Camfil GmbH

Camfil Ventures AB (vormals: Camfil AB)

Stockholm

Konzernabschluss zum Geschäftsjahr vom 01.01.2021 bis zum 31.12.2021

Org. nr 556230-1266

Contents

Global Organisation

Highlights

Historical Timeline

Business Areas

Annual report for the 2021 financial year

Board of Directors' report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Financial Position

Notes to the financial statements

Note 1. Significant accounting policies

Note 2. Revenue

Note 3. Business combinations

Note 4. Employees, personnel costs and key management compensation

Note 5. Fees and compensation paid to auditors

Note 6. Expenses by nature

Note 7. Other operating income

Note 8. Net finance costs

Note 9. Net foreign exchange gains/losses

Note 10. Appropriations

Note 11. Income tax/Tax on profit for the year

Note 12. Earnings per share

Note 13. Goodwill

Note 14. Other intangible assets

Note 15. Land and buildings

Note 16. Machinery and production equipment

Note 17. Equipment

Note 18. Right-of-use assets

Note 19. Shares in Group companies

Note 20. Receivables from Group companies

Note 21. Financial placements in derivative instruments

Note 22. Non-current receivables

Note 23. Inventory and contract assets

Note 24. Trade receivables

Note 25. Prepaid expenses and accrued income

Note 26. Cash and cash equivalents

Note 27. Share capital

Note 28. Bank overdraft facilities

Note 29. Interest-bearing liabilities

Note 30. Post-employment benefits

Note 31. Other provisions

Note 32. Accrued expenses and deferred income

Note 33. Other Liabilities

Note 34. Measurement and classification of financial assets and liabilities at fair value

Note 35. Financial risks and risk management

Note 36. Leases

Note 37. Untaxed reserves

Note 38. Pledged assets and contingencies

Note 39. Specifications of statement of cash flows

Note 40. Transaction with related parties

Note 41. Investment commitments

Note 42. Critical estimates and key judgements in applying the Group's accounting policies

Note 43. Exchange rates 7

Note 44. Definition of key ratios

Note 45. Significant events after the period end

Note 46. General information

Certification of the Board of Directors

Auditors' Report

Global Organisation

Highlights

Sustainable growth

2021 was another year impacted by the Covid-19 pandemic. Demand for air filtration remained high, but supply chain challenges put significant pressure on material prices and impacted deliveries despite a continued build-up of safety stock.

Timeline

Historical Timeline

Camfil Group

Annual report for the 2021 financial year

The Board of Directors and the President and CEO of Camfil Ventures AB hereby submit the following Annual Report for the financial year 2021. All amounts are in millions of Swedish Krona (MSEK) unless specified otherwise. Figures in parentheses refer to the preceding year.

The notes on pages 31 to 81 are an integral part of these consolidated financial statements.

Board of Directors' report

Information about Camfil's operations

Camfil is a market-leading manufacturer of clean air solutions for commercial and industrial systems for air filtration and dust collection. These systems and products increase the productivity of personnel and equipment, minimise energy use and protect people's health and the environment.

The Group's operations are conducted through four business areas: Filters, Air Pollution Control, Power Systems and Molecular Contamination Control. In 2021, sales of the Camfil Group totalled MSEK 9,774 (9,164) with an average of 5,157 (4,890) employees.

Business areas

Filters

The Filters business area, the Group's largest area of operation, offers a broad range of products to provide clean air for high indoor air quality (IAQ) within many different application areas.

Operations in the Filters business area are conducted within three geographic business units: Europe, the Middle East and Africa (EMEA); Asia Pacific (APAC), and the Americas (AMER). Comfort and Clean Processes are the two most important product ranges in the business area.

Comfort

Camfil provides energy-efficient air filters for air handling systems in buildings like schools, offices, homes, hospitals, airports and other similar public and commercial facilities. Camfil's air filtration solutions improve indoor air quality and also lower energy consumption, thereby helping to reduce carbon dioxide emissions.

The market consists mainly of replacement filters since filters in ventilation systems have to be changed at regular intervals. Business in this segment is therefore not so dependent on economic cycles and is consequently relatively stable.

Clean Processes

Advanced production equipment and sensitive products require a clean indoor air environment to protect machinery, enhance product quality and boost the efficiency of production processes. These are typical requirements in the electronics, pharmaceutical and food processing industries, among others. Clean Processes includes filtration solutions for Airborne Molecular Contamination (AMC) control. These solutions consist of highly efficient particle and gas filtration systems and contamination control systems for nuclear power plants. Camfil's air filters are also used in the chemical, biological and aviation industries.

This business, which is more cyclical than the Comfort product segment, is affected more by economic fluctuations since it relies more on new installations.

Air Pollution Control

The Air Pollution Control (APC) business area develops, manufactures and sells equipment and filters for dust collection and oil mist separation. Camfil APC's dust collectors and oil separators remove fumes, mist, gases and dust from industrial processes to create a clean and safe work environment within a broad spectrum of process and engineering industries. Products are used primarily in metalworking, pharmaceutical production, mining operations, food processing, chemical manufacturing and other similar industries.

Camfil APC's business is partly dependent on new investments in production facilities within the above industrial sectors and is consequently affected to some extent by factors such as the development of raw material prices for metals and investments in the mining industry, which makes business cyclical. This is compensated partly by more stable aftermarket sales of replacement filters in all segments.

Power Systems

Camfil Power Systems is a global supplier of air filtration and acoustical systems for gas turbines and compressors used by major power producers and offshore operators around the world. Solutions include air-inlet filtration systems, acoustic enclosures for noise control, ventilation systems and ducting, and exhaust air systems. These solutions ensure high operating efficiency and reduce turbine wear-and-tear. The business area also offers a range of services, including upgrades and retrofits of existing systems and filter replacements.

Power Systems' business, which is partly dependent on investments in the oil and gas sector, is consequently affected by economic cycles.

Molecular Contamination Control

Molecular Contamination Control (MCC) is a business area with global growth that provides molecular filtration products to remove mainly harmful gases and odours.

Solutions include corrosion control to protect sensitive electrical process control systems from acidic gases in petrochemical, pulp and paper, metal refining and printed circuit board manufacturing, and in data centres, wastewater treatment plants and other facilities. Corrosion control is also used to protect artefacts in museums. In addition, MCC delivers solutions to protect against process chemicals present in the air and to safeguard people and the environment from odours and toxins emitted in exhaust air streams from industrial plants. This business is less dependent on economic cycles since the typical uses involve some form of process in continuous operation.

Significant events during and after the financial year

Covid-19 pandemic

The year 2021 was challenging in many ways because of the Covid-19 pandemic. Increased demand for the company's products needed to be managed while high sick leave rates and infection reduction measures affected the production organisation's capacity. Delays in purchase and supply chain levels were also more evident during the second year of the pandemic, which had a negative impact on the Group. However, this has largely been offset by increased stockpiling of critical inputs.

Production

Construction of the new manufacturing plant in Taicang, China, was completed during the year. The transfer of operations has begun, and the factory is expected to be fully operational during the beginning of 2022.

For the second time, Camfil's U.S. production unit in Jonesboro, Arkansas, was damaged by a tornado at the end of the year. The destroyed production facility was housed in a temporary facility while the regular factory destroyed in a 2020 tornado was being rebuilt. This reconstruction is ongoing and will be completed in 2022. The costs incurred for the destroyed factory along with the insurance compensation were charged to operating income, resulting in zero impact on operating profit.

During the year, the Group closed the production facility that was part of the Resema acquisition as part of a rationalisation of the Swedish production organisation.

Reorganisation of business units

A reorganisation of the Group's business units was carried out during the year, in which the former units of Northern and Continental Europe and the British Isles were merged into the EMEA business unit. In conjunction with this, the Air Pollution Control business unit also ceased as a separate organisation and was incorporated in the three business units EMEA, AMER and APAC.

Integration of acquisitions

In Australia and New Zealand, Airepure was integrated into Camfil's existing operations in these markets.

Significant events after the period end

The parent company Camfil Ventures AB changed its name to from Camfil AB to Camfil Ventures AB after the end of the financial year (Note 45).

Business and market developments

The Covid-19 pandemic continued to affect operations in 2021, bringing uncertainty and challenges in the supply chain yet continued strong sales growth. Camfil's business areas were impacted in different ways during the year. But on the whole, the company adapted to these new circumstances and was able to meet the higher demand for certain products. Increased prices for inputs and transport in the wake of the pandemic have had a negative impact. In 2021, Camfil kept up its high pace of investment in buildings and production equipment to both maintain and expand production capacity.

The Filters business area generally experienced a positive trend of demand. Market demand for air filtration increased strongly during the year and was positively impacted by the Covid-19 pandemic.

While Power Systems' sales in the foremarket segment were volatile because of the size of projects, 2021 proved to be a strong year, with sales in the aftermarket also growing.

Air Pollution Control, which sells mainly to manufacturing industries, was positively affected by a greater willingness to invest within the automotive industry, among other sectors.

The Molecular Contamination Control business area showed strong performance. During the year, the Group made substantial investments in production equipment and facilities to support continued growth.

Multi-year summary for the Group

Operating results and position

Net sales

Net sales of the Camfil Group totalled MSEK 9,774 (9,164), which was MSEK 610 (6.7 %) higher than the preceding year. Net sales were 3.8 % lower than in 2020 because of the negative effects of exchange rates.

