THE LEGO GROUP ANNUAL REPORT 2014 - Plasticker.de

MANAGEMENT’S REVIEW – CONTINUED In April 2014, the foundation stone of a manufacturing facility in China to solely supply the Asian market was revealed. Construction is ongoing and the plant is expected to commence operation in 2015 and be fully operational by 2017. At the LEGO factory in Monterrey, Mexico, an expansion to the packaging facilities was inaugurated in June 2014. In September 2014, the construction of a new production hall at the LEGO factory in Kladno, the Czech Republic, was completed. The new hall is part of a significant expansion of the plant that is expected to be finalised in 2016. During 2014 considerable investments have been made in an upgrade of equipment in the moulding factory in Billund, Denmark, which remains the largest moulding location globally when measured by output. Finally, sales offices in Brazil, Turkey and Malaysia have been added to the long list of local presence for the LEGO Group. Intellectual capital resources The considerable success of the company is only possible because of the skills, dedication and commitment of LEGO employees. The average number of full-time employees was 12,582 in 2014 compared to 11,755 in 2013. A significant effort is carried out at all locations to ensure that new employees are carefully on-boarded with a focus on the Group’s cultural foundation and strategic outlook. As a consequence of the LEGO Group’s ambition to globalise its activities, an increased focus has been placed on attracting a more diverse, global workforce. This led to the decision in 2013 to set up a structure for the company’s non-manufacturing sites that will be able to attract a diverse global workforce. As a result, global main offices have during the year been opened in Shanghai and London to supplement the main offices in THE LEGO GROUP – ANNUAL REPORT 2014 Singapore and Enfield, US, and the headquarters in Billund, Denmark. All of these five locations have significant top management presence. Not least due to the considerable growth and ongoing globalisation, it is of the utmost importance to the company and its performance to ensure a clear link between the overall targets and objectives of the company and the individual employees’ targets. Therefore, all employees in the LEGO Group participate in the Performance Management Program (PMP). This Program ensures that the goals set for the performance of the employees relate directly to the overall objectives of the Group. On a current basis during the year, the manager and the employee follow up on whether the goals are achieved. The goals can be either individual or shared with other colleagues to foster collaboration. A total evaluation of the employee’s and the company’s performance compared with the defined goals, which is carried out at year-end, decides the amount of bonus for each individual employee. Research and development activities Each year, new launches account for approximately 60% of the LEGO Group’s sales to consumers. The considerable development activities that enable such an extensive degree of innovation comprise a wide range of activities from trend spotting and anthropological studies to the actual development of specific products and campaigns. More than 200 designers from 26 different countries make up the creative core of product development that is mainly based at the company headquarters in Billund, Denmark. Moreover, the LEGO Group cooperates with a number of educational institutions concerning various research projects within, among other things, children’s play and new technologies. Responsible business conduct The LEGO Group wants to have a positive impact on its stakeholders and its surroundings. This is at the core of the Group’s culture and the foundation of the strategy it pursues. 6

MANAGEMENT’S REVIEW – CONTINUED In 2003, the LEGO Group was the first company in the toy industry to sign the United Nations Global Compact. This was a confirmation of the company’s many years’ of support of human rights, labour standards, anti-corruption and the environment. The LEGO Group confirms its support to United Nations Global Compact and has issued its Responsibility Report 2014 (COP report) describing how the Group is working within the areas of human rights, labour standards, the environment and anti-corruption. Pursuant to section 99 a and 99 b of the Danish Financial Statements Act, the Responsibility Report 2014 constitutes the statutory statement of corporate social responsibility including quantitative targets for the underrepresented gender on the Board of Directors. The Report furthermore describes the LEGO Group’s efforts to achieve its non-financial goals. The Responsibility Report 2014 is available at: www.LEGO.com/responsibility Market development The LEGO Group’s main activity is the development, production, marketing and sale of play materials. The market for traditional toys, in which the Group operates, saw modest growth during 2014. North American and European toy markets experienced low single digit growth during the year. The Asia toy markets experienced the strongest regional growth, with both more established markets (such as Japan and South Korea) and emerging markets (such as China) experiencing year over year increases. Among the top selling lines in 2014 were core themes like LEGO City, LEGO Star Wars and LEGO Friends. Another significant contributor to sales growth in 2014 was THE LEGO MOVIE product line that launched in conjunction with the release of THE LEGO MOVIE feature film in early 2014. LEGO Creator products as well as the LEGO Technic designed for an older age group also experienced high growth rates in 2014. Finally, the LEGO Group’s sale of products to the educational sector achieved strong doubledigit growth. During the coming years, the LEGO Group expects to grow moderately ahead of the global toy market that is expected to continue to grow low single digit. This is expected to be achievable due to the Group’s continued focus on innovation and its commitment to global expansion. The majority of the LEGO Group’s sales are in foreign currency, the risks relating to currency are described in note 24. Events after the reporting date No events have occurred after the balance sheet date to this date that would influence the evaluation of the Annual Report. Expectations for 2015 The LEGO Group expects continued sales growth in 2015, in line with the long-term expectations mentioned above. The LEGO Group expects satisfactory results for 2015. LEGO sales All major LEGO markets experienced growth in 2014. The Group’s largest market, the US, grew double digit as did the UK, France, Russia and China, while Central and Northern European markets achieved healthy single digit growth rates. THE LEGO GROUP – ANNUAL REPORT 2014 7

