Arla Foods Annual Report 2020

Management Review Our Strategy EQUITY (CONTINUED) Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data Development in equity (EURM) 2,900 2,800 2,700 2,600 2,494 2,500 2,400 Understanding equity Equity accounts regulated by the Articles of Association can be split into three main categories: common capital, individual capital and other equity accounts. The characteristics of each account are explained below. Common capital Common capital is by nature un-allocated to individual members and consists of the capital account and the reserve for special purposes. The capital account represents a strong foundation for the cooperative's equity, as the non-impairment clause, described on page 70, ensures that the account cannot be used for payments to owners. The reserve for special purposes is an account that in extraordinary situations can be used to compensate owners for losses or impairments affecting the profit for appropriation. Amounts transferred from the annual profit appropriation to common capital are recognised in this account. Individual capital Individual capital is capital allocated to each owner based on their delivered milk volume. Individual capital consists of contributed individual capital, delivery-based owner certificates and injected individual capital. Amounts registered to these accounts will, subject to approval by the Board of Representatives, be paid out when owners leave the cooperative. Amounts allocated to contributed individual capital as part of the annual profit appropriation are interest-bearing. The account for proposed supplementary payment that will be paid out following the approval of the annual report is also classified as individual capital. Other equity accounts Other equity accounts include accounts prescribed by IFRS. These include reserves for value adjustments of hedging instruments, the reserve for fair value adjustments of certain financial assets and the reserve for foreign exchange adjustments. Non-controlling interests Non-controlling interests represent the share of group equity attributable to holders of non-controlling interests in group companies. Equity share 35 per cent During 2020 equity increased by EUR 145 million compared to last year and totalled EUR 2,639 million at 31 December 2020. Transactions with farmer owners A supplementary payment relating to 2019 totalling EUR 127 million was paid out in March 2020. Additionally, EUR 22 million was paid out to owners resigning or retiring from the cooperative. The Board of Directors proposes to pay EUR 223 million in March 2021 as a supplementary payment including interest on individual capital instruments for 2020. Furthermore, it is expected that EUR 18 million will be paid out in 2021 to owners resigning or retiring. Other equity adjustments Other equity adjustments of EUR -58 million relates to other comprehensive income of EUR -37 million and to changes in non-controlling interests of EUR -21 million. Other comprehensive income includes income and expenses as well as gains and losses that are excluded from the income statement. Typically they have not yet been realised. The net cost of EUR -37 million was due to negative value adjustments on net assets measured in foreign currencies, partly offset by positive value adjustments on hedging instruments and actuarial gains on pension assets and liabilities. The net cost of EUR-21 million in non-controlling interests relates to purchases of equity instruments in subsidiaries and the net effect of dividends and capital increases. The equity share of 35 per cent is calculated as equity excluding non-controlling interests at EUR 2,586 million divided by total assets of EUR 7,331 million. 69 ARLA FOODS ANNUAL REPORT 2020 2,300 2,200 interests 1 January 2020 Equity including non-controlling Profit for the year 352 -127 Supplementary payment related to 2019 Other payments to farmer owners -22 -58 2,639 Other equity adjustments Equity including non-controlling interests 31 December 2020

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