Change in net sales

Operating profit

Operating profit of the Camfil Group totalled MSEK 1,311 (1,345) and the operating margin was 13.4 % (14.7). The volume of sales increased during the year, which was impacted favourably by continued strong demand for air filtration partly driven by the Covid-19 pandemic, as well as by recovery within the Air Pollution Control business area. Operating profit in 2021 was affected by insurance compensation revenue resulting from the tornado that hit Jonesboro in 2020. Damage to machinery and stock resulting from the Jonesboro tornado at the end of 2021 was offset by an insurance claim. Overhead costs increased because of acquisitions and higher personnel expenses but were otherwise relatively stable, partly due to less business travel.

Depreciation

Depreciation for the year totalled MSEK 334 (323), an increase of MSEK 11. MSEK 131 (139) of depreciation for the year was related to IFRS 16.

Net finance costs

Net finance costs decreased by MSEK 22 to MSEK -41 (-63), due primarily to reduced costs due resulting from a lower level of borrowing.

Profit after tax

Profit after tax decreased by 1 % to MSEK 974 (987), corresponding to 10.0 % (10.8) of net sales. The tax rate, 23.3 % (23.0), was 0.3 percentage points more than the preceding year.

Operating capital

Operating capital of the Camfil Group was MSEK 1,541 (1,070), corresponding to 16 % (12) of annual sales.

Net debt and borrowings

The Group's interest-bearing net debt decreased by MSEK 56, from MSEK 504 to MSEK 448. At year-end, the Group's interest-bearing liabilities, including pension provisions, totalled MSEK 1,325 (1,885), of which MSEK 872 (1,241) consisted of liabilities to credit institutions and MSEK 301 (296) were related to leases. The average interest rate on the Group's interest-bearing loans, including interest rate swaps, was 1.9 % (1.33) at year-end.

Cash flow

Cash flow was negative in 2021 and totalled MSEK -543, as against MSEK 611 in 2020. Cash and cash equivalents amounted to MSEK 862 (1,344) at the close of the year.

Cash flow from operating activities was MSEK 607 lower than the preceding year, due mainly to increased inventories and trade receivables as well as higher taxes.

In 2021, investments in property, plant and equipment were at the same levels as in 2020 and totalled MSEK 498 (372) at year-end. Investments were made primarily in new facilities in Taicang, China, and Jonesboro, U.S., as well as in existing facilities, to expand and maintain production capacity. Investments in property, plant and equipment totalled 5.1 % (4.1) of net sales.

Cash flow from financing activities decreased by MSEK 539 during the year, from MSEK -473 in 2020 to MSEK - 1,012 in 2021. The change was primarily related to loan repayments.

Equity ratio and net debt-equity ratio (gearing ratio)

At year-end, the equity ratio was 57.7 % (49.9) and the net debt-equity ratio decreased to 19 % (35).

Incentive programme

There were no long-term incentive programmes in 2021 or 2020.

Parent company

Net sales of the parent company increased by MSEK 60, from MSEK 694 in 2020 to MSEK 754 in 2021. The parent company's sales consist entirely of internal sales to Group companies.

Financial risk management

Through Camfil's complex global operations, the Group is exposed to a number of financial risks such as currency risk, interest rate risk, and liquidity and refinancing risk. The corporate finance department of the Camfil Group is functionally responsible for managing the greater part of the Group's financial risks. The Board of Directors establishes the framework for managing the Group's financial risks in the Group's finance policy, which outlines the guidelines, goals and limits for financial management and financial risk management.

Operating companies in the Group regularly submit reports on their financial results and position in accordance with the internal reporting requirements and accounting regulations (IFRS standards) applied by Camfil. The Group's finance department audits and analyses the financial information as part of its quality control process for financial reporting.

For more information about currency risk, interest rate risk, liquidity and refinancing risk, and credit risk, see the following sections of this annual report: Accounting policies (Note 1), Financial risk management (Note 35), Financial assets (Note 21), Derivative financial instruments (Note 21) and Borrowings (Note 29).

Work of the Board of Directors

The Board of Directors has basic responsibility for Camfil's organisation and the administration of the company's business.

Responsibilities of the Board

The overall task of Camfil's Board of Directors is to administer the Group's business on behalf of the owners in such a way that the owners' interest in receiving a sound long-term return on their capital is met in the best possible way. The Board's work is regulated by the Swedish Companies Act, the company's articles of association and the rules of procedure that the Board has established for its work.

The Board decides on issues concerning the Group's overarching goals, strategic direction and significant policies, as well as important questions concerning financing, investments, acquisitions and divestments. The Board supervises and deals with monitoring and controlling the Group's operations, the information issued by the Group and organisational matters.

The Board appoints the company's President (who is also CEO), who is responsible for the day-to-day administration of the company on the basis of the Board's guidelines and instructions. The Board develops rules of procedure for its work each year. Guidelines for the Board's work, as well as instructions for delegating work tasks between the Board and the President, and procedures for reporting to the Board, are described in this document. The rules of procedure covers, among other things, the basic tasks, functions and responsibilities of the Board, board work, board meetings, and information and reporting requirements. The rules of procedure also contain instructions for the President and other corporate functions regarding business that requires Board approval.

A statutory Board meeting is held immediately after the Annual General Meeting. Among other business, the meeting decides on the rules of procedure for the Board as well as appoints the person authorised to sign on behalf of the company and the persons who will serve on board committees.

Board members and meetings

In 2021, the parent company's Board of Directors consisted of nine members. Alan O'Connell and Dan Larson are also members of Group Management.

To meet the Board's requirements for information, the company's auditors participate in one board meeting per year to give their comments and observations from their audit and their opinion of the company's internal control procedures.

The Board held seven meetings during the year. All the meetings were held online or per capsulam. Each meeting followed an agenda that was given to the board members, together with background documentation, prior to each meeting. The length of the meetings is adapted to allow ample time for presentations and discussions.

Ensuring the quality of financial reporting

The rules of procedure approved annually by the Board include instructions regarding the financial reports and financial information that will be submitted to the Board. In addition to year-end reports, quarterly reports and annual reports, the Board examines and evaluates financial information concerning the Group as a whole and the individual units of the Group. The Board also reviews - primarily through the work of the Board's Audit Committee - internal audit reports, significant accounting policies and the financial reporting process.

Board committees

The Board has established a Remuneration Committee and an Audit Committee. The work of these committees is primarily of a preparatory and advisory nature. Business taken up at committee meetings is recorded in minutes and reported to the Board at their next meeting.

Audit Committee

The Board's Audit Committee is led by Johan Markman. The committee's main task is to assist the Board in monitoring processes, internal control of financial reports and the auditing of financial statements. The Audit Committee consists of two board members. The Group's Chief Financial Officer (CFO) and Vice President Group Finance and Business Control are co-opted members of the Audit Committee. In 2021, the committee held three meetings, all of which were with the Group's auditors.

Remuneration Committee

The Remuneration Committee, led by Jan Eric Larson, prepared and made proposals to the Board during the year concerning compensation paid to the President and the principles for compensation paid to other members of Group Management. These principles concern the goals for variable remuneration, the basis for calculating variable salary, guidelines for basic salary, long-term incentives, and pension terms and conditions. The Remuneration committee consists of three board members. One meeting was held in 2021. Camfil's CEO and President and its EVP Human Resources Director made presentations at this meeting.

Board remuneration

Remuneration for the Board is decided by the Annual General Meeting and is paid to board members who are not employed by Camfil. The fee paid to each member is shown in Note 4.

President and Group Management

At the end of 2021, Group Management consisted of the President, the five heads of the business areas/units and six heads responsible for staff and corporate functions. The composition of Group Management changed as a result of the merger of business areas that took place during the year. The President of the Camfil Group is appointed by the Board and receives instructions from the Board. The President, in tum, appoints the other members of Group Management and is responsible for the day-to- day administration of the Group's operations on the basis of the Board's guidelines and instructions. Group Management meetings are held regularly to review results and plans, and to discuss strategic issues.

Environmental information

Camfil operates in a field where more efficient products, longer product life, lower energy consumption and a better indoor climate are important components for sustainable development. Camfil is taking action to reduce its own direct environmental impact in order to decrease the Group's consumption of resources and energy in operations. The Group also develops products and services to help customers reduce their own energy usage and thus their environmental footprint, as well as improve the product's lifespan.

Sustainability report

In accordance with Chapter 6, Paragraph 10 of the Swedish Annual Accounts Act, Camfil has chosen to prepare a sustainability report that is part of its Board of Directors' report. The Group's business model of providing clean air solutions can be described through Camfil's vision, mission and values. Sustainable business has long been a cornerstone of Camfil's operations through the competitive advantages of energy-efficient air purification solutions and a high utilisation rate of resources consumed. Camfil has long been a socially responsible employer and member of society, which we have demonstrated in various ways over time. Camfil basis its work with the environment, human rights, working conditions, anti-corruption and business ethics on the United Nations Global Compact's ten principles and supports these goals of a sustainable and ethical business practice.

