PART 1 - COMPANY REPORT Annual Report 2021

The connection to the world of sustainable tropical agriculture

100% all the criteria for processing RSPO certified oil palm products have been met
RSPO-compliant certificates 31 granted to the operational units of the Group
employees (FTE) 21 233 work on the plantations and in related processing facilities

	2017	2018	2019	2020	2021
CASH FLOW FROM OPERATING ACTIVITIES* (IN KUSD)	119 853	36 221	33 988	73 262	160 312
KASSTROOM UIT BEDRIJFSACTIVITEITEN NA BELASTINGEN (IN KUSD)	83 697	121 443	164 623	151 165	49 192
GROSS DIVIDEND (IN EUR)	0.55	0	0.35	2.00
NET FINANCIAL DEBT (IN KUSD)	634 636	644 509	638 688	727 329
SHAREHOLDER'S EQUITY (IN KUSD)	636	686	688	727
SHARE OF THE GROUP (IN KUSD)	36 221	33 988	73 262	160 312

* As from 2021, the financing of plasma advances has been included under investing activities instead of operating activities. The prior year figures have been restated accordingly.

	2017	2018	2019	2020	2021
TOTAL PLANTED HECTARAGE (IN HA)	78 213	79 787	82 225	83 893	79 942
TOTAL OWN PRODUCTION OF PALM OIL OF CONSOLIDATED COMPANIES (IN TONNES)	272 312	290 441	264 641	271 472	316 740
AVERAGE MARKET PRICE OF PALM OIL (USD/TONNE)	715	598	566	715	1 195
RECURRING NET PROFIT SHARE OF THE GROUP (IN KUSD)	64 481	22 713	-8 004	14 122	82 746

Key figures
Produced palm oil in 2021: 384 178 tonnes
Average world market price of palm oil in 2021: 1 195 USD/tonne (CIF)
Gross profit in 2021: 169 218 KUSD

Mission

As a producer of traceable, sustainably certified and premium tropical agricultural commodities, mainly high-quality crude palm oil and other palm products, SIPEF aims to be a reliable partner and preferred supplier to the processing industry. The Group operates in remote areas, where a sustainable approach is necessary for social development and economic growth. SIPEF creates value through sustainable expansion and optimum yield per hectare, by using the best planting materials and efficient and innovative management of all products, including by-products in the chain. It also actively promotes employment and works to train smallholders, with a view to their integration into the production chain. In all of its activities, SIPEF continually strives to achieve a balance between taking care of the environment and social welfare, and development at an economic level. SIPEF also aspires to attain a growing dividend income and a rising share price for its shareholders, by means of thorough and ecient cost management, and an increasing asset base.

Mission...................................................... Cover
Key figures 2021............................................. Cover
SIPEF at a glance ................................................ 2
Significant events in 2021 ........................................4
Message from the chairman ......................................6
Message from the managing director.............................9
S trategy of the Group ........................................... 13
B usiness model ................................................. 18
P roduct markets ................................................26
S IPEF operational activities .................................... 34
- - Palm oil ..........................................36
- - Bananas .........................................52
- - Rubber en tea ....................................58
- - Research and development ...................... 63
R isks and uncertainties .........................................70
C orporate governance statement ............................... 76
S IPEF on the stock market .....................................110
Other information about the Company ........................ 113
Glossary .......................................................116
Annex ..........................................................122
Responsible persons ........................................... 131
For further information ....................................... 1 32

SIPEF Company Report 2021

SIPEF at a glance

Palm oil

SIPEF manages 36 oil palm plantations. The Group runs nine palm oil mills in total, of which six in Indonesia and three in Papua New Guinea. The palm oil mills in Indonesia produce crude palm oil and palm kernels. The mills in Papua New Guinea produce crude palm oil and crude palm kernel oil.

The most important certifications
All nine palm oil mills are RSPO certified but also have other certificates, such as ISPO, ISCC, ISO 14005:2015 and ISO 9001:2015. (For the various certificates, see part 3: Sustainability Report).

Main operations (own and smallholders)
* Indonesia (60% of CPO)
* P apua New Guinea (40% of CPO)

Main markets
The majority of SIPEF's oils are sold directly or indirectly to the European market, both as a food component and for biofuel. After all, these markets are the most willing to pay a premium for sustainable oil.

Average world market price 2021 (vs 2020 in %)
CPO USD 1 195 per tonne (+67.1%)
PKO USD 1 517 per tonne (+83.7%)

77 163 Hectares planted

Bananas

SIPEF owns five estates in Ivory Coast equipped with seven packing stations (four currently operational and three in the course of 2022 and early 2023), where green bananas, the Cavendish variety, are grown, packed and exported according to international standards.

The most important certifications
The plantations are fully Rainforest Alliance and Fairtrade certified. (For the various certificates, see part 3: Sustainability Report).

Main operations
* Ivory Coast

Main markets
SIPEF's main commercial market is Europe, including the United Kingdom. The rest is sold in the West Africa region and on the local market of Ivory Coast. The markets in the West Africa subregion are gradually expanding.

Average European market price 2021 (vs 2020 in %)
EUR 616 per tonne (-1.9%)

794 Hectares planted

* Including only four months of rubber and tea production of PT Melania
** Of the revenue of the SIPEF group

Palm oil: 384 178 tonnes
Bananas: 32 200 tonnes
Rubber: 3 827 tonnes*
Tea: 965 tonnes*

92%
5%
2%
1%

Indonesia: 65 512 ha
Papua New Guinea: 13 605 ha
Ivory Coast: 825 ha

82%
1%
17%
1%

79 942 ha Total planted area * * * *

SIPEF Company Report 2021

SIPEF at a glance

Significant events in 2021

Activities
* Total Group production of palm oil increased by 16.7% compared with 2020.
* Despite covid-19, all Group production units remained operational, with no loss of volume or yield.
* Palm oil production in Indonesia increased by 8.52%: in North Sumatra, recovery from last year's drought was limited, while in the expansion regions, production growth continued.
* Total palm oil production from the Hargy Oil Palms Ltd (HOPL) plantations in Papua New Guinea, which were aected by volcanic eruptions in 2019, increased by 29.7%.

Investments and divestments
* In May, SIPEF signed the conditional agreement regarding the sale of PT Melania to the Indonesian Shamrock Group and realised a capital gain of USD 11 million, share of the Group.
* In summer, SIPEF acquired the assets of the insolvent Wanita banana plantations in Ivory Coast.

Expansion
* In Musi Rawas, in the past year, in accordance with the RSPO New Planting Procedures (NPP), an additional 763 hectares were oset and 956 hectares were prepared for planting or planted, to reach a total of 14 970 cultivated hectares.
* Since acquisition in 2017, 7 836 hectares have already been replanted or planted in Dendymarker, including 2 630 in 2021.
* About 22% of the comprehensive investment budget for realising the expansion projects, which were temporarily delayed by covid-19-related logistical problems, will be pushed forward to 2022.# SIPEF Company Report 2021

The connection to the world of sustainable tropical agriculture

Sustainability

The Group's 2021 sustainability reporting was drafted using the Global Reporting Initiative (GRI) reference framework.
The uniform calculation of greenhouse gas (GHG) emissions for all Group's crops in accordance with ISO 14064 was completed and an initial overview published, with 2019 as the base year.
SIPEF participated for the first time in the Carbon Disclosure Project (CDP) reporting.
By November 2021, 92% of the SIPEF employees and their dependents in Indonesia had been fully vaccinated against covid-19 at SIPEF’s expense. A booster program will follow in 2022.
SIPEF was ranked 4th out of the 350 most influential companies of the commodity sector by Forest 500 and 9th out of 100 palm oil companies by the Sustainability Policy Transparency Toolkit (SPOTT).
By November 2021, 92% of the SIPEF employees and their dependents in Indonesia had been fully vaccinated against covid-19 at SIPEF’s expense.

Results

The palm oil market experienced a steady increase in prices throughout the year.
In Indonesia, the combined export levy and tax on sales prices remained in place, but was relaxed during the first half of the year, effective from 2 July 2021.
The combination of excellent production and selling prices resulted in outstanding financial performances:
- The net recurring result, share of the Group, after tax, amounted to KUSD 82 746, compared to KUSD 14 122 last year.
- Including the capital gain of USD 11 million on the sale of PT Melania (Indonesian tea estate and half of the rubber operations) net results, share of the Group, reached KUSD 93 749.
- Operational cash flow amounted to KUSD 160 312, an increase of 118.8% on the previous year.
- Net debt decreased by more than two thirds, from KUSD 151 165 to KUSD 49 192.
In line with the 30% pay-out ratio of previous years, the board of directors proposes to increase the gross dividend from EUR 0.35 per share last year to EUR 2.00 per share, payable on 6 July 2022.

SIPEF Company Report 2021

Significant events in 2021

Our employees, as well as the local smallholders, with whom the Group works, continued to devote themselves wholeheartedly to their work during the pandemic. Thanks to their great commitment, the favourable climate and the strong markets, SIPEF is able to present excellent figures for 2021.

-- Baron Luc Bertrand

The connection to the world of sustainable tropical agriculture

Message from the chairman

In 2021, the world remained in the grip of covid-19. Indonesia was more affected by the pandemic than Ivory Coast and Papua New Guinea, where the populations seemed to be more resistant to the virus. However, the public health system in Indonesia was inadequate to treat everyone efficiently. Therefore, we felt called to come to the rescue and set up a vaccination program at SIPEF’s expense. This allowed almost 92% or 20 000 people, employees of the Group's Indonesian subsidiaries and their close relatives, to be vaccinated. We also organised vaccination programs in Ivory Coast and Papua New Guinea. 45% of the employees in Ivory Coast were double vaccinated and 15% received a single dose. In Papua New Guinea, however, the program did not initially meet with much success, but gradually took off, thanks to the efforts of the local management. This enabled the Group to help the local population as much as possible to cope during these difficult times.

Covid-19 affected the Group's operations in a limited way. Our employees, as well as the local smallholders, with whom the Group works, continued to devote themselves wholeheartedly to their work during the pandemic. Thanks to their great commitment, the favourable climate

We set up a vaccination program at SIPEF’s expense. This allowed almost 92% or 20 000 people, employees of the Group's Indonesian subsidiaries and their close relatives, to be vaccinated.

and the strong markets, SIPEF is able to present excellent figures for 2021. I would particularly like to mention the team in Papua New Guinea. Despite the years with lower palm oil prices and the volcanic eruptions in 2019, it made an unprecedented contribution to the SIPEF group's 2021 operating results. The strong performance, combined with the conditional sale of PT Melania, provided ample cash flow, which, subject to the continuation of the expansion in Indonesia and Ivory Coast, also allowed for a more than two-thirds reduction in net financial debt in one year, to a level below USD 50 million. Despite an extensive investment program for the next few years, it is strategically desirable to keep the debt level as low as possible.

SIPEF Company Report 2021

Message from the chairman

2021 was also an important year for succession in the Group. The general manager of Papua New Guinea was successfully replaced at the start of the new year. In Indonesia, as of April 2022, the succession of the president director is in place. A new general manager has also been appointed in Ivory Coast, and a rejuvenated and expanded team is ready to cope with the expansion there.

In June 2021, Petra Meekers left the board of directors to become the first woman to join the executive committee. Ever since, as chief operating officer Asia-Pacific, she has been monitoring the Group's activities in Indonesia and Papua New Guinea out of Singapore. Moreover, as a sustainability expert, she is assisting the executive committee in implementing the Group's sustainable development policy and the various complex rules and regulations that come with it.

Finally, in June 2021 the board of directors welcomed Yu-Leng Khor. As a new independent director, she will be able to expertly guide the Group, thanks to her vast experience in the tropical agriculture sector and in the field of sustainability.

Looking to the future, SIPEF is thus well prepared at all levels of management in the various countries where the Group operates. I am therefore convinced, that we can continue and expand our activities with confidence in a sustainable and efficient manner, but above all take on new challenges with the drive to actively contribute to a better world.

baron luc bertrand
chairman of the board of directors

Message from the managing director

2021 was an excellent year for the SIPEF group with strong recurrent results, which could also be increased with exceptional capital gain. Over the past year, the palm oil market experienced a very stable environment with high prices that reached peaks unprecedented in the last decade. It was also a positive year for the Group's palm oil production which, thanks to generally very favourable weather conditions, reached a record figure of 384 178 tonnes. The good climate also led to higher oil extraction rates (OER) for the palm oil mills. Unfortunately, the Group continued to face an exceptional export tax on its Indonesian palm oil production in order to finance the B30 palm oil blending program. However, this tax was revised downwards and capped in July.

The exceptionally good operational performances, combined with sustained rising prices, enabled SIPEF to end the year with a record recurring profit, six times the previous year's figure.

In 2021, the expansion of the palm plantations, which was hampered in 2020 by the covid-19 pandemic, continued steadily and already bore its first fruits. The banana activities were also expanded further, with the purchase of the plantations and factories of the insolvent Wanita banana plantations. Furthermore, practical preparations were started for the conversion from rubber to oil palms. This conversion is the result of the 2020 strategic decision to further focus on the production of crude palm oil, palm kernels and palm kernel oil, and to phase out rubber production.

More specifically, the conversion of the rubber plantations into oil palm was started in North Sumatra and Bengkulu, in an agronomically efficient and responsible manner. A further step in this direction was taken with the conditional transfer of PT Melania, which represents half of the Group's rubber operations and tea plantation. As from May 2021, the management of the rubber activities was transferred to Shamrock Group and, in addition, at a later stage the entire tea business will also leave the Group.

With the expansion and greater concentration on palm products, at the expense of rubber and tea, SIPEF wants to respond to the strong future of palm oil as the main vegetable oil in the food and energy sector. This is based on the fact that there is a growing world population, especially in southern hemisphere countries. It goes without saying, that the consumption of palm oil as a basic ingredient in people's diets will increase. For one reason, this is due to the efficient industrial processing and the low cost of palm oil compared to other vegetable oils. In addition, palm oil has a

SIPEF Company Report 2021

Message from the managing director

SIPEF ended the year with a record recurring profit, six times the previous year's figure.

-- François Van Hoydonck

yield per hectare that is five to ten times higher than any other vegetable oil. This is an important factor in a world where agricultural soils are becoming increasingly scarce. Hence, the Group will concentrate mainly on improving the efficiency of the areas already planted and on innovations, with a view to high productivity. In short, research and development remain very important for the palm oil sector. But above all, 'sustainability' runs like a thread through the life of the Group. SIPEF wants to realise its activities, and also its growth, in a sustainable and economically responsible manner, and all this in cooperation with local smallholders.# SIPEF Company Report 2021

Message from the managing director

As a listed European company investors must be able to receive the guarantee of respect for people and planet, through the reputable certification of all SIPEF's activities and products. Today, the Group is fully RSPO compliant for all oil palm plantations, with certification for all areas that can already be certified. The Group continues to follow the trends indicated by its customers and stakeholders, according to their needs for confirmation that sustainability standards are respected at all times. In that context, a research project was started in 2021, to test the level of contaminants in the crude palm oil and to produce high quality oil with low contaminant content via the application of new technologies in the mills. In 2021, SIPEF also took an important step in reducing greenhouse gas emissions by mapping its carbon footprint at the group level. The determination of a ‘baseline assessment’ was the necessary basis for improvement in the following years. SIPEF intends to continue investing in new technologies to significantly reduce its current ecological footprint. As the managing director, I think I can say that we have completed an important obstacle course in recent years that was crowned with success in 2021. We were able to achieve this through the commitment of our employees around the world who have continued to support us through thick and thin, and have all worked together for a better world. We also want our shareholders to enjoy this record year by presenting them with a gross dividend of 2 euro per share, for approval on 8 June. Following the successful year of 2021, SIPEF is well placed to therefore embark on the next few years with a great deal of ambition, once again supported by strong market prices. The expansion achieved in recent years will only strengthen its position as a coveted producer of quality palm oil.

françois van hoydonck
managing director

SIPEF Company Report 2021

Message from the managing director

SIPEF wants to realise its activities, and also its growth, in a sustainable and economically responsible manner, and all this in cooperation with local smallholders. -- François Van Hoydonck

The connection to the world of sustainable tropical agriculture

Strategy of the Group

SIPEF increasingly focuses on the production of crude palm oil, palm kernels and palm kernel oil in Indonesia and Papua New Guinea

In 2020, the decision was made to convert the rubber plantations of North Sumatra and Bengkulu to oil palm plantations in an agronomically efficient and responsible manner. The conditional sale of 95% of PT Melania shares in 2021 is also part of this strategy, as PT Melania manages rubber and tea plantations. At the end of 2021, palm products in Indonesia and Papua New Guinea accounted for approximately 92% of the Group’s total turnover. The growing banana business in Ivory Coast also continues to be part of the Group's strategic interests. SIPEF actively works on its internal and external growth as a palm oil producer in Indonesia and Papua New Guinea in part- nership with local smallholders

SIPEF invests in research via Verdant Bioscience Pte Ltd (VBS) to ensure it can profit from the strong growth the sector is set to experience. As the global population rises, there is increasing demand for vegetable oils and fats, but available farmland is decreasing. In addition, climate change is bringing more and more extreme weather events. Most of the required growth in production can be achieved in palm oil, the most efficient vegetable oil. Only by developing stronger, more productive palm varieties can SIPEF rise to these challenges. SIPEF therefore wants to bring the productivity of its oil palm plantations to a significantly higher level in the medium term by applying the scientific developments of VBS, thereby substantially supporting, and improving the Group's future profitability.

At the end of 2021, palm products in Indonesia and Papua New Guinea accounted for approximately 92% of the Group’s total turnover.

SIPEF invests in research via Verdant Bioscience Pte Ltd (VBS) to ensure it can profit from the strong growth the sector is set to experience.

92 %

SIPEF Company Report 2021

Strategy of the Group

SIPEF aims for a sustainably developed area of 100 000 hectares.

The Group wants to expand in a sustainable and economically responsible manner, with a limited debt ratio and in partnership with local smallholders. That is why SIPEF continues to actively search for existing areas that can meet RSPO certification criteria. Furthermore, expansion is increasingly realised in close partnership with local smallholders who wish to sell their production to and work with SIPEF. The Group is committed to training these farmers and working together to create a sustainable production environment.

The connection to the world of sustainable tropical agriculture

SIPEF invests in the development of high-quality crude palm oil with low levels of contaminants

SIPEF has launched a research project to measure and reduce the level of contaminants in its crude palm oil using new technologies in its mills. This project is the first big step towards the production of high-quality oil with a low contaminant content. In this way, the Group wants to further develop and innovate, with a focus on high- quality palm oil, and target customers, both in the food sector and in all other sectors, for whom the added value of this product is a very important focal point and who are prepared to pay a higher premium for it.

Sustainability remains an absolute priority for SIPEF with value creation as the common denominator

Continuing to be a role model in terms of sustainability is of vital importance to SIPEF. As a listed European company, SIPEF wishes to provide its investors with formal assurance of its respect for people and the planet. It does so by means of the certification of all its activities and products that gives due consideration to ecological and socially responsible standards for tropical industrial agriculture. In the future, SIPEF will continue to endeavour to deliver all

Continuing to be a role model in terms of sustainability is of vital importance to SIPEF.

SIPEF Company Report 2021

Strategy of the Group

its products in certified physical goods flows (for more details about certification, see page 69 of the Sustainability Report.) The Group focuses on a limited number of regular customers who are prepared to pay a premium for quality certification. The Company also goes beyond certification to increase its impact in the area of sustainability and has established a Responsible Plantations Policy (RPP), which is updated annually. The RPP encourages SIPEF to apply the most innovative standards, often going beyond what the certifications require. SIPEF remains very actively involved in the organisations that encourage the use of sustainable palm oil in the food industry and with consumers in Europe and the rest of the world.

All goods sold by SIPEF are fully traceable

SIPEF wants to be completely transparent about its goods supply chain with full traceability of the commodities. The place of production for every product sold by SIPEF can be verified, be that a plantation managed by the Group or land farmed by a local smallholder in partnership with SIPEF. SIPEF has a Responsible Purchase Policy (RPuP) that defines the criteria for selecting and working with smallholders on their way to certification. The policy guarantees that all SIPEF suppliers are or shall be certified in accordance with the RSPO standards, as far as this is possible.

SIPEF achieves the protection, conservation and restoration of terrestrial ecosystems and biodiversity

For several years now, SIPEF has made a long-term contribution to the conservation, protection and restoration of important ecological areas in Indonesia. It does this, among other things, through an Indonesian foundation established by the Group in 2009 (see page 69 of the Sustainability Report).

SIPEF aims to optimise its results

The Group pursues the optimisation of its results by improving its production volumes and efficiently controlling the costs of the palm oil activities. SIPEF has the ambition to increase the volume of the Group’s annual palm oil production to 500 000 tonnes per year by 2026. This equates to a compound annual growth rate (CAGR) of 5%. For the other businesses, mainly bananas, management is concentrating on yield increases and cost reductions with a focus on labour costs, as these cultures are more labour-intensive than the palm oil activities.

The connection to the world of sustainable tropical agriculture

SIPEF has the ambition to increase the volume of the Group’s annual palm oil production to 500 000 tonnes per year by 2026. This equates to a compound annual growth rate (CAGR) of 5%.

It is SIPEF’s intention to continue to reduce its current debt level and maintain its dividend policy in the future

With a limited debt ratio, SIPEF wants to find the right balance between the planned investments and their financing from the operational cash flows. The Company also intends to maintain its dividend policy, which has been set at 30% of recurring profit for many years.

SIPEF Company Report 2021

High quality, fully traceable, certified palm products

SIPEF customers:	refiners
Methane capture	SIPEF employee housing and facilities
SIPEF factories	Public power grid
Power supply	Electricity generation
SIPEF employees	Investments in mills
Engineering and	Machinery producers, agricultural
industrial suppliers	equipment and tools
Investments in	Production resources, e.g.
agricultural equipment

Business model

SIPEF product destination

From palm seed to palm oil

The chart illustrates SIPEF’s palm oil production business model. Palm oil production constitutes the Company’s main production activity, generating 98.4% of the Group’s gross margin. Broadly speaking, this model also applies to the Group’s other activities.

SIPEF activities	Value creation	Third party activities	SIPEF product destination
Extraction mill	• Employment • Housing • Schools • Health centres • Roads and bridges • Access to basic daily needs (clean water, electricity, ATM, mobile phone network) • Houses of worship • Access to the international market for smallholder production • Poverty alleviation for employees and local communities	Use and preservation of ecosystem services such as: • Water management • Biodiversity control • Forest protection • Preventing methane emissions • Reducing the use of imported fertilisers • Preserving soil fertility • Euent management	SIPEF customers: refiners Methane capture SIPEF employee housing and facilities SIPEF factories Public power grid Power supply Electricity generation SIPEF employees Investments in mills Engineering and industrial suppliers Investments in agricultural equipment Machinery producers, agricultural equipment and tools Production resources, e.g. fertilisers Supplier production resources Seeds and plants (including Verdant Bioscience Pte Ltd) Seed producers and plant suppliers Other stakeholders and government Long term lease of land Flaring Retailers Consumers Biofuel Cosmetics industry Chemical industry Detergent industry Food industry Distribution network SIPEF plantations & smallholder plantations REDUCING EMISSIONS RECYCLING via gas engine Fibres EFB torrefaction Pellets For the industry RECYCLING Empty fruit bunches and euent compost Shipping (Traders) Storage of palm oil, also in tanks at the port CERTIFICATIONS (see Sustainability Report page 18)

Costs of the Group

The production of palm products, rubber, tea, bananas and horticulture is very labour- intensive. The accompanying chart shows the employee ratio. In total, the Group currently has 21 233 employees (full-time equivalents - FTEs). Labour is one of SIPEF’s largest cost items. Other important recurring costs of the Group relate to the purchase of chemical and organic fertilisers. The total operational charges (including depreciations) of the SIPEF group can be split into five dierent categories, based on the Group’s business model:

NUMBER OF FIELD WORKERS PER 100 HECTARES OF CROP

TOTAL OPERATIONAL CHARGES	2021	2020	2019	2018	2017
Palm oil	16	31	81	96	153
Rubber	30	100	150
Horticulture
Tea
Bananas

TOTAL OPERATIONAL CHARGES

Estate charges (60.8%): include all charges relating to the fieldwork to produce the base agricultural products (i.e. fresh fruit bunches (FFB), latex, bananas, horticulture);
FFB/crude palm oil (CPO)/latex purchases (24.4%): include all purchases from third parties (smallholders) or associates and joint ventures;
Processing charges (13.4%): include all charges relating to the processing of the base agricultural products into finished agricultural commodities (i.e. palm oil and rubber);
Sales charges (8.7%): include all direct costs attributable to the sales in the course of the year (i.e. transport charges, palm oil export levy and tax);
Stock movement (-7.3%): includes the variance in stock compared with the previous year. (For additional information on the Group’s costs, see Note 7 – Operational result and segment information in the Financial Statements.)

In addition to these charges incurred in the course of the year, the Group makes considerable investments in biological assets (bearer plants), buildings, infrastructure, installations and machinery, vehicles, office equipment and other property, plant and equipment. These investments are capitalised on the balance sheet and subsequently depreciated. Depreciation costs are calculated over the estimated useful life of an asset and, depending on the asset, recognised in either estate charges or processing charges. To ensure the continuity of its activities, SIPEF must acquire and retain concession rights, and renew the concession agreements for the long term. The acquisition of these concession rights is capitalised, but not depreciated over time, as they are deemed indefinite. The costs of renewing the original concession rights are capitalised and depreciated over the period of the renewal. Lastly, the Group continues to look for expansion opportunities by acquiring plantations from other companies and/or working with local owners.

Value creation by the Group

In implementing its business model, the Group does its utmost to improve its productivity and to stimulate its growth as efficiently as possible, based on sustainable practices. By doing so, SIPEF creates value for the Company, the environment and society. Furthermore, as a sustainable company, in its business model SIPEF constantly takes account of the sustainable development and value creation requirements of the stakeholders.

SIPEF creates value for the company

Since 2005, SIPEF has actively driven its growth, particularly in the palm oil industry in Indonesia and Papua New Guinea. It actively seeks investment opportunities to enlarge the planted areas in remote regions, where most people work in agriculture. Thanks to the partnership with Verdant Bioscience Pte Ltd (VBS), a renowned palm oil production research centre in Singapore, the Group will be able to benefit from the development of high-yield palms. By applying these scientific developments, SIPEF expects to raise the productivity of the oil palm plantations in the medium to long term and significantly strengthen and improve their future profitability.

SIPEF creates value for the environment

Sustainability has been an essential part of the Group’s business model from the very beginning, and is a key factor in SIPEF’s whole existence and achievements. The Group is committed to working to improve its results, and to integrating and tailoring its sustainability eorts to its activities. In recent years SIPEF has shown its engagement by taking various steps to reduce the greenhouse gas (GHG) emissions of its mills and factories. SIPEF has long put this policy into practice by protecting, conserving and restoring terrestrial ecosystems and biodiversity. The Group has contributed to nature conservation in Indonesia for many years and remains active in research and development to improve aorestation. The Group is constantly working on new projects and encourages new ideas to create a better environment.

SIPEF creates value for society

SIPEF is conscious of being part of the community everywhere it operates, and of having a duty to change for the better the lives of its employees, their families and the local communities. It makes continual adjustments to maintain the highest possible standards with regard to the wellbeing of employees and their families. These include constructing and improving housing for managers and workers of the Group. The Company wishes to continue to play a positive role by assuming its responsibility for problems that occur and dealing with them in an amicable and transparent manner, within the framework of appropriate complaints procedures in the spirit of the Roundtable on Sustainable Palm Oil (RSPO). This all occurs within the context of a long-term commitment and the ‘creation of shared value’, which is an important step on the road towards a sustainable and successful business. More detailed insight into how the Group creates value at various levels is provided in the Sustainability Report, part 3 of this Annual Report.

Products - customers

Oil palm products

SIPEF oers its customers crude palm oil (CPO), palm kernel oil (PKO) and palm kernels (PK).# SIPEF Company Report 2021

The connection to the world of sustainable tropical agriculture

Palm oil

It targets RSPO certification for 100% of its palm oil products. However, the Company applies other generally recognised standards, such as the Indonesian Sustainable Palm Oil (ISPO) system and the International Sustainability and Carbon Certification (ISCC) standard. A detailed overview of all certifications is provided on page 18 of the Sustainability Report, part 3 of this Annual Report. The Group’s oil palm products are sold on the local market in Indonesia and on the European market. They are used in the food industry and for green energy (biodiesel) production. SIPEF’s customers are refineries that are prepared to pay a sustainability premium for fully traceable and certified palm products.

Rubber products

SIPEF manages two rubber plantations and two natural rubber factories in Indonesia. These two plantations are covered by the procedure for conversion into oil palm plantations, which should be completed by 2028. The conversion will be conducted in compliance with the RSPO ‘New Planting Procedures’, so that the new oil palm plantations can be certified as soon as possible. Since 30 April 2021, a third plantation and a factory owned by PT Melania have been managed by the Shamrock Group, following their conditional sale to this Indonesian group. The United States of America are the biggest market for the rubber products.

Tea

SIPEF has a 1 700-hectare tea estate, one of the largest in the world, in West Java. The bushes continue to be hand-plucked to meet the high standards of a superior black ‘Cut, Tear and Curl’ (CTC) tea. Since 30 April 2021, this plantation has been subject of a conditional forward sale, but will be managed by the Group until the realisation of the transfer. Pakistan is the biggest market for this tea. The rest is sold to multinationals specialised in blending tea to order. There is also increasing demand for tea on the local market in Indonesia. The estate is Rainforest Alliance certified.

Bananas

Bananas grown by SIPEF are sold within certified goods flows with full raw material traceability. The bananas are picked and packed in the Group’s packing stations. SIPEF cultivates the Cavendish variety, which is packed in standard SIPEF-branded cardboard boxes or in customer-branded packaging as ordered. SIPEF’s customers are ‘ripeners’ that distribute ‘ready- to-eat’ bananas to supermarkets and wholesale markets. After shipment, more than 80% of the high-quality bananas are sold to the European market in accordance with EU guidelines, and to the United Kingdom. The rest are sold in the West Africa region and at local markets in Ivory Coast. The Group has privileged access to Europe, as it is exempt from import duties in Europe. In 2021, the commercial agreements with the UK government, particularly with regard to bananas, were renewed for the majority of the supply countries, including Ivory Coast. This means that Brexit has had no negative impact on SIPEF’s banana exports.

SIPEF Company Report 2021

Business model

Product markets

Palm oil

The 2021 vegetable oil market started o with a very tight stock scenario across all major vegetable oils. Great demand from the food and biofuel industry in recent years in a relative low-price environment had depleted most origin stocks. Big inverses also led to minimal stored oil in destinations. Sunflower oil was leading the bullish price environment after the strongly reduced 2020 crop. The palm oil market was tight, but at the beginning of the year it was mainly following the price movements of the other vegetable oils. The production of palm oil throughout the year has been below expectations for the industry as a whole. In Malaysia, the lack of foreign labour was one element; however, there have been more factors at play: due to the low-price environment, for several years a consistent below par volume of fertiliser has been applied and very little replanting has been done. As a result, the industry is faced with an aging tree profile, that is being fertilised less than ideally, and experiencing a general yield decline. Due to the existing planting moratorium and No Deforestation, No Peat, No Exploitation (NDPE) requirements, there is also hardly any new oil palm acreage coming into play. The Indonesian palm plantation industry benefitted least from the high-price environment, due to the export tax and export levy system. At the beginning of the year, the system reduced nearly all the upside in selling price, but the export levy was amended in July, whereby a decreased levy was collected, and a maximum level was also introduced. The B30 biodiesel fund was suciently warranted, and there was again an upside for Indonesian plantations when there was a rising market. As the market price continued to rally, in November 2021, the market reached a maximum of USD 175 export levy and USD 200 export tax, but the net price for crude palm oil (CPO) almost reached USD 1 000.

The connection to the world of sustainable tropical agriculture

Given the tight vegetable oil picture, the new annual crops of soybeans, rapeseed and sunﬂower seed were very important. The heat wave that hit Canada and the eastern United States soybean belt had a devastating eect, particularly on the canola crop. It triggered another rally across the complex and, despite a good soybean crop in the United States and great sunﬂower seed crops in Russia and Ukraine, it reshued all kinds of trade ﬂows. It demonstrated the tightness in vegetable oils, and more than one good crop would be required to bring relief. In 2021, several governmental actions triggered a change in trade patterns. The Indonesian differential export tax and levy system has already been mentioned, but there were other producing countries introducing or increasing export taxes. Temporary reductions were also seen in the biodiesel mandates in Brazil. And importing countries have amended import taxes to curb food inﬂation, whereby India, in particular, has made strong reductions during the year. Most of these governmental actions are dicult to predict and timing can be essential. It certainly created a lot of volatility. The demand in itself has been reasonably good throughout 2021. However, high prices and big inverses are normally two ways to reduce demand and lower the inland inventories. Lockdowns at the beginning of the year had a dampening effect on demand in certain regions as well. Therefore, demand has certainly not grown as in previous years, but despite its lower growth, prices remained in a very high range. The average price for CPO CIF Rotterdam in 2021 was USD 1 195 per tonne against an average of USD 715 per tonne in 2020, an increase of almost 55%. However, the year closed near USD 1 250.

SIPEF Company Report 2021

Product markets

Palm kernel oil

The lauric oil market, the generic term for palm kernel oil (PKO) and coconut oil, has been following the path of the palm oil market for most of the year, trading at its usual premium over palm oil. Despite coconut oil showing more volatility and a higher price path, PKO could not get overly excited till the last quarter of 2021. The dierential export tax system in Indonesia has certainly contributed to this, as local refining and oleochemical industry in Indonesia has a massive competitive advantage when its products are exported around the globe. The recent typhoon in the Philippines also supported overall lauric oil prices, with millions of trees being severely damaged. The price of PKO was around a normal USD 200-300 premium over palm oil for most of the year, but the premium really exploded in the last quarter once the tightness really kicked in. The average price of PKO CIF Rotterdam in 2021 was USD 1 517 against an average in 2020 of USD 826, a 83.7% increase. But the year ended with prices above USD 1 800, with huge volatility and a massive USD 650 premium over palm oil.

	2020	2021
The average price of PKO CIF Rotterdam increased with 83.7%.		+83.7 %

The connection to the world of sustainable tropical agriculture

Events after the balance sheet date

Russia’s invasion of Ukraine; impact on commodity prices

Russia’s decision to invade Ukraine on 24 February 2022 radically changed the geopolitical landscape. This war is having a tremendous eect on (agricultural) commodities. Ukraine is the world’s largest sunﬂower seed producer, as well as the top sunflower oil exporter. It was also expected to rank No. 3 in rapeseed and wheat exports this season. The ports are closed and hardly any products are being exported. As a result, many prices of staple food commodities have rallied strongly, further fuelling food price inﬂation. In addition, Russia is a big producer of wheat, sunflower seeds and barley, and despite the Russian ports not being closed, the usual ﬂows are being significantly interrupted due to the war. Many Western companies are currently rather reluctant to trade with Russian companies or in Russian goods. The sudden lack of sunﬂower seeds and sunﬂower oil is having a tremendous eect on the global vegetable oil market. Rapeseed oil and palm oil were already in rather short supply due to adverse weather, but in the last couple of months there has also been the drought impact of La Niña in South America. It reduced the soybean crop by approximately 25 million tonnes, equivalent to 5 million tonnes of soybean oil. Therefore, many countries were depending more than ever on the supply of sunﬂower oil from Ukraine and Russia. There is not sucient vegetable oil in the market to overcome this deficit; therefore, a price mechanism needs to drive demand reduction. It is expected that there will be more pressure to reduce certain biofuel blending mandates, such as in the European Union, the United States and Indonesia, to release more oil into the food industry.# SIPEF Company Report 2021

Product markets

Rubber

The rubber market remained in a rather narrow trading range. The supply side was impacted by lower production due to adverse weather and diseases; however, the demand was impacted in a fiercer manner. New car deliveries were slow, triggering low fresh rubber demand, and the cost of container freight increased tenfold or more, becoming a massive element of the landed prices. Strangely enough, these supply and demand effects seemed to balance each other to a large extent, and the market remained in a stable, but low-price environment. Where in 2020 the demand for latex gloves was peaking, it slowed down during 2021 as the worst covid-19 fears subsided. Therefore, the latex grades such as RSS1 also returned to their usual premium over block rubber. Prices for the standard RSS3 latex grade started the year at USD 2 340 per tonne on SICOM (Singapore Commodity Exchange) and closed at USD 1 850 per tonne, a decrease of 21%. The average price for 2021 was USD 2 071 per tonne versus USD 1 728 in 2020.

The connection to the world of sustainable tropical agriculture

Bananas

In 2021, there were no fundamental changes with regard to global production and supplies to consumer markets. Thanks to the volumes from the South and Central America production areas, particularly Ecuador, Colombia and Costa Rica, but also Guatemala and Honduras, the global supply of dollar bananas remained close to the level of recent years. As a reminder, at the end of 2020, Guatemala and Honduras were hit by severe flooding, but production has since resumed. The Africa, Caribbean, Pacific (ACP) production area also remained generally stable, with a slight decline in the Caribbean region in favour of Africa, Ivory Coast in particular, which saw exports increase slightly. European production also ended the year in balance, as the decline in production since September 2021 in the Canary Islands, following the eruption of the Cumbre Vieja volcano on La Palma, was offset by an increase in the Antilles.

The Panama disease, also known as Tropical Race 4 (‘TR4’), is a fungus which ravages plantations. The disease continues to spread in South America. Initially detected in Colombia in 2019, the first infected plots were recently discovered in Peru. The global banana sector is seriously concerned about the disease, although it has not yet had a significant impact on global production of the Cavendish banana, which remains the main variety of dessert banana produced and sold worldwide. The Cavendish variety may disappear fairly soon. However, plant matter research institutes and production laboratories have redoubled their efforts to improve the banana variety.

The covid-19 pandemic affected the consumer market to a much lesser extent in 2021 than in 2020. Bananas continue to be a basic consumer good, which is included in the essential household basket, and all in all, global supply, distribution and consumer flows are relatively well maintained. However, the demand for bananas that are packed, labelled, barcoded or tied with tape at source has increased considerably. This speeds up the sales process and avoids unnecessary manipulation for weighing the bananas at the fruit department of the supermarket.

The demand for bananas that are packed, labelled, barcoded or tied with tape at source has increased considerably. This speeds up the sales process and avoids unnecessary manipulation for weighing the bananas at the fruit department of the supermarket.

The EU 27 plus the United Kingdom remains the world’s primary market. Consumption has generally remained stable after some years of constant growth. In 2021, consumption in Europe was 6 675 457 tonnes, which corresponds to nearly 13 kg per inhabitant per year. As a reminder, the ten-year average is 11.7 kg. There are substantial differences from one EU country to another. Annual consumption in Sweden, for example, is 17 kg, compared with 7-8 kg in the Baltic countries. As purchasing power increases in some EU countries, it is clear that production areas continue to be in competition for supply and market share. The dollar area accounts for 75% of the market, with ACP at 16% and the EU at 9%. The rules of access to the United Kingdom remain in lockstep with the rules in the UE 27. They are not expected to change on the European continent, with customs duty on dollar bananas at EUR 75 per tonne and unfettered access for bananas from the ACP area.

The problems in Guatemala and Honduras did not disrupt the United States market, as Ecuador, Colombia and Costa Rica quickly stepped in to make up the shortfall. Consumption therefore remained stable at 4 632 397 tonnes. In 2021, two major developments had a large impact on the market in 2021, leading to a significant change in contractual sales prices for 2022. For one, the costs of various factors of production have increased since the end of 2020. This particularly goes for fertiliser and packaging materials, such as cardboard and plastic. Secondly, the global shipping crisis, which has resulted in a hike in shipping costs, continues in 2022. This crisis, which affects all sectors of the economy, naturally led to the revision of contractual sales prices in 2022, while bananas from Ivory Coast also benefited from a favourable USD/EUR exchange rate effect.

On the one hand, European customs duties on dollar banana imports remain at EUR 75 per tonne, as expected. On the other hand, and as announced, the British government has renewed its import rules based on the ex-EU Trade Agreements, notably those concerning bananas, in particular for Ivory Coast. Consequently, Brexit did not have a negative impact on the Group’s exports to British customers. However, and unsurprisingly, the European price (CIRAD reference) has again reached a rather lower price at USD 11.4 per box, i.e. 2% or USD 30 cents less per box, compared to 2020. Since 2015, the peak of the European import price in the last decade, the loss has been USD 2.7 per box, a collapse of 20%.

The covid-19 pandemic affected the consumer market to a much lesser extent in 2021 than in 2020.

SIPEF operational activities

History in brief

Société Internationale de Plantations et de Finance (SIPEF) was founded in 1919. Initially, the Company developed and managed plantation companies in tropical and subtropical areas through two agencies: one in Kuala Lumpur, Malaysia, and one in Medan, Indonesia. Gradually, SIPEF grew into a diversified agro- industrial group, with production and export facilities in Asia, Oceania, Africa and South America. It managed large plantations of traditional crops such as rubber, palm oil and tea. From 1970 onwards, the Group also invested in other products, such as bananas, pineapples, ornamental plants, guava and pepper, and in Belgian and American real estate. Over time, most of these interests, with the exception of bananas, have been phased out completely. In recent years, SIPEF has concentrated almost exclusively on the production of palm oil in Indonesia and Papua New Guinea, and bananas in Ivory Coast.

The SIPEF group is headquartered in Belgium. From here, the Group is managed on a strategic, financial and economic level. In recent years, SIPEF has strengthened its information technology (IT), sustainability and legal services. The team in Schoten employs 23 people. SIPEF is listed on Euronext Brussels. Since 2021, SIPEF has also been operating in Singapore through SIPEF Singapore Pte Ltd. From there, the COO APAC, Petra Meekers, who resides in Singapore, closely monitors all the Group's activities in Indonesia and Papua New Guinea. Finally, SIPEF is also represented in Luxembourg by Jabelmalux SA. This company is the Luxembourg parent company of the oil palm expansions in North Sumatra (PT Umbul Mas Wisesa, PT Toton Usaha Mandiri and PT Citra Sawit Mandiri) and of one of the expansions in the Musi Rawas region in South Sumatra (PT Agro Muara Rupit). After the successful public purchase offer issued in 2011, Jabelmalux SA left the Luxembourg stock exchange. At the end of 2021, the SIPEF group controls 99.9% of the company. SIPEF aims, in the future, to also acquire the remaining shares that are still in public hands.

PLANTED AREA IN HECTARES	INDONESIA	PAPUA NEW GUINEA	IVORY COAST	TOTAL
Oil palms	63 558	13 605	0	77 163
Rubber	1 954	0	0	1 954
Bananas	0	0	794	794
Horticulture	0	0	31	31
Tea	0	0	0	0
Total	65 512	13 605	825	79 942
%	81.9%	17.1%	1.0%	100%

At the end of the 2021 financial year, the number of hectares of oil palms planted amounts to 77 163, and the total planted hectares including bananas, rubber and horticulture amounts to 79 942, compared to 64 088 hectares in 2011. The annual hectarage growth rate was therefore 2.4% on average for the last 10 years. Slowly but surely, the goal of 100 000 planted hectares is becoming a reality. SIPEF continues to actively look for investment opportunities by expanding the planted hectares in areas remote from the cities where the agricultural sector is the main employer. In this context, the retention of property rights and concession rights is of prime importance for the Group, in order to ensure and further develop production in the various countries.# SIPEF Company Report 2021

Operational activities

Palm oil

INDONESIA

North Sumatra
1
2
3
Keras aan
4
Eastern Sumatra
5
Citra Sawit Mandiri
6
Toton Usaha Mandiri
Umbul Mas Wisesa
Tolan Tiga
1
2
Agro Rawas Ulu
3
Agro Muara Rupit
4
Dendymarker Indah Lestari
Agro Kati Lama
1
Agro Muko
2
Mukomuko Agro Sejahtera
South Sumatra
Bengkulu
1
2
3
4
5
6
1
2
1
2
3
4
36 The connection to the world of sustainable tropical agriculture

Hargy Oil Palms
West New Britain
1
1

PAPUA NEW GUINEA
37

Indonesia

In 2021, the Group fresh fruit bunch (FFB) production increased for both, own plantations and smallholders. This rise remained above 14% for the three first quarters, dropped slightly for the fourth quarter, while being back in line for the month of December, to end the year with a total production growth of 13.7% versus the previous year. Not only has the FFB production been very good, but the extraction rates have improved, compared with 2020. The Group's total palm oil production reached the record figure of 384 178 tonnes, showing an increase of 16.7% compared to the previous year. This growth rate was similar for the production from own plantations and from the smallholders selling their FFB to the SIPEF mills.

Indonesia SIPEF controls directly and indirectly through its subsidiary PT Tolan Tiga Indonesia, Jabelmalux and SIPEF Singapore Pte Ltd, 30 oil palm estates, two rubber estates, one tea estate, six crude palm oil mills, two rubber factories and one tea factory. PT Tolan Tiga Indonesia manages the activities via its Head Oce based in Medan, North Sumatra and three regional management oces located in North Sumatra, Bengkulu and South Sumatra province.

38 The connection to the world of sustainable tropical agriculture

Rainfall Chart

After the 2019 drought and a relatively dry 2020 production year, except for South Sumatra, the annual rainfall in 2021 was found to be slightly above the five-year average in all regions. As good as normal weather conditions have been promoting palm growth and fruit development. Only the first four months of the year showed a water deficit for the regions of North Sumatra and Bengkulu. The region of South Sumatra had a water surplus almost all year round, and all estates exceeded the 10-year mean, very often by 30% or more. Nevertheless, a slightly delayed stress eect of the 2019 drought on the reduced formation of female fruit could still be observed.

Estates

Due to low palm oil prices in 2019, management decided to postpone Indonesia's replanting program in North Sumatra and Bengkulu in 2020, in order to focus financial resources on developments in South Sumatra. The replanting program of these regions resumed in 2021. In South Sumatra, planting activities continued at a rapid pace during the year. Also in 2021, the Group continued to focus mainly on the investment programs in South Sumatra, which concerned the further expansion of the planted areas and infrastructure in Musi Rawas, the replanting and improvement of SIPEF’s own oil palm plantations, and of the plantations of smallholders (plasma) in Dendymarker. In the other operating units, the usual renewal of investments and/or materials was done as and when necessary. A significant achievement in the continuing growth and development of SIPEF Indonesia was observed over the Christmas week, when the

NORTH SUMATRA 2021 RAINFALL VS. AVERAGE IN MM

BENGKULU 2021 RAINFALL VS. AVERAGE IN MM

SOUTH SUMATRA 2021 RAINFALL VS. AVERAGE IN MM

The production milestone of one million tonnes of fresh fruit bunches within a calendar year from own estates was achieved for the first time in the Company history.

SIPEF Company Report 2021

Operational activities

The estates of the North Sumatran business unit are the most mature of the SIPEF Indonesia group. Up to June 2021, they produced as expected, but then in the third and fourth quarters were aected by a real drop in crop. With a generally wet 2021, the crop performance was variable, still aected by the abortion of female flower buds due to the water deficit from 2018, 2019 and early 2020. Some progress was noted late in the year, but overall, own plantations ended the year at -0.51% for Tolan Tiga group and 8.43% for Umbul Mas Wisesa group, versus last year.

FFB production in the mature plantations with the mineral soil of North Sumatra had a slower than expected start at the beginning of the year as a result of two dry months, followed by a much better second quarter. The third and fourth quarters were again lower than last year, and are detailed as follows. Perlabian estate (PLE) has 3 708 hectares of mature oil palms, while 493 hectares are immature, and 310 hectares were felled in preparation for planting by September 2022, after one year of fallow to mitigate the Ganoderma problems.

production milestone of one million tonnes of fresh fruit bunches (FFB) within a calendar year from own estates was achieved for the first time in the Company history. The year 2021 actually ended with 1 019 009 tonnes of FFB. This remarkable accomplishment has been built on the vision, hard work, dedication and commitment of so many people, past and present, and is a positive sign of things to come. This is especially as the South Sumatra projects continue to mature and further boost production, and the Company’s replants across North Sumatra and Bengkulu produce steep yield curves earlier than expected.

A ‘Smallholders Department’ has recently been created within the SIPEF Medan Head Office, to comply with the new Indonesian regulation. It stipulates that plantation companies must reserve a further 20% of the area for smallholders, in addition to their own number of hectares. It is already managing 90 cooperatives in the three regions, with 5 098 members, representing more than 15 000 hectares of smallholder production, of which 1 178 hectares are already RSPO certified.

	PLANTED AREA AND PRODUCTION		AVERAGE OIL PALM AGE	FFB PRODUCED 2020 (IN TONNES)	FFB PRODUCED 2021 (IN TONNES)	YIELD 2021 FFB/HA (IN TONNES)
	MATURE (IN HECTARES)	IMMATURE (IN HECTARES)
Tolan Tiga group	12 027	875	13.90	298 757	297 229	24.7
Umbul Mas Wisesa group	9 937	0	12.60	206 984	224 429	22.6
Subtotal own plantations	21 964	875	13.33	505 741	521 659	23.8
Smallholders	NA	NA	NA	4 333	7 715	NA
TOTAL				510 074	529 374

  

40 The connection to the world of sustainable tropical agriculture

In all, by end of the year PLE was at -1.46% in crop compared to the previous year, bringing the estate to an annual yield of 24.77 tonnes per hectare. Tolan estate (TLE), with 3 614 hectares of mature oil palms, is currently in a planting break, and the first replant is expected in 2023 for 173 hectares, whereafter every year between 170 and 300 hectares will be replanted. TLE experienced a better than usual year with rainfall 20% over the 10-year mean. Production was also good up to September, but dropped for the rest of the year, however ending at 1.22% above last year. Over the last three years, yields have been dropping, as the average age of the palms is higher, and a continuous replant will be required in the next 10 years. Bukit Maradja estate (BME), which has 2631 hectares of mature palms next to 279 hectares of immature plantings, has in wet circumstances performed in line with expectations for most of the year, but lost out on performance in the last quarter, ending the year at -2.52% versus last year. BME is one of the estates suffering from Ganoderma and has a constant replanting program ahead for the next 10 years at a rate between 140 and 200 hectares per year.

SIPEF Company Report 2021

Operational activities

Keras aan estate (KER) was showing a similar picture as BME, also suffering from the Ganoderma fungus eects. With 2 073 mature hectares and the 102 immature hectares, it allowed a harvest of 55 212 tonnes of FFB by the end of December, but finished at 0.74% compared to last year. KER reached its highest yield in the last 10 years, 26.63 tonnes per hectare, also the highest for the area. The replanting program will continue up to 2026, with annual replanting between 80 and 145 hectares.

In the Umbul Mas Wisesa (UMW) group's organic soil plantations, the normalised rainfall supported the fruit harvest. In combination with the application of the adjusted fertilisation recommendations over the past two years, this resulted in a fruit production that was higher for all four plantations of this group. There has been no replanting and no nursery work in the Umbul Mas Wisesa/Toton Usaha Mandiri (UMW/TUM) estates, as all these estates are mature and the first replanting is projected in a few years from now. 2021 has indeed seen an excellent crop performance in UMW/TUM estates, with reasonable rainfall, only two dry months at the start of the year, and the very wet months of September and October. Crop came down in the fourth quarter, but the estates are back on track in terms of yield per hectare, at an average of 22.58 tonnes. The amended manuring schedules and increased micro-nutrients have had their positive impact on the fruit setting, and it is expected that this will not change in the coming year. Total FFB production for the year closed at 224 429 tonnes.# PLANTED AREA AND PRODUCTION

	MATURE (IN HECTARES)	IMMATURE (IN HECTARES)	AVERAGE OIL PALM AGE	FFB PRODUCED 2020 (IN TONNES)	FFB PRODUCED 2021 (IN TONNES)	YIELD 2021 FFB/HA (IN TONNES)
Agro Muko	16	332	1,508	13.03	333	172
Mukomuko Agro Sejahtera	2,822	471	9.21	29,374	34,661	12.3
Subtotal own plantations	19,154	1,979	12.44	362,545	396,782	20.7
Smallholders	NA	NA	NA	16,386	18,277	NA
TOTAL	378,931	415,059

In the oil palm plantations in Bengkulu Province, the weather conditions were favourable for palm growth and fruit development. Especially the young mature palms produced more. But the volumes of the hectares with older palms also increased, compared with last year, by more than 10%. In addition, more hectares were put into production. The crops exceeded last year’s production by 8.69%.

The connection to the world of sustainable tropical agriculture

The business unit comprises the operations of Agro Muko’s nine own plantations and four Mukomuko Agro Sejahtera (MMAS) plantations, which include the two recent extensions with Sungei Teramang estate (Asri Rimba acquired in 2019) and with Batu Kuda estate (Agricinal conditionally acquired in 2021). The regional management office is also taking care of the Corporate Social Responsibility (CSR) activities of the Yayasan SIPEF Indonesia (YSI), protecting the turtles, and the SIPEF Biodiversity Indonesia (SBI) operations, protecting the forest. A key topic over the last two years has been the renewal of cultivation licences (Hak Guna Usaha - HGU) for the large majority of the estates of Agro Muko and, with the plasma obligation being introduced during the process of application, the team had to adjust plans to introduce and prove the existence of the 20% of plasma areas before arial maps could be made. Agro Muko plantations have harvested 362 121 tonnes of FFB, being 8.69% above last year’s production. MMAS, with the newly acquired estates, has produced 34 661 tonnes, corresponding to 18.25% above last year.

SIPEF Company Report 2021

	MATURE (IN HECTARES)	IMMATURE (IN HECTARES)	AVERAGE OIL PALM AGE	FFB PRODUCED 2020 (IN TONNES)	FFB PRODUCED 2021 (IN TONNES)	YIELD 2021 FFB/HA (IN TONNES)
PT Agro Kati Lama	3,638	538	4.67	29,005	38,940	10.7
PT Agro Rawas Ulu	1,816	728	3.81	14,064	22,684	12.5
PT Agro Muara Rupit	3,294	2,355	2.76	11,777	23,658	7.2
PT Dendymarker Indah Lestari	1,447	5,770	2.26	27,721	15,287	10.6
Subtotal own plantations	10,194	9,391	3.12	82,567	100,568	9.9
Smallholders	NA	NA	NA	7,933	14,855	NA
TOTAL	90,500	115,424

In the South Sumatra Musi Rawas region, the harvested crop increased by 59.8%. The exceptional production in the Agro Muara Rupit (AMR) plantations was more than double than that of last year: +101.4% and 149.2% respectively for the East and West estates. This was the result of an increase in the hectares harvested and an increase in the average fruit weight in most of the young plantations. It is satisfying to see that the total planting/ replanting for the South Sumatra projects, which started 10 years ago, now nearly reach 20 000 hectares own and almost 5 000 hectares plasma. The teams on the ground achieved 3 711 hectares of planting in 2021, of which 2 070 were for Dendymarker Indah Lestari (DIL). In DIL, a further 1 077 hectares are expected to be completed in 2022 and 2023 in the own estates, bringing the total figure for own estates to 7 806 hectares. The plasma will require another 1 648 hectares of replanting in the following three years, to complete the plasma area of 2 760 hectares, and a total project area of 10 566 hectares planted in DIL. The plasma replanting in DIL was started in 2020 and currently 1 112 hectares have been replanted (40%), while this replanting is supposed to be continued for another three years, at a speed of up to 550 hectares a year. The remaining older DIL plantations experienced solid production in the first quarter. However, due to the intensive replanting program, total fruit production at the end of the year decreased by 45.49% compared with last year.

MILLS NORTH SUMATRA

	BMPOM	PLPOM	UMWPOM
	2020	2021	2020
Capacity (tonnes FFB/h)	30	30	55
Actual throughput	27.24	30.05	54.32
FFB processed (tonnes)	121,660	122,769	179,502
Crude palm oil produced (tonnes)	28,427	28,910	39,432
Oil extraction rate (%)	23.37	23.55	21.97
Kernel extraction rate (%)	4.91	4.92	5.79

The average oil extraction rates (OER) of the Indonesian palm oil processing mills, accordingly with the local rainfall volumes, varied in a larger range compared with last year. They ﬂuctuated from 21.4% to 22.4% in South Sumatra, which still processes a relatively high percentage of old palm fruits with low oil content, to 23.3% in the fully mature plantations with organic soils in North Sumatra. Thanks to these high extraction rates, the increase in palm fruit volumes (13.55%) were also reﬂected in an even higher increase in palm oil volumes (16.68%) compared with the year 2020. A good performance was achieved in the Bukit Maradja Palm Oil Mill (BMPOM), the smallest mill in North Sumatra: the OER was 23.55% against 23.37% last year. The Perlabian Palm Oil Mill (PLPOM) which is the biggest but also the oldest mill in North Sumatra, is the key operator and many upgrades have been done over the last few years to improve its performance. The PLPOM has increased the OER from about 20% some years ago to currently 22.17%, but remains hampered by the low oil content of the remaining old fruit coming mainly from PLE. At the Umbul Mas Wisesa Palm Oil Mill (UMWPOM), due to the wet weather in September/October and the lower bunch set, the overall performance of the mill came down in OER, FFA during the last quarter: the final OER was an average of 23.30%, against 23.11% last year.

SIPEF Company Report 2021

Operational activities

MILLS BENGKULU AND SOUTH SUMATRA

	MMPOM	BTPOM	DILPOM
	2020	2021	2020
Capacity (tonnes FFB/h)	60	60	30
Actual throughput	59.38	58.18	29.83
FFB processed (tonnes)	242,611	264,977	134,445
Crude palm oil produced (tonnes)	56,968	62,538	30,249
Oil extraction rate (%)	23.48	23.64	22.50
Kernel extraction rate (%)	4.52	4.33	5.05

The Mukomuko Palm Oil Mill (MMPOM), which takes most of the crop of the northern estates of the Agro Muko group, reached an average OER of 23.64% at the end of 2021, better than the 23.48% of last year. The main reason for the good performance is the increase in the ripeness standards of the harvested fruits. FFA numbers were slightly higher, especially around the Ramadan and the Lebaran break. The Bunga Tanjung Palm Oil Mill (BTPOM), which takes the crop of the southern estates, continues to struggle in terms of performance, mainly because it is not running at full capacity: at 83% on the basis of 30 tonnes per hour and only 42% on a calculation of 60 tonnes per hour. OER was 22.24% at the end of the year, versus 22.50% the year before. An additional industrial asset was the Agro Muko Tank Terminal located in Padang, which remained essential in terms of shipping, if and when required. Its capacity remained unchanged, with a total of 26 000 tonnes stored in eight tanks. The ongoing upgrade of the Dendymarker Indah Lestari Palm Oil Mill (DILPOM) from 20 to 60 tonnes per hour capacity has continued, while the mill was running and processing at full speed. The mill will have a horizontal Compact Modular Concept (CMC) Indexing System steriliser and entirely new power supply (boilers, turbines, etc.), while the old material will be dismantled as soon as possible. The old boiler will remain on standby. The mill should provide a better oil recovery and kernel recovery, less oil loss and a good steaming process. The final commissioning could be expected by the end of April 2022. For the year 2021, OER was at 22.57% compared with 21.52% for the previous year.

Papua New Guinea

Hargy Oil Palms Ltd (HOPL) has six oil palm plantations regrouped under three estates, together with 3 635 independent smallholder plantations that supply its palm oil mills on a regular basis. After a dry month of December 2020 and a relatively mild rainy season in the first quarter of 2021, followed by lower than average precipitation volumes in the second half, the yearly average rainfall in the oil palm plantations in Papua New Guinea was about 30% lower than the five-year average. These weather circumstances provided agronomically good conditions in the region, leading to steady high production coupled with the unexpectedly rapid recovery of the areas affected by the Navo volcano. This has had a generally positive impact on all aspects of the operations.

SIPEF Company Report 2021

	MATURE (IN HECTARES)	IMMATURE (IN HECTARES)	AVERAGE OIL PALM AGE	FFB PRODUCED 2020 (IN TONNES)	FFB PRODUCED 2021 (IN TONNES)	YIELD 2021 FFB/HA (IN TONNES)
Hargy estate	4,023	393	9.03	106,610	133,587	33.2
Navo estate	6,262	343	11.60	95,607	154,969	24.7
Pandi estate	2,584	0	8.54	67,398	78,293	30.3
Subtotal own plantations	12,869	736	10.18	269,616	366,849	28.5
Smallholders	14,074	744	15.89	209,791	232,134	16.5
TOTAL	26,943	1,480		479,407	598,983	22.2

Estates

Following almost two years without replanting, due to having focused on rehabilitation and recovery of the areas affected by the 2019 volcanic eruptions, HOPL resumed its replanting programme in 2021. All seedlings have been from the DAMI ‘Super Family’ type since 2015, enabling the yields for the future to be enhanced. The seedling quality issues experienced late 2020 and early 2021 have been steadily overcome.# SIPEF Company Report 2021 Operational activities

However, the new overhead sprinkler irrigation system being installed this year in the nursery will surely improve the uniformity of the seedling development. Replanting has progressed well, despite some difficulties with contractor felling equipment and seed delivery delays. The replanting team achieved nearly 675 hectares own, allowing an average palm age of 10.2 years to be maintained. About 150 hectares have been deferred to 2022, mainly due to delays in seed deliveries. For the smallholders, the replanting is ongoing at a slower pace, and the average palm age is 15.9 years at the end of 2021.

HARGY ESTATE 2021 RAINFALL VS. AVERAGE (IN MM)
NAVO ESTATE 2021 RAINFALL VS. AVERAGE (IN MM)
BAKADA ESTATE 2021 RAINFALL VS. AVERAGE (IN MM)

The connection to the world of sustainable tropical agriculture

In 2021, the replanting programme resumed in the areas affected by the 2019 volcanic eruptions. For SIPEF’s subsidiary in Papua New Guinea, 2021 will remain an exceptional year in the history of HOPL’s production since its establishment in the country 45 years ago. On the one hand, the plantations benefitted from very favourable and extraordinary weather conditions, with very moderate rainfalls all year round. On the other hand, as the estates continued to recover reasonably well in the areas affected by the 2019 volcanic eruptions, production has shown a record year, closing 2021 with an increase of 41.9 % on own palm oil volumes, and 14.1% on smallholder palm oil volumes, for whom the harvesting was also encouraged by the high world market prices for their delivered fruit. All three estates surpassed their peaks from 2018. Helped by the weather, the harvesting teams have controlled the daily harvesting rounds well, resulting in good quality fresh fruit bunches (FFB). They significantly increased crop collection, ending the year with a 36.1% FFB production rise versus last year. The rehabilitation pruning work of the plantations at Navo impacted by the volcano was completed early in the year with the assistance of contractors. Subsequent access to the crop on the most affected areas assisted Navo, almost doubling its production.

SIPEF Company Report 2021

Operational activities

The smallholders had more difficulties, delivering decreased fruit volumes at the start of the year. However, they finally ended the year with a significant rise, a record-breaking performance at 10.7%, surpassing their highest volumes in 2018. The outstanding prices have seen smallholder block maintenance improve across the project area and, with the regular uninterrupted 14-day crop pickup schedules, largely contributed to their good production. Also, no crop has been rejected. Road access has been good all year, even though there has been little assistance from the Government for the main and smallholder roads, which are still primarily maintained by the Company.

Mills

Mill extraction rates have also been at record levels. Whilst these are significantly influenced by the exceptional weather, good fruit quality as a consequence of well controlled harvest day rounds, an overall improvement in field management, regular uninterrupted smallholder 14-day crop pickup schedules, and excellent work by the mill teams have made this possible. The three palm oil mills in Papua New Guinea reached a peak annual average of 25.8%. At year end, Hargy Palm Oil Mill (HPOM) was on average at 24.9%, with Barema Palm Oil Mill (BPOM) at 25.6% and Navo Palm Oil Mill (NPOM) at 26.0%.

The connection to the world of sustainable tropical agriculture

On the other hand, the same reasons of a mild wet season, well-maintained plantation harvest rounds and regular smallholder crop collections, have combined to enable the mills to maintain FFAs below 4.00%, ending the year on average at 2.71% for HPOM, 3.63% for BPOM and 3.06% for NPOM. These rather low FFA levels led to a premium achieved on every shipment. To further improve on FFA and to avoid quick increases of FFA during the tank storage period before loading the ships, all storage tanks at the tank farm are emptied and cleaned on a routine basis. The Company’s wharf and oil pipeline remain certified as compliant with the International Ship and Port Facility Security Code (ISPS Code). Crude palm oil (CPO) and crude palm kernel oil (CPKO) produced were also on the record side, with 13 shipments loaded for the first time this year, compared with the usual 12 shipments a year. As a result of both good crop production and extraction rates, CPO volume is 29.7% above 2020.

MILLS	HPOM	NPOM	BPOM	TOTAL
2020	2021	2020	2021	2020
Capacity (tonnes FFB/h)	45	45	50	50
Actual throughput	45.32	46.74	48.88	50.95
FFB processed (tonnes)	50 583	70 654	130 272	191 604
FFB processed smallholders (tonnes)	90 848	94 893	27 730	37 633
Crude palm oil produced (tonnes)	33 569	41 242	38 999	59 596
Oil extraction rate (%)	23.74	24.91	24.68	26.00
Crude palm kernel oil produced (tonnes)	2 723	3 590	-	-
Palm kernels produced (tonnes)	7 093	8 679	8 302	11 601
Kernel extraction rate (%)	5.02	5.24	5.25	5.06
Kernel oil extraction rate (%)	1.93	2.17	-	-

SIPEF Company Report 2021

Operational activities

Bananas

IVORY COAST

Plantations J. Eglin - Azaguié 1 & 2
Plantations J. Eglin - Agboville
Plantations J. Eglin - Motobé
Plantations J. Eglin - Lumen 1 & 2
Plantations J. Eglin - Akoudié

Région des Lagunes

The connection to the world of sustainable tropical agriculture

SIPEF Company Report 2021

Operational activities

Plantations J. Eglin is a major player in the banana production in Ivory Coast, the most important banana producing and exporting country in Africa. The company produces nearly 33 000 tonnes of bananas for export annually, the vast majority for the European market, on a planted area of about 800 hectares, split into three locations Azaguié, Agboville and Motobé. However, with the assets acquisition by mid-2021 of an old banana plantation which ceased producing for the last two years, the planted area of Plantations J. Eglin will grow within the coming three years from 800 to 1 350 hectares. It will introduce two new locations, being Akoudié and Lumen.

Ivory Coast

Rainfall

Only Azaguié 1 got rainfall figures comparable to the long-term average. Otherwise all other sites were below the average. Motobé experienced the driest year within the sites in 2021, with -29% compared to last year, and -25% compared to the long-term average.

The connection to the world of sustainable tropical agriculture

Estates

The activities of the banana plantations remain concentrated on the same historical three production areas, where there were no major changes in 2021. As of 31 December 2021, the total banana area planted is 794 hectares, which is 4% more compared with last year. Plantations J. Eglin has the ambition to make optimal use of the area available for bananas by maintaining the regular replanting cycle, including fallow periods. With the use of in-vitro cultivated banana plants every seven years on average, the current strategy focuses on planting healthy plant material in healthy soil having had a period of fallow. In 2021, the banana area in Ivory Coast was expanded with a first new plantation. 22 hectares of this area were effectively planted in the fourth quarter and were, therefore, still unproductive in 2021. The annual production should consequently increase by more than 15% in 2022, mainly due to the new harvesting areas in the second half of the year.

AZAGUIÉ 1 & 2 2021 RAINFALL VS. AVERAGE (IN MM)
AGBOVILLE 2021 RAINFALL VS. AVERAGE (IN MM)
MOTOBÉ 2021 RAINFALL VS. AVERAGE (IN MM)

PLANTED AREA AND PRODUCTION

	PLANTED AREA (IN HECTARES)	PRODUCTION 2020 (IN TONNES)	PRODUCTION 2021 (IN TONNES)	YIELD 2021 TONNES/HA
Azaguié 1	146	5 152	5 600	38.4
Azaguié 2	191	8 447	7 512	39.3
Agboville	230	8 988	9 507	41.3
Motobé	226	8 571	9 581	42.4
Lumen 1	IN PREPARATION
Lumen 2	IN PREPARATION
Akoudié	IN PREPARATION
TOTAL	794	31 158	32 200	40.6

SIPEF Company Report 2021

Operational activities

After disappointing banana volumes at the end of 2020, expected higher production was achieved in most of the plantations as from the start of 2021. A limited impact of the colder Harmattan wind in the second quarter, combined with good production cycles, resulted in more bunches with a higher average weight and a consequently better volume for export to Europe and Africa for the first six months of the year. The third quarter saw a slight decrease in production, due to the variations in the production cycles of the four banana plantations. For the full year, the agronomic performance has been slightly higher than last year (+3.3%). Despite more bunches than expected being harvested overall, lower weights were however observed per bunch, from an almost identical harvested area.

