Annual Report • Apr 29, 2024
Annual Report
Open in ViewerOpens in native device viewer
SIPEF Integrated Annual Report 2023 Message from the chairman and managing director .........2 SIPEF at a glance ............................................8 Highlights of 2023 ..........................................10 SIPEF’s mission and strategy ...............................14 SIPEF’s operations ..........................................26 Palm oil .....................................................48 Bananas ....................................................64 Sustainability at SIPEF .....................................74 Environmental stewardship ................................90 Respecting employees and communities ...................114 Responsible supply chain management ....................136 Good business conduct .....................................146 Corporate governance statement ..........................154 SIPEF on the stock market .................................196 Financial statements ......................................198 Annex 1 – Sustainability targets and achievements .......264 Annex 2 – EU Taxonomy Accounting policies ............. 272 Annex 3 – Base Data ......................................280 Other information about the Company ...................300 Glossary ...................................................301 Responsible persons ......................................309 For further information ...................................311 Contents We remain confident that in a world with an ever-increasing population, palm oil will continue to be the main vegetable oil in the food and energy sector, due to its higher yield per hectare compared to other vegetable oils. 2 The connection to the world of sustainable tropical agriculture Looking back at 2023, we are proud to present once more outstanding financial results and operational cash flows. Thanks to these performances, reflect- ing persisting strong palm oil markets, SIPEF was able to continue its investments, mainly related to the ongoing expansion in South Sumatra, with a limited financial debt structure. The past year was marked by several geopolitical tensions, from the continuing war in Ukraine to the escalating battles in Gaza and the volatile situation in the South China Sea. However, in this turbulent landscape, palm oil markets have continued to remain favourable from a historical perspective. We remain confident that in a world with an ever-in- creasing population, palm oil will continue to be the main vegetable oil in the food and energy sector, due to its higher yield per hectare compared to other vegetable oils, its ecient industrial processing, and its low cost. Therefore, the Group continues to expand its plantations in a sustainable manner. This belief also inspired the conversion of two of the three rubber plantations into oil palm planta- tions. This process progressed well in 2023, with the first oil palms being planted, and is expected to be completed in 2024. SIPEF’s palm oil production was impacted by the El Niño weather phenomenon, resulting in a decline of 3.1% against 2022. At the end of November 2023, the Group’s activities in Papua New Guinea were disrupted by the volcanic eruption of Mount Ulawun, four years after the previous outbreak. Fortunately, no injuries or deaths were suered, and damage turned out to be less significant than originally expected. Nevertheless, it is anticipated that it will take an additional two years to fully absorb the negative impact on the production. In South Sumatra, the new developments steadily progressed with 18 179 hectares already planted by the end of 2023. Furthermore, the replanting of 10 184 hectares in the Dendymarker Indah Lestari plantations, acquired in 2017, was completed. Besides further expansion of planted areas and associated infrastructure, investments in South Sumatra included the construction of the Agro Muara Rupit mill. The operational start-up of this seventh palm oil mill in Indonesia occurred in April 2024, with a processing capacity of 45 tonnes of fresh fruit bunches (FFB) per hour in the first phase. SIPEF also continued to expand its banana operations, with the development of additional plantations in Côte d’Ivoire, bringing the total planted area to 1 229 hectares by the end of 2023. The newly developed sites of Lumen and Akoudié outperformed in their first year of harvest, pushing the overall banana production 27% higher than that of 2022. In February 2023, SIPEF decided to focus entirely on expanding banana operations in Côte d’Ivoire and to wind down the horticulture business over the next 18 months. Message from the chairman and managing director 3 SIPEF Integrated Annual Report 2023 Message from the chairman and managing director Driven by the understanding that only the highest-quality palm oil will meet future consumption standards, the Company expanded its growth strategy in 2023 to target markets