainable development in the four areas of human rights, labour, environment and anti-corruption. The governance of Lifco is based on the principles of the UN Global Compact, including the international human rights framework, the ILO Declaration on Fundamental Principles and Rights at Work, the OECD's principles and standards on responsible business for multinational enterprises, the UN Declaration on the Rights of the Child and the UN Convention against Corruption.

EVALUATION OF LIFCO'S SUSTAINABILITY MANAGEMENT

Each year, the Board evaluates the Group's goals, target achievement in the area of sustainability, sustainability indicators, sustainability strategy, materiality analysis and the effectiveness of the organisation. In this evaluation, business plans, stakeholder dialogues and risks and opportunities in the area of sustainability are taken into account, among other factors. The Board participates in stakeholder dialogues over the course of the year, for example by participating in visits to subsidiaries and customers. Board members also participate in seminars and meetings with various stakeholders regarding sustainability in order to deepen their knowledge of sustainability issues. The evaluation can, for example, lead to targets being revised, to resources being reallocated to improve the organisation's efficiency or to certain stakeholder dialogues with feedback on the Group's progress being given greater focus. The results of the Group's sustainability management and strategy are reported annually in the Sustainability Report, which forms part of the Group's annual report.

PROCESSES FOR ADDRESSING NEGATIVE IMPACTS

Lifco must remedy negative impacts identified as being caused or contributed to by the Group. Lifco uses different processes and methods to identify negative impacts: through the internal due diligence process, contacts with suppliers and employees, health and safety representatives, trade unions, local communities, etc. The processes and measures may also be regulated by local laws and guidelines, by agreements with trade unions or by other means. When measures are taken, this is often done in collaboration with the stakeholders concerned - employees, trade unions or the local community. The subsidiaries report on the identified negative impacts, the measures taken and monitoring to Group management, which in turn reports to the Board. Lifco does not have a centralized process through which employees can report cases and apply for compensation.

POLICIES

All sustainability-related Group policies are revised annually and adopted by the Board. The revision takes account of the risks and opportunities that were identified during the year. The Code of Conduct sets the standard for how the Lifco Group conducts its business, ethically and in accordance with applicable laws and regulations. The Code applies to all employees including boards of directors in the Group, individuals or businesses that work on behalf of any Lifco company and major suppliers. There are also Group policies on the environment, employees, tax and the whistleblowing channel. An overview of the Group's policies in the area of sustainability is presented on page 54.

In accordance with Lifco's decentralised governance model, the Managing Director of each Lifco company is responsible for ensuring that the company's operations are conducted in accordance with the Group's policies. The Lifco companies may, on their own initiative, adopt their own guidelines and programmes that include stricter requirements than in the Group policies and laws and regulations.

All new employees and employees of companies that Lifco acquires must be informed about the Code of Conduct and the whistleblowing channel within 30 days of their first working day in the Group. Under Lifco's decentralised governance model, the Managing Director of each Lifco company decides whether there is a need in the company for training about the Code of Conduct or other policies for employees and major suppliers. This assessment is normally based on the country or region in which the company and/or its suppliers operate and how serious the risk related to sustainability issues and potential violations of the Code of Conduct or other policies is considered to be. In case of company-wide or supplier-oriented training activities, evaluations are made to ensure the effectiveness of the training and consistent implementation of policies.

Employees or suppliers who have questions about the Code of Conduct or other policies, or fear that violations of policies have occurred or are at risk of occurring, should contact their immediate supervisor or the Managing Director of the company concerned. In addition, the whistleblower service is also available.

All Group policies are available online to the Group's employees on a shared website or via the subsidiaries' intranets. The Group's Code of Conduct, environmental policy, HR policy, tax policy and policy for the whistleblowing channel are available at www.lifco.se/sustainability.

Employees who have questions or need advice relating to policies and interpretations of policies should in the first hand contact their immediate supervisor. The issue can then be escalated to the company's Managing Director, who in turn can raise the issue with the Group CEO.

Lack of compliance or the risk of non-compliance with policies results in action from management and more serious cases are reported to the Board. Deviations can lead to disciplinary action and dismissal. The Code of Conduct also covers major suppliers. Violations of the Code of Conduct by suppliers may result in the termination of the contract. Existing orders and assignments may also be cancelled.

IMPLEMENTATION OF BUSINESS CULTURE IN THE GROUP

Lifco has an organisational structure where a number of group managers, who are former successful Managing Directors of subsidiaries, act as board chairmen for the subsidiaries. These managers ensure that the subsidiaries are integrated into the Lifco Group from a business culture perspective. One of the chairman's key tasks is to continuously monitor that the Managing Directors of the subsidiaries are motivated and have a sustainability focus.

INTERNAL CONTROL

Lifco's system for internal control and risk management in connection with the company's reporting process is described in the Corporate Governance Report on page 81.

MANAGEMENT SYSTEMS AND CERTIFICATIONS

A key element of the Group's continuous improvement work is the use of management systems, certifications and quality marks. Companies in the Group have management systems for health and safety, the environment, quality, the quality of medical devices, energy and quality assurance for welding. The Lifco companies make independent decisions about certifications and other quality schemes. The decisions are based on criteria such as industry practice, customer wishes and business benefits. No management systems or certifications are the result of legal requirements.

In 2022, 66 Lifco companies were certified under one or more of the ISO 3834, ISO 9001, ISO 13485, ISO 14001, OHSAS 18001/ISO 45001 or ISO 50001 management system standards, representing 31.8 per cent of the total number of companies.

See pages 143-144 for a full list of the Lifco companies' management systems and certifications.

OUR CORE VALUES

It is essential to the success of our decentralised business model that the Group has a clear and shared view of how to run a sustainable business. Our daily interactions with colleagues, customers, suppliers and other stakeholders are characterized by our three core values.

RESPECT FOR OTHERS

In all our dealings with customers, employees and other partners, we need to respect the people we interact with as being of equal value regardless of their sex, gender identity or expression, ethnic background, faith, functional variation, sexual orientation, age, nationality, political opinion, trade union membership, status, social background, language, state of health or family matters. This means that we need to exert ourselves to listen to and respect each individual's opinion, even if we do not share it.

OPENNESS

It is of the utmost that we create an atmosphere in which people dare to be open. To achieve this, we need to openly acknowledge our mistakes. It is natural for human beings to make mistakes.

PRAGMATISM

We should strive to make the best possible decision in each situation. Our decisions must be based exclusively on facts, without preconceptions. Decisions must not be influenced by prejudices, convictions or pride.

Lifco is a listed Swedish company whose governance is based on the Swedish Companies Act, the company's Articles of Association, Nasdaq Stockholm's rules for issuers and the Swedish Code of Corporate Governance as well as other regulations. The Board, its composition, organisation, work, external audit and other governance-related aspects are described in the Corporate Governance Report on pages 78-86. The ethics and investment committees review and prepare Lifco's acquisitions before they are proposed to the Board. Lifco's acquisition process including its sustainability due diligence is described on pages 12-13.

Lifco's governance is based on the Group's values as well as the principles of the UN Global Compact, the international human rights framework, the ILO Declaration on Fundamental Principles and Rights at Work, the UN Declaration on the Rights of the Child, the UN Convention against Corruption and the OECD's principles and standards on responsible business for multinational enterprises.

OUR SUSTAINABILITY POLICIES

Lifco's governance is based on the UN Global Compact's ten principles for sustainable development, including the international human rights framework, the ILO Declaration on Fundamental Principles and Rights at Work, the OECD's principles and standards on responsible business for multinational enterprises, the UN Declaration on the Rights of the Child and the UN Convention against Corruption. How the policies are adopted, revised, implemented, and how compliance is monitored and where the policies are published is described on page 51. Pages 14-38 and 50-51 describe how Lifco addresses its priority sustainability topics as well as the due diligence processes. The Code of Conduct also covers Lifco's major suppliers and subcontractors. Lifco's policies in the area of sustainability are available on the website lifco.se/sustainability.

PRIORITY SUSTAINABILITY TOPICS

EU TAXONOMY

To achieve its climate and energy goals for 2030 as well as the goals set out in the European Green Deal, the EU has established the EU Taxonomy. The purpose is to provide a tool for directing investments towards sustainable projects and activities. The Taxonomy is a classification system for what the EU considers to be sustainable economic activities.

The Taxonomy applies to listed companies and public-interest entities with more than 500 employees. Companies are required to provide disclosures regarding the share of turnover and capital and operating expenditure associated with the activities included in the Taxonomy. The initial version of the Taxonomy includes those sectors which the EU considers to have the greatest impact on carbon dioxide emissions: forestry, manufacturing, energy production, water and waste management, transport, construction and real estate, and data centres. For the 2022 financial year, companies are required to report their contributions to achieving the following two environmental goals defined in the Taxonomy: climate change mitigation and climate change adaptation.

As a listed company with more than 500 employees, Lifco is covered by the Taxonomy. Lifco has studied the Taxonomy and concluded that the manufacturing businesses that exist in the Group today are not Taxonomy-eligible. The manufacturing businesses cover a very broad spectrum of products with the majority of the revenue generated coming from the manufacture of demolition robots and excavator and crane attachments. Most of the products sold to industrial companies are not manufactured by the Group but are assembled from externally sourced finished inputs, which is not eligible under the Taxonomy today. The Group also includes manufacturers of dental products, such as dentures, disinfectants and other consumables, which is also not eligible. Lifco is following the development of the Taxonomy and expects that at least some operations will be eligible in future.

Total turnover is the Group's consolidated net sales which can be found in the Group's income statement on page 94. Total capital expenditure (capex) consists of the year's investments in tangible and intangible fixed assets excluding goodwill which is shown in notes 14 and 15 on the lines Investments and Acquisition of companies. Leasing agreements are reported as right-of-use assets and information on leasing agreements appears in note 11. Total operating expenses (opex) consist of non-capitalized costs related to research and development and short-term leasing agreements. Operating expenses can be found in the income statement on the lines Administrative costs and Research and development costs. Costs related to other repair and maintenance have not been identified but we continue to improve our reporting processes in accordance with the Taxonomy definitions to increase the granularity of our reporting.

As Lifco has no turnover covered by the Taxonomy, there are no capital expenditure or operating expenses linked to current or future turnover covered by the Taxonomy. The capital expenditure found in the numerator consists of purchases from suppliers covered by the Taxonomy (7.7 Acquisition or ownership of buildings). The capital expenditure identified for the financial year consists entirely of additional right-of-use assets in the form of leasing contracts for premises. These have been assessed as Taxonomy- eligible but not Taxonomy-aligned as the supplier's Taxonomy compatibility could not be ensured. No corresponding operating expenses have been identified.

Lifco has processes in place to secure minimum safeguards relating to anti-corruption, fair competition, taxation and human rights. For more information see pages 15-16, 26-28, 32-35, 37 and 50-54. No court judgment or fine has been issued against Lifco in any of these areas in 2022.

TAXONOMY REPORTING TABLE 2022 - TURNOVER

TAXONOMY REPORTING TABLE 2022 - CAPEX

Taxonomy reporting table 2022 - Opex

RISKS, MANAGEMENT AND OPPORTUNITIES

There are a number of factors which affect, or could affect, Lifco's operations, results and/or financial position. Lifco has 211 operating companies in 30 countries and a large number of suppliers and customers in different industries and geographic territories. This wide distribution of subsidiaries, customers and suppliers limits business risks as well as the sustainability risks at Group level. Lifco's industry, market and operational risks are explained on pages 78-79.

SUSTAINABILITY RISKS IN THE VALUE CHAIN

The Lifco companies' main operations comprise assembly, sale and distribution of products, resale and distribution of purchased goods and some manufacturing. Most of Lifco's operations are conducted in Europe. The Lifco companies' assembly and resale operations make the individual companies dependent on their central suppliers with regard to delivery capacity, product quality, price and sustainability risks. Most Lifco companies' purchases are made from suppliers located close to the companies' operations in Europe. Some suppliers or the suppliers' subcontractors operate in other regions, primarily Asia. There are suppliers and subcontractors that operate in countries which can be associated with higher risks regarding the environment, climate impact, resource use, health and safety, human rights, corruption and other risks. Individual subsidiaries may therefore have sustainability risks linked to supplier relationships.

The Lifco companies have a large number of customers, mainly in Europe. The majority of the customers are dental clinics and companies in the infrastructure, construction and demolition industries. These customers demand a high standard from their suppliers in terms of product safety and quality, delivery capability, environmental and climate impact as well as other criteria. Lifco believes that the individual subsidiaries have limited sustainability risks linked to customer relationships.

THE BUSINESS MODEL'S RESILIENCE TO SUSTAINABILITY RISKS

The cornerstones of Lifco's business model, which is based on a diversified portfolio of niche companies concentrated in Europe, strengthen the Group's resilience to sustainability risks. Lifco's strategy also creates good conditions for Lifco and its subsidiaries to take into account both the stakeholders' and the Group's impact on sustainability issues.

Lifco acquires and develops market-leading, sustainable businesses with sustainable earnings growth and robust cash flows. Lifco companies are often market leaders because they offer the highest-quality products in their niche for which customers are prepared to pay a premium. To maintain such a position, the companies need to have competent, motivated employees and a culture that encourages and harnesses new ideas and proposed improvements. This, in turn, is only possible if the companies offer fair working conditions and have a strong commitment to transparency, a high standard of ethics and a sustainability-oriented approach.

Lifco's organisation is strongly decentralised with a high degree of independence in the subsidiaries. Lifco ensures the transfer of knowledge and culture within the Group by appointing as chairmen of the subsidiaries senior individuals with a long history in the Group. This ensures that Lifco's strong culture is passed on and implemented quickly in newly acquired companies. The subsidiaries' high degree of independence makes them agile and responsive to the wishes and demands of customers, suppliers and employees in the area of sustainability as well as other areas.

A long-term approach is a hallmark of the Lifco Group. The Parent Company is committed to very long-term ownership of subsidiaries, which in turn have many long-term supplier and customer relationships. This long-term approach relies on close contacts and open dialogue about new and changed requirements and wishes, including in the area of sustainability.

In Lifco's acquisition process, the sustainability review is an important element. The acquisition process and Lifco's sustainability due diligence are described on pages 12-13.

Lifco's general assessment is that its business model has good resilience to sustainability risks.

LIFCO'S STRATEGIES AGAINST RISKS

Lifco's strategies in the area of sustainability are described on pages 14-42. Lifco's strategic work in the area of sustainability is aimed at controlling and minimising the risks and at taking advantage of the business opportunities that Lifco companies identify in the area of sustainability.

Lifco has not yet carried out a climate analysis and assessed the financial impact of climate change on the Group. The company intends to carry out a climate analysis in the next few years.

IDENTIFICATION OF RISKS AND OPPORTUNITIES

Risk assessments are carried out annually in the Lifco companies, both at the operational level and in the boards. The risk assessments take account of operational, financial and sustainability risks as well as associated opportunities. The chairmen of the subsidiaries are part of the extended management team that makes the annual overall risk assessment for the Group. The risk process is an integral part of the Lifco Group's business processes and is described in the section Sustainability governance on pages 50-53. Internal control and risk management in financial reporting are described in the Corporate Governance Report on page 83.

In identifying sustainability risks and opportunities in the area of sustainability, Lifco has used the GRI Standard (Global Reporting Initiative) and the value chain described on pages 44-45 as a basis.