MANAGEMENT’S STATEMENT The Management Board and the Board of Directors have today considered and adopted the Annual Report of LEGO A/S for the financial year 1 January - 31 December 2014. The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU, and the Parent Company Financial Statements are prepared in accord ance with the Danish Financial Statements Act. Moreover, the Consolidated Financial Statements are prepared in accordance with additional Danish disclosure requirements. Manage ment’s Review is prepared in accordance with the Danish Financial Statements Act. In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position at 31 December 2014 of the Group and the Parent Company and of the results of the Group and the Parent Company operations and consolidated cash flows for the financial year 1 January - 31 December 2014. In our opinion, Management’s Review includes a true and fair account of the development in the operations and financial circumstances of the Group and the Parent Company, of the results for the year and of the financial position of the Group and the Parent Company as well as a description of the most significant risks and elements of uncertain ty facing the Group and the Parent Company. We recommend that the Annual Report be adopted at the Annual General Meeting. Billund, 16 February 2015 Management Board Jørgen Vig Knudstorp President and Chief Executive Officer Julia Goldin Executive Vice President and Chief Marketing Officer John Goodwin Executive Vice President and Chief Financial Officer Loren I. Shuster Executive Vice President and Chief Commercial Officer Bali Padda Executive Vice President and Chief Operations Officer Board of Directors Niels Jacobsen Chairman Kjeld Kirk Kristiansen Deputy Chairman Thomas Kirk Kristiansen Eva Berneke Jan Nielsen Kåre Schultz THE LEGO GROUP – ANNUAL REPORT 2014 Søren Thorup Sørensen 8

INDEPENDENT AUDITOR’S REPORT To the shareholders of LEGO A/S Report on Consolidated Financial Statements and Parent Company Financial Statements We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of LEGO A/S for the financial year 1 January to 31 December 2014, which comprise income statement, balance sheet, statement of changes in equity and notes including summary of significant accounting policies for both the Group and the Parent Company, as well as statement of comprehensive income and cash flow statement for the Group. The Consolidated Financial Statements are prepared in accor dance with International Financial Reporting Standards as adopted by the EU and any further disclosure requirements of the Danish Financial Statements Act, and the Parent Company Financial Statements are prepared in accor dance with the Danish Financial Statements Act. Management’s Responsibility for the Consolidated Financial Statements and the Parent Company Financial Statements Management is responsible for the preparation of Consolidated Financial Statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further Danish disclosure requirements in accordance with the Danish Financial Statements Act and for preparing Parent Company Financial Statements that give a true and fair view in accordance with the Danish Financial Statements Act and for such internal control as Management determines is necessary to enable the preparation of Consolidated Financial Statements and Parent Company Financial Statements that are free from material misstatement, whether due to fraud or error. accor dance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Consolidated Financial Statements and the Parent Company Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements and the Parent Company Financial Statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Consolidated Financial Statements and the Parent Company Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Consolidated Financial Statements and the Parent Company Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The audit has not resulted in any qualification. Auditor’s Responsibility Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company Financial Statements based on our audit. We conducted our audit in THE LEGO GROUP – ANNUAL REPORT 2014 9

