02 Report of the Board of directors

Last year, the board of directors (hereinafter: the Board) worked hard on realising greater transparency for the internal certificates’ market. As a result of increasing legislation and regulations, the board of directors also recognised the need to hand responsibility for the exchange to a professional body. The board thus put a proposal to the Members’ general meeting in November 2021. Members approved the transfer of the exchange.

The decision by the members of Association HZPC means that from May 2022, trading will take place under the responsibility of Captin. We can now also use Captin’s updated trading platform. As a result, there will be greater transparency during the trading period with regard to how the rate is set. Captin is a body that is regulated by the Authority of the Financial Markets (AFM). Trade via Captin takes place in line with the latest EU regulations and legislation.

The transfer of the exchange to Captin also means that Captin must accept the individual certificate holders as clients. Until May 2022, there was only a relationship between HZPC and the certificate holder. Captin was just the facilitator. As a result of the transfer of the responsibilities for trading to Captin, however, there is now also a direct relationship between Captin and the certificate holder. Certificate holders have been asked to identify themselves using an official means of ID and to accept the various conditions of the legislation and regulations. It is not possible to trade in the exchange without going through the identification process and accepting the general terms and conditions. This is in accordance with the EU's regulations.

The board would like to thank all members for their trust in taking this step.

The trading day in November 2021 was the last trading day under the old structure. Under this old structure, certificate holders placed their buying and selling orders over a few weeks. Once these specific weeks had come to an end, there was a review of the price under which most of the orders could be fulfilled. In November 2021, the meant that certificate holders were once again confronted with a ten percent reduction in the price of HZPC share certificates (hereinafter: certificates). The huge supply of certificates was not absorbed by the corresponding rate of demand.

May 2022 was the first time that ongoing trading could take place in HZPC certificates for two weeks, on the Captin trading platform. As a result, the price was set on a daily basis. It was also possible for all certificate holders to see what was being traded. This was only visible, however, to certificate holders who had completed the identification process and accepted the general terms and conditions for trading on the exchange. Unfortunately this process has not yet been completed by all certificate holders. The board hopes that all certificate holders will finalise this process as quickly as possible.

The market fell again in May 2022. The increased bandwidth meant that the rate could fall by a maximum of 20%. This did, indeed, happen and the price after the trading period in May 2022 ended up at EUR 76.60. Supply once again outstripped demand.

Liquidity is relatively limited on the HZPC certificate exchange. There are 783,725 share certificates and the average demand currently lags behind the supply. This may change when the price reduces further, allowing potential certificate holders to buy their first share certificates or existing certificate holders to add to their stocks. However, it makes life difficult for certificate holders who wish to sell certificates. The Board of Association HZPC is monitoring the trade in HZPC share certificates to ensure the trading days run properly. However, the price is set entirely on the basis of supply and demand and in the maximum bandwidth within which the share certificates can move.

The Association HZPC holds 783,725 shares in the Company and is therefore sole shareholder of HZPC Holding B.V. Association HZPC  has issued all the shares in the form of certificates to natural persons and legal entities that comply with specific requirements. On behalf of its members, the Board of Association HZPC carries out the duties of shareholder at the General Meeting of Shareholders of HZPC Holding B.V. All of the activities of HZPC Holding B.V. focus on the potato product. HZPC carries out research, breeds varieties and grows seed potatoes, ware potatoes and mini-tubers. In addition, HZPC is working on other business models such as Woksi and Fries4All, which could offer support to the sales of HZPC’s seed potatoes internationally.

As a result of the international growth of HZPC Holding B.V., the issues are no longer focussed entirely on the interests of Dutch growers. The Board of Association HZPC aims to represent the interests of all members both nationally and internationally. Members include (former) growers, (former) breeders and (former) personnel members. The autonomy and continuation of the HZPC organisation are therefore a guiding principle for the Board.

The participation HZPC Holding B.V. has realised a result, before processing the costs for the Connecting Growers’ programme, of EUR 7 million. The result before processing of the Connecting Growers programme is applied with respect to the dividend.

When the costs of the Connecting Growers programme are applied, the result comes out at EUR 5.5 million. The Return on Equity before HZPC Holding before processing Connecting Growers is 13.4%. This is in line with the historic average.

The Supervisory Board of HZPC Holding B.V. has decided, in line with standard policy, to issue two-thirds of the net profit. This means EUR 6 will be paid out per share certificate. This dividend has been incorporated in the annual accounts of the Association HZPC.