Packing stations

The development of the new plantations which started in the second semester should not, above all, affect the current operations on the historical four sites.Therefore the new areas have been managed as a separate business unit. At Lumen 1 and 2, as at 31 December 2021, 22 hectares had been prepared, drained, irrigated and planted. The tissue culture plants were grown in Azaguié’s own nursery. The cableway is being installed, to be ready for the first harvesting, which will take place by July- August 2022. At Akoudié, the first project to be completed was to have the access road reshaped up to the national main tarmac road. A ring road was then constructed to ensure all cultivated land by the Group cannot be encroached upon by outside people. The land preparation itself has been contracted out for the cleaning, subsoiling and drainage of the area, during the driest period, to make sure the land will be ready for planting in the second semester of 2022.

PACKING STATIONS

	EU	REGIONAL	LOCAL	TOTAL
CAPACITY (TONNES/DAY)	2020	2021	2020	2021
Azaguié 1	30	4 444	4 856	709
Azaguié 2	40	7 075	6 358	1 372
Agboville	40	8 055	8 547	933
Motobé	40	7 565	8 257	1 006
Lumen 1	WILL RESUME OPERATIONS AS FROM JULY 2022
Lumen 2	WILL RESUME OPERATIONS AS FROM JULY 2022
Akoudié	WILL RESUME OPERATIONS AS FROM DECEMBER 2022

56 Horticulture

ORNAMENTAL PLANTS

	PINEAPPLE	FLOWERS	ORNAMENTAL FOLIAGE	LOTUS
	2020	2021	VARIANCE %	2020
Azaguié 2	345 299	333 775	-3.3%	1 736 100

UNITS

The horticulture activities are carried out in Ivory Coast on 32 hectares of land adjacent to the banana plantation site of Azaguié 2. For many years, pineapple ﬂowers and ornamental foliage have been grown on the same cultivated area. This year has seen a small decrease in the hectarage, as nine hectares were transformed into the banana plantations, and three hectares were extended on wasteland which has been rehabilitated. The lotus ﬂowers are grown on the dam lake of the Agboville site.

57 SIPEF Company Report 2021

Operational activities

Rubber and tea

1 Agro Muko

Bengkulu

1 Melania (Tea Estate)

West Java

1 2 1 1 1 Melania (Rubber Estate)

1 Timbang Deli

2 Bandar Sumatra

1 North Sumatra

South Sumatra

INDONESIA

58 The connection to the world of sustainable tropical agriculture

59 SIPEF Company Report 2021

Operational activities

Rubber

In June 2020, it was decided to convert two of the three rubber plantations, also suitable for palm cultivation, into oil palm plantations and immediately start the conversion process. Besides the need for getting RSPO approval beforehand, and applying all the New Planting Procedures (NPP), the conversion also includes the closure of the nurseries, the cessation of replanting efforts and the maintenance of the remaining areas. When planting is allowed, it will, of course, include a plasma development, which is a requirement imposed by the governmental authorities on the oil palm industry, related to the renewal of land use rights licences (Hak Guna Usaha – HGU). The restructuring will last for about three to four years, during which time the rubber tapping will continue to the maximum and be accompanied by the gradual planting of oil palms. By 2029, the switch to mature and cash-generating oil palm plantations should be complete.

Estates

Rubber production remained problematic all year long, mainly in Bandar Pinang estate (BPE). The crop was indeed 34.8% below in 2021, a year heavily aﬀected by the Pestalotiopsis fungus. The main reason is the reduced numbers of tapped hectares caused by the early start of the conversion, while early and prolonged wintering also reduced the possibility for stimulation. The low production is aﬀecting the unit cost of production, which has gone up compared to the net selling price. Preparing for the conversion is in progress, with 465 hectares waiting to be planted with oil palm, but RSPO assessments and HGU renewal concerns make it continue as a rubber estate for the time being.

60 The connection to the world of sustainable tropical agriculture

As the management of MASE Palembang was handed over to Shamrock Group on 1 May 2021, the figures of these activities were from that date no longer integrated In the consolidation.

Mills

The Crumb Rubber Factory (CRF) in Agro Muko was running below capacity all year long, a result of the start of the conversion to rubber. Also due to the sale of PT Melania, from May onwards the cup lumps from MASE were no longer sent to Agro Muko. As the conversion from rubber to oil palm is expected to be implemented from 2024 on, calculations need to be made, based on the rubber market prices, about when it will become more beneficial to stop producing in the CRF, and just tap and sell the cup lumps to a dedicated buyer. There is no alternative for the factory, once processing is stopped. The operational performance of PT Timbang Deli also remained frustratingly on the low side. Tolan Tiga group was buying the latex produced by PT Timbang Deli’s limited plantation activity to manufacture it into ribbed smoked sheets (RSS). In Agro Muko, nearly 500 hectares of rubber plantations have already been felled and planted with Mucuna cover crop. In the meantime, a consultant carried out the environmental and social impact assessments for RSPO compliance, and the reports were submitted to the High Conservation Value Resource Network (HCVRN) organisation in October 2021. The workforce has already been reduced by a third, with some workers being relocated.

61 SIPEF Company Report 2021

Operational activities

Tea

The tea plantation in West Java covers 1 811 hectares. Since the economic life of tea bushes is much longer than that of oil palms or rubber trees, replanting does not happen until 50 years, or sometimes more, after planting. The result is that the area to be replanted annually is much smaller than for other agricultural commodities, and no replanting was done in 2021. The agreement related to the sale of PT Melania by PT Tolan Tiga Indonesia to Shamrock Group was signed in May 2021. PT Tolan Tiga Indonesia is currently working towards the HGU renewals in order to complete definitively the sale. Unlike the situation of MAS Palembang, Cibuni estate continued to be eﬃciently managed by PT Melania. Shamrock Group is sending a visiting agent to keep track of operations on a monthly basis. The production has been continued and all the leaf quality and final product specifications have been preserved. With respect to the HGU renewal applications, which are likely to be completed by the end of 2022, and the related 20% plasma requirements, the contracted smallholders are very engaged in delivering tea leaves, corresponding so far to 14,1% of the annual production. These leaves are processed separately into the ‘Melchi’ brand tea sold separately from the ‘Melania’ brand, mainly on the local market.

62 The connection to the world of sustainable tropical agriculture

Research and development

Verdant Bioscience Pte Ltd

Research and development to increase yields per hectare remains very important for a sector that is under pressure to produce ever more vegetable oil, and always in a more sustainable manner, but which has little or no access to additional land. Therefore, the Group must focus on improving the eﬃciency of the areas already planted. In that context, the Company's 38% participation in Verdant Bioscience Pte Ltd (VBS), a company founded in 2013, is of particular importance.

63 SIPEF Company Report 2021

Operational activities

To achieve this SIPEF collaborates with reliable professional partners: Ackermans & van Haaren (42%) a renowned Belgian Investment Company; Dharma Satya Nusantara Tbk (10%), an Indonesian listed plantation company; and BioSing (10%), the VBS management. Through VBS, SIPEF not only has access to new varieties of high-yielding oil palms, but also to the real potential to generate very meaningful sustainability benefits worldwide. An increase in yield per unit of area is seen as the only real solution to the growing world demand for vegetable oil, without increasing the area of oil palm planted. This could eliminate the risk of further loss of rainforest and biological diversity. Such a yield increase would be unique for a crop like oil palm with its global economic importance. VBS is one of the first Indonesian seed producers to bring semi-clonal seeds to the market, based on clones produced as female seed palms through a tissue culture process. This production of semi-cloned seeds enables VBS to produce, in commercial quantities, selected elite crosses under the brand name Verdant Select, which have been thoroughly tested in both Papua New Guinea and Indonesia. Besides the semi-cloned seeds, VBS is focusing a specific F 1 hybrid programme. Through VBS, SIPEF not only has access to new varieties of high-yielding oil palms, but also to the real potential to generate very meaningful sustainability benefits worldwide.

64 The connection to the world of sustainable tropical agriculture

It focuses on the development of high-yielding F 1 hybrid oil palms and other supporting technologies and innovation solutions, that underpin the significant potential for yield and productivity improvement in the global palm oil sector. The seeds from a single selected F 1 hybrid variety will have higher yields and be genetically uniform. This genetic uniformity within each F 1 hybrid variety allows management practices (harvesting, nutrients applied and replanting time) to be further optimised from which the grower can lever great value. Despite the challenges of operating during a pandemic, the F 1 hybrid programme has made good progress and candidate F 1 hybrid crosses grown in the nursery were field planted in 2021. Further testing of new F 1 hybrid crosses will now continue each year with female plants from diﬀerent genetic backgrounds.# SIPEF Company Report 2021

Operational activities

Successes were also achieved in increasing the frequency of crosses with F 1 hybrid palms from well-defined but diverse genetic backgrounds. The first-generation offspring of these homozygous parental plants (F 1 hybrid crosses) have the potential to deliver greatly improved yields. As a major shareholder of VBS, SIPEF is testing commercial varieties of candidate oil palms on its Sumatran plantations. These trials include selection not only based on higher yields, but also on important commercial secondary traits such as disease resistance, as well as selection of new commercial material for specific environmental conditions, e.g. rainfall amount and distribution, or soil fertility, microbial diversity and moisture holding capacity.

SIPEF Company Report 2021

Operational activities

VBS agronomists and crop protection staff have continued to work with SIPEF plantation management to make recommendations in order to realise the potential of existing plantations, mainly by increasing yields per hectare and innovatively enriching the soil. Long-term trials of both fertilisers and compost have been carried out on representative soils in each SIPEF region. In this way, the recommendations for fertilisers and compost can be further refined for the specific growing conditions, based on the results of objective science, also with the aim of improving the soil health.

VBS also works with the plantation management of PT Tolan Tiga Indonesia on the development of new insights and their future integration into strategies. These developments include the optimisation of plant growth, the regulation of carbon in the soil, the maintenance of good water balance, and also the control of pests and diseases. In this way, the Group wants to prevent commercial losses in oil palm, rubber and tea.

In addition, work is also being undertaken to further optimise the good agricultural practices that underpin the sustainable manner in which SIPEF operates its plantations. In this respect, preference is given to biological control of pests and the minimum use of pesticides. With all these developments, SIPEF aims to improve the circularity and carbon positive impacts. As a major shareholder of VBS, SIPEF is testing commercial varieties of candidate oil palms on its Sumatran plantations.

The connection to the world of sustainable tropical agriculture

Other developments

SIPEF continues to focus on renewal and innovations that further contribute to making the Company more sustainable. This is important for a company in the agricultural sector, in order to continue producing sufficient and healthy food. Therefore, SIPEF has examined how it can efficiently manage and reduce greenhouse gas (GHG) emissions with targeted investments. First of all, it is important to calculate a GHG inventory that provides the necessary information for the further progress of emissions reduction.

In 2021, SIPEF focused on creating that inventory using the internationally recognised 'Carbon Footprint' ISO 14064 standard. The initial findings of these calculations can be found in the Sustainability Report, part 3 of this Annual Report. In 2022, SIPEF will focus on verifying the application of this methodology by the various business units of the Group and publish the results at the end of the year. Thanks to this inventory and the continued development of its mitigation strategy, SIPEF could in the future reduce GHG emissions in a recognised, transparent and verifiable manner.

SIPEF Company Report 2021

Operational activities

This calculation has shown that in the palm oil production process, including the fermentation of wastewater in an open pond system, a natural biological fermentation process (anaerobic), a significant amount of methane (CH4) is emitted. The methane can be captured and flared by building a capture system. Currently, SIPEF has already equipped five of its nine plants with such a capture system. The Dendymarker mill is the sixth mill where this kind of installation will be set up. Due to covid-19, its construction was delayed in 2021. The end of the works is planned for 2025.

In addition, it is possible to convert the biogas into electricity and heat with limited emissions. This application is profitable if the generated energy can be delivered to the grid at a green rate when there is an internal shortage of biomass or steam. In Bengkulu, a plant for electricity generation from methane gases has been built. Since the end of 2017, the Group has supplied the energy that could not be used internally to the public grid. This has made SIPEF a direct supplier of green energy to the public sector for the first time. However, this is only profitable if the tariffs are good and if sufficient volume is purchased, which unfortunately is not currently the case. However, SIPEF hopes that in the future there will be renewed interest from the government for green energy at the right price.

Furthermore, SIPEF also focuses on reusing land and commodities as much as possible, with as few residues as possible and reduced emissions. In circular agriculture, the focus is on enriching the soil. The reduction of GHG will increase due to the reduced use of nitrogen fertilisers, which are in themselves energy intensive.

In North Sumatra, SIPEF has been working for several years with a state-of-the-art composting facility, which absorbs the empty bunches and wastewater from the Bukit Maradja palm oil mill. In this way, the residual flows are used in an emission-neutral process. In this process, the compost produced is used to improve the soil structure of the oldest plantations in the long term and significantly reduce the use of chemical fertilisers.

In North Sumatra, at the UMW mill, a biomass pellet plant is being established, which will convert excess biomass (empty fruit bunches) into high-quality calorific pellets. The biomass will be dried and converted under high pressure and heat into these pellets. The residual steam is produced sustainably and is available in large quantities. The energy required for the process also comes from a sustainable source (biogas and steam). In this way, the entire chain is emission- neutral. The pellets can then be used again to generate green electricity. The project was delayed in 2021 due to technical modifications and the covid-19 pandemic. The project will be completed in the second quarter of 2022.

SIPEF focuses on reusing land and commodities as much as possible, with as few residues as possible and reduced emissions.

The connection to the world of sustainable tropical agriculture

Finally, SIPEF started an integral research project in 2021 to further increase the quality of oil produced. For good future prospects, the production of high-quality oil is very important for the sector, given the increasing quality requirements for the fats and oil industry. Therefore, SIPEF has started a project in collaboration with a partner, whereby the quality of the oil is increased by washing the crude palm oil. In this process, the precursors that can form 3-MCPD (3-monochloropropane-1, 2-diol are removed. 3-MCPD is a substance that can be formed during the heating of high-fat products at very high temperatures in the refining of vegetable oils. Treating the crude oil in the first production process at the mill lowers the risk of formation of this substance, while increasing the quality of the crude palm oil before it goes for refining. This is an added value for both the refining and the final product. The quality is guaranteed from the beginning of the process. The first research results show that good results can be obtained in a test installation. SIPEF has decided to scale up the project and provide a first mill with a washing system in 2022.

SIPEF Company Report 2021

Risks and uncertainties

In November 2021, the audit committee once more analysed the various risks that face the Group. In this process the committee identified and classified 76 risks: general, product, operational, workforce, financial, commercial, legal and political. Subsequently, all of these risks were then assessed, based on the likelihood that they would occur and their potential impact on the Company, and were mapped out. The audit committee has adapted the classification of a number of risks compared with the 2020 classification, in response to the events in 2021. Based on that analysis, only the principal risks that are certain, virtually certain or likely to occur in the SIPEF group, and that could have a significant or moderate negative impact on the financial situation, the operating results or the liquidity of the Group leading to impairments of assets, are stated below.

1. Principal risks

The following principal risks have been identified:

	CERTAIN	VIRTUALLY CERTAIN
1. Risk connected with the spread of activities over a limited number of countries and with limited product diversification	HIGH
2. Risk connected with expansion	HIGH
3. Risk of dependence on a limited number of large customers	HIGH
4. Risk connected with land property rights and rights of use	HIGH
5. Risk of natural disasters (plantations – mills)	HIGH
6. Risk of rising raw material-related input prices		AVERAGE
7. Risk of not finding sufficient staff in remote areas		AVERAGE
8. Risk of wage rises		AVERAGE
9. Climate risk		AVERAGE
10. Future climate change		AVERAGE
11. Risk of an unexpected fall in future short-term margins		AVERAGE
12. Risk connected with the concern for sustainability in Europe and increased RSPO restrictions		AVERAGE

POSSIBILITY IMPACT

The connection to the world of sustainable tropical agriculture

2. Specific risks

Four specific risks have been selected from the aforementioned principal risks. They are discussed below, given their relevance to the Group’s activities in the past financial year 2021. A full description of the other principal risks is published on the website at www.sipef.com/ investors/risks-and-uncertainties.# Risks and uncertainties

Risk connected with the spread of activities over a limited number of countries and with the limited product diversification

The Group chiefly produces oil palm products in Indonesia and Papua New Guinea, and bananas in Ivory Coast. The concentration of the activities in Indonesia, Papua New Guinea and Ivory Coast is explained by history. The Group accordingly remains a long-term investor in industrial agriculture in these countries and also wishes to increase its presence and production there, given that it has been able to build up a position as a recognised and renowned producer of sustainable agricultural products. The Group naturally continues to closely monitor all political, economic and legislative developments and initiatives in these countries, in order to be able to respond to them as well as possible. The centre of gravity of SIPEF’s activities is in the cultivation of oil palm products in Indonesia and Papua New Guinea, which accounts for approximately 92% of total turnover. So, if problems of any nature occur in Indonesia, and to a lesser extent in Papua New Guinea and Ivory Coast, that obstruct the cultivation or production of these products, this could have a significant negative impact on the results and the financial situation of the Group.

SIPEF is of the opinion that it is better to concentrate on a few high-yield products with good long-term prospects than investing in more lower-yield products with uncertain prospects. This explains why, in recent years, SIPEF has decided to focus exclusively on the production of oil palm products and, to a lesser extent, bananas that guarantee a stable yield. SIPEF is convinced that palm oil, as the most productive and efficient vegetable oil, will remain an essential part of the balanced diet of a growing >>> 71 SIPEF Company Report 2021 Risks and uncertainties and increasingly prosperous global population. Palm oil is capturing an ever-larger share of food and biofuel markets worldwide, except in Europe. That is due, among other things, to its efficient industrial processing and its low-cost price compared with other vegetable oils. Furthermore, the palm oil yield per hectare is five to ten times higher than any other vegetable oil. This yield will only continue to rise as efficiency is improved, while the area available as agricultural land will only continue to fall. So, the long-term expectations for palm oil remain generally very favourable.

Risk connected with land property and use rights

The retention of property rights and concession rights is essential for the Group in order to safeguard and develop production in the various countries. The Group activities and results could therefore be seriously impacted if it does not manage to retain these rights or, in the case of concession agreements, renew them for a long term. There is also a risk for the Group if the existing land use rights are limited.

SIPEF has precisely mapped the various property rights and concession rights. The Group also employs legal experts with a solid knowledge of local laws and who maintain a constructive relationship with the relevant authorities. Constant monitoring of property rights and concession rights ensures that SIPEF can follow the correct and necessary procedures in a timely manner to renew or extend them or even acquire new rights.

Furthermore, in recent years, the requirement was introduced in Indonesia that 20% of the area covered by an agreement on new concession rights or the renewal of original concession rights must be registered in the name of local smallholders. Pursuant to this, SIPEF has entered into new agreements with these smallholders. It will take a long time to integrate these smallholders into SIPEF’s RSPO-certified supply chain by means of specific programmes. A ‘local smallholder’ department was set up at the Head Office of the Indonesian activities to give appropriate attention to directing and supporting these processes.

72 The connection to the world of sustainable tropical agriculture

Climate risk

The volumes produced, the turnover and margins generated are impacted by climate conditions, such as precipitation, sunshine, temperature and humidity. Unfavourable weather can disrupt the agricultural activities and have a negative impact on agricultural production. Severe weather, e.g. floods, droughts, severe storms, could result in significant damage to property, protracted interruptions to the activities, personal injury and other damage to the operating activities of the Group. The potential physical consequences of climate change are uncertain and may differ depending on the region and the product.

The Group endeavours to prepare as well as possible for certain natural phenomena, in order to limit or even avoid its consequences. It focuses in particular on the impact of changes in precipitation, which can result in flooding or droughts. A study has been done to monitor water tables and the moisture content of the soils, to determine its impact and to design, according to best management practice, systems which will deal with water retention. To maintain the right water levels in the estates and in the landscape, water gates have been built to contain or guide the water to an appropriate level. Of course, all of this is done by following the best practices and the existing regulations.

In addition, in the banana operations of the Group 70% of irrigation water is stored in catchment basins during the rainy season and can be used responsibly during the dryer season. Furthermore, across all Group activities special attention is given to the maintenance of buffer zones and riparian areas around natural rivers within the estates or on adjacent coastline. These zones and areas are used to maintain good vegetation, keep moisture levels high, control erosion and protect the coastline. The Group has also invested in fire prevention, fire risk monitoring and firefighting, particularly in areas which are more prone to drought and fires. In certain areas the soil needs to be drained for the cultivation of oil palms. Following best practices is very important in these areas to make sure the risk of fire and flooding is reduced. The Group also conducts drainage assessments to minimise these risks and to maintain a good natural flow of water. SIPEF reports and makes great efforts to control fires that occur in the concessional areas it manages. Moreover, it monitors areas outside the Group's plantations and engages with stakeholders to prevent and stop fires when they occur.

73 SIPEF Company Report 2021 Risks and uncertainties

Risk connected with the concern for sustainability in Europe and increased RSPO restrictions

The Group’s reputation is based on its RSPO certification. Given the growing consumer concern for sustainability and corporate social responsibility, the European Union or the various authorities in the countries in which SIPEF operates could impose tougher rules on companies. It is uncertain whether the Group and the local producers will always be able to comply with these certification requirements. If the Group fails to meet the requirements, it could lose its certification or the certification could be suspended. Such loss or suspension could have an adverse impact on the activities, reputation and financial situation of the Group.

The Group oil palm plantations follow the RSPO standards and are compliant with the RSPO Principles and Criteria set. SIPEF also has its own Responsible Plantations Policy following the No Deforestation, No Peat and No Exploitation (NDPE) rules, and verification and monitoring is in place. Full certification according to RSPO for the new development areas is pending on the issuing of the permanent Indonesian cultivation licence (Hak Guna Usaha - HGU). Full High Conservation Value/ High Carbon Stock (HCV/HCS) and Sustainability Impact Assessment (SIA) assessments have been completed in the areas, which are ready to be certified when the HGU will be obtained. The Company also continues to follow the trends set by its customers and stakeholders, based on their need for confirmation that sustainability standards are fulfilled at all times.

Unfortunately, all sustainability efforts and positive impacts of the Group have not always been understood by the consumer market nor motivated buyers to only buy sustainable, fully traceable palm oil. SIPEF therefore continues to work on its engagement with different stakeholders, including well established NGOs, towards their understanding in which context oil palms are cultivated, how sustainable palm oil is produced and how it contributes to the social and environmental objectives of the Sustainable Development Goals in producing countries. Palm oil can also count on a considerable number of customers in emerging markets, especially in Indonesia, India and China. It is important to consider a balanced approach and not single out one particular vegetable oil. With that in mind, the Company is convinced that the crude palm oil (CPO) market will not be regulated out of existence. This is confirmed by the steady growth in demand for palm oil and the ever- greater share of the global market, notwithstanding the increasing importance given to sustainability.

74 The connection to the world of sustainable tropical agriculture

Risk connected with local regulations, specifically a tax levy on every palm oil export out of Indonesia

Currently, there is a progressive tax plus levy on every palm oil export out of Indonesia.The price of sales to Indonesian customers is also impacted by this levy, given the local population is not prepared to pay more than the net export price. These levies, therefore, have a major direct and indirect impact on all palm oil produced by SIPEF in Indonesia. In December 2020, this tax and levy was increased substantially, due to the application of a new export levy matrix for palm products. The higher tax was passed to finance the Indonesian government’s biodiesel programme. That meant that the export levy and tax increased significantly in 2021 compared with 2020, and was on average USD 349 per tonne in 2021, compared with USD 74 per tonne a year earlier. This equated to a rise of USD 275 per tonne compared with the previous system. The continuing rise in CPO prices in the course of the first half of the year led to the easing of the export levy mechanism on 2 July 2021. The levy and tax will be calculated by the government on a monthly basis, based on the applicable palm oil prices on the international markets. There is also a potential risk of unexpected taxation in Papua New Guinea. Given the uncertainty about the setting of the local reference price for palm oil, the available palm oil volumes in Indonesia will be put on the market on a monthly basis and the expected volumes of the SIPEF plantations will no longer be hedged by future contracts. However, the opposite is true for Papua New Guinea, where future contracts were signed in 2021. That said, given the unstable political climate in that country, the board of directors regularly sets a maximum term and volumes for these sales, based on the prevailing economic and political circumstances.

SIPEF Company Report 2021

Risks and uncertainties

Corporate governance statement

1. General

The ‘Corporate governance statement’ gives special attention to factual information with regard to good governance for a given financial year. This chapter describes any changes that were made to policy and the relevant events regarding good governance during the past financial year 2021 and the closing of the financial year until the meeting of the board of directors of 15 February 2022. The statement also contains the remuneration report and the diversity policy that SIPEF applies for the composition of the board of directors and the executive committee.

For the application of the ‘comply or explain’ principle, the Company relies on the Belgian Corporate Governance Code 2020 ('Code') as the reference code. (www.corporategovernancecommittee.be) SIPEF has always formulated the Company’s policy to be in line with the best practices of good governance. In 2005, the board of directors of SIPEF adopted the original version of the Corporate Governance Charter (‘Charter’). The Charter sets out the structure, powers and functioning of the Company’s bodies as well as the obligations of the members of the board of directors and the various committees of the Company. It also contains the rules of conduct that apply to the persons discharging managerial responsibilities and the sta of the Company, if they conduct transactions relating to SIPEF’s financial instruments.

The Charter has been regularly updated since 2005, in line with changes to applicable regulations and the best practices of good governance. It was last amended on 11 August 2021. These last amendments mainly concerned the appointment of a sixth member of the executive committee and a change in the shareholding of SIPEF. The amended version of the Charter can be consulted on the website (www.sipef.com). The rules of the Charter have been supplemented since 1 January 2020 by the provisions of the Code of Conduct, which sets out the ethical rules of conduct for the persons discharging managerial responsibilities and sta of SIPEF.

The connection to the world of sustainable tropical agriculture

In 2021, the corporate governance of SIPEF was once again inﬂuenced by covid-19. As was the case in 2020, the safety of the Company's shareholders, the directors, the members of the executive committee and all other employees and stakeholders of the SIPEF group took precedence. Nevertheless, the Group's operations in Belgium, as well as in Indonesia, Papua New Guinea and Ivory Coast went smoothly via virtual meetings, the strict observance of the necessary security measures and the implementation of various technologies that were constantly updated and reinforced.

The board of directors and the committees organised hybrid meetings, in which members could participate physically or virtually. The ordinary general meeting of 9 June 2021 took place for the second time behind closed doors. In order to increase the involvement of shareholders, it was decided to allow them to participate virtually in the meeting, which was also streamed live. All appropriate measures were taken to ensure that the shareholders were able to exercise their rights to vote and to ask questions as fully as possible. In this way, the remuneration policy was approved as well as the remuneration report that included for the first time the individual remuneration of the members of the executive committee. That said, management found it very regrettable that in 2021 again, it could not meet the shareholders of the Company and speak in person to them at this annual event.

2. Board of directors

2.1 Composition at 31 December 2021

The board of directors consisted of 10 members at 31 December 2021. Furthermore, at 31 December 2021 the following independent directors sat on the board of directors:

Yu-Leng Khor
Sophie Lammerant-Velge
Nicholas Thompson

These directors fulfil all independence criteria stated in principle 3 of the Code. The Company’s shareholder structure is characterised by the presence of two reference shareholders, Ackermans & van Haaren and Group Bracht, composed of Priscilla, Theodora and Victoria Bracht, and their respective companies (Cabra P, Cabra T and Cabra V), and Cabra NV, which act in mutual consultation, on the basis of a shareholder agreement that was originally entered into in 2007 for a period of 15 years. In 2017, this agreement was amended and renewed for a further period of 15 years. In spite of this shareholder structure, no director or group of directors has a dominant inﬂuence on the functioning of the board of directors.

TERM
Baron Luc Bertrand, chairman	2020-2023
François Van Hoydonck, managing director	2019-2023
Tom Bamelis	2018-2022
Priscilla Bracht	2018-2022
Baron Jacques Delen	2021-2022
Antoine Friling	2019-2023
Gaëtan Hannecart	2020-2024
Yu-Leng Khor (from 9 June 2021)	2021-2025
Sophie Lammerant-Velge	2019-2023
Petra Meekers (until 9 June 2021)	2020-2021
Nicholas Thompson	2019-2023

The curricula vitae of the directors are available on the Company website (www.sipef.com). At least half of the members of the board are non-executive directors, more precisely nine of the ten. Three of the ten directors are women. The Company accordingly respects the legal gender diversity quota of one third.


9 Non-executive directors	3 Female directors	3 Independent directors

Luc Bertrand chairman
Tom Bamelis
Antoine Friling
Sophie Lammerant-Velge
Nicholas Thompson
François Van Hoydonck managing director
Priscilla Bracht
Jacques Delen
Yu-Leng Khor
Gaëtan Hannecart

2.2 Diversity policy

The board can only deliberate and make decisions efficiently when the number of members is limited, and the appropriate diversity is present on the board. The Company applies various criteria when appointing directors, including experience, knowledge, training, age, gender and nationality. The board also gives special attention to the complementary competencies of its members, which are often associated with the diverse backgrounds of the directors. The Company also endeavours to protect the interests of all stakeholders through the presence of independent directors. SIPEF does not tolerate any form of discrimination.

The background and professional experience of the members are very diversified within the board. They extend over the agricultural, financial, manufacturing and marketing industries. Sustainability being a key aspect of all activities of the SIPEF group, the Company ensures that the board is able to call on the requisite expertise in this domain from within its ranks. At 31 December 2021, three nationalities were represented by the members of the board: Belgian, British and Malaysian.

Women have sat on the SIPEF board of directors for many years. Priscilla Bracht was the first female director to be appointed in 2004. Sophie Lammerant-Velge joined the board in 2011 and in 2017 the number of female directors increased to three, when Petra Meekers was co-opted to replace Antoine de Spoelberch. In 2021, Petra Meekers left the board of directors to join the executive committee. She was replaced by a new female director, Yu-Leng Khor. This way, in 2021 three of the ten directors were uninterruptedly women. SIPEF aspires to have a sufficient number of independent directors on the board of directors. At the end of 2021, three of the ten directors were independent.

2.3 Changes to the composition of the board of directors

The directorships of Tom Bamelis, Priscilla Bracht and Jacques Delen expire at the end of the ordinary general meeting of 8 June 2022. Tom Bamelis and Priscilla Bracht have each applied for a new directorship of four years. The mandate of Jacques Delen will not be renewed.

It will be proposed to the general meeting of 8 June 2022 to appoint Alexandre Delen as a new director for a period of four years.His term of office will therefore expire at the end of the general meeting in June 2026, which will decide on the accounts for the 2025 financial year.

2.4 Directorships at listed companies at 31 December 2021

The Code limits to five the number of directorships that a director is permitted to hold in listed companies. The following directors have directorships at listed companies other than SIPEF:

Baron Luc Bertrand:
- Ackermans & van Haaren
- CFE
Baron Jacques Delen:
- Ackermans & van Haaren
Gaëtan Hannecart:
- Financière de Tubize
Yu-Leng Khor:
- Rohas Tecnic Berhad

2.5 Meetings of the board in 2021 and attendance record

The SIPEF board of directors met six times in 2021. The weighted average attendance was 98.3%. The individual attendance record at the meetings was as follows:

ATTENDANCE
Baron Luc Bertrand, chairman	6/6
François Van Hoydonck, managing director	6/6
Tom Bamelis	6/6
Priscilla Bracht	6/6
Baron Jacques Delen	6/6
Antoine Friling	6/6
Gaëtan Hannecart	5/6
Yu-Leng Khor (from 9 June 2021)*	3/3
Sophie Lammerant-Velge	6/6
Petra Meekers (until 9 June 2021)**	3/3
Nicholas Thompson	6/6

attendance calculated from the ordinary general meeting of 9 June 2021 and based on the meetings during her directorship
** attendance calculated up to and including the day of the ordinary general meeting of 9 June 2021 and based on the meetings during her directorship

The boards of directors of February and August 2021 established the annual and semi-annual financial statements and dealt with the respective press releases. The meeting in September 2021 deliberated on the Group strategy.

81 SIPEF Company Report 2021 Corporate governance statement 82

The connection to the world of sustainable tropical agriculture

As a rule, the development of the activities of the various subsidiaries is checked at each meeting, based on a report drawn up by the executive committee. In addition, the board dealt with the following specific subjects, among others, at its various meetings:

the conditional sale of the Indonesian company, PT Melania, which owns the Mas rubber plantation and tea assets, to the Indonesian Shamrock Group;
the purchase in Ivory Coast of the assets of the Wanita banana plantations;
the Research & Development project for the development of high-quality crude palm oil with a low contaminant level;
the 10-year business plan;
the budgets relating to 2021 and 2022 for the Group;
risks, internal audit and internal control within the Group;
the benchmarking of remuneration for directors and executive committee members;
the bonus pool for the Group's management and staff for the 2020 financial year and the variable remuneration of the members of the executive committee;
the remuneration of the directors and the fixed remuneration for the members of the executive committee for 2022;
the remuneration policy;
the Carbon Disclosure Project reporting;
various topics related to sustainability and, among others, the materiality index, KPIs, SDGs and GRI reporting;
the 2020 annual report, including the remuneration report and deviations from the Code;
the convening and organisation of the ordinary general meeting of 9 June 2021;
the triennial evaluation of the board of directors and its committees;
the update of the Charter;
the 2021 management option plan;
the application of the Code of Conduct and the dialogue with shareholders.

2.6 Assessment

In accordance with the Code, every three years the directors assess the scale, composition and functioning of the board of directors and the committees of the Company. During the board of directors' meetings of 11 August and 23 September 2021, this triennial evaluation took place. The current size and composition of the board and its committees were found to be appropriate and it was considered that the essential qualifications are sufficiently present. The next evaluation of the composition and functioning of the board and its committees will take place in 2024.

Furthermore, the non-executive directors assess the relationship between the board of directors and the executive committee once a year, in the absence of the managing director (article 2.8 of the Charter). This annual assessment of the interaction was held on 10 February 2021. The directors in question were of the opinion that the relationship with the executive committee is reliable and open, giving them a sound and transparent view of the day-to-day operations of the Group.

83 SIPEF Company Report 2021 Corporate governance statement

3. Executive committee

3.1 Composition at 31 December 2021

3.2 Members of the executive committee

At 31 December 2021, the executive management comprised six people who act together as the executive committee. The committee is responsible for the daily management of the Company and is chaired by the managing director, François Van Hoydonck. The board appoints the members of the executive committee for an indefinite period of time. This ensures continuity in the functioning of the executive committee.

COMPOSITION EXECUTIVE COMMITTEE AT 31 DECEMBER 2021


François Van Hoydonck, chairman	managing director
Charles De Wulf	estates department manager
Thomas Hildenbrand	fruit department manager
Robbert Kessels	chief commercial officer
Petra Meekers (from 10 June 2021)	chief operating officer Asia-Pacific
Johan Nelis	chief financial officer

The curricula vitae of the members of the executive committee are available on the Company website (www.sipef.com).

84 The connection to the world of sustainable tropical agriculture

To anticipate future developments in the Group, Petra Meekers joined the committee as of 10 June 2021, in her role as ‘chief operating officer Asia-Pacific’ (COO APAC). With the prospect of this appointment, Petra Meekers resigned as a director of SIPEF at the ordinary general meeting of 9 June 2021. The Company does not have any intentions to make any further changes to the composition of this committee in 2022.

3.3 Diversity policy

The diversity policy, on which basis the composition of the board of directors is determined, also applies to the executive committee. A balanced and varied composition is all the more important for the committee, which must be composed of a limited number of people with the knowledge and experience to be able to handle all aspects of the Company’s activities. When appointing the members, the Company is primarily focused on the experience, knowledge and training of the candidates to ensure sufficient complementary competence is present. Age, gender and nationality are other criteria that are considered. They guarantee a diverse way of thinking and acting. No form of discrimination is tolerated.

All members of the committee have their own specific competence in various fields, being agrarian management, sustainability, commercial and administrative management, finance, legal and IT. Where necessary, the members have the required experience in countries where SIPEF is active or in countries in tropical and subtropical regions. The ages of the members vary from early forties to early sixties. The age limit is set at 65. There are three different nationalities in the committee: French, Dutch and Belgian. SIPEF is completely open to the integration of women at all levels of the Company. Women hold key positions both in Belgium and abroad. This was recently confirmed once again by the appointment of Petra Meekers as a member of the executive committee.

3.4 Meetings in 2021

As a rule, the executive committee meets every Tuesday, subject to unforeseen circumstances, and whenever required in the interests of the Company. The committee is responsible for the daily management of the Group, including all actions connected with the day-to-day operations of the Company and the other companies of the Group, as well as all actions that are not important enough for the board of directors or too urgent to justify the intervention of the board. It has the appropriate operational freedom and resources to duly perform its work.

85 SIPEF Company Report 2021 Corporate governance statement

In practice, the committee prepares all decisions of the board and ensures all decisions taken are implemented. In 2021, among other things, the committee prepared the statutory and consolidated accounts, as well as the quarterly figures of the Group, and established the short-term and long-term budgets, which were submitted to the board for approval. It followed the operational and financial developments of the Group and made related presentations for the board of directors. It formulated proposals concerning the strategy to be followed. Among other things, it prepared the sale of PT Melania as well as the investment in the assets of the Wanita banana plantations, and took the necessary measures for their realisation. It deliberated on the materiality index, KPIs, SDGs and GRI reporting to be adopted by the Company for the sustainability report. It also studied the new national and European legislative initiatives in the field of sustainability and the consequences for the Company. It submitted various drafts to the board of directors for approval, amongst which those of the annual report, including the remuneration report and the sustainability report.

3.5 Assessment

The composition, operation and performance of the executive committee are evaluated twice a year by the remuneration committee. Furthermore, the remuneration committee, together with the managing director, evaluates each year the contribution of each member of the executive committee to the development of the activities and the results of the Group. The chairman of the committee does not participate in the evaluation of his own performance.# SIPEF Company Report 2021

Corporate governance statement

The non-executive directors also give their opinion on the interaction between the board of directors and the executive committee annually, in the absence of the managing director. Their opinion on 10 February 2021 was that the relationship of the board with the executive committee is reliable and open, giving the directors a sound and transparent view of the day-to-day operations of the Group. In addition, throughout the year, the board of directors evaluates the executive committee based on its work and preparations for the board.

86 The connection to the world of sustainable tropical agriculture
87 SIPEF Company Report 2021

Corporate governance statement

4.1 Audit committee

Audit Committee of the Board of Directors
2021

The audit committee met four times in 2021. The weighted average attendance was 100%. In February and August, the committee’s primary focus was on analysing the annual and semi-annual financial statements and the press release relating to these accounts. At each of these meetings, the auditor presented the results of the audit of these statements.

In addition, the following were also explained and discussed during the various meetings:
* the application of the goodwill impairment test;
* the accelerated depreciation of the immature and mature rubber plantations to be converted into oil palm plantations;
* the analysis of the accounting treatment of the 2020-2021 tax expenses (effective and deferred tax);
* the accounting treatment of the sale of the 95% PT Melania shares and the related press release;
* the impairment of the PT Dendymarker plantings and of the long-term receivable from smallholders;
* the allocation of the purchase price of the assets of the Wanita banana plantations;
* the financial covenant regarding the long-term loan and its evolution;
* the update of the existing risks and their classification;
* the reports of the internal audit committees of the Indonesian subsidiaries and Hargy Oil Palms Ltd in Papua New Guinea;

Committees of the board of directors

TERM	ATTENDANCE
2019-2022	4/4
2019-2023	4/4
2019-2023	4/4

the reasons for not organising an internal audit at the Head Office in Belgium;
the proposal to appoint a new Group auditor as from the financial year 2021;
the evaluation of the relationship of the statutory auditor with the management and the financial department.

The auditor attended all the meetings of the committee in 2021. The internal auditors of the operational subsidiaries did not attend the meetings of the audit committee of the mother company. The managing director and CFO held virtual meetings with the local internal audit managers in Indonesia and Papua New Guinea, in the course of the financial year 2021.

Periodic assessment of the composition and functioning of the board of directors

The periodic assessment of the composition and functioning of the board of directors also relates to the committees of the board of directors.

4.2 Remuneration committee

Remuneration Committee of the Board of Directors
2021

TERM	ATTENDANCE
2019-2023	2/2
2021-2025	1/1
2019-2023	2/2
2020-2021	1/1

attendance calculated from the ordinary general meeting of 9 June 2021 and based on the meetings during her mandate
attendance calculated up to and including the day of the ordinary general meeting of 9 June 2021 and based on the meetings during her mandate

At 31 December 2021, the remuneration committee is composed of three members, all non-executive directors. The majority of the committee, i.e. two of the three members, are independent directors. The committee is chaired by Antoine Friling. The term in which members have a seat on the committee coincides with the term of their directorship. The committee has the required expertise in remuneration policy.

The remuneration committee met twice in 2021. The weighted average attendance was 100%.

In 2021, the remuneration committee considered the following issues:
* benchmarking of the compensation of the Group's expatriates, managers and directors;
* determination of the Group's bonus pool;
* individual assessment of management and proposal of variable remuneration payable in 2021;
* remuneration policy and remuneration report;
* remuneration of directors and fixed remuneration of the members of the executive committee for 2022;
* update of succession planning;
* issue of share options in 2021 for the Group's managers.

The managing director also attended the meetings of the remuneration committee. A representative of each of the reference share-holders, Ackermans & van Haaren and Group Bracht, was present at the February and November meetings.

Periodic assessment of the composition and functioning of the board of directors

The periodic assessment of the composition and functioning of the board of directors also relates to the committees of the board of directors.

4.3 Nomination committee

Nomination Committee of the Board of Directors
2021

The SIPEF nomination committee is composed of all the members of the board of directors. The change to the composition of the nomination committee is identical to the change to the composition of the board of directors (see point 2.1.). The board met twice in 2021 in its capacity of nomination committee, on 10 February and 17 November. The weighted average attendance was 100%.

The board of directors in its capacity as nomination committee, expressed its opinion on the following issues:
* the interaction between the board of directors and the executive committee, in the absence of the managing director;
* the renewal of the mandate of directors and appointment of a new independent director;
* the appointment of a new member of the remuneration committee and of the executive committee;
* the appointment of a new auditor and determination of his remuneration.

4.4 Assessment of the committees of the board of directors

The board of directors regularly assesses its own composition and functioning, as well as the composition and functioning of its committees. At the meetings of 11 August and 23 September 2021, in addition to the assessment of the board, the composition and functioning of the board's committees were discussed. The current size and composition of the board committees were found to be appropriate and it was considered that the essential qualifications are sufficiently present. The next assessment of the board of directors and its committees will take place in 2024.

90 The connection to the world of sustainable tropical agriculture

5. Remuneration report

5.1 Introduction

The present remuneration report has been prepared in accordance with article 3:6. §3 of the Companies Code, as amended by the law of 28 April 2020, enacting into Belgian law the EU directive encouraging long-term shareholder engagement. It provides a comprehensive overview of all aspects of the remuneration, including all benefits in whatever form that were awarded to the non-executive directors, the managing director and the other members of the executive committee during the financial year 2021. It contains a detailed presentation of the remuneration of every member of the executive committee, the collegiate body that is responsible for daily management.

In 2021, a variable remuneration was again paid to the executive management. Indeed, in 2020, the recurring consolidated result, the basis for calculating this remuneration, was no longer negative, as it was in 2019. The performance of the year 2020 formed the basis for the determination of the variable remuneration paid in 2021. It was characterised by some important developments and transactions that are set out under the section 'Significant events in 2020' (see Company Report 2020 page 6). The significant events in 2021 will be decisive for the variable remuneration to be paid in 2022.

In 2021, there were no major changes to the composition of the board of directors with an impact on the remuneration of the members of the board of directors. The number of members of the executive committee, on the other hand, was increased from five to six compared to the previous financial year. Petra Meekers, who until then had been a member of the board of directors, joined the executive committee on 10 June 2021 in her capacity as ‘chief operating officer Asia-Pacific’.

This report has been prepared in accordance with the remuneration policy approved by a majority of 95.8% of votes at the ordinary general meeting of 9 June 2021. This new policy, which broadly reflects the old one, applies to remuneration paid from 1 January 2021. The detailed text of the remuneration policy is published on the Company's website.

5.2 Total remuneration of the directors

The directors receive a fixed remuneration that is not linked to the results. This remuneration consists of the emoluments for the meetings of the board of directors and, where applicable, remuneration for membership of a given committee.

In 2021, the directors received the following remuneration:

IN EUR (ON AN ANNUAL BASIS PER PERSON)	MEMBER	CHAIRMAN
Board of directors	29 000	60 000
Audit committee	7 500	9 750
Remuneration committee	4 000	5 200

91 SIPEF Company Report 2021
Corporate governance statement

The outgoing and incoming directors are remunerated in accordance with the number of months they served as director in the financial year.The non-executive directors do not receive any variable remuneration or options. Neither is part of their remuneration paid out in the form of shares of the Company (see Company Report, page 109). They benefit from director liability insurance.

5.3 Total remuneration of the members of the executive committee

The members of the executive committee, consisting of the managing director and other managers of the Company, receive fixed remuneration, variable remuneration and, possibly, share options. The Company has not set any minimum number of shares that must be held by the members of the executive management (see Company Report, page 109). No shares were awarded to the members of the executive committee in 2021.

BOARD OF DIRECTORS	AUDIT COMMITTEE	REMUNERATION COMMITTEE	TOTAL IN KEUR
2020	2021	2020	2021
Baron Luc Bertrand	60.00	60.00	0.00
François Van Hoydonck	29.00	29.00	0.00
Tom Bamelis	29.00	29.00	9.75
Priscilla Bracht	29.00	29.00	0.00
Baron Jacques Delen	29.00	29.00	0.00
Antoine Friling	29.00	29.00	0.00
Regnier Haegelsteen (until 10 June 2020)	14.50	0.00	0.00
Gaëtan Hannecart (from 10 June 2020)	14.50	29.00	0.00
Yu-Leng Khor (from 9 June 2021)	0.00	14.50	0.00
Sophie Lammerant-Velge	29.00	29.00	7.50
Petra Meekers (until 9 June 2021)	29.00	14.50	0.00
Nicholas Thompson	29.00	29.00	7.50
TOTAL	321.00	321.00	24.75

The managing director receives emoluments for participating in the meetings of the board of directors and additional fixed remuneration for his executive duties.

2021 IN KEUR	FVH	CDW	TH	RK	PM	JN	TOTAL	%
Board remuneration	29	0	0	0	17	0	46	1.7%
Fixed remuneration	365	256	246	299	375	336	1 877	69.6%
Variable remuneration	88	41	43	38	0	62	272	10.1%
Pension contributions	256	46	47	0	0	46	395	14.7%
Other	15	9	15	28	31	8	106	3.9%
SUBTOTAL	753	352	351	365	423	452	2 696	100.0%
Capital gain vested share option (at vesting date)*	32	11	11	11	0	11	74
TOTAL REMUNERATION	785	363	362	376	423	463	2 770
Subtotal 100%	100%	100%	100%	100%	100%	100%	100%
Fixed	88%	88%	88%	90%	100%	86%	90%
Variable	12%	12%	12%	10%	0%	14%	10%

2020 IN KEUR	FVH	CDW	TH	RK	PM	JN	TOTAL	%
Board remuneration	29	0	0	0	0	0	29	1.5%
Fixed remuneration	370	254	246	298	0	303	1 471	74.8%
Variable remuneration	0	0	0	0	0	0	0	0.0%
Pension contributions	258	46	49	0	0	46	399	20.3%
Other	10	9	14	27	0	8	68	3.5%
SUBTOTAL	667	309	309	325	0	357	1 967	100.0%
Capital gain vested share option (at vesting date)*	0	0	0	0	0	0	0
TOTAL REMUNERATION	667	309	309	325	0	357	1 967
Subtotal 100%	100%	100%	100%	100%	N/A	100%	100%
Fixed	100%	100%	100%	100%	N/A	100%	100%
Variable	0%	0%	0%	0%	N/A	0%	0%

For more details on the respective option plans (respectively, SOP 2018 and SOP 2017), see page 97 and 98, table: Breakdown of the SIPEF stock option plan (SOP).

5.3.1 Remuneration of the members of the executive committee

The members of the executive committee receive a fixed remuneration and benefit from group insurance with fixed contributions. This comprises a supplementary pension, as well as disability and life insurance. In addition, the Company has taken out hospitalisation insurance and assistance insurance with global cover for every member. Management also benefits from a company car and meal vouchers. However, the fixed remuneration of Petra Meekers, who operates from Singapore, includes a fixed monthly amount that, in addition to the fixed remuneration, is provided for costs such as pension, company car and accommodation expenses. Also, Petra benefits from a disability, life and health care insurance and receives an allowance for the studies of her children (see item ‘Other’).

5.3.2 Variable remuneration

The total amount of the variable remuneration paid to both the staff and the members of the executive committee cannot be more than 2% of the consolidated recurring result before tax, share of the Group. The maximum amount of the variable short-term remuneration in cash of each member of the executive committee is set at two times the fixed remuneration of this member. Petra Meekers is not entitled to any variable remuneration during the first two years of her employment with SIPEF. The ultimate individual amount of the variable remuneration awarded to each of the members is based on financial criteria that are set in a discretionary manner by the board of directors, at the proposal of the remuneration committee. This committee makes a proposal based on the various components of the profit of the financial year and the contribution of each member of the executive committee to its achievement. In doing so, the remuneration committee is guided by the financial and objectively measurable criteria, set in advance and applied for a period of one financial year. The linking of the variable remuneration to performance in one financial year – rather than performance criteria over two or three financial years as laid down by law – is justified by the volatility of the results of the agro-industrial activities, particularly the palm oil market, whose performance is linked to the price of agricultural raw materials. It is therefore logical that the remuneration of the staff and management, like the shareholder dividend, changes with the volatility of the Group. The Company strictly applies this reasoning every year. This means that if the Group incurs a loss in a given year, no variable remuneration and dividend are paid the following year to the members of the executive committee and the shareholders respectively. This was the case in 2020, when no variable remuneration and dividend were paid due to the loss in 2019.

Setting the variable remuneration on the basis of performance in one financial year does not undermine the long-term vision of the executive management. This vision is inextricably bound up with the agro-industrial activities of the SIPEF group, which can only be evaluated in the long-term, as evidenced by the strategy and business model of SIPEF (see Company Report, page 13 and further). Furthermore, the board of directors did not award any special bonuses to any members for specific accomplishments in 2021. Besides the short-term variable remuneration, the members of the executive committee receive no long-term variable remuneration in cash.

5.3.3 Clawback clause

All members of the executive committee have signed a clawback clause. This means that the Company is entitled to demand variable net remuneration is returned if it was awarded on the basis of incorrect financial data. The Company did not trigger this clawback clause in 2021.

5.4 Consistency between remuneration and remuneration policy and application of the performance criteria

The total remuneration of the directors and the members of the executive committee is completely in line with the remuneration policy, and is calculated and applied in a transparent way. The fixed remuneration of the members of the board of directors and the executive committee is benchmarked on an annual basis against market practice and is, therefore, in line with the market. The variable remuneration is linked to the annual results of the Group, which depend directly on the volatile prices of agricultural raw materials. The Company notifies its shareholders, management, employees and all other stakeholders on a continual basis, and in a proper and transparent way, about developments with regard to the activities, sustainability, performance and corporate governance of the Group. Since 2020, this transparency has been provided in even more detail in this report with regard to the remuneration of the members of the executive committee. Clear communication and transparency are the cornerstones of satisfaction, keep people motivated and contribute to good long-term performance. This way, staff and management remain motivated and dedicated to achieving the long-term goals the Group has set.

5.5 Stock option plan

Share options have been offered to members of the executive committee every financial year since 2011. The share options offered in the SIPEF share option plan have the following characteristics:

Type: SIPEF share options (one option gives the holder the right to one SIPEF share);
Time of the offer: second half of November;
Exercise price: price based on the average closing price of the share over the 30 days preceding the offer;
Term of the plan: 10 years;
Exercise term: from 1 January of the year following the third anniversary of the grant, up to and including the end of the tenth year after the date of the offer;
No performance criteria have been set for the granting or exercise of share options.

Options granted to the members of the executive committee in 2021.

On 18 November 2021, options were granted by SIPEF to the members of the executive committee. These options were accepted by the beneficiaries as follows:

NUMBER
François Van Hoydonck	6 000
Charles De Wulf	2 000
Thomas Hildenbrand	2 000
Robbert Kessels	2 000
Johan Nelis	2 000
TOTAL	14 000

Another 4 000 options were granted to general managers of the foreign subsidiaries.The options granted in 2021 have the following characteristics:
* Exercise price: EUR 58.31
* Expiry date: 18 November 2031
* Exercise period: at any time from 1 January 2025 up to and including 17 November 2031

96 The connection to the world of sustainable tropical agriculture

BREAKDOWN OF THE SIPEF STOCK OPTION PLAN (SOP)

	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021
Offer	23/11/11	21/11/12	20/11/13	18/11/14	28/11/15	07/12/16	23/11/17	20/11/18	23/11/19	19/11/20	18/11/21
Vesting	31/12/14	31/12/15	31/12/16	31/12/17	31/12/18	31/12/19	31/12/20	31/12/21	31/12/22	31/12/23	31/12/24
Exercise period begin:	01/01/15	01/01/16	01/01/17	01/01/18	01/01/19	01/01/20	01/01/21	01/01/22	01/01/23	01/01/24	01/01/25
Exercise period end:*	22/11/21	20/11/22	19/11/23	17/11/24	27/11/25	06/12/26	22/11/27	19/11/28	22/11/29	18/11/30	17/11/31
Exercise price (in EUR)	56.99	59.14	55.50	54.71	49.15	53.09	62.87	51.58	45.61	44.59	58.31
Market price at vesting date (in EUR)	47.68	52.77	60.49	62.80	48.80	54.80	43.20	56.90

FRANÇOIS VAN HOYDONCK

	VESTED	NOT VESTED	SOP 2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	TOTAL
Offered not yet vested			0	0	0	0	0	0	0	0	6 000	6 000	6 000	18 000
Vested before the end of 2021	6 000		6 000	6 000	6 000	6 000	6 000	6 000	6 000	6 000	0	0	0	48 000
Exercised in 2021	-6 000		-6 000	0	0	0	0	0	0	0	0	0	0	-6 000
Expired in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Total share options at the end of the year	0	6 000	6 000	6 000	6 000	6 000	6 000	6 000	6 000	6 000	6 000	6 000	60 000
Vested at exercise price (in EUR)			377 220	309 480
Vested at market price (in EUR)			259 200	341 400
Latent capital gain at vesting date (in EUR)			0	31 920

CHARLES DE WULF

	VESTED	NOT VESTED	SOP 2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	TOTAL
Offered not yet vested			0	0	0	0	0	0	0	0	2 000	2 000	2 000	6 000
Vested before the end of 2021	0		0	0	2 000	2 000	2 000	2 000	2 000	2 000	0	0	0	10 000
Exercised in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Expired in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Total share options at the end of the year	0	0	0	0	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	16 000
Vested at exercise price (in EUR)			125 740	103 160
Vested at market price (in EUR)			86 400	113 800
Latent capital gain at vesting date (in EUR)			0	10 640

THOMAS HILDENBRAND

	VESTED	NOT VESTED	SOP 2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	TOTAL
Offered not yet vested			0	0	0	0	0	0	0	0	2 000	2 000	2 000	6 000
Vested before the end of 2021	2 000		2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	0	0	0	16 000
Exercised in 2021	-2 000		-2 000	0	0	0	0	0	0	0	0	0	0	-2 000
Expired in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Total share options at the end of the year	0	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	20 000
Vested at exercise price (in EUR)			125 740	103 160
Vested at market price (in EUR)			86 400	113 800
Latent capital gain at vesting date (in EUR)			0	10 640

ROBBERT KESSELS

	VESTED	NOT VESTED	SOP 2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	TOTAL
Offered not yet vested			0	0	0	0	0	0	0	0	2 000	2 000	2 000	6 000
Vested before the end of 2021	0		0	0	2 000	2 000	2 000	2 000	2 000	2 000	0	0	0	12 000
Exercised in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Expired in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Total share options at the end of the year	0	0	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	18 000
Vested at exercise price (in EUR)			125 740	103 160
Vested at market price (in EUR)			86 400	113 800
Latent capital gain at vesting date (in EUR)			0	10 640

JOHAN NELIS

	VESTED	NOT VESTED	SOP 2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	TOTAL
Offered not yet vested			0	0	0	0	0	0	0	0	2 000	2 000	2 000	6 000
Vested before the end of 2021	2 000		2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	0	0	0	16 000
Exercised in 2021	-2 000		-2 000	0	0	0	0	0	0	0	0	0	0	-2 000
Expired in 2021	0		0	0	0	0	0	0	0	0	0	0	0	0
Total share options at the end of the year	0	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	2 000	20 000
Vested at exercise price (in EUR)			125 740	103 160
Vested at market price (in EUR)			86 400	113 800
Latent capital gain at vesting date (in EUR)			0	10 640

In 2021, three members of the executive committee together exercised 10 000 options of the 2011 stock option plan. The remaining 6 000 options of that plan, which were granted to general managers of subsidiaries, were also exercised by the beneficiaries before 22 November 2021, the expiry date. In 2021, the members of the executive committee exercised no other options than those mentioned above and no options expired.

97 SIPEF Company Report 2021 Corporate governance statement

A YEARLY CHANGE IN REMUNERATION (IN PERCENTAGE)

	2017	2018	VARIANCE	2019	VARIANCE	2020	VARIANCE	2021	VARIANCE
Total board remuneration (1) (in KEUR)	315	344	+9%	359	+4%	359	0%	359	0%
Total fixed remuneration excom (2) (in KEUR)	1 832	1 899	+4%	1 943	+2%	1 967	+1%	2 424	+23%
Total variable remuneration excom (3) (in KEUR)	682	1 168	+71%	416	-64%	0	-100%	272	N/A

B YEARLY CHANGE IN THE PERFORMANCE OF THE COMPANY

	2017	2018	VARIANCE	2019	VARIANCE	2020	VARIANCE	2021	VARIANCE
CPO market price (in USD/tonne CIF Rotterdam)	715	598	-16%	566	-5%	715	+26%	1 195	+67%
Produced CPO volumes (in tonnes)	330 958	351 757	+6%	312 514	-11%	329 284	+5%	384 187	+17%
Result, share of the Group (recurring) (in KUSD)	64 481	22 713	-65%	-8 004	-135%	14 122	N/A	82 746	+486%

C YEARLY CHANGE IN THE AVERAGE REMUNERATION OF THE EMPLOYEES

	2017	2018	VARIANCE	2019	VARIANCE	2020	VARIANCE	2021	VARIANCE
Average fixed remuneration employees SIPEF HQ (4) (in KEUR/month)	4 467	4 440	-1%	4 491	+1%	4 832	+8%	5 165	+7%
Average variable remuneration employees SIPEF HQ (5) (in KEUR/year)	12 012	20 003	+67%	7 618	-62%	0	-100%	4 955	N/A

D RATIO HIGHEST/LOWEST REMUNERATION (FTE)

	2017	2018	2019	2020	2021
Ratio total fixed remuneration highest member excom and lowest employee HQ (6)	12.5	12.8	9.3	9.2	9.1

Deviations from the remuneration policy in 2021

In 2021, remuneration was awarded to the directors and the members of the executive committee in compliance with the remuneration policy, except for the departures mentioned under 5.3. a. and b. These deviations are linked to the stay of Petra Meekers in Singapore where she is stationed for the operational management of the Asia-Pacific subsidiaries of the Group.

5.7 Comparative information on changes to the remuneration and the performance of the Company over a period of 5 years; ratio between highest and lowest remuneration of SIPEF

(1) Remuneration as included under 5.2. Total remuneration of the directors
(2) Fixed remuneration as included under 5.3. Total remuneration of the members of the executive committee
(3) Variable remuneration as included under 5.3. Total remuneration of the members of the executive committee
(4) Average gross salary (full-time equivalent) in January of the respective year
(5) Average variable remuneration (full-time equivalent) paid
(6) Total fixed cost highest individual remuneration of the executive committee/total fixed cost (full-time equivalent) lowest employee remuneration HQ

99 SIPEF Company Report 2021 Corporate governance statement

5.8 Information on the general meeting votes on the remuneration policy and report

The new remuneration policy applied for the first time to the financial year 2021. It was approved with a majority of 95.8% of the votes by the general meeting of 9 June 2021. The same general meeting also approved the remuneration report for the 2020 financial year, which had been prepared in accordance with the old remuneration policy. The current remuneration report, drawn up on the basis of the new remuneration policy, will also be submitted for approval to the ordinary general meeting on 8 June 2022.

100 The connection to the world of sustainable tropical agriculture

6.1 External audit

The ordinary general meeting of 9 June 2021 noted the resignation of the auditor, Deloitte Bedrijfsrevisoren CVBA, represented by Kathleen De Brabander. This mandate, which would normally expire at the end of the ordinary general meeting of June 2023, was fully in line with the European regulation on audit reform of 16 April 2014. However, the Belgian legislator interprets the transitional provisions of this regulation regarding the external rotation of auditors in a restrictive way. As a result, Deloitte could only exercise its renewed mandate for the financial year 2020 and had to interrupt it for the two following financial years. Subsequently, at the end of 2020, SIPEF initiated a private tender procedure with a view to appointing a new auditor in accordance with European regulations. Based on the outcome of this procedure, the general meeting of 9 June 2021 appointed EY Bedrijfsrevisoren B V, represented by Christoph Oris and Wim Van Gasse, for a term of three years. The annual remuneration was set at USD 93 000, excluding indexation and VAT. The auditor conducts the external audit on the consolidated and individual financial statements of SIPEF. He reports to the audit committee and the board of directors twice a year. The annual remuneration of the statutory auditor for the financial year 2021 regarding the statutory audit of the accounts and consolidated financial statements of SIPEF amounts to KUSD 116. The remuneration for non-audit services in 2021 came to KUSD 0. The total cost of external control of the SIPEF group paid to the EY network amounted to KUSD 577. The fees paid for advice from the same statutory auditor and related companies came to KUSD 0. All details regarding the fees paid to Deloitte can be found in Note 33 of the Financial Statements.

6.2 Internal audit

An internal audit department has been set up at the operating units in Indonesia and at Hargy Oil Palms Ltd in Papua New Guinea, reporting four times per year to the local audit committee that assesses the internal audit reports.# Corporate governance statement

6. External and internal audit

The internal audit function at the Head Oce in Belgium and in the other subsidiaries was exercised in 2021 by the member of the executive committee responsible, along with the managing director and the chief financial ocer of SIPEF. Given the limited size of these companies, in 2021 the SIPEF audit committee did not change its opinion that no separate internal audit department should be set up at this time for the Head Oce and these subsidiaries. The committee did recommend in November 2020 that one of the Group controllers at the Head Office should conduct an internal audit and present a report on these few companies to the SIPEF audit committee. This procedure was strictly applied in 2021.

7. Report in connection with internal control and risk management systems

The SIPEF board of directors has also drawn up a ‘Responsible Plantations Policy’ (www.sipef. com/hq/sustainability/policies/responsible- plantations-policy) and a ‘Responsible Purchase Policy’ (www.sipef.com/hq/sustainability/ policies/responsible-purchasing-policy/), which apply to all plantation activities and raw materials. It reviews these lines of policy every year to adapt them to the latest legal, social and environmental standards. To facilitate and encourage further growth, SIPEF pursues in the day-to-day management of its activities clear sustainable regulations that are stricter than the legal requirements of the countries in which the Company does business. That undertaking is documented by certificates and generally accepted standards: see the Sustainability Report, page 18. The internal control exercised by SIPEF monitors compliance with all these procedures, guidelines and rules to protect the assets, sta and activities of the Group and optimise their management.

The corporate structure, corporate philosophy and management style of the SIPEF group can be generally described as ‘ﬂat’. This is explained by the limited number of decision channels in the hierarchy. This and the low sta turnover increase the social control in the Company. The Group is split into a number of departments. Each department has specific functions and each person in that department has a specific job description. The required level of education and/or experience is established for each job and duty. There is a well-defined policy of delegating powers. The SIPEF board of directors is responsible for assessing the inherent risks of the Group and the eectiveness of internal control. SIPEF’s internal control systems were set up in accordance with the Belgian legal requirements for risk management and internal control, the principles stated in the 2020 Belgian Corporate Governance Code, and are organised on the basis of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) model. An analysis conducted at Group level forms the basis of the internal control and risk management system, an important pillar of which is the reliability of the financial reporting and the communication process.

7.1 Control environment

SIPEF is a Belgian-listed company specialising in agro-industrial activities in tropical and subtropical regions. The Group produces mainly palm products in Indonesia and Papua New Guinea and, on a smaller scale, bananas in the Ivory Coast. The production of these products is a very labour-intensive process. To optimise the management of the plantations, a lot of attention is given to the employees’ general knowledge and training in agricultural and management methods. The Company draws up manuals with standard operating procedures containing practical guidelines and appropriate management practices, to ensure the implementation of the Group policy in agriculture, technology and environment by the various members of sta in dierent parts of the world. The Group management ensures that all employees are able to work in a safe and healthy environment.

Lastly, SIPEF monitors the strict application of the rules set down in its Corporate Governance Charter and the Code of Conduct to ensure that the directors, all persons discharging managerial responsibilities and the sta of the Group act honestly and ethically, and in accordance with the applicable rules and principles of good governance.

7.2 Risk analysis and control activities

Every year, the board of directors approves the strategic plan setting out the strategic, operational, financial, tax and legal goals. Certain risks can threaten the achievement of these goals. These risks have been identified and classified based on their potential importance, the likelihood they will become reality and the steps taken to deal with them. The risk actions are split into the following categories: reduction, transfer, avoidance and acceptance. The Company has issued the appropriate instructions and/or established the required procedures to enable the identified risks to be dealt with appropriately.

7.3 Information and communication

A set of internal and external operational and financial reports ensures the appropriate information can be made available at the appropriate levels on a periodic basis (daily, weekly, monthly, quarterly, every six months or annually) so that the assigned responsibilities can be duly taken.

7.4 Supervision and monitoring

It is the responsibility of every employee to report potential failings in the internal control to the appropriate person. In addition, the internal audit departments at the operating units in Indonesia and at Hargy Oil Palms Ltd in Papua New Guinea, are responsible for the constant supervision of the eectiveness and compliance of the existing internal control for their respective activities. They propose the appropriate adjustments based on their findings. A local audit committee discusses the reports of the internal audit departments every quarter. A summary of the most important findings is submitted to the SIPEF audit committee every year. The responsible member of the executive committee, together with the managing director and the chief financial ocer of SIPEF, monitors the internal control at small subsidiaries for which a separate internal audit function has not been created. Furthermore, one of the Group controllers at the Head Oce conducts an internal audit of the activities of these subsidiaries and presents a report to the SIPEF audit committee. In addition, the financial statements of every Group subsidiary are checked by an external auditor at least every year. Any remarks ensuing from this external audit are submitted to the board of directors in the form of a management letter. No major failures in the internal control have been established in the past.