Vision - Clean air, a human right

At Camfil, we believe that breathing clean air should be a human right. That's why we offer a wide range of premium clean air solutions for commercial and industrial filtration, air pollution control and turbomachinery applications. Clean air improves worker and equipment productivity, minimises energy use, and benefits human health and the environment. Through a fresh approach to problemsolving, innovative design, precise process control and a strong customer focus we aim to conserve more, use less and find better ways - so we can all breathe easier.

Mission - Protecting people, processes and the environment

Our mission is to protect people, processes and the environment by defining, developing and delivering solutions that combine clean air with energy efficiency in a sustainable and profitable way.

Core values, goals and governance

To understand and govern the Group's development and position from a sustainability perspective in matters concerning the environment, social conditions, personnel, respect for human rights and the fight against corruption, the Group has set targets for energy consumption, gender equality, workplace health and safety, and environmental impact. Our goals are set based on Camfil's core values, taking into account the risks that affect the Group in these different areas. Based on the set goals, annual action plans and activities are created and the outcomes followed up against the goals. The Group's guidelines for the processes of achieving the different goals in are set out in different policies. Camfil's values, documented primarily through its core values, code of conduct and ownership directives, impact all established policies.

Environment

Camfil's impact on the environment has been broken down into three areas in its sustainability efforts.

Sustainable products and innovation

Camfil's air filtration products represent the area where the Group makes the biggest impact on the environment by reducing our customers' energy consumption. Products and services are being developed to improve air quality for our customers while achieving as low a carbon footprint as possible. In order to credibly demonstrate the environmental impact of our major products, life cycle assessments are carried out and environmental product declarations are prepared for them by an independent institute. These have been reviewed and approved through a third-party audit. The life cycle assessment shows that the greatest environmental impact from a filter is during the operational phase, which means switching to filters with a better energy classification is the single most important measure for reducing environmental impact. Camfil uses Eurovent's energy classification of filters for the different filtration efficiency rates based on ISO 16890. Camfil therefore sets targets to continuously increase the proportion of sales from energy-efficient filters.

Sustainable production

The Group's internal processes for the production of products and services have a direct carbon footprint, something that is also revealed by the life cycle analyses. Minimising the Group's carbon footprint is part of our strategic three-year plan as a separate key area. Energy consumption in production has a direct impact on the surrounding environment, so Camfil strives to minimise this consumption for both environmental and cost reasons. As the Group grows and consumption is affected by the volume produced, the target for reduced consumption is set relative to the cost of goods sold. This metric is thus also affected by components other than reduced energy consumption alone, but our assessment is that the weighted indication suffices for determining whether our operations are headed in the right direction.

The manufacturing process itself comprises a large part of the Group's direct climate impact. Thus, working on continuous improvement such as increased utilisation of inputs has a major impact on reducing our footprint. The manufacture of filter media, which through production loss is subsequently not used in finished products, means an unnecessary use of natural resources, energy and transport. To accurately measure this, Camfil has developed software that collects and compiles data on the resource utilisation rate of production. This software enables analysis and identification of the point in the process where loss occurs. It has been implemented in several of our production facilities but is not yet fully rolled out across the Group. Camfil aims to use the software in at least one additional factory each year. Where this measurement is possible, the Group aims to reduce losses relative to production volume by 1 % annually.

Sustainable transport

Transport entails a major environmental impact, both through direct transport emissions and indirectly through the damage that can occur, which might mean that products are no longer usable. Camfil has identified several ways to affect its carbon footprint for transporting inputs and finished products. The choice of shipping method has an impact since the methods have different energy efficiencies and use energy sources with different carbon footprints. Camfil thus strives to switch to shipping methods with a lower climate impact, for example by switching to rail from road transport wherever feasible. Transported volume has an impact because the greater the volumes shipped, the higher the energy consumption. The Group takes various actions to reduce the volume transported per filter by minimising void fill in packaging, repacking products and consolidating transport among sister companies. The quality of transport and packaging affects our footprint as products arrive in a usable state to our customers, indicating that resource allocation across the value chain up to that point has not been in vain.

Camfil has set different targets for reducing the environmental impact of transport over the years, all with the same goal of reducing energy consumption per filter. Targets for 2021 and 2022 aim to encourage transport providers to commit to taking steps to reduce their climate impact, to take environmental concerns into account during shipping procurement and to increase shipping efficiency.

Labour and social issues

Employee safety and well-being is one of Camfil's top priorities. As 2021 was marked by the ongoing Covid-19 pandemic, great care was taken to comply with local regulations and recommendations and to support the Group's various units. Several offices experienced a reduction in staffing as employees worked from home during the year, and production facilities adapted their operations to minimise the risk of spreading infection. This crisis management was carried out through globally coordinated yet locally prepared instructions. Ordinary efforts around employee safety and well-being are governed by a special policy that has been translated into local languages.

In order to measure the safety and well-being of employees, the Group follows monthly statistical reporting on sick leave and accidents and incidents (OSHA) per unit.

Human rights

Camfil's vision is for clean air to be a human right. This is reflected in the Group's efforts to raise awareness and educate people about the fundamental importance of clean air by providing knowledge, expertise and resources. The Group's work on human rights is based on the UN's Guiding Principles on Business and Human Rights, which urges companies to take action on respecting human rights regardless of the shortcomings of local regulations. Camfil's position on human rights is incorporated in internal policies and processes, including codes of conduct for employees and suppliers alike and in our owner directives.

To ensure that the Group has the right global skills supply in the long term to achieve this vision, Camfil must attract and retain employees with a range of experiences and diverse backgrounds from across the world. Only by allowing all employees to develop to their full potential on equal terms will we drive innovation and exceed customer expectations. Camfil therefore aims for all major production facilities to be GEEIS certified. GEEIS is an internationally recognised certification for companies that demonstrate a strong willingness to achieve diversity and a level playing field in the workplace.

Countering corruption

Corruption is prevented in several ways. In addition to direct action in specific transactions, Camfil applies data protection and information security as a crucial aspect of maintaining a good control environment that serves to hinder various forms of corruption. The company's clear position, underpinned by strong core values that condemn bribery and corruption, is also vital in shaping a corporate culture that stands strong against corruption.

Anti-corruption

Camfil takes a clear stand against bribery and other forms of corruption. The Group provides products and services worldwide and complies with applicable laws and trade regulations established by the EU, United States and UN as well as local rules for the sale and delivery of our products and services. Specifically, Camfil's owner directive states that we do not conduct business that conflicts with the Group's ethical and moral principles. Camfil has appointed a compliance officer who monitors compliance with Camfil's trade policy regarding trade barriers and sanctions and ensures that the necessary processes for monitoring and assessing business partners are in place. As part of this process, several groups of employees are trained each year on these regulations to ensure that these considerations are part of our day-to-day operations. Targets have therefore been set for the percentage of employees in the selected groups who will undergo this training.

IT security and data protection

Increasing digitalisation brings more business opportunities for Camfil, but it also entails a greater risk of hacking into systems, cybercrime and data leaks. To protect the privacy of the company, employees, suppliers and customers, the Group works actively to address IT security. These efforts are governed by the Group's IT policy. The EU's General Data Protection Regulation (GDPR) has also been integrated in our IT policy to ensure individuals' right to personal data protection in line with the regulation.

To ensure that Camfil maintains a robust IT security environment and processes personal data appropriately, targets have been set for employees' completion of regular training in IT security.

An ethical corporate culture

As a basic prerequisite for compliance with the Group's policies and guidelines, employees must be familiar with these documents, including Camfil's core values as expressed in the employee code of conduct. The code of conduct provides guidance on how the company's values affect our day-to-day work and the kind of culture we should promote. This applies to all employees and entails a special responsibility for managers, who must lead by example and serve as corporate ambassadors. Code of conduct violations can, if necessary, be reported anonymously to a third party using a whistleblowing function, which is available in multiple languages to provide accessibility to all of the Group's employees. To promote awareness of the code of conduct for all employees and of our core values, a target has been set for all new employees to have completed an online course in our code of conduct.

Further information about Camfil's sustainable development efforts is available on our website at https://www.camfil.com/en/about-us/sustainability

Environmental permits

In 2021, Camfil had 32 production facilities of which three were in Sweden. Camfil's operations impact the environment in the form of evaporative emissions and effluent. The majority of the Group's production units are required to report the quantity of consumed thermosetting plastics or thermosetting plastic waste to regulatory agencies. Many of the production units in the United States also have permits covering process wastewater effluent and flue gas emissions.

Sweden

In Sweden, manufacturing was conducted at three sites in 2021: production of different types of air filters in Trosa and Tranas/Aneby, and production of metal filters, activated carbon filters and sheet metal parts for filters in Osterbymo. No permits are required for these facilities. All of these production units are certified to ISO 14001 and ISO 9001. The facility in Tranas/Aneby was decommissioned during the year.

Future growth

Shifts in the economy and the global business environment affect Camfil's operations in different ways. This will depend mainly on general economic developments and fluctuations in the market sectors where Camfil is active.

Camfil drives the development of leading technologies within air and particle filtration to create sustainable customer offerings that perform better and reduce resource consumption. The business landscape is influenced by various driving forces, such as changes in economic development and opinions about the environment and sustainability.

The following factors contribute to the continuing viable and favourable development of Camfil's market:

The Group's operations have excellent geographical coverage, with sales companies, agents and distributors in more than 50 countries. This global position reduces the risk that the Group's financial performance will be affected if the economy of a particular country should weaken.