where demand for premium-quality, low-contaminant, virgin oils will be required. For many years, SIPEF’s business strategy has been built on controlled growth as an upstream player and value creation for all its stakeholders. However, as cultivable land continues to become increasingly scarce, SIPEF recognised the imperative to enhance production eciency and optimise land utilisation through the adoption of new technologies and farming techniques. This realisation prompted an investment in 2013 in Verdant Bioscience Pte Ltd, a company dedicat- ed to developing F 1 hybrid varieties, resulting in high-yielding palm seeds and methodologies aimed at increasing crop resilience. Consequently, SIPEF's current strategy places a strong emphasis on operational enhancements in land use, production and processing eciency. This involves the integration of new technologies to enhance palm oil quality, the development of superior seed varieties, and the adoption of best practices, including the segregation of quality streams for food production. Furthermore, driven by the understanding that only the highest-quality palm oil will meet future consumption standards, and motivated by new European regulations, the Company expanded its growth strategy in 2023 to target markets where demand for premium-quality, low-contaminant, virgin oils will be required. This new strategy was concretised by the devel- opment of several projects, some of which could already be finalised by the end of 2023. More pre- cisely, the Crude Palm Oil (CPO) washing plant in Bengkulu for the production of low chloride and low contaminated mineral oil has been running in test conditions since mid-November 2023. Several samples have been taken for analysis and test results are promising. In Papua New Guinea, the pilot project at the Barema palm oil mill for the segregation of virgin oil and technical oil has progressed steadily, with the first commissioning taking place in March 2024. Sustainability remains a key feature for the Group performance and is strongly interrelated with SIPEF’s quality and traceability ambitions. As such, the Group works relentlessly to halt deforestation, to address the needs of communities by improving their livelihoods, and to protect wildlife and the environment. It continued in 2023 to produce 100% RSPO compliant palm oil and 100% Fairtrade and Rainforest Alliance labelled bananas. Also, great efforts were made by the teams of Papua New Guinea for the recertification of all own plantations and smallholders’ plantations in accordance with the latest RSPO standards. 4 The connection to the world of sustainable tropical agriculture Sustainability remains a key feature for the Group performance and is strongly interrelated with SIPEF’s quality and traceability ambitions. 5 SIPEF Integrated Annual Report 2023 Message from the chairman and managing director SIPEF is committed to further expanding its GHG reduction initiatives to ensure it can achieve its target and make progress beyond 2030. This includes constructing methane capture facilities for all its mills. 6 The connection to the world of sustainable tropical agriculture Moreover, SIPEF is making eorts to address the risks and impacts of climate change and proceeds to make headway with its greenhouse gas (GHG) emissions. In 2022, SIPEF‘s carbon footprint cal- culation was externally verified to the ISO 14064 standards. Since then, the Company has set a target to reduce its GHG emission intensity (Scopes 1 and 2) per tonne of CPO by 28% by 2030 against its verified 2021 baseline. SIPEF is committed to further expanding its GHG reduction initiatives to ensure it can achieve its target and make progress beyond 2030. This includes constructing methane capture facilities for all its mills. To date, six out of ten mills have been equipped with these facilities. New sustainability requirements, including the European measures, continuously pushed the Group over the last few years to further invest in digital technologies, IT systems and human resources, enlarging, among others, its sustain- ability and IT teams. On the level of the board of directors, SIPEF strengthened its sustainable and scientific management with the appointment of Giulia Stellari, an expert in agronomic technologies. So, today the Group is well prepared and positioned to comply with these new requirements. We can conclude that SIPEF has invested a signif- icant amount of time and resources to prepare the Group to tackle future challenges eectively. But all these eorts and investments are in vain without proper leadership. Therefore, in anticipation of the managing director's retirement in September 2024, a comprehensive succession plan was meticulously developed and monitored in recent years. This diligent planning resulted in the designation of Petra Meekers as the future managing director last April. Petra's journey within SIPEF has been marked by her expertise and dedication. In 