SUSTAINABILITY RISKS

CLIMATE, ENVIRONMENT AND RESOURCE USE

CONT. CLIMATE, ENVIRONMENT AND RESOURCE USE

WORK ENVIRONMENT, HEALTH AND SAFETY

HUMAN RIGHTS

CORRUPTION, MONEY LAUNDERING AND TAX

CONT. CORRUPTION, MONEY LAUNDERING AND TAX

CUSTOMER PRIVACY AND DATA SECURITY

ABOUT THE SUSTAINABILITY REPORT

The report covers the Lifco Group, i.e. the Parent Company Lifco AB (publ) and all subsidiaries. Lifco AB (publ) is a Swedish public company whose shares are listed on Nasdaq Stockholm. The company's head office and registered office are in Enköping, Sweden. In the report, the company name is shortened to Lifco.

The Sustainability Report covers the period 1 January 2022 to 31 December 2022 and constitutes Lifco's statutory annual sustainability report. The Sustainability Report includes pages 14-65 and has been examined in accordance with FAR:s auditing standard RevR 12 The auditor's opinion regarding the statutory sustainability report. The Sustainability Report contains information on targets, results, governance, policies, risks, risk management and opportunities that are relevant to material environmental, social and corporate governance-related aspects and impacts of Lifco's operations. Lifco's business model, strategy and acquisition process are described on pages 8-13. Together with the Corporate Governance Report, the Sustainability Report forms part of the Directors' Report. The contact person for the Sustainability Report is CEO Per Waldemarson, email ir@lifco.se.

REPORTING PRINCIPLES AND REPORTING FRAMEWORK

The Sustainability Report has been prepared with reference to the GRI Standards (Global Reporting Initiative Standards). Lifco intends to report annually according to GRI from 2023. In preparing the report, principles for defining content such as stakeholder participation, materiality and completeness as well as principles for accounting quality such as accuracy, balance, clarity, comparability, reliability and time factors have been applied. Lifco signed the UN Global Compact in 2016 and issues a Communication on Progress every year. Lifco's Communication on Progress is available from 2023 on Lifco's website lifco.se/sustainability.

CHANGES FROM THE PREVIOUS REPORTING PERIOD

The Sustainability Report 2022 has been supplemented with several new indicators, targets and disclosures compared with the 2021 report. Some employee data that was reported in the 2021 sustainability report has been adjusted because the data collection was refined in 2022. For 2021, the Group's energy consumption has been adjusted so that all electricity for cooling is included. The 2022 Sustainability Report includes the following new information:

REDUCED ENVIRONMENTAL AND CLIMATE IMPACT

Hazardous waste, tonnes per year and SEK of profit

Water consumption, litres per year, employee and SEK of profit Water consumption from water-stressed areas, litres per year, employee and SEK of profit

Energy consumption in relation to net sales and number of employees

Renewable energy, kWh in relation to total energy consumption and SEK of profit, net sales and employees ¹

Biogenic emissions

Scope 3 has been expanded with upstream transport and distribution

Operations in or near environmentally protected areas

Fines or charges due to negligence in the environmental area ¹

MOTIVATED EMPLOYEES AND SAFE WORKPLACES

Number and proportion of employees covered by health and safety management systems

Workplace accidents per region and employee ¹ , lost working days and fatal accidents

Number of wage-setting managers by gender ¹

Proportion of subsidiaries that carried out gender pay gap analyses

Employee turnover per region

Sick leave per region, number of sick days, sick days per employee and in relation to number of working hours

Number and proportion of employees on parental leave by gender

Number and proportion of employees covered by collective bargaining agreements

Number and proportion of employees by gender and region

Number and proportion of employees by contract type, working hours, region and gender

Number and proportion of employees by age group

Number of employees with non-guaranteed hours by region and gender

Number of workers who are not employees

Number and proportion of new employees per gender and region Number and proportion of new employees by age group and gender

SOUND BUSINESS PRACTICES

Consolidated net sales broken down based on the Global

Corruption Index, in absolute terms and as a percentage

Number of cases of corruption ¹

Number of corruption-related legal trials involving employees ¹

Losses resulting from corruption ¹

Current tax expense per country

Losses resulting from poor product quality ¹

Number of incidents resulting from a product or service's impact on health or safety that resulted in fines or other penalties ¹

Number of incidents resulting from a lack of information about a product or service that resulted in fines or other penalties ¹

Number of violations of marketing guidelines and rules that resulted in fines or other penalties ¹

Number of complaints regarding breaches of customer confidentiality and/or loss of customer data that have been confirmed by the organisation ¹

Number of criticisms from regulatory authorities regarding personal data ¹

NEW TARGETS

In 2022, Lifco set targets for the performance measures marked with footnote 1 above.

Lifco has reported its greenhouse gas emissions since 2019 and in 2022 set the target of reducing its Scope 1 -2 emissions in relation to profit every year.

FINANCIAL RESULTS

Lifco performed strongly in 2022 as result of generally favourable market conditions and acquisitions.

Net sales increased 23.3 per cent to SEK 21,552 (17,480) million. Organic growth was 11.3 per cent, acquisitions contributed 8.7 per cent and changes in exchange rates had a positive effect on net sales of 5.1 per cent. The divestment in May 2022 of the Estonian company Hekotek, which mainly sells sawmill equipment to Russia, had a negative impact on net sales of 1.8 per cent. Price increases to compensate for higher costs in most parts of the business had a positive impact on net sales.

EBITA increased by 25.7 per cent to SEK 4,662 (3,709) million and the EBITA margin expanded by 0.4 percentage points to 21.6 (21.2) per cent. Organic growth and acquisitions contributed to the increase in EBITA. Foreign exchange gains had a positive impact on EBITA of 4.4 per cent. During the period, 41 (40) per cent of EBITA was generated in EUR, 24 (25) per cent in SEK, 12 (12) per cent in NOK, 8 (7) per cent in GBP, 6 (5) per cent in DKK, 4 (5) per cent in USD and 5 (6) per cent in other currencies.

Investments in intangible and tangible assets totalled SEK 348 (312) million.

The net financial expense amounted to SEK -111 (-71) million, mainly as a result of higher interest expenses.

Earnings before tax grew 25.1 per cent to SEK 3,842 (3,070) million. Items related to the acquired businesses that were consolidated during the year had a negative impact of SEK 36 (42) million on earnings for 2022.

Net profit for the year increased 16.4 per cent to SEK 2,828 (2,429) million. Earnings per share grew 16.5 per cent to SEK 6.13 (5.26).

The Group's tax expense was SEK 1,014 (641) million, which represents 26.4 (20.9) per cent of earnings before tax. Tax paid was SEK 911 (684) million, which equates to 23.7 (22.3) per cent of earnings before tax. The effective tax rate was higher than normal due to the revaluation of pension obligations secured by endowment policies, which resulted in a lower deferred tax asset. This revaluation increased the year's tax expense by approximately SEK 47 (-71) million. The effective tax rate for 2022 was also affected by the announced increase in corporation tax in the UK, which led to a higher deferred tax liability.

Inventories were SEK 3,682 (2,821) million and accounts receivable SEK 2,853 (2,257) million. Average capital employed excluding goodwill increased over the year to SEK 3,444 (2,294) million while EBITA in relation to average capital employed excluding goodwill was 135 (162) per cent at the end of the year.

Goodwill and other intangible assets totalled SEK 18,286 (15,497) million at year-end.

Net debt increased by SEK 1,463 million in 2022 to SEK 8,576 (7,113) million, of which SEK 1,946 (1,657) million refers to liabilities related to put/call options. Interest-bearing net debt increased by SEK 987 million to SEK 5,590 (4,603) million at 31 December 2022.

During the year, Lifco updated its MTN programme, expanding it from five to six billion Swedish kronor. The MTN programme allows Lifco to issue bonds in the Swedish market. Lifco sold SEK 750 million of unsecured bonds in two issues in 2022 and had SEK 3,100 million in outstanding bonds at year-end. In addition to bonds, Lifco has standard short-term credit facilities.

The net debt/equity ratio at 31 December 2021 was 0.6 (0.7) and net debt in relation to EBITDA was 1.7 (1.7) times. Interestbearing net debt in relation to EBITDA was 1.1 (1.1) times. At year-end, 62 (55) per cent of the Group's interest-bearing liabilities were denominated in EUR. Equity was SEK 13,339 (10,756) million and the equity/assets ratio 44.8 (43.2) per cent.

Cash flow from operating activities increased by 4.5 per cent to SEK 3,069 (2,938) million during the year and was negatively affected by an increase in the amount of capital tied up in inventory as well as an increase in accounts receivable as a result of organic growth. Cash flow from investing activities was SEK -2,717 (-3,287) million, which was mainly attributable to acquisitions. Cash flow was also affected by a total dividend payment of SEK 848 (643) million.

PROPOSED DIVIDEND

The Board of Directors and Chief Executive Officer propose that the Annual General Meeting authorise the payment of a dividend of SEK 1.80 (1.50) per share for the 2022 financial year, representing a total distribution of SEK 817.6 (681.3) million. This is equal to 29.4 (28.5) per cent of the net profit for the year attributable to shareholders of Lifco AB.

PRODUCT DEVELOPMENT

Innovation and product development are key success factors, especially in the Demolition & Tools and Systems Solutions business areas. Innovation and product development enable Lifco to strengthen its customer offering and establish sustainable organic growth. Acquisitions of businesses complement the Group's internal product development. Developments in the market are monitored continuously by all subsidiaries and a large number of potential projects are evaluated each year. In 2022, product development costs totalled SEK 163 (140) million.

FINANCIAL RESULTS

Business area

DENTAL

Lifco's Dental business area brings together a large number of leading distributors of dental products for dentists, primarily in Europe, as well as manufacturers of dental consumables. Lifco also has companies that sell dental technology and businesses that develop and sell medical record systems. In 2022, the business area was expanded through the acquisition of businesses operating in the healthcare and medical technology sectors.

The distribution companies in Dental are leading suppliers of consumables, equipment and technical service to dentists in their respective markets. The companies operate mainly in Europe. Dental also conducts certain distribution activities in the United States. In the Nordic countries and Germany, Lifco also sells dental technology such as dentures. These are manufactured in Lifco's dental laboratories in Sweden, the Philippines, China, Turkey and Germany. The companies that develop and sell medical record systems for dentists operate in Denmark, Sweden and Germany.

Lifco's distributors fill an important role in the dental market by bringing together a large number of suppliers in what is otherwise a fragmented market. The companies offer a wide product range with everything a dental clinic needs, ranging from consumables such as napkins and gloves to dental technology and advanced technical equipment such as X-ray machines and dental chairs.

Lifco's dental products manufacturers produce denture attachments, disinfectants, saliva ejectors, bite registration and dental impression materials, bonding agents and other consumables that are sold to dentists through distributors around the world. The distributors include Lifco companies as well as external players.

Of Dental's total sales in 2022, distribution accounted for 60 (61) per cent, manufacturing for 23 (22) per cent, dental technology for 14 (14) per cent and software for 3 (3) per cent. In recent years, Dental has through acquisitions and organic growth increased its earnings in manufacturing, dental technology and software faster than in distribution, which has had a positive impact on margin growth in the business area. Of Dental's total EBITA in 2022, distribution accounted for 38 per cent and other operations for 62 per cent.

A STABLE, NON-CYCLICAL MARKET

Dental care is a significant market, accounting for around 0.5 per cent of GDP in Lifco's main markets. The European market for dental care is stable and relatively non-cyclical, while growth has historically been weak.

Demand for consumables and dental technology is non-cyclical and characterised by frequent orders and high expectations for delivery and product reliability. Lifco's distributors need to offer a wide range of products so that dental clinics are able to purchase essentially everything they need from one supplier. Demand for equipment is also relatively stable and depends mainly on the age of the installed equipment, the length of the replacement cycle and the number of new dental clinics.

Although the dental market is generally stable, the results of individual companies in Lifco's Dental business may in any individual quarter be influenced by significant fluctuations in exchange rates, calendar effects such as Easter, gained or lost contracts in procurements of consumables by public-sector or major privatesector customers and fluctuations in the delivery of equipment.

SYNERGIES AMONG DISTRIBUTION COMPANIES

Although Lifco's subsidiaries mostly operate independently of each other, the distribution companies have chosen to collaborate on purchasing. The Group therefore has central warehouses for consumables in Enköping in Sweden, outside Aarhus in Denmark and in Budingen in Germany. The warehouses stock 18,000-58,000 items and the distribution companies offer products from around 500 suppliers. Part of the range consists of own-brand products, which are mostly less complex products. Own brands account for 10-15 per cent of the subsidiaries' sales, and the companies are working actively to increase the share of own brands.

In the area of dental technology, Lifco achieves cost advantages through its laboratories outside Europe.

ONLINE SALES

Distribution sales of consumables are made through three main channels: the subsidiaries' sales forces, catalogue sales and online. Between 50-90 per cent of sales are made online depending on the market and subsidiary. The remaining orders are mainly made by telephone.

ACQUISITIONS IN 2022

In 2022, four acquisitions in Dental were consolidated. At the time of acquisition the consolidated businesses had combined sales of approximately SEK 180 million and around 50 employees.

During the year, two distribution companies were acquired: Oslo Dental in Norway and Zenith Dental in Denmark. In addition, the business was expanded into the healthcare sector through the acquisition of the UK company Specialist Alarm Services, which develops and manufactures staff attack and nurse call systems for the healthcare sector. Lifco also took its first step into the medical technology sector through the acquisition of Medtec Medizintechnik of Germany, which manufactures equipment and consumables based on MR technology for the treatment of joints.

EARNINGS IN 2022

Dental's net sales increased 3.4 per cent to SEK 5,295 (5,123) million. In the first quarter, the production of dentures in China was affected by the pandemic. This had a negative impact on sales throughout the year as customers continued to purchase locally produced dental technology to a greater extent even after the disruptions to production ended. In the fourth quarter, sales approached normal levels.

EBITA decreased by 5.8 per cent to SEK 1,017 (1,080) million during the year and the EBITA margin was 19.2 (21.1) per cent. Profitability was negatively impacted by lower demand for dentures from China in the first three quarters of the year, and by increased sales and marketing activities following the easing of pandemic restrictions.

FINANCIAL RESULTS

Business area

DEMOLITION & TOOLS

The companies in the Demolition & Tools business area develop, manufacture and sell niche equipment for the infrastructure, demolition and construction industries. Brokk is the world's leading manufacturer of demolition robots and Kinshofer with its subsidiaries is a world leader in crane and excavator attachments. In 2021 and 2022, Lifco acquired companies that manufacture mini dumpers and skid loaders.

DEMOLITION ROBOTS

Demolition robots account for 24 (28) per cent of the business area's net sales. Lifco's remote-controlled demolition robots are sold under the Brokk brand. The machines are easy to manoeuvre and can be deployed without time-consuming preparations. They can also handle hot and stressful environments. The arms have a long reach, and a wide range of attachments increase the machines' flexibility and applications. Brokk's machines are sold to a large number of countries globally and are used in many areas of application. In addition to demolition, Brokk's machines are used for renovation of cement kilns, removal of linings as well as other purposes. As the machines can be remote-controlled, they are suitable for use in elevated-risk environments such as nuclear power plants and for handling contaminated materials.

The company's main markets are the global demolition and construction industries. Its sales follow the trend in the global market for construction machinery. The demolition robots are sold directly to the end customers or to selected distributors and agents. The components are produced by contract manufacturers and the products are assembled in Sweden.

The Demolition Robots division also includes Aquajet Systems, which manufactures hydrodemolition robots, Ahlbergs Cameras, which manufactures radiation-resistant cameras, and Darda. Darda makes tools that are often used on Brokk's demolition machines, such as concrete crushers, rock splitters and steel cutters.