A large percentage of sales, mainly in the Filters and Molecular Contamination Control (MCC) business areas, consist of aftermarket sales, so Camfil's operations are affected to a lesser extent by changes in demand caused by economic fluctuations, which primarily impact new investment projects.

For the Power Systems and Air Pollution Control business areas, project activities represent a relatively larger share than in the Filter business area. Demand for their products is consequently more driven by investments, making the business areas more sensitive to economic fluctuations.

In summary, Camfil estimates that the Group's prerequisites for growth remain positive. However, there may be exceptions to this in the short-term and medium-long term within certain geographic markets, or in categories where economic uncertainty negatively affects the willingness of customers to invest in new projects. The Group will continue to make investments focused on growth over the next few years.

Ownership structure

On 31 December 2021, the company was owned by:

Class A common shares carry 10 votes each, and Class B common shares 1 vote each.

Proposed disposition of earnings

A total of SEK 1,893,041,457 is available for distribution by the Annual General Meeting.

The Board of Directors and the President propose that the above sum be distributed as follows:

The dividend will be paid in the amount of SEK 14.75 per share on 30 March 2022 and SEK 14.00 per share on 30 September 2022.

Regarding the company's financial results and position, please refer to the following financial statements and accompanying notes to the financial statements.

Board's statement on the proposed disposition of earnings

The proposed dividend to shareholders reduces the parent company's equity ratio to 51 % and the Group's equity ratio to 56 %. The equity ratio is acceptable against the background that the operations of the parent company and the Group can be continued with satisfactory profitability. The Board estimates that liquidity in the parent company and the Group can be maintained on a similar adequate level.

The Group recognises the value of financial derivatives at fair value. The Group's equity at 31 December 2021 totalled MSEK 4,679 and MSEK -7 of this amount was attributable to such recognition. The Group has no other financial assets or liabilities recognised at fair value in accordance with Chapter 4, Paragraph 14a of the Swedish Annual Accounts Act (1995:1554). The parent company's equity at 31 December 2021 totalled MSEK 2,403 and MSEK 2 of this amount was attributable to such recognition. The parent company has no other financial assets or liabilities recognised at fair value in accordance with Chapter 4, Paragraph 14a of the Swedish Annual Accounts Act.

In the opinion of the Board, the proposed dividend does not prevent the parent company, and the other companies in the Group, from fulfilling their obligations in the short and long term, or from carrying out necessary investments. The proposed dividend can thus be defended with regard to the Swedish Companies Act, Chapter 17, Section 3, Paragraphs 2-3 (the prudence rule).

Consolidated Income Statement

MSEK

Consolidated Statement of Comprehensive Income

MSEK

Consolidated Statement of Financial Position

MSEK

Consolidated Statement of Changes in Equity

(Note 27, 30)

MSEK

Consolidated Statement of Cash Flows

MSEK

Parent Company Income Statement

MSEK

Parent Company Statement of Comprehensive Income

Parent Company Balance Sheet

MSEK

Parent Company Statement of Changes in Equity

MSEK

Parent Company Statement of Cash Flows

MSEK

Notes to the financial statements

Note 1. Significant accounting policies

Below is a description of the most significant accounting policies for the Group that were applied in the preparation of this Annual Report. These principles have been consistently applied for all presented years, unless specified otherwise.

Conformity with standards and laws

These consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the EU. "RFR 1 Supplementary Accounting Regulations for Groups", issued by the Swedish Financial Reporting Board, has also been applied.

The parent company applies the same accounting policies as the Group, except as described below in the section "Accounting policies of the Parent Company".

The annual report and consolidated financial statements were authorised for issue by the Board and the President on 18 March 2022. The consolidated statements of income and other comprehensive income, the consolidated statement of financial position, and the parent company's income statement and balance sheet will be submitted for approval by the Annual General Meeting on 23 March 2022.

Basis of measurement applied in the preparation of the financial statements

Assets and liabilities are stated on a historical cost basis except for certain financial assets and liabilities, which are stated at fair value. Financial assets and liabilities measured at fair value comprise derivative financial instruments, financial instruments that have to be measured at fair value through profit or loss, and debt and equity instruments measured at fair value through other comprehensive income. Liabilities for equity-settled sharebased payments are also measured at fair value. A defined benefit pension liability/asset is stated at the net of fair value in plan assets under management and the present value of the defined benefit liability, adjusted for any asset limitations.

Functional and presentation currency

The parent company's functional currency is the Swedish Krona (SEK), which is also the presentation currency for the parent company and Group. The financial statements are therefore presented in SEK. All amounts are rounded up to the nearest million, unless indicated otherwise.

Use of judgements and estimates in the financial statements

In preparing these consolidated financial statements in accordance with IFRS, management has made judgements and estimates that affect the application of the Group's accounting policies and the carrying amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 42.

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

Significant accounting policies applied in the preparation of the financial statements

The accounting policies described below, with the exception of those described in greater detail, have been consistently applied for all periods presented in the Group's financial statements. When required, the Group's accounting policies have also been consistently applied by the Group's companies.

Changes in accounting policies

Changes in accounting policies due to new or revised IFRS standards:

Changes in accounting policies that the Group has been applying since 1 January 2021 are described below. Other revisions to IFRS applied from 1 January 2021 have not had a material effect on the Group's financial statements.

Amendments to IFRS as a result of interest rate benchmark reforms (IBOR Reform Phase 2). The amendments apply to adjustments in financial assets, financial liabilities and lease liabilities, special hedging transactions and disclosure requirements where IFRS 7 is used to supplement the changes regarding adjustments and hedging transactions. The amendments will be applied as of 1 January 2021. The amendments have no decisive impact on the Group.

Amendments to IFRS 16 Leases: Covid-19-related rent concessions. The change gives lessees an exemption when it comes to assessing whether Covid-19-related rent concessions are lease modifications. The changes apply to annual reporting periods beginning on or after 1 June 2020. The amendments have no decisive impact on the Group.

New IFRS standards not yet adopted by the Group

New or amended IFRS standards for future application are not expected to have a material effect on the Group's financial statements.

Briefly described, amended accounting policies for future application have the following significance:

Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Noncurrent - Deferral of Effective Date. Among other things, the amendments provide guidance to companies to determine if a liability should be classified as non-current or current when there is uncertainty about the effective date for the settlement of the liability. According to IASB, to be applied as of 1 January 2023. Early adoption is allowed. The expected date for EU approval is not known for the time being.

Amendments to IFRS 3 Business combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Annual Improvements 2018-2020. According to IASB, to be applied as of 1 January 2022. The amendments were approved by the EU in the first half of 2021.

IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17. According to IASB, to be applied as of 1 January 2023. The effective date is not known for the time being.

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosures of accounting policies. According to IASB, to be applied as of 1 January 2023. The expected date for EU approval is not known for the time being.

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates. According to IASB, to be applied as of 1 January 2023. The expected date for EU approval is not known for the time being.

Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction. According to IASB, to be applied as of 1 January 2023. The expected date for EU approval is not known for the time being.

Classification, etc.

Assets consist basically of amounts that are expected to be recovered or paid after more than 12 months from the balance sheet date, while current assets are basically amounts that are expected to be recovered or paid within 12 months from the balance sheet date. Non-current liabilities consist primarily of amounts for which Camfil has an unconditional right at the close of the reporting period to choose to pay over a period longer than 12 months. If Camfil does not have that right at the end of the reporting period - or has a trade liability, or if the liability is expected to be settled within the normal business cycle - the liability is recognised as a current liability.

Basis of consolidation and business combinations

Business combinations

For each transaction, the Group assesses if it should be accounted for as a business combination or an acquisition of assets. The transaction is a business combination when the company obtains control over the business or businesses. A business consists of activities and assets which, as a minimum, consist of inputs and substantial processes that can produce goods or services for customers to generate income from ordinary activities.

For transactions in which the fair value of the acquired assets basically consists of an asset or group of similar assets, a simplified assessment is used to report the transaction as an acquisition of assets. The option to use the simplified assessment is applied from transaction to transaction.

Subsidiaries

Subsidiaries are all companies (including structured companies) over which the Group has a controlling interest. The Group controls a company when it is exposed to or is entitled to variable returns from its holding in the company and can influence the returns through its influence in the company. Subsidiaries are included in the consolidated financial statements as of the time when the controlling influence is transferred to the Group. They are excluded from the consolidated financial statements as of the time when the controlling influence ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group.

The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

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

Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Transactions eliminated on consolidation

Intra-Group receivables and liabilities, income and expenses, and any unrealised gains and losses arising from transactions between Group companies, are eliminated in their entirety in the preparation of the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Disposals of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as a financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in SEK, which is the parent company's functional currency and the Group's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses resulting from the translation of trade receivables and trade payables are recognised in cost of goods sold, while the translation effects of other financial assets and liabilities are recognised in finance income and expenses, except when the transactions are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges, in which case the gains/losses are recognised in other comprehensive income.

Financial reports of foreign operations

The results and financial position of all the Group's entities (none of which has the currency of a hyperinflationary economy as its functional currency) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to other comprehensive income and accumulated in a separate component in equity, designated as "translation difference". When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Revenue

Performance obligations and revenue recognition policies

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

Information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies, is summarised below.