Alongside COVID-19 and the war in Ukraine, the new Business Transformation Program Aurora has been paid the necessary attention by the board of Association HZPC. In July 2022, a decision was made to approve the budget for the first year of Aurora. Subsequent budgets will be assessed on the basis of milestones achieved. Aurora will be on the agenda of every meeting of the board for the coming years.

HZPC Holding B.V. invests in Research & Development. This is a fixed item on the agenda in discussions between the Supervisory Board, the Executive Board and the Board of Association HZPC. This concerns questions such as: What should HZPC Holding do in that situation? How much money should be invested? In which areas can you cooperate?

Developments in plant breeding come about quickly. In the past, HZPC has invested a great deal in techniques which accelerate breeding and make the process more effective. These investments are beginning to bear fruit and the varieties that are being introduced now and in the future will represent a significant improvement on past varieties. In the past few years, great results have also been achieved in the hybrid potato breeding programme. Hybrid potato varieties allow botanical potato seed to be produced and distributed. These developments are expected to be a genuine ‘game changer’ in the longer term for potato production across the world. This means that there must be a disciplined, regular review of these developments. With the Executive Board taking the lead, the Supervisory Board advises and critically reviews whether we are on the right track. The Board of Association HZPC maintains an appropriate distance.

The risks for Association HZPC are limited. Ensuring that the trade in share certificates for HZPC Holding B.V. runs smoothly is an important activity. The responsibility for and execution of this has been in the hands of Captin since May 2022. This is a professional party and means the risks associated with this trade are mitigated. The Board of Association HZPC will continue to closely monitor the process.

The dividend received, after deductions of dividend tax, will be directly transferred to the certificate holders.

The HZPC Holding B.V. Articles of Association HZPC stipulate which decisions have to be presented to the General Meeting of Shareholders and, therefore, to the Board of Association HZPC for approval. The General Meeting of Shareholders/Certificate Holders was held twice last year. The meeting agenda included the progress of the company's results. The Board of Association HZPC met eight times, primarily as a result of implementing the new trading system. All members of the Board of Association HZPC were able to attend the meetings.

During the AGM in November 2021, the Chair J. van der Heijden, having been appointed in 2009, stood down as his term as Chair had come to an end. The Board is enormously grateful to Mr van der Heijden for the contribution he made over his many years of service. The Association HZPC appointed E. de Vries as new Chair during the meeting. During the AGM, M. Wijten was appointed as new member of the Board of Association HZPC. In the first board meeting after the AGM, M. Verhage was appointed as vice-Chair. Mr S. Andringa and R. Smith were reappointed for four years in November 2021. 

Within Association HZPC , there is the Board of Growers which conducts discussions with HZPC Holland on production issues in HZPC Holland. There is also the Youth Board and the Board of Breeders which discusses growers’ issues with HZPC Research. Lastly, we have the Supervisory Committee which advises Association HZPC on the progress of shares trading. As a result of the changing stock market environment, the Supervisory Committee was disbanded after the trading day in November 2021.

Below, you can see the amendments which took place in the other two boards.

With regard to roles within the Board of Growers: Mr Gesink is Chair. Mr Vael has taken on the role of secretary for the board. Mr Hoornsman has left the board after 8 years and was succeeded in March by Mr Slot, who is now vice-Chair. A. Doppenberg has been a new member since March 2022.

In the Youth Board: E. v.d. Star was appointed as Chair and B. Westerhuis is secretary. Members who have stood down are: P. Meijer, V. v.d. Hoek, G. Smits, T. Sinnema and J. v.d. Zee. New members that have joined are K. v.d. Spek, H. Plomp, J.W. Sinnema, H. Hoogterp, E. Goodijk and J. Bartelen.

In the Board of Breeders, Chair P. Thijsen was succeeded in June 2022 by K. Hiddema. J. Biemond will join as a new member.

Over the past few financial years, changing legislation has meant that it is no longer possible for growers to borrow money from the Association HZPC to fund the purchase of share certificates from HZPC Holding B.V. There are no current outstanding loans (last year EUR 16,000).

Finally, on behalf of the Board of Association HZPC, we would to express our thanks for the input over the past financial year and stress how much we are looking forward to the next one.

Joure, 12 October 2022
On behalf of the Board of Association HZPC,
Egbert de Vries, Chair