7.5 Internal control and risk management systems related to financial reporting

The process for drawing up financial reports is as follows:

The process is led by the corporate finance department, which is under the direct supervision of the chief financial ocer of SIPEF.
A s chedule is drawn up based on the imposed (internal and external) deadlines. This is given to every reporting entity and the external auditor at the start of the year. The external deadlines are also published on the Company’s website.
The following reporting entities can be identified:
- SIPEF in Belgium
- Jabelmalux SA in Luxembourg
- t he companies in Indonesia, including PT Timbang Deli, taken as a whole, and PT Melania
- H argy Oil Palms Ltd in Papua New Guinea
- Plantations J. Eglin SA in Ivory Coast
- V erdant Bioscience Pte Ltd in Singapore
- SIPEF Singapore Pte Ltd in Singapore
The financial department of each entity is headed by a certified accountant.
The first step in the annual reporting cycle is drawing up a budget for the following year. This is done in the period September to November and is submitted to the board of directors for approval in November. The strategic options in this budget also fit in with the long-term plan strategy that is updated and approved by the board of directors annually.
Sensitivity analyses for the strategic plan and the annual budget are drawn up to be able to make the right risk profile for the decisions to be made.
The production figures and the cash financial position of the previous month are received and consolidated by the ‘corporate finance’ department in the first week of every month, before being submitted to the managing director and the executive committee.
The intergroup transactions are also reconciled in this first week, before the accounts are closed.
The monthly financial reporting comprises an analysis of the volumes of initial stock, production, sales and end stock; the operational result and a summary of the other items on the income statement, i.e. financial result and tax, a balance sheet and cash ﬂow analysis.
The accounting policies used for the monthly reporting are identical to those used for the legal consolidation under IFRS.
The monthly figures are compared with the budget and the same period a year earlier for each reporting entity, and significant dierences are investigated.
The corporate finance department consolidates these (summary) operational and financial figures (in functional currency) on a monthly basis to the reporting currency (USD), and checks once again that they are consistent with the budget or the previous period.
The consolidated monthly reporting is submitted to the managing director and the executive committee.
The board of directors receives this report on a periodic basis, i.e. 3, 6, 9 and 12 months, as preparation for the board meeting. This report is accompanied by a memorandum with a detailed description of the operational and financial trends of the preceding quarter.# SIPEF Company Report 2021

Corporate governance statement

8. Rules of conduct concerning conﬂicts of interest

The Charter describes the policy with regard to transactions between the Company or one of its aliated companies and a member of the board of directors or the executive committee, or an associated person, that could entail a conﬂict of interest, within the meaning of the Companies Code or otherwise. It also states the legal procedures that are laid down in articles 7:96 and 7:97 of the Companies Code.

In 2021, transactions giving rise to a conﬂict of interests within the meaning of article 7:96 of the Companies Code were reported to the board of directors of 10 February 2021 and 17 November 2021. The legal procedure provided for by this article was applied to the related decisions of the board. The Company auditor was given the minutes of the meeting in which these board decisions were made.

Excerpts of the minutes relating to the decisions in question are reproduced in full below:

Excerpt of the minutes of 10 February 2021

“The Chairman of the Remuneration Committee, Antoine Friling, summarises the proposals of the Committee to the Directors as follows: … - The individual evaluation of the members of the Executive Committee was discussed in length. As this item concerns part of his remuneration, François Van Hoydonck, Managing Director, states that there is a conﬂict of interest on his behalf. Article 7:96 of the Belgian Companies Code is therefore applicable. He leaves the meeting temporarily. The Directors take notice of the evaluation and the bonus proposed by the Remuneration Committee for François Van Hoydonck regarding 2020. They confirm the recommendation issued by the Remuneration Committee.

F rançois Van Hoydonck enters the meeting room. ...

T he Committee has also continued the discussion on succession planning in the SIPEF group. P etra Meekers being concerned by this item, states that there is a conﬂict of interest on her behalf in the sense of article 7:96 of the Belgian Companies Code and leaves the meeting. From previous reports it is proven that the Group is well prepared for the future at the dierent levels of management in the various countries, except for the replacement of the President Director in Indonesia and the Managing Director in Head Oce. It has been proposed that Petra Meekers will join the Group as CEO of SIPEF Singapore Pte Ltd as from 1st April 2021 onwards. She will be responsible for the operations in Indonesia and PNG as Chief Operating Ocer Asia-Pacific (COO APAC). A remuneration package with a total cost of KEUR 622 has been advised for approval. Petra is also recommended to join the SIPEF Executive Committee as from 10th June 2021. Petra informed the company that in view of her new executive functions in SIPEF, she will resign from the Board of Directors at the next AGM of 9 June 2021. Petra will follow a path towards a potential nomination as Managing Director of SIPEF by September 2024. There will be well-defined stepstones for evaluation and advice by the Remuneration Committee to the Board of Directors as Nomination Committee. The succession of the President Director Indonesia will be considered as one of the priorities in the next six months.

The Board unanimously approves these recommendations of the Remuneration Committee. Petra Meekers enters the meeting again.”

Excerpt of the minutes of 17 November 2021

“The Chairman of the Remuneration Committee, Antoine Friling, summarises the advice of the Committee to the Directors as follows: … As the next items concern his individual remuneration, François Van Hoydonck, Managing Director, states that there is a conﬂict of interest on his part, as referred to in article 7:96 of the Belgian Company Code. François leaves the meeting. - T he same benchmark study shows that the overall fixed remuneration of the Managing Director and the Executive Committee members are in line with the market and that no general adjustment is required. The variable remunerations received in 2021 were substantially lower than the benchmark average, but in line with the profitability of the Company in 2020. It is however recommended, in view of the developments over the last few years, including the growth of the size of the Company, in combination with the debt reduction at times of low palm oil prices, to increase the annual remuneration of the Managing Director from KEUR 667 to KEUR 750 (cost to the Company) as from 2022 onwards. - It is proposed that the yearly option scheme, started in 2011, would be continued in 2021. The options would have the same characteristics as those granted last year, being an annual stock option plan on existing SIPEF shares and in line with Belgian tax legislation. The Committee proposes to grant a total number of 20 000 share options to the Managing Director, the extended Executive Committee and the 2 Managers in charge of the operations of SIPEF in Indonesia and Ivory Coast. The Manager in charge of PNG is not earmarked for the option program oered in 2021, as being in a transition phase. One option giving the beneficiary the right to buy one SIPEF share, 20 000 options correspond to an amount of approximately KEUR 1 120 (on the basis of a share price of approximately EUR 56 per share); 6 000 options (KEUR 336) would be oered to the Managing Director. As the yearly option scheme issued in 2011 will expire on 23rd November 2021, it is likely that the remaining 16 000 shares will be exercised before the due date. It is further recommended that the Company continuously cover all outstanding options by a buyback of SIPEF shares until expiry of the program or the exercise of all options will have taken place. It is assumed that by the end of 2021 a total of 180 000 treasury shares will be needed to cover all options, including the 2021 plan. The Directors, in the absence of François Van Hoydonck, approve these last proposals of the Committee. François Van Hoydonck enters the meeting again.”

There were no other conﬂicts of interest in 2021.

9. Policy concerning financial transactions

The board of directors has drawn up and set down the rules of conduct that the directors, employees and self-employed sta of SIPEF must comply with in financial transactions with Company stock and its policy to prevent market abuse drafted and written down in chapter 5 of the Charter.

10. Shareholder structure

The SIPEF shareholder structure is characterised by the presence of two controlling shareholders, Ackermans & van Haaren and Group Bracht (comprising of Priscilla, Theodora and Victoria Bracht and their respective companies (Cabra P, Cabra T and Cabra V), and Cabra NV), which act together in mutual consultation on the basis of a shareholder agreement that was originally entered into in 2007 for a period of 15 years. On 3 March 2017, this agreement was amended and renewed for a further period of 15 years. With a stable shareholding of SIPEF, the aim of this shareholder agreement is to promote the balanced development and profitable growth of SIPEF and its subsidiaries. Among other things, it contains voting arrangements in relation to the appointment of directors and arrangements in relation to the transfer of shares.

On 2 July 2020, SIPEF received notification of (i) the fact that Cabra NV had decreased its SIPEF voting rights under the 10% threshold and (ii) the change to the composition of Group Bracht. These changes to the shareholding of SIPEF were the consequence of the partial split on 30 June 2020 of Cabra NV, due to the formation of three new companies: Cabra P, Cabra T and Cabra V, controlled by Priscilla Bracht, Theodora Bracht and Victoria Bracht, respectively. In connection with this partial split, 100 000 SIPEF shares were contributed in each of the newly formed companies. After this transaction, Cabra NV held 9.46% of the voting rights of SIPEF. The partial split has no impact on the total number of SIPEF shares that Group Bracht holds (12.31%) or on the shareholder agreement entered into with Ackermans & van Haaren, by virtue of which the latter company exercises joint control of SIPEF together with Group Bracht.

Based on this notification, Ackermans & van Haaren together in consultation with Group Bracht holds 46.99% of the votes, of which 34.68% are in the hands of Ackermans & van Haaren and the rest are in the possession of Group Bracht. The relevant details of this transparency statement have been published on the Company’s website (www.sipef.com/hq/investors/shareholders-information/shareholders-structure). On that date, no other shareholder held more than 5% of the votes of SIPEF.# 108 The connection to the world of sustainable tropical agriculture

11. Agreement with the Belgian Corporate Governance Code 2020 – ‘comply or explain’

SIPEF’s corporate governance deviates from a limited number of recommendations of the Code:

Remuneration of the non-executive directors: deviation from the requirement that part of their remuneration should be in the form of shares of the Company that must be held until at least one year after the end of the term of office and at least three years after their award (article 7.6 Code).
Reason: This form of remuneration is imposed by the Code to ensure the non-executive directors act from the perspective of a long-term shareholder. However, the non-executive directors must represent the interests of all stakeholders rather than simply the shareholders. Furthermore, the activities and strategy of SIPEF are solely driven by a long-term vision. The Company is therefore of the opinion that it is unnecessary to extend such a vision to the remuneration policy.
Remuneration of the members of the executive committee: no minimum threshold has been set by the board of directors for shares that must be held by the members of the executive committee (article 7.9 Code).
Reason: The Company imposes no minimum threshold on the members of the executive committee, as they are always driven by a long-term vision that is inextricably bound up with the agro-industrial activities of the Group. These can only be evaluated in the long-term, as evidenced by the strategy and business model of SIPEF. Furthermore, the remuneration of the members of the executive committee is already linked to the performance of the Company by means of the variable remuneration and the granting of share options that are valid for a period of 10 years.
The board of directors has not appointed a secretary fulfilling the roles laid down by the Code (article 3.19 Code).
- Reason: The roles laid down by article 3.20 of the Code are fulfilled by the managing director, assisted by the legal counsel of the Company.
The board has not set up a nomination committee. The full board of directors serves as a nomination committee and only 30% of its members are independent directors, rather than the majority as required by the Code (article 4.19 Code).
Reason: SIPEF is of the opinion that the whole board of directors is better suited than a nomination committee to prepare and organise the composition and the succession planning of the board and its committees. Furthermore, the relatively limited size of the board – ten members – does not hamper efficient deliberation and decision-making.

109 SIPEF Company Report 2021 Corporate governance statement

2017 2018 2019 2020 2021 Average

	2017	2018	2019	2020	2021	Average
SIPEF share price	40	50	60	70	80	60
Average crude palm oil price	600	900	1200	1500	300	30

SIPEF on the stock market

Stock market listing

SIPEF shares have been listed on the Brussels stock market since the establishment of SIPEF in 1919. Currently, the shares are listed on the continuous market of Euronext Brussels (share code: SIP, ISIN code: BE0003898187).

The graph above shows that, until roughly the middle of 2020, SIPEF shares in EUR generally followed the same trend as the crude palm oil (CPO) prices. From the second half of 2020, the share price of SIPEF in EUR has remained relatively stable, while the prices of CPO have risen from roughly USD 600 per tonne in June 2020 to USD 1,350 per tonne in December. Even though it is difficult to explain the market movements, this change in trend is probably due to the change in export tax and export levy policies in Indonesia, limiting the upside effect of increasing CPO prices for the Indonesian subsidiaries. In addition, the ESG profile of the palm oil sector has evolved negatively in recent years within the European Union, which may also weigh on the SIPEF share price.

EVOLUTION OF THE SIPEF SHARE IN EUR COMPARED TO THE CRUDE PALM OIL PRICE IN USD

110 The connection to the world of sustainable tropical agriculture

Evolution of stock market data of the SIPEF share (in EUR)

	2017	2018	2019	2020	2021
Highest stock price of the year	69.84	65.00	54.80	56.70	60.80
Lowest stock price of the year	57.76	47.10	35.25	38.00	43.85
Closing stock price per 31/12	62.80	48.80	54.80	43.20	56.90
Market capitalisation per 31/12 (KEUR)	664 382	516 271	579 747	457 027	601 964
Number of shares per 31/12	10 579 328	10 579 328	10 579 328	10 579 328	10 579 328
Average number of shares traded per trading day	5 014	4 967	5 081	5 956	5 277
Average turnover per trading day (KEUR)	318	287	229	274	263

Dividend policy

As from 2004, the pay-out ratio increased from 17% to about 30% in 2012. This percentage remained stable over the 2012-2020 period, except for 2019. In 2019, SIPEF recorded a loss so that no dividend payment was proposed for 2020. It is SIPEF's intention to continue with the policy of paying out a dividend of approximately 30% of the recurring profit from the previous financial year and reinvesting the balance in the further growth of the Company.

EVOLUTION OF THE DIVIDEND AND PAY-OUT RATIO

	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021
Gross dividend (in EUR)	0.30	0.30	0.40	0.80	0.80	1.10	1.50	1.70	1.70	1.25	1.25	0.60	1.25	1.60	0.55	0.00	0.35	2.00
Pay-out ratio (in %)	17%	23%	22%	24%	21%	25%	25%	25%	32%	32%	30%	31%	31%	30%	30%	30%	30%	30%

111 SIPEF Company Report 2021

SIPEF on the stock market

Financial calendar

The periodical and occasional information relating to the Company and to the Group will be published before opening hours of the stock exchange as follows:

Thursday 21 April 2022: interim report for the first three months
Thursday 18 August 2022: half-year results
Thursday 20 October 2022: interim report for the first nine months
February 2023: results of the financial year, accompanied with comments on the activities of the Group
Wednesday 7 June 2023: next ordinary general meeting of shareholders will be held at 3:00 pm at Kasteel Calesberg, Calesbergdreef 5, 2900 Schoten

In accordance with the applicable legal requirements, each major event that could affect the Company’s and the Group’s result is the subject of a separate press release.

Financial service

The main paying agent is Bank Degroof Petercam.

Corporate website

The website (ww.sipef.com) plays an increasingly important role in SIPEF financial communication. Therefore, a substantial part of the corporate website is reserved for investor relations. As of the launch of the renewed SIPEF website in October 2018, reference is made to the daily stock price and the daily CPO price (www.sipef.com/hq/investors/daily-share-price-cpo-price).

112 The connection to the world of sustainable tropical agriculture

Other information about the Company

Term

The Company exists for an indefinite term.

Capital  

SIPEF has been granted official approval from the Federal Public Service (FPS) Economy, as from 1 January 2016, to keep its accounts and draw up its financial statements in US dollars, the functional currency of SIPEF. At 31 December 2021 the fully paid-up registered capital was USD 44,733,752.04. It is represented by 10,579,328 shares without nominal value. All shares representing the capital have the same rights. Each share gives the right to one vote. SIPEF has issued no other categories of shares, such as shares without voting rights or preferential shares.

 

The extraordinary general meeting of 10 June 2020 passed a resolution to extend by five years the authorisation granted to the board of directors to increase the capital of USD 44,733,752.04 on one or more occasions, according to the terms stipulated in the Articles of Association. That authorisation is valid for a period of five years, from 2 July 2020, the date of publication in the Appendices to the Belgisch Staatsblad, up to and including 1 July 2025.

The extraordinary general meeting of 10 June 2020 decided that, if the Company receives an announcement from the Financial Services and Markets Authority (FSMA) that it has been informed of a public bid to acquire the shares of the Company, in accordance with article 7:202 §2, 2° of the Companies Code, the board of directors can only use its authorisation with regard to the authorised capital, if this notification is made no later than three years after the date of the extraordinary general meeting that renewed the authorisation in question, being from 10 June 2020 up to and including 9 June 2023.

113 SIPEF Company Report 2021

Other information about the Company

At 31 December 2021 the fully authorised capital was USD 44,733,752.04. Based on this amount, no more than 10,579,328 new shares can be issued.

 

The extraordinary general meeting of 10 June 2020 renewed for a period of five years the authorisation given to the board of directors, as a result of which the board, with due consideration for the legal provisions, may obtain a maximum number of 2,115,865 own shares being 20% of the issued capital, according to the modalities specified in the Articles of Association. That authorisation is valid for a period of five years, from 2 July 2020, the date of publication in the Appendices to the Belgisch Staatsblad, up to and including 1 July 2025.

This extraordinary general meeting also renewed the authorisation granted to the board of directors to obtain own shares, if this purchase is necessary to avoid an imminent serious disadvantage for the Company. That authorisation is valid for a period of three years, from 2 July 2020, the date of publication in the Appendices to the Belgisch Staatsblad, up to and including 1 July 2023.

The purchase and sale of own shares in 2021 are described in Note 22 of this Annual Report. At 31 December 2021, SIPEF owns 178,000 treasury shares (1.68% of the total number of outstanding shares) which are reserved for the exercise of granted and not yet exercised options.# Documents available to the public

SIPEF has a website (www.sipef.com) where shareholders can access all information on the Company. This website is regularly updated and contains the information required under the Royal Decree of 14 November 2007 on the obligations of issuers of financial instruments admitted to trading on a regulated market and the Companies Code. Among other things, the website contains the financial statements and annual reports, all press releases published by the Company, and all useful and necessary information on the general meetings and the participation of the shareholders in these meetings, particularly the conditions provided by the articles of association for the convening of the (ordinary and extraordinary) general meetings of the shareholders. Lastly, the results of the votes and the minutes of the general meetings are also published on the website.

114

The connection to the world of sustainable tropical agriculture

The coordinated articles of association of the Company can be inspected at the Registry of the Commercial Court in Antwerp, at the Company’s registered office and on its website ( www.sipef.com/hq/investors/shareholders-information/corporate-governance).

The annual financial statements are deposited with the National Bank of Belgium and can be consulted on the website of SIPEF. The resolutions concerning the appointment and the removal of the members of the executive bodies of the Company are published in the Appendices to the Belgisch Staatsblad. The financial notices of the Company are published in the financial press. The other documents available for public inspection can be consulted at the Company’s registered office. The annual report of the Company is sent every year to registered shareholders and to everyone who has expressed a wish to receive the report. It is available free of charge at the registered office. The annual reports of the three most recent financial years and all other documents mentioned in this paragraph can be consulted on the Company’s website.

SIPEF Company Report 2021

115

Glossary

General

ACP -- The African, Caribbean and Pacific Group of States organisation was created by the Georgetown Agreement in 1975. It is composed of 79 states, which are bound to the European Union via the EU Partnership Agreement. One of the main objectives is the sustainable development of its member states and their gradual integration into the global economy.

CDM -- The Clean Development Mechanism allows a country with an emission limitation or reduction commitment under the Kyoto Protocol to implement an emission reduction project in developing countries. Such projects can earn saleable Certified Emission Reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets. It is the first global, environmental investment and credit scheme of its kind, providing a standardised emissions offset instrument, CER. CDM is managed by the UNFCCC (United Nations Framework Convention on Climate Change).

CIF Rotterdam -- Cost, Insurance and Freight (CIF) is the selling price to cover all costs including insurance and freight up to the port of destination which is Rotterdam in this case. The buyer will pay for the goods delivered in Rotterdam. The CIF Rotterdam price is a worldwide reference in the palm oil market.

CPO -- Crude Palm Oil is an edible oil which is extracted from the pulp of the fruit of the oil palm.

CSPKO -- Certified Sustainable Palm Kernel Oil is palm kernel oil produced by palm oil plantations, which have been independently audited and certified against the Roundtable on Sustainable Palm Oil (RSPO) standard.

CSPO -- Certified Sustainable Palm Oil is palm oil produced by palm oil plantations, which have been independently audited and certified against the RSPO standard.

CTC tea -- During the Cut, Tear and Curl tea process, the leaf is not rolled. Instead, it goes through a CTC machine, which results in a different tea from orthodox tea. It infuses more quickly and makes stronger cups of black tea.

EFB -- Empty Fruit Bunches are the remains of the Fresh Fruit Bunches (FFB) after the fruit has been removed for palm oil pressing.

EMS -- An Environmental Management System is a set of processes and practices that enables an organisation/ company to reduce its environmental impacts.

FFA -- Free Fatty Acids are found in palm oil, as in all oils. The major FFA in palm oil are palmitic and oleic. Crude palm oil quality and price are dependent on the FFA content at time of shipping.

FFB -- Fresh Fruit Bunches are the palm fruits that grow in bunches on the oil palm, the raw material to be transported to a palm oil mill for processing. The mill process extracts the palm oil from the flesh of each individual piece of fruit on the bunch.

FOB Indonesia -- Free on Board is the selling price indicating that the seller pays for the transportation of the goods to the port of shipment, in this case Indonesia, plus loading costs. The buyer pays, in addition to the goods, the cost of freight, insurance, unloading and transportation from the port of arrival to the final destination.

FPIC -- Free, Prior and Informed Consent (FPIC) is a specific right that pertains to indigenous peoples and local communities, and is recognised in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). It allows indigenous peoples and local communities with demonstrable user rights over an area to give or withhold consent to a project that may affect them or their territories.

GHG -- Greenhouse gases are the emissions into the Earth's atmosphere of any of various gases, amongst others carbon dioxide and methane, that contribute to the greenhouse effect, leading to changes in temperature.

GLOBALG.A.P. -- Is a worldwide recognised farm certification program that translates consumer requirements into Good Agricultural Practices among multiple retailers and their suppliers.

GRI -- The Global Reporting Initiative (GRI) is an independent international organisation that has pioneered sustainability reporting since 1997. GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being. This enables real action to create social, environmental and economic benefits for everyone.

116

The connection to the world of sustainable tropical agriculture

HCSA -- The High Carbon Stock Approach is a methodology that distinguishes forest areas for protection from degraded lands, with low carbon and biodiversity values that may be developed. The methodology was developed with the aim of ensuring a widely accepted practical, transparent, robust and scientifically credible approach to implement commitments to halt deforestation in the tropics, while ensuring the rights and livelihoods of local peoples are respected.

HCV -- The High Conservation Value (HCV) concept was originally developed by the Forest Stewardship Council in 1999 for use in forest management certification. In 2005 the HCV Resource Network was established and the scope was widened from 'HCV Forest' to 'HCV Area'. It is now a keystone principle of sustainability standards for palm oil, soy, sugar, biofuels and carbon, as well as being widely used for landscape mapping, conservation and natural resource planning and advocacy.

HCVA -- High Conservation Value Areas are designated on the basis of high HCVs which are biological, ecological, social or cultural values considered outstandingly significant at the national, regional or global level.

HFCC -- High Forest Cover Countries (HFCC) are defined as those having > 60% forest cover (based on recent, trusted recognition of their Reduction of Emissions from Deforestation and Forest Degradation (REDD+) and national data); < 1% oil palm cover; a deforestation trajectory that is historically low but increasing or constant; and a known frontier area for oil palm or where major areas have been allocated for development.

HFCL -- High Forest Cover Landscapes (HFCL) are landscapes having > 80% forest cover. The High Carbon Forest Landscape (HCFL) concept was developed by the High Carbon Stock Approach (HCSA) and a specific section in the HCSA Toolkit relating to HCFL is being developed in conjunction with RSPO.

HGU -- "Hak Guna Usaha" is a cultivation licence issued by the Indonesian Government.

IP -- Sustainable palm oil from a single identifiable certified source is kept separately from ordinary palm oil throughout the supply chain. A mill is deemed to be Identity Preserved (IP) if the FFB processed by the mill are sourced from plantations/estates that are certified against the RSPO Principles and Criteria (RSPO P&C).

IPM -- Integrated Pest Management is an ecosystem approach to crop production that combines different management strategies and practices to grow healthy crops and minimise the use of pesticides.

ISCC -- International Sustainability and Carbon Certification is an independent certification scheme designed to demonstrate that biomass and bioenergy, and other biomass-based products used as ingredients by the feed, food and chemical industries, comply with requirements related to sustainability and GHG emissions. The scheme aims to reduce GHG emissions; ensure that biomass is not produced on land with high carbon stock or high biodiversity; ensure the application of good agricultural practices related to soil, water and air; and finally, ensure respect for human, labour and land rights.

ISEAL -- The International Social and Environmental Accreditation (ISEAL) is the global membership association for credible sustainability standards. These sustainability standards meet the Codes of Good Practice and promote measurable change through open, rigorous and accessible certification systems.# SIPEF Company Report 2021 Glossary

Sustainable Tropical Agriculture

ISPO -- The Indonesian Sustainable Palm Oil system is a policy adopted by the Ministry of Agriculture on behalf of the Indonesian Government. The aims are to improve the competitiveness of Indonesian palm oil in the global market; reduce GHG; draw attention to environmental issues and also lead the ISPO GHG Working Group. The ISPO Commission and the GHG Working Group have worked together to formulate the calculation guidelines for palm oil plantations in Indonesia. These guidelines will be used as a reference and be incorporated by the Government into the latest ISPO standard.
Izin Lokasi -- This licence issued by the Indonesian Government authorises a developer to compensate land from private owners in a specific location for a defined project.
Mass Balance (MB) -- Sustainable palm oil from certified sources is mixed with ordinary palm oil throughout the supply chain. A mill is deemed to be Mass Balance (MB) if the mill processes FFB from both RSPO certified and uncertified plantations/estates. A mill may be taking delivery of FFB from uncertified growers, in addition to those from its own and third-party certified supply bases. In that scenario, only the volume of oil palm products produced from the processing of the certified FFB can claim MB.
NPP -- The New Planting Procedure (NPP) was introduced with the aim of providing a framework for the responsible development of new land for oil palm cultivation. The NPP includes a set of assessments and verification activities carried out by both growers and certification bodies before any new oil palm development commences. The assessments ensure that new oil palm plantings will not negatively impact primary forest, High Conservation Value (HCV) areas, High Carbon Stock (HCS), fragile and marginal soil, or local peoples’ lands. A successful implementation of the NPP ensures that all indicators of the RSPO Principles and Criteria (P&C) 2013, Principle 7, are being implemented, and are therefore in compliance when a new development starts.
PKO -- Palm Kernel Oil is an edible vegetable oil derived from the kernel of the oil palm fruit.
Plasma -- Cooperative programs for plantation development in Indonesia oblige oil palm plantation companies by law to assist individual farmers to develop their agricultural land and manage oil palm planted areas, called 'plasma' areas. Their production is stated as ‘outgrowers’ in the Group production figures.
POIG -- The Palm Oil Innovation Group (POIG) is a multi-stakeholder initiative that strives to achieve the adoption of responsible palm oil production practices by key players in the supply chain, through developing and sharing a credible and verifiable benchmark that builds upon the Roundtable on Sustainable Palm Oil (RSPO), and creating and promoting innovations. Founded in 2013, the initiative was developed in partnership with leading NGOs as well as with progressive palm oil producers.
POME -- Palm Oil Mill Euent is wastewater generated from palm oil milling activities. With its high organic content, POME is a source with great potential for biogas production and/or composting.
Rainforest Alliance -- The Rainforest Alliance is an international non-profit organisation working at the intersection of business, agriculture and forestry to make responsible business the new normal, and awarding certifications. It is an alliance of companies, farmers, foresters, communities and consumers committed to creating a world where people and nature thrive in harmony.
RSPO -- The Roundtable on Sustainable Palm Oil is a non-profit global certification scheme that unites stakeholders from the palm oil industry: palm oil producers, processors or traders, consumer goods manufacturers, retailers, banks/ investors, and environmental and social non-governmental organisations (NGOs), to develop and implement global standards for sustainable palm oil. A set of environmental and social criteria has been developed, with which companies must comply in order to produce Certified Sustainable Palm Oil (CSPO). When properly applied, these criteria can help to minimise the negative impacts of palm oil cultivation on the environment and communities in palm oil producing regions. The RSPO members have committed to produce, source and/or use sustainable palm oil certified by the RSPO.
RSS -- Ribbed Smoked Sheets (commonly known as RSS 1 to 5) are a natural rubber which comes directly from the latex of rubber trees. The coagulated latex, rolled in sheets, is graded on the basis of certain parameters, after having been smoked, dried, and the packed in bales. The number 1 to 5 indicates the level of purity of the sheet. The RSS3 processed in Indonesia is mainly used for tires and tubes.
SAN -- The Sustainable Agriculture Network (SAN) is a coalition of non-profit conservation organisations in America, Africa, Europe and Asia promoting the environmental and social sustainability of agricultural activities through the development of standards for best practices, certification and training for rural farmers around the world. Their vision of the world is one where agricultural activity contributes to biodiversity conservation and sustainable livelihoods. Their mission is to be a global network transforming agriculture into a sustainable activity.
SDGs -- Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. The 17 SDGs are integrated—that is, they recognise that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.
SIR -- Standard Indonesian Rubber. The different parameters are specified with numbers and letters defining the specifications content (dirt, ash, viscosity, etc.). According to SNI (Indonesian National Standard) specifications, a SIR 10 means that it is a cleaner rubber with less impurities than a SIR 20 and a SIR3CV60 presents a higher viscosity than a SIR3CV50 rubber.
SOP -- Standard Operating Procedures: step-by-step instructions compiled by an organisation or company on how a process works, in order to help employees carry out routine operations.
SPOTT -- The Sustainability Policy Transparency Toolkit (SPOTT) is a free, online platform supporting sustainable commodity production and trade. By tracking transparency, SPOTT incentivises the implementation of corporate best practice. SPOTT assesses commodity producers and traders on their public disclosure regarding their organisation, policies and practices related to environmental, social and governance issues.
UNFCCC -- The United Nations Framework Convention on Climate Change (UNFCCC) is an international environmental treaty negotiated at the United Nations Conference on Environment and Development (UNCED), informally known as the Earth Summit, held in Rio de Janeiro from 3 to 14 June 1992. The objective of the UNFCCC is to stabilise greenhouse gas (GHG) concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system, in a time frame which allows ecosystems to adapt naturally and enables sustainable development.

Finance

IFRS Terminology

Associated companies -- Entities in which SIPEF has a significant influence and that are processed using the equity-method.
Biological assets - bearer plants -- The bearer plants (trees, tea bushes, banana plants, ...) on which the biological produce grows.
Biological assets - agricultural produce -- The harvested product coming from biological assets - bearer plants.
CGU -- Cash generating unit or cash flow generating unit.
Earnings per share basic -- Net result for the period (Group share) / Average outstanding shares over the period.
Earnings per share diluted -- Net result for the period (Group share)/ [Average number of outstanding shares over the period - own shares + (number of possible new shares that have to be issued within the framework of the existing outstanding stock options plans x dilution effect of the stock option plans)].
Joint ventures -- Entities that are controlled jointly. These companies are consolidated following the equity method.
Net financial position -- Interest bearing financial debts at more than one year + interest bearing financial debts within the maximum of one year - cash and cash equivalents.
Subsidiaries -- Fully consolidated entities under SIPEF control.

Financial performance measures

EBIT -- Operating results + profit/loss from equity companies.
EBITDA -- EBIT + depreciation and additional impairments/ increases on assets.
Market capitalisation -- Closing price x total number of outstanding share.
Working capital -- Inventories + trade receivables + other receivables + recoverable taxes - trade payables - payables taxes - other payables.# The connection to the world of sustainable tropical agriculture

Glossary

Annex

Group production (in tonnes)

	YTD 2021	YTD 2020	% CHANGE
OWN
Indonesia
Tolan Tiga group	1 019 009	950 854	7.17%
Umbul Mas Wisesa group	297 229	298 757	-0.51%
Agro Muko group	224 429	206 984	8.43%
South Sumatra group	396 782	362 545	9.44%
Papua New Guinea	100 568	82 567	21.80%
Hargy Oil Palms Ltd	366 849	269 616	36.06%
TOTAL OWN	366 849	269 616	36.06%
OUTGROWERS	1 385 858	1 220 470	13.55%
Indonesia
Tolan Tiga group	40 848	28 652	42.57%
Umbul Mas Wisesa group	6 963	2 408	189.20%
Agro Muko group	752	1 925	-60.95%
South Sumatra group	18 277	16 386	11.54%
Papua New Guinea	14 855	7 933	87.25%
Hargy Oil Palms Ltd	232 134	209 791	10.65%
TOTAL OUTGROWERS	232 134	209 791	10.65%
TOTAL FRESH FRUIT	272 982	238 443	14.49%
BUNCHES PRODUCED	1 658 840	1 458 913	13.70%

FRESH FRUIT BUNCHES SOLD

	YTD 2021	YTD 2020	% CHANGE
Indonesia	55 116	52 969	4.05%
Tolan Tiga group	2 231	2 120	900.92%
Umbul Mas Wisesa group	41 532	42 095	-1.34%
Agro Muko group	4 628	1 875	146.83%
South Sumatra group	6 726	8 996	-25.24%
TOTAL FRESH FRUIT	55 116	52 969	4.05%
BUNCHES SOLD

OIL EXTRACTION RATE

	YTD 2021	YTD 2020	% CHANGE
Indonesia	23.0%	22.8%	0.87%
Tolan Tiga group	22.7%	22.5%	0.89%
Umbul Mas Wisesa group	23.3%	23.1%	0.84%
Agro Muko group	23.1%	23.1%	0.07%
South Sumatra group	22.6%	21.5%	4.90%
Papua New Guinea	25.6%	24.6%	3.81%
Hargy Oil Palms Ltd	25.6%	24.6%	3.81%
TOTAL OIL EXTRACTION RATE	24.0%	23.4%	2.28%

FRESH FRUIT BUNCHES PROCESSED

	YTD 2021	YTD 2020	% CHANGE
Indonesia	1 004 740	926 537	8.44%
Tolan Tiga group	301 961	301 163	0.27%
Umbul Mas Wisesa group	183 649	166 814	10.09%
Agro Muko group	410 431	377 056	8.85%
South Sumatra group	108 698	81 504	33.37%
Papua New Guinea	598 983	479 407	24.94%
Hargy Oil Palms Ltd	598 983	479 407	24.94%
TOTAL FRESH FRUIT	1 603 723	1 405 944	14.07%
BUNCHES PROCESSED

PALM KERNELS

	YTD 2021	YTD 2020	% CHANGE
OWN
Indonesia	44 445	42 867	3.68%
Tolan Tiga group	16 135	16 255	-0.73%
Umbul Mas Wisesa group	7 412	6 754	9.75%
Agro Muko group	17 519	17 036	2.84%
South Sumatra group	3 378	2 822	19.69%
TOTAL OWN	44 445	42 867	3.68%
OUTGROWERS
Indonesia	1 498	1 162	28.93%
Tolan Tiga group	225	113	98.68%
Umbul Mas Wisesa group	10	22	-55.58%
Agro Muko group	777	720	7.95%
South Sumatra group	486	306	58.68%
TOTAL OUTGROWERS	1 498	1 162	28.93%
TOTAL PALM KERNELS	45 943	44 028	4.35%

PALM OIL

	YTD 2021	YTD 2020	% CHANGE
OWN
Indonesia	222 509	205 040	8.52%
Tolan Tiga group	67 550	67 310	0.36%
Umbul Mas Wisesa group	42 733	38 413	11.25%
Agro Muko group	90 895	83 545	8.80%
South Sumatra group	21 331	15 772	35.25%
Papua New Guinea	94 231	66 432	41.85%
Hargy Oil Palms Ltd	94 231	66 432	41.85%
TOTAL OWN	316 740	271 472	16.68%
OUTGROWERS
Indonesia	8 466	6 121	38.31%
Tolan Tiga group	1 094	549	99.29%
Umbul Mas Wisesa group	59	132	-54.93%
Agro Muko group	4 103	3 671	11.76%
South Sumatra group	3 209	1 769	81.43%
Papua New Guinea	58 972	51 691	14.09%
Hargy Oil Palms Ltd	58 972	51 691	14.09%
TOTAL OUTGROWERS	67 438	57 812	16.65%
TOTAL PALM OIL	384 178	329 284	16.67%

PALM KERNEL OIL

	YTD 2021	YTD 2020	% CHANGE
Papua New Guinea	12 251	9 397	30.38%
Hargy Oil Palms Ltd - Own	7 437	5 294	40.47%
Hargy Oil Palms Ltd - Outgrowers	4 814	4 102	17.35%
TOTAL PALM KERNEL OIL	12 251	9 397	30.38%

RUBBER

	YTD 2021	YTD 2020	% CHANGE
OWN
Indonesia	3 182	5 300	-39.96%
Tolan Tiga group	599	918	-34.78%
Melania*	1 186	2 695	-55.99%
Agro Muko	1 397	1 686	-17.16%
TOTAL OWN	3 182	5 300	39.96%
OUTGROWERS
Indonesia	645	711	-9.28%
Tolan Tiga group	645	711	-9.28%
TOTAL OUTGROWERS	645	711	9.28%
TOTAL RUBBER	3 827	6 011	36.33%

TEA

	YTD 2021	YTD 2020	% CHANGE
Indonesia	965	2 762	-65.06%
Melania - Own*	829	2 664	-68.88%
Melania - Outgrowers*	136	98	38.78%
TOTAL TEA	965	2 762	65.06%

BANANAS

	YTD 2021	YTD 2020	% CHANGE
Ivory Coast	32 200	31 158	3.34%
Azaguie	1 5 600	5 152	8.70%
Azaguie	2 7 512	8 447	-11.07%
Agboville	9 507	8 988	5.77%
Motobé	9 581	8 571	11.78%
TOTAL BANANAS	32 200	31 158	3.34%

PT Melania rubber and tea productions are included for 4 months only because of the sale of PT Melania as of 30/04/2021.

Planted area (in hectares)

Total planted area of consolidated companies excluding PT Timbang Deli.

	2021			2020
	MATURE	IMMATURE	PLANTED	MATURE	IMMATURE	PLANTED
OIL PALMS	64 181	12 982	77 163	63 489	12 984	76 473
Indonesia	51 312	12 245	63 558	50 745	12 040	62 785
Tolan Tiga group	12 027	875	12 902	12 383	581	12 963
PT Tolan Tiga	7 322	493	7 816	7 452	375	7 827
PT Eastern Sumatra	2 631	280	2 911	2 716	205	2 921
PT Kerasaan	2 073	102	2 175	2 215	0	2 215
Umbul Mas Wisesa group	9 937	0	9 937	9 938	6	9 944
PT Umbul Mas Wisesa	7 056	0	7 056	7 063	0	7 063
PT Toton Usaha Mandiri	1 135	0	1 135	1 135	0	1 135
PT Citra Sawit Mandiri	1 746	0	1 746	1 740	6	1 746
Agro Muko group	19 154	1 979	21 133	18 891	2 196	21 087
PT Agro Muko	16 332	1 508	17 839	16 045	1 877	17 922
PT Mukomuko Agro Sejahtera	2 822	471	3 294	2 847	319	3 166
South Sumatra group	10 194	9 391	19 586	9 532	9 258	18 790
PT Agro Kati Lama	3 638	538	4 176	3 373	616	3 989
PT Agro Muara Rupit	3 294	2 355	5 649	2 377	3 082	5 459
PT Agro Rawas Ulu	1 816	728	2 543	1 546	906	2 452
PT Dendymarker Indah Lestari	1 447	5 770	7 217	2 236	4 654	6 890
Papua New Guinea	12 869	736	13 605	12 744	944	13 689
Hargy Oil Palms Ltd	12 869	736	13 605	12 744	944	13 689
RUBBER	1 954	0	1 954	4 142	674	4 816
Indonesia	1 954	0	1 954	4 142	674	4 816
Tolan Tiga group	696	0	696	2 778	674	3 452
PT Bandar Sumatra	696	0	696	767	0	767
PT Melania	0	0	0	2 011	674	2 685
Agro Muko group	1 258	0	1 258	1 363	0	1 363
PT Agro Muko	1 258	0	1 258	1 363	0	1 363
TEA	0	0	0	1 744	43	1 786
Indonesia	0	0	0	1 744	43	1 786
PT Melania	0	0	0	1 744	43	1 786
BANANAS	794	0	794	780	0	780
Ivory Coast	794	0	794	780	0	780
Plantations J. Eglin SA	794	0	794	780	0	780
PINEAPPLE FLOWERS	23	8	31	30	8	38
Ivory Coast	23	8	31	30	8	38
Plantations J. Eglin SA	23	8	31	30	8	38
TOTAL	66 952	12 989	79 942	70 184	13 709	83 893

Planted area (in hectares)

Total planted area of consolidated companies (share of the Group) excluding PT Timbang Deli.

	TOTAL BENEFICIAL INTEREST	 % SHARE OF THE GROUP
OIL PALMS	77 163	93.04%
Indonesia	63 558	91.55%
Tolan Tiga group	12 902	87.04%
PT Tolan Tiga	7 816	95.00%
PT Eastern Sumatra	2 911	90.25%
PT Kerasaan	2 175	54.15%
Umbul Mas Wisesa group	9 937	94.90%
PT Umbul Mas Wisesa	7 056	94.90%
PT Toton Usaha Mandiri	1 135	94.90%
PT Citra Sawit Mandiri	1 746	94.90%
Agro Muko group	21 133	89.55%
PT Agro Muko	17 839	90.25%
PT Mukomuko Agro Sejahtera	3 294	85.74%
South Sumatra group	19 586	94.97%
PT Agro Kati Lama	4 176	95.00%
PT Agro Muara Rupit	5 649	94.90%
PT Agro Rawas Ulu	2 543	95.00%
PT Dendymarker Indah Lestari	7 217	95.00%
Papua New Guinea	13 605	100.00%
Hargy Oil Palms Ltd	13 605	100.00%
RUBBER	1 954	90.25%
Indonesia	1 954	90.25%
Tolan Tiga group	696	90.25%
PT Bandar Sumatra	696	90.25%
PT Melania	0	0.00%
Agro Muko group	1 258	90.25%
PT Agro Muko	1 258	90.25%
TEA	0	0.00%
Indonesia	0	0.00%
PT Melania	0	0.00%
BANANAS	794	100.00%
Ivory Coast	794	100.00%
Plantations J. Eglin SA	794	100.00%
PINEAPPLE FLOWERS	31	100.00%
Ivory Coast	31	100.00%
Plantations J. Eglin SA	31	100.00%
TOTAL	79 942	93.04%

Age profile (in hectares)

YEAR	TOLAN TIGA GROUP	UMBUL MAS WISESA GROUP	AGRO MUKO GROUP	SOUTH SUMATRA GROUP	HARGY OIL PALMS	TOTAL
2021	597	0	1 192	2 904	673	5 365
2020	0	0	118	3 241	135	3 494
2019	278	0	1 526	3 246	263	5 314
2018	303	0	1 067	2 761	547	4 676
2017	399	45	971	2 624	596	4 635
2016	328	185	397	2 302	219	3 431
2015	679	69	1 080	1 114	741	3 682
2014	709	0	1 011	686	1 387	3 793
2013	434	0	1 244	301	947	2 926
2012	745	202	1 505	117	1 628	4 198
2011	754	755	26	0	811	2 346
2010	625	1 525	387	0	619	3 156
2009	103	1 658	573	0	294	2 627
2008	397	1 954	332	0	239	2 921
2007	319	2 152	578	0	1 563	4 612
2006	619	365	1 063	0	928	2 975
2005	551	1 004	557	0	190	2 301
2004	133	0	759	0	159	1 051
2003	750	0	120	0	148	1 018
2002	470	0	63	0	330	863
2001	296	0	585	0	774	1 655
2000	302	0	1 129	263	243	1 936
1999	370	0	1 672	27	173	2 242
1998	426	0	1 522	0	0	1 948
1997	753	0	0	0	0	753
Before 1997	1 564	24	1 657	0	0	3 244
TOTAL	12 902	9 937	21 133	19 585	13 605	77 163
Average age	13.90	12.60	12.44	3.12	10.18	9.94

Evolution of key data over 5 years

ACTIVITIES	2021	2020	2019	2018	2017
Total own production of consolidated companies (in tonnes)
Palm oil	316 740	271 472	264 641	290 441	272 312
Rubber	3 182	5 300	5 495	6 930	6 964
Tea	829	2 644	2 331	2 422	2 402
Bananas	32 200	31 158	32 849	27 788	29 772
Average world market price (USD/tonne)
Palm oil*	1 195	715	566	598	715
Rubber**	2 071	1 728	1 640	1 565	1 995
Tea**	2 112	2 004	2 226	2 579	2 804
Bananas***	616	628	662	647	684
Own FFB production (in tonnes/ha)
Indonesia	19.86	18.74	19.52	20.60	22.36
Papua New Guinea	28.51	21.16	20.79	28.25	27.21
Palm oil extraction rate (in %)
Indonesia	22.99%	22.79%	23.23%	22.73%	22.80%
Papua New Guinea	25.58%	24.64%	23.35%	24.36%	24.64%

STOCK EXCHANGE SHARE PRICE IN EUR

	2021	2020	2019	2018	2017
Maximum	60.80	56.70	54.80	65.00	69.84
Minimum	43.85	38.00	35.25	47.10	57.76
Closing 31/12	56.90	43.20	54.80	48.80	62.80

Stock Exchange capitalization at 31/12 (in KEUR)


	601 964	457 027	579 747	516 271	664 382

Oil World price data
** W orld bank commodity price data - updated database
*** CIRAD price data (in EUR)
(1) Operating fixed assets = biological assets - bearer plants, other property, plant & equipment and investment property# RESULTS IN KUSD

	2021	2020	2019	2018	2017
Turnover	416 053	274 027	248 310	275 270	321 641
Gross profit	169 218	62 357	37 162	72 096	120 474
Operating result	139 416	30 778	4 940	50 065	169 585
Share of the group in the result	93 749	14 122	- 8 004	30 089	139 663
Cash ﬂow from the operating activities after taxes	160 311	73 262	33 988	36 221	119 853
Free cash ﬂow	112 270	21 299	- 27 751	- 12 912	- 16 512

BALANCE SHEET IN KUSD

	2021	2020	2019	2018	2017
Operational fixed assets (1)	667 267	670 637	665 413	640 435	614 351
Shareholders' equity	727 329	638 688	628 686	644 509	634 636
Net financial assets (+) / obligations (-)	- 49 192	- 151 165	- 164 623	- 121 443	- 83 697
Investments in intangible and operating fixed assets (1)	68 692	51 763	66 546	69 428	59 625

SIPEF Company Report 2021 Annex

DATA PER SHARE IN USD

	2021	2020	2019	2018	2017
Number of shares	10 579 328	10 579 328	10 579 328	10 579 328	10 579 328
Number of own shares	178 000	160 000	160 000	143 300	124 000
Equity	69.93	61.30	60.34	61.76	60.70
Basic earnings per share (2)	9.00	1.36	-0.77	2.88	14.21
Cash ﬂow from operating activities after taxes (2)	15.39	7.03	3.26	3.46	12.20
Free cash ﬂow (2)	10.78	2.04	-2.66	-1.24	-1.68

(2) Denominator 2021 = weighted average number of shares issued (10 418 431 shares)

The connection to the world of sustainable tropical agriculture

PART 2 - FINANCIAL STATEMENTS

Annual Report 2021

Comments on the consolidated financial statements – 2
Consolidated balance sheet – 8
Consolidated income statement – 10
Statement of consolidated comprehensive income – 11
Consolidated cash ﬂow statement – 12
Statement of changes in consolidated equity – 13
Notes – 14
1 - Identification – 14
2 - Statement of compliance – 14
3 - Accounting policies – 14
4 - Use of accounting estimates and judgements – 20
5 - Group companies / consolidation scope – 22
6 - Exchange rates – 22
7 - Operational result and segment information – 23
8 - Goodwill and other intangible assets – 27
9 - Biological assets - bearer plants – 30
10 - Other property, plant & equipment – 31
11 - Receivables > 1 year – 34
12 - Inventories – 34
13 - Biological assets – 34
14 - Other current receivables and other current payables – 35
15 - Shareholders’ equity – 35
16 - Non-controlling interests – 37
17 - Provisions – 38
18 - Pension liabilities – 38
19 - Net financial assets/(liabilities) – 40
20 - Other operating income/(charges) – 42
21 - Financial result – 42
22 - Share based payment – 42
23 - Income taxes – 43
24 - Investments in associates and joint ventures – 45
25 - Change in net working capital – 47
26 - Financial instruments – 47
27 - Leasing – 53
28 - Rights and commitments not reﬂected in the balance sheet – 54
29 - Related party transactions – 55
30 - Business combinations, acquisitions and divestures – 55
31 - Earnings per share (basic and diluted) – 57
32 - Events after the balance sheet date – 57
33 - Services provided by the auditor and related fees – 57
34 - Covid-19 – 58
Statutory auditor’s report on consolidated financial statements – 59
Parent company summarised statutory accounts – 66
- Condensed balance sheet – 67
- Condensed income statement – 68
- Appropriation account – 68
ESEF information – 72
Responsible persons – 73
For further information – 74

SIPEF Financial statements 2021

Comments on the consolidated financial statements

The consolidated financial statements for the financial year 2021 are prepared in accordance with the International Financial Reporting Standards (IFRS).

Balance sheet

With the exception of the strong decrease in the net cash position due to the excellent free cash ﬂow, the main movements in the balance sheet positions were related to the deconsolidation of PT Melania. Note 30 summarises the impact on the income statement of this transaction as well as the impact on the various balance sheet items. The reduction in biological assets – bearer plants (KUSD 8 456) is the result of the deconsolidation of PT Melania (KUSD 12 482) and the accelerated depreciation in PT Dendymarker on earlier than planned replanting (KUSD 4 229). The other fixed assets showed a slight increase due to the accelerated execution of the investment budget in the second semester, whereby the investments exceeded the depreciations. The amounts receivable after one year increased, due to the granting of loans to the plasma smallholders in South Sumatra for the financing of their new plantings. The assets held for sale of KUSD 13 520 (55% of KUSD 24 582) represent the estimated net sales value of the part of PT Melania that is still held by the Group until all conditions for a final sale are fulfilled. The advances received after 1 year relate to the sale of 40% of the shares of PT Melania. They include the difference between the amount received (KUSD 19 000) and the sum of the value of 40% of the shares of PT Melania (KUSD 9 833) that were transferred, and the amounts paid since the transfer for the renewal of the concession rights, pension payments and the financing of the tea activities (KUSD 1 922). Of the total remaining advance of KUSD 7 245, KUSD 2 415 is expected to be used within the year and KUSD 4 830 to be used after more than one year.

The net current assets, net of cash, experienced four major movements, without any impact on the overall structure of the balance sheet:

an increase in stocks, biological assets and trade receivables of KUSD 25 325;
an increase in net tax liabilities of KUSD 24,956. This is the result of insufficient pre-payments compared to the taxes to be paid in accordance with the legislation in force in Indonesia and Papua New Guinea;
an increase in the advance payments received of KUSD 8 450 and, more specifically, on palm oil to be shipped;
an increase in the other current liabilities of KUSD 8 529, as a result of an increased bonus provision.

IN KUSD	31/12/2021	31/12/2020
Inventories	48 017	29 648
Biological assets	9 168	6 763
Trade receivables	32 282	27 731
Other receivables	49 878	49 146
Current tax receivables	1 469	11 766
Derivatives	0	0
Other current assets	2 151	2 043
Trade payables	-23 605	-21 384
Advances received	-11 934	-1 071
Other payables	-11 519	-8 805
Income taxes	- 19 346	- 4 687
Derivatives	- 2 066	- 793
Other current liabilities	-12 749	-4 220
NET CURRENT ASSETS, NET OF CASH	61 746	86 137

IN KUSD	31/12/2021	31/12/2020
Other investments and deposits	38 0
Cash and cash equivalents	19 939	9 790
Financial liabilities > 1 year	-36 000	-54 000
Leasing liabilities > 1 year	-2 207	-2 285
Current portion of amounts payable > 1 year	-18 000	-18 000
Financial liabilities	-12 477	-86 128
Leasing liabilities < 1 year	- 484	- 543
NET CASH POSITION	-49 192	-151 165

The net financial debt decreased by KUSD 101 973 thanks to the positive free cash ﬂow.

Result

Total revenue increased by 51.8% compared with 2020, up to USD 416 million. The revenue from palm products increased by 60.9%, mainly due to a combination of higher volumes and higher world market prices for crude palm oil (CPO). Rubber revenue decreased by 9.1% despite a higher realised unit selling price, due to lower production at PT Agro Muko and the loss of direct sales to external clients by PT Melania, the company that was deconsolidated in 2021. This deconsolidation also resulted in the revenue from tea being almost halved. The revenue in the banana segment, expressed in the# SIPEF Financial statements 2021

Comments on the consolidated financial statements

The functional currency, the euro, increased mainly due to a 3.6% rise in volumes sold. As the bananas are traded in euro, the USD revenue increased by 6.1%, due to the evolution of the EUR/USD exchange rate. The total cost of sales increased by KUSD 36,837. Purchases of Fresh Fruit Bunches (FFB) from third parties augmented by KUSD 34,462, due to a rise in the purchased volumes and the increased FFB purchase prices, which are related to CPO prices. The average ex-works unit cost price for the oil palm plantations experienced a slight increase by 4.3%. In Indonesia, the high costs of the young mature plantations weighed on the average cost level, while in Papua New Guinea, the excellent production of Hargy Oil Palms Ltd led to a decrease in the unit cost price by 17.7%. The unit cost price of the banana segment remained about the same as in 2020. For the rubber segment, the unit cost prices increased significantly (50.8%): in preparation for the conversion from rubber into palm, production decreased significantly and the remaining net carrying value was depreciated more quickly. The changes in fair value concerned the valuation of the hanging fruits (IAS 41R). The gross profit rose from KUSD 62,357 at the end of 2020 to KUSD 169,218 at the end of 2021.

The connection to the world of sustainable tropical agriculture

The gross result of the palm segment (98.4% of the total gross profit) increased by KUSD 106,816, thanks to higher production and especially higher net palm oil prices. The average world market price for CPO for 2021 was USD 1,195 per tonne CIF Rotterdam. This is 67.1% higher than over the same period last year. However, it should be noted that in Indonesia the export levy and export tax increased significantly compared to last year. For the entire year 2021, the total impact of the export levy and export tax is estimated at approximately USD 349 per tonne compared with USD 74 per tonne last year. The graph below shows Indonesia's export levy and export tax per month.

In Papua New Guinea, the Group was able to fully benefit from the increase in CPO prices. Despite this export levy and export tax, the total average ex-works sales price (gross sales price lowered by the local and international transport costs, and export levy and export tax) for CPO increased. This evolved from USD 583 per tonne for 2020 to USD 807 per tonne for 2021, an increase of 38.4%. The relatively strong recovery of sales prices for rubber, since the second half of last year, could not prevent a further increase in the negative contribution of the rubber segment to the gross margin. This is mainly due to the decreased production volumes in the rubber estates of PT Bandar Sumatra and PT Agro Muko. Since 2021, the net result of the tea segment represents exclusively the commissions that SIPEF receives from the sale of tea volumes in the market. The profitability of the banana and horticulture activities was confirmed with a gross margin of KUSD 3,803. The general and administrative expenses increased compared with last year, mainly due to the increased bonus provision because of the better results.

	2020	2021
JAN	50	50
FEB	68	55
MAR	53	55
APR	50	55
MAY	50	58
JUN	55	58
JUL	55	213
AUG	55	299
SEP	55	348
OCT	58	348
NOV	58	371
DEC	213	399

INDONESIA'S EXPORT LEVY AND EXPORT TAX PER MONTH

The other operating charges and income included an exceptional depreciation on earlier than foreseen replanting in PT Dendymarker (KUSD 4,229). The recurring operating result amounted to KUSD 127,776 against KUSD 30,778 last year. The financial income mainly comprises the positive time effect of the discount of the receivable from the sale of the SIPEF-CI oil palm plantation in Ivory Coast at the end of 2016 (KUSD 748). This receivable was almost completely collected by the end of 2021. In addition, interest income from the growing receivables from plasma smallholders in South Sumatra increased. The financial charges were mainly related to long-term and short-term financing. Of these, approximately half were hedged through an Interest Rate Swap (IRS). The result before tax amounted to KUSD 124,997 compared with KUSD 28,064 in 2020. The recurring tax expense of 28.9% was slightly higher than the recurring theoretical tax expense of 26%. This was mainly due to the negative impact (KUSD 1,942) of a number of non-deductible expenses, of which the most important was the limitation of interest deduction in Indonesia (KUSD -825). The share of results of associated companies and joint ventures (KUSD -1,091) included the research activities that are centralised in PT Timbang Deli and Verdant Bioscience Pte Ltd (KUSD -1,032), and four-month result of PT Melania (KUSD -59). The recurring profit for the period amounted to KUSD 87,832. The recurring net result, share of the Group, amounted to KUSD 82,746, almost six times higher than the result of KUSD 14,122 in 2020. On 30 April 2021, an agreement was signed with Shamrock Group concerning the conditional sale of PT Melania for USD 36 million. The total capital gain of KUSD 11,640 (share of the Group, KUSD 11,003) realised on this transaction is further detailed in note 30. The net result, share of the Group, amounted to KUSD 93,749.

Cash flow

In line with the increase of the operating result, the cash flow from operating activities increased from KUSD 73,669 in 2020 to KUSD 178,796 this year. The variation of the working capital of KUSD -8,523 mainly concerned the following elements:
* an increase in inventories (KUSD -22,211) as a result of higher inventory volumes, mainly of finished products, and a higher unit cost price for CPO;
* an increase in trade receivables (KUSD -4,614);
* an increase in advances received on local sales (KUSD 8,450);
* an increase in other payables and other current liabilities including an increase in bonus provision following the improved result (KUSD 10,582).

The above-mentioned use of working capital concerned the usual temporary movements. In Indonesia and Papua New Guinea the Group made advance payments of taxes in accordance with local legislation. These were partly based on the results of 2019 and partly on the results of 2020 which were both lower than the results of 2021. Therefore, the prepayments of taxes of KUSD 9,962 were significantly below the taxes to be paid of KUSD 34,722.

The acquisitions in intangible and tangible assets (KUSD -68,692) related to the usual replacement investments, but mainly to the expansions in South Sumatra (KUSD -33,180). Due to covid-19 related logistic and operational impediments, investments temporarily remained below expectations. During the year, additional loans (KUSD -9,578) were also granted to the surrounding plasma smallholders in South Sumatra. The selling price of property, plant and equipment (PP&E) and financial assets (KUSD 30,229) mainly concerned funds received from three transactions:
* the sale of PT Melania for KUSD 17,077 (see note 30);
* the balance of the sale of SIPEF-CI in 2016 for KUSD 7,631;
* the sale of tangible fixed assets, mainly the sale of young palm trees to the surrounding plasma smallholders in South Sumatra in Indonesia.

The free cash flow for the year amounted to KUSD 112,270 compared with KUSD 21,299 for the same period last year. The other financing activities (KUSD -102,084) comprise the buy-back and sale transactions of treasury shares (KUSD -1,161); the partial repayments of long-term financing (KUSD -18,000 for the long-term loan and KUSD -78 for the leasing debts); repayment of short-term financing (KUSD -73,710); dividend payments to SIPEF shareholders (KUSD -4,443); dividend payments to non-controlling parties (KUSD -2,306); and interest payments (KUSD -2,386).

IN KUSD	NOTE	2021	2020
Non-current assets		815 303	809 753
Intangible assets	8	348 473	104 782
Goodwill	8	104 782	104 782
Biological assets - bearer plants	9	307 371	315 826
Other property, plant & equipment	10	359 896	354 811
Investment property		0	0
Investments in associates and joint ventures	24	3 598	4 630
Financial assets	92	80
Other financial assets	92	80
Receivables > 1 year	25	666	16 101
Other receivables	11	25 666	16 101
Deferred tax assets	23	13 550	13 049
Current assets		176 462	136 888
Inventories	12	48 017	29 648
Biological assets	13	9 168	6 763
Trade and other receivables	82 161	76 877
Trade receivables	26	32 282	27 731
Other receivables	14	49 878	49 146
Current tax receivables	23	1 469	11 766
Investments	38	0
Other investments and deposits	19	38	0
Derivatives	26	0	0
Cash and cash equivalents	19	19 939	9 790
Other current assets	2	151	2 043
Assets held for sale	30	13 520	0
TOTAL ASSETS		991 765	946 641

Consolidated balance sheet

IN KUSD	NOTE	2021	2020
Total equity		766 183	674 550
Shareholders' equity	15	727 329	638 688
Issued capital	44	734	44 734
Share premium	107	970	107 970
Treasury shares (-)		-11 521	-10 277
Reserves	596	813	507 299
Translation differences		-10 666	-11 038
Non-controlling interests	16	38 854	35 862
Non-current liabilities		113 402	126 460
Provisions > 1 year	17	1 125	1 354
Provisions	17	1 125	1 354
Deferred tax liabilities	23	46 950	44 010
Trade and other liabilities > 1 year	26	0	0
Financial liabilities > 1 year (incl.

IN KUSD

NOTE	2021	2020
Revenue	7 416 053	274 027
Cost of sales	-249 240	-212 403
Changes in fair value of biological assets	2 404 733	0
Gross profit	169 218	62 357
General and administrative expenses	-36 891	-31 573
Other operating income/(charges)	7 088	-6
Operating result	139 416	30 778
Financial income	1 475	2 012
Financial charges	-3 096	-5 103
Exchange diﬀerences	-1 157	378
Financial result	-2 779	-2 713
Profit before tax	136 637	28 065
Tax expense	-36 075	-10 828
Profit after tax	100 562	17 237
Share of results of associated companies and joint ventures	-1 091	-1 059
Result from continuing operations	99 471	16 178
Result from discontinued operations	0	0
Profit for the period	99 471	16 178
Attributable to:
- Non-controlling interests	5 722	2 055
- Equity holders of the parent	93 749	14 122

EARNINGS PER SHARE (IN USD)

NOTE	2021	2020
FROM CONTINUING AND DISCONTINUED OPERATIONS
Basic earnings per share	9.00	1.36
Diluted earnings per share	8.99	1.36
FROM CONTINUING OPERATIONS
Basic earnings per share	9.00	1.36
Diluted earnings per share	8.99	1.36
Basic earnings per share excluding capital gain sale PT Melania	7.88	1.36

Consolidated income statement

10 The connection to the world of sustainable tropical agriculture

IN KUSD

NOTE	2021	2020
Profit for the period	99 471	16 178
Other comprehensive income:
Items that may be reclassified to profit and loss in subsequent periods
- Exchange diﬀerences on translating foreign operations	15 372	755
- Cash ﬂow hedges - fair value result for the period	26 905	-1 922
- Income tax eﬀect (cash ﬂow hedges)	26 - 226	489
Items that will not be reclassified to profit and loss in subsequent periods
- Defined Benefit Plans - IAS 19R	18 - 631	-1 329
- Income tax eﬀect	139	292
Total other comprehensive income for the year	559	-1 714
Other comprehensive income attributable to:
- Non-controlling interests	2 - 94	-
- Equity holders of the parent	557	-1 619
Total comprehensive income for the year	100 030	14 464
Total comprehensive income attributable to:
- Non-controlling interests	5 724	1 961
- Equity holders of the parent	94 306	12 503

Statement of consolidated comprehensive income

11 SIPEF Financial statements 2021

IN KUSD

NOTE	2021	2020
OPERATING ACTIVITIES
Profit before tax	136 637	28 065
Adjusted for:
Depreciation	8,9,10 48 616	43 581
Movement in provisions	17, 18 2 452	197
Stock options	121	128
Unrealized exchange result	0	- 169
Changes in fair value of biological assets	-2 404	- 733
Other non-cash results	- 773	-1 266
Hedge reserves and financial derivatives	26 2 178	-1 171
Financial income and charges	2 369	4 330
Loss on receivables	0	- 249
Loss/(gain) on sale of investments	0	0
Result on disposal of property, plant and equipment	1 241	957
Result on disposal of financial assets	30 -11 640	0
Cash ﬂow from operating activities before change in net working capital	25 178 796	73 669
Change in net working capital	25 -8 523	3 165
Variation in long term receivables*	0	0
Cash ﬂow from operating activities after change in net working capital	170 273	76 834
Income taxes paid	23 -9 962	-3 572
Cash ﬂow from operating activities	160 312	73 262
INVESTING ACTIVITIES
Acquisition intangible assets	8 - 40	- 49
Acquisition biological assets	9 -27 396	-26 971
Acquisition property, plant & equipment	10 -41 256	-24 743
Financing plasma advances*	11 -9 578	-4 479
Acquisition investment property	0	0
Acquisition subsidiaries	0	0
Dividends received from associated companies and joint ventures	0	0
Proceeds from sale of property, plant & equipment	5 521	2 401
Proceeds from sale of financial assets	30 24 708	1 878
Cash ﬂow from investing activities	-48 042	-51 963
Free cash ﬂow	112 270	21 299
FINANCING ACTIVITIES
Capital increase	0	0
Equity transactions with non-controlling parties	0	-2 795
Increase of treasury shares	22 -2 194	0
Decrease of treasury shares	22 1 033	0
Decrease in long-term financial borrowings	19 -18 078	-9 228
Increase in long-term financial borrowings	19 0	0
Decrease short-term financial borrowings	19 -73 710	-5 092
Increase short-term financial borrowings	19 0	0
Last year's dividend paid during this book year	-4 443	0
Dividends paid by subsidiaries to minorities	16 -2 306	- 716
Interest received – paid	-2 386	-4 331
Cash ﬂow from financing activities	-102 084	-22 162
Net increase in investments, cash and cash equivalents	19 10 186	- 863
Investments and cash and cash equivalents (opening balance)	19 9 790	10 653
Eﬀect of exchange rate ﬂuctuations on cash and cash equivalents	19 0	0
Investments and cash and cash equivalents (closing balance)	19 19 977	9 790

Consolidated cash ﬂow statement

As from 2021, the financing of plasma advances has been included under investing activities instead of changes in net working capital. The 2020 comparative figures have been changed accordingly.

12 The connection to the world of sustainable tropical agriculture

IN KUSD	Issued capital SIPEF	Share premium SIPEF	Treasury shares	Defined benefit plans IAS19R	Reserves	Translation diﬀerences	Share- holder equity	Non- controlling interests	Total equity
JANUARY 1, 2021	44 734	107 970	-10 277	-4 539	511 838	-11 038	638 688	35 862	674 550
Result for the period							93 749	5 722	99 471
Other comprehensive income				- 494	679	372	557	2 559	2 559
Total comprehensive income							94 428	372	94 306
Last year's dividend paid							-4 443	-2 306	-6 749
Sale PT Melania							- 426		- 426
Other (note 22)				-1 244	23		-1 221		-1 221
DECEMBER 31, 2021	44 734	107 970	-11 521	-5 033	601 846	-10 666	727 329	38 854	766 183

JANUARY 1, 2020	44 734	107 970	-10 277	-3 598	501 650	-11 793	628 686	34 325	663 010
Result for the period							14 122	2 055	16 178
Other comprehensive income				- 941	-1 433	755	-1 619	- 95	-1 714
Total comprehensive income							12 689	755	12 503
Last year's dividend paid							- 200		- 200
Equity transactions with non-controlling parties								-2 573	-2 795
Other							72		72
DECEMBER 31, 2020	44 734	107 970	-10 277	-4 539	511 838	-11 038	638 688	35 862	674 550

Statement of changes in consolidated equity

13 SIPEF Financial statements 2021

Notes

1. IDENTIFICATION

SIPEF (the ‘company’) is a limited liability company (‘naamloze vennootschap’ / ’société anonyme’) incorporated in Belgium and registered at 2900 Schoten, Calesbergdreef 5. The consolidated financial statements for the year ended 31 December 2021 comprise SIPEF and its subsidiaries (together referred to as ‘SIPEF group’ or ‘the Group’). Comparative figures are for the financial year 2020. The consolidated financial statements have been established by the Board of Directors on 15 February 2022. The subsequent events were updated and approved for issue by the directors on April 19, 2022. These financial statements will be presented to the shareholders at the general meeting of June 08, 2022. A list of the directors and the statutory auditor, as well as a description of the principal activities of the Group, are included in ‘Part 1 – Company report’ of this annual report.

2. STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) which have been adopted by the European Union as per 31 December 2021. The following standards or interpretations are applicable for the annual period beginning on 1 January 2021:

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
Amendment to IFRS 16 Leases: COVID-19-Related Rent Concessions beyond 30 June 2021 (applicable for annual periods beginning on or after 1 April 2021)
Amendments to IFRS 4 Insurance Contracts – Extension of the Temporary Exemption from Applying IFRS 9 to 1 January 2023 (applicable for annual periods beginning on or after 1 January 2021)

These changes did not have a significant impact on the equity or net result of the Group.

The Group did not elect for early application of the following new standards and interpretations which were issued at the date of approval of these financial statements but were not yet effective on the balance sheet date:

Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use (applicable for annual periods beginning on or after 1 January 2022)
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts — Cost of Fulfilling a Contract (applicable for annual periods beginning on or after 1 January 2022)
Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework (applicable for annual periods beginning on or after 1 January 2022)
Annual Improvements to IFRS Standards 2018–2020 (applicable for annual periods beginning on or after 1 January 2022)
IFRS 17 Insurance Contracts (applicable for annual periods beginning on or after 1 January 2023)
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (applicable for annual periods beginning on or after 1 January 2023, but not yet endorsed in the EU)
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (applicable for annual periods beginning on or after 1 January 2023, but not yet endorsed in# 3. ACCOUNTING POLICIES

Basis of preparation

Starting in 2007 the consolidated financial statements are presented in US dollar (until 2006 this was done in euro), rounded off to the nearest thousand (KUSD). This modification is the result of the changed policy with regard to the liquidity and debt management since the end of 2006, whereby the functional currency of the majority of the subsidiaries has been changed from the local currency to the US dollar. The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: investments in equity instruments measured at FVOCI, financial derivative instruments and biological produce. The accounting policies have been consistently applied throughout the Group and are consistent with those used in the previous year.