CRANE & EXCAVATOR ATTACHMENTS

Crane and excavator attachments account for 67 (72) per cent of the business area's net sales. Lifco's crane and excavator attachments are sold under the Auger Torque, Demarec, Doherty, Hammer, Hultdins, Indexator, Kinshofer, RF-System and Solesbee's brands. The attachments make it possible to use the same crane or excavator for different purposes. Typical applications include construction and earthworks, snow clearing, demolition, pipe and cable laying, forestry work, scrap handling and railway works.

Sales of crane and excavator attachments largely follow global machinery sales. As purchasing an attachment from Lifco is a smaller investment for the customer than buying a new machine, the market is less cyclical than the market for construction machinery. Crane attachments are sold directly to the crane manufacturers while excavator attachments are sold mainly through resellers. The products are sold under Lifco's brand or under the crane and excavator manufacturers' own brands.

OTHER NICHE MARKETS

Over the past two years, Lifco has broadened its operations through the acquisition of the two Italian companies MultiOne and Cormidi, which manufacture mini dumpers and skid loaders.

Other niche machines account for 9 (6) per cent of the business area's net sales.

ACQUISITIONS IN 2022

In 2022, three acquisitions were consolidated in Demolition & Tools which at the time of acquisition had combined net sales of approximately SEK 580 million and around 165 employees. The consolidated businesses are the two Italian companies Cormidi and Trevi Benne as well as the British company Prolec. Cormidi is a leading manufacturer of mini dumpers and skid loaders and Trevi Benne manufactures excavator tools and attachments.

Prolec is a niche developer of software and hardware solutions for the construction industry.

EARNINGS IN 2022

Net sales increased by 33.7 per cent in 2022 to SEK 6,285 (4,701) million through a combination of organic growth, acquisitions and positive exchange rate effects. The market situation during the year was generally favourable. Net sales were also positively affected by price increases to compensate for higher costs in the business.

EBITA increased by 27.4 per cent in 2022 to SEK 1,607 (1,261) million through organic growth, acquisitions and exchange rate effects. The product mix had a negative effect on the EBITA margin, which came in at 25.6 (26.8) per cent. Over the course of the financial year, the business area's EBITA margin may vary from one quarter to another as a result of occasional large special orders and changes in the product mix.

FINANCIAL RESULTS

Business area

SYSTEMS SOLUTIONS

The Systems Solutions business area comprises B2B companies which are specialized in their respective niches and excel themselves for high product quality. They are often leaders in their market niches. Systems Solutions has five divisions: Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution, and Forest.

CONSTRUCTION MATERIALS

The Construction Materials division includes the Proline Group, which operates in several European markets and restores pipes through relining. The division also includes Pro Optix of Sweden and Fiberworks of Norway, which offer fibre optic transceivers, cables and communication equipment for the European fibre optic market. The Norwegian companies Cenika, a supplier of low-voltage electrical equipment, and Nordesign, a supplier of LED lighting, are also part of the division. In Norway, the division includes Elit, a wholesale provider of machinery and equipment for electrical installations, and Hydal, which produces aluminium cabinets. Another member of the division is Blinken, which sells measurement instruments for land surveyors and the construction industry in Norway and Sweden. Bode Component, a leading German manufacturer of safety products for lifts, and Elvarmeprodukter i Skellefteå , a Swedish company which sells heating products for floor, roof, ground and frost protection, have been part of the division since 2021.

In Construction Materials, Cenec Tavlebygg, a Norwegian manufacturer of low-voltage electrical equipment, and BCC Solutions of Finland, which provides fibre optic transceivers, fibre cabling and other products, were consolidated in 2022. Heinz Schuller, a German niche distributor of cable support systems and lightning protection products, was also consolidated.

Construction Materials saw good sales growth during the year with improved profitability, boosted by acquisitions.

CONTRACT MANUFACTURING

Under the Leab, Texor and Zetterströms Rostfria brands, Lifco offers contract manufacturing of products that are used in a wide range of industries, including manufacturing and medical technology. The companies focus on products with high standards of quality and delivery service and where the manufacture of the product is a key part of the value chain. The customers include world-leading manufacturers of equipment for the pharmaceutical industry and makers of railway equipment. The division also includes the Norwegian company Auto-Maskin, which manufactures diesel control units for environmentally friendly marine applications and emergency power systems for challenging environments in the telecom, airport, hospital and defence sectors. Since 2020, Tastitalia of Italy, a niche manufacturer of customised touch panels, displays and keypads, has been part of the division.

In Contract Manufacturing, Condale Plastics, a UK manufacturer of bespoke plastic extrusions, was consolidated in 2022.

Contract Manufacturing saw good sales growth during the year with improved profitability.

ENVIRONMENTAL TECHNOLOGY

Under the Eldan Recycling, Rapid Granulator, Redoma Recycling and TMC/Nessco brands, Lifco manufactures and sells machinery which helps to improve the environment, such as recycling machinery for tyres, cables, refrigerators, aluminium products and plastics as well as energy-efficient compressors. The division also includes Silvent, a leading manufacturer of air nozzles and air guns for industrial applications. The division also includes ErgoPack, a leading manufacturer of ergonomic and mobile pallet strapping systems, and Rustibus Worldwide, a leading supplier of surface preparation and safety equipment for marine vessels. The British companies Cleveland Cascades, a global leader in the design and manufacture of bespoke dry bulk loading chutes, and Spinaclean, which develops and sells vacuum cleaners and pressure washers for high-level cleaning, have been part of the division since 2021. The division also includes Easy Life International of the Netherlands, a leading maker of water purification consumables and plant nutrition for aquariums.

Environmental Technology saw good sales and profitability growth in 2022.

SERVICE AND DISTRIBUTION

Under the name Modul-System, Lifco makes interior modules for vans and light commercial vehicles, including tool storage and other modules. The division also includes Brian James Trailers, a niche manufacturer of open and enclosed car transport trailers. The leading supplier of exhibition and display materials, UK POS, is also part of the division, as is Cramaro Tarpaulin Systems of Italy, a niche manufacturer of tarpaulin systems for trucks and agricultural vehicles. DVG De Vecchi, a leading Italian manufacturer and distributor of components and accessories for coffee machines, T. Freemantle, a British niche manufacturer of cartoning and sleeving machinery and Next Hydraulics, a leading Italian manufacturer of telescopic cranes used mainly on light commercial vehicles, have been part of the division since 2021. Truck-line, a leading German manufacturer of high-end lightbars for trucks sold under the LightFix brand, is also part of the division.

EFKA Holding of the Netherlands, which manufactures customised aluminium frames for textiles, was consolidated in the division in 2022.

Service and Distribution saw good sales growth during the year with improved profitability, aided by acquisitions.

FOREST

Lifco offers sawmill equipment under the Heinola brand. The company operates in the Baltic and Nordic countries. Heinola offers a large part of the equipment required at a sawmill, such as timber and wood handling equipment, drying equipment and sawing lines. The product range also includes equipment for pellet plants. Sales are often made in project form and normally take several years from initial discussion to first delivery. The business also provides service and spare parts but new equipment accounts for a majority of sales. The division also includes Haglöf Sweden, a world-leading supplier of instruments for professional forestry surveyors, and the Swedish company Wexman, which makes professional workwear.

In May 2022, Hekotek, which mainly sells sawmill equipment to Russia, was divested.

Sales in the remaining operations in the Forest division remained stable in 2022 with good profitability.

ACQUISITIONS IN 2022

At the time of acquisition the five consolidated acquisitions had combined net sales of just over SEK 720 million and approximately 180 employees in total.

EARNINGS IN 2022

Systems Solutions' net sales grew 30.3 per cent to SEK 9,972 (7,656) million in 2022, mainly due to organic growth in all divisions except Forest, acquisitions and positive exchange rate effects. In Systems Solutions, the market situation was generally good during the year and sales were also boosted by price increases to compensate for higher costs in most parts of the business.

EBITA increased by 46.2 per cent in 2022, to SEK 2,184 (1,494) million, and the EBITA margin expanded by 2.4 percentage points to 21.9 (19.5) per cent. Organic growth, acquisitions and exchange rate effects contributed to the increase in EBITA and margin improvement.

SHARE INFORMATION

Lifco's Class B shares have been listed on the main list of Nasdaq Stockholm since 21 November 2014. The stock is included in the Nasdaq OMX Nordic Large Cap index. In 2022, the number of known shareholders increased to 21,518 (20,801). The share of foreign-owned shares at year-end was 19.4 (21.5) per cent. The company trades under the stock symbol LIFCO B.

SHARE PERFORMANCE AND LIQUIDITY

Lifco's share price at year-end was SEK 174.15, which translates to a market capitalisation of SEK 79.1 billion. Lifco's Class B shares declined by 35.7 per cent in 2022. Nasdaq Stockholm, as measured by the OMXS PI index, lost 24.6 per cent in 2022.

The highest price paid in 2022 was SEK 271.9 on 3 January and the lowest price paid was SEK 140.3 on 13 October.

Lifco's IPO price was SEK 18.6. From the initial public offering to the end of 2022, the share price increased by 836.3 per cent. Nasdaq Stockholm, as measured by the OMXS PI index, gained 68.0 per cent over the same period.

In 2022, 310,769,038 (292,365,658) shares were traded. The daily average was 1,213,942 (1,169,463) shares. 37.5 (42.3) per cent of the shares were traded on Nasdaq Stockholm.

SHARE CAPITAL

At the end of 2022, Lifco had a share capital of SEK 18,168,652 represented by 454,216,300 shares, of which 30,379,850 were Class A shares and 423,836,450 Class B shares. All shares have equal rights to dividends. Each A share carries ten votes and each B share one vote.

DIVIDEND POLICY

Lifco's Board of Directors has adopted a dividend policy under which dividends are paid based on the company's earnings performance, taking account of future development opportunities and the company's financial position. The long-term objective is to ensure stable dividend growth while maintaining a payout ratio of 30-50 per cent of earnings after tax.

SHAREHOLDER INFORMATION

Financial information about Lifco is available on the company's website. Questions can also be sent directly to Lifco. Annual reports, interim reports and other information can be ordered from Lifco's head office, on the website, by e-mail or by telephone.

Website: www.lifco.se E-mail: ir@lifco.se Telephone: +46 72 717 59 05

SHAREHOLDER VALUE

The management of the Lifco Group works continuously to develop and improve the financial information provided to give current and future owners a good basis on which to obtain a true and fair view of the company. This includes participating in meetings with analysts, investors and the media.

ANALYSTS FOLLOWING LIFCO

Karl Bokvist, ABG Sundal Collier

Robert Redin, Carnegie

Anna Lindholm-Widström, Handelsbanken

Mathias Lundberg, Kepler Cheuvreux

Carl Ragnerstam, Nordea

Dan Johansson, SEB

STOCK MARKET HISTORY

In 1998, Lifco was distributed to the shareholders of Getinge Industrier and listed on the Stockholm Stock Exchange. In 2000, Carl Bennet AB acquired Lifco through a public offer and Lifco was delisted. In the following year, the operations of the company were refocused on its core business areas. Lifco gained its current form in 2006 after acquiring its sister company Sorb Industri, which had been taken private by Carl Bennet AB in 1999. Lifco listed again on the main list of Nasdaq Stockholm in 2014.

DISTRIBUTION OF SHARE CAPITAL

OWNERSHIP DISTRIBUTION BY COUNTRY 31 DECEMBER 2022

Source: Modular Finance.

LIFCO'S 20 LARGEST SHAREHOLDERS, 31 DECEMBER 2022

OWNERSHIP DISTRIBUTION BY SHAREHOLDING 31 DECEMBER 2022

Source: Modular Finance.

DATA PER SHARE

Source: Modular Finance.

The table shows the largest identified shareholders in terms of capital in order of number of votes. Some significant shareholders may have their shares registered in the name of a nominee and are therefore included in other shareholders.

ACQUISITIONS IN 2022

In 2022, Lifco consolidated twelve new businesses with total net sales at the time of acquisition of approximately SEK 1.5 billion and with around 400 employees.

The acquisitions have brought complementary or new products to Lifco and expanded the Group's market presence. The acquisitions had a net positive impact on Lifco's results and financial position during the year.

ACQUISITIONS IN DENTAL

In Dental, four acquisitions were consolidated:

Medtec Medizintechnik, a German maker of equipment and consumables based on MR technology for the treatment of joints.

Oslo Dental of Norway, which sells equipment and service to dentists.

Specialist Alarm Services, a UK maker of staff attack and nurse call systems for the healthcare sector.

Zenith Dental of Denmark, which distributes dental products.

ACQUISITIONS IN DEMOLITION & TOOLS

In Demolition & Tools, three acquisitions were consolidated:

Two Italian companies: Cormidi, a leading manufacturer of mini dumpers and skid loaders, and Trevi Benne, which manufactures excavator tools and attachments.

Prolec of the UK, a niche developer of software and hardware solutions for the construction industry.

ACQUISITIONS IN SYSTEMS SOLUTIONS

In Systems Solutions, five acquisitions were consolidated:

BCC Solutions, a Finnish provider of fibre optic transceivers, fibre cabling and other products.

Cenec Tavlebygg, a Norwegian manufacturer of low-voltage electrical equipment.

Condale Plastics, a UK manufacturer of bespoke plastic extrusions.

EFKA Holding of the Netherlands, which manufactures customised aluminium frames for textiles.

Heinz Schuller, a German distributor of cable support systems and lightning protection products.

PREVIOUS ACQUISITIONS

Over the period 2006-2022, Lifco consolidated 108 acquisitions. A list of all consolidated acquisitions is provided on pages 134-136.

SALE IN 2022

In May 2022, all shares in the Estonian company Hekotek, which sells sawmill equipment to primarily Russian customers, were sold. Hekotek had 130 employees and generated sales of approximately EUR 40 million in 2021. The company was part of the Systems Solutions business area, Forest division. The divestment did not have a material impact on the Group's financial position or on Lifco's results and financial position during the year.

ACQUISITIONS AFTER THE END OF THE YEAR

In January 2023, the assets of Welte Dentallabor, a German dental laboratory, is consolidated. Welte Dentallabor had sales of approximately EUR 1.3 million in 2021 and has twelve employees.

In January 2023, Doxa Dental of Sweden, which develops, manufactures and commercialises bioceramic dental products, is consolidated. Doxa Dental had sales of approximately SEK 12 million in 2021.

In February 2023, Lifco announced the acquisition of The Real Spirit of Coffee in the UK which is a supplier of high-end coffee machines and consumables sold under the Rijo42 brand. The company reported net sales of approximately GBP 24 million in 2022 and has 66 employees.

In March 2023, the UK company Alwayse Engineering, which is a global supplier of ball transfer units and other ball unit solutions, is consolidated. The company reported net sales of approximately GBP 5.6 million in 2022 and has 41 employees.

In March 2023, the UK company Broughton Plant Hire and Sales, which is a niche provider of plant hire solutions for the construction industry, is consolidated. The company reported net sales of approximately GBP 22 million in 2022 and has 100 employees.

In March 2023, the UK company Didsbury Engineering, which is a global supplier of equipment for ground service and maintenance of aircrafts, is consolidated. In 2022, the company reported net sales of approximately GBP 6.5 million and has 33 employees.

In March 2023, the German company Kohler Medizintechnik, which is a manufacturer of dental instruments, is consolidated.

In 2022, Kohler Medizintechnik reported net sales of approximately EUR 7.0 million and has 36 employees.

ACQUISITIONS CONSOLIDATED IN 2022

¹ Refers to net sales in 2020

RISKS AND RISK MANAGEMENT

There are a number of factors which affect, or could affect, Lifco's operations, results and/or financial position. Lifco has 211 operating companies in 30 countries and a large number of suppliers and customers in different industries and geographic territories. This wide distribution of subsidiaries, customers and suppliers limits business risks as well as the sustainability risks at Group level. Lifco's sustainability risks and the business model's resilience to sustainability risks are described on pages 56-62. Lifco's risk process is described on pages 24-25, 32-34, 46, 50-51 and 56.

