02 Report of the Board

October 2022 and May 2023 were the periods when 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 and the various price movements.

On the HZPC certificate exchange, liquidity is often relatively limited. This year, however, a total of more than 40.000 certificates were traded in November 2022 and May 2023. This is more than 5% of the total number of outstanding certificates. In November 2022, the new weighted average share price was set at EUR 66,70. For the first time since November 2015, the price settled within the 20% range. We can once again look back on well-run trading periods. After a share price decline for nine trading periods, a share price increase of 14,35% was realised in May 2023. The new weighted average price of the HZPC certificate has been set at EUR 76,27. The new bandwidth for the October 2023 trade has been set at EUR 61,05 to EUR 91,50.

The board of Association HZPC closely monitors the HZPC certificate trade to ensure that trading runs 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. Orders and trades are processed and taken care of by Captin.

The Association HZPC board has had to conclude that it has not been able to fully implement the Connecting Growers programme this year. Fortunately, at the request of the Association HZPC, the Connecting Growers (CG) HZPC Foundation had already purchased EUR 1 million worth of certificates in October 2022. In the May 2023 trading period, it was not possible to buy EUR 0,5 million worth of certificates. In recent years, the CG HZPC Foundation has managed to buy certificates for EUR 1,5 million relatively easily in the trading period. The inability to buy the required certificates was down to insufficient supply. HZPC has bought a total of 16.311 certificates for the Connecting Growers programme for EUR 1,1 million over the past two trading periods.

The Connecting Growers programme has been rolled out to growers from six EU countries, i.e. the Netherlands, Belgium, France, Poland, Germany and Finland. The aim of the Connecting Growers programme is to ensure that the majority of certificates remain in the hands of growers who grow for entities of Royal HZPC Group. Association HZPC, the Supervisory Board and the executive team believe it is important that the Association HZPC and the company continues to be ‘for and of’ active growers. The Board of the Association HZPC hopes to continue this Connecting Growers program in the coming years, but this will depend in part on the results of an evaluation of the program the coming year.

As a result of changing laws and regulations, the certificates purchased by CG HZPC Foundation under this programme are only allocated to growers who have a growing contract in the EU with Royal HZPC Group for 2023 and have fully completed the identification process at Captin. Participation in Connecting Growers has consequently reduced to 50%. The Association HZPC regrets that not all 882 growers in the six countries have completed the identification process with Captin. As a result, more than 400 growers did not receive almost 1 Certificate per hectare worth EUR 80 per certificate. Now 463 Growers receive 1,5 certificate per hectare, this would have been 0,9 certificate per hectare if all entitled growers had identified themselves with Captin.

The Association HZPC owns 100% of the shares in the company, making it the sole shareholder of Royal HZPC Group. HZPC Association 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 Royal HZPC Group B.V. All of the activities of Royal HZPC Group focus on the potato product.

HZPC carries out research, breeds varieties and grows seed potatoes, ware potatoes and mini-tubers. In addition, Royal HZPC Group 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 Royal HZPC Group, the issues are no longer focused 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 here include (former) growers, (former) breeders and (former) staff members. The autonomy and continuation of the HZPC organisation are therefore a guiding principle for the Board.

Royal HZPC Group B.V. has a net result of € 6,0 million which includes a charge of € 1,1 million for the Connecting Growers programme. The dividend is based on the result before processing of the Connecting Growers program.

When the costs of the Connecting Growers programme are applied, the result comes out at EUR 6,0 million. The Return on Equity for Royal HZPC Group B.V. before processing Connecting Growers is 13,0%. This is in line with the historic average.

Alongside 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.

Royal HZPC Group invests in Research & Development. This is a fixed item on the agenda in discussions between the SB, the Executive Board and the board of Association HZPC. This concerns questions such as: What should Royal HZPC Group do in this area? 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 year, 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. The Executive Board taking the lead. The SB 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 Royal HZPC Group 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 from Royal HZPC Group B.V., after deductions of dividend tax, will be directly transferred to the certificate holders.

The Royal HZPC Group B.V. Articles of Association 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 acquisition of T.L.C. Limited by HZPC Group and corporate results were discussed. Progress with respect to Aurora was also covered. The Association HZPC board met six times. One member of the Association HZPC board was unable to attend any of the meetings.

Below are the changes that have taken place.

With regard to roles within the Board of Growers: Mr J.M. Hendrikse was appointed secretary with immediate effect at the meeting on 5 April. He took over this position from Mr A. Vael.

In the Youth Board: E. van der Star was the season 2021/2022 Chair. This position was taken over by M. Duisterwinkel with effect from 13 October 2022 for the 2022/2023 season. B. Westerhuis was the secretary for season 2021/2022. This position was taken over by K. van der Spek with effect from 13 October 2022.

In the Board of Breeders: F. van der Zee has been a new member of the board since March 2023.