2021, she transitioned from her role on the SIPEF board to join the executive committee as a sustainability expert and the chief operating ocer Asia-Pacific (COO APAC). In this capacity, she spearheaded all operational activities in Indonesia and Papua New Guinea and gained invaluable insights into the details of the banana business and other facets of the Group's operations. We are confident that Petra's leadership will secure a prosperous future for SIPEF, and we trust that our shareholders will feel similarly confident and approve her appoint- ment as member of the board of directors in June 2024. The year 2023 was important for the Group in terms of new strategic choices. We are certain that in the future, strengthened by a solid balance sheet, a strong cash flow and a limited debt position, we will be able to successfully implement our new strategy. Nevertheless, we are aware that we cannot succeed in our mission without the support of all our stakeholders and in particular our sharehold- ers. We want to thank them for their confidence by proposing a gross dividend of euro 2.0, in line with the 30% payout ratio of the previous year. Finally, and most importantly, we want to express our gratitude for the relentless dedication and con- tribution of all the people working for the Group worldwide, who made the 2023 results and achieve- ments possible. We are convinced that together with its enthusiastic and skilled teams, SIPEF can face the future with great optimism. chairman of the board of directors managing director 7 SIPEF Integrated Annual Report 2023 Message from the chairman and managing director CÔTE D'IVOIRE BANANAS 1 258 ha 2 483 employees (1) INDONESIA PALM 70 522 ha 15 547 employees (1) PAPUA NEW GUINEA PALM 13 550 ha 4 989 employees BELGIUM AND LUXEMBOURG OFFICES 24 employees MARKETS SERVED Europe United Kingdom Indonesia West Africa SINGAPORE OFFICES 14 employees GLOBAL PRESENCE SIPEF at a glance SIPEF is a Belgian agribusiness group listed on Euronext Brussels. The Group operates agro-in- dustrial activities, mainly in the production of sustainable palm products in Indonesia and Papua New Guinea, and bananas in Côte d’Ivoire. The palm products SIPEF produces include fresh fruit bunches (FFB), crude palm oil (CPO), palm kernels (PK) and crude palm kernel oil (CPKO). The Group also has operations in natural rubber, tea, and horticulture which are in the process of being phased out. SIPEF has a multinational workforce of 23 057 people, full-time equivalent (FTE), the majority of whom are employed or contracted through SIPEF’s subsidiaries. The Group manages a total of 85 329 hectares of own production area across its global operations. Further details on SIPEF’s operational activities can be found in the chapter on SIPEF's operations, on pages 26-73. (1) Figures include total employees in tea and rubber activities (Indonesia) and horticulture (Côte d'Ivoire). 8 The connection to the world of sustainable tropical agriculture 5 Banana estates 7 Banana packing stations 6 Palm oil mills 6 Oil palm plantations 3 Palm oil mills 2 Kernel crushing plants (integrated with mills) Palm oil Tonnes 391 215 Rubber Tonnes 968 Bananas Tonnes 40 976 30 Oil palm plantations 2 Rubber estates INDONESIA PAPUA NEW GUINEA MALECÔTE D’IVOIRE FEMALE Palm oil Bananas Rubber HA 85 329 Total planted area 5 846 Female 17 212 Male PLANTED AREA IN HECTARES INDONESIA PAPUA NEW GUINEA CÔTE D’IVOIRE TOTAL Oil palms 68 621 13 550 0 82 171 Rubber 1 901 0 0 1 901 Bananas 0 0 1 229 1 229 Horticulture 0 0 29 29 TOTAL 70 522 13 550 1 258 85 329 EMPLOYEES BY COUNTRY Belgium 24 Indonesia 15 547 Papua New Guinea 4 989 Côte d’Ivoire 2 483 Singapore 14 TOTAL 23 057 9 SIPEF Integrated Annual Report 2023 SIPEF at a glance Highlights of 2023 ACTIVITIES • Palm oil production of the SIPEF group declined by 3.1% against last year, as a result of weather challenges, marked by the El Niño weather phenomenon. • In Papua New Guinea, the reduction was exacerbated by the volcanic eruption on 20 November 2023. After initial verification, the damage was found to be less significant than originally estimated. The rehabilitation is proceeding well. 01 • All palm oil extraction mills in Papua New Guinea and Indonesia have taken quality measures to keep MOSH/MOAH levels in palm oil low. • Banana production increased by 27.0% on previous year’s exported volumes. The increase is entirely related to the ongoing expansion of 421 hectares in two new production sites in Côte d’Ivoire. 03 • The Indonesian affiliate PT Citra Sawit Mandiri obtained the Hak Guna Usaha (HGU, i.e. the long-term licence to use the land) in the second half of 2023. • The CPO washing plant at the Mukomuko palm oil mill has been operational for testing since mid- November 2023, with promising initial results. • The pilot project at the Barema palm oil mill in Papua New Guinea for the separation of ‘virgin’ oil and ‘technical’ oil continued steadily in 2023, with the first commissioning in March 2024. 