CORPORATE GOVERNANCE REPORT

Lifco is a Swedish public company that was listed on Nasdaq Stockholm on 21 November 2014. Lifco acquires and develops market-leading, sustainable niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. The Group is guided by a clear philosophy based on long-term growth, profitability and sustainability as well as a strongly decentralised organisation. Lifco comprises 211 operating companies in 30 countries. One of the company's greatest competitive advantages is that it is able to offer secure ownership for small and medium-sized businesses.

Lifco's corporate governance is designed to ensure a continued strong performance for the company and to ensure that the Group fulfils its obligations to its shareholders, customers, employees, suppliers, creditors and society. Lifco's corporate governance and all internal regulations are aimed at furthering the Group's commercial objectives, strategies and sustainability. The Group's risks have been thoroughly analysed and risk management is integrated into the work of the Board as well as the Group's operating activities. The clear connection between corporate governance and the Group's commercial goals ensures fast and flexible decision-making, which is often a crucial success factor. Lifco's organisation is structured to be able to respond rapidly to changes in the market. A strongly decentralised organisation and high degree of autonomy in the subsidiaries enable fast operational decision-making. General decisions on acquisitions, sales, strategies and focus areas are made by Lifco's Board of Directors and Group management.

EXTERNAL AND INTERNAL REGULATIONS

Corporate governance at Lifco is based on Swedish laws, primarily the Swedish Companies Act, as well as the company's Articles of Association, Nasdaq Stockholm's rules for issuers, and other rules and recommendations issued by relevant organisations. Since its listing on Nasdaq Stockholm, Lifco has applied the Swedish Corporate Governance Code ("the Code"). The Code is based on the principle of 'comply or explain'. This means that companies which apply the Code can deviate from individual rules but are required to explain the reasons for each such deviation.

Lifco deviates from the Code in one respect, which is that the Chairman of the Board is also Chairman of the Nomination Committee. This deviation is explained below under "The Nomination Committee".

Internal regulations which affect Lifco ́s corporate governance include the Articles of Association, the rules of procedure for the Board of Directors, the terms of reference for the CEO, the Group ́s Code of Conduct and other policies.

Read more:

About the Code: www.bolagsstyrning.se Lifco's Code of Conduct, Articles of Association and policies in the area of sustainability: lifco.se

SHAREHOLDERS

At 31 December 2022, Lifco had 21,518 shareholders, according to Modular Finance. At 31 December 2022, Lifco ́s share capital consisted of 454,216,300 shares, comprising 30,379,850

Class A shares with ten votes each and 423,836,450 Class B shares with one vote each. At the end of 2022, Lifco had a stock market capitalisation of SEK 79.1 billion. The company's largest shareholder is Carl Bennet AB, which holds 68.9 per cent of the total number of votes in the company. Further information on Lifco's shareholder structure, share performance, etc. is provided on pages 72-73.

2022 ANNUAL GENERAL MEETING

Lifco's Annual General Meeting in Stockholm on 29 April 2022 was attended by 678 shareholders representing 81.8 per cent of the number of shares and 88.6 per cent of the total number of votes. Under the temporary law on exemptions to facilitate the holding of general meetings of businesses and associations, the shareholders had also been offered the opportunity to exercise their right to vote by post. The Chairman of the Board, Chairman of the Audit Committee, CEO, CFO and the company's auditors attended the AGM.

At the AGM, the Directors Carl Bennet, Ulrika Dellby, Dan Frohm, Erik Gabrielson, Ulf Grunander, Annika Espander, Johan Stern, Caroline af Ugglas, Axel Wachtmeister and Per Waldemarson were re-elected to the Board. Carl Bennet was re-elected Chairman of the Board. It was noted that the employee organisations had appointed Tobias Nordin and Peter Wiberg as members of the Board with Anders Lindström and Anders Lorentzson as deputies.

The minutes of the AGM are available at www.lifco.se.

Main resolutions of the AGM: • Adoption of the presented Parent Company and consolidated income statements and balance sheets. • Approval of the Board's proposed dividend of SEK 1.50 per share. • The members of the Board and the Chief Executive Officer were released from liability in respect of the 2021 financial year. • It was resolved that fees in a total amount of SEK 6,760,000 be paid to the Directors, and that fees for committee work be paid in the amount of SEK 268,000 to the Chairman of the Audit Committee and SEK 134,000 to each of the other committee members. The Chairman of the Remuneration Committee will receive SEK 144,000 and each of the other members SEK 89,000. More detailed information can be found below in the section Directors' fees and in Note 10. • The audit firm PricewaterhouseCoopers AB was re-appointed as the company's auditors. • The AGM resolved to approve the Nomination Committee's proposed principles of appointment and terms of reference for the Nomination Committee. • Approval of the Board of Directors' remuneration report. • Approval of the Board of Directors' proposed guidelines for remuneration of senior executives.

2023 ANNUAL GENERAL MEETING

The 2023 Annual General Meeting will be held on Friday 28 April, at 11:00 a.m. at Bonnierhuset, Torsgatan 21, Stockholm. More information about registration, etc. will be provided in the notice.

THE SHAREHOLDERS' MEETING

The shareholders ́ meeting is the company ́s highest decision-making body. At a shareholders ́ meeting the shareholders exercise their voting rights in accordance with Swedish corporate law and Lifco ́s Articles of Association. The shareholders ́ meeting elects the company ́s Board of Directors and auditor. Other duties of the shareholders ́ meeting are to adopt income statements and balance sheets, decide on the appropriation of the company ́s profit or loss and on release from liability for the members of the Board and CEO. The shareholders ́ meeting also adopts resolutions on Directors ́ fees, auditor ́s fees and guidelines for remuneration of senior executives.

The Annual General Meeting must be held within six months of the end of the financial year. In addition to the Annual General Meeting, extraordinary general meetings may be convened. Under Lifco's Articles of Association, notice of a shareholders' meeting is given by advertisement in Post- och Inrikes Tidningar and through publication of the notice on the company's website. The fact that notice has been given shall be announced in Dagens Industri. Shareholders' meetings can be held either in Enköping or Stockholm.

THE NOMINATION COMMITTEE

The duty of the Nomination Committee is to submit, prior to the Annual General Meeting, proposals concerning the election of a chairman for the AGM, the election of the Chairman of the Board and of other members of the Board of Directors, the election of auditors, and Directors' and auditors' fees.

The composition of the Nomination Committee prior to the 2023 Annual General Meeting was published in the interim report for the third quarter and on the company's website on 21 October 2022. The Nomination Committee for the 2023 Annual General Meeting consists of representatives of the registered shareholders holding the largest number of votes. The Chairman of the Board, Carl Bennet, was appointed Chairman of the Nomination Committee prior to the 2023 Annual General Meeting, which is a deviation from the rules of the Code. The reason for the deviation is that it seems natural that a representative of the largest shareholder in terms of votes should chair the Nomination Committee, as this shareholder also has a decisive influence on the composition of the Nomination Committee through its voting majority at shareholders' meetings.

Prior to the 2023 AGM, the Nomination Committee consists of the following representatives:

All shareholders have had an opportunity to submit nominations to the Nomination Committee. No remuneration is paid to the members of the Nomination Committee and the members have determined that there are no conflicts of interest affecting their duties. The Nomination Committee held two minuted meetings prior to the 2023 Annual General Meeting. In addition, the members of the Nomination Committee have had ongoing contact and engaged in further dialogue by telephone in between meetings. The Nomination Committee has addressed all matters that it is required to address under the Code. Furthermore, to ensure that the company is able to fulfil its information disclosure obligations to the shareholders, the Nomination Committee has informed the company of how it has conducted its work and of the proposals that the committee has decided to submit.

As a basis for its work, the Nomination Committee has studied the financial statements for Lifco's operations in 2022. The committee has also studied the nomination proposals received and the evaluation of the Board and its work that has been carried out. The evaluation is done through a web-based self-evaluation and the full results have been presented both to the Nomination Committee and the Board. The results of the evaluation showed that the Directors represent a broad range of expertise and extensive industry and financial knowledge as well as knowledge about international conditions and markets. The evaluation also showed that attendance at Board meetings had been high and that all Directors had displayed a high degree of commitment. Further information on the work of the Nomination Committee is presented in the Nomination Committee's report for the 2023 Annual General Meeting.

In preparing its proposal to the Board, the Nomination Committee applies Rule 4.1, diversity policy, of the Code. The aim of the policy is that the Board of Directors should have a composition that is appropriate in view of the company's operations, development stage and other circumstances as well as diverse and broad with regard to the Directors' expertise, experience and background, and that an equal gender distribution should be strived for. The Nomination Committee's proposals for election of Directors, remuneration of the Board and election of auditors, and other relevant proposals will be submitted in conjunction with the notice of the 2023 Annual General Meeting.

The 2022 AGM resolved to appoint Directors in accordance with the Nomination Committee's proposal, which meant that ten Directors were elected, including three women and seven men, representing 30 and 70 per cent of the Directors, respectively.

THE BOARD OF DIRECTORS

The Board of Directors is the company's second highest decision-making body after the shareholders' meeting and its highest executive body. The Board of Directors is responsible for the company's organisation and the management of its affairs. The Board is also tasked with ensuring that the organisation of the company's accounting and management of funds incorporates satisfactory control activities.

Lifco's Articles of Association state that the Board of Directors shall consist of at least three and not more than ten Directors. The members of the Board are elected annually at the Annual General Meeting for the period until the end of the next AGM. The AGM also appoints the Chairman of the Board. The Chairman's role is to lead the work of the Board and ensure that the Board's activities are well organised and conducted efficiently.

The Articles of Association do not contain provisions regarding the dismissal of Directors or amendments to the Articles of Association.

The Board of Directors operates in accordance with written rules of procedure which are reviewed and adopted annually at the statutory Board meeting. The rules of procedure regulate Board practices, functions and the division of responsibilities between the Board and CEO. Under the rules of procedure, the Board is required to review its own procedures each year. In connection with the statutory Board meeting, the Board also adopts instructions for the company's financial reporting.

The Board convenes in accordance with a schedule that is defined annually. In addition to such Board meetings, further meetings may be convened to address issues which cannot be deferred to a regular meeting. In addition to the Board meetings, the Chairman of the Board and CEO engage in ongoing dialogue concerning the management of the company. In 2022, the auditor participated in one meeting without the presence of representatives of the company.

The Board of Directors constituted itself on 29 April 2022. In 2022, 13 Board meetings were held with an average attendance of the Directors of 98 per cent. With the exception of the CEO, no member of Lifco's Board of Directors has an operational role in the company. A more detailed presentation of the Board and CEO is provided on pages 82-85.

Independence: Lifco meets the requirements of the Code in respect of the independence of Directors. The company is of the view that Per Waldemarson, in his capacity as CEO, was not to be considered independent of the company and management, and that Carl Bennet, Dan Frohm, Erik Gabrielson and Johan Stern, as representatives and Directors of Lifco's main shareholder, Carl Bennet AB, are not to be considered independent of major shareholders. The Director Erik Gabrielson is a partner of Advokatfirman Vinge, a law firm which provides legal services to Lifco AB and Carl Bennet AB. However, the Nomination Committee has made the overall assessment that Erik Gabrielson is nonetheless to be regarded as independent of the company and of management. The other Directors - Ulrika Dellby, Annika Espander, Ulf Grunander, Caroline af Ugglas and Axel Wachtmeister-are considered to be independent of the company, management and major shareholders.

Therése Hoffman, CFO, has acted as secretary at the meetings of the Board. At its regular meetings the Board addresses those standing agenda items which are specified in the rules of procedure for the Board, such as the business situation, financial planning, and preparation of the annual accounts and interim reports. The Board has also addressed general issues concerning the effects of the war in Ukraine, the coronavirus pandemic, economic conditions and related cost issues, acquisitions and other investments, long-term strategies including sustainability management, financial matters, and structural and organisational matters.

As part of the effort to improve the efficiency of and deepen the work of the Board on certain matters, two committees have been established: the Audit Committee and Remuneration Committee. The committees were appointed at the statutory meeting of the Board. The delegation of responsibilities and decision-making power to these committees is described in the rules of procedure for the Board. Matters addressed and resolutions adopted at meetings of the committees are minuted and a report is submitted at a subsequent meeting of the Board.

The Chairman ensures that an annual evaluation is made of the work of the Board of Directors and Chief Executive Officer, and that the Nomination Committee is given an opportunity to study the results of the evaluation. The evaluation was conducted through an online questionnaire given to the members of the Board. The Chairman of the Board has presented the results to the Board of Directors and Nomination Committee.

THE AUDIT COMMITTEE

The Audit Committee is appointed annually by the Board of Directors. The Audit Committee shall, without prejudice to other responsibilities and duties of the Board, monitor the company ́s financial reporting, monitor the effectiveness of Lifco ́s internal control, internal reviews and risk management, keep itself informed on the audit of the annual accounts and consolidated financial statements, assess and monitor the impartiality and independence of the auditor, paying particular attention to whether the auditor provides other services than auditing to the company. The Committee is also tasked with evaluating the audit work and submitting this information to the Nomination Committee, and assisting the Nomination Committee in producing proposals for auditors and the fees to be paid for auditing services.

After the 2022 AGM, the Audit Committee had the following composition: Ulf Grunander, chairman, Ulrika Dellby, member, Dan Frohm, member, and Caroline af Ugglas, member. In 2022, the committee held four minuted meetings and had informal contacts in between meetings, as required. All members attended all meetings of the committee during the year. The company's auditor participated at all meetings of the Audit Committee. The committee discussed and determined the extent of the audit together with the auditor.

THE REMUNERATION COMMITTEE

The Remuneration Committee is appointed annually by the Board of Directors. The Remuneration Committee is tasked with preparing proposals for remuneration principles and for remuneration and other terms of employment for the CEO and senior executives. The Remuneration Committee has not used payroll consultants or engaged other external assistance. After the 2022 AGM, the Remuneration Committee had the following composition: Carl Bennet, chairman, Erik Gabrielson, member, Annika Espander, member, Johan Stern, member, and Axel Wachtmeister, member. In 2022, the committee held two minuted meetings and had informal contacts in between meetings, as required. All members attended all meetings of the committee during the year.

PRESIDENT AND CEO

The Chief Executive Officer reports to the Board of Directors and is responsible for the day-to-day administration and operational management of Lifco. The division of responsibilities between the Board of Directors and CEO is set out in the rules of procedure for the Board and the terms of reference for the CEO. The CEO is also responsible for drafting reports and compiling information from management in preparation for Board meetings and for presenting the material at the meetings.

Under the instructions for financial reporting, the CEO is responsible for financial reporting in the company and is required to ensure that the Board receives sufficient information to enable it continuously to evaluate the company's financial position.

The CEO is required to keep the Board continuously informed about the development of the company's operations, its sales performance, earnings and financial situation, its liquidity and credit situation, significant business events, sustainability management and any other event, circumstance or relationship that may be of material importance to the company's shareholders.

FINANCIAL REPORTING

The Board of Directors monitors the quality of financial reporting by issuing instructions to the CEO and Audit Committee and by defining requirements for the content of the reports on financial conditions that are submitted to the Board on an ongoing basis through an instruction on financial reporting. The Board studies and ensures that financial reports such as year-end reports and annual reports are produced, and has delegated to management responsibility for ensuring that press releases with financial content and presentation material in connection with meetings with the media, shareholders and financial institutions are produced.