Sale of products

Customers obtain control of the products when the products are dispatched from the Group's warehouse. Invoices are generated and revenue is recognised at that point in time when the goods are delivered and control of the products has been transferred to the customer. Invoices are usually payable within 30 to 60 days.

Project contracts

Large projects involving sales of a number of customerspecific units that run over a long period of time. The project is usually started when advance payment for part of the contract amount is received from the customer. The length of the project will depend on its complexity but is usually three to six months. Revenue is recognised when the products have been delivered and accepted by the customer.

Service contracts

Revenue is recognised over time as the services are provided and is thus based on the contract's stage of completion.

If the services under a single arrangement were rendered in different reporting periods, then the consideration is allocated on the basis of relative independent sales prices.

Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At commencement or on modification of a contract that contains several components - lease and non-lease components - the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of land and buildings in which the Group is the lessee, the Group has elected not to separate non-lease components and accounts for the lease and non-lease components paid in fixed amounts, as a single lease component.

Leases in which the Group is the lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, which, for the Group, is normally the end of the lease term. In rarer cases, when the cost of the right-of-use asset reflects that the Group will exercise an option to purchase the underlying asset, the right-of-use asset is depreciated over the useful life of the underlying asset.

The lease liability - which is divided into a non-current and current portion - is initially measured at the present

value of the remaining lease payments over the estimated lease term. The lease term consists of the period during which lease payments are non-cancellable and also includes optional periods in the contract if it is reasonably sure they will be utilised at the lease commencement date.

Lease payments are normally discounted using the Group's incremental borrowing rate which reflects, in addition to the Group's/company's credit risk, the lease term of each contract, the currency and the quality of the underlying asset used as the intended collateral. However, in cases when the implicit interest of the lease contract can be easily determined, that interest rate is used, which is the case for parts of the Group's vehicle leases.

The lease liability comprises the present value of the following payments over the estimated lease term:

The amount of the liability increases with the interest expense for each period and is reduced by lease payments. The interest expense is calculated as the amount of the liability times the discount rate.

The lease liability for the Group's premises with rents, as determined with an index, are calculated as the rent that applies at the end of each reporting period. At that point of time, the liability is adjusted by a corresponding adjustment of the right-of-use asset's carrying amount. In a corresponding way, the value of the liability and the asset are adjusted when the lease term is remeasured. This is done when the last cancellation date in the previously measured lease term for the rental contract for the premises has passed, or when significant events occur, or when circumstances in a material way change in a manner that is within the Group's control and impact the current measurement of the lease term.

For lease contracts with a term of 12 months or less, or with an underlying asset of low value, less than SEK 50,000, no right-of-use asset and lease liability are reported. Lease payments for these contracts are reported as a cost that is recognised on a straight-line basis over the term of the lease.

Finance income and finance costs

The Group's finance income and finance costs include:

Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group's right to receive payment is established.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the financial liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

Taxes

Income taxes consist of current tax and deferred tax. Income taxes are recognised in profit or loss, except when the underlying transaction is recognised in other comprehensive income, or in equity, whereby the associated tax effect is recognised in other comprehensive income or in equity.

Current tax comprises the expected tax payable or receivable for the current year as measured by the application of the determined tax rates, or the tax rates enacted on the balance sheet date. Current tax also includes adjustments of the tax payable or receivable in respect of previous years.

Deferred tax is calculated using the liability method and is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised in consolidated goodwill for temporary differences, or for temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination at the time of the transaction and does not affect either accounting or the taxable profit or loss. In addition, deferred tax is not recognised in respect of temporary differences related to investments in subsidiaries and associated companies that are not expected to be reversed in the foreseeable future. Deferred tax is measured on the basis of how the underlying asset or liability will be realised or settled. Deferred income tax is determined using tax rates that have been enacted or substantially enacted on the balance sheet date.

Deferred tax assets related to deductible temporary differences and tax loss carryforwards are recognised only to the extent that their realisation is probable. Deferred tax assets are reduced when it is no longer considered probable that the related tax benefit can be realised.

Any income tax arising from dividends is recognised on the date when the dividend was recognised as a liability.

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

Financial instruments

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not measured at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classification and subsequent measurement

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income - debt instrument investment; fair value through other comprehensive income - equity investment; or fair value through profit or loss.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value through profit or loss:

A debt instrument investment is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated as at fair value through profit or loss:

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or fair value through other comprehensive income, as described above, are measured at fair value through profit or loss. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost, or at fair value through other comprehensive income, which is measured at fair value through profit or loss, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets - Subsequent measurement and gains and losses:

Financial liabilities - Classification, subsequent measurement, and gains and losses

Financial liabilities are classified as measured at amortised cost or at fair value through profit or loss. A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading, it is a derivative, or it is designated as such on initial recognition. Financial liabilities at fair value through profit or loss are measured at fair value, and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Derecognition in the consolidated statement of financial position

Financial assets

The Group derecognises a financial asset in the consolidated statement of financial position when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

Financial liabilities

The Group derecognises a financial liability in the consolidated statement of financial position when its contractual obligations are discharged or cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Derivative financial instruments and hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss.

The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortised to profit or loss over the period to maturity. The Group only applies fair value hedge accounting for hedging fixed interest risk on borrowings. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate borrowings is recognised in the income statement within "Finance costs". Changes in the fair value of the hedge fixed rate borrowings attributable to interest rate risk are recognised in the income statement within "Finance costs".

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within "Cost of goods sold" (forward foreign exchange contracts) or within financial items (interest rate swaps).

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within "Finance costs". The gain or loss relating to the ineffective portion is recognised in the income statement within "Finance costs". However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within "Cost of goods sold" (forward foreign exchange contracts) or within financial items (interest rate swaps).

Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement within "Cost of goods sold" (forward foreign exchange contracts) or within financial items (interest rate swaps).

Hedging of net investments in foreign operations

The Group has no hedges of net investments in foreign operations.

Derivative financial instruments and hedging activities

Interest rate swaps are used to hedge the uncertainty of highly probable forecast interest rates for borrowings at floating interest rates in which the Group obtains a floating rate and pays a fixed interest rate. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

(a) hedges of the fair value of recognised liabilities (fair value hedge) or

(b) hedges of a particular risk associated with a recognised liability or a highly probable forecast transaction (cash flow hedge).

The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes are disclosed in Note 34. Movements on the hedging reserve in shareholders' equity are shown in Note 27. The full fair value of a hedging derivative is classified as a current asset or long-term liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or current liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units, in accordance with the Group's operating segments, which are expected to benefit from the business combination in which the goodwill arose.

Acquired software

Standard computer software is normally expensed. Costs for software developed by the company, or software that has been modified considerably for the Group's use, as well as standard software of major value, are capitalised and amortised over five and three years, respectively, using the straight-line method. In the income statement, depreciation of software is included in the item "Cost of goods sold", or in "Selling costs" or "Administrative expenses", depending on the application. Costs associated with maintaining software are recognised as an expense as incurred.

Research and development work

Research expenditure is recognised as an expense as incurred. Costs incurred in development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and costs can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs that have been recognised earlier as a cost are not recognised in the following period. Development costs with a finite useful life that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit for five years.

Property, plant and equipment

Land and buildings comprise mainly factories and offices. Property, plant and equipment are stated at acquisition cost less depreciation and any impairment. The acquisition cost includes costs that can be directly attributable to the acquisition of the asset.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation policies

Depreciation on property, plant and equipment is calculated using the straight-line method over their estimated utilisation period. The following depreciation periods are applied:

The residual value of assets and utilisation period are tested for impairment on each balance sheet date and adjusted if needed.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, firstout (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Impairment

The Group's recognised assets are reviewed on each reporting date to determine if there is a requirement for impairment. IAS 36 is applied for impairment of assets other than financial assets, which are recognised under IFRS 9, and for inventories, plan assets used to finance compensation to employees, and deferred tax assets. For the excepted assets above, the carrying amounts are estimated under each respective standard.

Impairment of property, plant and equipment and intangible assets

If there is an indication for a need for impairment, the asset's recoverable amount is estimated (see below). For goodwill, other intangible assets with an undetermined value in use and intangible assets that are not yet ready for use, the recoverable amount is also estimated on an annual basis. If largely separate cash flows cannot be determined for an individual asset, and its fair value less selling costs cannot be used, the assets are grouped when testing for impairment requirements at the lowest level where it is possible to identify largely separate cash flows - a so-called cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (group of units) exceeds its recoverable amount. An impairment loss is recognised as an expense in profit or loss for the year. When the impairment requirement has been identified for a cashgenerating unit (group of units), the impairment amount is allocated primarily to goodwill, after which other assets belonging to the unit (group of units) are written down in a proportional amount.

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. When estimating value in use, future cash flows are discounted with a discount factor that takes into consideration risk-free interest and the risk associated with the specific asset.

Reversal of impairment losses

Impairment of assets as applied under IAS 36 is reversed if there is an indication that the impairment requirement no longer exists and if there has been a change to the assumptions that were used as the basis for estimating the recoverable amount. However, impairment of goodwill is never reversed. A reversal is made only to the extent that the asset's carrying amount after reversal does not exceed the carrying amount that should have been recognised, less impairment if relevant, if no impairment had been made.