04 • The production of fresh fruit bunches in South Sumatra’s new plantations increased by 40.3% compared with 2022. 02 01 02 03 04 +27% Bananas 10 The connection to the world of sustainable tropical agriculture INVESTMENTS AND EXPANSION • The Group invested a total of KUSD 106 986 in intangible and tangible assets in 2023. These related to the usual replacement investments in the existing developments, as well as the new developments in South Sumatra and Côte d'Ivoire. 01 02 03 • The expansion in South Sumatra, Indonesia, (excluding Dendymarker Indah Lestari - DIL) has been steady, with 18 179 hectares already planted. 01 • The replanting of the DIL plantations acquired in 2017 has been completed. 10 184 hectares have been replanted in this plantation. • In addition to further expansion of planted areas and associated infrastructure, such as houses and roads, investments in South Sumatra included, amongst others, the construction of the Agro Muara Rupit palm oil mill, the seventh in Indonesia. The first commissioning took place in April 2024. In its first phase, this palm oil mill has a processing capacity of 45 tonnes of fresh fruit bunches per hour. 02 • The expansion of hectares planted with bananas in Côte d’Ivoire continued with another 163 hectares in 2023, bringing the total planted area at the end of 2023 to 1229 hectares. 03 +163 ha Planted area in Côte d’Ivoire 11 SIPEF Integrated Annual Report 2023 Highlights of 2023 RESULTS • Palm oil markets continued to remain favourable from a historical perspective: prices mostly navigated within a tight range between USD 900 and 1 000 CIF Rotterdam during 2023. 01 • Steady prices and enhanced cost control once more guaranteed outstanding financial performances, albeit lower than the all-time record year 2022. • The unit production prices of palm oil remained well under control. The decrease in fertiliser and energy costs resulted in a lower cost, which was, however, oset by the lower total production, leading to a higher unit selling price. 02 • The Net Financial Position remains limited to KUSD -31 418, after investments of KUSD 106 986, mainly related to the continued expansion in South Sumatra. • Net profit, share of the Group, after taxes, amounted to KUSD 72 735 against KUSD 108 157 last year. The decrease was mainly due to the lower unit selling price per tonne of crude palm oil and the decrease in total palm oil production. Basic earnings per share were USD 6.99 compared with USD 10.40 per share in 2022. • The board of directors decided to propose to the shareholders' meeting of 12 June 2024 a gross dividend of euro 2.00 per share, payable as of 3 July 2024. SUSTAINABILITY • By the close of 2023, SIPEF has already achieved a reduction of 10% in its net GHG emissions intensity (Scope 1 and Scope 2) relative to its 2021 baseline of 1.88 tonnes of CPO, mainly due to the lower POME emissions. 03 • During the course of 2023, SIPEF achieved Rainforest Alliance and GLOBALG.A.P certifications for its new banana plantation sites, Akoudié and Lumen, reinstating the status of SIPEF’s banana operations as fully certified. In 2023, all sites that were Fairtrade certified in previous years have maintained their certification. 01 02 03 28% GHG reduction plan 12 The connection to the world of sustainable tropical agriculture • SIPEF achieved Roundtable on Sustainable Palm Oil (RSPO) certification for nearly 3 000 hectares (100%) of smallholder area at PT Dendymarker Indah Lestari (DIL) in South Sumatra. 01 • The SIPEF subsidiary in Papua New Guinea completed an integrated High Conservation Value and High Carbon Stock Approach (HCV-HCSA) assessment, which covered all existing estates, smallholders, and surrounding areas. It identified large areas for conservation, as well as for potential new development in and around existing smallholder estates. As a participatory mapping initiative, the assessment also facilitated extensive community engagement. • On 11 December 2023, the Indonesian Ministry of Environment and Forestry (KLHK) approved the SIPEF Biodiversity Indonesia (SBI) 10-year management plan for the 12 672 hectares of forest area overseen by the initiative. The approval secures SBI’s existing licence of 60 years to manage and conserve the area for another decade. 88.9% SPOTT D • C New score • SIPEF’s improvements in sustainability reporting and performance are reflected in the sustainability benchmark scores and rankings for 2023. With an 88.9% rating from the Sustainability Policy Transparency Toolkit (SPOTT), the Company increased its score by 2.1% compared with 2022 and maintained its ranking of 11th out of 100 palm oil companies. 