EXTERNAL AUDITORS

The auditor-in-charge at PricewaterhouseCoopers AB is the Authorised Public Accountant Cecilia Andren Dorselius, with the Authorised Public Accountant Vicky Johansson as co-auditor. Neither Cecilia Andren Dorselius nor Vicky Johansson holds shares in the company. When PricewaterhouseCoopers is engaged to provide other services than auditing this is done in accordance with the rules adopted by the Audit Committee concerning approval of the nature and scope of the services and payment for these. Lifco does not consider that the performance of these services has jeopardised PricewaterhouseCoopers' independence.

All fees paid to the auditors over the past two years are presented in Note 8. Lifco's auditor participated at all meetings of the Audit Committee in 2022 and at one Board meeting. In connection with the Board meeting, the auditor held a meeting with the Board of Directors at which no representatives of the company participated.

Under the Articles of Association, Lifco is required to have one or two auditors with up to two deputies. The appointed auditor must be an Authorised Public Accountant or registered audit firm.

OPERATING ACTIVITIES

The CEO and other members of Group management hold ongoing meetings to review monthly results, update forecasts and plans, and discuss strategic matters. Lifco's Group management team consists of three individuals, who are presented on page 86. In addition to operational matters concerning each business area, Group management addresses matters of concern to the Group as a whole. Group management consists of the Chief Executive Officer, Chief Financial Officer and Head of Business Area Systems Solutions.

The Board is responsible for ensuring that an effective system for internal control and risk management is in place. Responsibility for establishing a good framework for working on these matters has been delegated to the CEO. Group management and managers at different levels of the company have this responsibility in their respective areas. Authority and responsibilities are defined in policies, guidelines and descriptions of responsibilities.

DIRECTORS'FEES

The 2022 AGM approved the payment of Directors' fees in a total amount of SEK 6,760,000, of which SEK 1,352,000 was payable to the Chairman of the Board and SEK 676,000 to each of the Non-Executive Directors. The AGM also approved the payment of remuneration for work on the Audit Committee in the amount of SEK 268,000 to the Chairman and SEK 134,000 to each of the other members, and the payment of remuneration for work on the Remuneration Committee in the amount of SEK 144,000 to the Chairman and SEK 89,000 to each of the other members.

SYNTHETIC OPTIONS

On 31 May 2021, Lifco was informed by the company's main owner, Carl Bennet AB, that Directors and senior executives of Lifco had acquired synthetic call options on shares in Lifco issued by Carl Bennet AB.

Carl Bennet AB made an offer to all AGM-appointed Directors, with the exception of Carl Bennet, and all senior executives in Lifco, a total of 21 individuals, to acquire synthetic call options on shares in Lifco issued by Carl Bennet AB. A total of 415,201 options were acquired at a price equal to the options' market value on the transaction date, based on an external valuation statement. The total market value of the options on the transaction date was estimated at SEK 9.5 million.

The synthetic call options refer to Lifco's series Class B shares and have a term of four years. The options can be exercised during the period 1 March 2025 to 31 May 2025. The exercise price is SEK 223.71 per option, which is equal to 122 per cent of the volume-weighted average price paid for Lifco's Class B shares on Nasdaq Stockholm on each trading day during the period 24-28 May 2021. Upon exercise of the option, the holder receives a cash payment from the option issuer equal to the market price of the shares at the time of exercise less the exercise price. The terms of the options contain a cap which limits the payout for each option to SEK 326.40. The options are not subject to any transfer restrictions.

SHARE/SHARE PRICE-BASED INCENTIVE SCHEMES

There are no outstanding share- or share pricebased incentive schemes for the members of the Board of Directors, the CEO or other senior executives.

REMUNERATION OF SENIOR EXECUTIVES

The 2022 AGM adopted the below guidelines for remuneration of senior executives. Of the votes cast, 96.39 per cent approved the proposal and 0.12 per cent abstained from voting. The guidelines essentially match the principles applied to date.

1. SCOPE OF THE GUIDELINES

These guidelines pertain to remuneration and other terms and conditions of employment for the persons who during the time the guidelines apply are members of Lifco AB's Group management, referred to jointly below as "senior executives". The guidelines are to be applied to remuneration that is agreed, and changes made to already agreed remuneration, after the time that the guidelines have been adopted by the 2022 AGM. The guidelines do not encompass remuneration resolved by the shareholders' meeting.

Concerning terms of employment subject to regulations other than those applying in Sweden, appropriate adjustments may be made to comply with such mandatory regulations or established local practices, whereby the overall objectives of these guidelines must be met to the extent possible.

2. THE GUIDELINES' PROMOTION OF THE COMPANY'S BUSINESS STRATEGY, LONGTERM INTERESTS AND SUSTAINABILITY

Lifco's business concept is to acquire and develop market-leading niche businesses that conduct sustainable operations and have the potential to deliver sustainable earnings growth and robust cash flows. The Group pursues a distinct business strategy focusing on results, simplicity and decentralisation. Lifco's overall aim is to increase earnings every year, which has been achieved through both organic growth and acquisitions. For further information on Lifco ́s business strategy, see the annual report.

A prerequisite for successful implementation of the company's business strategy and safeguarding of Lifco's long-term interests, including its sustainability, is that the company is able to recruit and retain qualified employees. To achieve this, the company must be able to offer competitive remuneration. These guidelines make it possible to offer competitive total remuneration to senior executives. Variable cash remuneration covered by these guidelines shall aim at promoting the company's business strategy and long-term interests, including its sustainability.

3. FORMS OF REMUNERATION, ETC.

Remuneration shall be market-aligned and may comprise the following components: fixed cash salary, variable cash salary, pension benefits and other benefits. The shareholders' meeting may also - regardless of these guidelines - resolve on, for example, share- and share price-related remuneration.

Fixed remuneration

The fixed remuneration, the basic salary, shall be based on the individual executive ́s area of responsibility, authorities, field of competence and experience.

Variable remuneration and criteria for payment of variable cash remuneration, etc.

Variable cash remuneration covered by these guidelines shall aim at promoting the company's business strategy and long-term interests, including its sustainability. The amount of variable remuneration in relation to basic salary must be in proportion to the senior executive's responsibility and authority. Variable remuneration is linked to predefined and measurable criteria which have been defined with the aim of promoting the creation of long-term value by the company. Fulfilment of criteria for the payment of variable cash salary shall be measured over a period of one year. When the measurement period for fulfilment of criteria for payment of variable cash salary has ended, an assessment is to be made of the extent to which the criteria have been met.

For the CEO, variable remuneration is capped at 100 per cent of the basic salary. The variable remuneration shall be based on individual targets proposed by the Remuneration Committee and adopted by the Board. Examples of such targets include earnings, volume growth, working capital and cash flow. For other senior executives, the variable remuneration shall be based, partly, on the outcome of his/her own area of responsibility and, partly, on individually set targets. Examples of such targets include earnings, volume growth, working capital and cash flow. The CEO is responsible for the assessment of variable cash salary paid to other executives.

No variable remuneration shall be paid if a pre-tax loss is reported.

Pension benefits and other benefits

Pension rights for the CEO and other senior executives shall apply no earlier than from age 65. For the CEO, an amount corresponding to 60 per cent (excluding payroll expenses) of the annual basic salary will be reserved in capital, pension, life and health insurances. Other senior executives are entitled to pension benefits of a maximum of 35 per cent (excluding payroll expenses) of the annual basic salary. Pension agreements shall be entered into based on applicable local rules in the senior executive's country of residence. All pension benefits are defined contribution benefits and vested, meaning they are not conditional on future employment in Lifco.

Other benefits, such as a company car, extra health insurance or occupational health care, may be offered to the extent that this is considered to be in line with market practice for senior executives in equivalent positions in the labour market in which the executive is active. The total value of such benefits must, however, represent a minor portion of the total compensation.

Termination of employment

The employment contract of the CEO is terminable on six months' notice in case of termination by the CEO. If the employment of the CEO is terminated by the company, a period of notice of not more than 18 months will apply. If the employment of other senior executives is terminated by the company, a period of notice of not more than 12 months will apply. The right to salary and other benefits is retained during the period of notice. Basic salary during the period of notice and severance pay shall, combined, not exceed an amount corresponding to basic salary for two years. Other income shall not be deducted from termination pay.

4. SALARY AND TERMS OF EMPLOYMENT FOR EMPLOYEES

When preparing the Board's proposal on these remuneration guidelines, salary and terms of employment for the company's employees have been considered by having information on the employees' total remuneration, components of the remuneration and the increase and rate of increase in remuneration over time constitute part of the Remuneration Committee's and the Board's decision documentation when assessing the fairness of the guidelines and the limitations that follow from them.

5. DECISION-MAKING PROCESS FOR ADOPTING, REVIEWING AND IMPLEMENTING THE GUIDELINES

The Board has established a Remuneration Committee. This committee's tasks include preparing the Board's resolution on the proposed guidelines for remuneration of senior executives. The Board shall formulate proposals for new guidelines when needs arise for significant changes in the guidelines, although at least every fourth year, and submit the proposal for resolution by the AGM. The guidelines are to apply until new guidelines have been adopted by the shareholders' meeting. The Remuneration Committee shall also monitor and evaluate variable remuneration programs for the company management, the application of guidelines for remuneration of senior executives and applicable remuneration structures and remuneration levels in the company. Members of the Remuneration Committee are independent in relation to the company and executive management. Neither the CEO nor other members of company management participate in the Board of Directors' processing of and decisions on remuneration-related matters, insofar as they are impacted by these matters.

6. DEVIATION FROM THE GUIDELINES

The Board shall be entitled to partly or fully deviate from the guidelines if there is special reason to do so in an individual case and such deviation is necessary to satisfy the company's long-term interests, including its sustainability, or to safeguard the company's financial viability. As stated above, the Remuneration Committee's tasks include preparing the Board of Directors' resolutions on remuneration-related matters.

AUDITORS' FEES

PricewaterhouseCoopers AB has been engaged as the company's auditor. Audit engagement refers to the examination of the annual accounts and accounting records and of the Board of Directors' and Chief Executive Officer's administration of the company, other tasks incumbent on the company's auditor as well as advice and other assistance occasioned by observations made in the course of such examination or the carrying-out of such other tasks. Other services refer essentially to advisory services in the area of accounting and tax as well as assistance in connection with acquisitions. Auditors' fees for the audit engagement in 2022 totalled SEK 12 (11) million while fees for other services totalled SEK 2 (2) million, see Note 8.

INTERNAL CONTROL AND RISK MANAGEMENT RELATED TO FINANCIAL REPORTING

Internal control over financial reporting is an integral part of corporate governance in the Lifco Group. It includes processes and methods for safeguarding the assets of the Group and the accuracy of its financial reporting, and thus also the shareholders' investment in the company.

CONTROL ENVIRONMENT

Lifco's organisation is structured to be able to respond rapidly to changes in the market. A strongly decentralised organisation and high degree of autonomy in the subsidiaries enable fast operational decision-making. General decisions on acquisitions, sales, strategies and focus areas are made by Lifco's Board of Directors and Group management. The internal control activities for financial reporting have been designed to handle these circumstances. The basis for internal control related to financial reporting consists of the control environment, including organisation, decision paths, authority and responsibilities, as documented and communicated in governing documents.

Each year, the Board adopts rules of procedure, which regulate the duties of the Chairman of the Board and Chief Executive Officer among other matters. The Board has established an Audit Committee to improve transparency and control of the company's accounting, financial reporting and risk management as well as a Remuneration Committee to handle matters relating to remuneration of management.

Each operating unit has one or more administrative centres that are responsible for ongoing transaction management and accounting. Each operating unit has a financial officer who is responsible for the financial governance of the unit and for ensuring that financial reports are correct and complete and delivered in time for the preparation of the consolidated financial statements.

RISK ASSESSMENT

Risk assessment is based on the Lifco Group's financial targets. The general financial risks have been defined and are largely industry-specific. Through quantitative and qualitative risk analyses based on the consolidated balance sheet and income statement, Lifco identifies those key risks which could jeopardise the Group's ability to achieve its commercial and financial targets. In each operating unit, analyses are also made of several subsidiaries to obtain a more detailed view of the actual application of existing regulations. Measures aimed at minimising the identified risks are then defined centrally in the Group.

CONTROL ACTIVITIES

Identified risks related to financial reporting are managed through the company's control activities. There are, for example, automated controls in IT-based systems which manage authorisations and authorisation rights as well as manual controls. Detailed financial analyses of results supplement business-specific controls and provide a general confirmation of the quality of the reporting.

INFORMATION AND COMMUNICATION

Lifco has information and communication paths which are aimed at promoting completeness and accuracy in financial reporting. Policies and instructions are available on the company's intranet. Information about the effectiveness of internal control in the Group is prepared and reported on a regular basis to relevant parties in the organisation.

REVIEW AND MONITORING

Each month, management and the central finance function analyse the Group's financial reporting at a detailed level. At its meetings, the Audit Committee reviews the financial reporting and receives reports from the company's auditors containing their observations and recommendations. The Board receives financial reports on a monthly basis and discusses the Group's financial situation at each meeting. The effectiveness of the Group's internal control activities is reviewed regularly at different levels of the Group, covering an assessment of design and operational functionality.

In 2022, the review of the Group's internal control was completed by Group management and Lifco's central finance function with the assistance of the external auditors. The Audit Committee also plays an important role in internal control, having the task of evaluating the audit services and internal control. The review showed that in all essential respects documentation and control activities have been established in the Group. Based on the completed internal control activities, the Board has made the assessment that there is currently no need to introduce a separate audit function (internal audit function).

ONGOING ACTIVITIES

Over the coming year, the ongoing internal control activities in the Lifco Group will focus mainly on risk assessment, control activities, and review and monitoring activities.

THE BOARD OF DIRECTORS

CARL BENNET

Chairman of the Board

Born in 1951. Elected in 1998.

B.Sc. (Econ.), Ph.D h.c. (Med.), Ph.D. h.c. (Tech.)

Current posts: CEO Carl Bennet AB. Deputy Chairman of the Boards of Arjo, Elanders and Getinge. Director of Holmen and L E Lundbergforetagen.

Previous posts: President and CEO of Getinge.

Shareholding through companies, 31 December 2022: 30,379,850 Class A shares, 197,502,023 Class B shares.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: No

ULRIKA DELLBY

Director

Born in 1966. Elected in 2015.

M.Sc. in Economics and Business

Current posts: Chairman of Fasadgruppen Group AB. Director of BICO AB, Line AB, SJ AB, Werksta Nordic AB and Business Executives Council of the Royal Swedish Academy of Engineering.

Previous posts: Partner of Fagerberg & Dellby Fond I AB and of The Boston Consulting Group, CEO of Brindfors Enterprise IG (now Brand Union), Vice Chairman of Norrporten, Director of among all Kavli Holding AS and Cybercom Group AB.

Own and related parties ́ shareholdings, 31 December 2022: 65,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: Yes

ANNIKA ESPANDER

Director

Born in 1964. Elected in 2016.

B.Sc. in Chemistry and MBA

Current posts: CEO of Asperion Ltda.

Previous posts: Head of Private Banking at Handelsbanken, Chairman of SHB Luxemburg. Senior positions at Catella Healthcare, Enskilda Securities and other companies. Director of Elekta AB, Biotage AB, Probi AB and Stille AB. Own and related parties' shareholdings, 31 December 2022: 10,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: Yes

DANFROHM

Director

Born in 1981. Elected in 2020.

M.Sc. in Engineering

Current posts: CEO of DF Advisory LLC. Chairman of the Board of Elanders AB and Director of Arjo AB, Carl Bennet AB, Getinge AB and the Swedish-American Chamber of Commerce, Inc.