Impairment of financial assets

Financial instruments and contract assets

The Group recognises loss allowances for expected credit losses on:

The Group measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured at 12-month expected credit losses:

Loss allowances for trade receivables, contract assets and lease receivables are always measured at an amount equal to lifetime expected credit losses. The Group uses a matrix for calculating the loss reserve with expected loss percentages divided into how many days a receivable is late and which customer category the receivable originates from. The loss percentages are based on historical experiences and specific conditions and expectations at the end of the reporting period.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information.

The Group considers that the credit risk of a financial asset has increased significantly if it is more than 180 days past due.

The Group considers a financial asset to be in default when:

The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group is exposed to credit risk.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income are credit-impaired. A financial asset is credit- impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

Presentation of allowance for expected credit losses in the statement of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities measured at fair value through other comprehensive income, the loss allowance is charged to profit or loss and is recognised in other comprehensive income.

Write-offs

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount in full when the financial asset is 365 days past due, based on historical experience of recoveries of similar assets. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

Payment of capital to owners

Dividends are recognised as a liability after the Annual General Meeting has approved the dividend.

Earnings per share

The calculation of basic earnings per share is based on the profit or loss for the year in the Group attributable to owners of the parent company and the weighted average number of outstanding shares during the year. Diluted earnings per share is not calculated because there are no dilutive potential ordinary shares in the company originating from convertible debentures and share options issued to employees.

Employee benefits

Short-term employee benefits

The calculation of short-term employee benefits is not discounted and is expensed as the related service is provided.

An appropriation is recognised for the expected cost of profit-sharing and bonus payments when the Group has the legal or informal obligation to make such payment when services are received from the employees and the obligation can be judged as reliable. The Group recognises a liability and an expense for bonuses, based on an estimate that takes into consideration the bonusgenerating parameters established for the bonus.

Pension obligations

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan 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 the legal entity does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not based on defined contributions. A defined benefit plan typically defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Past service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees' remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available to the Group.

Other post-employment benefits

Some Group companies (mainly in Italy) provide a type of severance pay when an employee leaves or retires from the company. The right to these benefits is usually based on the employee receiving a certain percentage of his or her annual salary for work at the company, when the employee leaves the company. The compensation is based on the employee's salary on the date employment is terminated. The anticipated cost of these benefits is allocated over the employment period using an accounting method that is similar to the method used for defined benefit pension plans. These obligations are valued annually by independent qualified actuaries.

Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

Provisions

A provision differs from other liabilities because there is uncertainty about the payment timing or the amount of the payment to settle the obligation. A provision is recognised in the statement of financial statement position when there is a legal or constructive obligation as a result of past events and it is probable that an outflow of economic resources will be required to settle the obligation and the amount has been reliably estimated.

Provisions are made in an amount that is the best estimate of what is required to settle the obligation at the end of the reporting period. When the effect of the payment timing is significant, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Warranties

A provision for warranties is recognised when the underlying products or services are sold, based on historical warranty data and a weighting of possible outcomes against their associated probabilities.

Restructuring

A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.

Onerous contracts

A provision for onerous contracts is recognised when the anticipated benefits that the Group expects to receive from a contract are lower than the unavoidable costs of fulfilling the obligations according to the contract.

Contingencies

Contingencies are disclosed when there is a possible obligation related to past events whose existence is confirmed only by one or several future events that are not within the control of the Group, or when there is an obligation that is not recognised as a liability or provision because it is not probable that it will lead to an outflow of economic resources, or it cannot be measured reliably.

Share capital

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Accounting policies of the parent company

The financial statements of the parent company have been prepared in accordance with the Swedish Annual Accounts Act (1995:1554) and standard RFR 2 "Accounting for Legal Entities" issued by the Swedish Financial Reporting Board. The interpretations of the Swedish Financial Reporting Board for listed companies are also to be applied. In RFR 2, the parent company, in its financial statements for the legal entity, is to apply all International Financial Reporting Standards (IFRS) and interpretations adopted by the EU to the greatest extent possible within the framework of the Swedish Annual Accounts Act and the Swedish law on safeguarding pension obligations ("Tryggandelagen"), taking into account the relationship between accounting and taxation. The recommendation states the exceptions and supplementary accounting principles that are to be applied from IFRS.

Differences between the accounting policies of the Group and parent company

The differences between the accounting policies of the Group and parent company are described below. The accounting policies for the parent company have been consistently applied for all reporting periods in the parent company's financial statement.

Changes in accounting policies

Unless mentioned otherwise below, the accounting policies of the parent company for 2021 have been changed in accordance with what is stated above for the Group.

Classification and presentation of financial statements

An income statement with profit or loss and a statement of other comprehensive income are presented for the parent company, while these two statements for the Group together comprise a statement of profit or loss and a statement of other comprehensive income. In addition, the terms balance sheet and statement of cash flows are used for the parent company for the statements of the Group designated consolidated statement of financial position and consolidated statement of cash flows, respectively. The income statement and balance sheet for the parent company are prepared in accordance with the format of the Swedish Annual Accounts Act, while the income statement and statement of other comprehensive income, the statement of changes in equity and the statement of cash flows are based on IAS 1 "Presentation of Financial Statements" and IAS 7 "Statement of Cash Flows". The differences compared with the Group's statements, which are found in the parent company's income statement and balance sheet, consist mainly of the presentations of finance income and costs, property, plant and equipment, shareholders' equity and the presence of provisions as its own line item in the balance sheet.

Subsidiaries

Shares in subsidiaries are recognised in the parent company in accordance with the purchase method, in which transaction costs are included in the recognised value of the holdings in subsidiaries. In the consolidated financial statements, transaction costs related to subsidiaries are recognised directly in profit or loss as they arise.

Contingent consideration is measured on the basis that it is probable that the consideration will be paid. Any change in the provision/receivable is added to/reduced in the acquisition cost. In the consolidated financial statements, contingent consideration is measured at fair value with value changes through profit or loss.

Acquisitions at low price corresponding to future expected losses and expenses are reversed during the periods in which the losses and expenses are expected to incur. Acquisitions at low price incurred due to other factors are recognised as appropriations to the extent which does not exceed the fair value on acquired and identified nonmonetary assets. The part that exceeds this amount is directly recognised as income. The part that does not exceed the fair value of acquired and identified nonmonetary assets is recognised as income systematically over a period of time based on the weighted remaining average usage period for the acquired identified depreciable assets. In the consolidated financial statements, acquisitions at low price are accounted for directly in profit or loss.

Shares and participations in subsidiaries are recognised at acquisition cost after deduction for any impairment. The acquisition cost includes acquisition-related costs and any additional consideration that is transferred. Dividends received are recognised as financial income. If dividends exceed a subsidiary's comprehensive income for the period or result in the book value of the holding's net assets being less than the book value of the participations in the consolidated financial statements, there is an indication for a need for impairment.

Revenue recognition

Sales of goods and provision of services

The parent company recognises revenues from service assignments when an assignment is completed. Until the assignment is completed, it is reported as work on contract at the lower of acquisition cost and net sales cost on the balance sheet date.

Dividends

Dividend income is recognised when the right to receive payment is considered certain.

Financial instruments and hedge accounting

The parent company has chosen not to apply IFRS 9 to financial instruments. Nor does the parent company apply the measurement rules in IAS 39. However, what is otherwise written about financial instruments also applies to the parent company. In the parent company, financial assets are recognised at cost less any impairment losses and financial current assets are recognised at the lower of cost or net realisable value.

Derivatives and hedge accounting

Derivatives that are not used for hedging purposes are recognised in the parent company at the lower of cost or net realisable value. The recognition of derivatives that are used for hedging depends on the hedged item, in which case the derivative is treated as an off-balance item as long as the hedged item is not recognised in the balance sheet at acquisition cost. When the hedged item is recognised in the balance sheet, the derivative is recognised in the balance sheet at fair value.

Shares and participations in subsidiaries

When there is an indication that shares and participations in subsidiaries have declined in value, the recoverable amount is assessed. If it is lower than the carrying amount, an impairment loss is recognised. The impairment loss is recognised in the item "Result from participations in Group companies".

Property, plant and equipment

In the parent company, property, plant and equipment is recognised at acquisition cost after deduction for accumulated depreciation and any impairment losses in the same way as for the Group but with the addition of any revaluations.

Fixed assets leased by the company

The parent company does not apply IFRS 16 in accordance with the exception in RFR 2. As a lessee, leasing fees are expensed on a straight-line basis over the leasing period and therefore right-of-use assets and lease liabilities are not recognised in the balance sheet. In the same way as in the consolidated financial statements, lease and non-lease components are not separated for land and buildings. Instead, lease and non-lease components are recognised as one single lease component for these types of underlying assets. The agreements in which the parent company is the lessor are accounted for as operating leases.

Borrowing costs

In the Parent Company, borrowing costs are charged against income for the period they refer to. No borrowing costs are capitalised in assets.

Research and development

In the Parent Company, expenditures for the development of products are capitalised if the project costs exceed MSEK 1. Expenditures less than MSEK 1 are recognised as costs in the income statement.

Employee benefits

Defined benefit plans

The parent company recognises defined benefit plans as defined contribution plans when the pension premium is paid to an insurance company, an insurance association or similar entity.