01 02 • SIPEF also advanced in its CDP Climate Change disclosure, moving up to a C (‘Awareness’) from the 2022 score of D (‘Disclosure’). The new score aligns SIPEF’s performance with the crop sector’s average. SIPEF maintained its B (‘Management’) score for its CDP Forests submission, a score that falls in line with the average performance of palm oil in the crop farming sector, and is higher than the European regional average. • For the first time, the Group's headquarters in Belgium achieved certification under the GlobalG.A.P. Chain of Custody Standard and the Rainforest Alliance supply chain certification standard (2020 Sustainable Agriculture Standard: Supply Chain Requirements). 02 13 SIPEF Integrated Annual Report 2023 Highlights of 2023 SIPEF’s mission and strategy SIPEF is a well-established agricultural commodities company, having operated for more than 100 years. With its wealth of experience, the Group works to consistently produce high-quality and fully traceable palm oil products and bananas, while preserving nat- ural ecosystems, engaging in fair labour practices, and providing support for local communities in the places where it operates. Looking to the future, SIPEF is also focusing on diver- sification into targeted markets, with the aim of being the preferred supplier of premium agricultural products. Fundamental to the realisation of its ambitions and the Group’s overarching mission are SIPEF's seven Guiding Principles and its Balanced Growth Strategy. 14 The connection to the world of sustainable tropical agriculture SIPEF'S BALANCED GROWTH STRATEGY • Production efficiency • Operational excellence • High quality, sustainable, traceable, certified products • Innovation and early adoption • Environmental stewardship • Respecting employees and communities • Responsible supply chain management • Good business conduct SIPEF produces high-quality, sustainable, and traceable agricultural products, with the aim to diversify into targeted markets and foster a harmonious balance among nature, people and growth. GUIDING PRINCIPLES • Reliability and stability • Long-term planning and decision making • Continuous improvement • Sustainable economic growth • Conservation and restoration of the environment • Supporting employees and communities • Value creation for all stakeholders SIPEF’s Mission, Guiding Principles, and Balanced Growth Strategy 15 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy With operations and offices in Indonesia, Papua New Guinea, Côte d'Ivoire, Singapore, and Luxembourg, (1) and its Headquarters in Belgium, SIPEF has a very multicultural and diverse workforce. The management, employees, as well as all contracting parties, are gov- erned by a set of Guiding Principles, which shape the conduct and culture of the Group. GUIDING PRINCIPLES Like we see with the long-lived lifecycle of the palm tree, long-term thinking is naturally embedded in the way we conduct business at SIPEF. This includes looking at the future impacts of today's decisions and actions on the environment and communities in the areas where we operate. François Van Hoydonck (1) Jabelmalux SA is the Luxembourg parent company of SIPEF’s latest oil palm developments in North Sumatra (PT Umbul Mas Wisesa, PT Toton Usaha Mandiri and PT Citra Sawit Mandiri), and of one of the new developments in the Musi Rawas Region in South Sumatra (PT Agro Muara Rupit). 16 The connection to the world of sustainable tropical agriculture 2. Long-term planning and decision making To always plan for, and make decisions, based on its long-term vision. 7. Value creation for all stakeholders To create value for all its stakeholders, fairly and responsibly. 1. Reliability and stability To be a reliable and stable partner for all its stakeholders. SIPEF strives for: 4. Sustainable economic growth To generate economic value for its shareholders and other stakeholders, while striving for a controlled level of debt. 5. Conservation and restoration of the environment To conserve, and where possible, restore the natural environment within its operations by engaging in sustainable agricultural practices and actively managing conservation areas. 3. Continuous improvement To continuously improve all aspects of its business, focusing on quality, productivity, and best environmental, social and governance practices. 6. Supporting employees and communities To treat all employees and local com- munities with respect for their rights, while supporting opportunities to improve their well-being and development. 17 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy BALANCED GROWTH STRATEGY SIPEF believes that with its Balanced Growth Strategy, it can achieve its business objectives in a way that simul- taneously respects and promotes its sustainability goals. As a Belgian agribusiness company listed on Euronext Brussels, SIPEF is committed to gener- ating economic value for its shareholders and other stakeholders, while striving for a controlled level of debt. At the same time, sustainability is firmly anchored to the core of SIPEF’s business model, and the Group has made a top-down commitment to managing its operations in an environmentally and socially responsible manner. Through its business activities and partnerships, SIPEF is also work- ing to contribute positively to the communities and local economies in the remote areas where it operates. SIPEF’s Balanced Growth Strategy takes an inte- grated approach towards the realisation of the Company’s business and sustainability priorities. 