Previous posts: Management consultant at Applied Value LLC in New York.

Own and related parties' shareholdings, 31 December 2022: 253,090 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: No

¹ The synthetic options are issued by Carl Bennet AB.

ERIK GABRIELSON

Director

Born in 1962. Elected in 2001.

LL.M.

Current posts: Lawyer and partner, Advokatfirman Vinge. Chairman of Allegresse AB, Eldan Recycling A/S and Redoma Recycling AB. Director of Carl Bennet AB, Elanders AB, ECG Vignoble AB, ECG Vinivest AB and Zutec Holding AB.

Previous posts: Director of Advokatfirman Vinge AB, Advokatfirman Vinge Skane AB, Generic Sweden AB, Rosengard Invest AB and Storegate AB. Own and related parties' shareholdings, 31 December 2022: 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: No

ULF GRUNANDER

Director

Born in 1954. Elected in 2015.

M.Sc. in Economics and Business

Current posts: Director of AMF Fonder AB, AMF Tjanstepension AB, Arjo AB, Djurgården Hockey AB and Episurf Medical AB.

Previous posts: CFO of Getinge Group.

Own and related parties' shareholdings, 31 December 2022: 14,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: Yes

JOHAN STERN

Vice Chairman

Born in 1951. Elected in 2001.

M.Sc. in Economics and Business

Current posts: Chairman of Healthinvest Partners AB, Rolling Optics AB, Skanör Falsterbo Fastighets AB and Stiftelsen Harry Cullbergs Fond. Director of Carl Bennet AB, Elanders AB and Estea AB.

Previous posts: Roles at SEB in Sweden and the US. Director of Getinge AB and RP Ventures AB.

Own and related parties' shareholdings, 31 December 2022: 230,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: No

CAROLINE AF UGGLAS

Director

Born in 1958. Elected in 2020.

M.Sc. in Economics from Stockholm University

Current posts: Director of ACQ BURE, Beijer Alma, Bilia, Spiltan Invest och Trapets.

Previous posts: Deputy CEO at the Confederation of Swedish Enterprise, head of Equities at Livforsakrings AB Skandia and Director of Acando AB, AMF, Connecta, Lindab and Latour.

Own and related parties' shareholdings, 31 December 2022: 5,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: Yes

¹ The synthetic options are issued by Carl Bennet AB.

AXEL WACHTMEISTER

Director

Born in 1951. Elected in 2006.

M.Sc. in Engineering.

Previous posts: Director of Sorb Industri AB and Troponor AB.

Own and related parties' shareholdings, 31 December 2022: 81,000 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: Yes

Independent of main owner: Yes

PER WALDEMARSON

Director and CEO.

Born in 1977. Elected in 2019.

M.Sc. in Business Administration

Current posts outside Lifco: -

Previous posts: Deputy CEO Lifco, Head of Business Area Dental, CEO

Brokk AB, Management Consultant Bain & Co.

Own and related parties' shareholdings, 31 December 2022: 513,500 Class B shares, 180,000 Class B shares through a pension plan and 87,412 synthetic call options ¹.

Nationality: Swedish

Independent of the company and of management: No

Independent of main owner: Yes

TOBIAS NORDIN

Director, employee representative PTK

Born in 1983. Elected in 2022. Employed at Brokk.

Own and related parties' shareholdings, 31 December 2022: -

Nationality: Swedish

PETER WIBERG

Director, employee representative LO

Born in 1960. Elected in 2013. Employee of Modul-System HH AB.

Own and related parties' shareholdings, 31 December 2022: 1,575 Class B shares.

Nationality: Swedish

¹ The synthetic options are issued by Carl Bennet AB.

ANDERS LINDSTROM

Employee representative, deputy, LO

Born in 1958. Elected in 2019. Employee of Lifco Dental AB.

Own and related parties' shareholdings, 31 December 2022: - Nationality: Swedish

ANDERS LORENTZSON

Employee representative, deputy, PTK

Regular Director 2018-2021.

Born in 1957. Elected in 2017. Employee of Rapid Granulator AB.

Own and related parties' shareholdings, 31 December 2022: -

Nationality: Swedish

AUDITOR

PricewaterhouseCoopers AB has been Lifco's auditor since 2010.

At the 2022 Annual General Meeting, PricewaterhouseCoopers were re-appointed for the period until the end of the 2023 AGM.

Cecilia Andrén Dorselius is the auditor-in-charge. Cecilia Andrén Dorselius is an Authorised Public Accountant and member of FAR.

Vicky Johansson is co-auditor. Vicky Johansson is an Authorised Public Accountant and member of FAR.

The address of PricewaterhouseCoopers is Torsgatan 21, SE-113 97 Stockholm.

DIRECTORS' ATTENDANCE

¹ Appointed at the 2022 Annual General Meeting.

GROUP MANAGEMENT

PER WALDEMARSON

President and CEO

Born in 1977. Appointed in 2019. Hired in 2006.

M.Sc. in Economics and Business

Previous posts: Deputy CEO Lifco, Head of Business Area Dental, CEO Brokk AB, Management Consultant Bain & Co.

Own and related parties' shareholdings, 31 December 2022: 513,500 Class B shares, 180,000 Class B shares through a pension plan and 87,412 synthetic call options ¹.

Nationality: Swedish

THERESE HOFFMAN

Chief Financial Officer

Born in 1971. Appointed in 2011. Hired in 2007.

High School Economist, International Marketing

Previous posts: CFO at Nordenta AB.

Own and related parties' shareholdings, 31 December 2022: 1,500 Class B shares and 10,926 synthetic call options ¹.

Nationality: Swedish

MARTIN LINDER

Head of Business Area Systems Solutions

Born in 1972. Appointed in 2019. Hired in 2008.

M.Sc. in Engineering, Ph.D.

Previous posts: CEO Proline Group, CEO Leab Group, senior positions at Note.

Own and related parties' shareholdings, 31 December 2022: 203,000

Class B shares, 51,250 Class B shares through a pension plan and 43,706 synthetic call options ¹.

Nationality: Swedish

APPROPRIATION OF RETAINED EARNINGS

Lifco AB (publ), corp. ID 556465-3185

The Board of Directors believes the proposed dividend is justifiable with regard to the equity requirements arising from the nature, scope and risks associated with the operations of the Group as well as the Group's consolidation requirements, liquidity and financial position.

For more information about the results and financial position of the Group and Parent Company, see the annual report. The income statements and balance sheets will be presented for approval by the Annual General Meeting on 28 April 2023.

The Board of Directors and CEO certify that the consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU, and provide a true and fair view of the Group's financial position and results. The annual accounts have been prepared in accordance with generally accepted accounting standards and provide a true and fair view of the Parent Company's financial position and results.

The Directors' report for the Group and Parent Company provides a true and fair overview of the development of the Group's and Parent Company's business, financial position and results and describes significant risks and uncertainties faced by the Parent Company and the companies included in the Group.

AUDITOR'S REPORT

Unofficial translation

To the general meeting of the shareholders of Lifco AB (publ), corporate identity number 556465-3185

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS

OPINIONS

We have audited the annual accounts and consolidated accounts of Lifco AB (publ) for the year 2022 except for the corporate governance statement and the statutory sustainability report on pages 80-88 and 14-65 respectively. The annual accounts and consolidated accounts of the company are included on pages 14-121 and 124-134 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company and the group as of 31 December 2022 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2022 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement and the statutory sustainability report on pages 80-88 and 14-65 respectively. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.

BASIS FOR OPINIONS

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

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

OUR AUDIT APPROACH

Audit scope

We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where management and the Board of Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management and the Managing Director override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

KEY AUDIT MATTERS

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

OTHER INFORMATION THAN THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-65, 122-123 and 135-155. The Board of Directors and the Managing Director are responsible for this other information.

The other information also consists of the 2022 Compensation Report that we obtained prior to the date of this auditor's report. The Board of Directors and the CEO are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE BOARD OF DIRECTOR'S AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.

AUDITOR'S RESPONSIBILITY

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

A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/ revisornsansvar. This description is part of the auditor's report.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

OPINIONS

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Director's and the Managing Director of Lifco AB (publ) for the year 2022 and the proposed appropriations of the company's profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Director's and the Managing Director be discharged from liability for the financial year.

BASIS FOR OPINIONS

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

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

RESPONSIBILITIES OF THE BOARD OF DIRECTOR'S AND THE MANAGING DIRECTOR

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group' equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.

AUDITOR'S RESPONSIBILITY

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.

THE AUDITOR'S EXAMINATION OF THE ESEF REPORT

OPINION

In addition to our audit of the annual accounts and consolidated accounts, we have also examined that the Board of Directors and the Managing Director have prepared the annual accounts and consolidated accounts in a format that enables uniform electronic reporting (the Esef report) pursuant to Chapter 16, Section 4 a of the Swedish Securities Market Act (2007:528) for Lifco AB (publ) for the financial year 2022.

Our examination and our opinion relate only to the statutory requirements.

In our opinion, the Esef report has been prepared in a format that, in all material respects, enables uniform electronic reporting.

BASIS FOR OPINION

We have performed the examination in accordance with FAR's recommendation RevR 18 Examination of the Esef report. Our responsibility under this recommendation is described in more detail in the Auditors' responsibility section. We are independent of Lifco AB (publ) in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

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

RESPONSIBILITIES OF THE BOARD OF DIRECTOR'S AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Director are responsible for the preparation of the Esef report in accordance with the Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director determine is necessary to prepare the Esef report without material misstatements, whether due to fraud or error.

AUDITOR'S RESPONSIBILITY

Our responsibility is to obtain reasonable assurance whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), based on the procedures performed.

RevR 18 requires us to plan and execute procedures to achieve reasonable assurance that the Esef report is prepared in a format that meets these requirements.

Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Esef report.

The audit firm applies ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regulatory requirements.

The examination involves obtaining evidence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement in the report, whether due to fraud or error. In carrying out this risk assessment, and in order to design procedures that are appropriate in the circumstances, the auditor considers those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opinion on the effectiveness of those internal controls. The examination also includes an evaluation of the appropriateness and reasonableness of assumptions made by the Board of Directors and the Managing Director.

The procedures mainly include a validation that the Esef report has been prepared in a valid XHTML format and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts.

Furthermore, the procedures also include an assessment of whether the consolidated statement of financial performance, financial position, changes in equity, cash flow and disclosures in the Esef report has been marked with iXBRL in accordance with what follows from the Esef regulation.

THE AUDITOR'S EXAMINATION OF THE CORPORATE GOVERNANCE STATEMENT

The Board of Directors is responsible for that the corporate governance statement on pages 80-88 has been prepared in accordance with the Annual Accounts Act.

Our examination of the corporate governance statement is conducted in accordance with FAR's auditing standard RevR 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.

AUDITOR'S REPORT ON THE STATUTORY SUSTAINABILITY REPORT

It is the board of directors who is responsible for the statutory sustainability report on pages 14-65 and that it has been prepared in accordance with the Annual Accounts Act.

Our examination has been conducted in accordance with FAR's auditing standard RevR 12 The auditor's opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is substantially different and less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.

A statutory sustainability report has been prepared.

PricewaterhouseCoopers AB, 113 97 Stockholm, was appointed auditor of Lifco AB (publ) by the general meeting of the shareholders on the 29 April 2022 and has been the company's auditor since the general meeting of the shareholders in 2010.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

CONSOLIDATED BALANCE SHEET

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

CONSOLIDATED BALANCE SHEET, CONTINUED

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT

The notes on pages 98-132 are an integral part of the annual report and consolidated financial statements.

NOTE 1 GENERAL INFORMATION

Lifco acquires and develops market-leading sustainable niche businesses in three business areas: Dental, Demolition & Tools and Systems Solutions. The operations are conducted through subsidiaries in 30 countries. The Parent Company, Lifco AB (publ), is a limited company with registered office in Enköping, Sweden (Verkmästaregatan 1, SE-745 85 Enköping).

This annual report, relating to the 2022 financial year, was approved for publication by the Board of Directors on 29 March 2023. The consolidated and Parent Company income statements and balance sheets will be submitted for adoption at the Annual General Meeting on 28 April 2023.

Unless otherwise stated, all amounts are expressed in millions of Swedish kronor (SEK million). Figures in parentheses refer to the previous year.

Parent Company guarantees were issued to the subsidiaries M+W Dental Muller & Weygandt GmbH, Interadent Zahntechnik GmbH, MDH AG Mamisch Dental Health, Kinshofer GmbH, ErgoPack Deutschland GmbH and Truck-line Gmbh, registered in Germany. Lifco AB (publ) guarantees all existing commitments for these companies from 31 December 2022 until the end of the next financial year. Due to this, these companies, including their German subsidiaries, as described in Note 48, apply the exemption stipulated in Section 264 (3) of the German Commercial Code (HGB). These regulations exempt the company from statutory audits and entail relief regarding the preparation and publication of financial statements. According to Sec 291 (1) and (2) of the German Commercial Code (HGB), Interadent Zahntechnik GmbH, MDH AG Mamisch Dental Health, EDP European Dental Partners Holding GmbH, PP Greiftechnik GmbH and Kinshofer GmbH are also exempt from the requirement to prepare consolidated financial statements since they are included in Lifco AB's consolidated financial statements.

It has also been decided that the exemption rules provided for in Section 264 (3) of the German Commercial Code are applicable in respect of the Directors' Report and the publication of the financial statements in the official Federal Gazette for the subsidiaries, as listed below:

For a full list of consolidated companies, see Note 48.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The key accounting policies applied in preparing these consolidated financial statements are described in the following. Unless otherwise stated, these policies have been applied consistently for all the years presented.

2.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The consolidated financial statements for the Lifco Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU. Recommendation RFR 1 Supplementary Financial Reporting Rules for Corporate Groups of the Swedish Financial Reporting Board and the Swedish Annual Accounts Act have also been applied. The consolidated financial statements have been prepared using the cost method.

New and amended standards applied by the Group

The new standards and interpretations that became effective from the 2022 financial year have not had any significant impact on the financial statements.

New and amended standards and interpretations which have not yet become effective

No standards, amendments and interpretations which become effective for financial years beginning after 1 January 2023 will have a material impact on the consolidated financial statements.

2.2 CONSOLIDATION

Subsidiaries

All companies (including structured entities) over which the Group exercises a controlling influence are classified as subsidiaries. The Group controls a company when it is exposed to or has the right to a variable return on its investment in the company and is able to influence the return through its influence in the company. Subsidiaries are included in the consolidated financial statements as of the date at which the controlling interest is transferred to the Group. They are excluded from the consolidated financial statements as of the date on which the controlling interest ceases to exist. In most cases, Lifco acquires 100 per cent of its subsidiaries. Where a smaller stake is acquired this is done with mandatory put/buy options, which means that minority-owned companies are not significant and thus have no significant impact on the consolidated financial statements.

The purchase method is applied in accounting for the Group's business combinations. The consideration paid for the acquisition of a subsidiary comprises the fair value of the transferred assets, liabilities and any shares issued by the Group. The consideration also includes the fair value of all assets or liabilities that are a consequence of a contingent consideration arrangement. Each contingent consideration payable by the Group is measured at fair value at the acquisition date. Subsequent changes to the fair value of a contingent consideration that has been classified as a liability is accounted for in accordance with IAS 39 in profit or loss. Acquisition-related costs are charged to expense as incurred. Identified assets acquired and liabilities assumed in a business combination are initially measured at fair value at the acquisition date. For each acquisition, i.e. on an acquisition by acquisition basis, the Group determines whether to recognise a non-controlling interest in the acquired entity at fair value or at the interest's proportional share of the acquired entity's net assets.