INDEPENDENT AUDITOR’S REPORT – CONTINUED Opinion In our opinion, the Consolidated Financial Statements give a true and fair view of the Group’s financial position at 31 December 2014 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2014 in accordance with International Financial Reporting Standards as adopted by the EU and further Danish disclosure requirements in accordance with the Danish Financial Statements Act. Moreover, in our opinion, the Parent Company Financial Statements give a true and fair view of the Parent Company’s financial position at 31 December 2014 and of the results of the Parent Company’s operations for the financial year 1 January to 31 December 2014 in accor dance with the Danish Financial Statements Act. Statement on Management’s Review We have read Management’s Review in accor dance with the Danish Financial Statements Act. We have not performed any procedures additional to the audit of the Consolidated Financial Statements and the Parent Company Financial Statements. On this basis, in our opinion, the information provided in Management’s Review is consistent with the Consolidated Financial Statements and the Parent Company Financial Statements. Billund, 16 February 2015 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Mogens Nørgaard Mogensen State Authorised Public Accountant THE LEGO GROUP – ANNUAL REPORT 2014 Henrik Trangeled Kristensen State Authorised Public Accountant 10

THE LEGO GROUP 12,582 Average employees 2014 13.0% 3.1 BILLION Revenue growth 2014 Capacity investments 2014 (DKK) 28.6 BILLION 7.0 BILLION Revenue 2014 (DKK) THE LEGO GROUP – ANNUAL REPORT 2014 Net profit 2014 (DKK) 11

Consolidated Income Statement and Consolidated Statement of Comprehensive Income 1 January – 31 December (mDKK) Note Revenue Production costs Administrative expenses 2013 3 28,578 25,294 4,6,7 (8,071) (7,423) 20,507 17,871 Gross profit Sales and distribution expenses 2014 4,6,7 (7,782) (7,026) 4,5,6,7 (1,444) (1,200) 4,6,8 (1,584) (1,309) 9,697 8,336 12 13 Other operating expenses Operating profit Financial income Financial expenses 9 10 Profit before income tax Tax on profit for the year Net profit for the year 11 (218) (110) 9,491 8,239 (2,466) (2,120) 7,025 6,119 7,025 6,076 Allocated as follows: Parent Company shareholders Non-controlling interests – 43 7,025 6,119 7,025 6,119 (378) 258 40 (167) 4 (18) Consolidated Statement of Comprehensive Income: Profit for the year Items that will be reclassified subsequently to the income statement, when specific conditions are met: Change in market value of cash flow hedges Reclassification of cash flow hedges from equity to be recognised as part of: Revenue in the income statement Production costs in the income statement Tax on other comprehensive income 83 (18) Currency translation differences 12 (257) Items that will not be reclassified subsequently to the income statement: Remeasurements of defined benefit plans 14 (1) Total comprehensive income for the year 6,800 5,916 6,800 5,874 – 42 6,800 5,916 Allocated as follows: Parent Company shareholders Non-controlling interests THE LEGO GROUP – ANNUAL REPORT 2014 12

Consolidated Balance Sheet at 31 December (mDKK) Note 2014 2013 85 71 126 131 60 58 271 260 ASSETS Non-current assets: Development projects Software Licences, patents and other rights Intangible assets 12 Land, buildings and installations 3,299 1,777 Plant and machinery 2,494 2,114 Other fixtures and fittings, tools and equipment 1,072 846 Fixed assets under construction 1,591 1,553 Property, plant and equipment 13 8,456 6,290 Deferred tax assets 19 494 140 Investments in associates 14 3 3 Prepayments 162 146 Other non-current assets 659 289 9,386 6,839 Total non-current assets Current assets: Inventories 15 2,182 1,824 Trade receivables 16,25 5,891 4,870 Other receivables 25 733 946 99 74 Prepayments Current tax receivables Receivables from related parties 25,29 Cash at banks 25,28 48 65 2,598 2,310 482 1,024 Total current assets 12,033 11,113 TOTAL ASSETS 21,419 17,952 THE LEGO GROUP – ANNUAL REPORT 2014 13