18 The connection to the world of sustainable tropical agriculture Production eciency Respecting the limited availability of agri- cultural land, whilst continuing to meet growing market demands, is crucial for SIPEF’s success as a business, now and in the future. The Group works to enhance its production eciency by: • Optimising land use in production areas • Improving production processes • Engaging in practices and solutions focused on boosting yields • See chapter on SIPEF's operations for more details (page 26) Environmental stewardship For SIPEF, environmental stewardship means minimising and managing all direct and indirect impacts of its business activities on the natural environment, and on the climate. SIPEF’s priorities under environmental stewardship are: • Sustainable land use and biodiversity conservation • No deforestation and no new developments on peat (NDP) • Best Management Practices (BMPs) that minimise environmental impacts • Greenhouse gas (GHG) reduction initiatives • See chapter on environmental stewardship for more details (page 90) The Strategy’s eight key levers and their components are described in the following: 19 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy Operational excellence SIPEF is committed to operational excel- lence, and continuously strives to improve the eciency of its processes and the eec- tiveness of its practices. Operational excellence at SIPEF means: • Maximising production quantity and quality • Optimising inputs, reusing by- products, and minimising waste • Promoting a culture of continuous improvement • See chapter on SIPEF's operations for more details (page 26) Respecting employees and communities SIPEF’s Balanced Growth Strategy rests on the premise that growth is not possible without being a responsible employer and neighbour, first. For SIPEF, being a good employer and neighbour means: • Respecting human, labour, and community rights, in accordance with local laws and international frameworks • Contributing to the needs of local communities by providing employment, and health, education, and infrastructural services • See chapter on respecting employees and communities for more details (page 114) 20 The connection to the world of sustainable tropical agriculture High-quality, sustainable, traceable, certified products Supplying high-quality, sustainable, traceable, and certified products is key for SIPEF to dierentiate itself from others and diversify into targeted markets. Integral to this lever in SIPEF’s strategy are the following: • Implementing the highest food safety and quality standards • Maintaining 100% traceability for all products • Full compliance with leading sustainability standards and certifications • See chapter on SIPEF's operations for more details (page 26) Responsible supply chain management SIPEF believes that creating value in a responsible way includes supporting its suppliers to become part of its sustainable supply chain. All of the Group’s suppliers are oil palm smallholders, whose locations are known and mapped. SIPEF’s approach to responsible supply chain management is centred around: • Supporting smallholders in their journey towards improved, sustainable, and certified production • Providing training, planting materials, and agronomic services to smallholders • Supporting smallholders to earn higher incomes and have better access to international markets • Screening and monitoring suppliers to ensure compliance with SIPEF policies • See chapter on responsible supply chain management for more details (page 136) 21 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy Innovation and early adoption SIPEF recognises the immense potential of being an early adopter of innovations that focus on enhancing the productivity, quality, and resilience of its future crops. SIPEF’s priorities under innovation and early adoption are: • Investing in research and development (R&D) to enable progress towards sustainable and optimal land use, ecient production, higher quality products, and resilient crops • Testing and applying new principles and practices • Remaining agile and adaptable to accommodate strategic and market shifts • See chapter on SIPEF's operations for more details (page 26) Good business conduct SIPEF maintains the highest regard for ethical business practices, understanding their critical role in mitigating financial, reputational, and legal risks. For SIPEF, good business conduct means: • Fostering a culture of ethical conduct amongst management, sta, and contractors • Implementing systems and processes to ensure the practice of ethical conduct • Having robust