The amount by which the consideration, any non-controlling interest and the fair value of the previous equity interest in the acquired entity at the acquisition date exceeds the fair value of the identified net assets is recognised as goodwill.

Commitments for the acquisition of non-controlling interests are considered as financial liabilities and the subsequent changes in value are recognised in equity.

Intercompany transactions, balances, income and expenses, and unrealised gains and losses on transactions between Group companies are eliminated. Where applicable, the accounting policies for subsidiaries have been amended to guarantee a consistent application of the Group's policies.

Change in ownership interest in a subsidiary without loss of control

Transactions with non-controlling interests which do not lead to loss of control are accounted for as equity transactions, i.e. transactions with owners in their role as owners. In case of acquisitions from non-controlling interests the difference between the fair value of the consideration paid and the actual acquired portion of the carrying amount of the subsidiary's net assets is recognised in equity. Gains and losses on sales to non-controlling interests are also recognised in equity.

2.3 TRANSLATION OF FOREIGN CURRENCY

Functional currency and reporting currency

The various entities in the Group have the local currency as their functional currency, as the local currency has been defined as the currency of the primary economic environment in which each entity operates. Swedish kronor (SEK), the functional and reporting currency of the Parent Company and Group, is used in the consolidated financial statements.

Transactions and balances

Transactions in foreign currency are translated to the functional currency at the transaction date exchange rates. Exchange rate gains and losses arising from such transactions and upon translation of monetary assets and liabilities in foreign currency at closing rates are recognised in profit or loss, except when the transactions constitute net investments, for which gains and losses are recognised in other comprehensive income. Receivables and liabilities in foreign currency are stated at closing rates. Unrealised exchange rate gains and losses are included in profit or loss. Exchange rate differences attributable to operating receivables and payables are accounted for as other operating income (operating expenses). Exchange rate differences related to financial assets and liabilities are accounted for in other financial items.

Translation of foreign Group companies

Results and financial position for those entities which have a different functional currency than the reporting currency are translated to the Group's reporting currency. All assets and liabilities in the subsidiaries are translated at the closing rate while all items in the income statements are translated at the average exchange rate. The resulting translation differences are due partly to the difference between the income statements' average rates and the closing rate, and partly to the fact that the net assets are translated at a different rate at the end of the year than at the beginning of the year. The translation differences are recognised in other comprehensive income. Hedge accounting is used for external loans which have been raised for the purpose of reducing the translation effects in the exposed currency to meet the net assets which exist in the foreign subsidiaries. Exchange rate differences on these loans are recognised directly in other comprehensive income for the Group. Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities in this operation and translated at the closing rate. Translation differences are recognised in other comprehensive income.

2.4 INTANGIBLE ASSETS

Goodwill

Goodwill arises on the acquisition of subsidiaries and refers to the amount by which the consideration exceeds Lifco's share of the fair value of identifiable assets, liabilities and contingent liabilities in the acquired entity and the fair value of non-controlling interests in the acquired entity. All acquisitions refer to a strategic and long-term investment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill has been allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. Goodwill is tested for impairment at least annually if there are events or changes in circumstances which indicate potential impairment. The carrying amount of goodwill is compared with the recoverable amount, which is defined as the higher of value in use and fair value less selling expenses. Any impairment loss is expensed immediately and cannot be reversed.

Patents

Patents which have been acquired separately are recognised at cost less accumulated amortisation. Patents are sought for unique constructions and technical solutions which form part of products developed by the company. The assets are amortised on a straight-line basis to allocate the cost for patents over the estimated useful life, which is the shorter of the patent's legal life and the period until the product related to the patent is expected to be produced. As a rule, the estimated useful life of patents is not expected to exceed five years.

Licences, trademarks and customer relationships

Licences, trademarks and customer relationships which have been acquired separately are recognised at cost while those which have been acquired through a business combination are measured at fair value at the acquisition date. Licences, trademarks and customer relationships which have a definite useful life are recognised at cost less accumulated amortisation. The assets are amortised on a straight-line basis to allocate the cost over the estimated useful life, which is estimated at 2-20 years for licenses and trademarks and ten years for customer relationships. Trademarks, which are considered to have indefinite useful lives, are tested annually for impairment.

Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These capitalised costs are amortised over the estimated useful life, which ranges from 3-5 years.

2.5 TANGIBLE ASSETS

Tangible assets are recognised at cost less depreciation. Cost is including expenditure that is directly attributable to the acquisition of the asset.

Any additional expenditure is added to the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the asset will accrue to Lifco and the cost can be reliably measured. The carrying amount of a replaced portion is removed from the balance sheet. All other forms of repairs and maintenance are recognised as expenses in the income statement in the periods in which they are incurred.

Land is not depreciated. Each part of a tangible fixed asset with a cost that is significant in relation to the total cost of the item is depreciated separately. Assets are depreciated on a straight-line basis as follows:

Residual values and useful lives of assets are tested at the end of each reporting period and adjusted where required. An asset's carrying amount is written down to the recoverable amount immediately if the carrying amount exceeds the estimated recoverable amount.

Gains and losses on the sale of a tangible fixed asset is determined by comparing the sale proceeds and the carrying amount, whereby the difference is recognised in other operating income or other operating expenses in the income statement.

2.6 IMPAIRMENT OF NON-FINANCIAL FIXED ASSETS

Assets that are depreciated or amortised are tested for impairment when an event or change of circumstance indicates that the carrying amount may not be recoverable. The difference between the carrying amount and recoverable amount is recognised as an impairment loss. The recoverable amount is the higher of the fair value of the asset less costs to sell and value in use. In testing for impairment, assets are grouped to the lowest levels at which there are separate identifiable cash flows (cash-generating units).

2.7 FINANCIAL INSTRUMENTS INITIAL RECOGNITION

Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument. Purchases and sales of financial assets are recognised at the trade date, which is the date when the Group undertakes to buy or sell the asset.

Financial instruments are initially measured at fair value plus transaction costs directly attributable to the acquisition or issue of a financial asset or financial liability, such as fees and commissions.

2.7.1 CLASSIFICATION

The Group classifies its financial assets and liabilities in the categories amortised cost and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial asset or liability was acquired.

Financial assets at amortised cost

Assets held for the purpose of collecting contractual cash flows that are solely payments of principal and interest are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit losses that have been recognised (see the section on impairment below). Interest income from these financial assets is recognised using the effective interest method and is included in financial income. The Group's financial assets at amortised cost consist of other long-term receivables, accounts receivable, and cash and cash equivalents.

Financial liabilities at amortised cost

The Group's other financial liabilities are classified at amortised cost using the effective interest method. Other financial liabilities comprise liabilities to credit institutions, bonds, accounts payable and overdraft facilities.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities that are held for trading or additional considerations in business combinations. Financial liabilities at fair value through profit or loss are measured at fair value also in subsequent periods and changes in value are recognised in profit or loss. Liabilities in this category are classified as current liabilities if they fall due within twelve months of the balance sheet date and as non-current liabilities if they fall due after more than twelve months from the balance sheet date.

Other liabilities at fair value

Other liabilities at fair value comprise liabilities attributable to put options or combined put/call options related to acquisitions of non-controlling interests. Changes in the value of these options are recognised in equity as ownership transactions.

2.7.2 RECOGNITION AND MEASUREMENT

Purchases and sales of financial assets are recognised at the trade date, which is the date when the Group undertakes to buy or sell the asset. Financial instruments are recognised initially at fair value plus transaction costs. Financial assets are derecognised when the right to receive cash flows from the instrument has expired or been transferred and the Group has transferred essentially all risks and benefits associated with ownership. Financial liabilities are derecognised when the obligation arising from the agreement has been fulfilled or otherwise been extinguished. After the acquisition date loans and accounts receivable and other financial liabilities are stated at amortised cost by applying the effective interest method.

2.7.3 OFFSET OF FINANCIAL INSTRUMENTS

Financial assets and liabilities are offset and the net amount presented in the balance sheet only when there is a legally enforceable right to set off the recognised amounts and an intention to settle them on a net basis or to realise the asset and settle the liability simultaneously.

2.7.4 IMPAIRMENT OF FINANCIAL ASSETS

Assets at amortised cost

At the end of each reporting period the Group assesses whether there is objective evidence of impairment of a financial asset or group of financial assets.

The Group estimates expected future credit losses on assets at amortised cost. The Group's financial assets for which expected credit losses are estimated essentially comprise accounts receivable. The Group recognises a provision for such expected credit losses at each reporting date. For accounts receivable, the Group applies the simplified approach for expected credit losses, which means that it recognises a provision equal to the expected loss over the expected life of the receivable. To measure expected credit losses, accounts receivable are grouped based on allocated credit risk characteristics and days past due. The Group uses forward-looking variables for expected credit losses. Expected credit losses are recognised in the consolidated income statement in the item Administrative expenses.

2.7.5 HEDGE OF NET INVESTMENT

Hedges of net investments in foreign operations are accounted for in a similar manner to cash flow hedges. The portion of the gain or loss on the hedging instrument that is deemed to constitute an effective hedge is recognised in other comprehensive income. The gain or loss attributable to the ineffective portion is recognised in profit or loss. Cumulative gains and losses in equity are recognised in profit or loss when the foreign operation is wholly or partially divested.

2.8 INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first in, first out method (FIFO). The value of inventories includes a related portion of indirect costs. The value of finished products includes raw materials, direct labour, other direct costs and production-related overheads including depreciation.

The cost consists of the purchase price from subcontractors and costs for customs and freight. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to complete and sell. Inventory obsolescence is estimated continuously over the course of the year.

2.9 ACCOUNTS RECEIVABLE-TRADE

Accounts receivable are amounts due from customers for goods sold or services provided in the ordinary course of business. If payment is expected within one year or earlier accounts receivable are classified as current assets. If not, they are recognised as fixed assets. Accounts receivable are initially stated at cost and subsequently at amortised cost by applying the effective interest method, less any provisions for impairment.

2.10 CASH AND CASH EQUIVALENTS

In the balance sheet as well as the cash flow statement, cash and cash equivalents comprise cash and bank balances.

2.11 ACCOUNTS PAYABLE - TRADE

Accounts payable are obligations to pay for goods and services purchased from suppliers in operating activities. Accounts payable are classified as current liabilities if they fall due within one year. If not, they are recognised as non-current liabilities.

Accounts payable are recognised at the nominal amount. The carrying amount of accounts payable is assumed to be equal to their fair value, as this item is of a short-term nature.

Accounts payable are initially stated at fair value and subsequently at amortised cost by applying the effective interest method, see 2.7 Financial instruments.

2.12 CURRENT AND DEFERRED TAX

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except when the tax refers to items which are recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or equity. The current tax expense is calculated based on tax rules which have been adopted or adopted in practice at the balance sheet date in those countries where the Parent Company and its subsidiaries operate and generate taxable revenue.

Deferred tax is accounted for, by applying the balance sheet liability method, for all temporary differences between the carrying amounts and tax bases of assets and liabilities in the consolidated financial statements. However, deferred tax is not recognised if it is incurred as a result of a transaction that constitutes the initial recognition of an asset or liability which is not a business combination and which at the time of the transaction affects neither the accounting profit nor the tax profit. Deferred income tax is calculated by applying tax rates that have been enacted or announced at the balance sheet date and that are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets arising from loss carry forwards are recognised to the extent that it is probable that future taxable profits will be available against which the loss carry forwards can be used.

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

2.13 BORROWINGS

Borrowings are initially recognised at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Overdraft facilities are classified as borrowings under current liabilities in the balance sheet.

2.14 EMPLOYEE BENEFITS

Retirement benefit obligations

The Group has both defined benefit and defined contribution pension plans.

The Group's main defined benefit plan is the ITP Supplementary Pension Plan for Salaried Employees in Industry and Commerce, which is secured through contributions paid to Alecta (for information on Alecta, see Note 25).

Defined contribution pension plans are post-employment benefit plans under which the Group pays fixed contributions into a separate legal entity. The Group has no legal or constructive obligations to pay further contributions if this legal entity does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. In a defined benefit pension plan the Group pays contributions to publicly or privately managed pension schemes on a mandatory, contractual or voluntary basis. Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as personnel costs when they fall due. Prepaid contributions are recognised as an asset to the extent that cash repayments or reductions of future payments may accrue to the benefit of the Group.

The small amount of retirement benefit obligations that has not been taken over by an insurance company or been secured through funding with an external party is recognised as a liability in the balance sheet.

2.15 PROVISIONS

Provisions are recognised when the Group has a legal or constructive obligation as a result of a past event and it is more probable than not that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions for warranty costs are estimates of submitted warranty claims and are estimated based on combined experience in the form of statistics on historical claims, expected costs for measures and the average time from the occurrence of the fault to the filing of a claim against the Group.

2.16 RECOGNITION OF REVENUE

Sale of goods

The Group's material revenue streams arising from the sale of goods comprise sales of dental products, machinery and tools, construction materials, service and distribution, environmental technology and forest industry equipment. The "dental products" revenue stream arising from the Dental operating segment is generated from sales of products in the form of consumables and equipment for dentists. The "machinery and tools" revenue stream arising from the Demolition & Tools operating segment is generated from sales of equipment for the construction and demolition industries, where the most significant products are demolition robots and crane and excavator attachments. The "Construction Materials," "Service and Distribution," "Environmental Technology," and "Forest" revenue streams, which arise from the Systems Solutions operating segment, are generated from sales of a wide range of products, including machinery and equipment for electrical installations and electricity production, electrical equipment, LED lighting, interior modules for vans and light commercial vehicles, machines designed to improve the environment, workwear, instruments for forestry surveyors, sawmill and pellet plant equipment.

The Forest area uses fixed-price contracts linked to customised equipment for sawmills, such as timber and wood handling equipment, drying equipment, sawing lines and pellet mills. Revenue from fixed-price contracts accounts for a minor portion, around 2 per cent, of the Group's total revenue.

For fixed-price contracts, revenue is recognised based on a calculation of costs incurred at the balance sheet date divided by total expected costs for satisfying the performance obligation. Estimates of revenue, costs or the degree of completion of a project are revised if circumstances change.

Under a fixed-price contract, the customer pays the agreed price on agreed payment dates. If the performance obligations satisfied by the Group exceed the payment, a contract asset is recognised. If the payments exceed the satisfied performance obligations, a contract liability is recognised.

The Group is engaged in the development and manufacture of products but also sources products from subcontractors primarily for sale to end customers. The contract with the customer is normally considered to consist of one or multiple performance obligations (if several products are delivered). In some cases, contracts provide for performance obligations other than products, when service installation, assembly and/or support are included in the contract. Sales of goods are recognised as revenue when control of the goods is transferred, which normally occurs when the goods are delivered to the customer. All revenue from the sale of goods are recognised at a point in time. Some contracts provide for a customer rebate, which is based on accumulated sales to the customer over a certain period, normally one year or longer. Revenue from the sale of goods is based on the price in the contract less the estimated customer rebate. Historical data is used to estimate the expected value of the customer rebate and revenue is recognised only to the extent that it is highly probable that a significant reversal will not occur. A liability included in the item "Accrued expenses and deferred income" is recognised for the expected customer rebate in relation to sales up to and including the balance sheet date. The Group does not consider that there is a financing component, as the average credit period is short. The Group has obligations to repair or replace defective products in accordance with normal warranty rules, which are recognised as provisions. Extended warranties are sold in a few cases. A receivable is recognised when the goods are delivered, as it is at this point that the right to receive consideration becomes unconditional (i.e. only the passage of time is required for payment of the consideration to be made).