Business combinations

Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of acquisition. Any costs directly attributable to the acquisition are recognized in profit or loss. The purchase consideration to acquire a business, including contingent payments, is recorded at fair value at the acquisition date, while subsequent adjustments to the contingent payments resulting from events after the acquisition date are recognized in profit or loss. The ‘full goodwill’ option, which can be elected on a case by case basis, allows SIPEF to measure the non-controlling interest either at fair value or at its proportionate share of the acquiree’s net assets. All acquisition-related costs, such as consulting fees, are expensed. If the initial accounting for a business combination is incomplete by the end of the financial year in which the combination occurs, SIPEF group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see paragraph below), and/or additional assets and/or liabilities are recognised to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the acquisition date to the date SIPEF group obtains complete information about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

Step acquisitions

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the company. Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

Consolidation principles

Subsidiaries

Subsidiaries are those enterprises controlled by the company. An investor controls an investee if and only if the investor has all of the following elements, in accordance with IFRS 10:
* Power over the investee, i.e. the investor has existing rights that give it the ability to direct the relevant activities;
* Exposure, or rights, to variable returns from its involvement with the investee;
* The ability to use its power over the investee to affect the amount of the investor’s returns.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases (or a date nearby).

Associates

Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognized gains and losses of associates on an equity accounting basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases (or a date nearby). When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

Joint ventures

Joint ventures are those enterprises over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group's share of the total recognized gains and losses of joint ventures on an equity accounting basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases (or a date nearby). When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the joint ventures.

Transactions eliminated on consolidation

All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated for companies included using the full consolidation method in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.

Foreign currency

Foreign currency transactions

In the individual Group companies, transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.

Business combinations

Step acquisitions

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the company. Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognized in profit or loss.Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

Consolidation principles

Subsidiaries

Associates

Joint ventures

Transactions eliminated on consolidation

Foreign currency

Foreign currency transactions

Financial statements of foreign operations

Functional currency: items included in financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the functional currency). Starting from 2007 the consolidated financial statements are presented in USD, this is the functional currency of the majority of the Group companies. To consolidate the Group and each of its subsidiaries, the financial statements of the individual entities are translated as follows:
* Assets and liabilities at the closing rate;
* Income statements at the average exchange rate for the year;
* The components of shareholders’ equity at the historical exchange rate.

Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associated entities at the year-end exchange rate are recorded as part of the shareholders’ equity under “translation differences”. When a foreign entity is sold, such exchange differences are recognized in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets and liabilities of the foreign entity and are translated at the closing rate.

Biological assets

SIPEF group only recognizes a biological asset or growing agricultural produce (“agricultural produce”) when it controls the asset as a result of past events, when it is probable that future economic benefits associated with the asset will flow to SIPEF group and when the fair value or cost of the asset can be measured reliably. In accordance with the amendments to IAS 16 and IAS 41, bearer plants are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated using the straight-line method based on the estimated useful life (20 to 25 years). The growing agricultural produce of palm oil is defined as the oil contained in the palm fruit, so that the fair value of this distinct asset can be estimated reliably. The growing biological produce of tea is defined as the leaves that are ready to be plucked and processed, even if not yet fully grown, so that the fair value of this distinct asset can be estimated reliably. SIPEF group has opted to measure growing biological produce of rubber at fair value at the point of harvest in accordance with IAS 41.32 and not to measure it at fair value as it grows less costs to sell in accordance with IAS 41.10c as we are of the opinion that all parameters used in any alternative fair value measurement (future productions, determination of the start of the life cycle, cost allocation,…) are clearly unreliable. As a consequence, all alternative fair value measurements are also considered clearly unreliable. The growing biological produce of bananas is measured at fair value as it grows less costs to sell, taking into account that all the parameters for the fair value calculation are available and reliable. A gain or loss arising on initial recognition of a biological asset at fair value less estimated point of sale costs and from the change in fair value less estimated point of sale costs of a biological asset is included in net profit or loss in the period in which it arises.

Goodwill

Goodwill represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired in a business combination. Goodwill is not amortized but reviewed for impairment at least annually. For the purpose of testing goodwill for impairment, goodwill is allocated to operating companies which is the lowest level at which the goodwill is monitored for internal management purposes (i.e. cash flow generating unit). Any impairment is immediately recognized in the income statement and is not subsequently reversed. Negative goodwill represents the excess of the Group’s interest in the fair value of the net identifiable assets acquired over the cost of acquisition. Negative goodwill is immediately recognized in the income statement.

Intangible assets

Intangible assets include computer software and various licenses. Intangible assets are capitalized and amortized using the straight-line method over their useful life.

Property, plant and equipment

Property, plant and equipment, including investment property, are stated at cost less accumulated depreciation and any accumulated impairment losses. Borrowing costs attributable to the construction or production of qualifying assets are capitalized. Expenses for the repair of property, plant and equipment are usually charged against income when incurred. Property held for sale, if any, is stated at the lower of amortized cost and fair value less selling charges. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets:

Asset Category	Useful Life (Years)
Buildings	5 to 30
Infrastructure	5 to 25
Installations and machinery	5 to 30
Vehicles	3 to 20
Office equipment and furniture	5 to 10
Other property, plant and equipment	2 to 20

Land is not amortized. The Group presents the cost of land rights as a part of property, plant & equipment, consistently with practices in the industry and with relevant guidance in that respect. In addition, The Group closely monitors the situation of each land title in terms of renewal and only depreciates its land rights if there is an indication that the land title might not be renewed.

Leases

Assets, representing the right to use the underlying leased asset, are capitalized as property, plant and equipment at cost, comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs and restoration costs. The corresponding lease liabilities, representing the net present value of the lease payments, are recognized as long-term or current liabilities depending on the period in which they are due. Leased assets and liabilities are recognized for all leases with a term of more than 12 months, unless the underlying asset is of low value. The lease payments are discounted using the lessee’s incremental borrowing rate, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.# Leases

Leased assets and liabilities are recognized for all leases with a term of more than 12 months, unless the underlying asset is of low value. The lease payments are discounted using the lessee’s incremental borrowing rate, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The interest rate implicit in the lease could not be determined. Lease interest is charged to the income statement as an interest expense. Leased assets are depreciated, using straight-line depreciation over the lease term, including the period of renewable options, in case it is probable that the option will be exercised.

Lessee accounting

Due to the nature of the Group’s business whereby the operations are primarily taking place in relatively remote areas, the Group owns most of the assets used. Therefore, there is only a limited amount of leases which qualify for lease accounting. The three main categories consist of:

Office rental

Office rentals are currently accounted for as operational leases. Analysis shows that these meet the definition of a lease and as such a right-of-use asset and corresponding lease liability will need to be accounted for under the new standard. Considering that most of the office rentals are long-term leases, the main areas management actions are required:

Determining the lease term;
Calculating the incremental borrowing rate.

Company cars

Company cars in Belgium meet the definition of a lease and therefore the same approach as office rentals will be applied.

Papua-New-Guinea land rights

In the Group’s subsidiary Hargy Oil Palms Ltd in Papua-New- Guinea, a part of the land rights include a fixed annual rental payment for the usufruct of the land, as well as a variable royalty depending on the production levels of the year measured in tons FFB. The annual fixed rental payment meets the definition of a lease, whereby the lease term of asset has been determined as the average lifespan of an oil palm (25 years).

Lessor accounting

The Group has no contracts that could lead to lessor accounting.

Impairment of assets

Property, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may be higher than the recoverable amount. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. If impairment is no longer justified in future periods due to a recovery in assets’ fair value or value in use, the impairment reserve is reversed.

Financial instruments

Classification and measurement of financial instruments

Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

The financial assets include the investments in equity instruments designated at fair value through other comprehensive income, loans to related parties, receivables including trade receivables and other receivables, derivative financial instruments, financial assets at fair value through profit or loss, cash and cash equivalents. The acquisitions and sales of financial assets are recognised at the transaction date.

Financial assets – debt instruments

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Debt instruments that meet the following conditions are subsequently measured at amortised cost:

The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt instruments include:

Receivables that are measured at amortised cost
Trade receivables measured at amortised cost
Cash and cash equivalents# SIPEF Financial statements 2021

Financial assets – investments in equity instruments

On initial recognition, the Group made an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the investment’s revaluation reserve. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, they will be transferred to retained earnings. Because of the lack of sufficient recent information available to measure fair value, management has assessed that cost is an appropriate estimate of fair value for those unquoted equity investments.

Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

Derivatives

The Group uses financial derivative instruments primarily to manage its exposure to interest rate and foreign currency risks arising from operational, financing and investment activities. The Group applies hedge accounting under IFRS 9 – "Financial Instruments". Derivative instruments are valued at fair value at initial recognition. The changes in fair value are reported in the income statement unless these instruments are part of hedging transactions, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The Group designates certain derivatives as hedging instruments in respect interest rate risk in cash flow hedges. Derivatives related to the foreign currency risk are not documented in a hedging relationship. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all the following hedge effectiveness requirements:

There is an economic relationship between the hedged item and the hedging instrument;
The effect of credit risk does not dominate the value changes that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.

If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i. e. rebalances the hedge) so that it meets the qualifying criteria again.

The value fluctuations of a derivative financial instrument that complies with the strict conditions for recognition as a cash flow hedge are recorded in other comprehensive income for the effective part. The ineffective part is recorded directly in the profit and loss account. The hedging results are recorded out of other comprehensive income into the profit and loss account at the moment the hedged transaction influences the result.

A derivative with a positive fair value is recorded as a financial asset, while a derivative with a negative fair value is recorded as a financial liability. A derivate is presented as current or non-current depending on the expected expiration date of the financial instrument.

Impairment of financial assets

In relation to the impairment of financial assets an expected credit loss model is applied. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. Specifically, the following assets are included in the scope for impairment assessment for the Group:

1) trade receivables;
2) non-current receivables and loans to related parties;
3) cash and cash equivalents.

IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group has applied the simplified approach and records lifetime expected losses on all trade receivables.

IFRS 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. On the other hand, if the credit risk on a financial instrument has not increased significantly since initial recognition, the Group is required to measure the loss allowance for that financial instrument at an amount equal to 12month expected credit losses.

For long term receivables IFRS 9 provides a choice to measure expected credit losses applying lifetime or a general (3 stages of expected credit loss assessment) expected credit losses model. The Group selected the general model. All bank balances are assessed for expected credit losses as well.

Derecognition of financial assets

On derecognition of a financial asset measured at amortised cost, the difference between a) the asset’s carrying amount and b) the sum of the consideration received and receivable is recognised in profit or loss. In addition, on derecognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss.

Financial liabilities

All financial liabilities of the Group are subsequently measured at amortised cost using the effective interest method. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Receivables and payables

The Group initially measures an amount receivable and payable at fair value. For the amount receivables, the transaction price is deemed to be equal to the fair value. Subsequently, these amount receivables are carried at amortized cost using the effective interest method less any allowance for expected credit losses. For amounts payable, the transaction price is deemed to be equal to the fair value. Subsequently, these amount payable are carried at amortized cost using the effective interest method. Amounts receivable and payable in a currency other than the functional currency of the subsidiary are translated at the prevailing Group exchange rates on the balance sheet date.

Cash and cash equivalents

Cash and cash equivalents are measured at their amortised value and include cash and deposits with an original maturity of three months or less. Negative cash balances are recorded as liabilities.

Interest-bearing borrowings

Interest-bearing borrowings are measured at amortised cost price. Borrowings are initially recognized as proceeds received, net of transaction costs. Any difference between cost and redemption value is recognized in the income statement using the effective interest method.

Inventories

Inventories are valued at the lower of cost or net realizable value.# SIPEF Financial statements 2021

The connection to the world of sustainable tropical agriculture

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset measured at amortised cost, the difference between a) the asset’s carrying amount and b) the sum of the consideration received and receivable is recognised in profit or loss. In addition, on derecognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss.

Financial liabilities

Receivables and payables

Cash and cash equivalents

Cash and cash equivalents are measured at their amortised value and include cash and deposits with an original maturity of three months or less. Negative cash balances are recorded as liabilities.

Interest-bearing borrowings

Inventories

Inventories are valued at the lower of cost or net realizable value. The stock finished products including biological assets are valued by adding production cost to the fair value of the biological asset concerned. Inventories are written down on a case-by-case basis if the estimated net realizable value declines below the carrying amount of the inventories. Net realizable value is the estimated selling price less the estimated costs necessary to make the sale. When the reason for a write-down of the inventories has ceased to exist, the write-down is reversed.

Assets held for sale

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group-, excluding finance costs and income tax expenses). The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plant to sell the asset and the sale expected to be completed within one year from the date of the classification. PP&E and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the consolidated income statement.

Shareholders’ equity

Dividends of the parent company payable on ordinary shares are only recognized as a liability in the period in which they are approved. Costs incurred with respect to the issuance of equity instruments are recorded as a deduction in equity.

Non-controlling interest

Non-controlling interests include a proportion of the fair value of identifiable assets and liabilities recognized upon acquisition of a subsidiary, together with the appropriate proportion of subsequent profits and losses. In the income statement the minority share in the company’s profit or loss is separated from the consolidated result of the Group.

19 SIPEF Financial statements 2021

Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in the share premium.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be made.

Pensions and other post-employment benefits

Group companies have various pension schemes in accordance with the local conditions and practices in the countries they operate in.

Defined benefit plans
The defined benefit plans are generally un-funded but fully provisioned for using the ‘projected unit credit’- method. This provision represents the present value of the defined benefit obligation. The actuarial gains and losses are recognized in the Other Comprehensive Income.
Defined contribution plans
The Group pays contributions to publicly or privately administered insurance plans.# Since the Group is obliged to make additional payments if the average return on the employer’s contribution and on the employees’ contributions is not attained, those plans should be treated as “defined benefit plans” in accordance with IAS 19.

Employee benefits in equity instruments

Stock option plans exist within the SIPEF group, giving employees the right to buy SIPEF shares at a predefined price. This price is determined at the time when the options are granted and it is based on the market price or the intrinsic value. The performance of the beneficiary is measured (at the moment of granting) on the basis of the fair value of the granted options and warrants and recognized in profit and loss when the services are rendered during the vesting period.

Revenue recognition

The SIPEF group’s core activity is the sale of goods. SIPEF group recognises revenue at the moment the control over the asset is transferred to the customer. The goods sold are transported by ship and recognized as revenue as soon as the goods are loaded onto the ship. Revenue recognition occurs at the moment when the goods are loaded onto the ship. Revenue is recorded at this point in time for all contracts within the SIPEF group. The payment terms depend on the delivery terms of the contract and can vary between prepayment, cash against documents and 45 days after handover of the bill of lading. Deliveries are at a fixed price. For each contract there is only one performance obligation which needs to be fulfilled: the delivery of the goods. The Group has no material incremental costs of obtaining a contract which would fulfil the capitalization criteria as defined by IFRS 15.

Cost of sales

Cost of sales includes all costs associated with harvest, transformation and transport. Purchases are recognized net of cash discounts and other supplier discounts and allowances.

General and administrative expenses

General and administrative expenses include expenses of the marketing and financial department and general management expenses.

Income taxes

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax liabilities and assets are recognized for temporary differences between the carrying amount in the balance sheet and the tax bases of assets and liabilities and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. Deferred tax assets are included in the consolidated accounts only to the extent that their realization is probable in the foreseeable future.

4. USE OF ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the consolidated financial statements in conformity with IFRS requires the Group to use accounting estimates and judgements and make assumptions that may affect the reported amounts of assets and liabilities at the date of the balance sheets and reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates. Below we present an update of the most important judgements applicable in the annual report:
* Judging that land rights will not be amortized unless there is an indication that the land title might not be renewed: A total of 2 500 hectares of land rights in PT Agro Muko expired in 2020. All documentation for the renewal of the land rights that expire in 2020 was delivered on time to the relevant authorities. The authorities are in the process of reviewing and approving them. There is no indication that these land rights will not be renewed.
The main areas in which estimates are used during 2021 are:
* Deferred tax assets
* Impairment of assets (goodwill impairment)
* Determination of the estimated costs related to the sale of PT Melania.
The key estimates used in the calculation of deferred tax assets and impairment of assets (goodwill impairment) testing rely on making an estimate on commodity prices over a longer period. By nature, the commodity prices used in such estimates are volatile and will therefore in reality be different from the estimated amounts. There is no unique independent variable on which a relevant sensitivity can be done on the calculation of the deferred tax assets. We refer to note 8 for the goodwill impairment testing. The determination of the net selling price of PT Melania includes an estimate of the costs related to the sale as agreed in the Sale and purchase agreement (“SPA”). The main estimates made include:
* The timing and the cost of renewing the permanent concession rights (HGU)
* The compensation for the accumulated social rights of the employed personnel, who will presumably be taken over almost entirely by Shamrock Group.
20 The connection to the world of sustainable tropical agriculture estimates are volatile and will therefore in reality be different from the estimated amounts. There is no unique independent variable on which a relevant sensitivity can be done on the calculation of the deferred tax assets. We refer to note 8 for the goodwill impairment testing. The determination of the net selling price of PT Melania includes an estimate of the costs related to the sale as agreed in the Sale and purchase agreement (“SPA”). The main estimates made include:
* The timing and the cost of renewing the permanent concession rights (HGU)
* The compensation for the accumulated social rights of the employed personnel, who will presumably be taken over almost entirely by Shamrock Group.
21 SIPEF Financial statements 2021

5. GROUP COMPANIES / CONSOLIDATION SCOPE

The ultimate parent of the Group, SIPEF, Schoten/Belgium, is the parent company of the following significant subsidiaries:

	Location	% of control	% of interest
Consolidated companies (full consolidation)
PT Tolan Tiga Indonesia	Medan / Indonesia	95.00	95.00
PT Eastern Sumatra Indonesia	Medan / Indonesia	95.00	90.25
PT Kerasaan Indonesia	Medan / Indonesia	57.00	54.15
PT Bandar Sumatra Indonesia	Medan / Indonesia	95.00	90.25
PT Mukomuko Agro Sejahtera	Medan / Indonesia	95.00	85.74
PT Umbul Mas Wisesa	Medan / Indonesia	95.00	94.90
PT Citra Sawit Mandiri	Medan / Indonesia	95.00	94.90
PT Toton Usaha Mandiri	Medan / Indonesia	95.00	94.90
PT Agro Rawas Ulu	Medan / Indonesia	95.00	95.00
PT Agro Kati Lama	Medan / Indonesia	95.00	95.00
PT Agro Muara Rupit	Medan / Indonesia	95.00	94.90
Hargy Oil Palms Ltd	Bialla / Papua N.G.	100.00	100.00
Plantations J. Eglin SA	Azaguié / Ivory Coast	100.00	100.00
Jabelmalux SA	Luxembourg / G.D. Luxemburg	99.89	99.89
Sipef Singapore	Singapore / Republic of Singapore	100.00	100.00
PT Agro Muko	Medan / Indonesia	95.00	90.25
PT Dendymarker Indah Lestari	Medan / Indonesia	100.00	95.00
Associates and joint ventures (equity method)
Verdant Bioscience Pte Ltd	Singapore / Republic of Singapore	38.00	38.00
PT Melania Indonesia	Medan / Indonesia	55.00	52.25
PT Timbang Deli Indonesia	Medan / Indonesia	38.00	36.10
Companies not included
Horikiki Development Cy Ltd	Honiara / Solomon Islands	90.80	90.80

SIPEF has signed a sale and purchase agreement with Shamrock Group (SG) on the sale of 100% of the share capital of its Indonesian subsidiary, PT Melania. Upon signing of the SPA, SIPEF has lost full control of PT Melania. Subsequently, PT Melania has been accounted for as a joint venture held for sale as from 30 April 2021. The assets and liabilities of PT Melania have been measured at fair value, equaling the net selling price of KUSD 23 353. As of 30 April 2021, the results of PT Melania are no longer included in the consolidated profit and loss of the SIPEF group as PT Melania is classified as a joint venture held for sale. Despite the possession of the majority of voting rights, the Group has no control over the non-consolidated company Horikiki Development Cy Ltd because it is established in inaccessible regions. Even so there is no value in Horikiki. All companies included in the consolidation are also included in the sustainability report of the Group. There are no restrictions to realise assets and settle liabilities of subsidiaries.

6. EXCHANGE RATES

As a result of a revised liquidity- and debt management as from the end of 2006 the functional currency in the majority of the subsidiaries has been changed to US dollar as from January 1, 2007. The following subsidiary has a different functional currency:
* Plantations J. Eglin SA EUR

The exchange rates below have been used to convert the balance sheets and the results of these entities into US dollar (this is the currency in which the Group presents its results).

	Closing rate			Average rate
	2021	2020	2019	2021	2020	2019
EUR	0.8816	0.8154	0.8916	0.8480	0.8727	0.8941

7. OPERATIONAL RESULT AND SEGMENT INFORMATION

SIPEF's activities can be classified into segments based on the type of product. SIPEF has the following segments:
* Palm: Includes all palm products, including palm oil, palm kernels and palm kernel oil, both in Indonesia and Papua New Guinea.
* Rubber: Includes all different types of rubber produced in Indonesia and sold by the SIPEF group:
* Ribbed Smoked Sheets (RSS)
* Standard Indonesia Rubber (SIR)
* Scraps and Lumps
* Tea: Includes the “cut, tear, curl” (CTC) tea produced by SIPEF in Indonesia.
* Bananas and horticulture: Includes all sales of bananas and horticulture originating from Ivory Coast.
* Corporate: Mainly includes management fees received from non-group companies, commissions charged on sea freight and other commissions which are not covered by the sales contract.

The overview of segments below is based on the SIPEF group’s internal management reporting. The executive committee is the chief operating decision maker.# 7. OPERATIONAL RESULT AND SEGMENT INFORMATION

SIPEF's activities can be classified into segments based on the type of product. SIPEF has the following segments:

Palm: Includes all palm products, including palm oil, palm kernels and palm kernel oil, both in Indonesia and Papua New Guinea.
Rubber: Includes all different types of rubber produced in Indonesia and sold by the SIPEF group:
- Ribbed Smoked Sheets (RSS)
- Standard Indonesia Rubber (SIR)
- Scraps and Lumps
Tea: Includes the “cut, tear, curl” (CTC) tea produced by SIPEF in Indonesia.
Bananas and horticulture: Includes all sales of bananas and horticulture originating from Ivory Coast.
Corporate: Mainly includes management fees received from non-group companies, commissions charged on sea freight and other commissions which are not covered by the sales contract.

The overview of segments below is based on the SIPEF group’s internal management reporting. The executive committee is the chief operating decision maker.

The most important differences with IFRS consolidation are:

Instead of revenue the gross margin per segment is used as the starting point.
The capital gain on the sale of PT Melania was not included in the “other operating income/(charges)” but is included on a separate line.

In KUSD | | 2021 | 2020
------- | -------- | --------
Gross margin per product | | |
Palm | | 166 562 | 59 886
Rubber | | -2 608 | -1 814
Tea | | 134 | - 788
Bananas and plants | | 3 803 | 4 390
Corporate | | 1 328 | 682
Total gross margin | | 169 218 | 62 357
General and administrative expenses | | -36 891 | -31 573
Other operating income/(charges) | | -4 552 | - 6
Financial income/(charges) | | -2 369 | -4 458
Discounting Sipef-CI | | 748 | 1 368
Exchange differences | | -1 157 | 378
Result before tax | | 124 997 | 28 065
Tax expense | | -36 075 | -10 828
Effective tax rate | | -28.9% | -38.6%
Result after tax | | 88 923 | 17 237
Share of results of associated companies | | -1 091 | -1 059
Result for the period before sale of PT Melania | | 87 832 | 16 178
Gain on sale PT Melania | | 11 640 | 0
Result for the period | | 99 471 | 16 178

Below we present the segment information per product and per geographical region in accordance with the IFRS profit and loss accounts. The segment result is revenue minus expense that is directly attributable to the segment and the relevant portion of income and expense that can be allocated on a reasonable basis to the segment.

	Closing rate	Average rate
	2021	2020	2019	2021	2020
EUR	0.8816	0.8154	0.8916	0.8480	0.8727

Gross profit by product

2021 - KUSD	Revenue	Cost of sales	Changes in the fair value	Gross profit	% of total
Palm	380 862	-216 913	2 613	166 562	98.4
Rubber	8 059	-10 667	0	-2 608	-1.5
Tea	2 719	-2 574	- 11	134	0.1
Bananas and horticulture	23 085	-19 085	- 197	3 803	2.2
Corporate	1 328	0	0	1 328	0.8
Total	416 053	-249 239	2 404	169 218	100.0

2020 - KUSD	Revenue	Cost of sales	Changes in the fair value	Gross profit	% of total
Palm	236 707	-177 137	176	59 746	95.8
Rubber	8 866	-10 680	0	-1 814	-2.9
Tea	5 858	-6 611	- 35	-788	-1.3
Bananas and horticulture	21 774	-17 976	592	4 390	7.0
Corporate	823	0	0	823	1.3
Total	274 027	-212 403	733	62 357	100.0

Total revenue increased by 51.8% compared with 2020 up to USD 416 million. Palm oil revenue increased by 60.9% primarily due to a combination of higher production volumes and a higher world market price for crude palm oil (CPO). Rubber revenue decreased by 9.1% despite a higher realised unit selling price, due to lower production at PT Agro Muko and the loss of direct sales to external clients by PT Melania, the company that was deconsolidated in 2021.This deconsolidation also resulted in the revenue from tea being almost halved. The revenue in the banana segment, expressed in the functional currency, the euro, increased mainly due to a 3.6% rise in volumes sold. As the bananas are traded in euro, the USD revenue increased by 6.1%, due to the evolution of the EUR/USD exchange rate. Purchases of Fresh Fruit Bunches (FFB) from third parties augmented by KUSD 34 462, due to a rise in the purchased volumes and the increased FFB purchase prices, which are related to CPO prices. The average ex works unit cost price for the oil palm plantations experienced a slight increase by 4.3%. In Indonesia, the high costs of the young mature plantations weighed on the average cost level, while in Papua New Guinea, the excellent production of Hargy Oil Palms Ltd led to a decrease in the unit cost price by 17.7%. The unit cost price of the banana segment remained about the same as in 2020. For the rubber segment, the unit cost prices increased significantly (50.8%): in preparation for the conversion from rubber into palm, production decreased significantly and the remaining net carrying value was depreciated more quickly. Additionally an estimated total of MUSD 6.8 of rubber biological assets will be depreciated over the period 2022-2026. The changes in fair value related to the impact on the measurement of hanging fruits at their fair value (IAS 41R). The gross profit rose from KUSD 62 357 at the end of 2020 to KUSD 169 218 at the end of 2021. The gross profit of the palm segment (98.4% of the total gross profit) increased by KUSD 106 816, thanks to higher production and especially higher net palm oil prices. The average world market price for CPO for 2021 was USD 1 195 per tonne CIF Rotterdam. This is 67.1% higher than over the same period last year. However, it should be noted that in Indonesia the export levy and export tax increased significantly compared to last year. For the entire year 2021, the total impact of the export levy and export tax is estimated at approximately USD 349 per tonne compared with USD 74 per tonne last year. The relatively strong recovery of sales prices for rubber, since the second half of last year, could not prevent a further increase in the negative contribution of the rubber segment to the gross margin. This is mainly due to the decreased production volumes in the rubber estates of PT Bandar Sumatra and PT Agro Muko. Since 2021, the net result of the tea segment represents exclusively the commissions that SIPEF receives from the sale of tea volumes in the market. The profitability of the banana and horticulture activities was confirmed with a gross margin of KUSD 3 803. The segment "corporate" comprises the management fees received from non-group entities, additional commissions on sea freights and any other commissions that are not included in the sales contracts.

Gross profit by geographical segment

2021 - KUSD	Revenue	Cost of sales	Other income	Changes in the fair value	Gross profit	% of total
Indonesia	215 361	-130 497	900	1 392	87 156	51.5
Papua New Guinea	167 920	-91 298	0	1 209	77 831	46.0
Ivory Coast	31 444	-27 445	0	- 197	3 803	2.2
Europe	428	0	0	0	428	0.3
Total	415 153	-249 240	900	2 404	169 218	100.0

2020 - KUSD	Revenue	Cost of sales	Other income	Changes in the fair value	Gross profit	% of total
Indonesia	160 337	-119 228	444	- 421	41 132	66.0
Papua New Guinea	89 279	-73 829	0	562	16 012	24.7
Ivory Coast	23 144	-19 346	0	592	4 390	7.0
Europe	822	0	0	0	822	1.3
Total	273 583	-212 403	444	733	62 357	100.0

Total cost of sales can be split up in the following categories:

Estate charges - includes all charges relating to the field work to produce the base agricultural products (i.e. fresh fruit bunches, latex, tea leaves, bananas, horticulture);
Processing charges - includes all charges relating to the processing of the base agricultural products to the finished agricultural commodities (i.e. palm oil, rubber, tea, ...);
FFB/CPO/latex purchases - includes all purchases from third parties (smallholders) or associates and joint ventures.
Stock movement - includes the variance in stock and changes in fair value;
Changes in fair value includes the changes in the fair value of the biological assets of palm oil, bananas and tea;
Sales charges - includes all direct costs attributable to the sales of the year (i.e. transport charges, palm oil export tax/levy, ...);
General and administrative expenses – includes all costs related to the overall organisation (i.e. general management, financial department, marketing, internal audit, sustainability, etc.).## 8. GOODWILL AND OTHER INTANGIBLE ASSETS

In KUSD	2021	2020
Goodwill	104 782	104 782
Intangible assets	767	787
Gross carrying amount at January 1	104 782	1 078
Acquisitions	0	40
Sales and disposals	0	- 60
Transfers	0	0
Translation differences	0	0
Gross carrying amount at December 31	104 782	767
Accumulated amortization and impairment losses at January 1	0	- 314
Depreciations	0	- 165
Sales and disposals	0	60
Transfers	0	0
Remeasurement	0	0
Accumulated amortization and impairment losses at December 31	0	- 419
Net carrying amount January 1	104 782	473
Net carrying amount December 31	104 782	348

Segment information – geographical

2021

In KUSD	Indonesia	PNG	Ivory Coast	Europe	Others	Total
Intangible assets	0	0	0	348	0	348
Goodwill	104 782	0	0	0	0	104 782
Biological assets	226 144	80 950	277	0	0	307 371
Other property, plant & equipment	253 032	98 848	7 311	704	0	359 896
Investment property	0	0	0	0	0	0
Investments in associates and joint ventures	- 749	0	0	0	4 347	3 598
Other financial assets	46	0	31	15	0	92
Receivables > 1 year	25 666	0	0	0	0	25 666
Deferred tax assets	10 995	0	319	2 237	0	13 550
Total non-current assets	619 916	179 798	7 938	3 304	4 347	815 303
% of total	76.03%	22.05%	0.97%	0.41%	0.53%	100.00%

2020

In KUSD	Indonesia	PNG	Ivory Coast	Europe	Others	Total
Intangible assets	0	0	0	473	0	473
Goodwill	104 782	0	0	0	0	104 782
Biological assets	231 602	83 952	273	0	0	315 826
Other property, plant & equipment	248 665	101 487	3 992	668	0	354 811
Investment property	0	0	0	0	0	0
Investments in associates and joint ventures	- 282	0	0	0	4 912	4 630
Other financial assets	46	0	19	15	0	80
Receivables > 1 year	16 092	0	0	9	0	16 101
Deferred tax assets	10 447	0	363	2 240	0	13 049
Total non-current assets	611 352	185 438	4 645	3 406	4 912	809 753
% of total	75.50%	22.90%	0.57%	0.42%	0.61%	100.00%

Cost of sales and general and administrative expenses

In KUSD	2021	2020
Estate charges	150 127	134 547
Processing charges	33 003	30 894
FFB/CPO/latex purchases	60 143	26 297
Stock movement	-20 333	-3 462
Changes in fair value	2 404	733
Sales charges	21 492	22 661
Cost of sales	246 835	211 670
General and administrative expenses	36 891	31 573
Total cost of sales and general and administrative expenses	283 726	243 243

Estate charges have increased compared to last year due to:
* a general increase in costs due to inflation;
* the additional mature hectares in the Musi Rawas region, whereby estate and general field charges are now increasing annually;
* higher FFB productions in 2021

The processing charges increased slightly compared to prior year due to a higher number of FFB’s being processed.

FFB / CPO / latex purchases have increased with more than 125% compared to prior year. The increase is a consequence of higher CPO prices in 2021 which results in a higher FFB price, an increase in purchased quantities within the framework of the plasma law and the recovery of smallholder productions in Papua New Guinea which resulted in a higher supply of third party FFB’s.

Stock movement has increased primarily due to the increased stock of palm products at year-end, combined with an increased value of the stock palm products following the high world market prices at year-end.

Sales charges have remained relatively stable despite increased export tax and export levies in Indonesia during 2021. This is due to an increase of the Group’s local sales in Indonesia compared to 2020. On these local sales no export tax and levy is applicable. However in practice a comparable amount is deducted immediately from the selling price for local Indonesian sales, resulting in a comparable net selling price.

Total depreciation in the estate and processing charges amounts to KUSD 40 222. A total of KUSD 3 482 of depreciation charges is recorded in the "General and administrative" expenses and 4 912 KUSD in "other operating income/charges". The depreciations in the “other operating income/charges” relate for roughly KUSD 4 229 to the accelerated depreciation of the oil palms in PT Dendymarker. In note 20 the “other operating income/charges” are presented in more detail.

The general and administrative expenses increased compared with last year, mainly due to the increased bonus provision because of the better results.

Gross profit by geographical segment

2021 - KUSD

	Revenue	Cost of sales	Other income	Changes in the fair value	Gross profit	% of total
Indonesia	215 361	-130 497	900	1 392	87 156	51.5
Papua New Guinea	167 920	-91 298	0	1 209	77 831	46.0
Ivory Coast	31 444	-27 445	0	-	197	3 803
Europe	428	0	0	0	428	0.3
Total	415 153	-249 240	900	2 404	169 218	100.0

2020 - KUSD

	Revenue	Cost of sales	Other income	Changes in the fair value	Gross profit	% of total
Indonesia	160 337	-119 228	444	-	421	41 132
Papua New Guinea	89 279	-73 829	0	562	16 012	24.7
Ivory Coast	23 144	-19 346	0	592	4 390	7.0
Europe	822	0	0	0	822	1.3
Total	273 583	-212 403	444	733	62 357	100.0

The profitability of the banana and horticulture activities was confirmed with a gross margin of KUSD 3 803. The segment "corporate" comprises the management fees received from non-group entities, additional commissions on sea freights and any other commissions that are not included in the sales contracts.

Revenue by location of the debtors

In KUSD	2021	2020
Indonesia	205 284	133 264
The Netherlands	152 297	85 340
France	9 408	14 839
Malaysia	8 460	1 377
Switzerland	7 822	44
Belgium	6 360	4 009
United Kingdom	5 677	2 459
Singapore	5 627	20 507
United States	3 726	4 001
Ivory coast	3 602	2 273
Spain	2 634	117
Ireland	1 671	2 003
China	1 557	1 065
Germany	928	877
Poland	485	26
United Arab. Emirates	195	0
Afghanistan	116	824
Pakistan	111	914
Other	93	88
Total	416 053	274 027

The revenue of the Group is realised against a relatively small number of first-class buyers: per product about 90% of the turnover is realized with a maximum of 10 clients. For additional information we refer to note 26 – financial instruments.# GOODWILL AND OTHER INTANGIBLE ASSETS

	2021	2020
	In KUSD	In KUSD
Goodwill
Intangible assets
Gross carrying amount at January 1	104 782	104 782
Acquisitions	0	0
Sales and disposals	0	0
Transfers	0	0
Translation differences	0	0
Gross carrying amount at December 31	104 782	104 782

Accumulated amortization and impairment losses at January 1	0	0
Depreciations	0	0
Sales and disposals	0	0
Transfers	0	0
Remeasurement	0	0
Accumulated amortization and impairment losses at December 31	0	0

Net carrying amount January 1	104 782	104 782
Net carrying amount December 31	104 782	104 782

27 SIPEF Financial statements 2021

Goodwill impairment analysis

Goodwill is the positive difference between the acquisition price of a subsidiary, associated company or joint venture and the share of the Group in the fair value of the identifiable assets and liabilities of the acquired entity on the acquisition date. Under standard IFRS 3 – Business Combinations, goodwill is not amortized, but rather tested for impairment.

Goodwill and intangible fixed assets are tested annually by management to see whether they have been exposed to impairment in accordance with the accounting policies in note 3 (regardless of whether there are indications of impairment). To be able to assess the necessity of an impairment, the goodwill is allocated to a cash-generating unit (CGU). A cash-generating unit is the smallest identifiable group that generates cash that is to a large degree independent of the inflow of cash from other assets or groups of assets.

This cash-generating unit is analysed on each balance sheet date to determine whether the carrying value of the goodwill can be fully recovered. If the realizable value of the cash-generating unit is lower in the long term than the carrying value, an impairment is recognized on the income statement in the amount of this difference.

In the SIPEF model, the cash-generating unit is compared with the total underlying asset related to the palm oil segment as of 31 December 2021. This consists of the following items:

Assets (in KUSD)*	2021
Biological assets – bearer plants	305 432
Other fixed assets	350 219
Goodwill	104 782
Current assets – current liabilities	13 438
Total	773 872

Assets include only the entities with palm oil activities

The SIPEF group has defined the “cash-generating unit” as the operational palm oil segment. It consists of all cash flows from the palm oil activities of all plantations in Indonesia and Papua New Guinea. The cash flows from the sale of rubber, tea and bananas are not included here, as the goodwill has been allocated exclusively to the whole of the palm oil segment.

The recoverable value of the cash-generating units to which goodwill is allocated was determined by means of a calculation using a discounted cash flow model (DCF model). The starting point is the operational plans of the Group, which look a decade ahead (to 2031) and have been approved by the Board of Directors. In this model, the macro-economic parameters, such as palm oil price and inflation, are deemed constant for each year.

The constant palm oil price used in the model (USD 755/ton) is management's best estimate of the long-term palm oil price expressed as CIF Rotterdam. The negative impact of the altered export tax and export levy schemes in Indonesia have been included in the future cash flows. The average palm oil price used in the goodwill impairment amounts to USD 755/ton whereas the spot price per 31 December 2021 amount to USD 1 305/ton.

In the model, the growth of sales is the same as the normal improvement of the production volumes due to the maturity of the palm trees of the various subsidiaries. Any improvement in the future EBITDA margins in the model is a normal consequence of the same improvement in production volumes. The current model was established with a weighted average cost of capital (after tax) of 8.19% and an average tax rate of 22%-30%. The terminal value in the discounted cash flow model is based on perpetual growth of 2% in accordance with the Gordon growth model.

In the model we use a sensitivity analysis for various palm oil prices and various weighted average costs of capital (WACC):

Palm oil price (CIF Rotterdam)	WACC
Scenario 1 USD 705/ton CIF Rotterdam	Scenario 1 7.19%
Scenario 2 (base case) USD 755/ton CIF Rotterdam	Scenario 2 (base case) 8.19%
Scenario 3 USD 805/ton CIF Rotterdam	Scenario 3 9.19%

Summary assumptions of 2021:

PO / WACC	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	Scenario 1	Scenario 4	Scenario 7
USD 755/ton CIF Rotterdam	Scenario 2	Scenario 5 (base case)	Scenario 8
USD 805/ton CIF Rotterdam	Scenario 3	Scenario 6	Scenario 9

Summary assumptions of 2020:

PO / WACC	7.01%	8.01%	9.01%
USD 663/ton CIF Rotterdam	Scenario 1	Scenario 4	Scenario 7
USD 713/ton CIF Rotterdam	Scenario 2	Scenario 5 (base case)	Scenario 8
USD 763/ton CIF Rotterdam	Scenario 3	Scenario 6	Scenario 9

For the sensitivity analysis, the price was increased and decreased by USD 50/ton. The WACC was increased and decreased with one percent. A sensitivity matrix is shown below for the total discounted cash flow for various palm oil prices and various weighted average costs of capital (WACC).

Sensitivity matrix

WACC/PO price (in KUSD)	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	931 010	751 748	623 023
USD 755/ton CIF Rotterdam	1 662 152	1 366 300	1 153 492
USD 805/ton CIF Rotterdam	2 046 183	1 689 049	1 432 036

| Value of underlying assets* | 773 872 | 773 872 | 773 872 |

Concerns the underlying assets related to the palm oil segment

The headroom is the difference between the total discounted cash flows and the value of the underlying asset:

Headroom (in KUSD)

	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	157 138	-22 124	-150 850
USD 755/ton CIF Rotterdam	888 279	592 428	379 620
USD 805/ton CIF Rotterdam	1 272 311	915 177	658 163

Green = base scenario

We also calculate the breakeven palm oil price based on the various WACCs.

Breakeven price

	7.19%	8.19%	9.19%
USD/ton	633 $/ton	659 $/ton	684 $/ton

Management is of the opinion that the assumptions used in the calculation of the value in use as described above give the best estimates of future development. The sensitivity analysis shows that goodwill is in most of the cases fully recoverable. As a result, management is of the opinion that there is no indication of any impairment. Future sales prices continue to be difficult to predict over a long period of time and will be continuously monitored in the future.

28 The connection to the world of sustainable tropical agriculture

Summary assumptions of 2021:

PO / WACC	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	Scenario 1	Scenario 4	Scenario 7
USD 755/ton CIF Rotterdam	Scenario 2	Scenario 5 (base case)	Scenario 8
USD 805/ton CIF Rotterdam	Scenario 3	Scenario 6	Scenario 9

Summary assumptions of 2020:

PO / WACC	7.01%	8.01%	9.01%
USD 663/ton CIF Rotterdam	Scenario 1	Scenario 4	Scenario 7
USD 713/ton CIF Rotterdam	Scenario 2	Scenario 5 (base case)	Scenario 8
USD 763/ton CIF Rotterdam	Scenario 3	Scenario 6	Scenario 9

Sensitivity matrix

WACC/PO price (in KUSD)	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	931 010	751 748	623 023
USD 755/ton CIF Rotterdam	1 662 152	1 366 300	1 153 492
USD 805/ton CIF Rotterdam	2 046 183	1 689 049	1 432 036

| Value of underlying assets* | 773 872 | 773 872 | 773 872 |

Concerns the underlying assets related to the palm oil segment

The headroom is the difference between the total discounted cash flows and the value of the underlying asset:

Headroom (in KUSD)

	7.19%	8.19%	9.19%
USD 705/ton CIF Rotterdam	157 138	-22 124	-150 850
USD 755/ton CIF Rotterdam	888 279	592 428	379 620
USD 805/ton CIF Rotterdam	1 272 311	915 177	658 163

Green = base scenario

We also calculate the breakeven palm oil price based on the various WACCs.

Breakeven price

	7.19%	8.19%	9.19%
USD/ton	633 $/ton	659 $/ton	684 $/ton

29 SIPEF Financial statements 2021

9. BIOLOGICAL ASSETS – BEARER PLANTS

Movement schedule biological assets - bearer plants

The balance sheet movements in biological assets – bearer plants can be summarized as follows:

	2021	2020
	In KUSD	In KUSD
Gross carrying amount at January 1	429 192	407 810
Change in consolidation scope	- 17 474	0
Acquisitions	27 396	26 971
Sales and disposals	- 22 594	- 4 261
Transfers	80	- 1 454
Other	0	0
Translation differences	- 114	128
Gross carrying amount at December 31	416 487	429 192

Accumulated depreciation and impairment losses at January 1	- 113 365	- 101 467
Change in consolidation scope	4 924	0
Depreciation	- 21 462	- 15 120
Sales and disposals	20 694	3 326
Transfers	0	0
Other	0	0
Translation differences	92	- 104
Accumulated depreciation and impairment losses at December 31	- 109 116	- 113 365

Net carrying amount January 1	315 827	306 343
Net carrying amount December 31	307 371	315 826

10.# 10. OTHER PROPERTY, PLANT AND EQUIPMENT

2021

In KUSD

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	Leasing In progress	Land rights	Total
Gross carrying amount at January 1	188 549	190 336	72 629	34 138	3 304	16 492	125 533
Change in consolidation scope	-7 491	-6 134	-1 322	-834	0	-1 131	-197
Acquisitions	13 846	4 833	3 987	1 544	247	10 448	6 351
Sales and disposals	-859	-1 199	-3 017	-90	0	-4 142	-259
Transfers	7 722	237	505	186	0	-8 729	0
Other	-12	12	0	0	0	0	0
Translation differences	-922	-231	-160	-78	0	-144	-17
Gross carrying amount at December 31	200 834	187 855	72 622	34 867	3 551	12 794	131 411

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	Leasing In progress	Total
Accumulated depreciation and impairment losses at January 1	-81 098	-114 635	-56 458	-20 431	-547	-3 002
Change in consolidation scope	5 854	5 390	1 193	541	0	181
Depreciation	-7 846	-10 635	-5 473	-2 454	-416	-29
Sales and disposals	725	1 142	2 770	84	0	0
Transfers	1	0	0	0	0	0
Other	0	0	0	0	0	0
Translation differences	713	196	112	68	0	16
Accumulated depreciation and impairment losses at December 31	-81 651	-118 542	-57 856	-22 192	-963	-2 834

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	Leasing In progress	Land rights	Total
Net carrying amount January 1	107 451	75 701	16 171	13 707	2 757	16 492	122 531
Net carrying amount December 31	119 183	69 313	14 766	12 675	2 588	12 794	128 577

SIPEF Financial statements 2021

2020

In KUSD

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	In progress	Land rights	Leasing	Total
Gross carrying amount at January 1	180 654	186 614	69 811	32 711	3 253	16 696	122 422	612 163
Change in consolidation scope	0	0	0	0	0	0	0	0
Acquisitions	6 675	2 990	4 009	668	122	5 655	5 586	25 705
Sales and disposals	-778	-1 065	-1 716	-322	0	-3 514	0	-7 395
Transfers	985	1 525	361	994	0	-2 411	0	1 454
Other	-11	11	0	0	-71	60	-2 495	-2 506
Translation differences	1 024	261	164	87	0	6	20	1 562
Gross carrying amount at December 31	188 549	190 336	72 629	34 138	3 304	16 492	125 533	630 983

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	In progress	Total
Accumulated depreciation and impairment losses at January 1	-73 094	-104 561	-52 061	-17 584	-358	-5 434
Change in consolidation scope	0	0	0	0	0	0
Depreciation	-7 767	-10 884	-5 768	-2 953	-386	-45
Sales and disposals	628	1 029	1 495	180	0	0
Transfers	1	0	0	0	0	0
Other	-87	0	0	0	197	2 495
Translation differences	-779	-220	-124	-74	0	-18
Accumulated depreciation and impairment losses at December 31	-81 098	-114 635	-56 458	-20 431	-547	-3 002

	Land, buildings and infrastructure	Installations and machinery	Vehicles	Office equipment, furniture and others	In progress	Land rights	Leasing	Total
Net carrying amount January 1	107 560	82 053	17 750	15 127	2 895	16 696	116 988	359 071
Net carrying amount December 31	107 451	75 701	16 171	13 707	2 757	16 492	122 531	354 811

The acquisitions included, in addition to the standard replacement capital expenditure, investments for the improvement of the logistics and infrastructure of the plantations and the palm oil extraction mills. Below is a table with the proprietary rights on which the plantations of the SIPEF group are established:

	Hectares	Type	Maturity	Crop
PT Tolan Tiga Indonesia	6 042	Concession	2023	Oil palm
PT Tolan Tiga Indonesia	2 437	Concession	2024	Oil palm
PT Eastern Sumatra Indonesia	3 178	Concession	2023	Oil palm
PT Kerasaan Indonesia	2 362	Concession	2023	Oil palm
PT Bandar Sumatra Indonesia	1 413	Concession	2024	Rubber
PT Melania Indonesia	5 140	Concession	2023	Rubber and Tea
PT Toton Usaha Mandiri	1 199	Concession	2046	Oil palm
PT Agro Muko	2 256	Concession	2044	Oil palm
PT Agro Muko	2 500	Concession	2020*	Oil palm
PT Agro Muko	315	Concession	2031	Oil palm
PT Agro Muko	1 410	Concession	2028	Oil palm
PT Agro Muko	2 903	Concession	2028	Oil palm
PT Agro Muko	5 150	Concession	2044	Oil palm
PT Agro Muko	2 287	Concession	2044	Oil palm
PT Agro Muko	2 185	Concession	2022	Oil palm
PT Agro Muko	1 515	Concession	2022	Rubber
PT Agro Muko	2 100	Concession	2022	Oil palm
PT Agro Muko	232	Concession	2056	Oil palm
PT Umbul Mas Wisea	4 397	Concession	2048	Oil palm
PT Umbul Mas Wisea	2 071	Concession	2048	Oil palm
PT Umbul Mas Wisea	679	Concession	2049	Oil palm
PT Umbul Mas Wisea	462	Concession	2049	Oil palm
PT Umbul Mas Wisea	155	Concession	2049	Oil palm
PT Dendymarker Indah Lestari	13 705	Concession	2028	Oil palm
PT Mukomuko Agro Sejahtera	1 705	Concession	2053	Oil palm
PT Mukomuko Agro Sejahtera (STGE)	1 770	Concession	2024	Oil palm
PT Timbang Deli Indonesia	972	Concession	2023	Rubber and oil palm
Hargy Oil Palms Limited	128	Concession	2075	Oil palm
Hargy Oil Palms Limited	2 967	Concession	2076	Oil palm
Hargy Oil Palms Limited	17	Concession	2077	Oil palm
Hargy Oil Palms Limited	6 460	Concession	2082	Oil palm
Hargy Oil Palms Limited	2 900	Concession	2101	Oil palm
Hargy Oil Palms Limited	170	Concession	2102	Oil palm
Hargy Oil Palms Limited	695	Concession	2106	Oil palm
Hargy Oil Palms Limited	18	Concession	2113	Oil palm
Hargy Oil Palms Limited	246	Concession	2117	Oil palm
Plantations J. Eglin SA	1 021	Freehold	n/a	bananas and horticulture
Plantations J. Eglin SA	743	Provisional concession	n/a	bananas and horticulture
Total	85 905

	Hectares	Type	Maturity	Crop
PT Mukomuko Agro Sejahtera	623	In negotiation	-	Oil palm
PT Mukomuko Agro Sejahtera (BKDE)	1 513	In negotiation	-	Oil palm
PT Citra Sawit Mandiri	1 814	In negotiation	-	Oil palm
PT Agro Rawas Ulu	5 712	In negotiation	-	Oil palm
PT Agro Kati Lama	7 568	In negotiation	-	Oil palm
PT Agro Kati Lama	3 091	In negotiation	-	Oil palm
PT Agro Muara Rupit	4 811	In negotiation	-	Oil palm
PT Agro Muara Rupit	7 498	In negotiation	-	Oil palm
PT Agro Muara Rupit	1 303	In negotiation	-	Oil palm
PT Agro Muara Rupit	4 201	In negotiation	-	Oil palm
Total	38 134

* All documentation for the renewal of the land rights which matured in 2020 has been delivered in time to the relevant authorities. The authorities are in the process of reviewing and approving. There is no indication that these land rights will not be renewed. In addition, our subsidiary Hargy Oil Palms Ltd has a total of 4 166 hectares of planted area on subleased land.

32 The connection to the world of sustainable tropical agriculture

Hectares

	Hectares	Type	Maturity	Crop
PT Tolan Tiga Indonesia	6 042	Concession	2023	Oil palm
PT Tolan Tiga Indonesia	2 437	Concession	2024	Oil palm
PT Eastern Sumatra Indonesia	3 178	Concession	2023	Oil palm
PT Kerasaan Indonesia	2 362	Concession	2023	Oil palm
PT Bandar Sumatra Indonesia	1 413	Concession	2024	Rubber
PT Melania Indonesia	5 140	Concession	2023	Rubber and Tea
PT Toton Usaha Mandiri	1 199	Concession	2046	Oil palm
PT Agro Muko	2 256	Concession	2044	Oil palm
PT Agro Muko	2 500	Concession	2020*	Oil palm
PT Agro Muko	315	Concession	2031	Oil palm
PT Agro Muko	1 410	Concession	2028	Oil palm
PT Agro Muko	2 903	Concession	2028	Oil palm
PT Agro Muko	5 150	Concession	2044	Oil palm
PT Agro Muko	2 287	Concession	2044	Oil palm
PT Agro Muko	2 185	Concession	2022	Oil palm
PT Agro Muko	1 515	Concession	2022	Rubber
PT Agro Muko	2 100	Concession	2022	Oil palm
PT Agro Muko	232	Concession	2056	Oil palm
PT Umbul Mas Wisea	4 397	Concession	2048	Oil palm
PT Umbul Mas Wisea	2 071	Concession	2048	Oil palm
PT Umbul Mas Wisea	679	Concession	2049	Oil palm
PT Umbul Mas Wisea	462	Concession	2049	Oil palm
PT Umbul Mas Wisea	155	Concession	2049	Oil palm
PT Dendymarker Indah Lestari	13 705	Concession	2028	Oil palm
PT Mukomuko Agro Sejahtera	1 705	Concession	2053	Oil palm
PT Mukomuko Agro Sejahtera (STGE)	1 770	Concession	2024	Oil palm
PT Timbang Deli Indonesia	972	Concession	2023	Rubber and oil palm
Hargy Oil Palms Limited	128	Concession	2075	Oil palm
Hargy Oil Palms Limited	2 967	Concession	2076	Oil palm
Hargy Oil Palms Limited	17	Concession	2077	Oil palm
Hargy Oil Palms Limited	6 460	Concession	2082	Oil palm
Hargy Oil Palms Limited	2 900	Concession	2101	Oil palm
Hargy Oil Palms Limited	170	Concession	2102	Oil palm
Hargy Oil Palms Limited	695	Concession	2106	Oil palm
Hargy Oil Palms Limited	18	Concession	2113	Oil palm
Hargy Oil Palms Limited	246	Concession	2117	Oil palm
Plantations J. Eglin SA	1 021	Freehold	n/a	bananas and horticulture
Plantations J. Eglin SA	743	Provisional concession	n/a	bananas and horticulture

11. RECEIVABLES > 1 YEAR

	In KUSD
	2021	2020
Receivables > 1 year	25 666	16 101

The receivables > 1 year as per 31 December 2021 mainly consist out of plasma receivables in Indonesia.

	In KUSD
	2021	2020
Plasma receivable	25 666	16 092
Other	0	9
Total	25 666	16 101

Plasma receivables represent a loan granted to the smallholders for the accumulated costs to develop plasma plantations which are currently being financed by the Group. When the plasma plantations start to mature, the plasma farmers are obliged to sell their harvests to the Group and a portion of the resulting proceeds will be used to repay the loans. The plasma receivables will be gradually repaid from the moment the plasma holders become a going concern plantation whereby proceeds of the FFB sales will be partly used to repay the loan. The Group has calculated the expected credit loss in accordance with IFRS 9 and has done an impairment test on the outstanding plasma receivables which showed no basis for impairment based on the long-term repayment plans. The repayment of the plasma loans will be determined largely by the plasma fruit production and world palm oil prices over the next years and is also dependant on the terms and conditions of the plasma scheme. Therefore it is not possible to predict the exact timing of repayment. The Group currently has a total short term plasma receivable of KUSD 1 032 – included in the current other receivables - and a long term plasma receivable of KUSD 25 666.

12. INVENTORIES

Analysis of inventories:

	In KUSD
	2021	2020
Raw materials and supplies	21 508	17 658
Finished goods	26 509	11 990
Total	48 017	29 648

The remaining stock of raw materials and supplies has increased with KUSD 3 850 in comparison to prior year. This is mainly due to timing differences in purchases. The increase in finished goods is caused by an increase in CPO/PK stock per year-end and the higher CPO prices which results in a higher stock value.

13. BIOLOGICAL ASSETS

The total biological assets at the end of the year is presented below:

	In KUSD
	2021	2020
Biological assets	9 168	6 763

The growing agricultural produce of palm oil is defined as the oil contained in the palm fruit. When the palm fruit contains oil, then this distinct asset is recognised and the fair value is estimated based on:

The estimated quantity of oil that is available in the palm fruit;
The estimated sales price of palm oil at the time of closing;
The estimated cost to harvest and process the palm fruit;
The estimated sales charges (transport, export tax, …).

Different scientific studies have shown that the oil in the palm oil fruit develops exponentially in approximately 4 weeks. The estimated quantity of oil in the palm oil fruit is therefore determined based on the harvest of the 4 weeks after the time of closing. In the calculation of the estimated quantity of available oil, the weighted importance of the harvest decreases step-by-step per week, in order to approximate the quantity of oil at the time of closing as well as possible. The fair value of the biological assets calculated at the closing value on the 31st of December 2021 is based on level 2 data input.

At 31 December 2021 the total biological assets of palm oil amounted to KUSD 6 306 compared to KUSD 3 668 at 31 December 2020.

	Carrying value of the biological assets - palm oil	Gross Impact income statement (before tax)
-10%	5 675	- 631
Carrying amount	6 306
+10%	6 937	631

The estimated sales price and the estimated costs and charges are the actual sales prices and costs at the time of closing. The results from the change of the fair value of the palm fruit are included in ‘changes in fair value of biological assets’.

The biological assets at the end of December also contain the growing biological produce of bananas of our subsidiary Plantations J. Eglin SA. The growing agricultural produce of bananas is defined as the banana bunches which will be harvested in 3 months, weighted at their pro-rata for each remaining harvesting month. At 3 months before harvest, a reliable flower count is done, which is used to determine the estimated growing biological produce. The net selling price to value the growing biological produces is determined as the current market prices reduced by the remaining costs to sell the biological produce. The balance of 2021 amounted to KUSD 2 861 (2020 KUSD 3 058) and has decreased due to the less favourable production outlook in first quarter compared to last year.

	Carrying value of the biological assets - bananas	Gross Impact income statement (before tax)
-10%	2 575	- 286
Carrying amount	2 861
+10%	3 147	286

14. OTHER CURRENT RECEIVABLES AND OTHER CURRENT PAYABLES

The ‘other receivables’ have remained relatively stable at KUSD 49 878 in 2021 compared to KUSD 49 146 in 2020. The other receivables mainly consist of VAT receivables in the various entities, but also include a current account with Verdant Bioscience PTE Ltd (KUSD 8 588 in 2021 and KUSD 7 800 in 2020) and the smallholder receivables in Hargy Oil Palms Ltd. In 2020 this section also contained a receivable of KUSD 6 929 following the sale of Sipef-CI. This receivable was entirely received by the SIPEF group during 2021. The remaining increase in ‘other receivables’ is explained by an increase in the GST receivable (VAT receivable) in Hargy Oil Palms Ltd (+ KUSD 1 952), in our Indonesian subsidiaries, primarily the South Sumatra Group due to the continuing expansion (+ KUSD 2 002). Additionally there is an increase in PT Tolan Tiga of KUSD 5 211 relating to the current account towards PT Melania which is no longer fully eliminated after PT Melania’s classification as a joint-venture held for sale. The remaining increase consist of various smaller items in our different subsidiaries. The Group has calculated the expected credit loss in accordance with IFRS 9 and determined it to be immaterial. The ‘other payables’ (KUSD 11 519 in 2021 and KUSD 8 805 in 2020) mainly concern social obligations (salaries to be paid, provisions for holiday pay and bonus) and have increased slightly in comparison to prior year, primarily due to an increased bonus provision following the better results of the SIPEF group in 2021.

15. SHAREHOLDERS’ EQUITY

Capital stock and share premium

The issued capital of the company as at December 31, 2021 amounts to KUSD 44 734, represented by 10 579 328 fully paid ordinary shares without nominal value.

	2021	2020	Difference
Number of shares	10 579 328	10 579 328	0

	In KUSD
	2021	2020	Difference
Capital	44 734	44 734	0
Share premium	107 970	107 970	0
Total	152 704	152 704	0

15. SHAREHOLDERS’ EQUITY

Capital stock and share premium

The issued capital of the company as at December 31, 2021 amounts to KUSD 44 734, represented by 10 579 328 fully paid ordinary shares without nominal value.

	2021	2020	Difference
Number of shares	10579328	10579328	0

In KUSD	2021	2020
Capital	44734	44734
Share premium	107970	107970
Total	152704	152704

35 SIPEF Financial statements

	2021	2020	2021	2020
	KUSD	KUSD	KEUR	KEUR
Treasury shares - opening balance	10 277	10 277	8 389	8 389
Acquisition treasury shares	1 244	0	1 101	0
Treasury shares - ending balance	11 521	10 277	9 490	8 389

Since the start of the share buy-back program on 22 September 2011, SIPEF has bought back 178 000 shares for a total amount of KEUR 9 490, corresponding to 1.6825% of the total shares outstanding, as cover for a share option plan for the management.

Authorised capital

The extraordinary general meeting of shareholders on June 10, 2020 authorised the board of directors to increase the capital in one or more operations by an amount of KUSD 44 734 over a period of 5 years after the publication of the renewal.

Shareholder structure

The company has received following shareholders declarations:

	Number of shares	Date***	Denominator	%
Acting in concert
Ackermans & Van Haaren NV*	3 894 234	31/12/2021	10 579 328	36.810
Cabra NV**	1 001 032	31/12/2021	10 579 328	9.462
Cabra P**	100 000	31/12/2021	10 579 328	0.945
Cabra T**	100 000	31/12/2021	10 579 328	0.945
Cabra V**	100 000	31/12/2021	10 579 328	0.945
Theodora Bracht**	2 000	31/12/2021	10 579 328	0.019
Priscilla Bracht**	0	31/12/2021	10 579 328	0.000
Victoria Bracht**	0	31/12/2021	10 579 328	0.000
Total votes acting in concert	5 197 266			49.126

*Including 178 000 own shares
** Group Bracht
*** Not the same date as the date of notifying

Translation differences

Translation differences consists of all the differences related to the translation of the financial statements of our subsidiaries for which the functional currency is different from the presentation currency of the Group (USD). The deviation from last year is due to the movement of the USD versus the EUR (KUSD -719) and the change in consolidation scope due to the sale of PT Melania (KUSD 1 091).

In KUSD	2021	2020
Opening balance at January 1	-11038	-11793
Movement, full consolidation	-719	755
Movement, change in consolidation scope	1091	0
Ending balance at December 31	-10666	-11038

Dividends

On February 15, 2022 a dividend of KEUR 21 159 (EUR 2.00 gross per ordinary share) has been recommended by the board of directors but has not yet been approved by the general meeting of shareholders of SIPEF and is therefore not provided for in the financial statements as at December 31, 2021.

Capital management

The capital structure of the Group is based on the financial strategy as defined by the board of directors. Summarized, this strategy consists of an expansion policy while respecting a very limited debt ratio. The management puts forward yearly the plan for approval by the board of directors.

Chain of control

Chain of control above Ackermans & Van Haaren NV
I. Ackermans & Van Haaren NV is directly controlled by Scaldis Invest NV, a company incorporated under Belgian law.
II. Scaldis Invest NV is directly controlled by Belfimas NV, a company incorporated under Belgian law.
III. Belfimas NV is directly controlled by Celfloor SA, a company incorporated under Luxembourg law.
IV. Celfloor SA is directly controlled by Apodia International Holding BV, a company incorporated under Dutch law.
V. Apodia International Holding BV is directly controlled by Palamount SA, a company incorporated under Luxembourg law.
VI. Palamount SA is directly controlled by Stichting administratiekantoor “Het Torentje”, incorporated under Dutch law.
VII. Stichting Administratiekantoor “Het Torentje” is the ultimate controlling shareholder.
Chain of control above Cabra NV
Priscilla Bracht, Theodora Bracht and Victoria Bracht exercise joint control over Cabra NV.
Chain of control above Cabra P NV, Cabra T NV and Cabra V NV
Cabra P NV, Cabra T NV and Cabra V NV are controlled by, respectively, Priscilla Bracht, Theodora Bracht and Victoria Bracht.
Chain of control above SIPEF
Ackermans & van Haaren NV and Bracht Group jointly exercise control over SIPEF.

16. NON-CONTROLLING INTERESTS

According to previous Indonesian law, no foreign investor was allowed to own more than 95% of the shares of a plantation company. Therefore, most of the Indonesian subsidiaries have at least a 5% non-controlling interest. The non-controlling interests of our Indonesian subsidiaries mainly consist of one Indonesian pension fund. Following an alteration in the law in 2020, foreign investors are now allowed to own 100% of the shares of a plantation company. The table below presents the non-controlling interests per company, as well as their share of the equity and the profit of the year.

	2021		2020
	In KUSD	% Non- controlling interests	Share of the equity	Share of the profit of the year
PT Tolan Tiga Indonesia	20 610	5.00	1 344	5.00
PT Eastern Sumatra Indonesia	6 105	9.75	509	9.75
PT Kerasaan Indonesia	6 004	45.85	1 774	45.85
PT Bandar Sumatra Indonesia	1 139	9.75	- 125	9.75
PT Melania Indonesia	235	2.75	- 3	9.75
PT Mukomuko Agro Sejahtera	- 343	14.26	20	14.26
PT Umbul Mas Wisesa	- 537	5.10	248	5.10
PT Citra Sawit Mandiri	- 201	5.10	63	5.10
PT Toton Usaha Mandiri	156	5.10	97	5.10
PT Agro Rawas Ulu	- 194	5.00	- 22	5.00
PT Agro Kati Lama	- 700	5.00	- 24	5.00
PT Agro Muara Rupit	- 264	5.10	- 126	5.10
PT Agro Muko	9 259	9.75	2 391	9.75
PT Dendymarker Indah Lestari	-2 358	5.00	- 425	9.75
Jabelmalux SA	- 59	0.11	0	0.11
Total	38 854		5 722

The non-controlling interest's share of the property, plant and equipment (including biological assets - bearer plants) amounts to KUSD 35 091 in 2021 (2020: KUSD 35 980).

36 The connection to the world of sustainable tropical agriculture

Chain of control

Chain of control above Ackermans & Van Haaren NV
I. Ackermans & Van Haaren NV is directly controlled by Scaldis Invest NV, a company incorporated under Belgian law.
II. Scaldis Invest NV is directly controlled by Belfimas NV, a company incorporated under Belgian law.
III. Belfimas NV is directly controlled by Celfloor SA, a company incorporated under Luxembourg law.
IV. Celfloor SA is directly controlled by Apodia International Holding BV, a company incorporated under Dutch law.
V. Apodia International Holding BV is directly controlled by Palamount SA, a company incorporated under Luxembourg law.
VI. Palamount SA is directly controlled by Stichting administratiekantoor “Het Torentje”, incorporated under Dutch law.
VII. Stichting Administratiekantoor “Het Torentje” is the ultimate controlling shareholder.
Chain of control above Cabra NV
Priscilla Bracht, Theodora Bracht and Victoria Bracht exercise joint control over Cabra NV.
Chain of control above Cabra P NV, Cabra T NV and Cabra V NV
Cabra P NV, Cabra T NV and Cabra V NV are controlled by, respectively, Priscilla Bracht, Theodora Bracht and Victoria Bracht.
Chain of control above SIPEF
Ackermans & van Haaren NV and Bracht Group jointly exercise control over SIPEF.

16. NON-CONTROLLING INTERESTS

The non-controlling interest's share of the property, plant and equipment (including biological assets - bearer plants) amounts to KUSD 35 091 in 2021 (2020: KUSD 35 980).

SIPEF Financial statements 2021

The movements of the year can be summarized as follows:

In KUSD	2021	2020
At the end of the preceding period	35 862	34 325
Profit for the period attributable to non-controlling interests	5 722	2 055
Defined Benefit Plans - IAS19R	2	-95
Distributed dividends	-2 306	-200
Equity transactions with non-controlling parties	0	-223
Other	-426	0
At the end of the period	38 854	35 862

The distributed dividends to non-controlling interests consist of:

In KUSD	2021	2020
PT Kerasaan Indonesia	1 376	0
PT Melania Indonesia	930	0
PT Eastern Sumatra Indonesia	0	200
Total	2 306	200

The dividends from PT Kerasaan and PT Melania have been declared and paid in 2021. There are no limitations to the transfer of funds. The non-controlling interests have no rights to use the assets of the Group or to repay the liabilities of the subsidiaries. The non-controlling interests do not have significant protective rights. There are no restrictions to realise assets and settle liabilities of subsidiaries.