In the parent company, the calculation of defined benefit plans - so-called unfunded plans financed through debt in the balance sheet - is based on other principles that those stated in IAS 19. The parent company follows the regulations of the Swedish law on safeguarding pension obligations ("Tryggandelagen") and the instructions of the Swedish Financial Supervisory Authority ("Finansinspektionen") since such plans are a prerequisite for being entitled to tax deductions. The main differences, compared with the rules in IAS 19, is the way the discount rate is set; the calculation of the defined benefit obligation is based on the present salary level without assumptions for future salary raises, and that all actuarial gains and losses are recognised in the income statement as they arise.

The parent company has undertaken defined benefit obligations for salaried workers that are secured through insurance with Collectum and are recognised as a defined contribution plan. Pension costs are charged against operating income.

Taxes

In the parent company, untaxed reserves are recognised, including deferred income tax liabilities. However, in the consolidated accounts, untaxed reserves are divided into deferred income tax liabilities and equity.

Group contributions

Group contributions are recognised as an appropriation.

Note 2. Revenue

Revenue streams

The Group generates revenue primarily from the sale of air filtration solutions to its customers.

In the following table, revenue from contracts with customers is disaggregated by timing of revenue recognition:

^*) The Group has shorter service assignments in which revenue is recognised as the service is performed. The revenue is not significant and is therefore not reported separately.

Contract balances

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

The contract assets primarily relate to the Group's rights to consideration for work completed on large projects but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer.

The parent company only has revenue from transactions with Group companies.

Note 3. Business combinations

During the year, Camfil acquired two sister companies in Australia (Airepure Australia Pty Ltd) and New Zealand (Airepure (New Zealand) Pty Ltd), as well as two sister companies in Sweden (Resema AB) and Denmark (Resema AS). The combined turnovers of the companies contributed approximately MSEK 200 to the Group's annual sales in 2021. In addition, Strandstenen i Trosa AB and its associated property was purchased. The company does not conduct operations.

Goodwill totalling MSEK 72 has arisen from the acquisitions and is attributable to the acquired customer base (which is not separable) and the future economies of scale that are expected from integrating the operations in the Camfil Group.

There were no acquisitions in 2021.

The following table summarises the consideration paid for the fair value of the assets acquired and liabilities assumed at the acquisition date:

Note 4. Employees, personnel costs and key management compensation

Wages, salaries and other remuneration, and social security contributions:

Acquisition-related costs of MSEK 0 (5) have been included in administrative expenses in the consolidated income statement.

Average number of employees in the parent company and Group:

Gender distribution in company management:

¹⁾ One person can serve on the boards of several companies and may be included several times in the number of board members.

Key management compensation

Principles

Fees are paid to the Chairman of the Board and board members in accordance with the decision of the Annual General Meeting. Compensation paid to the President and CEO and other key management members consists of basic salary, variable salary, other benefits and pension. Other key management members in the parent company refers to staff heads, who together with the President and business area heads comprise Group Management.

Basic salary

Basic salary is to constitute the basis for total compensation. Salary should be related to the relevant market and reflect the extent of the responsibilities associated with the position. Basic salary is to be reviewed annually to ensure that it is market-based and competitive.

Variable salary, STI (Short-term incentives)

In addition to basic salary, key management members have the possibility to receive variable salary for profits that exceed one or several predetermined performance levels during a financial year. Variable salary is based on the company's financial results and, if relevant, individually set performance goals. The portion of variable salary based on goals varies between two months of salary and up to a maximum of 75 % of basic salary, with the possibility of receiving up to 2.5 times compensation for overachievement.

Variable salary, LTI (Long-term incentives)

There were no LTI programs with variable salary in 2021 or 2020.

Pension

Pension agreements are to be defined contribution plans, if possible, and formulated in accordance with the level and practice applicable in the country in which the key management member is employed.

The Group has basically only defined contribution pension plans for key management members. The pension expense refers to the cost that has impacted profit for the year. The retirement age for the President is 67 years. The pension premium for the President is to amount to 25 % of pension-based salary. Pension-based salary consists of basic salary and the variable salary paid in the most recent year. The retirement age for other key management members varies between 60 and 67 years.

Period of notice and severance pay

A six-month period of notice applies between the President and the company if the President resigns, and a 12-month period of notice if the company terminates his employment. When the company terminates the President's employment, the President will receive severance pay corresponding to 12 months of salary. Severance pay is not deducted from other income. If the President resigns, he receives no severance pay. The period of notice for other key management members varies between six and 12 months.

Basic compensation for the 2020 and 2021 financial years included expensed bonuses, which were paid in 2021 or 2022. Key management members also have a company car benefit amounting to MSEK 0.3. The company does not have any pension costs for external board members.

Preparation and decision-making process for remuneration

The rules of procedure for the Board states that remuneration paid to the President and other key management members is proposed by the Remuneration Committee. This committee consists of one of the principal owners, the Vice Chairman and another director from the Board. In 2020 and 2021, these committee members were Jan Eric Larson, Erik Markman and Peter Therman.

Audit Committee

Board members serving on the Audit Committee included Johan Markman and Johan Sjö.

Share-related compensation

There were no share-related programmes for key management members in 2021 or 2020.

Note 5. Fees and compensation paid to auditors

Auditing assignments refer to legal audits of the annual and consolidated accounts and accounting records, as well as audits of the Board's and President's administration and other auditing work performed in accordance with agreements or contracts.

Auditing assignments include other work incumbent on the company's auditors, as well as advisory services and other types of support as a result of observations made through such examinations or performance of such duties.

Note 6. Expenses by nature

Depreciation and amortisation in the line items below are recognised in profit or loss and other comprehensive income:

Research and development costs for the year totalled MSEK 122 (129) in the Group and MSEK 67 (76) in the parent company. In the income statements, research and development costs are included in the line item "Administrative expenses".

Note 7. Other operating income

In 2020, Camfil's APC production unit in Jonesboro, Arkansas, was damaged by a tornado. Construction of a new plant has been started and it is expected to be finished in 2022. Insurance compensation in the amount of MSEK 147 was recognised as revenue at the same time as the company incurred expenses for clearing and scrapping fixed assets. As a result, the consolidated income statement was affected with net operating income of MSEK 79. The temporary production structure involved higher operating costs that were charged on a continuous basis to operating income. In 2021, an additional MSEK 19 was received in insurance compensation for the tornado in 2020.

In December 2021, the Group's factory in rented premises in Jonesboro was once again hit by a tornado. Insurance compensation for the damage in the amount of MSEK 45 was recognised, while MSEK 45 for scrapping fixed assets and inventories were charged to operating income.

Income and costs are included in the following line items in the consolidated income statement:

Note 8. Net finance costs

Note 9. Net foreign exchange gains/losses

The exchange differences recognised in the income statement were as follows:

Note 10. Appropriations

Note 11. Income tax/Tax on profit for the year

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

The weighted average applicable tax rate was 22.6 % (23) in the Group and 10.6 % (13.0) in the parent company. The underlying tax rate in the Group, calculated at the applicable domestic tax rate for each country, decreased by 0.4 % till 22.6 %.

Difference between the parent company's tax charge and the tax charge based on nominal tax rates:

The parent company received tax-free dividends in 2021 that contributed to the low tax rate. There was MSEK 2 (0) in withholding tax on dividends in the parent company in 2021.

Income tax relating to components of other comprehensive income

Deferred tax assets and deferred tax liabilities

Deferred taxes are valued using the nominal tax rate. Deferred income tax assets are recognised for tax loss carryforwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable.

Deferred income tax assets and liabilities have not been offset even if there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same taxation authority.

Movements in deferred tax assets and liabilities in the Group were as follows during the year:

Deferred income tax assets in the parent company total MSEK 2 (2) and are attributable to a direct pension, including employer's contribution tax, for the benefit of the company's former President. The deferred tax asset is due later than one year.

Tax losses for which deferred income tax assets are not recognised:

Deferred tax losses have not been recognised for these items since it is not certain that the Group will be able to utilise them for settlement against future taxable profits within the next few years.

Note 12. Earnings per share

The lowest cash-generating unit (CGU) has been identified as Europe, Middle East & Africa (EMEA), Americas (AMER) and Asia Pacific (APAC), and the Power Systems (PS) business area. The first three are primarily geographically oriented with specific markets, while Power Systems has a global customer base spanning several geographical regions and therefore constitutes its own global CGU. This reflects the change that has been made in the internal follow-up and division of duties.

Impairment tests for goodwill

Goodwill is allocated to the Group's CGUs. A summary of the goodwill allocation per CGU is presented below:

Value-in-use calculations are used to determine the recoverable amount of a CGU. These calculations use cash flow projections based on forecasts approved by management and covering the next year.

Cash flows for the first three years are based on budgets and business plans. Cash flows beyond the next three years are extrapolated using estimated growth rates.

A sensitivity analysis shows no need for impairment, even if the estimated discount rate before tax applied to the discounted cash flows had been 10 % higher than management's estimate, or if the gross margin had been one percentage point lower than management's estimate.

Note 14. Other intangible assets

Intangible assets consist primarily of computer software, mechanical drawings, and methods for product development and the further development of existing business systems.