Sale of services

The Group's material revenue streams attributable to sales of services consist in part of sales of services in the area of "Contract Manufacturing" which derive from the Systems Solutions operating segment and in part of services connected to one of the revenue streams described above in respect of goods sold in the form of service, assembly, support and/or installation regarding sold products. The majority of the Group's contracts for services are time and materials contracts. Revenue from provided variable-price services is recognised over time in the period in which the services are provided. Revenue is normally recognised based on a price per hour.

Certain contracts include multiple services, such as sale of a good, assembly, service, support and/or installation of the sold products. For these contracts, an assessment is made of whether the contract includes one or multiple performance obligations based on whether the service is simple, includes an integration service or can be performed by another service provider. If the contract includes multiple performance obligations, the transaction price is allocated to each separate performance obligation based on their stand-alone selling prices.

Certain services, such as maintenance, service and support of products, are recognised on a straight-line basis over the term of the contract unless another method measures the satisfaction of the performance obligation more accurately.

Interest income is recognised over the term of the loan by applying the effective interest method.

2.17 LEASES

Leases are recognised as right-of-use assets and a corresponding lease liability in the balance sheet on the date that the leased asset is available for Lifco to use. Lease liabilities are recognised at the present value of future lease payments. Each lease payment is divided into amortisation of the lease liability and a financial expense. The financial expense is distributed over the lease term so that each reporting period is charged with an amount corresponding to the fixed interest rate for the liability recognised for each period. Future lease payments are discounted at the rate implicit in the lease if that can be readily determined. If not, the Group's incremental borrowing rate is used based on the currency and length of the term. The weighted average borrowing rate used to calculate the discount effect is 0.72 (0.93) per cent. Right-of-use assets are recognised at cost and comprise the initial present value of the lease liability. Expenses for restoring the asset to the condition stated in the conditions of the lease are included in the asset if a corresponding provision for restoration costs is identified. The right-of-use assets are depreciated straight-line over the shorter of the useful life of the asset and the term of the lease. The term of the lease is determined as the non-cancellable period adjusted for periods that by using options can extend or shorten the lease, if it is reasonably certain that these options will be exercised. An assessment of the probability that an option will be used is made by management, taking into account all available information, such as costs for terminating the lease and the significance of the asset to the operations. Lifco's leases primarily comprise right-of-use assets for premises, such as office, warehouse and factory premises. Exceptions are made for short-term leases and low-value leases, and these are expenses straight-line in profit or loss.

2.18 CASH FLOW STATEMENT

The cash flow statement has been prepared using the indirect method. This means that the net profit or loss is adjusted for transactions which have not resulted in incoming or outgoing payments during the period, and for any income or expenses attributable to cash flows from investing or financing activities.

2.19 DIVIDENDS

Dividend payments to the shareholders of the Parent Company are recognised as a liability in the consolidated financial statements in the period in which the payment is approved by the shareholders of the Parent Company. Dividend income is recognised when the right to receive payment has been established.

2.20 SHAREHOLDER CONTRIBUTIONS

Shareholder contributions are recognised directly in equity in the receiving entity and converted into shares in the contributing entity, insofar as no impairment loss is required.

2.21 SEGMENT INFORMATION

Segment information is reported in a way that is consistent with the internal reports submitted to the most senior executive. The most senior executive is the function that is responsible for allocating resources and assessing the results of operating segments. In the Group this function has been identified as the Chief Executive Officer, who makes strategic decisions. Group management has defined the operating segments based on the information that is handled by the CEO and used as a basis for decisions on the allocation of resources and evaluation of results.

The CEO evaluates the activities on the basis of three operating segments: Dental, Demolition & Tools and Systems Solutions. Systems Solutions consists of a merger of those business areas which have similar economic characteristics and which do not individually meet the defined quantitative limits.

2.22 ALTERNATIVE PERFORMANCE MEASURES

The primary alternative performance measures presented in this report are EBITA, EBITDA, interest-bearing net debt, net debt and capital employed. Reconciliations of the alternative performance measures are presented on pages 86-87, and the purpose and definitions of these measures are presented on page 114.

NOTE 3 FINANCIAL RISK MANAGEMENT

3.1 FINANCIAL RISK FACTORS

Through its activities, the Group is exposed to a wide range of financial risks: market risk (comprising currency risk, interest rate risk and price risk), credit risk and liquidity risk. These risks are managed in accordance with Lifco ́s financial policy, which has been adopted by the company ́s Board of Directors. The Group ́s policy is to apply hedge accounting only for net investments in foreign operations and it endeavours to minimise potential negative effects on the Group ́s financial results through an extensive Group account system in which surpluses in a certain currency are matched with payments in the same currency.

a) Market risk

(i) Currency risk

Currency risk is the risk that unfavourable changes in exchange rates will affect the Group's results and equity in SEK terms:

The Lifco Group conducts operations in 30 countries. Due to this geographic spread, as well as the large number of customers and products, Lifco's transaction exposure is relatively limited. The Lifco Group's transaction exposure arises when the subsidiaries import products for sale in their domestic markets and/or sell products in foreign currency. As far as possible, the effects of changes in exchange rates are managed through the use of currency clauses in customer contracts and through sales in the same currency as the purchase.

Under the policy that is applied in the Group, each company is required to manage its currency flows with regard to exposure to sudden changes in exchange rates. Currency risks are managed chiefly through a system of Group accounts in different currencies where surpluses in the system are used to pay for transactions in a certain currency. No derivatives have been entered into to manage the currency risk. Forward contracts may only be entered into with approval from Group management. There were no significant forward contracts for the Group in 2021 and 2022.

Lifco deems that the transaction exposure is limited, as there is a balance between purchases and sales in foreign currency in the Group. A moderate change in the value of the Swedish krona against other currencies thus has no material impact on consolidated earnings after tax. In 2022, net foreign exchange differences recognised in the income statement were SEK 40 (3) million, see Note 6. Lifco also has transaction exposure in the form of borrowings in foreign currency. This risk is limited, as these loans are part of the Group ́s net investment hedge.

Translation risk arises on the translation of foreign subsidiaries to the reporting currency, SEK. The Group has a number of investments in foreign operations whose net assets are exposed to currency risks. Currency exposure arising from the net assets in the Group's foreign operations is partly managed through borrowings in the foreign currencies concerned. These loans are recognised as hedge of net investment, see 2.7.5 Hedge of net investment. The Parent Company has outstanding bonds, loans in the form of overdraft facilities and bank loans related to acquisitions in the equivalent amount of SEK 5,734 (4,586) million denominated in EUR, SEK 743 (718) million in NOK, SEK 345 (299) million in USD, SEK 404 (146) million in GBP and SEK 7 (0) million in DKK. The acquisition-related loans have been identified as a net investment hedge. During the period, no ineffectiveness in hedges of net investments in foreign operations that needs to be recognised occurred. The net exposure is SEK 1,927 (1,358) million and hedged net assets total SEK 12,345 (12,799) million.

Based on the company's translation exposure, Lifco estimates that a change of 1 per cent in the value of the Swedish krona against other currencies would have an impact on equity of SEK +/- 56 (107) million. The exposure refers to:

(ii) Interest rate risk

Interest rate risk is the risk that changes in the interest rate environment will have a negative impact on net financial items and earnings in the Group. The Group ́s borrowings have both fixed and variable interest rates. The interest rate related to cash flow to which the Group is exposed through variable interest rates is partly neutralised by cash assets bearing variable interest rates. The Group ́s average interest rate in the 2022 financial year was 1.8 per cent (0.7 per cent in 2021).

At the balance sheet date, the Group had total borrowings of SEK 8,263 (6,908) million (see Note 24), of which 100 per cent was subject to variable interest rates. A change in interest rates of +/- 1.0 percentage points would have an impact of SEK +/- 66 (54) million on net profit for the year.

b) Credit risk

Credit risk or counterparty risk is the risk that a counterparty in a financial transaction will fail to meet its obligations at maturity. Lifco's credit risk arises mainly from accounts receivable but there is also a certain credit risk in respect of cash and cash equivalents. Each company in the Group is responsible for monitoring and assessing credit risk and for assessing the creditworthiness of each new customer. Provisions for doubtful debts are made based on a schedule defined by the Group. Lifco deems that the risk of bad debts is low, as sales are to a large extent made to customers with which the Group has had long partnerships and/or good experience of the customer's willingness to pay. The Group continuously monitors its customers' creditworthiness and reviews credit terms based on specified guidelines where necessary. For cash and cash equivalents, the credit risk is deemed to be low, as the counterparties are large well-known banks with high creditworthiness. For the Group's credit losses, see Note 19. There are no material credit risks. The Group's financial assets that are subject to impairment testing essentially comprise accounts receivable. The expected credit losses are based on past payment history and past losses. Past losses are adjusted to take account of current and prospective information about macroeconomic factors that can affect the customers' ability to pay a receivable. For disclosures on the maturity structure of accounts receivable and the loss allowance, see Note 19 Accounts receivable.

c) Liquidity risk

Liquidity risk is the risk that the Group will not have sufficient liquid assets to meet its obligations in respect of financial liabilities. The goal of the company's liquidity management is to minimise the risk that the Group will not have sufficient liquid assets to meet its commercial obligations. To manage day-to-day payments, the Group has a cash pool system which ensures that liquid assets are available in the currencies in which payments are made. Management monitors rolling forecasts for the Group's cash and cash equivalents (including unused credit facilities) based on expected cash flows. Lifco's policy is to have a strong liquidity position with regard to available liquid assets and unused confirmed credit facilities.

At 31 December 2022, the Group had cash and cash equivalents of SEK 1,703 (1,509) million. Other future liquidity requirements refer to the settlement of accounts payable and other current liabilities as well as repayment of borrowings. For a maturity analysis of future cash flows from the Group's financial liabilities, see Note 24.

3.2 MANAGEMENT OF CAPITAL RISK

The Group's goal in respect of capital structure is to secure its ability to continue as a going concern in order to continue to generate a return for the shareholders and benefits for other stakeholders, and to maintain an optimal capital structure in order to keep the cost of capital down. Lifco currently sees no refinancing risk.

3.3 CALCULATION OF FAIR VALUE

Due to the short-term nature of accounts receivable and other receivables as well as accounts payable and other liabilities, their carrying amounts, less any impairment losses, are assumed to approximate their fair values. Information on the fair values and carrying amounts of non-current interest-bearing liabilities is presented in Note 24.

Financial instruments at fair value in the Group comprise financial liabilities in the form of put/call options for future acquisitions of non-controlling interests. The fair values of these are based on the company ́s future earnings. This item is classified to Level 3 of the fair value hierarchy. The following table shows the change for the year:

NOTE 4 CRITICAL ESTIMATES AND JUDGEMENTS

Estimates of the values of balance sheet items and judgements made when applying accounting policies are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and judgements

The Group makes estimates and assumptions about the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Impairment testing of goodwill and intangible assets with indefinite useful lives

Each year, the Group tests goodwill and intangible assets with indefinite useful lives for impairment in accordance with the accounting policy described in Note 2. Recoverable amounts for cash-generating units have been determined by calculating value in use. Historically, no adjustments have been made to the carrying amounts. For these calculations certain estimates need to be made, see Note 14.

Recognition of acquisitions

In connection with acquisitions, the Group prepares a purchase price allocation for accounting purposes in accordance with the accounting principle described in Note 2. Accounting for an acquisition involves a high degree of judgement and estimation, mainly with regard to the allocation of premiums and discounts to assets and liabilities (net assets) in the purchase price allocation as well as adjusting entries for adaptation to the Group's accounting policies. Historically, no adjustments have been made to the carrying amounts. Fair value adjustments and resultant goodwill are presented in Note 31.

NOTE 5 SEGMENT REPORTING

The Chief Executive Officer is the Group's chief operating decision maker. Management has defined the operating segments based on the information that is handled by the CEO and used as a basis for decisions on the allocation of resources and the evaluation of results. The results for the presented segments are assessed based on EBITA (earnings before amortisation of intangible assets arising on acquisition, acquisition costs, interest and tax).

REVENUE

The Group ́s material revenue streams arising from the sale of goods comprise sales of dental products, machinery and tools, construction materials, service and distribution, environmental technology and forest industry equipment. The "dental products" revenue stream arising from the Dental operating segment is generated from sales of products in the form of consumables and equipment for dentists. The "machinery and tools" revenue stream arising from the Demolition & Tools operating segment is generated from sales of equipment for the construction and demolition industries, where the most significant products are demolition robots and crane and excavator attachments. The "Construction Materials," "Service and Distribution," "Environmental Technology," and "Forest" revenue streams, which arise from the Systems Solutions operating segment, are generated from sales of a wide range of products, including machinery and equipment for electrical installations and electricity production, electrical equipment, LED lighting, interior modules for vans and light commercial vehicles, machines designed to improve the environment, workwear, instruments for forestry surveyors, sawmill and pellet plant equipment. The Group ́s material revenue streams attributable to sales of services consist in part of sales of services in the area of "Contract Manufacturing" which derive from the Systems Solutions operating segment and in part of services connected to one of the revenue streams described above in respect of goods sold in the form of service, assembly, support and/or installation regarding sold products.

No sales are made between the segments. The revenue from external parties that is reported to the CEO is measured in the same way as in the income statement.

Total fixed assets, other than financial instruments and deferred tax assets, located in Sweden totalled SEK 2,931 (3,791) million, SEK 7,134 (5,949) million in Germany, SEK 4,520 (3,260) million in Italy, SEK 2,010 (1,369) million in the United Kingdom and SEK 1,565 (1,373) million in Norway, and the sum of such fixed assets located in other countries is SEK 2,490 (1,806) million.

Contract assets and contract liabilities

The Group only has contract assets in the form of contract work in progress, which will continue to be presented separately in the item Inventories and be termed contract work in progress. In addition to accounts receivable, the Group also has receivables from contracts with customers where payment of the consideration for the goods or service is only dependent on the passage of time. Receivables from contracts with customers are accounted for as part of Prepaid expenses and accrued income in the line Receivables from contracts with customers.

Of the total contract liabilities of SEK 755 million recognised at the beginning of the financial year, revenue related to contract liabilities of SEK 755 million was recognised during the financial year. The closing balance of contract liabilities at the end of the financial year of SEK 539 million is expected to be recognised as revenue in the following financial year.

Outstanding unsatisfied performance obligations

All contracts for the sale of services have an original term of no more than one year or are billed on a time basis. In accordance with IFRS 15, no disclosures are made on the transaction prices for these unsatisfied obligations.

NOTE 6 NET FOREIGN EXCHANGE GAINS AND LOSSES

NOTE 7 SCHEDULED DEPRECIATION AND AMORTISATION

NOTE 8 AUDITORS' FEES

Audit engagement refers to fees for the statutory audit, i.e. such work as has been necessary to submit the auditor's report.

Tax advisory services refer mainly to general corporate tax matters. Other services refer to advice on financial reporting as well as services in connection with acquisitions. The total fee paid to PwC and its international network for the 2022 financial year is SEK 14 (13) million. The fee paid to the audit firm PricewaterhouseCoopers AB is SEK 6 (6) million, of which SEK 6 (6) million refers to the audit engagement, SEK 0 (0) million to other audit engagements and SEK 0 (0) million to other services.

NOTE 9 CLASSIFICATION OF EXPENSES BY NATURE

NOTE 10 PERSONNEL COSTS AND AVERAGE NUMBER OF EMPLOYEES

¹ Includes salaries and remuneration to the Board, Group management and Managing Directors in the Group's subsidiaries.

REMUNERATION AND BENEFITS IN 2022

Holdings of synthetic call options through Carl Bennet AB: CEO 87,412 and other members of Group management 54,632.

REMUNERATION AND BENEFITS IN 2021