17. PROVISIONS

In KUSD	2021	2020
Provisions	1 125	1 354

The provisions are entirely related to a VAT dispute in Indonesia (KUSD 1 125). During 2021 there have only been a limited amount of court cases which were settled. It is difficult to make an estimate of the settlement time of the dispute.

18. PENSION LIABILITIES

Defined benefit plans

Pension liabilities mainly represent defined benefit plans in Indonesia. These pension plans, set up in order to pay a lump sum amount at the time of retirement, are not financed with a third party. The total number of employees affected by the pension plan amounts to 8 569. The pension plan is payable to an employee at the age of 55 or after 30 years of seniority, whichever comes first. Since the pension plan is adjusted by future salary increases and discount rates, the pension plan is exposed to Indonesia's future salary expectations, as well as Indonesia's inflation and interest rate risk. Furthermore, the pension plan is payable in Indonesian Rupiah, exposing it to a currency risk. We refer to note 26 for further details concerning the currency risk of the Group. As the pension plan is unfunded, there is no risk relating to a return on plan assets.

The following reconciliation summarizes the variation of total pension liabilities between 2020 and 2021:

In KUSD	Indonesia	Ivory Coast	Total
	2020	2021
Pension cost	24 039	772	24 810
Payment	5 085	143	5 228
Exchange	-1 688	-20	-1 708
Translation difference	-	0	-
Change consolidation scope	-214	-61	-214
Other	-5 724	-42	-61
Total	21 498	792	22 290

The change in Consolidation scope relates to the sale of PT Melania. The sale is explained in more detail in note 30.

The following assumptions are used in the pension calculation of Indonesia:

	2021	2020
Discount rate	7.50%	7.75%
Future salary increase	5.00%	5.25%
Assumed retirement age	55 years or 30 years of seniority	55 years or 30 years of seniority

Pension liabilities in Indonesia have changed as follows:

In KUSD	2021	2020
Opening	24 039	22 408
Service cost	3 060	2 260
Interest cost	1 386	1 865
Benefits paid	-1 688	-3 426
Actuarial gains and losses	638	1 323
Exchange differences	-214	-409
Change consolidation scope	-5 724	0
Other	0	18
Closing	21 498	24 039

Actuarial gains and losses consist of the following components:

In KUSD	2021	2020
Experience adjustments	638	1 312
Changes in assumptions used	0	11
Total actuarial gains and losses	638	1 323

The actuarial gains and losses included in the above table contain the largest part of the total actuarial gains and losses included in the other comprehensive income (KUSD -631). The remaining difference (KUSD -7) consists of the actuarial gains and losses of the equity consolidated companies (PT Timbang Deli).

The amounts recognised in the balance sheet are as follows:

In KUSD	2021	2020
Pension liabilities	21 498	24 039

The amounts relating to the pension cost of Indonesia are as follows:

In KUSD	2021	2020
Service cost	3 060	2 260
Interest cost	1 386	1 865
Pension cost	4 446	4 125
Actuarial gains and losses recorded in Other Comprehensive Income	638	1 323
Total pension cost	5 085	5 448

These costs are included under the headings cost of sales and general and administrative expenses of the income statement. Estimated benefit payments in 2022 are KUSD 2 061.

Sensitivity of the variation of the discount rate and of the future salary increase

Values as appearing in the balance sheet are sensitive to changes in the actual discount rate compared to the discount rate used. The same applies to changes in the actual future salary increase compared to the future salary increase used in the calculation. For our Indonesian entities, simulations were made to calculate the impact of a 1% increase or decrease of both parameters on the pension provision, resulting in the following effects:

The connection to the world of sustainable tropical agriculture

The following assumptions are used in the pension calculation of Indonesia:

	2021	2020
Discount rate	7.50%	7.75%
Future salary increase	5.00%	5.25%
Assumed retirement age	55 years or 30 years of seniority	55 years or 30 years of seniority

Pension liabilities in Indonesia have changed as follows:

In KUSD	2021	2020
Opening	24 039	22 408
Service cost	3 060	2 260
Interest cost	1 386	1 865
Benefits paid	-1 688	-3 426
Actuarial gains and losses	638	1 323
Exchange differences	-214	-409
Change consolidation scope	-5 724	0
Other	0	18
Closing	21 498	24 039

Actuarial gains and losses consist of the following components:

In KUSD	2021	2020
Experience adjustments	638	1 312
Changes in assumptions used	0	11
Total actuarial gains and losses	638	1 323

The amounts recognised in the balance sheet are as follows:

In KUSD	2021	2020
Pension liabilities	21 498	24 039

The amounts relating to the pension cost of Indonesia are as follows:

In KUSD	2021	2020
Service cost	3 060	2 260
Interest cost	1 386	1 865
Pension cost	4 446	4 125
Actuarial gains and losses recorded in Other Comprehensive Income	638	1 323
Total pension cost	5 085	5 448

These costs are included under the headings cost of sales and general and administrative expenses of the income statement. Estimated benefit payments in 2022 are KUSD 2 061.

Sensitivity of the variation of the discount rate and of the future salary increase

SIPEF Financial statements 2021

Impact of the change in discount rate:

In KUSD	+1%	Carrying amount	-1%
Pension liability of the Indonesian subsidiaries	19 578	21 498	23 693
Gross impact on the comprehensive income	1 921		-2 195

Impact of the change in future salary increase:

In KUSD	+1%	Carrying amount	-1%
Pension liability of the Indonesian subsidiaries	23 821	21 498	19 440
Gross impact on the comprehensive income	-2 323		2 058

The pension liability in Indonesia consists of KUSD 21 498 from fully consolidated subsidiaries.

Defined contribution plans

The Group pays contributions to publicly or privately administered insurance plans. Since the Group is obliged to make additional payments if the average return on the employer’s contribution and on the employees’ contributions is not attained, those plans should be treated as “defined benefit plans” in accordance with IAS 19. The liability is based on an analysis of the plans and the limited difference between the legally guaranteed minimum returns and the interest guaranteed by the insurance company, the Group has concluded that the application of the PUC method would have an immaterial impact. The total accumulated reserves amount to KUSD 2 343 by the end of December 2021 (2020: KUSD 2 353) compared to the total minimum guaranteed reserves of KUSD 1 753 at 31 December 2021 (2020: KUSD 2 140). Contributions paid regarding the defined contribution plans amount to KUSD 530 (KUSD 508 in 2020). SIPEF NV is not responsible for the minimum guaranteed return on the contributions paid for the members of the executive committee (KUSD 470).

19.# NET FINANCIAL ASSETS/(LIABILITIES)

Net financial assets/(liabilities) (Non-GAAP measure) can be analysed as follows:

In KUSD	2021	2020
Short-term obligations - credit institutions	-12 477	-86 128
Financial liabilities > 1 year (incl. derivatives)	-36 000	-54 000
Current portion of amounts payable after one year	-18 000	-18 000
Investments and deposits	38	0
Cash and cash equivalents	19 939	9 790
Lease liability	-2 691	-2 828
Net financial assets/(liabilities)	-49 192	-151 165

Analysis of net financial assets/(liabilities) 2021 per currency:

In KUSD	EUR	USD	Others	Total
Short-term financial obligations	-12 477	-18 000	0	-30 477
Investments and deposits	38	0	0	38
Cash and cash equivalents	751	18 628	559	19 939
Financial liabilities > 1 year	0	-36 000	0	-36 000
Lease liability	-399	-2 292	0	-2 691
Total 2021	-12 088	-37 664	559	-49 192
Total 2020	-23 223	-128 798	855	-151 165

The short-term financial obligations relate to the commercial papers for a total amount of KUSD 12 477. This financial obligation has been completely hedged at an average rate of 1 EUR = 1.1869 USD. The financial liabilities with an original maturity of more than one year include an 85.5 million USD loan of which 31.5 million USD has already been repaid between 2019 - 2021. It concerns a long-term loan that was taken out with a banking consortium with a first-class rating for creditworthiness. It concerns an unsecured loan with a term of 5 years. The interest rate is composed as the USD 3M interest rate + a margin of 1.20% to 2.50%, depending on the debt/EBITDA ratio. The variable interest rate was hedged at a fixed interest rate of 1.3933% through an "Interest Rate Swap". It should be noted that SIPEF has made use of the possibility of postponing capital repayments to cope with the impact of covid-19. As a result, the repayments at the end of June 2020 (KUSD 4 500) has been postponed until June 2024, and the repayment at the end of September 2020 (KUSD 4 500) has been postponed until September 2024. There is one financial requirement applicable to the loan covenant which states that the net financial debt may not exceed 2.5 times the REBITDA of the year. This financial covenant is tested every half-year. The EBITDA of the group consists of the operating results + profit/loss from equity companies + depreciation and additional impairments/increases on assets. The REBITDA consists of the same calculation, but excluding the one-off, non-recurring effects. The Group does not breach borrowing limits or covenants (where applicable) on its borrowing facilities per December 31, 2021. The financial covenant ratio will remain at 2.50 at 30 June 2022 and 31 December 2022. Due to the significant volatility of the palm oil prices and the impact on the result and EBITDA of the Group, this covenant is continuously monitored. It is not expected that this covenant will be breached in 2022.

Covenant ratio

	2021	2020
Operating result	139 416	30 778
Exceptional items	-11 640	0
Recurring operating result	127 776	30 778
Depreciation and result on sale FA	49 857	44 539
REBITDA	177 632	75 317
(-) minorities recurring	-5 086	-2 055
REBITDA group share	172 546	73 262
Net Senior Leverage	0.29	2.06

Reconciliation of the net financial assets/(liabilities) and cash flow:

In KUSD	2021	2020
Net financial position at the beginning of the period	-151 165	-164 623
Decrease in long-term borrowings	18 078	9 228
Decrease in short-term financial obligations	73 710	5 092
Net movement in cash and cash equivalents	10 186	-863
Net financial assets/(liabilities) at the end of the period	-49 192	-151 165

Reconciliation of the total financial liabilities:

In KUSD	2021	2020
Financial liabilities at the beginning of the period	160 956	175 276
Decrease in long-term borrowings	-17 941	-9 000
Decrease in short-term financial obligations	-73 710	-5 111
Increase leasing liabilities - non cash	466	340
Decrease leasing liabilities - cash	-603	-549
Financial liabilities at the end of the period	69 168	160 956

The connection to the world of sustainable tropical agriculture It should be noted that SIPEF has made use of the possibility of postponing capital repayments to cope with the impact of covid-19. As a result, the repayments at the end of June 2020 (KUSD 4 500) has been postponed until June 2024, and the repayment at the end of September 2020 (KUSD 4 500) has been postponed until September 2024. There is one financial requirement applicable to the loan covenant which states that the net financial debt may not exceed 2.5 times the REBITDA of the year. This financial covenant is tested every half-year. The EBITDA of the group consists of the operating results + profit/loss from equity companies + depreciation and additional impairments/increases on assets. The REBITDA consists of the same calculation, but excluding the one-off, non-recurring effects. The Group does not breach borrowing limits or covenants (where applicable) on its borrowing facilities per December 31, 2021. The financial covenant ratio will remain at 2.50 at 30 June 2022 and 31 December 2022. Due to the significant volatility of the palm oil prices and the impact on the result and EBITDA of the Group, this covenant is continuously monitored. It is not expected that this covenant will be breached in 2022.

Covenant ratio

	2021	2020
Operating result	139 416	30 778
Exceptional items	-11 640	0
Recurring operating result	127 776	30 778
Depreciation and result on sale FA	49 857	44 539
REBITDA	177 632	75 317
(-) minorities recurring	-5 086	-2 055
REBITDA group share	172 546	73 262
Net Senior Leverage	0.29	2.06

Reconciliation of the net financial assets/(liabilities) and cash flow:

In KUSD	2021	2020
Net financial position at the beginning of the period	-151 165	-164 623
Decrease in long-term borrowings	18 078	9 228
Decrease in short-term financial obligations	73 710	5 092
Net movement in cash and cash equivalents	10 186	-863
Net financial assets/(liabilities) at the end of the period	-49 192	-151 165

Reconciliation of the total financial liabilities:

In KUSD	2021	2020
Financial liabilities at the beginning of the period	160 956	175 276
Decrease in long-term borrowings	-17 941	-9 000
Decrease in short-term financial obligations	-73 710	-5 111
Increase leasing liabilities - non cash	466	340
Decrease leasing liabilities - cash	-603	-549
Financial liabilities at the end of the period	69 168	160 956

SIPEF Financial statements 2021

20. OTHER OPERATING INCOME/(CHARGES)

The other operating income/(charges) can be detailed as follows:

In KUSD	Equity holders of the parent	Non- controlling interests	Total	Equity holders of the parent	Non- controlling interests	Total
	2021	2021	2021	2020	2020	2020
VAT claim Indonesia	53	6	59	163	18	181
Accelerated depreciation immature rubber assets	0	0	0	-610	-66	-676
Accelerated depreciation oil palms PT Dendymarker	-4 018	-211	-4 229	0	0	0
Capital gain sale PT Melania	11 003	637	11 640	0	0	0
Other income/(charges)	-291	-90	-381	604	-114	489
Other operating income/(charges)	6 748	341	7 088	157	-162	-6

The other income/charges mainly consist out of the accelerated depreciation of the oil palms in PT Dendymarker (KUSD - 4 229), a capital gain on the sale of PT Melania (KUSD 11 640), the movement in the provision for the Indonesian VAT claim (KUSD 59), a stock adjustments for obsolete stock, and warehouse sales to smallholders in Papua New Guinea.

21. FINANCIAL RESULT

The financial income concerns the interests received on current accounts with non-consolidated companies and on temporary excess cash, as well as the income resulting from the discounting of the receivables > 1 year. The financial charges concern the interests on long term and short-term borrowings as well as bank charges and other financial costs.

In KUSD	2021	2020
Interests received	727	644
Discounting of receivables > 1 year	748	1 368
Financial charges	-3 096	-5 103
Exchange result	1 021	-728
Financial result derivatives	-2 178	1 106
Financial result	-2 779	-2 713

22. SHARE BASED PAYMENT

Grant date	Opening balance	Number of options granted	Number of options exercised	Number of options expired	Ending Balance
2011	16 000		-16 000		0
2012		14 000			14 000
2013		16 000			16 000
2014		18 000			18 000
2015		18 000			18 000
2016		18 000			18 000
2017		18 000			18 000
2018		20 000			20 000
2019		20 000			20 000
2020		18 000			18 000
2021		18 000			18 000
Balance	176 000	18 000	-16 000	0	178 000

SIPEF's stock option plan, which was approved in November 2011, is intended to provide long term motivation for the members of the executive committee and general directors of the foreign subsidiaries whose activities are essential to the success of the Group. The options give them the right to acquire a corresponding number of SIPEF shares. The remuneration committee is responsible for monitoring this plan and selecting the beneficiaries. The options are provided free of charge and their exercise period is 10 years. IFRS 2 has been applied to the stock options. The total value of the outstanding options 2011 - 2021 (valued at the fair value at the moment of granting), amounts to KUSD 1 594 and is calculated on the basis of an adjusted Black & Scholes model of which the main characteristics are as follows:

Grant date	Share price (in EUR)	Dividend yield	Volatility	Interest rate	Estimated expected lifetime	Black & Scholes Value (in EUR)
2012	58.50	2.50%	37.55%	0.90%	5.00	15.07
2013	57.70	2.50%	29.69%	1.36%	5.00	12.72
2014	47.68	2.50%	24.83%	0.15%	5.00	5.34
2015	52.77	2.50%	22.29%	0.07%	5.00	8.03
2016	60.49	3.00%	19.40%	-0.37%	5.00	8.38
2017	62.80	3.00%	18.88%	-0.12%	5.00	5.57
2018	48.80	3.00%	18.60%	-0.03%	5.00	3.54
2019	54.80	3.00%	19.56%	-0.32%	5.00	8.12
2020	43.20	3.00%	23.35%	-0.66%	5.00	4.57
2021	56.90	3.00%	24.14%	-0.33%	5.00	6.74

In 2021, 18 000 new stock options were granted with an exercise price of EUR 58.31 per share. The fair value when granted was fixed at KUSD 138 and is recorded in the profit and loss accounts over the vesting period of 3 years (2022-2024).The total cost of the stock options included in the income statement is KUSD 121 in 2021 (2020: KUSD 128). To cover the outstanding option liability, SIPEF has a total of 178 000 treasury shares in portfolio.

Number of shares	Average purchase price (in EUR)	Total purchase price (in KEUR)	Total purchase price (in KUSD)
Opening balance 31/12/2020	160 000	52.43	8 389
Acquisition of treasury shares	34 000	57.06	1 940
Disposal of treasury shares	-16 000	52.44	- 839
Ending balance 31/12/2021	178 000	53.31	9 490

The extraordinary general meeting of shareholders on June 10, 2020 authorised the board of directors to purchase own shares of SIPEF if deemed necessary over a period of 5 years after the publication of the renewal.

23. INCOME TAXES

The reconciliation between the tax expenses and tax at local applicable tax rates is as follows:

In KUSD	2021	2020
Profit before tax	136 637	28 065
Tax at the applicable local rates	-35 039	-6 545
Average applicable tax rate	-23.32%	-23.32%
Non-taxable capital gain on sale of PT Melania	2 561	0
Permanent differences	-1 907	-1 915
Losses of the year for which no DTA is recognised	- 178	-1 762
Impairment losses recognised on DTA recognised in previous years	-2 560	-2 401
Reversal of impairment losses on DTA recognised in previous years	2 432	1 034
Impact of the change in tax-% in Indonesia on the deferred taxes	0	685
Corrections prior year	-1 384	76
Tax expense	-36 075	-10 828
Average effective tax rate	-26.40%	-38.58%

We received from the Indonesian tax authorities the formal approval, that starting from financial year 2014 our Indonesian affiliates are allowed to lodge their tax declaration in USD. From the tax authorities in Papua New Guinea the SIPEF group got permission to prepare the tax declaration based on USD accounts from 2015 onwards. For SIPEF NV and Jabelmalux SA a similar authorisation has been obtained with effect from the financial year 2016.

The connection to the world of sustainable tropical agriculture

The remuneration committee is responsible for monitoring this plan and selecting the beneficiaries. The options are provided free of charge and their exercise period is 10 years. IFRS 2 has been applied to the stock options. The total value of the outstanding options 2011 - 2021 (valued at the fair value at the moment of granting), amounts to KUSD 1 594 and is calculated on the basis of an adjusted Black & Scholes model of which the main characteristics are as follows:

Grant date	Share price (in EUR)	Dividend yield	Volatility	Interest rate	Estimated expected lifetime	Black & Scholes Value (in EUR)
2012	58.50	2.50%	37.55	0.90%	5.00	15.07
2013	57.70	2.50%	29.69	1.36%	5.00	12.72
2014	47.68	2.50%	24.83	0.15%	5.00	5.34
2015	52.77	2.50%	22.29	0.07%	5.00	8.03
2016	60.49	3.00%	19.40	-0.37%	5.00	8.38
2017	62.80	3.00%	18.88	-0.12%	5.00	5.57
2018	48.80	3.00%	18.60	-0.03%	5.00	3.54
2019	54.80	3.00%	19.56	-0.32%	5.00	8.12
2020	43.20	3.00%	23.35	-0.66%	5.00	4.57
2021	56.90	3.00%	24.14	-0.33%	5.00	6.74

In 2021, 18 000 new stock options were granted with an exercise price of EUR 58.31 per share. The fair value when granted was fixed at KUSD 138 and is recorded in the profit and loss accounts over the vesting period of 3 years (2022-2024). The total cost of the stock options included in the income statement is KUSD 121 in 2021 (2020: KUSD 128). To cover the outstanding option liability, SIPEF has a total of 178 000 treasury shares in portfolio.

Number of shares	Average purchase price (in EUR)	Total purchase price (in KEUR)	Total purchase price (in KUSD)
Opening balance 31/12/2020	160 000	52.43	8 389
Acquisition of treasury shares	34 000	57.06	1 940
Disposal of treasury shares	-16 000	52.44	- 839
Ending balance 31/12/2021	178 000	53.31	9 490

23. INCOME TAXES

The reconciliation between the tax expenses and tax at local applicable tax rates is as follows:

In KUSD	2021	2020
Profit before tax	136 637	28 065
Tax at the applicable local rates	-35 039	-6 545
Average applicable tax rate	-23.32%	-23.32%
Non-taxable capital gain on sale of PT Melania	2 561	0
Permanent differences	-1 907	-1 915
Losses of the year for which no DTA is recognised	- 178	-1 762
Impairment losses recognised on DTA recognised in previous years	-2 560	-2 401
Reversal of impairment losses on DTA recognised in previous years	2 432	1 034
Impact of the change in tax-% in Indonesia on the deferred taxes	0	685
Corrections prior year	-1 384	76
Tax expense	-36 075	-10 828
Average effective tax rate	-26.40%	-38.58%

SIPEF Financial statements 2021

Deferred tax liabilities and assets are offset per taxable entity which leads to the following split between deferred tax assets and deferred tax liabilities:

In KUSD	2021	2020
Deferred tax assets	13 550	13 049
Deferred tax liabilities	-46 950	-44 010
Net deferred taxes	-33 400	-30 961

The movements in net deferred taxes (assets - liabilities) are:

In KUSD	2021	2020
Opening balance	-30 961	-31 714
Variation (- expense) / (+ income) through income statement	-1 352	- 58
Tax impact of IAS 19R through comprehensive income	139	291
Tax impact hedge accounting via OCI	- 226	489
Change in consolidation scope	- 973	0
Other	- 27	31
Closing balance	-33 400	-30 961

Deferred taxes in the income statement are the result of:

In KUSD	2021	2020
Addition/(utilization) of tax losses brought forward	1 779	-2 585
Origin/(reversal) of temporary differences - IAS 41 revaluation	-3 149	380
Origin/(reversal) of temporary differences - fixed assets	-2 875	3 228
Origin/(reversal) of temporary differences - pension provision	561	- 528
Origin/(reversal) of temporary differences - other	2 332	- 553
Total	-1 352	- 58

Total deferred tax assets are not entirely recognized in the balance sheet. The breakdown of total recognized and unrecognized deferred taxes is as follows:

2021	Total	Not recorded	Recorded
Biological assets	-1 716	0	-1 716
Property, plant and equipment, including bearer plants	-44 446	0	-44 446
Inventories	-5 721	0	-5 721
Pension provision	4 730	0	4 730
Tax losses	15 074	4 848	10 226
Others	3 527	0	3 527
Total	-28 552	4 848	-33 400

The majority of the unrecognized deferred tax assets at the end of 2021 are located at the companies of the South Sumatra group (KUSD 4 107) and the Tolan Tiga group rubber activities (KUSD 720). The set-up of and the adjustments to the deferred tax assets are based on the most recently available long-term business plans. The total tax losses (recognized and unrecognized) have the following maturity structure:

2021	Total	Not recorded	Recorded
1 year	5 917	5 336	581
2 years	9 253	2 956	6 297
3 years	9 318	3 033	6 285
4 years	21 730	9 812	11 918
5 years	13 505	806	12 699
Unlimited	7 757	82	7 675
Total	67 480	22 025	45 455

In Indonesia and Papua New Guinea the Group made advance payments of taxes in accordance with local legislation. These were partly based on the results of 2019 and partly on the results of 2020 which were both lower than the results of 2021. Therefore, the prepayments of taxes of KUSD 9 962 were significantly below the taxes to be paid of KUSD 34 722.

In KUSD	2021	2020
Taxes to receive	1 469	11 766
Taxes to pay	-19 346	-4 687
Net taxes to receive/(to pay)	-17 877	7 079

In KUSD	2021	2020
Net taxes to receive/(to pay) at the beginning of the period	7 079	14 307
Change consolidation scope	- 211	0
Transfer	15	- 32
Taxes to pay	-34 722	-10 768
Paid taxes	9 962	3 572
Net taxes to receive/(to pay) at the end of the period	-17 877	7 079

Taxes paid as presented in the consolidated cash flow statement are detailed as follows:

In KUSD	2021	2020
Tax expense	-36 075	-10 828
Deferred tax	1 353	60
Current taxes	-34 722	-10 768
Variation prepaid taxes	10 101	3 021
Variation payable taxes	14 658	4 175
Paid taxes	-9 962	-3 572

There are no material unrecorded uncertain tax positions within the SIPEF group.

24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The SIPEF group has the following percentage of control and percentage of interest in the associates and joint ventures:

Entity	Location	% of control	% of interest
Verdant Bioscience Pte Ltd	Singapore / Republic of Singapore	38.00	38.00
PT Timbang Deli Indonesia	Medan / Indonesia	38.00	36.10

An associate is an entity over which the Group has significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Group has no joint ventures. The investments in associates and joint ventures consist of Verdant Bioscience Singapore and PT Timbang Deli, both active in tropical agriculture. Verdant Bioscience Pte Ltd (VBS) is a company located in Singapore. As of 1 January 2014, the Group holds a 38% interest in VBS. The company is a cooperation between Ackermans & Van Haaren (42%), SIPEF NV (38%), PT Dharma Satya Nusantara (10%) and Biosing Pte (10%) with the objective of conducting research into and developing high-yielding seeds with a view to commercializing them. The Group holds a 36.10% participation in PT Timbang Deli, a company located on the island of Sumatra in Indonesia. PT Timbang Deli is active in growing rubber. Following the Share Swap agreement with Verdant Bioscience Pte Ltd the SIPEF group contributed 95% of the total number of shares of PT Timbang Deli to Verdant Bioscience Pte Ltd.# 24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The SIPEF group has the following percentage of control and percentage of interest in the associates and joint ventures:

Entity	Location	% of control	% of interest
Verdant Bioscience Pte Ltd	Singapore / Republic of Singapore	38.00	38.00
PT Timbang Deli	Medan / Indonesia	38.00	36.10

The investments in associates and joint ventures consist of Verdant Bioscience Singapore and PT Timbang Deli, both active in tropical agriculture.

Verdant Bioscience Pte Ltd (VBS) is a company located in Singapore. As of 1 January 2014, the Group holds a 38% interest in VBS. The company is a cooperation between Ackermans & Van Haaren (42%), SIPEF NV (38%), PT Dharma Satya Nusantara (10%) and Biosing Pte (10%) with the objective of conducting research into and developing high-yielding seeds with a view to commercializing them.

The Group holds a 36.10% participation in PT Timbang Deli, a company located on the island of Sumatra in Indonesia. PT Timbang Deli is active in growing rubber. Following the Share Swap agreement with Verdant Bioscience Pte Ltd the SIPEF group contributed 95% of the total number of shares of PT Timbang Deli to Verdant Bioscience Pte Ltd.

During the first four months of 2021, PT Melania has been included in the consolidation as a joint-venture before being classified as an asset held for sale. Even though At 31 December 2021, the assets of PT Melania are not included in the ‘investments in associates and joint ventures’, the ‘share of results of associated companies and joint ventures’ does include 4 months of results of PT Melania.

SIPEF Financial statements 2021

The total section "investments in associates and joint ventures" can be summarized as follows:

In KUSD	2021	2020
Verdant Bioscience Pte Ltd	3 598	4 630
PT Timbang Deli Indonesia	- 749	- 282
Total	3 598	4 630

During the first four months of 2021, PT Melania has been included in the consolidation as a joint-venture before being classified as an asset held for sale.

The total section "Share of results of associated companies and joint ventures" can be summarized as follows:

In KUSD	2021	2020
Verdant Bioscience Pte Ltd	- 565	- 475
PT Timbang Deli Indonesia	- 467	- 584
PT Melania Indonesia	- 59	0
Total result	-1 091	-1 059

Below we present the condensed statements of financial position of the associated companies and joint ventures. These are prepared in accordance with IFRS and are before intercompany eliminations and excluding goodwill.

Verdant Bioscience Pte Ltd

In KUSD	2021	2020
Biological assets	0	0
Other non-current assets	23 876	23 701
Current assets	14 077	13 846
Cash and cash equivalents	129	81
Total assets	38 083	37 627
Non-current liabilities	- 14	- 14
Long term financial debts	0	0
Current liabilities	20 497	18 556
Short term financial debts	0	0
Equity	17 599	19 084
Total equity and liabilities	38 083	37 627

PT Timbang Deli

In KUSD	2021	2020
Biological assets	3 772	3 994
Other non-current assets	6 727	7 125
Current assets	1 276	1 008
Cash and cash equivalents	225	170
Total assets	12 000	12 297
Non-current liabilities	1 271	1 309
Long term financial debts	0	0
Current liabilities	15 039	14 004
Short term financial debts	0	0
Equity	-4 311	-3 016
Total equity and liabilities	12 000	12 297

Below we present the condensed income statements of the associated companies and joint ventures. These are prepared in accordance with IFRS and are before intercompany eliminations and excluding goodwill.

Verdant Bioscience Pte Ltd

In KUSD	2021	2020
Inclusion in the consolidation:	38.00%	38.00%
Revenue	0	0
Depreciation	10	8
Interest income	33	47
Interest charges	0	0
Net result	-1 486	-1 251
Share in the consolidation	- 565	- 475
Total share of the group	- 565	- 475
Total share minorities	0	0
Total	- 565	- 475

PT Timbang Deli

In KUSD	2021	2020
Inclusion in the consolidation:	36.10%	36.10%
Revenue	3 319	1 319
Depreciation	920	955
Interest income	3	3
Interest charges	- 33	- 46
Net result	-1 295	-1 617
Share in the consolidation	- 467	- 584
Total share of the group	- 467	- 584
Total share minorities	0	0
Total	- 467	- 584

Reconciliation of the associated companies and joint ventures

The below tables are prepared in accordance based on the IFRS financial statements as included in the consolidation, in accordance with the accounting policies of the SIPEF group, before goodwill allocation.

Verdant Bioscience Pte Ltd

In KUSD	2021	2020
Equity without goodwill	17 599	19 085
Share of the group	6 687	7 252
Goodwill	0	0
Total	4 347	4 912

PT Timbang Deli

In KUSD	2021	2020
Equity without goodwill	-4 311	-3 016
Share of the group	-1 556	-1 089
Goodwill	807	807
Equity elimination	- 2 340	- 2 340
Total	- 749	- 282

Dividends received from associated companies and joint ventures

During the year no dividends were received from associated companies and joint ventures. There are no restrictions on the transfers of funds to the Group.

25. CHANGE IN NET WORKING CAPITAL

In line with the increase of the operating result, the cash flow from operating activities increased from KUSD 73 669 in 2020 to KUSD 178 796 this year. The variation of the working capital of KUSD -8 523 mainly concerned the following elements:

an increase in inventories (KUSD -22 211) as a result of higher inventory volumes, mainly of finished products, and a higher unit cost price for CPO;
an increase in trade receivables (KUSD -4 614);
an increase in advances received on local sales (KUSD 8 450);
an increase in other payables and other current liabilities including an increase in bonus provision following the improved result (KUSD 10 582).

The above-mentioned use of working capital concerned the usual temporary movements.

26. FINANCIAL INSTRUMENTS

Exposure to fluctuations in the market price of core products, currencies, interest rates and credit risk arises in the normal course of the Group’s business. Financial derivative instruments are used to a limited extend to reduce the exposure to fluctuations in foreign exchange rates and interest rates.

Fluctuations in the market price of core products

Structural risk

SIPEF group is exposed to structural price risks of their core products. The risk is primarily related to palm oil and palm kernel oil and to a lesser extent to rubber. A change of the palm oil price of USD 10 CIF per ton has an impact of about KUSD 3 147 (without considering the impact of the current export tax and export levies in Indonesia) on result after tax. This risk is assumed to be a business risk.

Transactional risk

The Group faces transactional price risks on products sold. The transactional risk is the risk that the price of products purchased from third parties fluctuates between the time the price is fixed with a customer and the time the transaction is settled. This risk is assumed to be a business risk.

Currency risk

Most of the subsidiaries are using the US dollar as functional currency. The Group’s currency risk can be split into three distinct categories: structural, transactional and translational:

Structural risk

Most of the Group’s revenues are denominated in USD, while all the operations are located outside the USD zone (particularly in Indonesia, Papua New Guinea, Ivory Coast and Europe). Any change in the USD against the local currency will therefore have a considerable impact on the operating result of the company. Most of these risks are considered to be a business risk.# 26. FINANCIAL INSTRUMENTS

Fluctuations in the market price of core products

Structural risk

Transactional risk

Currency risk

Most of the subsidiaries are using the US dollar as functional currency. The Group’s currency risk can be split into three distinct categories: structural, transactional and translational:

Structural risk

Transactional risk

The Group is also subject to transactional risks in respect of currencies, i.e. the risk of currency exchange rates fluctuating between the time the price is fixed with a customer, supplier or financial institution and the time the transaction is settled. This risk, with the exception of naturally covered positions, is not covered since most receivables and payables have a short settlement term.

The pension liabilities in Indonesia are important long-term liabilities that are fully payable in IDR. A devaluation or revaluation of 10% of the IDR versus the USD has the following effect on the income statement:

In KUSD	IDR Dev 10%	Book value	IDR Rev 10%
Pension liabilities in Indonesia	19 777	21 755	24 172
Gross impact income statement	1 978		-2 417

The pension liability in Indonesia consists of KUSD 21 498 from fully consolidated subsidiaries and of KUSD 257 from equity consolidated companies (PT Timbang Deli).

The long term receivables on the Indonesian plasma holders are important long term assets that are fully payable in IDR. A devaluation or revaluation of 10% of the IDR versus the USD has the following effect on the income statement:

In KUSD	IDR Dev 10%	Book value	IDR Rev 10%
Plasma receivables	23 333	25 666	28 518
Gross impact income statement	-2 333		2 852

On February 15, 2022 the board of directors has proposed the payment of a dividend of KEUR 21 159 (EUR 2.00 gross per ordinary share). In line with the Group’s liquidity and currency policy the exchange risk was covered in 3 forward exchange contracts for the sale of KUSD 25 191 for KEUR 21 600 (average exchange rate of 1.1662) before year-end.

Sensitivity analysis

With regard to the cover of the dividend for the end of the year a devaluation or revaluation of 10% of the EUR versus the USD has the following effect on the profit and loss account:

In KUSD	EUR Dev 10%	Closing rate	EUR Rev 10%
Dividend	22 274	24 501	27 223
Gross Impact income statement	-2 227		2 722

Translational risk

The SIPEF group is an international company and has operations which do not use the USD as their reporting currency. When such results are consolidated into the Group’s accounts the translated amount is exposed to variations in the value of such local results are consolidated into the Group’s accounts the translated amount is exposed to variations in the value of such local currencies against the USD. SIPEF group does not hedge against such risk (see accounting policies). As from 1st of January 2007 onwards the functional currency of most of our activities is the same as the presentation currency, this risk has been largely restricted.

Interest rate risk

The Group’s exposure to changes in interest rates relates to the Group’s financial debt obligations. At the end of December 2021, the Group’s net financial assets/(liabilities) amounted to KUSD -49 192 (2020: KUSD -151 165), of which KUSD 30 961 short term financial liabilities (2020: KUSD 104 671) and KUSD 19 977 net short-term cash and cash equivalents (2020: KUSD 9 791). The financial liabilities > 1 year (incl. derivatives) amount to KUSD 38 207 (2020: KUSD 56 285). Considering that all short-term debts are of a current nature with variable interest rates, we believe a 0.5% change in interest rate will not have a material impact. Considering that the long-term financial debt is primarily based on a variable interest rate, the risk exists that with an increase of the interest rate, the financing cost will increase. This interest risk is hedged by the use of an interest rate swap (IRS). The goal of this interest rate swap is to decrease the volatility (and with it the interest rate risk) as much as possible Available funds are invested in short term deposits.

Credit risk

Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a loss. This credit risk can be split into a commercial and a financial credit risk. With regard to the commercial credit risk management has established a credit policy and the exposure to this credit risk is monitored on a continuous basis. In practice a difference is made between:

In KUSD	2021	2020
Receivables from the sale of palm oil/rubber/tea	30 609	26 315
Receivables from the sale of bananas and plants	1 673	1 416
Total	32 282	27 731

The credit risk for the first category is rather limited as these sales are for the most part immediately paid against presentation of documents. Moreover, it concerns a relatively small number of first-class buyers: per product about 90% of the turnover is realized with a maximum of 10 clients. For palm oil there are two clients who each represent over 30% of the total sales. For tea there are two clients which represents over 30% of total sales. For rubber there are two clients which represent over 30% of total revenues.

Contrary to the first category the credit risk for the receivables from the sales of bananas and horticulture is higher. For both categories there is a weekly monitoring of the open balances due and a proactive system of reminders. Impairments are applied as soon as total or partial payments are seen as unlikely. The elements that are taken into account for these appraisals are the lengths of the delay in payment and the creditworthiness of the client.

The receivables from the sales of bananas and horticulture have the following due date schedule:

In KUSD	2021	2020
Not yet due	941	812
Due < 30 days	523	604
Due 30-60 days	180	0
Due 60-90 days	0	0
Due > 90 days	29	0
Total	1 673	1 416

During 2021 and 2020, no material impairment on receivables was recorded in the income statement. The Group applied the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables based on historical losses. The Group analysed the impact of IFRS 9 and concluded there is no material impact on the bad debt reserve booked. The Group also assessed whether the historic pattern would change materially in the future and expects no significant impact.

Liquidity risk

A material and structural shortage in our cash flow would damage both our creditworthiness as well as the trust of investors and would restrict the capacity of the Group to attract fresh capital. The operational cash flow provides the means to finance the financial obligations and to increase shareholder value. The Group manages the liquidity risk by evaluating the short term and long-term cash flows. The SIPEF group maintains an access to the capital market through short- and long-term debt programs.

In KUSD	2021	2020
Receivables from the sale of palm oil/rubber/tea	30 609	26 315
Receivables from the sale of bananas and plants	1 673	1 416
Total	32 282	27 731

Contrary to the first category the credit risk for the receivables from the sales of bananas and horticulture is higher. For both categories there is a weekly monitoring of the open balances due and a proactive system of reminders. Impairments are applied as soon as total or partial payments are seen as unlikely.The elements that are taken into account for these appraisals are the lengths of the delay in payment and the creditworthiness of the client. The receivables from the sales of bananas and horticulture have the following due date schedule:

In KUSD	2021	2020
Not yet due	941	812
Due < 30 days	523	604
Due between 30 and 60 days	180	0
Due between 60 and 90 days	0	0
Due > 90 days	29	0
Total	1 673	1 416

Liquidity risk

49 SIPEF Financial statements 2021

The following table gives the contractually determined (not-discounted) cash flows resulting from liabilities at balance sheet date:

2021 - In KUSD

	Carrying amount	Contractual cash flows	Less than 1 year	1-2 years	2-3 years	3-4 years	More than 5 years
Financial obligations > 1 year (incl. derivatives)	36 000	-37 239	- 618	-18 510	-18 111	0	0
Leasing liabilities > 1 year	2 207	-4 250	- 177	- 489	- 464	- 449	-2 671
Advances received > 1 year	4 830	-4 830	0	-4 830	0	0	0
Trade & other liabilities < 1 year
Trade payables	23 605	-23 605	-23 605	0	0	0	0
Advances received	11 934	-11 934	-11 934	0	0	0	0
Financial liabilities < 1 year
Current portion of amounts payable after one year	18 000	-18 471	-18 471	0	0	0	0
Financial liabilities	12 477	-12 597	-12 597	0	0	0	0
Leasing liabilities < 1 year	484	- 523	- 523
Derivatives	2 066	-2 066	-2 066	0	0	0	0
Other current liabilities	0	0	0	0	0	0	0
Total liabilities	111 604	-115 516	-69 992	-23 829	-18 575	- 449	-2 671

2020 - In KUSD

	Carrying amount	Contractual cash flows	Less than 1 year	1-2 years	2-3 years	3-4 years	More than 5 years
Financial obligations > 1 year (incl. derivatives)	54 000	-58 053	-1 664	-19 480	-18 737	-18 173	0
Leasing liabilities > 1 year	2 285	-4 553	- 180	- 488	- 438	- 414	-3 033
Advances received > 1 year	0	0	0	0	0	0	0
Trade & other liabilities < 1 year
Trade payables	21 384	-21 384	-21 384	0	0	0	0
Advances received	1 071	-1 071	-1 071	0	0	0	0
Financial liabilities < 1 year
Current portion of amounts payable after one year	18 000	-18 701	-18 701	0	0	0	0
Financial liabilities	86 128	-86 254	-86 254	0	0	0	0
Leasing liabilities < 1 year	543	- 589	- 589
Derivatives	793	- 793	- 793	0	0	0	0
Other current liabilities	0	0	0	0	0	0	0
Total liabilities	181 375	-186 255	-129 866	-19 479	-18 737	-18 173	0

In order to limit the financial credit risk SIPEF has spread its more important activities over a small number of banking groups with a first-class rating for creditworthiness. The current maximum credit lines available amount to KUSD 178 686 (2020: KUSD 206 328). In 2021, same as in previous years, there were no infringements on the conditions stated in the credit agreements nor were there any shortcomings in repayments. It should be noted that SIPEF has made use of the possibility of postponing capital repayments to cope with the impact of covid-19. As a result, the repayments at the end of June 2020 (KUSD 4 500) have been postponed until June 2024, and the repayment at the end of September 2020 (KUSD 4 500) has also been postponed until September 2024.

Financial instruments measured at fair value in the statement of financial position

Companies within the Group may use financial instruments for risk management purposes. Specifically, these are instruments principally intended to manage the risks associated with fluctuating interest and exchange rates. The counterparties in the related transactions are exclusively first-ranked banks. Derivative instruments are measured at fair value at initial recognition. The changes in fair value are reported in the income statement unless these instruments are part of hedging transactions.

Fair values of derivatives are:

In KUSD	2021	2020
Interest rate swaps	- 797	-1 703
Forward exchange transactions	-1 269	910
Fair value (+ = asset; - = liability)	-2 066	- 793

In accordance with IFRS 13 financial instruments are grouped into 3 levels based on the degree to which the fair value is observable:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly;
Level 3 inputs are unobservable inputs for the asset or liability.

The fair value of the forward exchange contracts and interest rate swap calculated at the closing value on the 31st of December 2021 were also incorporated in level 2. The notional amount from the forward exchange contracts amounts to KUSD 13 056. The forward exchange contracts are not documented in a hedging relationship and accordingly, all changes in fair value are recorded in the financial result. The Group has documented the interest rate swaps (IRS) in a hedging relationship. The terms of the IRS and the hedged debt match 100%. Therefore, no effectiveness test based on a ratio of changes in fair value of the hedging instrument against that of the hedged debt is required. An IRS with matching contractual terms would have limited inefficiency. The IRS has a notional amount of KUSD 54 000. The carrying amount is recorded on the derivatives (liabilities) for an amount of KUSD -797, the deferred tax assets for an amount of KUSD 199 and the other comprehensive income in the equity for an amount of KUSD -598.

Financial instruments per category

The following table presents the financial instruments per category as per end 2021 and end 2020:

50 The connection to the world of sustainable tropical agriculture

Financial instruments measured at fair value in the statement of financial position

Fair values of derivatives are:

In KUSD	2021	2020
Interest rate swaps	- 797	-1 703
Forward exchange transactions	-1 269	910
Fair value (+ = asset; - = liability)	-2 066	- 793

In accordance with IFRS 13 financial instruments are grouped into 3 levels based on the degree to which the fair value is observable:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly;
Level 3 inputs are unobservable inputs for the asset or liability.

Financial instruments per category

The following table presents the financial instruments per category as per end 2021 and end 2020:

51 SIPEF Financial statements 2021

2021 - In KUSD

	Carrying amount	IFRS 9 category	Fair value	Fair value hierarchy
Financial assets
Other investments	92	AC	92	Level 2
Receivables > 1 year
Other receivables	25 666	AC	25 666	Level 2
Total non-current financial assets	25 758		25 758
Trade and other receivables
Trade receivables	32 282	AC	32 282	Level 2
Other receivables	49 878	AC	49 878	Level 2
Investments
Other investments and deposits	38	AC	38	Level 2
Cash and cash equivalents	19 939	AC	19 939	Level 2
Derivatives	0	FVTPL	0	Level 2
Derivatives	0	Hedging	0	Level 2
Total current financial assets	102 137		102 137
Trade and other obligations > 1 year
	0	AC	0	Level 2
Financial obligations > 1 year (incl.
The Group leases office space, land rights and vehicles under a number of lease agreements with a lease term of one year or more. The rent of the office buildings concerns the monthly rental payments for the offices in Indonesia. The rent of the offices and ancillary parking space in Belgium has not been included in the leases due to the short-term exemption. For the land rights the subject of the lease concerns the usufruct of certain land wherefore a fixed annual rental amount is paid. The remaining land rights in PNG have a duration of 99 years for which no rental amount is paid. These assets will be depreciated over a period of 25 years in line with the lifespan of an oil palm. The vehicles concern the limited number of car leases within the Group.

The future operating lease commitments under these non-cancellable leases are due as follows:

In KUSD	2021	2020
Current lease liabilities	484	543
Non-current lease liabilities	2 207	2 285
Total lease liability as at 31 December	2 691	2 828

The movement during the year of the lease liability can be summarised as follows:

In KUSD	2021	2020
Lease commitments disclosed as at 1 January	2 828	3 037
Acquisitions	246	129
Financial costs/(income)	220	237
Lease repayments	- 604	- 549
Exchange result	1	- 26
Lease liability recognised as at 31 December	2 691	2 828

The right-of-use assets can be classified as follows:

Movement (in KUSD)	2021	2020
Total right-of-use assets as at 1 January	2.757	2 895
Acquisition	246	122
Depreciation	-417	- 387
Other	0	127
Total right-of-use assets as at 31 December	2 587	2 757

Total right-of-use assets as at 31 December 2020	Land rights	Office rent	Car rent	Total
	958	1 493	306	2 757
Total right-of-use assets as at 31 December 2021	893	1 281	413	2 587

The total depreciation of the right-of-use assets until 31 December 2021 amounts to KUSD 417 and the financial charges to KUSD 216. Of the depreciation, KUSD 66 was recorded in the cost of sales of the palm segment of Papua New Guinea and KUSD 351 KUSD in the "general and administrative expenses".

RIGHTS AND COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET

Guarantees
No guarantees have been issued by third parties as security for the company’s account and one guarantee has been issued to a third party for the account of subsidiaries during 2021. A corporate guarantee has been given as part of the share purchase agreement of Verdant Bioscience Singapore Pte. Ltd. for a total amount of KUSD 6 165 to cover the outstanding liability that Verdant Bioscience Singapore Pte. Ltd. has to its previous shareholder Sime Darby Berhad. This liability is due in two equal yearly instalments between May 2022 and May 2023. In connection to the same share purchase agreement, Verdant Bioscience Singapore Pte. Ltd. has received a bank guarantee for a total amount of KUSD 1 185 from the new shareholder PT Dharma Satya Nusantara which will be used to provide a loan to Verdant Bioscience Singapore Pte. Ltd. to repay part (10/52) of the above outstanding liability.

Significant litigation
Nihil

Forward sales
The commitments for the delivery of goods (palm products, rubber, tea, bananas and horticulture) after the year end fall within the normal delivery period of about 3 months from date of sale. Those sales are not considered as forward sales.

RELATED PARTY TRANSACTIONS

Transactions with directors and members of the executive committee
Key management personnel are defined as the directors and the Group’s management committee. The table below shows an overview of total remuneration received:

In KUSD	2021	2020
Directors' fees	411	401
Fixed fees	2 213	1 686
Variable fees	321	0
Post-employment benefits	465	456
Other	126	79
Market value vested stock option (on vesting date)	88	0
Total	3 637	2 632

The amounts are paid in EUR. The amount paid in 2021 amounts to KEUR 3 084 (2020: KEUR 2 297). The increase of KEUR 787 is a consequence of a higher variable fee paid in 2021 compared to 2020 and an additional member in the executive committee. Starting from the financial year 2007 fixed fees shall be paid to the members of the board of directors, the audit committee and the remuneration committee.

Related party transactions are considered immaterial, except for the rental agreement since 1985 between Cabra NV and SIPEF covering the offices and ancillary parking space at Castle Calesberg in Schoten. The annual rent, adjusted for inflation, amounts to KUSD 208 (2020 KUSD 196) and KUSD 84 (2020 KUSD 80) is invoiced for SIPEF’s share of maintenance of the buildings, parking space and park area. SIPEF's relations with board members and management committee members are covered in detail in the “Corporate Governance statement” section.

Other related party transactions
Transactions with related companies are mainly trade transactions and are priced at arms’ length. The revenue and expenses related to these transactions are immaterial to the consolidated financial statements as a whole.

Transactions with group companies
Balances and transactions between the Group and its subsidiaries which are related parties of the Group have been eliminated in the consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. The following table represents the total of the transactions that have occurred during the financial year between the Group and the joint venture PT Timbang Deli and Verdant Bioscience Pte Ltd at 100%:

	Verdant Bioscience Pte Ltd	PT Timbang Deli
	2021	2020
Total sales during the financial year	0	0
Total purchases during the financial year	0	0
Total receivables as per 31 December 2021	8 330	7 800
Total payables as per 31 December 2021	300	300

30.# Business combinations, acquisitions and divestures

Sale of PT Melania

SIPEF has signed a sale and purchase agreement with Shamrock Group (SG) on the sale of 100% of the share capital of its Indonesian subsidiary, PT Melania. SG is an Indonesian group that runs several rubber plantations and factories, and specialises in the production and sale of latex gloves. SIPEF controls 95% of PT Melania through its Indonesian 95% subsidiary, PT Tolan Tiga, the remaining 5% being owned by an Indonesian pension fund. As a reminder, PT Melania owns half of the Group’s Indonesian rubber operations in Sumatra and the entire tea operations in Java.

Initially, 40% of the shares were sold for a payment of USD 19 million. After this first stage the Shamrock Group has taken over the management of the rubber activities. The second tranche of 60% of the shares (of which 55% are held by SIPEF) will be transferred no later than 2024 for USD 17 million, after the renewal of the permanent concession rights (HGU) for the whole of the rubber and tea business. The gross transaction price for 100% of the shares is USD 36 million.

The connection to the world of sustainable tropical agriculture

RELATED PARTY TRANSACTIONS

Transactions with directors and members of the executive committee

Key management personnel are defined as the directors and the Group’s management committee. The table below shows an overview of total remuneration received:

In KUSD	2021	2020
Directors' fees	411	401
Fixed fees	2 213	1 686
Variable fees	321	0
Post-employment benefits	465	456
Other	126	79
Market value vested stock option (on vesting date)	88	0
Total	3 637	2 632

Other related party transactions

Transactions with related companies are mainly trade transactions and are priced at arms’ length. The revenue and expenses related to these transactions are immaterial to the consolidated financial statements as a whole.

Transactions with group companies

Balances and transactions between the Group and its subsidiaries which are related parties of the Group have been eliminated in the consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

The following table represents the total of the transactions that have occurred during the financial year between the Group and the joint venture PT Timbang Deli and Verdant Bioscience Pte Ltd at 100%:

	Verdant Bioscience Pte Ltd	PT Timbang Deli
	2021	2020
Total sales during the financial year	0	0
Total purchases during the financial year	0	0
Total receivables as per 31 December 2021	8 330	7 800
Total payables as per 31 December 2021	300	300

Business combinations, acquisitions and divestures

Sale of PT Melania

The final net sale price and any capital gain on the sale of PT Melania will depend largely on the timing and the cost of renewing the permanent concession rights (HGU) and on the compensation for the accumulated social rights of the employed personnel, who will presumably be taken over almost entirely. The gain on the sale of PT Melania may be adjusted going forward depending on revision of the estimate of these costs in the future. SIPEF has made a best estimate of the costs related to the sale of PT Melania. Below we present the calculation of the net selling price.

In KUSD	Selling price
Total amount to be received	36 000
Estimated costs related to the sale	-11 418
Net selling price (100% of the shares)	24 582
Net selling price for 95%	23 353
Of which 40% of the shares	9 833
55% of the shares	13 520

Upon signing of the SPA, SIPEF has lost full control of PT Melania. Subsequently, PT Melania has been accounted for as a joint venture held for sale on 30 April 2021. The assets and liabilities of PT Melania have been measured at fair value, equaling the net selling price of KUSD 23 353. The results of PT Melania have been included in the share of results of associated companies and joint ventures for the first four months of 2021. As from 30 April 2021, the results of PT Melania are no longer included in the consolidated profit and loss of the SIPEF group as PT Melania is classified as a joint venture held for sale.

The classification as a joint venture held for sale, including subsequent remeasurement at fair value, and sale of 40% of the shares of PT Melania has the following impact on the balance sheet and profit and loss accounts of the SIPEF group:

In KUSD	30/04/2021	Sale of 40%	Payments during 2021	Total impact
Assets
Non-current assets	-17 319	-17 319
Assets held for sale	23 353	-9 833	13 520
Current assets	- 170	- 170
Cash and cash equivalents	- 1 19 000	-1 922	17 077
Total assets	5 864	9 167	-1 922	13 109
Liabilities
Currency translation adjustments	1 091		1 091
Minorities	- 559		- 559
Non-current liabilities	-5 833		-5 833
Non-current liabilities - advances received	4 830		4 830
Current liabilities - advances received	4 337	-1 922	2 415
Current liabilities	- 475	- 475
Total liabilities	-5 776	9 167	-1 922	1 469
Profit and loss
Other operating income/(charges)	11 640		11 640
Of which: Share of the group	11 003		11 003
Minorities	637		637
Total	11 640	0	0	11 640

Upon classification as joint venture as held for sale, a capital gain of KUSD 11 640 is realised, being the difference between the net selling price for 95% of the shares (KUSD 23 353) and the value of the net assets of PT Melania in the consolidated financial statements of the SIPEF group (KUSD 11 713). The sale of 40% of the shares of PT Melania for KUSD 19 000 has been recorded as a sale of 40% the value of the assets held for sale (KUSD 9 833) and as advances received (KUSD 9 167). Since the transfer of shares, there was a deduction for the amounts paid for the renewal of the concession rights, pension payments and the financing of the tea activities (KUSD 1 922). Of the total remaining advance of KUSD 7 245, KUSD 2 415 is expected to be used within the year and KUSD 4 830 to be used after more than one year. Total cash received (KUSD 17 077) is included in the cash flow as part of the proceeds from sales of financial assets (KUSD 24 708). The remaining amount on the proceeds from sales of financial assets (KUSD 7 631) relates to the final payment received for the sale of the shares of Sipef-CI.

EARNINGS PER SHARE (BASIC AND DILUTED)

From continuing operations

	2021	2020
Basic earnings per share
Basic earnings per share - calculation (USD)	9.00	1.36

Basic earnings per share is calculated as follows:

		2021	2020
Numerator: net result for the period attributable to ordinary shareholders (KUSD)		93 749	14 122
Denominator: the weighted average number of ordinary shares outstanding		10 418 431	10 419 328

The weighted average number of ordinary shares outstanding is calculated as follows:

	2021	2020
Number of ordinary shares outstanding at January 1	10 419 328	10 419 328
Effect of shares issued / share buyback programs	- 897	0
Effect of the capital increase	0	0
The weighted average number of ordinary shares outstanding at December 31	10 418 431	10 419 328

Diluted earnings per share

		2021	2020
Diluted earnings per share - calculation (USD)		8.99	1.36

The diluted earnings per share is calculated as follows:

		2021	2020
Numerator: net result for the period attributable to ordinary shareholders (KUSD)		93 749	14 122
Denominator: the weighted average number of dilutive ordinary shares outstanding		10 422 490	10 420 091

The weighted average number of dilutive ordinary shares outstanding is calculated as follows:

	2021	2020
The weighted average number of ordinary shares outstanding at December 31	10 418 431	10 419 328
Effect of stock options on issue	4 059	763
The weighted average number of dilutive ordinary shares outstanding at December 31	10 422 490	10 420 091

EVENTS AFTER THE BALANCE SHEET DATE

From continuing operations
| | 2021 | 2020 |
| :------------------------------------------------------------ | :------ | :------ |
| Basic earnings per share | | |
| Basic earnings per share - calculation (USD) | 9.00 | 1.36 |
| Basic earnings per share is calculated as follows: | | |
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 93 749 | 14 122 |
| Denominator: the weighted average number of ordinary shares outstanding | 10 418 431 | 10 419 328 |

The weighted average number of ordinary shares outstanding is calculated as follows:
| | 2021 | 2020 |
| :------------------------------------------------------------ | :--------- | :--------- |
| Number of ordinary shares outstanding at January 1 | 10 419 328 | 10 419 328 |
| Effect of shares issued / share buyback programs | - 897 0 | |
| Effect of the capital increase | 0 | 0 |
| The weighted average number of ordinary shares outstanding at December 31 | 10 418 431 | 10 419 328 |

Diluted earnings per share
| | 2021 | 2020 |
| :------------------------------------------------------------ | :------ | :------ |
| Diluted earnings per share - calculation (USD) | 8.99 | 1.36 |
| The diluted earnings per share is calculated as follows: | | |
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 93 749 | 14 122 |
| Denominator: the weighted average number of dilutive ordinary shares outstanding | 10 422 490 | 10 420 091 |

The weighted average number of dilutive ordinary shares outstanding is calculated as follows:
| | 2021 | 2020 |
| :------------------------------------------------------------ | :--------- | :--------- |
| The weighted average number of ordinary shares outstanding at December 31 | 10 418 431 | 10 419 328 |
| Effect of stock options on issue | 4 059 763 | |
| The weighted average number of dilutive ordinary shares outstanding at December 31 | 10 422 490 | 10 420 091 |

32. EVENTS AFTER THE BALANCE SHEET DATE

The war between Russia and Ukraine that started on 24 February 2022 radically changed the geopolitical landscape. This war is having a tremendous effect on (agricultural) commodities. Ukraine is the world’s largest sunflower seed producer, as well as the top sunflower oil exporter. It was also expected to rank No. 3 in rapeseed and wheat exports this season. The ports are closed and hardly any products are being exported. As a result, many prices of staple food commodities have rallied strongly, further fuelling food price inflation. Normally, the planting season for the new crops commences late March to early April; however, this will be strongly impacted for as long as the war continues. The duration of this war will determine its short- and medium-term impacts on agricultural commodities, although it is almost a certainty that there will be shortages for the time being. Agricultural commodity prices will stay strong for the foreseeable future. In light of this war, the Group confirms that it has no activities with parties in Ukraine, Russia or Belarus, nor are there assets receivable relating to these regions at 31 December 2021. The Group does not do business with any parties included on the sanctions list at the date of publishing.

33. SERVICES PROVIDED BY THE AUDITOR AND RELATED FEES

The statutory auditor of the SIPEF group is EY Bedrijfsrevisoren BV represented by Wim Van Gasse and Christoph Oris. The fees for the annual report of SIPEF were approved by the general meeting after review and approval of the audit committee and by the board of directors. These fees correspond to an amount of KUSD 118 (against KUSD 95 last year for Deloitte). For the Group, EY has provided services for KUSD 577 in 2021 (against KUSD 419 the year before for Deloitte), of which KUSD 0 (2020: KUSD 20 for Deloitte) are for non-audit services.

34. Covid-19

SIPEF continued its comprehensive programme to vaccinate against covid-19 its employees and their dependents free of charge. In Indonesia, where around 47% of the national population had been fully vaccinated, SIPEF made the most progress: 92% of the SIPEF employees and dependents had been double-vaccinated against covid-19 by November 2021. A booster programme will begin in 2022. In Ivory Coast, 45% of employees had been double-vaccinated and 15% had received a single dose. Due to limited vaccine availability the programme could not be continued and the number of vaccinated employees therefore remained the same in the last quarter of 2021. Nevertheless, with only 8.2% of the national population in Ivory Coast having been fully vaccinated, SIPEF believes its programme made a positive contribution. The Group will continue its programme in 2022, when more supply becomes available. In Papua New Guinea, SIPEF has focused on providing clear information and establishing supporting policies. More time will be needed to allow vaccine confidence to grow in order to increase the vaccination rate, which is currently below 10% of the targeted number. Lack of confidence may also partly explain the low vaccination rate at a national level, with only 2.5% of the country having been fully vaccinated as at December 2021.

Besloten vennootschap Société à responsabilité limitée RPR Brussel - RPM Bruxelles - BTW-TVA BE0446.334.711-IBAN N° BE71 2100 9059 0069 *handelend in naam van een vennootschap:/agissant au nom d'une société A member firm of Ernst & Young Global Limited EY Bedrijfsrevisoren EY Réviseurs d’Entreprises Borsbeeksebrug 26 B - 2600 Antwerpen (Berchem) Tel: +32 (0) 3 270 12 00 ey.com Independent auditor’s report to the general meeting of SIPEF NV for the year ended 31 December 2021

As required by law and the Company’s articles of association, we report to you as statutory auditor of SIPEF NV (the “Company”) and its subsidiaries (together the “Group”). This report includes our opinion on the consolidated balance sheet as at 31 December 2021, the consolidated income statement, the statement of consolidated comprehensive income, the consolidated cash flow statement and statement of changes in consolidated equity for the year ended 31 December 2021 and the disclosures (all elements together the “Consolidated Financial Statements”) as well as our report on other legal and regulatory requirements. These two reports are considered one report and are inseparable. We have been appointed as statutory auditor by the shareholders’ meeting of 9 June 2021, in accordance with the proposition by the Board of Directors following recommendation of the Audit Committee. Our mandate expires at the shareholders’ meeting that will deliberate on the Consolidated Financial Statements for the year ending 31 December 2023. We performed the audit of the Consolidated Financial Statements of the Group for one year.

Report on the audit of the Consolidated Financial Statements

Unqualified opinion

We have audited the Consolidated Financial Statements of SIPEF NV, that comprise of the consolidated balance sheet on 31 December 2021, the consolidated income statement, the statement of consolidated comprehensive income and the consolidated cash flow statement of the year and the disclosures, which show a consolidated balance sheet total of USD 991.765 thousand and of which the consolidated income statement shows a profit for the year of USD 99.471 thousand. In our opinion, the Consolidated Financial Statements give a true and fair view of the consolidated net equity and financial position as at 31 December 2021, and of its consolidated results for the year then ended, prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (“IFRS”) and with applicable legal and regulatory requirements in Belgium.

Basis for the unqualified opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the Consolidated Financial Statements” section of our report.# Statutory auditor’s report on consolidated financial statements

SIPEF Financial statements 2021

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

2 Impairment assessment of goodwill

Description of the key audit matter

The goodwill amounts to USD 104.782 thousand as at 31 December 2021, and relates to the palm oil segment in Indonesia and Papua New Guinea. Goodwill must be tested for impairment on at least an annual basis. The determination of recoverable amount requires judgement from management in both identifying and then valuing the relevant single Cash Generating Units. As disclosed in note [8] – Goodwill and Other intangible assets of the Consolidated Financial Statements, the recoverable value was determined by using a discounted cash flow model to determine the value in use. The cash flow model estimates the relevant cash flows expected to be generated in the future, and discounted to the present value using a discount rate approximating the weighted average cost of capital. This estimation requires the management to use of a number of variables and market conditions such as future prices and volume growth rates, the timing of future operating expenditure, and the discount and long term growth rates. As a consequence the determination of the recoverable value is subjective in nature due to judgements to be made by management of future performance of the palm oil segment. The key assumptions used in determining the estimated value in use are the expected long term crude palm oil price and the weighted average cost of capital. Changes in certain assumptions used in the model can lead to significant changes in the assessment of the recoverable amount. of. This matter has been considered as a key audit matter due to the level of judgment required in these estimates.

Summary of the procedures performed

We obtained an understanding of management’s review process of the discounted cash flow model used and the approval by the board of the underlying business plan.
We assessed the determination of the CGU’s based on our understanding of the nature of the Company and their operations, and assessed whether this is consistent with the internal reporting of the business;
We evaluated the appropriateness of the discounted cash flow model used in determining the value in use of the CGU, as well as assessing the weighted cost of capital rate used;
We compared the cash flow forecasts to approved budgets and other relevant market and economic information, as well as testing the underlying calculations;
We evaluated management’s key assumptions used in the impairment calculations;
We assessed the analysis made by management in respect of sensitivity of the value in use to changes in the assumptions used within the model;
We independently performed sensitivity analyses around the key assumptions used in the discounted cash flow model and we assessed the robustness of the budgeting process by management and we verified if the future cash flows were based on the approved business plan by the board;
We reviewed the adequacy of the disclosures in the note [8] – Goodwill and Other intangible assets of the Consolidated Financial Statements concerning those key assumptions.

Recoverability of the deferred tax assets

Description of the key audit matter

The deferred tax assets recognized amount to USD 10.226 thousand as at 31 December 2021 on unutilized cumulative tax losses carried forward. The recognition of deferred tax assets entails a significant level of judgement by the Board in assessing the quantification, probability and sufficiency of future taxable profits against which they may be offset and future reversals of existing taxable temporary differences. Due to the judgement required of the Board in interpreting the criteria set forth in local tax legislations in force and the risk that may arise from a different interpretation of such legislations, as well as the uncertainty associated with recovering the amounts recognized as deferred tax assets and the expected recovery period, we consider this to be a key audit matter.

Summary of the procedures performed

We obtained an understanding of the internal controls associated with the process of estimating the recoverability of the deferred tax assets;

The connection to the world of sustainable tropical agriculture

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

2 Impairment assessment of goodwill

Description of the key audit matter

Summary of the procedures performed

We obtained an understanding of management’s review process of the discounted cash flow model used and the approval by the board of the underlying business plan.
We assessed the determination of the CGU’s based on our understanding of the nature of the Company and their operations, and assessed whether this is consistent with the internal reporting of the business;
We evaluated the appropriateness of the discounted cash flow model used in determining the value in use of the CGU, as well as assessing the weighted cost of capital rate used;
We compared the cash flow forecasts to approved budgets and other relevant market and economic information, as well as testing the underlying calculations;
We evaluated management’s key assumptions used in the impairment calculations;
We assessed the analysis made by management in respect of sensitivity of the value in use to changes in the assumptions used within the model;
We independently performed sensitivity analyses around the key assumptions used in the discounted cash flow model and we assessed the robustness of the budgeting process by management and we verified if the future cash flows were based on the approved business plan by the board;
We reviewed the adequacy of the disclosures in the note [8] – Goodwill and Other intangible assets of the Consolidated Financial Statements concerning those key assumptions.

Recoverability of the deferred tax assets

Description of the key audit matter

Summary of the procedures performed

We obtained an understanding of the internal controls associated with the process of estimating the recoverability of the deferred tax assets.
We assessed the reasonableness of the criteria and the main assumptions considered by management in estimating the future taxable profits necessary for offset.
We involved local tax experts in Indonesia and Papua New Guinea to understand potential impacts of local tax regulations on the criteria used by management to determine the recoverability of the deferred tax assets.
We compared the profit and loss forecasts used as a basis for recognizing tax losses with the actual results obtained and evaluated the reasonableness of the time period in which management expects to offset these assets.
We agreed the profit and loss forecasts used as a basis for recognizing tax losses with the approved budgets.
We assessed whether the information disclosed in note [23] – Income taxes of the Consolidated Financial Statements on the recoverability of the aforementioned deferred tax assets meets the requirements of the applicable financial reporting framework.

Gain on sale transaction PT Melania

Description of the key audit matter

As disclosed in note 30 of the Consolidated Financial Statements, PT Melania is deconsolidated due to the loss of control at the end of April 2021, when SIPEF and the Shamrock Group entered into a conditional sale and purchase agreement of the shares of PT Melania. As a result, PT Melania has been accounted for as a joint venture held for sale since 30 April 2021. The assets and liabilities of PT Melania have been measured at fair value, equaling the net selling price of USD 23.353 thousand of which 55% is still retained in the balance sheet as assets held for sale per 31 December 2021 or USD 13.520 thousand. The sale and purchase agreement includes several key terms and conditions around future expenses still to be covered by SIPEF to fulfill conditions precedent. Significant judgments and estimates had to be made by management to determine those expected future costs included in the measurement of the fair value of the assets held for sale. The final net sale price and any capital gain on the sale of PT Melania depends largely on the cost and timing of renewing the permanent land rights and on the compensation for the accumulated social rights of the employed personnel. The gain on the sale of PT Melania may need to be adjusted after 31 December 2021 and going forward depending on revision of the estimate of these costs in the future.

Summary of the procedures performed

We have read the sales agreement to gain an understanding of the key terms and conditions of the transaction.
We evaluated whether the proper accounting treatment was applied for the transaction (recognition of the gain, presentation as held for sale at year-end).
We assessed the estimation of the net selling price as calculated by the management including assessment of the significant judgements and estimates made by management in evaluating certain key terms and conditions such as certain expenses still to be covered by SIPEF to fulfill the conditions precedent.
We assessed the appropriateness of the financial information disclosed in the note 30 to the Consolidated Financial Statements concerning this transaction.

Responsibilities of the Board of Directors for the preparation of the Consolidated Financial Statements

The Board of Directors is responsible for the preparation of the Consolidated Financial Statements that give a true and fair view in accordance with IFRS and with applicable legal and regulatory requirements in Belgium and for such internal controls relevant to the preparation of the Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of Consolidated Financial Statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, and provide, if applicable, information on matters impacting going concern. The Board of Directors should prepare the financial statements using the going concern basis of accounting, unless the Board of Directors either intends to liquidate the Company or to cease business operations, or has no realistic alternative but to do so.

61 SIPEF Financial statements 2021

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

Our responsibilities for the audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance whether the Consolidated Financial Statements are free from material misstatement, whether due to fraud or error, and to express an opinion on these Consolidated Financial Statements based on our audit. Reasonable assurance is a high level of assurance, but not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated Financial Statements.

In performing our audit, we comply with the legal, regulatory and normative framework that applies to the audit of the Consolidated Financial Statements in Belgium. However, a statutory audit does not provide assurance about the future viability of the Company and the Group, nor about the efficiency or effectiveness with which the board of directors has taken or will undertake the Company's and the Group’s business operations. Our responsibilities with regards to the going concern assumption used by the board of directors are described below.

As part of an audit in accordance with ISAs, we exercise professional judgment and we maintain professional skepticism throughout the audit. We also perform the following tasks:

identification and assessment of the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error, the planning and execution of audit procedures to respond to these risks and obtain audit evidence which is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting material misstatements resulting from fraud is higher than when such misstatements result from errors, since fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
obtaining insight in the system of internal controls that are relevant for the audit and with the objective 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.
evaluating the selected and applied accounting policies, and evaluating the reasonability of the accounting estimates and related disclosures made by the Board of Directors as well as the underlying information given by the Board of Directors.
conclude on the appropriateness of the Board of Directors’ use of the going-concern basis of accounting, and based on the audit evidence obtained, whether or not a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going-concern.
evaluating the overall presentation, structure and content of the Consolidated Financial Statements, and evaluating whether the Consolidated Financial Statements reflect a true and fair view of the underlying transactions and events.

62 The connection to the world of sustainable tropical agriculture

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

Our responsibilities for the audit of the Consolidated Financial Statements

identification and assessment of the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error, the planning and execution of audit procedures to respond to these risks and obtain audit evidence which is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting material misstatements resulting from fraud is higher than when such misstatements result from errors, since fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
obtaining insight in the system of internal controls that are relevant for the audit and with the objective 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;
evaluating the selected and applied accounting policies, and evaluating the reasonability of the accounting estimates and related disclosures made by the Board of Directors as well as the underlying information given by the Board of Directors;
conclude on the appropriateness of the Board of Directors’ use of the going-concern basis of accounting, and based on the audit evidence obtained, whether or not a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going-concern;
evaluating the overall presentation, structure and content of the Consolidated Financial Statements, and evaluating whether the Consolidated Financial Statements reflect a true and fair view of the underlying transactions and events.

We communicate with the Audit Committee within the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the audits of the subsidiaries. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. We provide the Audit Committee within the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued) 5 with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Audit Committee within the Board of Directors, we determine those matters that were of most significance in the audit of the Consolidated Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our report, unless the law or regulations prohibit this.

Report on other legal and regulatory requirements

Responsibilities of the Board of Directors

The Board of Directors is responsible for the preparation and the content of the Board of Directors’ report on the Consolidated Financial Statements.

Responsibilities of the auditor

In the context of our mandate and in accordance with the additional standard to the ISAs applicable in Belgium, it is our responsibility to verify, in all material respects, the Board of Directors’ report on the Consolidated Financial Statements, the non-financial information attached to the Board of Directors’ report, as well as to report on these matters.

Aspects relating to Board of Directors’ report

In our opinion, after carrying out specific procedures on the Board of Directors’ report, the Board of Directors’ report is consistent with the Consolidated Financial Statements and has been prepared in accordance with article 3:32 of the Code of companies and associations. In the context of our audit of the Consolidated Financial Statements, we are also responsible to consider whether, based on the information that we became aware of during the performance of our audit, the Board of Directors’ report contains any material inconsistencies or contains information that is inaccurate or otherwise misleading. In light of the work performed, there are no material inconsistencies to be reported.

The non–financial information required by article 3:32, § 2, of the Code of companies and associations has been included in the Board of Directors’ report on the Consolidated Financial Statements. The Company has prepared this non- financial information based on GRI Standards (“GRI”). However, we do not comment on whether this non-financial information has been prepared, in all material respects, in accordance with GRI.

Independence matters

Our audit firm and our network have not performed any services that are not compatible with the audit of the Consolidated Financial Statements and have remained independent of the Company during the course of our mandate. No additional services, that are compatible with the audit of the Consolidated Financial Statements as referred to in Article 3:65 of the Code of companies and associations and for which fees are due, have been carried out.

European single electronic format (“ESEF”)

In accordance with the standard on the audit of the conformity of the financial statements with the European single electronic format (hereinafter "ESEF"), we have carried out the audit of the compliance of the ESEF format with the regulatory technical standards set by the European Delegated Regulation No 2019/815 of 17 December 2018 (hereinafter: "Delegated Regulation").

The board of directors is responsible for the preparation, in accordance with the ESEF requirements, of the consolidated financial statements in the form of an electronic file in ESEF format (hereinafter 'the digital consolidated financial statements') included in the annual financial report available on the portal of the FSMA (https://www.fsma.be/en/data-portal). It is our responsibility to obtain sufficient and appropriate supporting evidence to conclude that the format and markup language of the digital consolidated financial statements comply in all material respects with the ESEF requirements under the Delegated Regulation.

63 SIPEF Financial statements 2021

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

Based on the work performed by us, we conclude that the format and tagging of information in the digital consolidated financial statements of SIPEF NV per 31 December 2021 included in the annual financial report available on the portal of the FSMA (https://www.fsma.be/en/data-portal) are, in all material respects, in accordance with the ESEF requirements under the Delegated Regulation.

Other communications.

This report is consistent with our supplementary declaration to the Audit Committee as specified in article 11 of the regulation (EU) nr. 537/2014.

Antwerp, 27 April 2022

EY Bedrijfsrevisoren BV
Statutory auditor
Represented by

Christoph Oris * Wim Van Gasse*
Partner Partner
*Acting on behalf of a BV/SRL
22CO0091

The connection to the world of sustainable tropical agriculture

Audit report dated 27 April 2022 on the Consolidated Financial Statements of SIPEF NV as of and for the year ended 31 December 2021 (continued)

Other communications.

This report is consistent with our supplementary declaration to the Audit Committee as specified in article 11 of the regulation (EU) nr. 537/2014.

Antwerp, 27 April 2022

EY Bedrijfsrevisoren BV
Statutory auditor
Represented by

Christoph Oris * Wim Van Gasse*
Partner Partner
*Acting on behalf of a BV/SRL
22CO0091

SIPEF Financial statements 2021

Parent company summarised statutory accounts

The annual accounts of SIPEF are given below in summarized form. In accordance with the Belgian Code on Companies, the annual accounts of SIPEF, together with the management report and the auditor’s report will be deposited with the National Bank of Belgium. These documents may also be obtained on request from:

SIPEF, Calesbergdreef 5, B-2900 Schoten

Only the consolidated annual financial statements as set forth in the preceding pages present a true and fair view of the financial position and performance of the SIPEF-group.# SIPEF NV Annual Report 2021

The statutory auditor’s report is unqualified and certifies that the annual accounts of SIPEF NV give a true and fair view of the company's net equity and financial position as of 31 December 2021 and of its results for the year then ended, in accordance with the financial reporting framework applicable in Belgium. The balance sheet total of the company as per 31 December 2021 amounts to KUSD 398 951 compared to KUSD 464 111 in previous year. The ‘financial assets – receivables from affiliated companies’ decreased with KUSD -101 700, and at the same time the ‘amounts receivable within one year’ increased by KUSD 34 075. The ‘receivables from affiliated companies’ have decreased mainly due to the transfer of KUSD 121 752 to the ‘amounts receivable within one year’. This is offset by an additional funding of KUSD 20 051 to SIPEF’s Indonesian subsidiaries for expansion. The amount receivable within one year have increased only by KUSD 34 075 because of the repayments by the subsidiaries of SIPEF following their increased result and cash flow. On the liabilities side the decrease in creditors (both long term and short term) relate to the repayment of both long term and short term financial loans following the cash received by SIPEF from its subsidiaries repayments. The equity of SIPEF before profit appropriation amounts to KUSD 295 218, which corresponds to 27.91 USD per share. The individual results of SIPEF are large determined by dividends and capital gains/losses. As SIPEF does not directly hold all of the Group’s participating interest, the consolidated result of the Group is a more accurate reflection of the underlying economic development. The statutory profit for the year 2021 amounts to KUSD 34 749 compared to a profit of KUSD 2 222 in the previous year. On February 15, 2022, a dividend of KEUR 21 159 (EUR 2.00 gross per ordinary share) has been recommended by the board of directors. After deduction of the withholding tax (30%), the net dividend will amount to EUR 1.40 per share. Since the treasury shares are not entitled to a dividend in accordance with Article 7:217 §3 of the Code of Companies and Associations, the total dividend amount depends on the number of treasury shares for account of SIPEF, on June 9, 2022 at 11.59 pm CET (i.e. the day be-fore the ex-date). The board of directors proposes to be authorised accordingly to enter the final total dividend amount (and the resulting change) in the statutory financial statements. The maximum proposed total amount is KEUR 21 159. If the annual general meeting approves this dividend proposal, the dividend will be payable from July 6, 2022. Taking into account the number of treasury shares held on the date of establishment of the annual report, the Board of Directors proposes to allocate the result (in KUSD) as follows:
* Profit carried forward from previous year: KUSD 92 445
* Profit of the year: KUSD 34 749
* Total available for appropriation: KUSD 127 194
* Addition to the legal reserve: KUSD 0
* Addition to the other reserves: KUSD - 477
* Dividend: KUSD -23 596
* Result to be carried forward: KUSD 103 121

Condensed balance sheet (after appropriation)

In KUSD		2020
Assets
	Fixed assets	279 081
	Formation expenses	0
	Intangible assets	348
	Tangible assets	291 362
	Financial assets	278 442
	Current assets	119 870
	Amounts receivable after more than one year	0
	Stocks and contracts in progress	618
	Amounts receivable within one year	98 184
	Investments	10 802
	Cash at bank and in hand	9 931
	Other current assets	334
	Total assets	398 951
Liabilities
	Equity	271 621
	Capital	44 734
	Share premium account	107 970
	Reserves	15 796
	Profit/ (loss) carried forward	103 121
	Provisions and deferred taxation	0
	Provisions for liabilities and charges	0
	Creditors	127 330
	Amounts payable after more than one year	36 000
	Amounts payable within one year	91 330
	Accrued charges and deferred income	0
	Total liabilities	398 951

Condensed income statement

In KUSD		2021	2020
	Operating income		221 962
	Operating charges		- 219 388
	Operating result		2 575
	Financial income		33 958
	Financial charges		- 963
	Financial result		32 995
	Result for the period before taxes		35 570
	Income taxes		- 820
	Result for the period		34 749

Appropriation account

In KUSD		2021	2020
	Profit/ (loss) to be appropriated		127 194
	Profit / (loss) for the period available for appropriation		34 749
	Profit / (loss) brought forward		92 445
	Appropriation account		127 194
	Transfers to legal reserve		0
	Transfers to other reserves		477
	Result to be carried forward		103 121
	Dividends		23 596
	Remuneration to directors		0

ESEF information

Homepage of reporting entity www.sipef.com
LEI code of reporting entity 549300NN3PC8KDD43S24
Name of reporting entity or other means of identification SIPEF
Domicile of entity Belgium
Legal form of entity Naamloze vennootschap
Country of incorporation Belgium
Address of entity's registered oce Calesbergdreef 5, 2900 Schoten, Belgium
Principal place of business Indonesia, Papua New Guinea and Ivory Coast
Description of nature of entity's operations and principal activities Tropical agriculture
Name of parent entity SIPEF
Name of ultimate parent of group SIPEF
Explanation of change in name of reporting entity or other means of identification from end of preceding reporting period No change in name of reporting entity
Length of life of limited life entity
Period covered by financial statements

PART 3 - SUSTAINABILITY REPORT

Annual Report 2021

Contents
About this report ................................................. 2
Managing director statement.....................................4
About SIPEF .....................................................8
Approach to sustainability....................................... 13
Targets and achievements .......................................32
Responsible production and processing .........................38
-- Productivity and quality ........................ . 40
-- Sus tainability certification progress .............47
-- Climate chang e .................................. 50
-- No Defores tation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-- P eatlands ........................................ 66
-- Biodiv ersity and conservation . . . . . . . . . . . . . . . . . . . 67
-- Bes t Management Practices .....................72
-- Respecting human and labour rights ............ . 80
-- Respecting community rights ................... 90
-- Community dev elopment .......................93
Responsible sourcing and smallholder production............... 96
-- Smallholder engag ement ........................98
-- Smallholder certification ....................... 105
-- Managing risks in SIPEF ’s supply base ......... 106
Responsible business and transparenc y ........................ 108
-- Corporate governance ..........................110
-- Anti-bribery and anti-corrup tion ................ 111
-- EU tax onomy: Consolidated disclosures -- pursuant to Art. 8 Taxonomy Regulation ....... 114
Annex .......................................................... 118
Responsible persons ...........................................143
For further information ........................................144

About this report

SIPEF publishes an Annual Report made up of three parts: a Company Report (part 1), a Financial Statement (part 2), and a Sustainability Report (part 3). The Sustainability Report focus- es on the environmental, social and governance performance of the Group, including SIPEF’s sus- tainability commitments, progress and next steps.

Report scope

The 2021 SIPEF Sustainability Report covers information and data on the Group’s sustainabil- ity performance for the financial year 1 January to 31 December 2021. The report’s scope includes all the operational and management activities within the Group: oil palm, bananas, tea and rubber operations in Indonesia, Papua New Guinea and Ivory Coast.

SIPEF is a Belgian company dedicated to the production of traceable, sustainable and high-quality agricultural products. Sustainability is at the core of SIPEF’s business model and the Group has made a top-down commitment to ensuring its activities make a positive contribution to the environment, society and local economies.

The main focus of the report is on the Group’s primary business, oil palm production and palm products. Another key focus area is on SIPEF’s second largest business, its banana production. During 2021, SIPEF commenced its transition away from the production of tea and rubber. This is reﬂected in the scope of this report, with reduced information and performance data on SIPEF’s tea and rubber activities. More informa- tion on this transition is available in part 1 of the Annual Report (Company Report).

Report framework and content

The report has been prepared taking into account the GRI Standards. The content and performance data covered have been expanded from previous years to align with the requirements of the stand- ards, as well as the latest materiality assessment conducted for the SIPEF group (see page 15 for details). The report also outlines the Group’s contributions to the United Nations Sustainable Development Goals (see pages 31 and 122).# SIPEF Sustainability Report 2021

The connection to the world of sustainable tropical agriculture

Within the wider framework of SIPEF’s Annual Report 2021, this report (part 3) includes the non-financial information required by the EU Non-Financial Reporting Directive, which was transposed into Belgian law in 2017. In accordance with the requirements of the European Commission’s Taxonomy Regulation, SIPEF has assessed the taxonomy-eligibility of its economic activities for the reporting period 2021 ('Climate change mitigation' and 'Climate change adaptation'). More details on the EU taxonomy and assessment results can be found on page 114.

Assurance

SIPEF has not engaged third-party assurance for the content of this report. However, a significant portion of the information and data related to the Group’s environmental and social performance has been reviewed through certification audits undertaken to comply with standards such as the Roundtable on Sustainable Palm Oil (RSPO) and Rainforest Alliance. The Group is working towards assurance of future Sustainability Reports.

This is the sixth Sustainability Report that has been issued by the Group since 2014. The last report was published as part 3 of SIPEF’s 2020 Annual Report. SIPEF’s Annual Reports are made available on the company website at: www.sipef.com/hq/investors/annual-reports/

2 European Commission. (Retrieved February 2022). EU taxonomy for sustainable activities. https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en

About this report

Managing director statement

Dear colleagues, partners and stakeholders,

I am pleased to present the SIPEF Sustainability Report for the financial year 2021, which provides an overview of the progress the Group has made in 2021. Reflecting on SIPEF’s sustainability journey since the last report, I am reminded of the Company’s purpose: to create value for all of its stakeholders and be the preferred supplier of traceable, sustainable, high-quality agricultural products. It is this purpose that guides SIPEF, as the Company navigates between remaining competitive and profitable, and forging the pathways to greater economic, environmental and social prosperity. It is also what drives the Group’s decisions and actions in a world that continues to face significant challenges.

In 2021, one of the greatest challenges faced by us all was the ongoing covid-19 pandemic. The Group continued its comprehensive programme of offering the covid-19 vaccination free of charge to all its employees and their dependents. In each operation, efforts were made to dedicate significant resources to mitigating the risks, including developing standard operating procedures (SOPs) to ensure that employees, as well as surrounding communities, were protected. These actions also helped to ensure business continuity, including for the many smallholders in the Group’s supply chain, who continued to receive an income for their produce.

As I reflect on this and other challenges – from climate change to the need for greater transparency in global supply chains – I am certain that the palm oil industry has a significant role to play in the global sustainability agenda. Demand for vegetable oils is forecast to increase significantly in the years to come, and certified sustainable palm oil is the best choice to meet that demand, while reducing pressure on land and creating sustainable livelihoods. Oil palm accounts for just 9% of the land used to grow vegetable oil crops, yet it produces 36% of the world’s vegetable oil supply. Per hectare, it can provide two to eight times more oil than crops like sunflower, rapeseed, soybean or corn. Innovative agricultural practices can lead to even greater productivity. Moreover, the palm oil industry provides a living for millions of people and contributes to development in the rural areas where oil palm is grown.

SIPEF is an upstream player focused on controlled, sustainable growth, and I am proud of its commitment to the production of sustainable palm oil and its contribution to a more sustainable world. SIPEF has been evolving and growing its business sustainably for decades, embracing technological change and innovation, and focusing on a transparent and long-term, sustainable value chain. Building on this experience, the Company took great strides forward in its sustainability activities in 2021. As SIPEF creates value and returns for its shareholders, it has set the objective of contributing to the United Nations Sustainable Development Goals (SDGs) and driving positive impacts aligned towards SIPEF’s purpose and customer expectations. The Group’s materiality assessment process has been significantly strengthened with a new component, to enhance engagement with stakeholders and align with the evolving priorities of the wider business and multi-stakeholder landscapes. This has resulted in a complete review of the Group’s material sustainability topics. 2022 will be an important year for review and reflection, particularly with regard to the Group’s policy framework, sustainability strategy, and alignment towards environmental, social and governance requirements, and wider stakeholder expectations.

I was pleased to once again see SIPEF’s achievements recognised by several high-profile benchmarking organisations in 2021. The Group was ranked fourth out of 350 companies by Forest 500 and ninth out of 100 palm oil companies by the Sustainability Policy Transparency Toolkit (SPOTT). SIPEF also maintained its industry-leading commitment to sustainability certification, achieving 100% compliance with RSPO criteria for palm oil and 100% Rainforest Alliance certification for bananas.

Traceability is a fundamental principle of sustainability, and this continued to be one of SIPEF’s greatest strengths in 2021. All commodities are fully traceable to their production location, either an estate managed by SIPEF or a supplier smallholder plot. In 2021, the Group’s interactive mapping application, Geo SIPEF, was updated with new features. Users can locate all SIPEF palm oil mills, kernel crushing plants, rubber and tea factories, and their respective supply bases, and they can now also switch on layers that show land conversion and fire hotspots.

Responsible production and processing

For SIPEF, sustainability starts with responsible production and processing at its own estates. Policies and Best Management Practices (BMPs) are implemented for a comprehensive set of topics: from human rights and labour standards, health and safety, and community rights, to prevention of deforestation, protection of biodiversity, and regenerative practices, among others.

Reducing greenhouse gas (GHG) emissions is a top priority. In 2021, the focus was on establishing a uniform methodology based on ISO 14064 to measure the Group’s footprint, as the baseline for a mitigation strategy to be set in 2022. This builds on several years of measuring the historical GHG emissions of SIPEF’s RSPO certified oil palm plantations, using the RSPO GHG calculator. Many initiatives are already under way to reduce the Group’s footprint, for instance by implementing measures to capture the methane gas produced by the waste from palm oil production, and by developing initiatives to convert waste into cost-effective industrial biomass.

Nature conservation is another focus area, which includes a project to protect more than 12,000 hectares of forest bordering the Kerinci Seblat National Park in Indonesia.

Agriculture is a people-centric business, and SIPEF focuses on valuing its 21,233 employees worldwide, by supporting their livelihoods, safeguarding their well-being and strengthening labour and human rights practices. In 2021, the Group worked with an independent external consultant, LINKS, to review its social framework and human resource policies, and their implementation. SIPEF also strives to ensure that local communities benefit from its activities. In addition to providing employment, SIPEF has set up schools, and built roads, health centres, bridges and places of worship.

SIPEF maintained its industry-leading commitment to sustainability certification, achieving 100% compliance with RSPO criteria for palm oil and 100% Rainforest Alliance certification for bananas.

Responsible sourcing and smallholder production

Smallholders produce around 40% of the world’s palm oil and SIPEF works with over 10,000 smallholders worldwide. The Group operates several programmes with an emphasis on improving livelihoods through increased yields, improved production quality and access to international markets, as well as reducing the impact of production on natural ecosystems. An important focus area in 2021 has been to continue supporting smallholders to achieve and maintain RSPO certification.

Responsible business and transparency

SIPEF has a strong corporate governance structure in place, and continued to strengthen its approach in 2021. The policy and regulatory framework for business governance, transparency and sustainability also continued to evolve in 2021, for instance with the mandatory due diligence rules for the import of products including palm oil into the European Union (EU), and the introduction of reporting eligibility to the EU taxonomy for sustainable activities. SIPEF welcomes these efforts to bring sustainability further into the mainstream, and strives to anticipate and align with all requirements, both globally and within the EU.# SIPEF Sustainability Report 2021

Managing director statement

Reducing greenhouse gas (GHG) emissions is a top priority. In 2021, the focus was on establishing a uniform methodology based on ISO 14064 to measure the Group’s footprint, as the baseline for a mitigation strategy to be set in 2022. The world continues to face great challenges in 2022 and beyond, but I am heartened by the growing focus on climate action, human rights and nature-positive solutions. Sustainability is a journey, and all businesses must constantly evolve to ensure their values, purpose and strategy continue to focus on the material impacts of their activities. While our strengths and our history of successfully tackling complex problems give us confidence, we cannot do it alone. We are truly stronger together, and I want to thank all of SIPEF’s employees, communities and partners for taking part in this work. I encourage you to read our full report to discover more about what we have achieved — and hope to achieve — together.

About SIPEF

SCALE OF SIPEF'S OPERATIONS

Commodity	Production (tonnes)	Percentage of Revenue
Palm oil	384 178	92%
Bananas	32 200	5%
Rubber	3 827*	2%
Tea	965*	1%

Including only four months of rubber and tea production of PT Melania
** Of the revenue of the SIPEF group

Region	Planted Area (ha)	Percentage of Total Planted Area
Indonesia	65 512	82%
Papua New Guinea	13 605	17%
Ivory Coast	825	1%

Total planted area: 79 942 ha

SIPEF is a Belgian public limited agribusiness company listed on Euronext Brussels. It operates agro-industrial activities in the production of sustainable oil palm products, including fresh fruit bunches (FFB), crude palm oil (CPO), palm kernels (PK), and crude palm kernel oil (CPKO). The Group also produces sustainable bananas, natural rubber, tea and horticultural products. SIPEF has a multinational workforce of 21 233 people (full-time equivalent—FTE), the majority of whom are employed or contracted through SIPEF’s subsidiaries. The Group manages a total of 79 942 hectares of own production area across its global operations. Palm products are SIPEF’s primary business focus, accounting for 92% of the Group’s total revenue. Banana production is the second largest activity, making up 5% of total revenue. SIPEF’s business strategy is built on controlled growth as an upstream player, and a crucial part of its mission is to be the preferred supplier of traceable, sustainable, high-quality agricultural products.

Markets served: Europe, UK, Indonesia, West Africa

Global operations:
* Group Headquarters: Schoten, Belgium
* Operating Regions: Indonesia, Papua New Guinea, Ivory Coast
* Singapore Office: SIPEF Singapore Pte Ltd (since 2021)

Operational Breakdown:

Indonesia:
- 30 Oil palm plantations
- 6 Oil palm mills
- 3 Rubber estates
- 3 Rubber factories
- 1 Tea estate
- 1 Tea factory
Papua New Guinea:
- 6 Oil palm plantations
- 3 Palm oil mills
- 2 Kernel crushing plants (integrated with mills)
Ivory Coast:
- 5 Banana estates
- 7 Banana packing stations

GLOBAL PRESENCE

SIPEF’s subsidiary Plantations J. Eglin also manages production areas for pineapple flowers, lotus flowers and foliage (Dracaena) at its banana estates in Azaguié. These products are packed for export at a separate packing station.

Operations and value chains

SIPEF is devoted to sustainable agriculture and sells almost all its products in physical and traceable sustainable supply chains. The following section provides a brief overview of its operations and activities linked with each commodity. A full overview of the Group’s activities, business model and financial performance in 2021 can be found in the Annual Report part 1 (Company Report) and part 2 (Financial Statement).

Palm products

The Group manages more than 77 000 hectares across its 36 oil palm estates, as well as 21 010 hectares of smallholder plantations. The total planted area comprises 98 173 hectares. Under its subsidiary PT Tolan Tiga Indonesia, SIPEF produces palm oil and palm kernels at six mills in North Sumatra, Bengkulu, and South Sumatra. These mills process fresh fruit bunches (FFB) from 30 of the company's own estates and 2 278 smallholders. The Group’s subsidiary in Papua New Guinea, Hargy Oil Palms Ltd (HOPL), produces palm oil and palm kernel oil at three mills and two kernel crushing plants in New Britain. A little over 60% of HOPL’s supply base consists of FFB from its own plantations, with 39% consisting of crops produced by the 3 635 associated smallholders engaging with the company. SIPEF’s palm products are either sold to refiners on the European market or to refiners in Indonesia, which mainly export to Europe. Sustainability is important for SIPEF’s customers, who want to purchase fully traceable and certified palm products.

Metric	Volume
Total planted area	77 163 ha
Immature area planted	12 982 ha
Mature area planted	64 181 ha
FFB	1 658 840 tonnes
* Produced by SIPEF's own plantations	1 385 858 tonnes
CPO / PK / CPKO	442 372 tonnes
* CPO	384 178 tonnes
* PK	45 943 tonnes
* CPKO	12 251 tonnes

Production volumes 2021

Source	Percentage
Smallholders	16.5%
Own plantations	83.5%

PALM PRODUCTION 2021

Product	Percentage
CPO	86.8%
PK	10.4%
CPKO	2.8%

OVERVIEW OF PALM OIL VALUE CHAIN

SIPEF plantations & smallholder plantations -> Extraction mill -> High quality, fully traceable, certified palm products -> SIPEF customers: refiners -> Distribution network -> Food industry, Chemical industry, Detergent industry, Cosmetics industry, Biofuel -> Storage of palm oil, also in tanks at the port -> Shipping (Traders) -> Retailers -> Consumers

Bananas

SIPEF’s subsidiary Plantations J. Eglin SA is a major player in banana production in Ivory Coast, the most important banana producing and exporting country in Africa. As of 31 December 2021, the company manages an area of 1 764 hectares located on the periphery of Abidjan. In 2021, the company expanded its operations to include two additional banana estates and three packing stations. These additions were a result of the company’s acquisition of the assets of the Wanita banana plantation in Ivory Coast. Plantations J. Eglin now manages a total of five estates, equipped with seven packing stations. Plantations J. Eglin annually produces around 32,000 tonnes of green bananas on a planted area of nearly 800 hectares, mainly exporting its bananas to the European market. Through the new acquisition, production is expected to increase by almost 80% over a three-year period to about 57,000 tonnes of export bananas.

Total planted area: 794 ha
Green bananas produced: 32 200 tonnes

BANANA PRODUCTION 2021

Rubber and Tea

As of 31 December 2021, SIPEF owns three rubber estates in Indonesia, as well as three rubber factories producing three different grades. SIPEF also manages the production and marketing of high-quality black ‘Cut, Tear and Curl’ (CTC) tea on a unique estate in West Java, Indonesia, which still harvests primarily using skilled hand plucking. In 2020, SIPEF announced its intentions to phase out of rubber and to convert two of its rubber plantations into oil palm. The conversion will be in alignment with the RSPO New Planting Procedure (NPP) to ensure that re-development does not contribute to deforestation and that Free, Prior and Informed Consent (FPIC) has been provided by local communities. In 2021, PT Melania, which accounts for all of SIPEF’s tea and half of its rubber, was subject to a conditional sale to Shamrock Group, an Indonesian company that owns and manages several rubber plantations and factories. As such, the rubber activities of PT Melania have been managed by the Shamrock Group since 30 April 2021. The tea activities remain under the management of SIPEF until the closing of the sale is completed. A full overview and explanation of changes to operations can be found in the Annual Report part 1 (Company Report).

Approach to sustainability

Sustainability is at the core of SIPEF’s business model and the Group has made a top-down commitment to ensuring its business activities make a positive contribution to the environment, society and local economies. This includes managing plantations and operations in an environmentally and socially responsible manner, as well as creating employment and development opportunities in the rural and remote areas in which it operates. SIPEF’s approach to sustainability includes the following principles and approaches:

Incorporating the three pillars of sustainability: environmental, social and economic
Setting strong sustainability policies and commitments
Striving for the best sustainability standards and agricultural practices
Enabling traceability back to production location
Ensuring optimum productivity and sustainable land use
Investing in innovation and continuous improvement
Good corporate governance, collaboration with key stakeholders and transparent reporting

Three pillars of sustainability

SIPEF’s overarching approach to sustainability reflects the three pillars of sustainable development: environmental, social and economic. These pillars underpin the Group’s core values, which are to engage in environmental stewardship, to be a good employer and neighbour, and to conduct profitable and responsible business. At the heart of this approach is SIPEF’s overarching goal to create value. This approach is further defined by the different levels of SIPEF’s business activities: responsible production and processing (SIPEF’s own estates and operations), responsible sourcing and smallholder production (SIPEF’s engagement with suppliers), and responsible business and transparency (SIPEF as a business entity).# SIPEF Sustainability Report 2021

The degree to which certain issues apply, and the policies and measures employed to manage them, are dependent on whether the sustainability risks occur in SIPEF’s own operations, in its supply chain, or for SIPEF as a business. SIPEF’s approach is also guided by an understanding that the environmental, social and economic issues relevant to its business and supply chain are inextricably linked. The Group recognises the interconnected nature of these issues and manages its activities accordingly.

CREATING VALUE

SIPEF’S APPROACH TO SUSTAINABILITY

The connection to the world of sustainable tropical agriculture

Material topics identified in 2021

SIPEF has followed the GRI materiality principle to ensure the Group’s sustainability approach and reporting continues to address the environmental, social, economic and governance issues that are most important for its business and stakeholders. During 2021, SIPEF conducted a review of its material topics, and made improvements to its materiality assessment process. Based on the assessment, 22 material topics were identified. The twelve priority topics were those that were ranked the highest by both SIPEF and its external stakeholders, as well as those considered to be critical to the Group’s sustainability strategy. The remaining ten issues have been classified as important topics. These are primarily emerging issues considered to be important by stakeholders that will be monitored more closely in future, or areas where SIPEF already has a good management system in place. SIPEF’s sustainability reporting and KPIs have been aligned in 2021 with the new selection of material topics. An overview of the final topics is provided on the next page, mapped against the three pillars, priority level, and the different levels of SIPEF’s business. The Group’s approach with respect to managing the risks and impacts linked with each of the topics it has identified to be material, are described in the sustainability performance chapters of this report: Responsible production and processing (pages 38-95), Responsible sourcing and smallholder production (pages 96-107), and Responsible business and transparency (pages 108-117). A full description of SIPEF’s 2021 materiality assessment process is available in the Annex (page 118-121).

MATERIAL TOPICS IDENTIFIED BY SIPEF IN 2021

| DIMENSIONS | RESPONSIBLE PRODUCTION AND PROCESSING | RESPONSIBLE SOURCING AND SMALLHOLDER PRODUCTION | RISKS, MANAGEMENT APPROACH AND PROGRESS COVERAGE IN REPORT # Approach to Sustainability

International Organization for Standardization (ISO)

The International Organization for Standardization (ISO) standards are the most recognised set of global technical, industrial and commercial standards for good practices, applicable to all processes and commodities. SIPEF’s environmental management system in Papua New Guinea has been ISO 14001 certified since 2014. All of SIPEF’s companies in Indonesia have achieved the quality management system certification ISO 9001 as of 2019. More information: www.iso.org/standards.html

International Sustainability and Carbon Certification (ISCC)

The International Sustainability and Carbon Certification (ISCC) standard certifies compliance with the European Renewable Energy Directive (RED). The adoption of methane capture at SIPEF’s palm oil mills enables the reduction of the emissions of greenhouse gases (GHG) during the production of crude palm oil. Currently, four of the Group’s six palm oil mills in Indonesia are certified according to the ISCC. More information: www.iscc-system.org/

Clean Development Mechanism (CDM)

Under the Clean Development Mechanism (CDM), emission-reduction projects in developing countries can earn certified emission reduction credits. SIPEF currently has four of its nine mills running CDM projects based on the reduction of GHG emissions through methane capture facilities, flaring or biogas generation. More information: cdm.unfccc.int/

Bananas

Rainforest Alliance

The Rainforest Alliance is an international non-profit organisation working at the intersection of business, agriculture and forests to make responsible business the new normal. The Rainforest Alliance’s Sustainable Agriculture Standard is considered one of the leading standards in the sector and covers environmental, social and economic topics. SIPEF’s banana production has been fully Rainforest Alliance certified since 2016. More information about the standard can be found on the Rainforest Alliance website: www.rainforest-alliance.org/tag/2020-certification-program

Rubber and Tea

SIPEF’s rubber operations have historically been Rainforest Alliance certified. The Rainforest Alliance stopped certifying rubber and all certifications expired in mid-2021. SIPEF previously announced that it intended to transition to FSC (Forest Stewardship Council) certification for rubber, but will not pursue this due to its announced intention to phase out of rubber production.

SIPEF’s tea production has also historically been Rainforest Alliance certified and will continue its certification journey under the management of SIPEF until the sale of PT Melania is completed. A full overview of sustainability certifications held by SIPEF’s tea operations is available in the 2020 SIPEF Sustainability Report.

Other Certifications and Standards

GLOBALG.A.P.

GLOBALG.A.P. is a set of standards focused on good agricultural practices including food safety and traceability, environment (including biodiversity), workers’ health, safety and welfare, and animal welfare. All SIPEF banana estates under Plantations J. Eglin in Ivory Coast have been certified since 2006. In August 2017, during the recertification of the banana activities, the horticulture activities were also included in response to strong customer demand. More information: www.globalgap.org

Fairtrade

Fairtrade certification is based on a partnership between producers and consumers, with the goal of improving lives and reducing poverty through ethical trade practices. All of SIPEF’s banana estates are Fairtrade certified. Motobé of Plantations J. Eglin in Ivory Coast has been certified since 2019. The two other estates, Agboville and Azaguié, were first certified in 2020. More information: www.fairtrade.net/product/bananas

Sedex

Sedex is one of the world’s leading ethical trade service providers, acting to improve working conditions in global supply chains. Plantations J. Eglin joined Sedex as a supplier in 2008. The company achieved its most recent certification renewal in 2021, having successfully completed the Sedex Members Ethical Trade Audit (SMETA). More information: www.sedex.com

Traceability

Traceability is a fundamental principle for sustainability in agricultural commodity supply chains. It enables customers and consumers to ascertain that the products they buy are indeed sourced from certified estates and smallholders, and therefore contribute to environmental, social and economic sustainability. SIPEF is a leader in traceability, with all commodities it sells being fully traceable to their production location, either an estate managed by SIPEF or a supplier smallholder plot.

Traceability of certified products

Most of the sustainability certification programmes adhered to by SIPEF require chain of custody certification for processing and trading certified materials. This regulates the degree to which certified products are traceable back to their origins as they move through the supply chain. SIPEF is 100% compliant with the criteria for processing RSPO certified oil palm products. All of SIPEF’s mills are RSPO Identity Preserved, with the exception of the Dendymarker Palm Oil Mill in Indonesia, which is RSPO Mass Balance due to a large proportion of its supply base currently being in the process of RSPO certification.

The Group’s two kernel crushing plants under Hargy Oil Palms Ltd in Papua New Guinea are RSPO Segregated. This is because both plants are processing kernels from more than one mill, as one of the three mills does not have its own kernel crushing facility. However, all three mills are certified Identity Preserved and have their supply bases fully mapped. SIPEF’s palm oil mills only source from its own plantations or from smallholders whose production locations are known and mapped. As such, while some of the Group’s palm oil supply base is not yet certified, and some of the Group’s production facilities are RSPO Segregated or Mass Balance, all of it is traceable.

All of the bananas produced and sold by Plantations J. Eglin are fully certified and traceable, and the company can disclose the origin of any shipment to its customers and to stakeholders.

Geo SIPEF

As part of its commitment to transparency and to a fully certified sustainable and traceable supply base, SIPEF has developed an interactive mapping application called ‘Geo SIPEF’. This tool allows the user to locate all SIPEF palm oil mills, kernel crushing plants, rubber and tea factories, and their respective supply bases. Additional information is provided on each entity including certification status (links to sustainability certificates) and production capacity. Layers can also be applied to the maps to visualise estate, smallholder and conservation area boundaries. New features were added in 2021, including the ability to switch on layers that show land conversion (potential deforestation) and fire hotspots recorded through SIPEF’s monitoring activities. SIPEF’s banana operations will be included in the mapping application in 2023. Geo SIPEF can be accessed at www.geosipef.com.

Productivity and Sustainable Land Use

Efficient production and respect for the limited availability of agricultural land are crucial for SIPEF’s success as a business, now and especially in the future. While SIPEF is striving for efficiency in all crops, optimising yields in the production of oil palm is particularly important. Oil palm is an extremely productive crop, requiring just one-fifth of the land area to produce a tonne of oil compared with its closest competitor. The Group therefore strongly believes that certified sustainable palm oil has a crucial role to play in meeting growing demand for vegetable oils, while protecting the environment and the livelihoods of communities. SIPEF is committed to implementing best agricultural practices that will increase its yields and minimise its environmental impact. The Group is also committed to investing in research and innovative solutions that will further strengthen the potential for optimising land use. Details of SIPEF’s approach to enhancing productivity can be found on page 40.

Innovation

SIPEF has made significant investments in innovation to enhance productivity, quality and circularity. This includes research on maximising yields, new regenerative and nature-positive agricultural techniques and methods, and technological advancements focused on reducing GHG emissions and creating value out of by-products. In 2021, SIPEF has continued to invest in hybrid palm varieties through its research and development joint venture, Verdant Bioscience Pte Ltd (VBS). It has also worked to advance its project at its Umbul Mas Wisesa mill focused on the conversion of processing by-products from fresh fruit bunches into biopellets for use as a renewable alternative to fossil fuels. Progress updates for 2021 on the work carried out by VBS and on SIPEF’s biopellets project have been provided in the performance chapters of this report (pages 45 and 54).

Corporate and Sustainability Governance

SIPEF has established policies, procedures and supporting structures that ensure good corporate and sustainability governance at all levels, including the Company’s subsidiaries. This section provides a brief overview of SIPEF’s sustainability governance structure and approach to analysing and managing sustainability risk.

An overview of SIPEF’s corporate governance policies and an update on the Group’s most relevant activities linked with responsible business conduct are provided on pages 110-113 of this report.
A more detailed account of SIPEF’s approach to corporate governance is provided in the Corporate Governance Statement on page 76 of the Annual Report part 1 (Company Report).# SIPEF Sustainability Report 2021

Approach to sustainability

Papua New Guinea

Executive committee chaired by the general manager

Ivory Coast

Executive committee chaired by the general manager

Indonesia

Executive committee chaired by the president director

SIPEF BOARD OF DIRECTORS

SIPEF EXECUTIVE COMMITTEE

Chaired by the managing director

GLOBAL SUSTAINABILITY TEAM

Chief operating ocer Asia-Pacific*
SIPEF sustainability director
CSR sustainability analyst*

REGIONAL SUSTAINABILITY TEAMS

Sustainability team Indonesia
* Team North Sumatra
* Team Bengkulu
* Team South Sumatra
* new position in 2021

Sustainability team Papua New Guinea

Sustainability team Ivory Coast

SIPEF BOARD OF DIRECTORS

Ultimate responsibility for sustainability lies at board level, with Priscilla Bracht having a particular interest in this issue. The full board reviews progress made by SIPEF based on sustainability rankings and ratings, certification progress, and internal risk assessments and reporting. A sustainability briefing paper is provided to the board of directors at least twice a year and the board discusses material ESG topics during its strategic board meeting once a year.

SIPEF EXECUTIVE COMMITTEE

The board is guided by SIPEF’s executive committee on the implementation and progress of the Group’s sustainability strategy. Sustainability is led from the executive committee level by Petra Meekers, who was appointed as chief operating ocer Asia-Pacific (COO APAC) in June 2021. With a strong background in sustainability, the appointment has significantly strengthened ESG leadership within the Group.

SIPEF GLOBAL SUSTAINABILITY TEAM

The global sustainability team was set up in 2021 with the purpose of ensuring that SIPEF’s sustainability strategy, policies and communications remain aligned with the evolving expec- tations and requirements of key stakeholders. This includes coordinating internal and exter- nal reporting on the Group’s sustainability performance. The team is overseen by SIPEF’s COO APAC, and is guided by the SIPEF sustainability director and assisted by a CSR sustaina- bility analyst who joined SIPEF in May 2021.

REGIONAL SUSTAINABILITY TEAMS

Three teams are in charge of the implementation of SIPEF’s sustainability strategy and policies at subsidiary level: the sustainability teams of Indonesia, Papua New Guinea and Ivory Coast.
* The Indonesian team is composed of 16 experts and is spread across four locations: the Medan Head Oce, North Sumatra, Bengkulu and Musi Rawas (South Sumatra).
* The team in Papua New Guinea consists of a sustainability head of department and five experts focused on dierent areas of sustainability at Hargy Oil Palms Ltd (HOPL). The head of department is also a member of HOPL’s executive committee.
* The team in Ivory Coast currently consists of two experts. The SIPEF sustainability director oversees the teams in Indonesia, Papua New Guinea and Ivory Coast, and reports directly to the in-country president director (Indonesia) and general managers (Papua New Guinea and Ivory Coast), as well as to SIPEF’s COO APAC.

SIPEF sustainability director

Sustainability Governance

SIPEF’s sustainability governance structure is designed to appropriately manage the implemen- tation and constant evolution of its sustainability commitments. A high-level overview of how sus- tainability governance is embedded, from board level to subsidiary level, is outlined below.

26 The connection to the world of sustainable tropical agriculture

Papua New Guinea

Executive committee chaired by the general manager

Ivory Coast

Executive committee chaired by the general manager

Indonesia

Executive committee chaired by the president director

SIPEF BOARD OF DIRECTORS

SIPEF EXECUTIVE COMMITTEE

Chaired by the managing director

GLOBAL SUSTAINABILITY TEAM

Chief operating ocer Asia-Pacific*
SIPEF sustainability director
CSR sustainability analyst*

REGIONAL SUSTAINABILITY TEAMS

Sustainability team Indonesia
* Team North Sumatra
* Team Bengkulu
* Team South Sumatra
* new position in 2021

Sustainability team Papua New Guinea

Sustainability team Ivory Coast

SIPEF BOARD OF DIRECTORS

SIPEF EXECUTIVE COMMITTEE

SIPEF GLOBAL SUSTAINABILITY TEAM

REGIONAL SUSTAINABILITY TEAMS

SIPEF sustainability director

27 SIPEF Sustainability Report 2021

Approach to sustainability

Sustainability risk assessment and management

The regular assessment of environmental, social and governance (ESG) risks plays an important role in the development and implementation of a long-term sustainability strategy. The SIPEF audit committee undertakes a risk analysis for the Group each year, evaluating the key potential business and sustainability risks for the Company. For the 2021 assessment, risks identified include those connected with climate change, conces- sion rights, and the increased expectations and requirements linked with sustainability certifi- cation and oil palm production. A more detailed analysis can be found on page 70 in the Annual Report part 1 (Company Report). All ESG risks that have been identified by SIPEF in 2021 have been highlighted throughout the per- formance chapters of this report (pages 38-117). In the course of 2022, a more extensive sustain- ability-focused risk analysis is planned as part of the upcoming review of SIPEF’s sustainability strategy.

28 The connection to the world of sustainable tropical agriculture

Multi-stakeholder partnerships and collaboration

RSPO (RSPO)

SIPEF has been a member of RSPO since 2005. It continues to actively contribute to RSPO’s operations by holding a seat on the Board of Governors on behalf of the ‘Rest-of-the-World’ growers, which includes Papua New Guinea and the Solomon Islands. Furthermore, SIPEF is a co-chair member of the Jurisdictional Working Group, and an active member of the Biodiversity and High Conservation Values Working Group, the Peat Working Group and the No Deforestation Joint Steering Group.
www.rspo.org

BASP (BELGIAN ASSOCIATION FOR SUSTAINABLE PALM OIL)

SIPEF is a founding member of BASP, whose main role is to promote the use of certified sustainable palm oil, primarily in the Belgian market, and to a lesser extent in the European market at large. SIPEF plays an active role as a member of the board.
www.duurzamepalmolie.be

TFA (TROPICAL FOREST ALLIANCE)

SIPEF is a member of the Tropical Forest Alliance.

Engaging with specialists and experts

EARTHQUALIZER

SIPEF has engaged Earthqualizer to assess the compliance of all its own oil palm estates and smallholders within its supply base against its commitments to no deforestation and no new plantings on peat.

HCVS ASSESSORS

SIPEF follows the requirements of the RSPO New Planting Procedure (NPP) before under- taking any new development or conversion of land. This involves an assessment of the poten- tial impact on both the environment and local communities. SIPEF works with a variety of technical consultancies and experts to carry out these assessments, all of which are licensed assessors under the High Conservation Value Network’s Assessor Licensing Scheme.
hcvnetwork.org

Stakeholder engagement and collaboration

Sustainability depends on deep collaboration between dierent sectors and actors. The Group places great importance on stakeholder engage- ment and collaboration in order to implement its sustainability strategy. SIPEF is helping to lead the journey to sustain- able land use through regular cooperation with its customers, shareholders, social and environ- mental NGOs, researchers and experts, technical consultancies, local communities, smallholders and other willing stakeholders.Together with them, the Company can develop and promote the adoption of responsible and sustainable standards and practices for the agricultural sector.

SIPEF Sustainability Report 2021

Approach to sustainability

9th Out of 100 palm oil companies

4th Out of 350 companies

Benchmark scores in 2021

Ranked 9th out of 100 palm oil companies in 2021; score 83.9%, a score increase of 3.4% from 2020 Developed by the Zoological Society of London (ZSL), the Sustainability Policy Transparency Toolkit (SPOTT) scores palm oil, tropical forestry, and natural rubber companies annually against over 100 sector-specific ESG indicators to benchmark their progress over time. www.spott.org/palm-oil

Ranked 4th out of 350 companies in 2021; score 73%, a 2% increase from 2020 Forest 500 identifies and ranks the most influential companies and financial institutions in forest risk commodity supply chains. https://forest500.org/rankings/companies

CDP runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. SIPEF submitted Forests and Climate Change disclosures to CDP for the first time in 2021, and will continue to do so moving forward. SIPEF’s CDP scores will be published from 2022 onwards. www.cdp.net/en

FOREST 500
SPOTT

The connection to the world of sustainable tropical agriculture

Supporting the United Nations Sustainable Development Goals

The United Nations Sustainable Development Goals (SDGs) were adopted in 2015 as an urgent call for action for all countries worldwide. They recognise that ending poverty must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve oceans and forests. Businesses have a crucial role to play in meeting the SDGs, and SIPEF is committed to playing its part by producing sustainable agricultural commodities. Certified palm oil is the most sustainable way to meet global demand for vegetable oils, as it is produced with respect for the environment and local communities and requires significantly less land than the alternatives. In 2021, SIPEF reviewed the contribution and alignment of its activities and sustainability key performance indicators (KPIs) to the SDGs and their respective targets. An overview of SIPEF’s contribution to the SDGs at target level is available in the Annex on page 122. For more information on the SDGs: https://sdgs.un.org/goals

SIPEF PRIMARILY CONTRIBUTES TO 10 OF THE 17 SDGs:

Targets and achievements

SIPEF carried out a high level review of its sustainability targets in 2021, as part of a wider initiative by the Group to evaluate its material topics and expand reporting on its sustainability performance. Some new targets have been set, and a number of existing targets adjusted for clarification purposes. In 2022, SIPEF plans to conduct a more in-depth assessment of its targets to ensure sufficient ambition and to align with the outcomes of an upcoming review of the Group’s sustainability strategy.

COMMITMENT	TARGETS	STATUS	RELEVANT MATERIAL TOPICS	HISTORICAL ACHIEVEMENTS
2018 - 2020	Achieve RSPO certification for Umbul Mas Wisesa (UMW) smallholders	100% certified by 2019	• Sustainability Standards and Certification • Smallholder Engagement	Achieved in 2018
	Roll out ISO 9001 certification for all operating units in Indonesia	100% certified by 2019	• Sustainability Standards and Certification	Achieved in 2019
	Increase firefighting operations in key areas in Indonesia	Operations in all high-risk/fire prone areas	• Fire Prevention and Management	Achieved in 2020
	Achieve Fairtrade certification for all banana estates	100% certified by 2021	• Sustainability Standards and Certification	Achieved in 2020

TARGETS AND PROGRESS IN 2021

COMMITMENT	TARGETS	STATUS	RELEVANT MATERIAL TOPICS
2020 - 2021	Calculate carbon footprint of the Group according to ISO 14064 methodology	Group footprint calculated by 2020	• Climate Change
	Utilise all Empty Fruit Bunches (EFB) from UMW operations for conversion into biopellets	Complete construction of biomass pellet facility at UMW by 2020	• R&D and Innovation • Regenerative Practices
	100% conversion of wastefibre into biopellets by 2021	Delayed Due to covid-19 and technical adjustments full commissioning is delayed until Q1 2022	• R&D and Innovation • Regenerative Practices
	No deforestation identified within High Conservation Value (HCV)/ High Carbon Stock (HCS) areas in Company managed and smallholder supplier production areas	Deforestation monitoring system operational by 2021	• Deforestation
	Zero hectares of tree cover loss identified within Company managed areas* (Ongoing)	Not achieved	• Deforestation
	Zero hectares of tree cover loss identified within Company concession areas* (Ongoing)	Not achieved	• Deforestation

DELAYS	PROGRESS
2020	Achieved in 2021
2020	Achieved in 2020
2021	Delayed in 2020 due to covid-19
2021	Achieved in 2021
Indonesia Around 15 hectares of tree cover loss, primarily due to unauthorised clearing by local communities Papua New Guinea Around 24 hectares of tree cover loss due to clearing by local communities within supplier areas	Global Forest Watch monitoring started in 2020 and has been fully operational since 2021 Verification process has started with partner Earthqualizer to verify incidents and is ongoing
Indonesia Around 102 hectares of tree cover loss on land outside of SIPEF’s management control	Facility construction completed in December 2020

Targets and achievements

COMMITMENT	TARGETS	STATUS	RELEVANT MATERIAL TOPICS
2021 - Ongoing	Reduce number of fires in total production area	Zero incidence of fires in Company managed areas* (Ongoing)	• Fire Prevention and Management
	Zero incidence of fires in Company concession areas* (Ongoing)	Not achieved	• Fire Prevention and Management
	Fire fighting in adjacent areas (Ongoing)	Achieved in 2021	• Fire Prevention and Management
	Improve water use management at SIPEF’s palm oil mills	Water usage intensity < one cubic metre of water per tonne of FFB (Ongoing)	• Water Management
	Incidence of BOD, COD and TSS* maintained below legal limits at point of release (Ongoing)	Not achieved	• Water Management
	No work-related fatalities	Zero incidence of work-related fatalities (Ongoing)	• Health and Safety

DELAYS	PROGRESS
Papua New Guinea Two arson incidents by external parties that affected around 1.3 hectares at the Pandi and Barema estates	Not achieved
Indonesia One arson incident that affected 3 hectares of land not under SIPEF’s management control in Musi Rawas	Indonesia Eight fires extinguished in land area adjacent to management area
	Not achieved Six out of nine mills achieved the target in 2021
	Not achieved Eight out of nine mills achieved the target in 2021
	Not achieved One fatality in 2021

UPCOMING COMMITMENTS AND TARGETS

COMMITMENT	TARGETS	STATUS	RELEVANT MATERIAL TOPICS
2022 - 2030	Reduce carbon footprint of SIPEF Group	GHG emissions reduction targets to be set in 2022	• Climate Change
	Achieve RSPO certification for Musi Rawas estates	100% certified by 2026	• Sustainability Standards and Certification
	Achieve RSPO certification for smallholders at PT Dendymarker Indah Lestari as areas come into production	100% certified by 2026	• Smallholder Engagement
	Improve management of HCV and HCS areas within HGU boundaries	Ranger/Restoration teams established for all regions by 2026	• Deforestation • Ecosystem Conservation and Restoration
	All previous standalone assessments updated to integrated HCV-HCS assessments by 2025	On track	• Ecosystem Conservation and Restoration • Biodiversity • Deforestation • Regenerative Practices
	Review and enhance habitat management plans by 2025	On track	• Ecosystem Conservation and Restoration • Biodiversity • Deforestation • Regenerative Practices
	Establish smallholder groups for relevant operational units	20% smallholders with MoU for all operational units prior to renewing HGU	• Smallholder Engagement
	Make advancements in SIPEF Biodiversity Indonesia (SBI) programme on conservation, management and monitoring	Restore 85 hectares of degraded land within SBI by 2024	• Ecosystem Conservation and Restoration • Biodiversity • Deforestation • Regenerative Practices
	Engage with 60 farmers on regenerative agricultural methods within SBI by 2024	On track	• Ecosystem Conservation and Restoration • Biodiversity • Deforestation • Regenerative Practices
	Review and improve biodiversity monitoring methodology (Ongoing)	On track	• Ecosystem Conservation and Restoration • Biodiversity • Deforestation • Regenerative Practices
	Protect coastal shorelines and prevent flooding	Restore 14 hectares of coastal areas by 2024	• Ecosystem Conservation and Restoration • Climate Change
	Annual monitoring of Responsible Plantations Policy implementation	One external verification on implementation conducted per year (Ongoing)	• Transparency
	No deforestation and no new planting on peat verified by Earthqualizer by 2023	On track	• Deforestation • Peatlands

PROGRESS
On track
On track Pending the approval and issuance of the concession rights agreements (Hak Guna Usaha – HGU) by the Indonesian Government
On track
On track Ranger teams to be established in line with issuance of HGU and RSPO certification
On track
On track
On track Progress will depend on HGU renewal schedule
On track
On track
On track
Indonesia Around 8 hectares of coastal buffer will be restored at SIPEF’s Agromuko operations Papua New Guinea A mangrove nursery is being established across 6.5 hectares of degraded coastal buffer area at Hargy Oil Palms Ltd's Kiba plantation
On track
On track

*Note:
- Some targets have been removed since the publication of SIPEF’s 2020 Annual Report, as these are longer relevant, or will be revised in 2022.
- Company managed areas are areas where SIPEF has full management control. Company concession areas are areas within SIPEF’s concession boundaries that also include land that is not under SIPEF’s management control.# SIPEF Sustainability Report 2021

BOD = biological oxygen demand; COD = chemical oxygen demand; TSS = total suspended solids

The connection to the world of sustainable tropical agriculture

Responsible production and processing

Agriculture is critical for food and nutrition security, and is inextricably linked with the welfare of people and the environment. Over recent decades the global food system has contributed to economic development, and food production has risen steadily. However, the system has also placed immense pressure on natural resources, the health of critical ecosystems and the climate. Sustainability leadership within the agricultural sector is becoming ever more important and sustainable land use, climate change and human rights are rising rapidly to the top of the global agenda. As a Company dedicated to sustainability in the industries in which it operates, SIPEF believes it can play an important role in demonstrating that the production of traceable, sustainable and high-quality agricultural products is possible. For SIPEF, sustainability starts with responsible production and processing at its own estates and operations. That means putting into practice the commitments it has set out in its Responsible Plantations Policy and other supporting sustainability policies. This includes its commitments to no deforestation, no new developments on peat, and no exploitation, as well as to reducing greenhouse gas emissions. At implementation level, this translates to adopting systems and working methods focused on the optimisation of land use and resources, environmental stewardship and socially responsible practices. The following sections outline SIPEF’s progress in these areas, including how the Group addresses the relevant environmental and social issues and risks that it has identified as material for its business. Sustainability leadership within the agricultural sector is becoming ever more important and sustainable land use, climate change and human rights are rising rapidly to the top of the global agenda.

Productivity and quality

Land scarcity is one of today’s most important sustainability issues. The world’s population is predicted to reach 9.7 billion by 2050, 3 with significant growth projected for developing countries. At the same time, the amount of available arable land is decreasing, due to soil degradation caused by human-induced erosion and pollution, land use competition, and the surging global demand for food. In the coming decades, this will be compounded by the acute physical risks linked with climate change, and future policy development that may further restrict the land available for agriculture. While SIPEF endeavours to optimise land use in the production of all of its crops, boosting yields and efficient land use in its oil palm production is especially critical. Palm oil continues to be one of the primary commodities of debate in discussions around deforestation and the impact of agriculture on people and the planet. On the other hand, it remains the most efficient source of edible vegetable oil, providing 36% of the world supply on just 9% of the land. 4 More than 300 million hectares of land is already used for the cultivation of vegetable oils worldwide, up from just over 111 million in 1961. 5 With the demand for vegetable oils forecast to increase by 46% by 2050, 6 certified sustainable palm oil will be essential to meet growing demand while using less land. SIPEF is committed to implementing best practices that aim to improve soil fertility, optimise inputs and recycle by-products, and further increase product quality and the tonnage of product per planted hectare (see pages 72-79). The Group is also committed to investing in research and development (R&D) and innovation that will enable progress towards these objectives, as well as enhance the quality of planting materials and resilience of future crops (see page 45).

3 United Nations Department of Economic and Social Affairs. (2019). World Population Prospects 2019 Highlights. https://population.un.org/wpp/Publications/Files/WPP2019_Highlights.pdf
4 Ritchie, H. and Roser, M. (Retrieved January 2022). Palm Oil. Our World in Data. https://ourworldindata.org/palm-oil
5 Our World in Data. (Retrieved March 2022). Land Use for Vegetable Oil Crops, World. https://ourworldindata.org/grapher/land-use-for-vegetable-oil-crops?country=~OWID_WRL
6 Meijaard, Erik. (2020). The Environmental Impacts of Palm Oil in Context. Nature Plants. https://research.wur.nl/en/publications/the-environmental-impacts-of-palm-oil-in-context

Palm oil versus other vegetable oils

Oil palm is an extremely productive perennial crop that can produce 2-8 times more oil per hectare than other annual crops like soybean, rapeseed, sunflower and corn. 7 This is in part due to the crop’s natural characteristics, but is also a result of the extensive research and development that has been dedicated to achieving higher efficiencies in oil palm production. Oil palm also has higher indexes of biodiversity within its production areas than other vegetable oil crops, and requires less inputs such as fertiliser and pesticides.

Adapted from: www.wur.nl/en/news-wur/Show/New-light-on-the-sustainability-of-palm-oil.htm

7 Wageningen University & Research. (2020, December 7). New Light on the Sustainability of Palm Oil. www.wur.nl/en/news-wur/Show/New-light-on-the-sustainability-of-palm-oil.htm

Palm oil production 2021

Palm oil and fresh fruit bunch (FFB) production are both key focus areas for SIPEF given the importance of maximising output through effective and sustainable management practices on current production areas. In 2021, SIPEF’s total palm oil production reached 384,178 tonnes, an increase of 16.7% on 2020. This growth rate applied to both production on the Group’s own plantations and purchases from local smallholders. Oil extraction rates (OER) also increased from 2020, up from 23.4% to 24%. The increases were the result of very favourable weather conditions in 2021, which were conducive to palm growth and fruit development in Indonesia and Papua New Guinea.

OIL EXTRACTION RATES	2019	2020	2021
Indonesia	23.33%*	22.79%*	22.99%
Papua New Guinea	23.33%	24.63%	25.58%
GROUP	23.26%*	23.42%*	23.96%

Improvements in productivity in 2021 are also linked with other factors that had impacts on yields in previous years. These include the drought in Indonesia, and the volcanic eruptions in Papua New Guinea, which led to lower yields in 2019. It is expected that the volume of palm oil produced should exceed 400,000 tonnes for the first time in 2022.

Data for Indonesia and Group for 2019 and 2020 have been restated.

BANANA PRODUCTION (TONNES)	2019	2020	2021
	32849	31158	32200

Banana production 2021

SIPEF’s banana production in Ivory Coast increased by 3.3% on the 2020 total, without any increase in harvested area. A new plantation was developed in Ivory Coast with 28 hectares planted in the fourth quarter, expected to lead to an increase in production of 18% in 2022. A full overview of SIPEF’s production figures and performance in 2021 can be found in the Annual Report part 1 (Company Report).

Improving product quality

SIPEF strives to maintain the highest standards in the quality of its products, ensuring that they comply with health and safety regulations, as well as the requirements of its customers. Ensuring good quality starts in the fields, with quality seedlings for oil palm and clones for rubber and tea, as well as viable tissue culture for bananas. Planting is timed to ensure that plants can establish their root system before a dry period. Fertile soil is crucial: it must contain enough well-decomposed organic matter and be clear of weeds. Cover crops are planted in the fields to prevent soil erosion without overshadowing the seedlings. Careful upkeep of the fields ensures that weeds and pests are controlled, and the application of the right fertilisers supports growth. Finally, good harvesting standards are critical to produce a high-quality product.

Quality control is an important focus area in the production of palm oil products, given the growing demand for high-end, controlled ingredients. This is also in view of the increasing number of consumer countries that are becoming concerned about additives and specific types of contaminants in vegetable oils. High quality palm oil contains a low quantity of free fatty acids (FFA), and SIPEF maintains the FFA content of its crude palm oil (CPO) and crude palm kernel oil (CPKO) below 5%. High FFA content can impede downstream processing and can have implications for the food safety of palm oil products intended for consumption. FFA content can increase when oil palm FFB are damaged during harvesting, handling or transport. High lipase activity leads to rapid oil acidification in bruised ripe fruits. To ensure FFA content stays low, SIPEF ensures proper management of handling, storage and transportation practices. FFB are delivered to mills as quickly as possible and controls are undertaken for overripe fruits and bruising.# SIPEF Sustainability Report 2021

Responsible production and processing

FOOD SAFETY: MITIGATING THE RISK OF 3MCPD CONTAMINANTS

The last few years have seen rising concern by food safety authorities about the presence of common probable food contaminants in edible vegetable oils. One of the biggest concerns relates to 3-monochloropropane-1,2-diol (3-MCPD), a chemical that has been associated with health risks when consumed at unsafe levels. 3-MCPD can be found in all refined vegetable oils. In 2021, SIPEF partnered with experts to launch a project exploring methods to mitigate the risk of 3-MCPD contaminants. 3-MCPD forms from chloride traces in crude palm oil (CPO) when heated at temperatures of more than 200 degrees Celsius during the refining process. SIPEF is an upstream player but, through the project, is looking at ways to reduce the use of chloride in the field and its milling activities, in order to mitigate the risk of 3-MCPD formation in the mid-stream activities of its customers. This includes controlling the sources of chloride that could impact the initial processing steps in the factory. The first trials are showing good results, and SIPEF will focus on scaling the project up over the coming years, including building the first washing installation in collaboration with its partner on the project.

The connection to the world of sustainable tropical agriculture

Research & Development: Verdant Bioscience

SIPEF recognises the significant potential for R&D and innovation in improving productivity and quality in the production of oil palm and palm products. Increasing oil yields per hectare remains a crucial focus area for the palm oil industry, which is under pressure to produce more vegetable oil sustainably, but with little or no access to additional land. In that context, the Company's 38% participation in Verdant Bioscience Pte Ltd (VBS), an R&D company founded in 2013, is of particular importance. Through VBS, SIPEF is investing in the development of high-yielding F1 hybrid oil palms, other supporting technologies and innovative solutions that underpin the significant potential for yield and productivity improvement in the global palm oil sector. The seeds from a single selected F1 hybrid variety will have higher yields and be genetically uniform. This genetic uniformity within each F1 hybrid variety allows management practices (harvesting, nutrient application and replanting time) to be further optimised, from which growers can leverage great value. By investing and working with VBS, SIPEF not only has access to new varieties of high-yielding oil palms, but also to the real potential to generate very meaningful sustainability benefits worldwide. Increasing yield per unit of area without increasing the area of oil palm planted could eliminate the risk of further loss of rainforest and biological diversity.

Despite the challenges of operating during a pandemic, the F1 hybrid programme has made good progress, and candidate F1 hybrid crosses grown in the nursery were planted in the field in 2021. Further testing of new F1 hybrid crosses will now continue each year with female plants from different genetic backgrounds. Successes were also achieved in increasing the frequency of crosses with F1 hybrid palms from well-defined but diverse genetic backgrounds. The first-generation offspring of these homozygous parental plants (F1 hybrid crosses) have the potential to deliver greatly improved yields. As a major shareholder of VBS, SIPEF is testing commercial varieties of candidate oil palms on its Sumatran plantations. These trials include selection, not only based on higher yields, but also on important commercial secondary traits such as disease resistance, as well as selection of new commercial material for specific environmental conditions, e.g. rainfall amount and distribution, soil fertility, microbial diversity and moisture holding capacity. VBS agronomists and crop protection staff have continued to work with SIPEF plantation management to make recommendations in order to realise the potential of existing plantations, mainly by increasing productivity, but also through innovations that focus on enriching soil health. Long-term trials of both fertilisers and compost have been carried out on representative soils in each of the regions where SIPEF has oil palm operations. VBS also works with the plantation management of PT Tolan Tiga Indonesia on the development of new insights and their future integration into strategies. These developments include the optimisation of plant growth, the regulation of carbon in the soil, the maintenance of good water balance, and the control of pests and diseases. Through these developments, the Group wants to prevent commercial losses in oil palm, rubber and tea.

VBS ENGAGES IN RESEARCH AND DEVELOPMENT ACTIVITIES IN THREE MAIN AREAS:

Plant breeding, genetics* and biotechnology, including the development of new or improved crop varieties
Improvements in agronomic practices, most notably through the optimisation of palm nutrition
Crop protection and resilience, including enhancing resistance to increasing threats from pests and diseases, and resilience in changing growing conditions

* Note: The scope does not include genetic modification

SUSTAINABILITY CERTIFICATION HIGHLIGHTS IN 2021

In addition, work is also being undertaken to further optimise the good agricultural practices that underpin the sustainable manner in which SIPEF operates its plantations. Preference is given to the biological control of pests and the minimal use of pesticides. With these developments, SIPEF also aims to reduce its carbon footprint and increase the potential for carbon storage in the soils in its production areas. More information can be found in the Annual Report part 1 (Company Report), pages 63 and further.

Sustainability certification progress

Sustainability certification is a versatile tool that can be used continuously throughout a company’s growth, and it remains fundamental for SIPEF in implementing its sustainability strategy. The commitment to managing operations in a sustainable manner is an ongoing, transformative process, and certification helps to guide this journey. It supports the implementation of good practices and continuous improvement, and provides a framework for transparency and accountability. Throughout 2021, SIPEF continued to maintain and progress its compliance with leading sustainability standards.

PALM OIL
SIPEF produced a total of 363 479 tonnes of crude palm oil (CPO) and 73 604 tonnes of palm kernels (PK), certified in accordance with the sustainability standards of the Roundtable on Sustainable Palm Oil (RSPO).
- Eight mills are RSPO Certified Identity Preserved, one mill is RSPO Certified Mass Balance.
- SIPEF’s six mills in Indonesia are all ISPO certified.
BANANAS
All bananas produced during the reporting period were certified against the Sustainable Agriculture Standard of the Rainforest Alliance. SIPEF’s banana production has further continued to adhere to the GLOBALG.A.P. and Fairtrade standards.
TEA
- All tea produced during the reporting period was certified against the Sustainable Agriculture Standard of the Rainforest Alliance.

95% of palm products RSPO certified
100% Rainforest Alliance certified
100% Rainforest Alliance certified

RSPO certification

As of 31 December 2021, 69% of the area under SIPEF’s own estates is RSPO certified. This is equivalent to a total area of 80 099 hectares. During the reporting period, SIPEF’s supply base produced 1 555 758 tonnes of certified FFB, which resulted in a volume of 363 479 tonnes of certified sustainable palm oil (CSPO) and 73 604 tonnes of certified sustainable palm kernels (CSPK). SIPEF’s nine mills and two kernel crushing plants have maintained their RSPO certification during the reporting period. Eight mills are RSPO certified Identity Preserved, with only one mill in Indonesia (Dendymarker - DIL) certified Mass Balance, due to part of its supply base not being certified yet. This includes supply from a group of smallholders, and the first production from new developments at Musi Rawas that have followed the RSPO New Planting Procedure (NPP), but are awaiting the issuance of a concessions rights agreement (Hak Guna Usaha – HGU). As such, 5% of SIPEF’s total production of CPO was not certified in 2021. The certification of the new developments will progress once the issuance of the final concession rights agreements are approved by the Indonesian Government. This process takes time, as it requires the majority of the land within the HGU to have been acquired. Following the principles of Free, Prior and Informed Consent (FPIC), the process can take many years. Pending the approvals, the aim is to have part of the new developments at Musi Rawas certified by 2023, with the full scope to be achieved by 2026. SIPEF’s progress on smallholder certification is reported in the Responsible sourcing and smallholder production chapter (see page 96).

AVERAGE PERCENTAGE OF FFA IN SIPEF’S PALM OIL PRODUCTION
PALM OIL MILLS INDONESIA	2018	2019	2020	2021
PLPOM	2.65%	2.97%	3.14%	3.42%
BMPOM	3.14%	3.06%	3.13%	3.13%
UMWPOM	3.62%	3.98%	3.31%	3.65%
MMPOM	3.46%	3.55%	2.97%	3.32%
BTPOM	3.86%	3.47%	3.40%	4.00%
DMPOM	3.71%	3.65%	3.57%	3.40%
PALM OIL MILLS PAPUA NEW GUINEA	2018	2019	2020	2021
HPOM	3.68%	4.03%	3.03%	2.71%
NPOM	4.30%	3.98%	3.70%	3.06%
BPOM	4.23%	4.26%	3.18%	3.64%

Responsible production and processing

SIPEF’s overall progress towards RSPO certification is also updated annually through its RSPO Annual Communication of Progress (ACOP) report, available at: rspo.org/members/acop

CSPO AND CSPK PRODUCTION

	2019	2020	2021
Indonesia	201,992	417,510	102,835
Papua New Guinea	21,784	199,877	42,076
Indonesia	210,276	42,801	153,203
Papua New Guinea	30,803	118,123	24,706
Indonesia
Papua New Guinea

ENVIRONMENTAL MANAGEMENT SYSTEM CERTIFICATION

SIPEF'S APPROACH TO EMS CERTIFICATION

SIPEF has an environmental policy focused on safeguarding the environment and reducing the Group’s environmental impacts. To implement this across its diverse set of operations, the Group’s Environmental Management System (EMS) has been designed to be adaptable to its different commodities and locations, while also ensuring that environmental risks are evaluated and addressed in a systematic manner.

For all of SIPEF’s operations, the following EMS principles and components apply:

Identifying, evaluating and mitigating environmental risks
Measuring and tracking environmental performance
Legal compliance, including with local environmental laws
Framework for monitoring and continuous improvement
Framework for compliance with leading, credible sustainability standards and certification

SIPEF’s approach to EMS certification varies by commodity and country of operation to ensure the best management approach is employed and customised to the needs and requirements in each local context. The Group has maintained its ISO 14001, ISO 9001 and GlobalG.A.P. certifications for the respective locations during the reporting period.

INDONESIA

SIPEF’s operations in Indonesia engage an approach that combines RSPO certification with the quality management system (QMS) certification ISO 9001.

PAPUA NEW GUINEA

SIPEF’s EMS at its palm oil operations in Papua New Guinea is certified in accordance with the ISO 14001 standard.

IVORY COAST

In Ivory Coast, SIPEF’s banana operations are GLOBALG.A.P. and Rainforest Alliance certified, and are regularly audited against the quality management system and environmental performance requirements of these standards.

Responsible production and processing

Climate change

Climate change is causing severe impacts worldwide, and there are serious risks for the food and agriculture sectors. Climate change can disrupt food availability, reduce access to food and affect food quality, leading to a negative impact on food security at global, regional and local levels. Projected increases in temperatures, changes in precipitation patterns, changes in extreme weather events and reductions in water availability may all result in reduced agricultural productivity.

The agricultural sector itself is also a contributor to climate change. Together, agriculture, forestry and land use account for around 18% of global greenhouse gas (GHG) emissions. 8 Although reducing GHG emissions from agriculture remains challenging, there is significant mitigation potential. In palm production, for example, improved integration of innovative techniques into growing and processing methods, such as capturing methane from the wastewater ponds, the efficient use of fertilisers, and increases in oil yield per hectare, can all play a role.

In recognition of the growing impacts and risks, SIPEF is working to expand the scope of its sustainability strategy to more holistically address issues linked with climate change. An important step taken in this regard is the calculation of SIPEF’s carbon footprint at Group level, which was completed in 2021. During the reporting period, SIPEF also continued to engage in the climate action initiatives the Group has in place under its current approach, including:

A composting facility for palm oil residues
Methane capture facilities and biogas plants that generate renewable electricity
A biomass pellet facility
Biodiversity, conservation and reforestation programmes in Indonesia, Papua New Guinea and Ivory Coast

Carbon footprint

In 2019, SIPEF started to calculate its carbon footprint at Group level, using the ISO 14064 standard. This methodology is aligned with widely used industry standards, and enables SIPEF to calculate its annual net GHG emissions for the full scope of its operations. Accurately measuring current GHG sources and sinks will provide a baseline against which to set future targets and monitor progress. It will also help SIPEF to determine its decarbonisation priorities, allocate the appropriate resources, and identify the actions that can be taken to mitigate and adapt to climate change impacts.

As of 2021, the first steps have been completed with the selection of the methodology and the review of the data. In 2022, SIPEF will be working with an external verifier on its calculations and working towards assurance. SIPEF also aims to shape its carbon strategy in 2022, and set both short, medium and long-term goals on GHG emission reductions.

The results presented in this section include the estimated net annual emissions for the Group’s Scope 1 and Scope 2 activities for 2019-2021, and account for emissions from upstream production, downstream processing and transport to the point of sale for palm oil, rubber, tea and bananas within SIPEF’s operations in Indonesia, Papua New Guinea and Ivory Coast.

It should be noted that the GHG emissions data presented in this report cannot be compared with the results obtained using the RSPO PalmGHG Calculator. The PalmGHG tool is closely aligned to the ISO 14044 life cycle assessment (LCA) methodology, and the results cannot be compared directly, due to key methodological differences between the two models.

TOTAL GROUP NET EMISSIONS 2021 (SCOPES 1 & 2) (tCO2e)

YEAR	SCOPE 1	SCOPE 2	TOTAL
2019	409,166	4,632	413,798
2020	527,069	8,860	535,929
2021	616,937	11,418	628,355

It should also be noted that, due to covid-19, the verification and validation of the data following the ISO 14064 methodology was not possible in 2021, and the data presented in this section is therefore still an estimate. A limited verification will be done by a certification body in 2022.

The total net emissions of the Group for 2019 were calculated at 413,798 tCO2e. This covered the Group’s production of 312,514 tonnes of crude palm oil (CPO), 6,326 tonnes of rubber, 2,331 tonnes of tea and 32,849 tonnes of bananas in 2019.
The total net emissions for the Group for 2020 were calculated at 535,929 tCO2e. This covered the Group’s production of 329,284 tonnes of CPO, 6,011 tonnes of rubber, 2,762 tonnes of tea and 31,158 tonnes of bananas in 2020.
The total net emissions for the Group for 2021 were calculated at 628,355 tCO2e. This covered the Group’s production of 384,178 tonnes of CPO, 3,826 tonnes of rubber, 2,664 tonnes of tea and 32,200 tonnes of bananas in 2021.

The majority of emissions for the Group fall under the category of Scope 1, the emissions from Group owned or controlled sources, rather than Scope 2, the indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the Group. SIPEF is planning to broaden its calculation to include Scope 3 emissions. This category covers indirect emissions from within the Group’s value chain, for instance from smallholders, offsite material transport, workers commuting, business travel and other sources. Further data validation and verification, as well as engagement with third parties, will be necessary to make this possible.

Palm oil is by far the largest contributor to the Group carbon footprint (96%), due to the large scale of operations. The greatest contribution per country is from Indonesia, again due to the larger hectarage and scale of the Group’s operations in the region. The increase in emissions in the years leading up to 2021 is mostly attributable to the expansion of oil palm plantations in Musi Rawas, as well as the increase in production of CPO, which is directly proportional to the increase in palm oil mill effluent (POME). Over the period of 2019 to 2021 there was a 29% increase in hectares of land cleared of rubber and mixed rubber/agroforestry for the purpose of conversion to oil palm. This resulted in emissions from the cleared biomass as well as a proportional decrease in CO2 sequestration in those areas. At the same time there was also a 23% increase in CPO production from 2019 to 2020.

The ISO 14064 carbon calculation methodology takes into account both carbon emissions, which release GHGs into the atmosphere, and carbon sinks, which contribute to the sequestration of atmospheric carbon. The crops grown by SIPEF (palm, banana, tea and rubber) act as carbon sinks. Sources of emissions from the Group’s activities, ranked in order of significance, are: historic and current land use change, POME, nitrogenous fertilisers, fertiliser, fuel in other transport, and mill diesel usage. Land use conversion and POME are the main contributors to the gross emissions. The emissions from the clearing of mixed previous land use (rubber/agroforestry) were compensated by carbon sequestration in the plantations. Still, a reduction in sequestration occurred between 2019 and 2021, due to the conversion of rubber to palm, the replanting of palm, and the conversion of scrub land into palm.# SIPEF Sustainability Report 2021 Responsible production and processing

The calculation on sequestration includes conservation areas within the boundaries of the estates, as well as High Conservation Value (HCV) and High Carbon Stock (HCS) areas within Company concessions. The SIPEF Biodiversity Indonesia (SBI) conservation area (12 672 hectares) is not included as a sink, as the ISO 14064 methodology only takes into account operational emissions and sinks. If SBI is taken into account, it would represent an estimated 116 445 tonnes of CO 2 e per annum as a sink.

The connection to the world of sustainable tropical agriculture

In palm oil production, POME is a significant source of GHG emissions. Emissions from POME primarily result from the anaerobic digestion of the organic material in the effluent that generates methane as a by-product. The emissions resulting from POME can be mitigated by further rolling out the methane capture technologies already operating in the Group. Using these technologies, parts of the conventional pond-based treatment systems are covered and the methane captured is flared, or burnt in a biogas installation. Methane is a powerful GHG. The global warming potential per mole of methane is 25 times that of carbon dioxide, which makes it one of the most effective areas for SIPEF to focus on for reduction. Methane also has a high calorific value, so it can be used to generate electricity if captured and stored. Electricity generated by burning methane is, in turn, much cleaner than the energy produced by burning coal or diesel, which are the most common sources of energy in the countries where SIPEF operates.

The Group’s methane capture facilities fitted with biogas plants in Indonesia generated 6 039 602 kWh of electricity in 2021, all of which was used for powering its mills or for general use by nearby communities. In Indonesia, four mills already have functioning methane capture facilities. In Papua New Guinea, one mill, Barema, has a methane capture tank. However, due to technical issues, the tanking system was not fully operational from 2019 through to 2021. This impacted the emissions linked with POME in Papua New Guinea during this timeframe. To mitigate the impact of methane Hargy Oil Palms Ltd (HOPL) has set out a mitigation programme to establish methane capture facilities for all its mills, to be completed by 2030.

Climate Action

In 2018, the European Union set its vision to be climate-neutral by 2050. Subsequently, many political bodies and businesses have followed suit, with an increasing number of institutions and companies calculating climate risk, setting net-zero targets and developing climate action plans. The calculation of the SIPEF group carbon footprint enables the establishment of a baseline, which is essential for setting GHG emissions reduction targets. As a critical next step, a GHG emissions reduction strategy is in development, building on the various existing measures SIPEF has implemented in recent years. Further information on initiatives and target setting will be made available in SIPEF’s upcoming Carbon Report, to be released in 2022. The calculation of the SIPEF group carbon footprint will enable the establishment of a baseline, which is essential for setting GHG emissions reduction targets.

⁹ European Commission. (Retrieved February 2022). Climate Action. 2050 Long-Term Strategy. https://ec.europa.eu/clima/eu-action/climate-strategies-targets/2050-long-term-strategy_en

BIOPELLETS: A RENEWABLE ALTERNATIVE TO FOSSIL FUELS

To mitigate climate change, it is crucial to reduce reliance on fossil fuels. Around two-thirds of global GHG emissions stem from the burning of fossil fuels for energy, utilised for heating, electricity, transport and industry. SIPEF continues to strive for a reduction in its overall energy consumption by increasing operational efficiencies, as well as initiatives that generate or utilise renewable energy.

SIPEF initiated its biopellets project in response to the results of a study conducted by the Group on renewable alternatives to fossil fuels. Biopellets are a carbon-neutral solid fuel that can directly replace coal or other types of biomass. The project is taking place at SIPEF’s Umbul Mas Wisesa (UMW) palm oil mill, where a biomass pellet facility was constructed in 2020. The facility is able to convert empty fruit bunches (EFB), a by-product of the milling process, into high-quality calorific pellets using a heating process called torrefaction. The project started in 2019, but the initial equipment installed in 2020 was found not to be suitable for the length of the fibres of the shredded EFB. Repairs and modifications to the plant are under way, and the facility is expected to be fully operational in 2022.

MANGROVE RESTORATION: REINFORCING NATURAL PROTECTION AGAINST RISING SEA LEVELS

While most of SIPEF’s previous and current initiatives have been geared towards climate change mitigation, SIPEF has also started to expand its strategy to incorporate opportunities for building resilience against the impacts of climate change. In June 2021, HOPL in Papua New Guinea initiated a new project focused on rehabilitating mangrove forests. These coastal forests provide a natural defence against storm surges, coastal erosion and coastal flooding. They are also crucial for livelihoods and food security for local communities, and serve as a breeding ground for marine biodiversity, including fish, crabs, shrimps, birds and reptiles.

Mangrove planting and rehabilitation is one of the most effective and least costly methods of coastal defence against rising sea levels. The project focuses on the development of a mangrove nursery at the Kiba plantation at HOPL’s Navo operations, in order to re-establish the coastal buffer where it had been degraded over an area of 6.5 hectares. The rehabilitation efforts are part of a wider plan for replanting oil palms in an area located next to the designated coastal buffer zone. Various types of mangrove trees will slowly be introduced over the course of five years. HOPL will continue to explore the potential of mangrove rehabilitation as an adaptation solution for protecting the coastal areas where it operates from the impacts of climate change. The company is closely monitoring the results to learn from the project, make improvements and replicate it if successful.

No Deforestation

Natural forests store huge amounts of carbon and host the vast majority of the world's terrestrial species. They are also important for the livelihoods of millions of people, including indigenous and local communities. Deforestation removes carbon stocks from forests and releases them into the atmosphere. The climatic impacts of forest loss can vary considerably, depending on the specific features of affected areas. Emissions from land use change can be substantial when mature forest is being impacted. Deforestation also contributes to biodiversity loss and can have damaging impacts on soils, including erosion and desertification. Collective and coordinated efforts by governments and businesses will be key to eliminating deforestation and to reaching global emissions targets linked with land use.

Since November 2014, SIPEF has upheld a group-level commitment to No Deforestation, as part of its wider commitment to No Deforestation, No Peat, and No Exploitation (NDPE). While this policy applies to all of its crops, extra attention is placed on its oil palm operations. SIPEF’s approach to effectively implementing its No Deforestation policy includes the following components and measures:

New developments: New developments do not take place on High Conservation Value (HCV) areas, High Carbon Stock (HCS) forests, peatland, fragile or marginal soils. The rights of local communities must also be respected, including their rights to any land being developed. The Group follows the RSPO New Planting Procedure (NPP) prior to any new developments in its own operations.
Deforestation monitoring: SIPEF monitors its concessions in Indonesia and Papua New Guinea for any land use change and potential illegal deforestation activities. Monitoring also covers areas managed under third-party suppliers.
Land use change verification: SIPEF works with external technical experts and partners to supplement its monitoring systems with the verification of any land use change in the areas under the Company’s management in Indonesia and Papua New Guinea.
Remediation and compensation: SIPEF is committed to the RSPO Remediation and Compensation Procedure (RaCP) for its own oil palm operations. The RaCP focuses on assessing historical plantation development, undertaken since November 2005, that has not undergone HCV assessments. If HCV area loss is confirmed through the procedure, a conservation programme must be developed to compensate for the loss.
Fire prevention and management: SIPEF has a strict no burning policy, which is applicable to its own estates and to suppliers. The Company also has a fire risk alert monitoring system, as well as firefighting procedures in place in case of any incidents of fire.

SHIFTING TRENDS: DEFORESTATION POLICY AND REGULATORY MEASURES

With the world accelerating its transition to a low carbon economy, policy makers are strengthening commitments and taking strict regulatory measures aimed at preventing deforestation. At the 26th annual United Nations Climate Change Conference (COP26) in Glasgow, more than 100 countries pledged to halt and reverse deforestation by 2030.As a major consumer of tropical agricultural commodities, the European Union has also recently proposed a regulation that sets mandatory due diligence rules aimed at preventing the import of commodities linked to deforestation. Six commodities – beef, wood, palm oil, soya, coffee and cocoa – and some of their derived products are included in the scope. In 2018, the Indonesian government placed a temporary moratorium on new permits for oil palm plantations, which ended in September 2021. The moratorium came into force in part to prevent forest fires and land conflicts. Together with other factors, including the increased number of companies covered by No Deforestation, No Peat, and No Exploitation (NDPE) policies, this has played a role in Indonesia’s deforestation rate hitting historic lows in 2020 and 2021. It is worth noting that deforestation, specifically attributed to the development of oil palm plantations, has also fallen to its lowest level since 2017 in Indonesia, Malaysia and Papua New Guinea. The complexity of implementing No Deforestation principles at a wider landscape level remains very much dependent on informed sustainable land use planning and strategies, which involve local landowners and policy makers. The efforts needed to ensure a just transition for smallholders are significant, and will require investment, dialogue and a sense of urgency from governments and businesses alike.

10 European Commission. (2021, November 17). Questions and Answers on New Rules for Deforestation-Free Products. https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_5919
11 Chain Reaction Research. (2022, March 7). The Chain: Deforestation Driven by Oil Palm Falls to a Four-Year Low. https://chainreactionresearch.com/the-chain-deforestation-driven-by-oil-palm-falls-to-a-four-year-low/

58 The connection to the world of sustainable tropical agriculture

New developments

SIPEF adheres to the requirements of the RSPO NPP for any new developments in its oil palm operations. The NPP requires all new development plans to undergo an integrated High Carbon Stock Approach (HCSA) and HCV Assessment, in line with current relevant standards and prior to any land development. The process includes a peer review of the HCV/HCS assessments, all of which are available on the HCV Network and HCSA websites. The procedure also requires companies to engage with community stakeholders and follow the process of Free, Prior and Informed Consent (FPIC), as well as to conduct social and environmental impact assessments, greenhouse gas (GHG) assessments, soil suitability studies and land use change analysis. Non-oil palm new developments follow similar procedures, as well as any relevant requirements under the Rainforest Alliance standard.

2021

In 2021, three NPP assessments were carried out in anticipation of the planned conversion of two rubber plantations to oil palm, as well as the acquisition of one existing oil palm estate. These NPPs cover 5,839 hectares of new development area.

Deforestation monitoring

SIPEF’s deforestation monitoring programme primarily utilises the Global Forest Watch (GFW) platform as a remote sensing tool to monitor its concessions for tree cover loss and land use change, including illegal land conversion and deforestation. The programme has been significantly expanded since 2020, and now covers the full scope of SIPEF’s own operations in Indonesia and Papua New Guinea, and their supplier areas.

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Responsible production and processing

CAUSE OF INCIDENT EVALUATED

If the incident is verified to have occurred, the cause of the incident is evaluated. This includes whether the incident was human-induced or due to natural causes, such as stream bank erosion, natural tree mortality or wind damage. Non-natural causes can include, but are not limited to, encroachment for subsistence farming, deforestation for timber or firewood, or conversion for the purposes of commercial farming or forestry.

SIPEF’S PROCESS FOR MONITORING DEFORESTATION USING GFW

GFW ALERT RECEIVED
When an alert is received via the Global Forest Watch (GFW) platform, field teams first investigate the site to verify whether there has in fact been an incident of tree cover loss. The majority of alerts being received turn out to be false positives, which result from interpretation errors due to the technical parameters within the GFW monitoring system.

VERIFICATION OF MANAGEMENT CONTROL
Verification is carried out to determine whether SIPEF has management control over the land where the incident has occurred, namely if it was purchased by SIPEF or not. As per FPIC requirements, landowners are given the option not to sell, and when this happens SIPEF does not have control over these areas of land, even if they are located within the Company’s concession areas.

ACTIONS TAKEN
All illegal deforestation activities are reported to the police, illegal settlers or land users evicted, and areas restored with natural vegetation as soon as possible. In alert cases where SIPEF does not have management control, SIPEF will inform and engage with communities on its sustainable land use policies.

60 The connection to the world of sustainable tropical agriculture

2021

In 2021, a total of 577 alerts were received through GFW monitoring of tree cover loss within SIPEF’s concession areas in Indonesia. Upon investigation, 168 incidents were confirmed to be actual tree cover loss, of which 89% were found to be caused by land clearing by local communities. Around 88% of the incidents took place in Musi Rawas (South Sumatra) on land occupied by communities that is currently not under SIPEF’s management control. In Papua New Guinea a total of 29 alerts were received for Hargy Oil Palms Ltd (HOPL) supplier areas, all of which were confirmed to be actual tree cover loss. The cause of 17 of the incidents was found to be a result of unauthorised clearing for food gardening by local communities, while the causes for the remaining 12 are still undergoing investigation.

GLOBAL FOREST WATCH TREE COVER LOSS MONITORING DATA 2021

COUNTRY / PROVINCE	WITHIN OWN CONCESSIONS	WITHIN SUPPLIER AREAS
	GFW ALERTS	VERIFIED INCIDENTS OF TREE COVER LOSS
INDONESIA	577	168
North Sumatra	18	0
Bengkulu	197	20
South Sumatra	362	148
PAPUA NEW GUINEA	0	0
TOTAL	577	168

NOTES:
• GFW tree cover loss monitoring does not cover supplier areas in Indonesia. These areas are monitored via the land use change verification component of SIPEF’s deforestation monitoring approach.
• Verified area of tree cover loss in Papua New Guinea covers only 17 incidents, as the verification of areas of tree cover loss for the remaining incidents is still underway.

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Responsible production and processing

Land use change analysis and verification

SIPEF has engaged Earthqualizer Foundation (EQ) to monitor all of its estates and suppliers against its NDP commitment. The engagement relies on a review of historic and real-time analysis of satellite imagery to detect any change in land cover that contravenes the NDP commitment. Past incidents are verified through a Recovery Liability Assessment, which also includes the documentation of causes and the development of corrective actions to be implemented so as to recover any confirmed liability. EQ will provide NDP monitoring reports based on verified data and assist SIPEF in engaging with interested stakeholders. It is planned to link these reports to the current content on SIPEF’s interactive mapping application, Geo SIPEF.

62 The connection to the world of sustainable tropical agriculture

Fire prevention and management

SIPEF does not permit the use of fire for land preparation in its own operations and in the managed areas of its suppliers. The use of fire for clearing land is against the laws of the countries where the Group operates. It also damages the long-term fertility of soils and can cause disruption to agricultural business activities. Most importantly, fires have a negative impact on people’s health, damage forests and other critical ecosystems, and contribute to the release of GHG emissions. With drought conditions becoming more prevalent due to climate change, fire risk monitoring and firefighting remain critical to SIPEF’s fire prevention and management approach. Water management in peatlands is also very important to avoid the risk of creating hotspots for fires, and SIPEF pays special attention to fire prevention in these areas.

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FIRE PREVENTION AND MANAGEMENT IN INDONESIA AND PAPUA NEW GUINEA

SIPEF monitors and manages fire risk via manned fire towers at its estates, communication and training for the Group’s field staff, and the investigation of all directly observed fires and potential fires or hotspots. Fire hotspots are monitored by satellite within and up to 100 meters outside its concession areas, as well as in the areas of its suppliers, using the Fire Information for Resource Management System (FIRMS). A strict reporting system is in place to document all fires on the estates. Automated hotspot alerts based on satellite imagery are generated on a continuous basis, and each alert is investigated. The fire risk status is updated daily and communicated to all levels of staff. Fire risk status signs are also placed at numerous sites on SIPEF’s estates, so that the employees and their families are kept informed of any potential or verified fires.# In accordance with the law and with the principles and criteria of RSPO, the Group has trained fire-fighters, dedicated resources and vehicles fitted with water tanks and high-pressure water pumps. When fire risk is considered high, firefighters are deployed, including outside of the estates to fight fires in the nearby villages, if necessary. All verified fires are immediately extinguished, and an internal report is compiled, which is then filed with the police. In the case of oil palm operations, these reports are also filed with the RSPO.

2021

In 2021, SIPEF’s fire monitoring system identified 35 hotspots within its own concession areas in Indonesia, of which one was verified to be an actual fire. The fire affected an area of three hectares at PT Dendymarker Indah Lestari's Sei Liam estate in Musi Rawas, and was found to be linked to land use activities by communities in areas currently not under SIPEF’s management control. In Papua New Guinea two hotspots were identified within HOPL’s own concession area, and were both verified as actual fires. Eight hotspots were identified within HOPL’s supplier areas, of which only one turned out to be an actual fire. The fires were primarily linked with food gardening activities by local communities, and the total area affected was around three hectares.

NUMBER OF HOTSPOTS VS. CONFIRMED FIRES WITHIN CONCESSIONS AND SUPPLIER AREAS 2020-2021

	Indonesia 2020	Indonesia 2021	Papua New Guinea 2020	Papua New Guinea 2021
Hotspots within concessions	107	35	5	2
Actual fires within concessions	1	0	0	2
Hotspots within supplier areas	10	8	0	1
Actual fires within supplier areas	0	1	0	0

REFORESTATION PROGRAMME IN IVORY COAST

Ivory Coast has lost more than 85% of its forested area since 1960, mostly as a result of agricultural expansion linked with cocoa farming. In recognition of the severity of this issue SIPEF’s banana company, Plantations J. Eglin, is working to make a contribution to restoration through its reforestation programme. Following a study in 2010 focused on the integrated management of flora and fauna on its production sites, the company developed a reforestation plan for low-lying areas not suited to banana cultivation, primarily on the sites of Azaguié and Agboville. Over the years, the programme has gradually expanded to an area of around 126 hectares, corresponding to 7% of the company’s estate. Around 158,000 gmelina (Gmelina arborea), teak (Tectona grandis) and acacia mangium (Acacia mangium) trees were planted between 2010 and 2021. The vast majority of trees planted were gmelina trees (78%), as they are better suited to the low-lying land found in the estates than teak trees (22%), which thrive better on hillsides. In the first year of the programme, around 11,110 teak trees were lost at the site in Agboville due to excessive water in low-lying areas. These were replaced by gmelina trees in the following year. In 2021, 950 acacia mangium trees were planted for the first time, broadening the diversity of species included in the programme. Although the programme’s ambition is primarily to have a positive environmental impact, the company has also been exploring the potential for the sustainable use of wood that could be generated from thinning. Thinning is already being carried out as part of the programme’s maintenance activities, and entails the selective removal of small-diameter and superfluous trees to improve the growth rate and health of the remaining trees. However, an assessment undertaken by a local company in 2021 revealed that many of the trees selected for thinning would not be suitable for commercial purposes. Moving forward, Plantations J. Eglin will continue to focus on maintaining the hectares already planted, and will evaluate the possibility of expanding the programme in the future.

The total area planted differs to the current area under the programme, due to the partial loss of the teak planted area in Agboville in 2010 (ten hectares), and illegal forest conversion in some of the plot areas in Azaguié (six hectares).

Location	Area
Azaguié	46 ha
Agboville	96 ha
Total area planted	142 ha

Species	Percentage
Gmelina	78%
Teak	22%
Acacia Mangium	0%

TREES PLANTED 158,064

TOTAL PLANTED AREA UNDER REFORESTATION PROGRAMME 2010-2021

SPECIES OF TREES PLANTED UNDER REFORESTATION PROGRAMME 2010-2021

Peatlands

Peatlands are a type of wetland formed over thousands of years from partially decayed vegetation. They occur in almost every country, and fall under the classification of organic soils. Globally, different definitions have been applied, which can vary based on the percentage of organic matter and the minimum thickness of organic layers of peat being classified. In their natural state, peatlands are carbon sinks. They also host unique biodiversity, regulate water flows, and serve as water purifiers and reserves. Over time, significant areas of peatland have been used for agriculture. As of 2015, industrial plantations covered 4.3 million hectares (27%) of peatlands in Peninsular Malaysia, Sumatra, and Borneo. Indonesia and Malaysia collectively have more than 24 million hectares of peatland.

Since 2014, SIPEF has strictly prohibited any new development on peat, regardless of depth, across all of its own and its suppliers’ operations. In Indonesia, SIPEF owns several estates with historically developed peat, and applies best management practices as defined by the RSPO and local regulations. All estates with areas classified as peatland are inventoried, documented and reported to the RSPO to enable the monitoring and promotion of peat best management practices. SIPEF also works with its smallholders to ensure that any areas planted on peat follow the same practices.

Peatland management and conservation

The RSPO Best Management Practices are designed to mitigate the challenges associated with cultivating oil palm on historically developed peat. SIPEF applies these best practices and identifies areas for conservation and restoration. To make peatland suitable for oil palm cultivation it must be drained, which leaves these areas susceptible to fires, peat soil subsidence, floods and productivity loss. Implementing good water management can help to prevent and mitigate these risks, while also reducing the release of GHG emissions. For any operations on peat, SIPEF regulates water levels and maintains a high water table, in compliance with RSPO requirements.

Following the RSPO Principles & Criteria (P&C) (2018), SIPEF conducts drainability assessments in accordance with the RSPO Drainability Assessment (DA) Procedure. The procedure was developed in 2019 to support oil palm companies in adjusting their peatland management processes, in order to reduce subsidence rates and the risks of flooding. To date, three drainability assessments have been submitted and are awaiting approval by the RSPO. The assessments were conducted at three estates and cover around 13,698 hectares, which are in the process of classification. SIPEF will continue to monitor the implementation of its management approach for estates with developed peat and, where possible, identify any further opportunities for conservation or restoration.

Biodiversity and conservation

Biodiversity is declining at a critical rate. The main drivers of biodiversity loss and the degradation of terrestrial ecosystems are human-induced: land use change, nutrient loading and pollution, overexploitation of natural resources and climate change. Biodiversity has always been important for the agricultural sector. Natural processes and living organisms are crucial for growing food, yet using land for agriculture often leads to changes in the surrounding environment. Prime farmland — land with good soil and water access — is a limited resource. Unfortunately, population growth and the sector’s continually expanding footprint place sensitive and important natural areas such as forests at risk of conversion. SIPEF’s subsidiaries are located in ecologically distinctive and biodiverse regions. The Group recognises its unique position and the role it can play in mitigating further biodiversity loss by decoupling deforestation and agricultural expansion, and by contributing to the safeguarding of important ecosystems in the landscapes where it operates. The Company’s management approach for biodiversity and conservation consists of the following commitments and actions:

Protection and restoration of areas identified for conservation within SIPEF’s concessions
Conservation areas are identified through HCV and HCSA assessments prior to development, carried out by licensed assessors under the HCV Network’s Assessor Licensing Scheme (ALS). Habitat management plans are developed for these areas. SIPEF is also committed to restoring any areas under the Group’s management control that have been impacted by fires.# Biodiversity monitoring and no hunting policy

SIPEF is committed to monitoring biodiversity in all set-aside areas under its management control, and to implementing its no hunting policy on its own estates and in the cultivated areas of its third-party suppliers.

Supporting landscape and biodiversity programmes and initiatives

Through the SIPEF Foundation, the Group finances and supports two long-term biodiversity projects in Indonesia. Both are based in West Sumatra near SIPEF’s Agromuko estates. One is focused on the protection of 12 672 hectares of natural forests, and the other is a sea turtle conservation programme.

Conservation areas

As of 31 December, SIPEF is managing a total of 9 219 hectares of conservation area across its concessions in Indonesia, Papua New Guinea and Ivory Coast. This includes HCV and HCS areas, as well as riparian and buffer zones, that fall under SIPEF’s management control. Around 5,510 hectares have been identified at SIPEF’s oil palm operations in Indonesia, and 3,483 hectares are set-asides at SIPEF’s estates in Papua New Guinea.

To date, a total of 24 HCV, HCSA and integrated HCV-HCSA assessments have been carried out and submitted for approval to the relevant reviewer organisations (HCV Network or HCSA). All approved assessments are made available on the HCV Network and HCSA websites.

All conservation areas under SIPEF’s management control are clearly delineated, actively protected and continuously monitored. SIPEF engages with neighbouring communities so that they are aware of the locations, importance and benefits of the HCV and HCS areas, and so that the communities have the opportunity to become actively involved in protecting them. Social HCV areas remain accessible to communities.

Biodiversity monitoring

An important component of SIPEF’s habitat management plans is biodiversity monitoring. Biodiversity monitoring is carried out with a combination of camera trap surveys and rangers that patrol the conservation areas. The conservation areas within SIPEF’s plantations in West Sumatra are of particularly high quality. Monitoring efforts have captured apex predators such as the Sumatran tiger (Panthera tigris sondaica), leopard cats as well as other large mammals such as the sun bear (Helarctos malayanus), tapirs (Tapirus indicus) and a variety of monkeys. The regular presence of these mammals is a good indication of ecological viability, integrity and connectivity within the landscape.

Conservation areas identified for the oil palm estates at PT Dendymarker Indah Lestari are excluded from the scope of reporting, as the final lease agreements have not yet been approved by the Indonesian Government. These areas currently fall outside of SIPEF’s management control.
Refers to ‘HCV 5: Community Needs’ and ‘HCV 6: Cultural Values’. For more information: https://hcvnetwork.org/hcv-approach/
The Biodiversity Finance Initiative. (Retrieved March 2022). Indonesia. https://www.biofin.org/indonesia.

SIPEF BIODIVERSITY INDONESIA

Indonesia is home to the largest expanse of rainforest in all of Asia, and hosts 17% of the world’s wildlife. SIPEF contributes to protecting this crucial landscape with the SIPEF Biodiversity Indonesia (SBI) project. The SBI project is a conservation programme managing a 12,672-hectare area of forest that acts as a buffer to the Kerinci Seblat National Park. It is one of just 16 projects in Indonesia that have been granted an ecosystem restoration concession for a term of 60 years.

Twenty-five people work at the SBI local office in Mukomuko, from experienced rangers to young graduates, who mostly come from the surrounding villages. The project focuses on the protection and monitoring of biodiversity, reforestation of degraded areas, and engagement with communities.

Biodiversity monitoring has identified an extremely rich range of megafauna in the area. Species include the critically endangered Sumatran tiger (Panthera tigris sondaica), the Asian giant tortoise (Manouria emys), and the Sunda pangolin (Manis javanica), as well as endangered and vulnerable species such as the Sumatran clouded leopard (Neofelis diardi diardi), the sun bear (Helarctos malayanus), the tapir (Tapirus indicus), the Sumatran muntjac (Muntiacus montanus) and the great argus (Argusianus argus). Two rare species have also been spotted: an Asian golden cat (Catopuma temminckii) and dhole dogs (Cuon alpinus).

Monitoring is carried out with 136 camera traps set up throughout the area, and through visual surveying by the rangers.

In 2016, a reforestation and enrichment programme was initiated by SBI with the aim of reforesting the degraded areas that are identified via satellite imagery and field checks. To date, nearly 171 hectares of degraded area have been restored, and around 45,258 trees have been planted.

SBI is also helping to develop alternative incomes for farmers that have historically used parts of the conservation area to maintain their livelihoods. The initiative makes use of agroforestry methods to create sustainable livelihoods that are compatible with the conservation objectives of the programme. Through the project, SBI is currently supporting around 309 agroforestry growers who receive technical support and seedlings to develop tree crops that can provide them with an income, without causing environmental damage to the surrounding habitat.

Another aspect of the project is the regular patrols that are carried out by project staff to address the ongoing threats of illegal felling of trees, illegal planting of oil palms and poaching. Oil palms growing illegally in the forest are identified and felled. The majority, 1,438, were removed in 2017, but between 60-90 oil palms continue to be felled each year, demonstrating the need for ongoing monitoring and community engagement.

TURTLE CONSERVATION PROJECT AT AIR HITAM CONSERVATION PARK

EGGS COLLECTED AND TURTLES RELEASED
YEARS
	OLIVE RIDLEY SEA TURTLE (Lepidochelys olivacea)		LEATHERBACK TURTLE (Dermochelys coriacea)		GREEN SEA TURTLE (Chelonia mydas)
	EGGS COLLECTED	TURTLES RELEASED	EGGS COLLECTED	TURTLES RELEASED	EGGS COLLECTED	TURTLES RELEASED
2019	4 873	2 734	76	0	0	0
2020	3 934	2 203	0	0	384	248
2021	3 944	2 648	318	230	0	0

Turtles always return to the beach where they were born, but beach erosion and changing conditions are reducing the space available for nesting in many areas. SIPEF’s turtle conservation project is helping to protect turtles on a five-kilometre-long stretch of beach at Air Hitam Conservation Park in Sumatra. Local authorities and residents of two villages work together as field operators to monitor the beach. If turtle eggs are found they are collected to safeguard them from scavenging lizards, and are hatched in controlled conditions before they are released. This important work helps to ensure as many baby turtles as possible make it back into the sea. Over time, the goal is to increase the number of turtles returning to the beaches to lay eggs.

Since 2007, the project has successfully enabled the collection of 34,682 eggs and the release of 20,206 turtles. In 2021 4,262 eggs were collected and 2,878 turtles released. The majority are olive ridley sea turtles (Lepidochelys olivacea), but other species include the leatherback sea turtle (Dermochelys coriacea), and in previous years, the green sea turtle (Chelonia mydas). In 2018, eggs from the leatherback sea turtle were collected for the first time in seven years. The project was launched in 2007, and is managed by the SIPEF Foundation since 2010, in collaboration with the National Resource and Conservation Office of Bengkulu Environment and Forestry Department. It is one of the very few protection projects in Sumatra to be implemented by the local population.

Best Management Practices

SIPEF strives to minimise the impacts of its activities on the climate, as well as on the environment surrounding its operations. Essential to its approach for managing these impacts are the Best Management Practices (BMPs) that the Group implements across its operations. These practices have been developed over the course of a century of active agriculture in the tropics, two decades of compliance with credible certification standards, and an ingrained corporate culture that stimulates innovation and continuous improvement. Wherever possible, the Group also engages in regenerative and circular practices. These practices are focused on making use of by-products and waste from its production and processing activities, and on implementing nature-based solutions.

SIPEF’S BEST MANAGEMENT PRACTICES FOCUS ON:

Sustainable land preparation and management
Minimising the use of agrichemicals
Preserving soil fertility and health
Using fewer resources to produce higher volumes of product
Minimising waste and pollution

Integrated Pest Management

Pest management is crucial for protecting crops and maximising yields. SIPEF engages in Integrated Pest Management (IPM) for both its oil palm and banana production. IPM is an effective and environmentally sensitive approach to pest management that relies on a combination of common-sense practices. It integrates a broad set of techniques and methods to control pests and diseases. The approach starts with identifying pests and monitoring their prevalence, taking into account knowledge of pest biology, life cycles, and the stages of pest damage. Action is then taken to maintain pests below economically damaging levels.# INTEGRATED PEST MANAGEMENT

INTEGRATED PEST MANAGEMENT

An important component of IPM involves preventing and suppressing pests by using pest-resistant varieties, preparing land appropriately, and maintaining sanitation, hygiene and nutrition. This minimises disease carry over, propagation, and the susceptibility of crops to pests and disease. For example, the common fungus Ganoderma mycelium can be suppressed by chipping palm trunks and leaving the chippings exposed to sunlight, enabling the ultraviolet radiation to kill the fungus. Other examples include:

Disc harrowing chips into mineral soil to limit the breeding habitat of the rhinoceros beetle (Oryctes rhinoceros)
Planting nitrogen-fixing cover crops to provide extra soil nitrogen and reduce noxious weeds
Applying empty fruit bunches (EFB) and formulated fertiliser to the varieties of palm hybrids that best suit the sites for healthier and more naturally resistant palms

SIPEF also utilises numerous different methods of natural or biological pest control. This includes establishing beneficial plants that will foster populations of natural enemies, releasing natural pest enemies such as parasitoids, e.g. Eocanthecona furcellata, or providing conditions for natural predators, such as nesting sites for owls or raptor perches in replanting areas. More advanced forms of biological control include trapping and infecting male Orcytes with a virus and releasing them to curb populations of Orcytes. Research and development of alternative methods of pest control are being conducted by both Verdant Bioscience Pte Ltd and the Papua New Guinea Oil Palm Research Association.

Pesticide use

Pesticides are used as a last resort when other methods, such as those previously mentioned, are not able to prevent outbreaks of pests and diseases above the economic threshold. All active ingredients in use are reviewed annually for safety and efficacy. Pesticides that are categorised as World Health Organisation (WHO) Class 1A or 1B, or that are listed by the Stockholm or Rotterdam Conventions, are not used unless in exceptional circumstances, as validated by a due diligence process, or when authorised by government authorities for pest outbreaks.

All of the Group’s tea, rubber and banana estates are certified to the Rainforest Alliance Standard, and do not apply any of the pesticides on its list of prohibited pesticides. The active ingredient, paraquat, was phased out of all SIPEF operations in July 2016. SIPEF also focuses on avoiding the development of resistance to pesticides. The various active ingredients used are changed regularly, so that low concentrations of pesticides can continue to have maximum effect. All workers, permanent or otherwise, involved with pesticides are trained and equipped with Personal Protective Equipment (PPE), and their health is monitored through regular medical checkups.

IPM PRACTICES AT INDONESIAN ESTATES IN 2021

	2021
Total number of barn owl boxes present on estates	403
Number of occupied barn owl boxes	207
Number of individual beneficial insects released in 2021	365
Number of plots of beneficial plants planted in 2021	14
Number of plots of beneficial plants maintained (to date)	23

The connection to the world of sustainable tropical agriculture

Enhancing soil health and fertility

Plants cannot grow without healthy soil, and SIPEF implements a broad range of BMPs to protect and enhance the fertility of its production areas. Soil health starts with soil conservation practices focused on minimising soil erosion, maintaining or improving soil structure, reducing rainwater runoff and nutrient loss, conserving moisture and increasing water infiltration.

At SIPEF’s palm oil operations, all land preparations start with detailed topographic maps generated using digital elevation data, and obtained utilising the latest satellite imagery and drone technology. These maps are used to assess the planted areas and ensure that the appropriate BMPs are implemented for soil health and conservation.

To prevent soil erosion, SIPEF utilises preventative measures like legume cover crops and follows best practices including installing stop bunds (silt traps), silt trenches, bunds and slope protection like vetiver grass. This prevents sediments entering the waterways. By applying compost and other biomass to the soil, soil exposure is reduced, thus contributing to soil health and conservation.

An important aspect of maintaining and enhancing soil health is the use of mineral fertilisers. Used correctly, mineral fertilisers can dramatically increase yield. SIPEF therefore focuses on finding a balance between the application of mineral and organic fertilisers, while maintaining the soil’s structure. Annual leaf samples and periodic soil samples are analysed for nutrient levels to determine the recommended application of fertiliser, in order to minimise fertiliser use while maintaining or improving productivity per hectare. This practice is also extended to the smallholders working with SIPEF.

Fertilisers represent one of the most significant costs of operations, and their use must be assessed in relation to overall soil conservation practices. To drive down the use of mineral fertilisers, organic matter is returned to the fields wherever possible. SIPEF has also invested in a composting system at its Bukit Maradja operations, which processes 100% of the plantation’s EFB and wastewater into organic fertiliser with a high nutrient content.

ENGAGING IN CIRCULAR PRACTICES: REUSING AND RECYCLING BY-PRODUCTS FROM PALM OIL PRODUCTION

USES FOR BY-PRODUCTS FROM SIPEF’S OIL PALM PRODUCTION CYCLE

Creating value sits at the heart of SIPEF’s approach to sustainability, and the Group’s business strategy. This principle is also applied at the operational level, where SIPEF strives to reuse and recycle the by-products from its production and processing activities. While the focus of external stakeholders has always been on the primary product, palm oil, there are many other by-products resulting from the oil palm production cycle. These by-products can often be used as input resources for production, for instance as fertiliser or fuel, or to generate electricity.

The best use for each by-product is determined by reviewing the different recycling pathways and the details of each location, such as soil conditions and cost of transportation, in order to assess the economic performance of the conversion.

Pruned palm fronds and old palm trunks

All pruned palm fronds are left in rows next to the palms to compost.
During replanting, when trees are replaced, old palm trunks are chipped and mulched back into the soil as an amendment.

Empty Fruit Bunches

Where possible, empty fruit bunches (EFB), a by-product from processing at the Group’s palm oil mills, are applied to the fields to return the remaining nutrients and organic matter content back to the soil.
Composted EFB can be beneficial for certain soils, and can in some cases be mixed with mill effluent to create organic fertiliser. The composting system at SIPEF’s Bukit Maradja operations is made up of eight ventilated bunkers and processes 100% of the plantation’s EFB and POME into organic fertiliser with a high nutrient content.
Other mill by-products can be used in the composting system, such as boiler ash and the deposits from the decanting systems. Maintaining aerobic conditions at a constant level is important to ensure that no methane is produced during the composting process.
SIPEF’s biomass pellet facility at SIPEF’s Umbul Mas Wisesa operations is able to convert EFB into high-quality calorific pellets using a heating process, called torrefaction.

USES FOR BY-PRODUCTS FROM SIPEF’S OIL PALM PRODUCTION CYCLE

While the above are the main current uses for by-products, there are several other uses being explored, tested and practised within the industry. Ongoing innovation and research and development will continue to help unlock a wealth of value from what was previously considered waste.

Palm Oil Mill Effluent

Wastewater from mills, better known as Palm Oil Mill Effluent (POME), is used as a source of methane generated through anaerobic digestion, which extracts a significant amount of its organic matter content, or applied to the fields for aerobic digestion and re-absorption into the palms.

Palm nut mesocarp, endocarp and endosperm

The palm nut mesocarp, the source of crude palm oil (CPO), contains significant amounts of fibre, all of which is burned in the mill boilers to generate electricity through steam turbines. 80% of SIPEF’s mills run on this form of renewable electricity.
The palm nut endocarp, the source of palm kernel shell, is sold to third parties as a biofuel. The calorific value of palm kernel is 18,836 KJ/kg. With 3,300 tonnes sold from Indonesia alone, this equates to over 62 million MJ.
The palm nut endosperm, the source of palm kernel oil (PKO), is also used after the oil is extracted. This product is called palm kernel expeller, and is used as a component in animal feed.# SIPEF Sustainability Report 2021

Responsible production and processing

Indonesia

Papua New Guinea

	2019	2020	2021
WATER USE PALM OIL MILLS
M³	813 708	906 866	954 258
Indonesia	785 027	604 144	785 027
Papua New Guinea

WATER USE AT BANANA OPERATIONS

CUBIC METRES (M³)

	2019	2020	2021
Plantations water use	3,601,692	4,012,702	3,901,644
Banana packing stations water use	231 400	211 674	218 112

CUBIC METRES (M³) / TONNE BANANAS

	2019	2020	2021
Banana packing plants water usage intensity	116.7	135.6	128.3

Water management

Water is a precious resource and SIPEF implements numerous BMPs to ensure it is managed as carefully as possible. The Group’s approach focuses on preserving the availability and quality of water resources for the surrounding communities and environment, as well as for its own business. SIPEF does this by reusing water as much as possible to keep water consumption at a minimum. Pollution of surface and ground water is mitigated through good soil conservation practices, the establishment of riparian zones and wastewater treatment. SIPEF measures and aims to optimise water use in all of its operations. However, none of the Group’s oil palm production areas are irrigated, and the operations in Indonesia and Papua New Guinea mainly use water for processing. The scope of data presented in this section therefore focuses on water management at SIPEF’s palm oil mills, banana plantations and banana packing stations.

2017-2021: WATER USE IN PALM OIL MILLS

(M³ / TONNE FFB)

Since 2017, SIPEF has invested in improving water usage across palm oil operations, with an annual target of less than one cubic metre of water per tonne of FFB for processing. Six out of nine mills achieved this target in the reporting period.

Bananas remain the Group’s most water-intensive product, primarily due to the use of irrigation. Almost 70% of the irrigation water used at the banana plantation in Ivory Coast is stored in dams during the rainy season, then reused and pumped during the dry season a few months later. The remaining amount comes from rivers alongside the farms. Water for the banana packing stations is supplied from wells, due to health and food safety requirements. The water used is recycled after the packing process by using decantation tanks, then stored in the dams for irrigation in the future.

TREATED PALM OIL MILL EFFLUENT BY DESTINATION (MG/L)

INDONESIA

DESTINATION	2019	2020	2021
PLPOM Land application	929	856	426
BMPOM Composting	1 239	1 545	1 235
UMWPOM Discharge into water body	24	32	20
MMPOM Discharge into water body	87	90	66
BTPOM Discharge into water body	83	78	57
DMPOM Discharge into water body	98	99	98

PAPUA NEW GUINEA

DESTINATION	2019	2020	2021
HPOM Discharge into water body	71	78	109
NPOM Land application	359	121	186
BPOM Land application	100	449	212

Pollution of waterways is prevented using the soil conservation measures described in the section on enhancing soil fertility. All of SIPEF’s crops are perennial, so there is rarely bare soil between the planted crops and leguminous cover crops are used where necessary. Maintaining riparian buffer zones is also important for absorbing runoff before it enters waterways. These buffer zones are made up of natural vegetation and vary in width (depending on stream or river width), in alignment with local regulations, sustainability certification requirements and BMPs. Wastewater from palm oil mills (POME) is either used as a liquid fertiliser for land application or discharged into water bodies. This discharge is carefully monitored for compliance with local regulations and to ensure there are no negative impacts. The most commonly used indicator of effluent quality is biochemical oxygen demand (BOD). BOD is a measure of the amount of oxygen the aerobic bacteria consume as a result of the organic matter content within the effluent. A high BOD indicates that the effluent is rich in nutrients and can foster the growth of bacteria, thereby increasing the consumption of dissolved oxygen within the effluent. BOD levels are regulated by law, and SIPEF uses its engineering controls and water treatment systems to ensure the levels stay within the required limits. When effluent will be discharged into natural water courses it is important to keep the BOD as low as possible, so that the effluent does not contribute to the eutrophication or oxygen starvation of aquatic ecosystems. The limit for discharge of BOD into a natural water body is 100 mg per litre. When the effluent is used as a fertiliser and applied to the land, a higher BOD is favourable, as it indicates a higher nutrient load. In this case, the limit is 5 000 mg per litre. SIPEF also uses other indicators, such as chemical oxygen demand (COD) and total suspended solids (TSS), to measure the quality of wastewater being discharged or used for land application (see page 136 in the Annex).

Respecting human and labour rights

The agricultural sector is responsible for the livelihoods of millions of people worldwide. The sector has also contributed to a number of additional positive social impacts, such as development in the rural areas where tropical commodities are grown. At the same time, the sector is vulnerable to significant social risks linked with human rights and exploitation. SIPEF acknowledges that sustainable agriculture cannot be achieved without respect for human rights. Human rights are inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion or any other status. The Group believes in being a responsible employer and a good neighbour, and is dedicated to having a positive social impact in these roles. As an employer, SIPEF aims to treat all employees fairly, with respect for human rights, and in line with local laws and international frameworks such as the International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work and the United Nations’ Universal Declaration of Human Rights.

Policies: Human rights and no exploitation

SIPEF’s commitments to human rights are stated in its Human Rights Policy, Responsible Plantations Policy and Responsible Purchasing Policy. Specific policies are also in place to address child labour, forced or trafficked labour, freedom of association, occupational health and safety, equal employment opportunity and sexual harassment. Collectively, SIPEF’s policies are built around the following core principles and commitments:

No exploitation: SIPEF does not tolerate child labour, forced labour or human trafficking. The minimum working age on all of SIPEF’s estates and operations is 18. These policies apply equally to SIPEF, its contractors and third-party suppliers.
Fair labour practices: SIPEF is committed to fair labour practices as per the ILO Conventions on Free and Fair Labour Principles, and as verified through its RSPO compliance. Third-party suppliers and contractors are required to prove that pay and employment conditions for workers or contract workers always at least meet legal or industry minimum standards.
Diversity and inclusion: SIPEF provides equal opportunities for all and does not tolerate discrimination. SIPEF’s suppliers are also required to prohibit any form of discrimination, including gender-related discrimination with regards to employment or pay.
Health and safety: SIPEF is committed to providing a safe and healthy work environment for all employees. Third-party suppliers must also ensure that the working environments under their control are safe and without undue risk to health. Compliance is ensured through the Group’s management systems, and verified by both internal and external audits.

Any cases of the violation of human rights, where substantiated, will result in disciplinary action up to and including dismissal, and may also lead to legal action. SIPEF also has an effective grievance mechanism in place, through which employees can report any form of child labour, forced labour or human trafficking. The Group is receptive to all grievances raised by stakeholders, internal and external, and handles complaints impartially. Further information on SIPEF’s Grievance Policy and mechanism can be found in the chapter on Responsible Business and Transparency on page 113, and on the Company website: www.sipef.com/hq/sustainability/grievances-sipef-group

Belgium

Indonesia

Papua New Guinea

Ivory Coast

Singapore

	1 583	4 628	1 14	998	23

SIPEF’s workforce

SIPEF’s workforce is made up of 21,233 people, including management, full-time employees, and temporary workers in Belgium, Indonesia, Papua New Guinea, Ivory Coast and Singapore.

EMPLOYEES AT GROUP LEVEL

GROUP EMPLOYEES	2019	2020	2021
Male	16 116	16 553	15 749
Female	5 395	5 081	5 484
TOTAL EMPLOYEES	21 511	21 634	21 233

EMPLOYEES BY COUNTRY 2021

PT Tolan Tiga in Indonesia employs the majority (71%), followed by Hargy Oil Palms Ltd in Papua New Guinea (22%), and Plantations J. Eglin (8%). Around 26% of SIPEF’s employees are women.

Fair labour practices

SIPEF applies fair labour practices in all of its operations. Employment contracts are clear, in the local language and, at a minimum, in compliance with local laws. All employees have the right to one day of rest per six days worked. All employees, workers and their families have access to health care through insurance and privately managed clinics. SIPEF meets all local regulations for wages and is compliant with the decent living wage calculations audited by the various certification standards to which the Group adheres.# SIPEF Sustainability Report 2021

The connection to the world of sustainable tropical agriculture

This includes workers on piece rate/quotas, for which the wage calculation is based on achievable quotas during regular working hours. In the absence of a locally relevant benchmark, the Group is working towards alignment with the definitions of the Global Living Wage Coalition (GLWC) following the certification standards’ processes.

SIPEF respects the rights to freedom of association and collective bargaining. There are different arrangements in each country, depending on local government regulations. As of 31 December, 78% of SIPEF’s employees are covered by collective bargaining agreements. In the absence of a proper collective bargaining agreement or association, workers are free to join unions or organise according to country legislation. The Company has a process in place to engage with union representatives and enable access to Company management through channels of dialogue and engagement.

A LIVING WAGE IS DEFINED BY THE GLWC AS FOLLOWS:

The remuneration received for a standard workweek by a worker in a particular place is sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events.

The GLWC publishes benchmarks that define the level of a living wage per region and per commodity. These benchmarks are developed by independent researchers and take into account the cost of living in a specific region. The living wage is often significantly higher than the legal minimum wage. A benchmark has already been published for Ivory Coast, and Plantations J. Eglin is working to align wages for all of its employees with this benchmark.

COMPLIANCE WITH RSPO, RAINFOREST ALLIANCE AND FAIRTRADE STANDARDS ON LIVING WAGES

SIPEF complies with the requirements of the RSPO, Rainforest Alliance and Fairtrade standards on living wages. Each of these standards uses the GLWC’s definition and sets its own requirements on how and when the living wage must be paid.

The RSPO Principles and Criteria (P&C) 2018 include requirements on providing a decent living wage. The RSPO is working on defining a benchmark for the oil palm sector for each country under the national interpretations.
The Rainforest Alliance Sustainable Agricultural Standard requires that certified members work towards a living wage.
The Fairtrade standard has put into effect a Fairtrade Base Wage for banana plantations as of July 2021. This is currently set at 70% of the take-home pay needed for a living wage, as established by the GLWC. By 2023, pay must reach 100% of the living wage benchmark.

SIPEF Sustainability Report 2021

Responsible production and processing

EMPLOYEE HOUSING, CLINICS, SCHOOLS AND CHILDCARE FACILITIES

Most of SIPEF’s employees and their families live within its operations. The Company provides them with housing, clean water and medical services, and ensures access to education for their children. SIPEF’s plantations in Indonesia have also offered free childcare since 2017, to support working families and to give women equal opportunities in the workplace.

EMPLOYEE HOUSING, CLINICS, SCHOOLS AND CHILDCARE FACILITIES AS OF DECEMBER 2021

Item	Quantity
Houses	8 436
Clinics	39
Schools	44
Day care facilities	15

In Indonesia, all workers are covered under BPJS Kesehatan (Badan Penyelenggara Jaminan Sosial Kesehatan), the country’s national health insurance programme. In 2021, SIPEF has focused significant efforts on ensuring that all temporary workers are also registered and covered accordingly, and verifying that regulations are followed by all parties. As of December 2021, 36,040 people (employees, temporary workers and family members) were registered as BPJSK participants at PT Tolan Tiga Indonesia. SIPEF is further committed to contributing to providing access to affordable food for its employees. In Indonesia, the Company supplies permanent workers and their families with up to 46 kg of rice per household every month, and supports access to affordable products at the stores within the estates. In Ivory Coast, all workers, employees and supervisors are provided a fixed monthly subsidy for the purchase of rice.

ADDRESSING GRIEVANCES

In 2020, a grievance was filed with the RSPO related to one of SIPEF’s estates in South Sumatra, PT Agro Kati Lama (PT AKL). The grievance related to allegations about the rights, working conditions and safety of temporary workers employed by third-party contractors. South Sumatra is a region with a complex social setting where there is a great demand for work from local communities. Temporary work is common and legally recognised. SIPEF’s policy is to transition towards a more permanent work force, but until this transition can be completed, the Group engages with third-party contractors that provide temporary labour from the surrounding communities. SIPEF has taken the allegations very seriously and has implemented a multi-pronged strategy to address the immediate complaints, while reviewing the policies and systems it has in place. In the short term, PT AKL assisted in the payment and other responsibilities that needed to be performed by the contractors. This included conducting the administration of payroll, issuing pay-slips, enlisting temporary workers in social security programmes, facilitating the payment of social security contributions and ensuring all workers are issued personal protective equipment (PPE). To investigate the issue further, SIPEF engaged Linkar Komunitas Sawit (LINKS) to conduct an independent review at PT AKL. LINKS is a social and developmental NGO that works to support multi-stakeholder efforts for social sustainability management in the oil palm sector in Indonesia. The review included 205 stakeholder interviews carried out independently to ensure unbiased participation. A report and an Action Plan have been shared with all parties. At the same time, SIPEF assessed its own internal procedures against the issues brought by the complainant, and is looking at the overall process and implementation. This has led to the roll out of new employee training across Indonesia, focusing on Company procedures and implementation practices, and occupational health and safety (OHS) management. Audits were carried out by regional sustainability teams to verify the effectiveness of this training, and these audits will continue annually from now on. Throughout the process, dialogue with the complainant has continued through a process mediated by the RSPO. Due to covid-19, several online meetings were held with a mediator in 2021. The objective is to work collectively on site with all parties involved aiming at the resolution of this case. It is expected that the case will be resolved in 2022, at which point it will be classified as a 'post-conflict monitoring' case by the RSPO. The Action Plan developed lists several actions, including the design of a programme that will contribute to improving livelihoods for local communities. Progress against the Action Plan will be monitored by LINKS through biannual visits.

Diversity and inclusion

SIPEF is committed to a non-discriminatory workplace and complies with all relevant anti-discrimination and equal employment laws and regulations of the countries where it operates. The Group promotes equal rights for men and women, including supporting women in applying for training programmes that lead towards roles in management. In Indonesia, for example, there is a long-running cadet programme designed to take in recent college graduates and fast-track them into SIPEF’s middle management career path. SIPEF believes the initiative can have a positive impact on a profession that is traditionally male-dominated, and the Company actively encourages women to participate. The intake of female cadets has increased significantly since the start of the initiative. In 2014, the first female cadets successfully completed the programme, and represented 12% of the total number of graduates. By comparison, female cadets made up 28% of the total number of successful graduates in 2021.

Health and safety

SIPEF ensures its employees are provided with a safe and healthy work environment. To prevent accidents, the Group invests in continuous training, the provision of appropriate PPE, and rigorous internal supervision and control systems. All risks are regularly analysed and assessed, and any occupational accidents are investigated to prevent them from being repeated. Particular attention is given to the handling of chemicals such as pesticides. Workers are given special training, supervision and PPE. Pregnant and breastfeeding women do not work with chemicals. All SIPEF employees have access to annual medical examinations, and these examinations take place more frequently for those who handle chemicals. Each operating unit (OU) has a qualified person in charge of OHS who is responsible for implementing a Safety Management Plan. Each OU also has its own health, safety and environment committee, which meets on a monthly basis, and is made up of representatives from those who work or live within the area. Participants can put forward comments and complaints at the monthly meetings regarding health, safety and environmental issues. Company doctors independently record the lost time injury frequency rate (LTIFR) for each unit.# SIPEF Sustainability Report 2021

The connection to the world of sustainable tropical agriculture

Regular meetings are held at the estate level to discuss any lost time injury (LTI) incidents and how they can be prevented in the future. In 2021, the OHS systems of all operating units have been standardised in line with the OHS 45001 and the Australian Standard. Under the Occupational Health and Safety Administration (OHSA) standard used for reporting, the LTIFR is calculated as the number of LTI plus fatalities, divided by the number of hours worked, multiplied by a factor of 1,000,000. SIPEF regrets to report that there was one fatal employee accident in Indonesia in 2021. In October 2021, a SIPEF employee was harvesting near power lines at the Bunga Tanjung estate in Bengkulu. The sickle hit the power lines, and the employee passed away at the polyclinic. An accident investigation has been completed and measures have been implemented to prevent a similar incident from happening in the future. Ongoing awareness-raising is conducted to reinforce existing procedures that ensure the safety of all of SIPEF’s workers.

LOST TIME INJURY FREQUENCY RATE BY COUNTRY

PER 1,000,000 HOURS WORKED

COUNTRY	2019	2020	2021
Indonesia	3.27*	2.86*	2.43
Papua New Guinea	27.96	23.76	22.67
Ivory Coast	14.50	21.44	16.38

* Lost time injury frequency rate data for Indonesia for 2019 and 2020 have been restated.

COVID-19 VACCINATION PROGRAMME

In 2021, SIPEF continued to advance its comprehensive programme to provide free access to covid-19 vaccinations for its employees and their dependents. In Indonesia, where around 42% of the national population had been fully vaccinated, SIPEF made the most progress: 92% of targeted SIPEF employees and dependents had been double vaccinated against covid-19 by December 2021. A booster programme will begin in 2022. In Ivory Coast, 45% of employees had been double-vaccinated and 15% had received a single dose by the end of the third quarter of 2021. Limited vaccine availability restricted the programme from expanding further, and the number of vaccinated individuals therefore remained the same in the last quarter. Nevertheless, SIPEF’s vaccination programme is having a positive impact, as just 8.2% of the national population in Ivory Coast had been fully vaccinated by December 2021. The Group will continue to advance its vaccination programme in 2022 when more supply becomes available. In Papua New Guinea, SIPEF has focused on providing clear information and establishing supporting policies in order to increase vaccine uptake among employees and their dependents. More time will be needed to allow vaccine confidence to grow in order to increase the vaccination rate, which is currently below 10% of the targeted number. Hesitancy towards vaccination may also partly explain the low uptake at a national level, with only 2.5% of the country having been fully vaccinated by December 2021.

Responsible production and processing

Respecting community rights

Agriculture plays a vital role in rural communities worldwide by contributing to poverty alleviation, providing employment opportunities and enabling development in rural areas. However, it can also be disruptive and have negative impacts if it is not managed sustainably. Industrial agriculture remains essential to meeting the demands of a growing population, but it also depends on the availability of significant areas of land. Without appropriate community engagement and consent processes in place, agricultural development can lead to conflict with local communities linked with the loss of customary land use rights, and food security and inequality. A sustainable approach is also critical for ensuring that activities do not cause the degradation of natural resources and ecosystems on which communities depend. SIPEF makes it a priority to be a good neighbour and believes it is important to support and develop long-term relationships with the local communities surrounding its operations. The Group is committed to upholding indigenous and local communities' legal and customary land tenure rights, as well as their rights to resources, territories, livelihoods and food security. SIPEF also strives to ensure that local communities can benefit from its activities. As well as providing employment, SIPEF provides and maintains schools, roads, health centres, bridges and places of worship.

Community engagement

The development and maintenance of long-standing, harmonious relationships inside and outside of estates is an essential part of managing the operations of the SIPEF group. SIPEF regularly and proactively engages with local communities and other key stakeholders. Social Impact Assessments (SIA) are carried out for new developments and as part of the Group’s compliance with sustainability standards and certification programmes. Surveys are also conducted annually to gain an understanding of stakeholder perceptions of the Group. Results are reviewed using a risk management matrix, and evaluated through a continuous improvement cycle.

Free, Prior and Informed Consent (FPIC)

A thorough Free, Prior and Informed Consent (FPIC) process is absolutely critical to the long-term success of any new operation. All SIPEF plantations and those of its suppliers must adhere to FPIC principles, as defined by the RSPO and the Rainforest Alliance, and as detailed in SIPEF’s Responsible Plantations Policy. This includes, for example, the communities’ right to say no to any new development, the right to legal representation of choice, and the right to compensation where existing operations have had a proven negative impact. The process of obtaining FPIC can take many years, but it contributes to building a long-lasting working relationship with local communities. The concept of FPIC does not end with the transfer of land use rights. An ongoing stakeholder engagement process tracks the impact on communities, in line with the SA8000 social accountability methodology. These engagements are audited annually for representativeness, transparency and other criteria.

COMMUNITY SURVEYS AND SOCIAL IMPACT ASSESSMENTS

In 2020 and 2021, two independent SIAs were carried out to precede the conversion of Bandar Pinang and Sei Jerinjing estates from rubber to oil palm. The SIAs formed part of a suite of independent studies that are required as part of the RSPO requirements for new plantings. Social surveys were undertaken in each of the villages surrounding these estates, focused on evaluating the potential impact of oil palm development in the area. The survey results included the concerns of these communities, which were incorporated in an integrated social and environmental management and monitoring plan, designed to minimise the impacts of the conversion and guide a well-integrated transition. The SIA also included participatory mapping of High Conservation Values (HCVs) within the proposed conversion areas, for which special management and monitoring requirements are to be implemented.

LAND CONFLICTS AND COMPENSATION FOR LOSS OF RIGHTS

Land conflicts are addressed through SIPEF’s conflict resolution mechanism, which is embedded in the Group’s Grievance Procedures. Conflict resolution processes are implemented in any cases of land conflict that arise. These processes must be agreed upon by all parties to the conflict. SIPEF’s conflict resolution mechanism and approach also ensure that all parties have the right to the legal representation of their choice. There is a documented system in place for any negotiations concerning compensation for loss of legal, customary or user rights. This system enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions.

Where there are or have been disputes, all parties are provided with proof of legal acquisition of title, as well as evidence that mutually agreed compensation has been paid to all people who held legal, customary or user rights at the time of acquisition. Evidence is also made available to show whether compensation was accepted following a documented process of FPIC. Details of any grievances related to land conflicts are available on the SIPEF Grievance Dashboard.

Community development

SIPEF invests significant resources in the provision of opportunities and services that support community development. Each operating unit (OU) has a budget that can be used to respond to local community needs. Plantation managers have open and constructive talks with local stakeholders to decide how funding can best be spent. Over the years, the Group has continued to construct and maintain schools, clinics, roads and other types of infrastructure. All facilities are fully accessible to employees, workers and their families, most of whom are also members of local communities. Many of the educational and medical facilities are also accessible to other community members. Communities within the vicinity of the Group’s operations are mostly engaged in farming, including oil palm. SIPEF supports their activities when possible and appropriate. In Indonesia, for example, SIPEF supplies planting material and land management services to families through its village smallholder programme (Kebun Masyarakat Desa), and guarantees access to the market on favourable terms.

Education

Free transport to state schools is arranged for the children of all Group employees, where relevant. In remote areas where there are no state schools, SIPEF establishes and operates its own schools.# SCHOOLS ESTABLISHED BY SIPEF

As of December 2021, SIPEF is operating a total of 44 kindergartens, primary and secondary schools in Indonesia, Papua New Guinea and Ivory Coast, 95% of which are accessible to community children.

In a joint project with the Papua New Guinea Incentive Fund, Hargy Oil Palms Ltd (HOPL) has built an additional school complex in one of the most remote areas of West New Britain, where more than 200 primary school children are now receiving education.

PT Tolan Tiga Indonesia operates around 38 kindergartens, primary and secondary school facilities. On several occasions, the company has also subsidised teacher salaries and granted land to the local authorities so that schools can be enlarged.

In Ivory Coast, Plantations J. Eglin has invested in supporting the education of communities by building and equipping 4 primary and nursery schools, and constructing housing for the teaching staff of these schools.

	Facilities accessible to employee children	Facilities accessible to community children	Total number of facilities/buildings
SCHOOLS ESTABLISHED BY SIPEF
	44	42	44
SIPEF Sustainability Report 2021			93

Responsible production and processing

Medical care

SIPEF pays particular attention to the provision of medical care. SIPEF’s Indonesia operations provide 23 polyclinics, which employ over 50 healthcare workers, including doctors, nurses and midwives. In Ivory Coast and Papua New Guinea, medical care is paid for in full by the Company, which works with its own doctors and nurses at local clinics and care centres set up on the plantations. All facilities in both locations are accessible to both employees and community members. During 2021, SIPEF’s Papua New Guinea operations treated over 100 000 patients, who were seen by 25 healthcare employees within 13 Company clinics.

Infrastructure

Maintenance of public roads is crucial to the smooth operation of SIPEF’s estates, but also brings many benefits to local communities. In Papua New Guinea and Indonesia, the Group works with local government to maintain public roads surrounding its areas of operation. At some estates in Indonesia, SIPEF also consults with communities on where to build new roads on the outskirts of its concessions. Some of the estate roads are also open to the public during the day. This cooperation greatly reduces the risk of accidents inside the estates, while giving more freedom of movement to communities.

SIPEF also promotes the opening of local stores by employees’ cooperatives. The Company subsidises the transport of goods or provides the capital needed for worker cooperatives, where required. In Indonesia, employees’ cooperatives have set up successful mini-markets on most plantations. In Papua New Guinea, the Group often works with local operators who receive medium to long-term operating concessions. The Company monitors prices to maintain the affordability of basic goods.

MATERNITY WARD RENOVATION IN PAPUA NEW GUINEA

Over the course of 2019-2021, HOPL led on a project to significantly improve maternity care at the Bialla Health Centre, which provides medical services to the community. The Bialla Health Centre operates in a community of approximately 50 000 people in West New Britain, Papua New Guinea. An existing building has been repurposed into a fully functional maternity ward that provides a safe and accessible facility for women to give birth. The project was funded by donors and carried out in cooperation with the West New Britain Provincial Health Authorities. HOPL supported the project by providing building materials and manpower to improve the existing building structure, as well as bedding and other required materials.

The connection to the world of sustainable tropical agriculture 95

SIPEF Sustainability Report 2021

Responsible production and processing

The connection to the world of sustainable tropical agriculture

Responsible sourcing and smallholder production

Smallholder farmers play a vital role in global food systems, producing around one-third of the world’s food supply. They also account for around 40% of global oil palm cultivation. Oil palm smallholders face a variety of challenges in their journey towards more sustainable production. They tend to have markedly lower yields and far fewer resources at their disposal than commercial plantations, including financial support, tools, fertiliser and planting materials. They also often lack access to knowledge of or training on applying sustainable agricultural practices. Without sufficient incentives to leave certain areas intact, the risk of smallholder expansion into forests, peatlands and other critical ecosystems is also increasing.

This section outlines SIPEF’s approach to engaging with smallholders and managing associated risks in its supply base. Updates have also been provided on the implementation of SIPEF’s Responsible Purchasing Policy (RPuP), focusing on smallholder certification progress.

Smallholder farmers play a vital role in global food systems, producing around one-third of the world’s food supply. They also account for around 40% of global oil palm cultivation. [^19]

[^19]: The Sustainable Palm Oil Choice. (2021, April). What causes deforestation in Indonesia, the world’s largest palm oil producer? www.sustainablepalmoilchoice.eu/deforestation-causes-in-indonesia-palm-oil/.

SIPEF Sustainability Report 2021

Responsible sourcing and smallholder production

Smallholder engagement

Supporting and engaging with smallholders can help to address poverty and have a positive impact on livelihoods through increased yields, improved production quality, higher incomes and access to international markets. At the same time, it can contribute to reducing the impacts of agricultural production on natural ecosystems, helping to achieve the sustainability goals and zero deforestation commitments set out by sustainability leaders in the industry.

As of 31 December 2021, SIPEF collaborates with a total of 10,004 oil palm, rubber and tea smallholders in Indonesia and Papua New Guinea. As the vast majority (9,148) of the smallholders SIPEF works with produce oil palm, the Company’s approach is primarily geared towards oil palm production. SIPEF’s oil palm smallholder supply base covers a production area of over 20,000 hectares. A total of 16% of the fresh fruit bunches (FFB) processed at SIPEF’s mills is produced by smallholders.

OIL PALM SMALLHOLDERS BY COUNTRY

	Papua New Guinea	Indonesia
	3,635	5,513
	40%	60%

SCHEME VS. INDEPENDENT OIL PALM SMALLHOLDERS

	Number	Percentage
Independent Smallholders	3,266	36%
Scheme Smallholders	5,882	64%

	Papua New Guinea
	3,635
	40%

The connection to the world of sustainable tropical agriculture

SIPEF has established a number of smallholder oil palm programmes and services focused on inclusivity, Best Management Practices (BMPs), certification and lowering cost barriers. These programmes and services are tailored to location and smallholder type, and contribute to enabling the smallholders to participate in sustainable industries and to benefit from the Group’s technical expertise. Emphasis is placed on achieving and maintaining RSPO certification, and increasing yields and production efficiency. The Group engages with different types of smallholders through its subsidiaries, Hargy Oil Palms Ltd (HOPL) in Papua New Guinea and PT Tolan Tiga Indonesia:

All smallholders working with HOPL are associated smallholders, in alignment with previous RSPO smallholder classification definitions. Based on the current RSPO smallholder classification, these smallholders are certified as scheme smallholders.
In Indonesia, PT Tolan Tiga manages smallholder estates under its company-managed programme, as well as its village smallholder programme. Both types follow the RSPO definition for scheme smallholders.
The smallholders in Indonesia who manage their own production areas and have the option to sell to SIPEF are associated buy/ sell smallholders. The smallholders that SIPEF supports with certified seed supply are associated seedling smallholders. Following RSPO definitions, both types are classified as independent smallholders, and their crop is currently not included in SIPEF’s physical supply chain.

Further information on how SIPEF works with smallholders can also be found on the Group’s website: www.sipef.com/hq/sustainability/smallholders/

SIPEF Sustainability Report 2021

Responsible sourcing and smallholder production

Papua New Guinea

SIPEF’s oil palm plantation in Papua New Guinea, HOPL, works with 3,635 associated oil palm smallholders, managing a production area of 14,890 hectares. This represents more than 50% of the company’s planted area. In 2021, these smallholders produced around 39% of the FFB processed in HOPL’s three mills.

Associated smallholders working with HOPL are in principle independent, as they own the land they farm and take full ownership of the choice of crop and management decisions. However, due to their geographic location, they can only sell to mills within their vicinity, and therefore have a standing arrangement with HOPL. As such, they are classified for certification purposes as scheme smallholders.

An overview of HOPL’s smallholder programme is provided in the following section and on the company’s website: www.sipef.com/sipef-papua-new-guinea/sustainability/smallholders/

’   

HOPL works with smallholders both directly and through the Local Planning Committee, which is made up of representatives from the Oil Palm Industry Corporation (OPIC), the Bialla Oil Palm Growers Association (BOPGA), the Oil Palm Research Association (OPRA), the East Nakanai Local Level Government (ENLLG), and the company. OPIC provides extension services and OPRA provides research and development services relevant to smallholders.# The connection to the world of sustainable tropical agriculture

HOPL’S ASSOCIATED SMALLHOLDER PROGRAMME

HOPL Hargy Oil Palms Ltd

Local Planning Committee

OPIC

OPRA

Hargy Oil Palms Ltd
Oil Palm Industry Corporation
Bialla Oil P alm Growers Association
Oil P alm Research Association
Eas t Nakanai Local Level Government

DIRECT SUPPORT:

Smallholder crop collection
Road and bridge maintenance for crop collection
Interest free loans for tools, fertiliser, seedlings
Manag ement, procurement and supply of fertiliser
Management of pest control teams for project areas

OPIC AND OPRA SUPPORT:

Research and development
Agronomic services
Training and education
Community development projects

For more information on OPRA and OPIC:
* www.agriculture.gov.pg/commodity-boards-a/oil-palm-industry-corporation
* www.pngopra.org

ANNUAL INVESTMENT PGK IN CAPACITY BUILDING AND RESEARCH FOR SMALLHOLDERS IN PAPUA NEW GUINEA

One of the main goals of the associated small- holder programme at HOPL is to support small- holders in sustaining their current planted area, while achieving a production rate of 20 tonnes per hectare by 2025. Production trends in the last three years indicate that HOPL’s associat - ed smallholders are making progress towards achieving this goal, although it is predicted that replanting will become a pressing issue in the coming years. With the number of smallholder blocks increasing, and palm oil production being a primary source of income, replanting is not being done on time. Since 2017, HOPL has increased its direct involve- ment in the extension services provided to small- holders. Together, HOPL and its associated smallholders invested a total of PGK 1967613 in capacity building and research in 2021.

HOPL SMALLHOLDER FIELD DAYS

As part of its commitment to supporting smallhold- ers, HOPL regularly hosts smallholder field days. These events bring together smallholder growers, relevant HOPL departments and a variety of external organisations, including those focused on extension services and research and development, like OPIC and OPRA. They focus on training, raising awareness and networking, with the objective of assisting small- holders with increasing their productivity, sustaining their livelihoods, and improving their compliance with RSPO certification and HOPL’s policies. The last field day was held in July 2021. Sessions were held on a variety of topics, including: productivity, fertiliser application, pest management, smallholder crop transportation, RSPO certification compliance, and grievance management. Financial institutions were also invited to present on savings and banking services. In addition to field days, HOPL hosts meetings and conducts numerous trainings throughout the year, to ensure its associated smallholders continue to stay up-to-date with the latest developments and BMPs. A total of 253 smallholder meetings and trainings were organised in 2021.

HOPL FFB YIELD 2019  2021 FFB TONNES/HA

Year	Own plantations FFB yield	Associated smallholder FFB yield
2019	28.5	16.5
2020	21.2	15.0
2021	20.9	13.4

Investment by HOPL and smallholders (2019-2021)

Year	Investment by HOPL	Investment by smallholders
2019	PGK 741,116	PGK 1,270,970
2020	PGK 839,162	PGK 1,226,497
2021	PGK 169,970	PGK 1,254,666

Indonesia

PT Tolan Tiga Indonesia currently works with a total of 6,369 oil palm, rubber and tea small- holders. For oil palm production, the company works with 5,513 smallholders through four different programmes.

PT TOLAN TIGA INDONESIA SMALLHOLDER PROGRAMMES

Company managed smallholders

1,943 smallholder members
Planted area: 4,643 hectares

The company managed programme follows a model traditionally set by the government-originated plasma schemes in Indonesia. Under this programme, PT Tolan Tiga is in full control of all aspects of the management and production of the crops.

Associated buy/sell smallholders

2,438 smallholder members
Planted area: 5,667 hectares

Under the associated buy/sell programme, farmers typically manage their own smaller parcels of land. They are not locked into any formal company partnerships and are technically free agents to sell their FFB to whomever they choose. However, they are encouraged to sell their FFB to the company, which agrees to the purchase on the basis of a transparent and published formula.

Village smallholders (Kebun Masyarakat Desa)

304 smallholder members
Planted area: 686 hectares

The village smallholders programme is another type of plasma smallholder programme. Through the Agro Muko operation the company works with surrounding villages to develop small oil palm blocks, which are either fully or partially managed by PT Tolan Tiga Indonesia’s plantations.

Associated seedling smallholders

828 smallholder members
Planted area: 2,312 hectares

Associated seedling smallholders both own and have full management control of their production plots. PT Tolan Tiga Indonesia is engaging with these small- holders as part of its commitment to increase the number of smallholders in its supply chain. With the wide diversity of smallholder activities and systems across Indonesia, the complexity of the arrangements will mean these smallhold- ers can choose to not be physically linked to the supply chain, and their integration will take time.

4,643 ha (Company managed)
686 ha (Village smallholders)
5,667 ha (Associated buy/sell)
2,312 ha (Associated seedling)

More information on how PT Tolan Tiga Indonesia works with smallholders can be found on the company’s website: www.sipef.com/sipef-indonesia/sustainability/smallholders/

VILLAGE SMALLHOLDERS  KEBUN MASYARAKAT DESA KMD

PT Tolan Tiga’s Village smallholder programme is focused on the villages surrounding its Agro Muko operations. Under this programme, small oil palm blocks are developed called Kebun Masyaraket Desa (KMD), or villagers’ estates, which are either fully or partially managed by PT Tolan Tiga Indonesia’s plantations. The programme consists of 304 small- holders and is fully RSPO certified. PT Tolan Tiga Indonesia pre-finances the develop- ment of the plots and later buys the production at market prices, with an agreed-upon deduction to pay off the low interest loan. This brings in significant additional revenue to the village cooperatives, which is often used for communal facilities and develop- ments. Monthly accounts are communicated to the community cooperatives, and the amounts paid by PT Tolan Tiga Indonesia are published in the local newspapers. The scheme is extremely popular, and even villages far from the Group’s estates volunteer to join.

Smallholder certification

As of 31 December, around 80% of SIPEF’s total oil palm smallholder production area is RSPO certified. This represents 4,297 smallholders, on 16,243 hectares of production area. Around 17% of the Group’s total certified FFB is produced by smallholders.

Papua New Guinea

All of the smallholders working with HOPL and supplying its three mills are certified for com- pliance with the RSPO. They first received their certification at the same time as HOPL’s own plantations in 2009, and have remained com- mitted to its preservation. This was the second group of smallholders to be certified on such a scale globally. A premium sharing structure is in place with the smallholders, which is linked to the sale of cer- tified products. Certified smallholders receive a sustainability premium from HOPL, based on their FFB contributions to the mills.

Indonesia

In Indonesia, nearly 30% of the smallholders supplying FFB to SIPEF's mills are certified, representing a production area of 1,353 hectares. When taking into consideration the full scope of smallholders SIPEF is working with, including those not supplying SIPEF’s mills, around 12% are RSPO certified. A key challenge with regard to achieving 100% certification is linked to the Indonesian regulation that requires an equivalent of 20% of any new concession rights agreement (Hak Guna Usaha – HGU) areas to be allocated for smallholders. In particular, the regulation was amended in 2017 to also include all renewals of HGU concessions.

To ensure compliance, SIPEF has added and engaged new smallholders, and is working with them on their integration into the Company’s certified supply base. In the meantime, crops from these smallholders are processed separately by third-party mills, in order to maintain the fully-certified status of SIPEF’s own mills.

RSPO CERTIFIED FFB PRODUCTION OF SMALLHOLDERS AND OWN PLANTATIONS TONNES

Category	Production (Tonnes)	Percentage
Own plantations	1,297,632	83%
Smallholders	258,126	17%
Total certified FFB	1,555,758	100%

AVERAGE PREMIUM PAID BY HOPL TO SMALLHOLDERS PGK / TONNE FFB

Year	Average Premium (PGK / Tonne FFB)
2019	12.6
2020	12.43*
2021	13.07*

*Average premium paid for 2020 is a restatement from previous reports.

Managing risks in SIPEF’s supply base

SIPEF’s third-party suppliers must comply with SIPEF’s RPuP, which frames the Group’s con- ditions for working with smallholders on their journey towards certification. Together with the Responsible Plantations Policy, the RPuP forms the basis for the criteria and pro- cedures to select and monitor smallholders in SIPEF’s supply base.# SIPEF Sustainability Report 2021

Responsible sourcing and smallholder production

These criteria and procedures are specifically adapted to the local contexts of Indonesia and Papua New Guinea, the two locations where SIPEF works with third-party suppliers.

20 Selection criteria

SIPEF engages in a screening process to determine whether the land and practices of any new smallholders, with whom the Group is planning to engage, are compliant with SIPEF’s policies. The process is also used to evaluate the smallholders’ potential for future RSPO certification.

Plot locations: location must be known and mapped. No planting on peat, on steep slopes, within a riparian zone, or within 100 metres of an area designated for forestry use or within 500 metres of a protected area.
Other criteria: proof of legal authorisation of land use, membership of an association, compliance with SIPEF policies on human rights, fair labour and no exploitation.

If these criteria are met, SIPEF can enter into a Memorandum of Understanding (MoU) with the smallholders.

PT Tolan Tiga Indonesia works with a checklist to be completed by the smallholders as part of the screening process, as well as for monitoring compliance during internal audits. The checklist also helps smallholders understand the policies and commitments involved in their engagement with the company. Smallholders evaluated as eligible must also sign an MoU, which includes a commitment to critical and continuous improvement criteria, through their representative association.

HOPL also works with a checklist, but primarily for monitoring the compliance of its existing smallholders. The company is currently not adding any new growers to its programme due to the requirements of the RSPO New Planting Procedure (NPP). A request has been submitted by smallholders to the RSPO and the High Carbon Stock Approach (HCSA) to review existing farmers, who operate land based on shifting agricultural practices.

The internal audit checklists can be found on SIPEF’s Company website at: www.sipef.com/hq/sustainability/traceability-and-risk-management/

New developments

Under the company-managed programme in Indonesia, the existing production areas are managed entirely by PT Tolan Tiga Indonesia and fall under the internal control system the company has in place for its own operations. Any new smallholder development under this programme will go through the RSPO NPP. This ensures that there is compliance with all of the key criteria including assessing soil suitability, integrated High Conservation Value (HCV)/High Carbon Stock (HCS), land use change, social impact and greenhouse gas (GHG) assessments.

Unlike the company-managed smallholders in Indonesia, smallholders in Papua New Guinea manage their own farms. The smallholders themselves therefore have to comply with SIPEF’s policies and the RSPO Principles & Criteria (P&C). HOPL also requires that any new smallholder developments undergo the NPP. However, there have been no new plantings due to the complexity of land use in Papua New Guinea, in connection with the NPP requirements.

Monitoring compliance

PT Tolan Tiga Indonesia monitors its smallholders for compliance through regular outreach, support and assessments. Assessments are carried out utilising the same screening checklists used when starting engagement with new smallholders. The objective of the outreach activities is to raise awareness of the policies and graduate growers into the scope of the certified supply base, once they are ready for RSPO certification.

In Papua New Guinea, HOPL provides associated smallholders with regular training, and conducts block inspections and internal audits. These smallholders are also audited annually by an RSPO Certification Body, utilising a sampling intensity formula. The block inspections evaluate the smallholder’s implementation of BMPs, and are conducted by extension officers who are part of HOPL’s Smallholder Agricultural Advisory Services (SHAAS) team. The internal audits evaluate smallholder compliance with RSPO requirements, and are carried out by the Sustainability department as part of HOPL’s internal audit plan. These audits also cover social indicators relevant to smallholders following the National Interpretation of the P&C in Papua New Guinea, including no child labour and grievance management.

Results of the audits and inspections are communicated to growers by the SHAAS team, which also supports the smallholders in addressing any issues of non-compliance identified.

Managing breaches

When a breach of policies or regulations is found, SIPEF prioritises maintaining engagement and providing the opportunity for smallholders to take remedial action. This is important to drive improvement, which SIPEF has found to be much more effective than exclusion. Non-compliances are evaluated on a case-by-case basis to understand their origins and subsequently determine the appropriate actions to be taken. If breaches are found, the crop is segregated from the certified supply chain.

106 The connection to the world of sustainable tropical agriculture

20 Overviews of the compliance and risk management approaches for suppliers by country of operation are available at: www.sipef.com/hq/sustainability/traceability-and-risk-management/

107 SIPEF Sustainability Report 2021

Responsible business and transparency

SIPEF believes that business can be a force for good. The private sector has the innovative potential to find solutions to the world’s toughest challenges, and to make a significant contribution to sustainable development. The Group operates with the highest regard for ethical principles, and continues to prioritise transparency towards its stakeholders on how it conducts its business.

In addition to the intrinsic importance of responsible business practices, SIPEF is aware of the legal, financial, reputational and operational risks associated with any instances of poor practice. The Company is committed to fostering a culture of ethical conduct amongst its employees, in alignment with all relevant laws and internal policies. SIPEF has also set up the appropriate systems and channels for employees and other stakeholders to communicate their concerns and provide feedback, or report any misconduct.

During 2021, SIPEF continued to strengthen its commitments and approach to corporate and sustainability governance. Recent years have also seen the introduction of new regulatory requirements on transparency and sustainability reporting. SIPEF strives to align with and anticipate these evolving requirements, both globally and within the European Union.

SIPEF believes that business can be a force for good. The Group operates with the highest regard for ethical principles, and continues to prioritise transparency towards its stakeholders on how it conducts its business.

108 The connection to the world of sustainable tropical agriculture

109 SIPEF Sustainability Report 2021

Corporate governance

SIPEF has a strong corporate governance structure in place with several policies addressing critical topics, such as responsible and ethical behaviour, privacy, bribery and corruption, and whistleblowing. These policies collectively set out the Group’s commitments to ethical business conduct and corporate governance best practice.

The Charter describes the most important elements of SIPEF’s corporate governance, including the governance structure of the Company.

Corporate Governance Charter

Ethics Policy

The Ethics Policy specifies SIPEF’s commitment to transparency, anti-bribery and anti-corruption, compliance with all relevant international and national laws, and the prohibition of using the Group’s facilities or working hours to conduct personal business.

Code of Conduct

Adopted by the Board in 2019, the Code of Conduct sets out the principles of conduct in terms of responsible and ethical behaviour for all staff, including consultants and contracting parties of SIPEF.

Whistleblowing Policies

SIPEF’s Group level policy and procedures on whistleblowing are outlined in the Code of Conduct. The Group’s subsidiary PT Tolan Tiga Indonesia also has a local level whistleblowing policy in place, which has been published on its website in both English and Bahasa Indonesia.

Grievance Policy

The Grievance Policy outlines SIPEF’s commitments associated with handling internal and external grievances. It states that the employees of the Group, and any other stakeholders, can report grievances freely and without fear of negative consequences. SIPEF’s commitment to handling grievances through transparent and unbiased mechanisms is also included in the Group’s Responsible Plantations Policy.

General Privacy Policy

SIPEF’s Privacy Policy has been effective since 25 May 2018. The policy defines how SIPEF uses, stores and protects personal data. It is aligned with the requirements applicable in the European Union under the General Data Protection Regulation (EU Regulation 2016/679).

The above policies and documents are available on SIPEF's company website:

www.sipef.com/hq/investors/shareholders-information/corporate-governance
www.sipef.com/hq/sustainability/sipef-corporate-policies

110 The connection to the world of sustainable tropical agriculture

Anti-bribery and anti-corruption

SIPEF understands the importance of creating a fair environment for business, free from the distorting, anti-competitive effects of bribery and other forms of corruption. The Company is aware of the seriousness of potential consequences for the Group in terms of legal, financial, reputational and operational impacts. Financial penalties can amount to thousands or millions of euros. Negative media coverage can seriously harm the reputation of the Group and have a potential impact on the stock price of SIPEF. Moreover, operations can be halted for a few hours, days, months or even fully stopped, for example if a land permit is revoked.# SIPEF Sustainability Report 2021

Responsible business and transparency

The Group has robust policies, mechanisms and measures in place to address any risks associated with corruption in the industry and locations in which the Group operates. Internal sanctions, up to dismissal, are issued for breaching Company regulations. The worst cases are reported to the relevant authorities, and the Company cooperates fully in cases of prosecution. Internal procedures and internal audit programmes are continuously under review to prevent and detect internal and external fraud.

Ethics Policy

SIPEF’s Ethics Policy was first drawn up in 2017, and applies to SIPEF and its suppliers. The Policy focuses on the following principles and commitments:
* Compliance: all relevant international and national laws will be upheld.
* Transparency: shareholders and stakeholders will be provided with all non-confidential information.
* Zero tolerance towards bribery and corruption: facilitation payments are actively avoided, and gifts may only be given with prior approval from senior management.
* Zero tolerance of child labour, slavery or forced labour.
* Prohibition of management and employees using the Group’s facilities or working hours to conduct personal business.

Code of Conduct

Anti-bribery and anti-corruption have an important place in SIPEF’s Code of Conduct. The Code sets out the principles of conduct in terms of responsible and ethical behaviour for the employees and management of SIPEF. It serves as a minimum set of guidelines, and is supported by other more specialised policies on specific topics, such as SIPEF’s Ethics Policy.

The Code covers various topics and issues linked with ethical conduct, including: attitude at work, relations with clients and suppliers, conflicts of interest and insider trading, use of corporate funds, bribery and improper payments, discrimination and equal treatment, whistleblowing, and data protection and privacy. As required by the Belgian Code and the Corporate Governance Charter, the board of directors of SIPEF monitors compliance with the Code of Conduct once a year. SIPEF has also introduced a code of conduct in all of the countries where it is active.

Whistleblowing procedures

Employees who have concerns about suspected misconduct are encouraged to come forward without fear of punishment or unfair treatment. All reported concerns are handled with the utmost confidentiality and the name of the whistleblower is not disclosed without consent. SIPEF and the subsidiaries of SIPEF are required to make sure that any concern reported is properly followed up and investigated, if appropriate, and that the necessary corrective actions are taken.

Training on policies

Since 2017, the Group has provided training for its employees, with the target of ensuring that employees at every level of the business understand the relevance and importance of the Group’s anti-corruption policies.

Grievance mechanism

SIPEF’s grievance mechanism ensures all stakeholders, internal and external, can be confident that their grievances will be heard and handled impartially, and will not be met with reprisal. A Group policy on grievances has been implemented and communicated to the entire workforce, as well as to other stakeholders. All grievances are addressed in a transparent and timely manner, directly between the complainants and the respective operation. A specific system is in place for cases involving sexual harassment, with an emphasis on preserving privacy and ensuring fair proceedings. Grievances received from NGOs, or grievances considered to be significant, are communicated on the Grievance Dashboard of the SIPEF company website, including information about the status of each case, and whether and how cases have been resolved. The Grievance Dashboard can be accessed at: www.sipef.com/hq/sustainability/grievances-dashboard-active-andor-progressing

EU taxonomy: Consolidated disclosures pursuant to Art. 8 Taxonomy Regulation

The EU taxonomy is a classification system for environmentally sustainable economic activities, developed by the European Commission to help scale up sustainable investment and implement the European Green Deal. The Taxonomy Regulation is a key component of the European Commission's action plan to redirect capital flows towards sustainable projects and activities. It represents an important step towards achieving carbon neutrality by 2050 in line with EU goals, as it establishes clear definitions and criteria for what is considered to be ‘sustainable’. This includes definitions and criteria for the environmental objectives ‘Climate change mitigation’ and ‘Climate change adaptation’.

As a non-financial parent undertaking, SIPEF has assessed the Taxonomy-eligibility of its economic activities for the reporting period 2021. The following section presents the proportion of the Group’s turnover, capital expenditure (Capex) and operating expenditure (Opex) associated with Taxonomy-eligible economic activities related to the first two environmental objectives (climate change mitigation and climate change adaptation), in accordance with Art. 8 Taxonomy Regulation and Art. 10 (2) of the Art. 8 Delegated Act.

SIPEF’s core business activities: Taxonomy-non-eligible

SIPEF has assessed all Taxonomy-eligible economic activities listed in the Climate Delegated Act based on the Company’s activities as an agro-industrial group. The Climate Delegated Act focuses on economic activities and sectors that have the most potential to achieve the objectives of climate change mitigation and climate change adaptation. The sectors covered include energy, selected manufacturing activities, transport and buildings. SIPEF’s assessment of Taxonomy-eligibility focused on economic activities defined as the provision of goods or services on a market, thus (potentially) generating revenues. In this context SIPEF, as an agro-industrial group, defines the growing of oil palm, rubber, tea and bananas, and the production of palm oil, palm kernels, palm kernel oil, rubber and tea as the core of its business activities.

THE TAXONOMY REGULATION ESTABLISHES SIX ENVIRONMENTAL OBJECTIVES:
* Climate change mitigation
* Climate change adaptation
* The sustainable use and protection of water and marine resources
* The transition to a circular economy
* Pollution prevention and control
* The protection and restoration of biodiversity and ecosystems

For more information: ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
European Commission. (Retrieved December 2021). EU taxonomy for sustainable activities. https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
Climate mitigation refers primarily to the need to avoid producing greenhouse gas emissions, the reduction of greenhouse gas emissions or to increase greenhouse gas removals and long-term carbon storage.

After a thorough evaluation involving all relevant departments and teams, it was concluded that SIPEF’s core economic activities are not covered by the Climate Delegated Act and as such, are Taxonomy-non-eligible. As stipulated in the Climate Delegated Act adopted in June 2021, the criteria for agriculture have been temporarily excluded from the Delegated Regulation, pending further progress on the negotiations underway on the Common Agricultural Policy (CAP). SIPEF therefore expects to be able to report at least some of its core business activities as Taxonomy-eligible under the objectives of climate change mitigation and climate change adaptation in the future. SIPEF discloses this information on a voluntary basis, as the Group believes that this information is helpful for users of its consolidated non-financial statement to gain a better understanding of its business activities. Although SIPEF’s core activities are not currently covered by the Climate Delegated Act, and not Taxonomy-eligible, the Group remains committed to reducing greenhouse gas emissions linked with its business activities, and to managing the risks and impacts associated with climate change. An overview of the Group’s existing initiatives with respect to climate change mitigation and adaptation has been provided on page 50 of this report.

Key Performance Indicators

The key performance indicators (KPIs) included in the assessment are the turnover KPI, the Capex KPI and the Opex KPI. For the reporting period 2021, it is required that these KPIs are disclosed in relation to Taxonomy-eligible economic activities and Taxonomy-non-eligible economic activities, pursuant to Art. 10 (2) of the Art. 8 Delegated Act. SIPEF’s turnover is Taxonomy-non-eligible because the Group’s economic activities are, to date, not covered by the Climate Delegated Act. Subsequently, the capital and operating expenditure related with these activities are also Taxonomy-non-eligible (see table below for totals of each KPI).

PROPORTION OF TAXONOMY-ELIGIBLE AND TAXONOMY-NON-ELIGIBLE ECONOMIC ACTIVITIES IN TOTAL TURNOVER, CAPEX AND OPEX	TOTAL (KUSD)	PROPORTION OF TAXONOMY-ELIGIBLE ECONOMIC ACTIVITIES (%)	PROPORTION OF TAXONOMY-NON-ELIGIBLE ECONOMIC ACTIVITIES (%)
Turnover	416 053	0%	100%
Capital expenditure (Capex)	68 692	0%	100%
Operating expenditure (Opex)	33 391	0%	100%

Accounting policies

The assessment of the Taxonomy-eligibility and Taxonomy-non-eligibility of SIPEF’s Turnover, Capex and Opex was carried out in accordance with the specifications and definitions set out in Annex I of the Art. 8 Delegated Act.The accounting policies utilized in this process are described as follows:

Taxonomy-eligible economic activities

The proportion of Taxonomy-eligible economic activities in the Group’s total turnover has been calculated as the part of net turnover derived from products and services associated with Taxonomy- eligible economic activities (numerator) divided by the net turnover (denominator). The denominator of the turnover KPI is based on the Group’s consolidated net turnover in accordance with IAS 1.82(a). For further details on the Group’s accounting policies regarding the Group’s consolidated net turnover, cf. page 20 of Annual Report part 2 (Financial Statements). With regard to the numerator, SIPEF has not identified any Taxonomy-eligible activities as explained above.

Reconciliation
The Group’s consolidated net turnover can be reconciled to the consolidated financial statements, cf. income statement on page 10 of Annual Report part 2 (Financial Statements – ‘Revenue’).

Capex KPI

The Capex KPI is defined as Taxonomy-eligible Capex (numerator) divided by the Group’s total Capex (denominator). Regarding the numerator, an explanation is provided below. Total Capex consists of additions to tangible and intangible fixed assets during the financial year, before depreciation, amortisation and any re-measurements, including those resulting from revaluations and impairments, as well as excluding changes in fair value. It includes additions to fixed assets (IAS 16), intangible assets (IAS 38) and right-of-use assets (IFRS 16). Additions resulting from business combinations are also included (but this is not applicable in 2021). Goodwill is not included in Capex as it is not defined as an intangible asset in accordance with IAS 38. For further details on the accounting policies regarding the Group’s Capex, cf. page 16 of Annual Report part 2 (Financial Statements).

Reconciliation
The Group’s total Capex can be reconciled to the consolidated financial statements, cf. page 12 of Annual Report part 2 (Financial Statements – ‘consolidated cash flow’) as the total of acquisition of intangible assets, acquisition of biological assets and acquisition of property, plant and equipment.

116 The connection to the world of sustainable tropical agriculture

Opex KPI

The Opex KPI is defined as Taxonomy-eligible Opex (numerator) divided by the total Opex (denominator). Regarding the numerator, an explanation is provided below. Total Opex consists of direct non-capitalised costs that relate to research and development, building renovation measures, short-term lease, maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment. This includes:

Research and development expenditure, which is not applicable to the SIPEF group. Although the SIPEF group does have research and development expenditures concentrated in its minority subsidiaries Verdant Bioscience Singapore and PT Timbang Deli, these are included in the consolidation as equity consolidated companies, which are not included for the Opex calculation.
The volume of non-capitalised leases, which was determined in accordance with IFRS 16 and includes expenses for short-term leases and low-value leases, cf. page 53 of Annual Report part 2 (Financial Statements).
Maintenance and repair and other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment and biological assets (bearer plants). These were determined based on the maintenance and repair costs allocated to the respective assets. The maintenance of the biological assets - bearer plants contains all costs related to keeping the biological assets (bearer plants) in a good productive state. Primary examples of this include all expenses linked with fertiliser application, pruning, pest and disease control. The related cost items can be found in various line items in the Group’s income statement, including cost of sales (maintenance of operational PP&E and biological assets – bearer plants) and general and administrative expenses (such as maintenance of IT-systems), if applicable. In general, this includes labour costs, costs for services, and material costs for daily servicing as well as for regular and unplanned maintenance and repair measures. These costs are directly allocated to PP&E.

As the SIPEF group has not identified Taxonomy-eligible economic activities, the Group does not record Capex/Opex related to assets or processes that are associated with Taxonomy-eligible economic activities in the numerator of the Capex KPI and the Opex.

117 SIPEF Sustainability Report 2021 Responsible business and transparency

OVERVIEW OF MATERIALITY ASSESSMENT PROCESS IN 2021

STAKEHOLDER IDENTIFICATION

A list of around 40 key internal and external stakeholders was developed, and the approach and level of engagement determined.

1 DESK RESEARCH AND GAP ANALYSES

Desk research was carried out to evaluate the ESG issues most relevant to SIPEF's business and stakeholders. This included a review of:
* Issues and trends in the media and upcoming regulatory changes;
* Sustainability reports, policies and other resources from identified stakeholders;
* Gap analyses against reporting frameworks, ESG rating criteria and benchmarks such as the Sustainability Policy Transparency Toolkit (SPOTT), CDP and Sustainalytics.

2 TOPIC IDENTIFICATION AND CONSOLIDATION

SIPEF's existing list of material topics was reviewed based on the desk research and gap analyses. An internal workshop was held to refine or update existing topics and incorporate any new topics by clustering identified sub-topics into categories. During this process additional criteria were taken into consideration, such as whether the impact of each topic could reasonably be assessed (quantitatively or qualitatively).

3 TOPIC PRIORITISATION - INTERNAL AND EXTERNAL STAKEHOLDER ENGAGEMENT

Selected internal and external stakeholders took part in a materiality survey to rank the importance level of each material topic from one to five.

4 VALIDATION

The validation process ensured that the topics chosen fully reflected SIPEF's priorities. A workshop was conducted with the Executive Committee to discuss the results of the assessment, including the stakeholder engagement surveys, and final adjustments were made.

5

Annex Materiality Assessment in 2021

The materiality assessment is the foundation of a strong ESG strategy, and SIPEF has placed significant focus on reviewing its material topics in 2021. This included improving SIPEF’s materiality assessment process, which has evolved from previous years to take into account wider internal and external stakeholder views.

118 The connection to the world of sustainable tropical agriculture

STAKEHOLDER IDENTIFICATION

A list of around 40 key internal and external stakeholders was developed, and the approach and level of engagement determined.

1 DESK RESEARCH AND GAP ANALYSES

2 TOPIC IDENTIFICATION AND CONSOLIDATION

3 TOPIC PRIORITISATION - INTERNAL AND EXTERNAL STAKEHOLDER ENGAGEMENT

Selected internal and external stakeholders took part in a materiality survey to rank the importance level of each material topic from one to five.

4 VALIDATION

5

119 SIPEF Sustainability Report 2021

Annex Stakeholder Engagement

A broader stakeholder engagement process was an important addition to the materiality assessment in 2021. A survey was carried to consult 15 internal and 16 external stakeholders from SIPEF’s employee and customer bases, investors and financial institutions, as well as experts, NGOs, and multi-stakeholder initiatives. External stakeholders were asked to rate the importance of each topic from one to five from the perspective of their own organisations. The internal survey incorporated the concept of ‘double materiality’, inviting participants to assess the 22 material topics from one to five across two dimensions. The first dimension was the level of SIPEF’s ESG impact linked with each topic, and the second was the level of potential impact of the issues on SIPEF's business. The average scores for both internal and external stakeholders were used to classify the topics into sub-groups of ‘Priority’ and ‘Important’ topics. The threshold for the priority category was set at topics that scored an average of four and above. To validate the results, the scores were plotted into materiality matrices. The first plotted internal stakeholder scores across the two dimensions of double materiality, and the second plotted the level of importance for each topic for internal versus external stakeholders. The matrices were used to analyse the different stakeholder views and make any final necessary adjustments to the priority levels assigned in the material topics list.# 2021 Material Topics

The highest rated topics for both internal and external stakeholders were similar to those evaluated to be of high importance in 2020: Human Rights and Labour Standards, Traceability, Deforestation and Smallholder Engagement. With the growing global focus on climate action, Climate Change was a newly added topic that was also classified as a priority issue. Replacing the 2020 topic GHG Emissions, it expands the scope to include both climate change mitigation and adaptation. Notably, none of the topics had an average score that ranked below three, meaning all the topics were considered important for the majority of the stakeholders consulted. The final selection of material topics have been presented in a simplified format for 2021, classified according to two levels of priority. This can be found on page 16.

OVERVIEW OF CHANGES TO MATERIAL TOPICS IN 2021

TOPICS RETAINED FROM 2020

Deforestation
Traceability
Health and Safety
Biodiversity
Water Management
Fertiliser and Pesticide Use
Community Development
Anti-bribery and Anti-corruption

UPDATED TOPICS

Human Rights and Labour Standards (Formerly: Fair Labour Practices)
Peatlands (Formerly: Peat Management)
Smallholder Engagement (Formerly: Smallholder Inclusion)
Productivity and Quality (Formerly: Productivity)
Sustainability Standards and Certification (Formerly: Certifications)
Fire Prevention and Management (Formerly: Wildfire)

TOPICS REMOVED IN 2021

GHG Emissions – expanded to ‘Climate Change’ to ensure coverage of both climate change mitigation and adaptation issues
Protection of Species – included as a sub-topic under ‘Biodiversity’ and ‘Ecosystem Conservation and Restoration’
Grievance Mechanism – included as a sub-topic under ‘Transparency’ and ‘Community Rights’
FPIC/Land Use – included as a sub-topic under ‘Community Rights’

+ NEW TOPICS

Climate Change
Community Rights
Transparency
R&D and Innovation
Ecosystem Conservation and Restoration
Regenerative Practices
Diversity and Inclusion
Food Safety
- : Blue = Priority topics Orange = Important topics

SIPEF Sustainability Report 2021 Annex

United Nations Sustainable Development Goals (SDGs)

SDG GOAL	SDG TARGET	RELEVANT MATERIAL TOPICS	SIPEF’S ACTIVITIES
SDG 1: No Poverty	1.4 - By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance	Community Rights Community Development	SIPEF ensures that prior to any new developments, Free, Prior and Informed Consent (FPIC) has been provided by local communities. Wherever possible, the Company also provides community members with opportunities to benefit from its activities, including through employment and development opportunities in the rural and remote areas in which the Group operates. Most of SIPEF’s employees and their families live within its operations, and the Group provides them with housing, clean water and medical services.
SDG 2: Zero Hunger	2.3 - By 2030, double the agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists and fishers, including through secure and equal access to land, other productive resources and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment	Smallholder Engagement Productivity and Quality	SIPEF has established smallholder oil palm programmes and services focused on enabling smallholders to participate in sustainable industries and to benefit from SIPEF’s technical expertise. Emphasis is placed on achieving and maintaining RSPO certification and increasing yields and production efficiency. SIPEF's services include: agronomic advice, training and the provision of quality seedlings.
	2.4 - By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding and other disasters and that progressively improve land and soil quality	Productivity and Quality Fertiliser and Pesticide Use R&D and Innovation Regenerative Practices	SIPEF implements Best Management and regenerative practices, and nature-based solutions. These practices focus on improving soil fertility, optimising inputs, recycling by-products, and increasing product quality and productivity. The Group is also committed to investing in R&D and innovation that will enable progress towards these objectives, as well as enhance the quality of planting materials and resilience of future crops.
SDG 3: Good Health and Well-being	3.8 - Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all	Human Rights and Labour Standards Community Development Health and Safety	SIPEF is operating 39 polyclinics in Indonesia, Papua New Guinea and Ivory Coast. In Ivory Coast and Papua New Guinea, medical care is paid for in full by SIPEF. All facilities in both locations are accessible to both employees and community members.
SDG 4: Quality Education	4.1 - By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and effective learning outcomes	Community Development	SIPEF has established 44 kindergartens, primary and secondary schools in Indonesia, Papua New Guinea and Ivory Coast. All facilities are accessible to employee children and 95% are also accessible to children from surrounding communities. SIPEF also provides free day care for employee children in Indonesia.
	4.2 - By 2030, ensure that all girls and boys have access to quality early childhood development, care and pre-primary education so that they are ready for primary education
SDG 6: Clean Water and Sanitation	6.3 - By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally	Water Management	SIPEF mitigates pollution of surface and ground water through good soil conservation practices, the establishment of riparian zones and wastewater treatment.
	6.4 - By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity	Water Management	SIPEF optimises water use across operations, including reusing water as much possible to keep water consumption at a minimum. Almost 70% of the irrigation water used at the banana plantation in Ivory Coast is stored in dams during the rainy season, then reused and pumped during the dry season a few months later.
SDG 7: Aordable and Clean Energy	7.2 - By 2030, increase substantially the share of renewable energy in the global energy mix	Climate Change	Generation of electricity from renewable energy sources, including from steam turbines and methane capture facilities fitted with biogas plants at SIPEF’s palm oil operations. In 2021 SIPEF generated 44 311 658 kWh of electricity from renewable energy sources, all of which was used for powering its palm oil mills or for general use by nearby communities.
SDG 8: Decent Work and Economic Growth	8.5 - By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value	Human Rights and Labour Standards	SIPEF meets all local regulations for wages and is compliant with the decent living wage calculations audited by the various certification standards to which the Group adheres. This includes workers on piece rate/quotas, for which the wage calculation is based on achievable quotas during regular working hours. The Group is working towards alignment with the definitions of the Global Living Wage Coalition (GLWC) following the certification standards’ processes.
	8.8 - Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment	Health and Safety	SIPEF ensures its employees and workers are provided with a safe and healthy work environment. To prevent accidents, the Group invests in continuous training, the provision of appropriate PPE, and rigorous internal supervision and control systems. All risks are regularly analysed and assessed, and any occupational accidents are investigated to prevent them from being repeated.

The connection to the world of sustainable tropical agriculture

SDG GOAL SDG TARGET RELEVANT MATERIAL TOPICS SIPEF’S ACTIVITIES

SDG 12: Responsible Consumption and Production

12.2 - By 2030, achieve the sustainable management and eﬃcient use of natural resources

Productivity and Quality
Sustainability Standards and Certification
Credible third-party certification is an important aspect of SIPEF’s sustainability approach. The Group applies the highest benchmarked international standards, including the RSPO and Rainforest Alliance standards. The Group also implements Best Management, regenerative and circular practices. This includes practices focused on improving reusing by-products and waste, and implementing nature-based solutions where possible. SIPEF engages in Integrated Pest Management (IPM) for both its oil palm and banana production. Pesticides are used as a last resort when IPM and other methods are not able to prevent outbreaks of pests and diseases above the economic threshold.

12.4 - By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment

Fertiliser and Pesticide Use

SDG GOAL SDG TARGET RELEVANT MATERIAL TOPICS SIPEF’S ACTIVITIES

SDG 13: Climate Action

13.1 - Strengthen resilience and adaptive capacity to climate-re- lated hazards and natural disasters in all countries

Climate Change
Fire Prevention and Management
SIPEF is engaging in the following climate change adaptation initiatives under its current approach:
- No new planting on peatlands and implementation of best management practices on existing plantings on peatland
- SIPEF has a fire risk alert monitoring system, as well as comprehensive firefighting procedures in place
- Strengthening natural defences against storm surges, coastal erosion and coastal flooding through the rehabilitation of coastal buﬀers

13.2 - Integrate climate change measures into national policies, strategies and planning

Climate Change
SIPEF is engaging in the following climate change mitigation initiatives under its current approach:
- A composting facility for palm oil residues
- Methane capture facilities and biogas plants that generate renewable electricity
- A biomass pellet facility
- Biodiversity, conservation and reforestation programmes in Indonesia, Papua New Guinea and Ivory Coast

SDG GOAL SDG TARGET RELEVANT MATERIAL TOPICS SIPEF’S ACTIVITIES

SDG 15: Life on Land

15.1 - By 2020, ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services, in particular forests, wetlands, mountains and drylands, in line with obligations under international agreements

Deforestation
Ecosystem Conservation and Restoration
Peatlands Conservation areas are identified and protected within the areas of SIPEF’s concessions where the Group has management control. The Group is committed to No Deforestation and no new plantings on peatland, and HCV and HCSA assessments are carried out prior to any new developments. SIPEF is also committed to monitoring biodiversity in all set-aside areas within its concessions, and to implementing its no hunting policy on its own estates and in the cultivated areas of its third-party suppliers. Through the SIPEF Foundation, the Group finances and supports two long-term biodiversity projects in Indonesia. Both are based in West Sumatra near SIPEF’s Agromuko estates. One is focused on the protection of 12,672 hectares of natural forests, and the other is a sea turtle conservation programme. In addition, Plantations J. Eglin In Ivory Coast manages a reforestation programme covering an area of 126 hectares.

15.2 - By 2020, promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afﬁliation and reforestation globally

Ecosystem Conservation and Restoration
Deforestation

15.3 - By 2030, combat desertiﬁcation, restore degraded land and soil, including land aﬀected by desertiﬁcation, drought and ﬂoods, and strive to achieve a land degradation-neutral world

Deforestation

15.5 - Take urgent and signiﬁcant action to reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect and prevent the extinction of threatened species

Biodiversity
Ecosystem Conservation and Restoration

Base Data About SIPEF

Planted area

Responsible production and processing


OIL PALM OPERATIONS (HECTARES)	2019	2020
SIPEF GROUP
Planted area – own plantations	73 977	76 473
Mature	59 531	63 489
Immature	14 446	12 984
INDONESIA
Planted area – own plantations	60 270	62 785
PAPUA NEW GUINEA
Planted area – own plantations	13 707	13 689

OIL PALM OPERATIONS (TONNES)	2019	2020	2021
SIPEF GROUP
Total FFB production	1 384 671	1 458 913	1 658 840
FFB production – own plantations	1 175 434	1 220 469	1 385 858
FFB production – smallholders	209 237	238 443	272 982
INDONESIA
Total FFB production	944 281	979 506	1 059 857
FFB production – own plantations	919 919	950 853	1 019 009
FFB production – smallholders	24 362	28 652	40 848
PAPUA NEW GUINEA
Total FFB production	440 390	479 407	598 983
FFB production – own plantations	255 515	269 616	366 849
FFB production – smallholders	184 875	209 791	232 134

BANANA OPERATIONS (HECTARES)

	2019	2020	2021
IVORY COAST
Planted area – own plantations	796	780	794

Oil Extraction Rates

Average percentage of free fatty acids in SIPEF’s palm oil production

PALM OIL MILL OPERATIONS	2018	2019	2020	2021
Indonesia	22.73%*	23.33%*	22.79%*	22.99%
Papua New Guinea	24.34%	23.33%	24.63%	25.58%
GROUP	23.36%*	23.26%*	23.42%*	23.96%

PALM OIL MILLS	2018	2019	2020	2021
INDONESIA
PLPOM	2.65%	2.97%	3.14%	3.42%
BMPOM	3.14%	3.06%	3.13%	3.13%
UMWPOM	3.62%	3.98%	3.31%	3.65%
MMPOM	3.46%	3.55%	2.97%	3.32%
BTPOM	3.86%	3.47%	3.40%	4.00%
DMPOM	3.71%	3.65%	3.57%	3.40%
PAPUA NEW GUINEA
HPOM	3.68%	4.03%	3.03%	2.71%
NPOM	4.30%	3.98%	3.70%	3.06%
BPOM	4.23%	4.26%	3.18%	3.64%

BANANA OPERATIONS (TONNES)

	2019	2020	2021
IVORY COAST
Total banana production	32 849	31 158	32 200

* NOTE: Data for Indonesia and Group for 2018, 2019 and 2020 have been restated.

Production volumes

	2019	2020	2021
CERTIFICATIONS
Number of certificates
RSPO: Roundtable on Sustainable Palm Oil	8*	8*	8*
ISCC: International Sustainability and Carbon Certification	5	4	4
ISPO: Indonesian Sustainable Palm Oil	5	6*	6*
ISO 14001:2015	1	1	1
ISO 9001:2015	1	1	1
GLOBALG.A.P.	1	1	1
Rainforest Alliance	5	5	5
Fairtrade	1	1	1
Sedex	1	1	1
FSSC 22000-4.1	1	1	1
Halal Assurance System	1	1	1
TOTAL	27*	30	30*

* NOTE:
* RSPO certificate data from 2018, 2019 and 2020 have been restated to accurately reflect that HOPL certificates are multi-site.
* ISPO certificate data from 2019 and 2020 have been restated. ISPO certificates are issued by company name and are not reflective of the number of mills certified.
* The three certificates for SIPEF’s rubber estates are only valid until July 2021, due to Rainforest Alliance having discontinued certification for rubber.

RSPO certified area of oil palm operations

OIL PALM OPERATIONS (HECTARES)	2019	2020	2021
SIPEF GROUP
Total RSPO certified area	96 975	95 139	96 342
RSPO certified area – own plantations	81 909	80 073	80 099
RSPO certified area – smallholders	15 066	15 066	16 243
INDONESIA
RSPO certified area	62 613	60 791	60 992
RSPO certified area – own plantations	61 440	59 618	59 639
RSPO certified area – smallholders	1 173	1 173	1 353
PAPUA NEW GUINEA
RSPO certified area	34 362	34 348	35 350
RSPO certified area – own plantations	20 469	20 455	20 460
RSPO certified area – smallholders	13 893	13 893	14 890

RSPO certified production volumes of oil palm operations

OIL PALM OPERATIONS (TONNES)	2019	2020	2021
SIPEF GROUP
Total RSPO certified FFB	1 323 079	1 381 092	1 555 758
RSPO certified FFB – own plantations	1 121 244	1 150 582	1 297 632
RSPO certified FFB – smallholders	201 835	230 510	258 126
INDONESIA
RSPO certified FFB	882 689	901 685	956 775
RSPO certified FFB – own plantations	865 729	880 966	930 783
RSPO certified FFB – smallholders	16 960	20 719	25 992
PAPUA NEW GUINEA
RSPO certified FFB	440 390	479 407	598 983
RSPO certified FFB – own plantations	255 515	269 616	366 849
RSPO certified FFB – smallholders	184 875	209 791	232 134

RSPO certification progress palm oil mill operations

PALM OIL MILL OPERATIONS	2019	2020	2021
INDONESIA
NUMBER OF MILLS
RSPO certified mills – Identity Preserved	5	5	5
RSPO certified mills – Mass Balance	1	1	1
ISPO certified mills	6	6	6
INDONESIA
TONNES
CSPO production	201 992	199 877	210 276
CSPK production	41 751	42 076	42 801
PAPUA NEW GUINEA
NUMBER OF MILLS
RSPO certified mills – Identity Preserved	3	3	3
PAPUA NEW GUINEA
TONNES
CSPO production	102 835	118 123	153 203
CSPK production	21 784	24 706	30 803

GHG Emissions

Total Group net emissions per year (Scopes 1 & 2)

YEAR	SCOPE 1	SCOPE 2	TOTAL tCO2e
2019	409 166	4 632	413 798
2020	527 069	8 860	535 929
2021	616 937	11 418	628 355

COUNTRY BIOGAS FACILITIES STEAM TURBINES TOTAL

	Kilowatt hours
Indonesia	6 039 602	21 090	27 130 224
Papua New Guinea	N/A	17 181	17 181 434
TOTAL	6 039 602	38 272 056	44 311 658

COUNTRY / PROVINCE WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS

GFW ALERTS VERIFIED INCIDENTS OF TREE COVER LOSS VERIFIED# AREA OF TREE COVER LOSS HA

GFW ALERTS VERIFIED INCIDENTS OF TREE COVER LOSS	VERIFIED AREA OF TREE COVER LOSS HA
Indonesia	577	168	117	N/A	N/A
North Sumatra	18	0	0	N/A	N/A
Bengkulu	197	20	6	N/A	N/A
South Sumatra	362	148	111	N/A	N/A
Papua New Guinea	0	0	0	29	29
TOTAL	577	168	117	29	29

: Verification and validation of the data following the ISO 14064 methodology was not possible in 2021. Data presented are therefore an estimate.

Energy generated from renewable sources in 2021

Global Forest Watch tree cover loss monitoring data 2021

The connection to the world of sustainable tropical agriculture

COUNTRY

	HECTARES)
	2019	2020	2021
Indonesia	5 575	5 217	5 510
Papua New Guinea	3 426	3 426	3 483
Ivory Coast	128	128	226
GROUP	9 129	8 771	9 219

PALM OIL MILLS

CUBIC METRES	2019	2020	2021
Indonesia	813 866	954 258	708 906
Papua New Guinea	785 027	604 144	785 027

BANANA OPERATIONS

CUBIC METRES	2019	2020	2021
Plantations	3 601 692	4 012 702	3 901 644
Banana packing stations	231 400	211 674	218 112

CUBIC METRES / TONNE BANANAS
Banana packing stations water usage intensity	116.7	135.6	128.3

COUNTRY / PROVINCE

	WITHIN OWN CONCESSIONS		SUPPLIER AREAS		HOTSPOTS		ACTUAL FIRES		HOTSPOTS		ACTUAL FIRES
	2020	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020	2021
Indonesia	107*	35	5	1	0	0	0	0	0	0	0	0
North Sumatra	72	5	0	0	0	0	0	0	0	0	0	0
Bengkulu	10	9	0	0	0	0	0	0	0	0	0	0
South Sumatra	25*	21	5	1	0	0	0	0	0	0	0	0
Papua New Guinea	0	2	0	2	1	8	0	1	0	0	0	0
TOTAL	107*	37	5	3	1	8	0	1	0	0	0	0

* : Data on number of hotspots within concessions in 2020 for Indonesia have been restated.

Conservation area within concessions by country

Palm oil mills and banana operations water use

Number of hotspots vs. confirmed fires within concessions and supplier areas 2020-2021

PALM OIL MILLS

CUBIC METRES / TONNE FFB	2019	2020	2021
Indonesia
PLPOM	0.61	0.68	0.68
BMPOM	0.88	0.89	0.92
UMWPOM	0.90	1.62	1.40
MMPOM	1.24	0.91	0.95
BTPOM	0.70	0.69	0.66
DMPOM	1.02	1.14	1.06
Papua New Guinea
HPOM	1.08	0.95	0.95
NPOM	1.00	1.20	1.13
BPOM	1.64	1.56	1.70

PALM OIL MILLS DESTINATION

	BIOLOGICAL OXYGEN DEMAND	CHEMICAL OXYGEN DEMAND	TOTAL SUSPENDED SOLIDS
Indonesia
PLPOM	426	781	N/A
BMPOM	1 235	2 544	N/A
UMWPOM	20	44	N/A
MMPOM	66	194	50
BTPOM	57	254	33
DMPOM	98	349	76
Papua New Guinea
HPOM	109	1 774	2 299
NPOM	186	4 726	12 865
BPOM	212	5 386	10 998

Palm oil mill water usage intensity

Quality indicators of treated palm oil mill effluent by destination in 2021

Employees by country

Lost time injury frequency rate by country (per 1 000 000 hours worked)

 		 
	EMPLOYEES	2019	2020	2021
GROUP	Male	16 116	16 553	15 749
	Female	5 395	5 081	5 484
	TOTAL EMPLOYEES	21 511	21 634	21 233

COUNTRY	2019	2020	2021
Belgium	23	24	23
Indonesia	15 420	15 622	14 998
Papua New Guinea	4 692	4 575	4 628
Ivory Coast	1 376	1 413	1 583
Singapore	N/A	N/A	1

COUNTRY	2019	2020	2021
Indonesia	3.27*	2.86*	2.43
Papua New Guinea	27.96	23.76	22.67
Ivory Coast	14.50	21.44	16.38

* : Lost time injury frequency rate data for Indonesia for 2019 and 2020 have been restated.

COUNTRY	2019	2020	2021
Indonesia	0	2	1
Papua New Guinea	1	0	0
Ivory Coast	0	0	0

Number of fatalities as a result of work-related injury

Number of houses provided to employees

Number of schools operational in 2021

Number of clinics operational in 2021

HOUSES PROVIDED BY SIPEF	2019	2020	2021
Indonesia	4 897	5 114	5 365
Papua New Guinea	2 290	2 269	2 305
Ivory Coast	675	783	766
TOTAL NUMBER OF HOUSES	7 826	8 166	8 436

SCHOOLS ESTABLISHED BY SIPEF	2019	2020	2021
Indonesia	35*	38*	38
Papua New Guinea	2	2	2
Ivory Coast	4	4	4
TOTAL NUMBER OF SCHOOLS	41	44	44

CLINICS PROVIDED BY SIPEF	2019	2020	2021
Indonesia	22*	23*	23
Papua New Guinea	13	13	13
Ivory Coast	3	3	3
TOTAL NUMBER OF CLINICS	38	39	39

* : Data for number of schools in Indonesia for 2019 and 2020 have been restated.
* : Data for number of clinics in Indonesia for 2019 and 2020 have been restated.

Annual investment in capacity building and research for smallholders in Papua New Guinea

CROP

	NUMBER OF SMALLHOLDERS	SMALLHOLDER PLANTED AREA HA
Oil palm	9 148	28 126
Tea	489	470
Rubber	367	650
ALL CROPS	10 004	29 246

SMALLHOLDER PROGRAMMES

	NUMBER OF SMALLHOLDERS	PLANTED AREA HA	FFB VOLUME PRODUCED TONNES
SIPEF GROUP
Scheme smallholders	5 882	20 219	265 258
Independent smallholders	3 266	7 979	2 970
GROUP TOTAL	9 148	28 198	268 228
INDONESIA
Company managed programme	1 943	4 643	23 738
Village smallholder programme (Kebun Masyarakat Desa)	304	686	9 386
Associated buy/sell programme	2 438	5 667	2 970*
Associated seedling programme	828	2 312	N/A*
INDONESIA TOTAL	5 513	13 308	36 095
PAPUA NEW GUINEA
Associated smallholder programme	3 635	14 890	232 134
PAPUA NEW GUINEA TOTAL	3 635	14 890	232 134

* : FFB production volume from the associated seedling programme and the majority of FFB production volume from the associated buy/sell programme are currently not included in SIPEF’s supply base.

ANNUAL INVESTMENT PGK

	2019	2020	2021
Investment by HOPL	169 970	839 162	162 741
Investment by smallholders	1 254 666	1 270 970	1 226 497
TOTAL AMOUNT INVESTED	1 424 636	2 110 132	1 967 613

Responsible sourcing and smallholder production

Oil Palm smallholder programmes by country in 2021

OIL PALM SMALLHOLDERS

SIPEF GROUP	2019	2020	2021
Number of RSPO certified smallholders	4 312	4 309	4 297
RSPO certified smallholder area (ha)	15 066	15 066	16 243
RSPO certified smallholder FFB volume (tonnes)	201 835	230 510	258 126
INDONESIA
Number of RSPO certified smallholders	665	663	662
RSPO certified smallholder area (ha)	1 173	1 173	1 353
RSPO certified smallholder FFB volume (tonnes)	16 960	20 719	25 992
PAPUA NEW GUINEA
Number of RSPO certified smallholders	3 647	3 646	3 635
RSPO certified smallholder area (ha)	13 893	13 893	14 890
RSPO certified smallholder FFB volume (tonnes)	184 875	209 791	232 134

RSPO certified smallholders, areas and production volumes

Responsible business and transparency

Proportion of Taxonomy-eligible and Taxonomy-non-eligible economic activities in total turnover, Capex and Opex

TAXONOMYELIGIBILITY	TOTAL KUSD	PROPORTION OF TAXONOMYELIGIBLE ECONOMIC ACTIVITIES %	PROPORTION OF TAXONOMYNONELIGIBLE ECONOMIC ACTIVITIES %
Turnover	416 053	0%	100%
Capital expenditure (Capex)	68 692	0%	100%
Operating expenditure (Opex)	33 391	0%	100%

Responsible persons

François Van Hoydonck managing director

Johan Nelis chief financial ocer

Baron Luc Bertrand, chairman and François Van Hoydonck, managing director declare that, to their knowledge:
- the consolidated financial statements for the financial year ended on 31 December 2021 were drawn up in accordance with the ‘International Financial Reporting Standards’ (IFRS) and provide an accurate picture of the consolidated financial position and the consolidated results of the SIPEF group and its subsidiary companies that are included in the consolidation.
- the financial report pro vides an accurate overview of the main events and transactions with aliated parties, which occurred during the financial year 2021 and their eects on the financial position, as well as a description of the main risks and uncertainties for the SIPEF group.



EY Bedrijfsrevisoren BV
Represented by Christoph Oris and Wim Van Gasse, Borsbeeksebrug 26 2600 Antwerpen (Berchem) Belgium

For further information

Kasteel Calesberg
Calesbergdreef 5
2900 Schoten
Belgium
RPR: Antwerpen
VAT: BE 0404 491 285
Website: www.sipef.com

For more information about SIPEF:
Tel.: +32 3 641 97 00

Dit jaarv erslag is ook verkrijgbaar in het Nederlands.
Translation: this annual report is available in Dutch and English. The Dutch version is the original; the other language version is a free translation. We have made every reasonable eort to avoid any discrepancies between the dierent language versions. However, should such discrepancies exist, the Dutch version will take precedence. The ocial Annual Report of the SIPEF group in ESEF-format can be found on the SIPEF-website, under the section “investors”. All other formats are considered to be unocial versions of the Annual Report.

Concept and realisation: Focus advertising
Photography: Portraits of the chairman, the members of the board of directors and the members of the executive committee © Wim Daneels - images of employees, estates and products © Jez O’Hare Photography, © Adrian Tan Photography, © Marc Adou and © Robert Weber.Printed in Belgium by: Inni Group 144 The connection to the world of sustainable tropical agriculture
www.sipef.com

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iso4217:USD
iso4217:USD
xbrli:shares

	2020	2021
JAN	50	50
FEB	68	55
MAR	53	55
APR	50	55
MAY	50	58
JUN	55	58
JUL	55	213
AUG	55	299
SEP	55	348
OCT	58	348
NOV	58	371
DEC	213	399

	2020	2021
JAN	50	50
FEB	68	55
MAR	53	55
APR	50	55
MAY	50	58
JUN	55	58
JUL	55	213
AUG	55	299
SEP	55	348
OCT	58	348
NOV	58	371
DEC	213	399

AI assistant

SIPEF — Annual Report 2021

4000_10-k_2022-04-27_52b86e9e-f88d-417e-997e-d20f4a407819.xhtml

PART 1 - COMPANY REPORT Annual Report 2021

The connection to the world of sustainable tropical agriculture

Mission

Contents

SIPEF Company Report 2021

SIPEF at a glance

Palm oil

Bananas

SIPEF Company Report 2021

SIPEF at a glance

Significant events in 2021

The connection to the world of sustainable tropical agriculture

Sustainability

Results

SIPEF Company Report 2021

Significant events in 2021

The connection to the world of sustainable tropical agriculture

Message from the chairman

SIPEF Company Report 2021

Message from the chairman

Message from the managing director

SIPEF Company Report 2021

Message from the managing director

Message from the managing director

SIPEF Company Report 2021

Message from the managing director

The connection to the world of sustainable tropical agriculture

Strategy of the Group

92 %

SIPEF Company Report 2021

Strategy of the Group

The connection to the world of sustainable tropical agriculture

SIPEF invests in the development of high-quality crude palm oil with low levels of contaminants

Sustainability remains an absolute priority for SIPEF with value creation as the common denominator

SIPEF Company Report 2021

Strategy of the Group

All goods sold by SIPEF are fully traceable

SIPEF achieves the protection, conservation and restoration of terrestrial ecosystems and biodiversity

SIPEF aims to optimise its results

The connection to the world of sustainable tropical agriculture

SIPEF has the ambition to increase the volume of the Group’s annual palm oil production to 500 000 tonnes per year by 2026. This equates to a compound annual growth rate (CAGR) of 5%.

SIPEF Company Report 2021

High quality, fully traceable, certified palm products

Business model

SIPEF product destination

Costs of the Group

Value creation by the Group

SIPEF creates value for the company

SIPEF creates value for the environment

SIPEF creates value for society

Products - customers

Oil palm products

The connection to the world of sustainable tropical agriculture

Palm oil

Rubber products

Tea

Bananas

SIPEF Company Report 2021

Business model

Product markets

Palm oil

The connection to the world of sustainable tropical agriculture

SIPEF Company Report 2021

Product markets

Palm kernel oil

The connection to the world of sustainable tropical agriculture

Events after the balance sheet date

Russia’s invasion of Ukraine; impact on commodity prices

Product markets

Rubber

The connection to the world of sustainable tropical agriculture

Bananas

SIPEF operational activities

History in brief

Operational activities

Palm oil

INDONESIA

SIPEF Annual Report 2021

	2020	2021
JAN	50	50
FEB	68	55
MAR	53	55
APR	50	55
MAY	50	58
JUN	55	58
JUL	55	213
AUG	55	299
SEP	55	348
OCT	58	348
NOV	58	371
DEC	213	399