Consolidated Balance Sheet – continued at 31 December (mDKK) Note 2014 2013 17 20 20 EQUITY AND LIABILITIES EQUITY Share capital Reserve for hedge accounting (158) 94 Reserve for currency translation (362) (374) Retained earnings 18 LEGO A/S’ share of equity Non-controlling interests Total equity 13,332 11,335 12,832 11,075 – – 12,832 11,075 LIABILITIES Non-current liabilities: Borrowings 25 196 205 Deferred tax liabilities 19 209 126 Pension obligations 20 82 57 Provisions 22 95 88 Debt to related parties 25, 29 600 600 Other long-term debt 21, 25 96 68 1,278 1,144 Total non-current liabilities Current liabilities: Borrowings 25 162 88 Trade payables 25 2,530 2,201 154 85 Current tax liabilities Provisions 22 228 110 21, 25 4,235 3,249 Total current liabilities 7,309 5,733 Total liabilities 8,587 6,877 21,419 17,952 Other short-term debt TOTAL EQUITY AND LIABILITIES Contingent assets, contingent liabilities and other obligations 23 Financial risks 24 Derivative financial instruments 26 Related party transactions 29 THE LEGO GROUP – ANNUAL REPORT 2014 14

Consolidated Statement of Changes in Equity 2014 (mDKK) Balance at 1 January Share capital Reserve Reserve for for hedgecurrency accounting translation Retained earnings LEGO A/S’ share of equity Noncontrolling interests Total equity 20 94 (374) 11,335 11,075 – 11,075 Profit for the year – – – 7,025 7,025 – 7,025 Other comprehensive income/ (expenses) for the year – (252) 12 15 (225) – (225) Acquisition of non-controlling interest in subsidiary – – – (43) (43) 43 – Dividend paid relating to prior year – – – (5,000) (5,000) (43) (5,043) 20 (158) (362) 13,332 12,832 – 12,832 Reserve Reserve for for hedgecurrency accounting translation Retained earnings LEGO A/S’ share of equity Noncontrolling interests Total equity Balance at 31 December 2013 (mDKK) Balance at 1 January Share capital 20 39 (117) 9,888 9,830 34 9,864 Profit for the year – – – 6,076 6,076 43 6,119 Other comprehensive income/ (expenses) for the year – 55 (257) – (202) (1) (203) Acquisition of non-controlling interest in subsidiaries – – – (129) (129) (44) (173) Dividend paid relating to prior year – – – (3,000) (3,000) (32) (3,032) Extraordinary dividend paid Balance at 31 December THE LEGO GROUP – ANNUAL REPORT 2014 – – – (1,500) (1,500) – (1,500) 20 94 (374) 11,335 11,075 – 11,075 15

Consolidated Cash Flow Statement 1 January – 31 December 2014 2013 Operating profit 9,697 8,336 Interest paid etc. (218) (110) 12 13 (2,556) (2,090) 838 822 Change in inventories (358) (119) Change in trade receivables, other receivables and prepayments (849) (230) (mDKK) Note Cash flows from operating activities: Interest received etc. Income tax paid Other reversals with no effect on cash flows 27 Change in trade payables and other payables 1,379 122 Net cash generated from operating activities 7,945 6,744 Cash flows from investing activities: Purchases of intangible assets 12 (59) (103) Purchases of property, plant and equipment 13 (3,115) (2,644) Proceeds from sale of property, plant and equipment Net cash used in investing activities 10 43 (3,164) (2,704) (5,000) (4,500) (43) (32) Cash flows from financing activities: Dividend paid to shareholders Dividend paid to non-controlling interests Acquisition of non-controlling interest (36) (141) Payment to related parties 29 (12,948) (6,280) Repayment from related parties 29 12,660 8,012 65 (525) (5,302) (3,466) Total cash flows (521) 574 Cash and cash equivalents at 1 January 1,024 468 (21) (18) 482 1,024 Repayments of borrowings Net cash used in financing activities Exchange losses on cash at banks Cash at banks at 31 December THE LEGO GROUP – ANNUAL REPORT 2014 28 16

Note 1. Significant accounting policies The Consolidated Financial Statements of the LEGO financial instruments. Among other amendments, Group have been prepared in accordance with it introduces a new hedge accounting model that International Financial Reporting Standards (IFRS) is designed to be more closely aligned with risk as adopted by the EU and additional Danish disclo- management activities. It includes amendments to sure requirements. the treatment of option premiums and the possibility to hedge net posi

THE LEGO GROUP - ANNUAL REPORT 2014 1 THE LEGO GROUP ANNUAL REPORT 2014 The LEGO Group CVR: 54 56 25 19. THE LEGO GROUP - ANNUAL REPORT 2014 2 FINANCIAL HIGHLIGHTS THE LEGO GROUP (mDKK) 2014 2013 2012 2011 2010 Consolidated Income Statement: Revenue 28,578 25,294 23,095 18,731 16,014