Depreciation costs totalling MSEK 13 (7) are included in the administrative expenses of the Group. Depreciation costs amounting to MSEK 3 (4) are included in the administrative expenses of the parent company.

Note 15. Land and buildings

Most building improvements refer to property leased from a subsidiary. No bank loans are secured by land and buildings.

Note 16. Machinery and production equipment

Note 17. Equipment

Note 18. Right-of-use assets

The Group recognises right-of-use assets in accordance with IFRS 16 as shown below. Buildings consist of leased office and factory buildings. Equipment consists mostly of motor vehicles. See "Note 36, Leases" for more information about lease contracts.

Note 19. Shares in Group companies

^*) In accordance with German law, these companies are exempted through these consolidated financial statements from the requirement to prepare, report and disclose

individual financial statements and consolidated year-end reports.

Acquisitions and divestments

During the year, all shares in SCI Longhamps, France, were divested. There were no acquisitions in 2021.

An intra-group restructuring was carried out because a number of companies were transferred from Camfil Ventures AB to Camfil Holding AB.

Capital infusions

Camfil Latinoamerica LTDA received a capital infusion of MSEK 11.

Share write-downs

Shares were written down in the total amount of MSEK 39 in Farr Filtration Ltd and Bushbury Holdings Ltd.

Other

All subsidiary undertakings are consolidated in the Camfil Group. The proportion of the voting rights in the subsidiary undertakings directly owned by the parent company do not differ from the proportion of ordinary shares held.

In Thailand, 42 % of Camfil (Thailand) LTD is indirectly owned through the American company Lifmac Asia Holding LLC. Camfil Ventures AB owns 40 % of Lifmac Asia Holding LLC and Comlog AB owns 2 %. Camfil (Thailand) LTD has been consolidated 100 percent because the Group has a controlling interest in the company.

Note 21. Financial placements in derivative instruments

Restrictions

Cash and short-term deposits of MSEK 163 (158) are held in China, Brazil and India and are subject to local exchange control regulations. These regulations provide for restrictions on exporting capital from the country, other than through normal dividends.

Note 20. Receivables from Group companies

The weighted average effective interest rate on receivables was as follows at the balance sheet date:

The full fair value of a derivative instrument is classified as an asset or non-current liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or current liability if the maturity of the hedged item is less than 12 months.

In 2021, ineffectiveness recorded from cash flow hedges amounted to MSEK 0 (2), which generated a cost of less than MSEK 0 (2) in the income statement.

The maximum exposure to credit risk on the balance sheet date is the fair value of the derivative instruments recognised as assets in the balance sheet.

The hedged, highly probable forecast transactions denominated in foreign currency are expected to occur at various dates over the next 12 months. Gains and losses on forward foreign exchange contracts are accounted for as hedges and reported in the hedging reserve in equity (Note 27), after which they are included in the income statement in the period or periods during which the hedged forecast transaction affects the income statement.

Gains and losses on forward foreign exchange contracts at 31 December, which are gradually recognised in equity, will be released to the income statement at various dates between one month and 12 months from the balance sheet date.

Note 22. Non-current receivables

It is estimated that there is no concentration of credit risk in non-current receivables.

Note 23. Inventory and contract assets

The cost of raw material inventories, which is recognised as an expense and included in "Cost of goods sold", amounted to MSEK 2,802 (2,437).

Note 24. Trade receivables

Trade receivables, after deduction for the reserve for expected and known bad credit losses, amounted to MSEK 1,694 (1,488) in the Group.

The Group has transferred certain trade receivables to a bank under a factoring arrangement and received cash proceeds in exchange. Trade receivables have not been derecognised from the statement of financial position because the Group substantially retains all of the risks and rewards - primarily credit risk. The amount received from the bank is recognised as a current liability.

The amount that the company received from the bank totalled as follows in the Group:

Note 25. Prepaid expenses and accrued income

Note 26. Cash and cash equivalents

Note 27. Share capital

The shares have a par (quota) value of SEK 14.49 each (14.49). All issued shares are fully paid. All holders of shares are entitled to dividends. At the Annual General Meeting of shareholders, Class A shares carry 10 votes each, while Class B shares carry 1 vote each.

A specification of the changes in equity is found in this report in the consolidated statement of changes in equity.

Dividend

For 2021, a dividend of SEK 28.75 per share is proposed for A shares and B shares, a total of MSEK 230. This amount has not been recognised as a liability in these financial statements. The dividend for 2020 and 2019 amounted to MSEK 230 and MSEK 192, respectively, corresponding to a dividend per share of SEK 28.75 for 2020 and SEK 24.00 for 2019.

Other reserves

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in profit or loss.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations that have prepared their financial statements in a currency other than the currency in which the Group's financial statements are presented. The parent company and Group present their financial statements in SEK.

Note 28. Bank overdraft facilities

For flexibility in the event of short-term liquidity fluctuations and temporary short-term borrowing needs, the Group utilises internal cash pools in a number of currencies, including SEK, USD, SGD, GBP, DKK, NOK, CAD, CZK and EUR. In the internal cash pool structure, each company's share is reported as an internal balance with the parent company - the company that has the external credit with a credit institution - which reduces the external credit requirements of the subsidiaries. In the internal cash pool structure, the parent company has granted bank overdraft facilities corresponding to MSEK 75 (75). None of the bank overdraft facilities had been utilised at the balance sheet date. There is also a local bank overdraft facility in Canada in the amount of MCAD 2.5, the equivalent of MSEK 18.0, of which none had been utilised at the balance sheet date.

Note 29. Interest-bearing liabilities

The table specifies the total interest-bearing liabilities for the Group and the parent company. See Note 35 for more information about the company's exposure to interest risk and foreign exchange risk.

See the following tables for the terms and repayment dates.

Note 30. Post-employment benefits

The table below outlines where the Group's postemployment amounts and activity are included in the financial statements.

^*) The income statement charge included within operating profit includes current service cost, past service costs, net interest costs, and gains and losses on settlement and curtailment.

Defined benefit pension plans

The Group operates defined benefit pension plans in France, Germany, the United Kingdom, Sweden, the Netherlands, Belgium and Thailand under broadly similar regulatory frameworks. All of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on the employees' length of service and their salary at the time of retirement. In the plans in Sweden, pension payments are generally updated in line with the retail price index, whereas in the plans in other countries, pensions generally do not receive inflationary increases once in payment. With the exception of this inflationary risk in Sweden, the plans face broadly similar risks, as described below.

Pension insurance in Alecta and Collectum

The obligations for retirement pensions and family pensions under the ITP 2 plan (supplementary pension plan for industry and trade) for salaried workers in Sweden are secured through pension insurance with Alecta. In accordance with a statement by the Swedish Financial Reporting Board, "UFR 10 Accounting for pension plans in ITP2 financed through insurance with Alecta", this is a multi-employer defined benefit plan. For the 2021 financial year, the Group did not have access to information that would enable it to report its proportional share of the plan's obligations, plan assets and costs. As a consequence, it is not possible to report this plan as a defined benefit plan. The pension plan in accordance with ITP 2 is secured through insurance with Alecta and is therefore reported as a defined contribution plan.

Premiums to Alecta are determined by assumptions about interest rates, life expectancy, operating costs and yield tax and are calculated so that payment of consistent premiums up to the time of retirement is sufficient to ensure that the entire targeted benefit, based on the insuree's current pensionable salary, is earned.

There are no established regulations for managing a deficit that may arise, although losses are to be covered by Alecta's collective consolidation capital, which does not result in increased costs through raised contracted premiums. Regulations also lack for distributing surpluses or deficits when terminating the plan and the company's exit from the plan.

The collective funding ratio consists of the market value of Alecta's assets as a percentage of its insurance commitments, as calculated according to Alecta's actuarial calculation assumptions, which do not comply with IAS 19. The collective funding ratio is normally allowed to vary between 125-155 %. If Alecta's collective funding ratio is less than 125 % or exceeds 155 %, measures must be taken to create the conditions for returning the funding ratio to the normal range. If the funding ratio is low, a possible measure could be to raise the contracted price for new insurance subscriptions and expansion of current benefits. If the funding ratio is high, one possible measure can be to reduce the premium. At year-end 2021, Alecta's surplus in the form of its collective funding ratio was 172 % (148).

Plan for severance benefits after termination of employment

The Group operates plans for severance benefits after termination of employment in which the employees have the right to receive post-employment benefits based on the employee's final salary and years of service. These plans exist primarily in Italy, India, Austria and France. The reporting method, assumptions and number of measurement periods are the same as those for defined benefit pension plans.

Defined contribution plan under own management

In the United States, there is a defined contribution pension plan under the company's own management.

There is also a defined contribution plan in Norway for a few senior executives.

The movement in the defined benefit liability for pension plans and post-employment benefits for pension plans over the year is presented on the following pages.

The defined benefit pension obligation and plan assets were composed by country as follows:

The significant actuarial assumptions (as weighted averages) were as follows:

Assumptions regarding life expectancy are set on the basis of actuarial advice in accordance with published mortality statistics and experience in each country. Theseassumptions translate into an average life expectancy in years for a pensioner retiring at age 65:

Sensitivity analysis

Possible changes at the reporting date to actuarial assumptions, holding other assumptions constant, and how these would impact the defined benefit obligation, are shown in the following table: