TALLINNA KAUBAMAJA GRUPP AS CONSOLIDATED ANNUAL REPORT 2020 The main areas of activity of Tallinna Kaubamaja Grupp AS (hereinafter referred to as the ‘Tallinna Kaubamaja Group’ or ‘the Group’) are retail and wholesale trade. At the year-end 2020, Tallinna Kaubamaja Grupp AS employed more than 4,500 employees. Legal address: Kaubamaja 1 10143 Tallinn Republic of Estonia Commercial Register no.: 10223439 Telephone: 372 667 3300 E-mail: [email protected] Beginning of financial year: 1.01.2020 End of financial year: 31.12.2020 Auditor: PricewaterhouseCoopers AS This consolidated annual report consists of the management report, the consolidated financial statements, the independent auditor’s report and the profit allocation proposal. Name of the reporting entity or other means of TALLINNA KAUBAMAJA GRUPP AS identification Explanation of change in name of reporting entity or other means of identification from end of preceding reporting period TKMG did not change its name or means of identification during the last reporting period. Domicile of entity Republic of Estonia Legal form of entity AS Country of incorporation Republic of Estonia Address of entity's registered office Kaubamaja 1, 10143 Tallinn Principal place of business Kaubamaja 1, 10143 Tallinn Description of nature of entity's operations and retail trade and provision of related services principal activities Name of parent entity OÜ NG Investeeringud Name of ultimate parent of group NG Kapital OÜ Tallinna Kaubamaja Grupp AS 2 Consolidated Annual Report 2020 (translation of the Estonian original) MANAGEMENT REPORT .................................................................................................................... 4 CONSOLIDATED FINANCIAL STATEMENTS ............................................................................. 40 MANAGEMENT BOARD’S CONFIRMATION OF THE CONSOLIDATED FINANCIAL STATEMENTS.............. 40 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................................... 41 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................. 42 CONSOLIDATED CASH FLOW STATEMENT ............................................................................................................. 43 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY...................................................................................... 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................. 45 Note 1 General information ................................................................................................................................... 45 Note 2 Accounting policies adopted in the preparation of the financial statements ........................... 45 Note 3 Critical accounting estimates and judgements .................................................................................. 59 Note 4 Management of financial risks ................................................................................................................ 60 Note 5 Cash and cash equivalents ....................................................................................................................... 64 Note 6 Trade and other receivables .................................................................................................................... 65 Note 7 Trade receivables ........................................................................................................................................ 65 Note 8 Inventories ..................................................................................................................................................... 65 Note 9 Subsidiaries .................................................................................................................................................. 66 Note 10 Investments in associates ...................................................................................................................... 68 Note 11 Long-term trade and other receivables .............................................................................................. 68 Note 12 Investment property ................................................................................................................................. 68 Note 13 Property, plant and equipment ............................................................................................................. 70 Note 14 Intangible assets ....................................................................................................................................... 75 Note 15 Interest bearing borrowings .................................................................................................................. 76 Note 16 Lease agreements ..................................................................................................................................... 78 Note 17 Trade and other payables ...................................................................................................................... 79 Note 18 Taxes ............................................................................................................................................................ 80 Note 19 Share capital .............................................................................................................................................. 80 Note 20 Segment reporting .................................................................................................................................... 81 Note 21 Services expenses .................................................................................................................................... 84 Note 22 Staff costs ................................................................................................................................................... 85 Note 23 Finance income and costs ...................................................................................................................... 85 Note 24 Earnings per share ................................................................................................................................... 85 Note 25 Loan collateral and pledged assets .................................................................................................... 86 Note 26 Related party transactions ..................................................................................................................... 86 Note 27 Interests of the members of the Management and Supervisory Board .................................... 87 Note 28 Shareholders with more than 5% of the shares of Tallinna Kaubamaja Grupp AS .............. 88 Note 29 Contingent liabilities ............................................................................................................................... 88 Note 30 Financial information of the Parent company .................................................................................. 89 INDEPENDENT AUDITOR’S REPORT ........................................................................................................................ 93 SIGNATURES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD TO THE ANNUAL REPORT 2020 ................................................................................................................................................................................ 101 REVENUE ALLOCATION ACCORDING TO THE ESTONIAN CLASSIFICATION OF ECONOMIC ACTIVITIES (EMTAK) .......................................................................................................................................................................... 102 Tallinna Kaubamaja Grupp AS 3 Consolidated Annual Report 2020 (translation of the Estonian original) MANAGEMENT REPORT Overview of the Group’s activities Briefly about Tallinna Kaubamaja Group Tallinna Kaubamaja Group is the biggest retail company in Estonia. Our 4,500 employees serve customers in 112 stores, where 694,000 loyal customers make 45 million purchases a year. 741.9 19.5 Million euros Million euros Revenue Net profit (2019: 717.2 million euros) (2019: 31.8 million euros) Revenue 2020 Net profit 2020 9% 3% 16% 12% -13% 1% 1% 41% 72% 71% 48 4,558 Cents Yearly average number Net profit Employees per share (2019: 4,273) (2019: 78 cents) Tallinna Kaubamaja Grupp AS 4 Consolidated Annual Report 2020 (translation of the Estonian original) Group’s vision The objective of Tallinna Kaubamaja Grupp AS is to be the flagship of Estonian trade and one of the most successful listed companies in the Baltic region in every area of its business. Group’s mission Group’s mission is to be the first choice for its customers, valued employer to its employees and trustworthy investment option for its shareholders. Group’s core values Integrity We are open and sincere and do not distort the truth. Concern We are friendly and helpful and open to solutions. Reliability We keep our promises and follow applicable regulations. Innovation We are open to new and progressive ideas, so that we always try to be a step ahead. Environmental awareness We care about the surrounding environment and we use our resources sustainably. Morality and legality The underlying principle of the Group’s business activity is to ensure, that all lines of businesses comply with the code of ethics. The Group has established a Code of Ethics, which summarizes and describes the most important principles