policies, procedures and measures in place to address any risks, including those associated with bribery or corruption • See chapter on good business conduct for more details (page 146) 22 The connection to the world of sustainable tropical agriculture 23 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy STRATEGY GOVERNANCE AND MANAGEMENT STRUCTURE SIPEF’s board of directors is ultimately responsible for the design and oversight of the Balanced Growth St rateg y. At a Group level, implementation of the Strategy is led by SIPEF’s executive committee, which steers the global teams in Belgium, Singapore, and Luxembourg. The global teams take on a coordinating role in the delivery of the Strategy, including monitoring and reporting on progress. At SIPEF’s operations in Indonesia, Papua New Guinea, and Côte d’Ivoire, the execution of the Strategy is carried out by the regional teams at the Group’s sub- sidiaries. The regional executive committees in each country oversee these teams and their activities, and report to SIPEF’s executive committee. 24 The connection to the world of sustainable tropical agriculture Leadership teams Board committees Global teams Group subsidiaries SIPEF EXECUTIVE COMMITTEE LUXEMBOURG (Jabelmalux SA) BELGIUM (SIPEF Head Oce) SINGAPORE (SIPEF Singapore Pte Ltd) Regional executive committee Regional executive committee PAPUA NEW GUINEA (Hargy Oil Palms Ltd) Regional executive committee CÔTE D'IVOIRE (Plantations J. Eglin SA) At a Group level, the Balanced Growth Strategy's implementation is coordinated by global teams in Belgium, Singapore and Luxembourg (finance, legal, marketing, IT, operational management and sustainability). Operational activities and the execution of the priorities under the Balanced Growth Strategy for SIPEF's palm products are carried out by the regional teams at its subsidiaries in Indonesia and Papua New Guinea. The regional executive committees in each country oversee these teams and activities, and report to the SIPEF executive committee. Operational activities and the execution of the priorities under the Balanced Growth Strategy for SIPEF's bananas are carried out by the regional teams at its subsidiary in Côte d'Ivoire. The regional executive committee in Côte d'Ivoire oversees these teams and activities, and reports to the SIPEF executive committee. SIPEF's board of directors is ultimately responsible for the design and oversight of the Balanced Growth Strategy. The Strategy's implementation is led by SIPEF's executive committee. • For a detailed description of ' - see pages 156-167) • For a detailed description of ' - see pages 84-85) (1) SIPEF has 14 subsidiaries in Indonesia. Governance, communications and reporting to the SIPEF executive committee are managed through the regional executive committee of SIPEF’s main and largest subsidiary, PT Tolan Tiga Indonesia. SIPEF's Balanced Growth Strategy: Governance Structure INDONESIA (PT Tolan Tiga Indonesia) (1) SIPEF BOARD OF DIRECTORS REMUNERATION COMMITTEE NOMINATION COMMITTEE AUDIT COMMITTEE 25 SIPEF Integrated Annual Report 2023 SIPEF’s mission and strategy SIPEF’s operations OVERVIEW OF OPERATIONS Palm Oil SIPEF’s primary operational activities are in the cultivation of oil palms and in the production of palm oil products. These activities take place across West New Britain, Papua New Guinea, and three provinces in Sumatra in Indonesia, where fresh fruit bunches (FFB) are grown, harvested and pro- cessed into crude palm oil (CPO), palm kernels (PK) and crude palm kernel oil (CPKO). The products are sold directly to customers in Indonesia or exported for sale to European customers. During the course of 2023, the Group’s commercial focus was on further developing its activities with an extended oil palm landbank in South Sumatra, where an addi- tional 1786 hectares were compensated, and 2 337 hectares were prepared for planting or planted, to reach a total of 18 760 cultivated hectares. With the replant of PT Dendymarker Indah Lestari (PT DIL) completed, the Group has 28 362 newly planted, maturing oil palm hectares in South Sumatra. By 31 December 2023, a total of 82 171 hectares within SIPEF’s concessions have been planted with oil palms. When accounting for the supply base managed by partnering smallholder producers, SIPEF’s total supply base exceeded more than 100000 hectares in 2023, reaching a new milestone. The production from this area collectively supplies nine palm oil processing mills in Indonesia and Papua New Guinea. In 2023, the Group’s palm related activities account- ed for 91% of its total rev - enue. The compounded annual oil palm hectarage growth rate over the last 10 years is 4.0%. 26 The connection to the world of sustainable tropical agriculture Bananas SIPEF’s banana production in Côte d’Ivoire is the Group’s second largest activity. SIPEF cultivates the Cavendish variety across five plantations managed by its subsidiary, Plantations J. Eglin. Plantations J. Eglin is one of the three major players within the banana export sector in Côte d’Ivoire. More than 80% of the bananas are sold to the European market and to the United Kingdom, in accordance with all relevant regula- tory requirements and guidelines. The rest are sold in the West Africa region and on the local market in Côte d'Ivoire. During the course of 2023, the new sites at Lumen and Akoudié were devel- oped. Together, they added an additional 421 hectares of banana cultivation, successfully already out- performing during their first year of harvest. By 31 December 2023, SIPEF’s total planted area for bananas was 1 229 hectares. Production of bananas in Côte d’Ivoire increased by 43.8% in the fourth quarter of 2023, bringing the annual production up to 40 976 tonnes, which is a 27.0% increase when compared to 2022. In 2023, the Group’s banana production accounted for 7% of total revenue. Rubber and tea In 2021, SIPEF had started phasing out its opera- tions in natural rubber and tea, a process that will be completed in 2024. The remaining 1% of SIPEF’s 2023 revenue comes from its residual production volumes of rubber and tea in Indonesia. In line with the phase out process, including the conversion of the rubber plantations to oil palm, the production of rubber continued to decline to less than 1 000 tonnes in 2023. 27 SIPEF Integrated Annual Report 2023 SIPEF’s operations PLANTED AREA BY ACTIVITY IN 2023 IN HECTARES INDONESIA PAPUA NEW GUINEA CÔTE D'IVOIRE TOTAL % Oil palms 68 621 13 550 0 82 171 96.3% Rubber 1 901 0 0 1 901 2.2% Bananas 0 0 1 229 1 229 1.4% Horticulture 0 0 29 29 0.0% Total 70 522 13 550 1 258 85 329 100.0% % 82.6% 15.9% 1.5% 100.0% By 2031, SIPEF is aiming for an annual production target of 600 000 tonnes of palm oil, and 55000 tonnes of bananas. To achieve this, SIPEF is focus- ing on improving production eciency by optimis- ing land use, improving production processes and boosting existing oil palm yields. The Group will also continue to seek investment opportunities by exploring the possibilities of developing new hectares with oil palm adjacent to its current oper- ations in order to enlarge its production capacity and, if needed, its infrastructure. Additionally, it will continue its work to retain existing property and concession rights. More information on SIPEF’s palm and banana operational activities and their results for 2023 can be found on pages 48-71. PRODUCTION 2023 IN TONNES OWN THIRD PARTIES YTD Q4/23 Oil palms 321 629 69 586 391 215 Rubber 827 141 968 Bananas 40 976 0 40 976 Planted area and production target 28 The connection to the world of sustainable tropical agriculture • Production efficiency • Operational excellence • High-quality, sustainable, traceable, certified products • Innovation and early adoption BUSINESS LEVERS SUSTAINABILITY LEVERS • Environmental stewardship • Respecting employees and communities • Responsible supply chain management • Good business conduct BUSINESS STRATEGY IMPLEMENTATION SIPEF’s operational activities and business strategy re- flect the Company’s top-down commitment to creating added value for all its stakeholders, fairly and respon- sibly. SIPEF’s Balanced Growth Strategy is founded on balancing commercial success with creating a positive impact on the environment, society, the local economies in the places where it operates, and for the various other stakeholders the Group engages with. SIPEF’s Balanced Growth Strategy has four core business levers that drive its commercial activities. 29 SIPEF Integrated Annual Report 2023 SIPEF’s operations Business and sustainability levers: complimentary and interconnected SIPEF’s business levers complement and operate together with its four core sustainability levers. Collectively, they ensure that SIPEF’s commercial activities are always interwoven with its environ- mental, social and good governance priorities. Both sets of levers are embedded in SIPEF’s stra - tegic decision-making, operational and business activities, employee and community engagements, and value chain relationships. Further details on the four sustainability levers, and how they connect with the business levers can be found in the chapter on sustainability at SIPEF, on page 74. 30 The connection to the world of sustainable tropical agriculture (1) Source: www.wur.nl/en/newsarticle/New-light-on-the-sustainability-of-palm-oil.htm (2) Source: www.bananalink.org.uk/all-about-bananas/ Production efficiency Land scarcity is one of today’s most critical issues. While the world’s population continues to rise, the amount of available arable land is decreasing due to land use competition, soil degradation caused by human-induced erosion and pollution, and the surging global demand for food. In the coming dec- ades, this will be compounded by the acute physical risks linked with climate change, and future policy developments that may induce further restrictions. SIPEF will continue to explore new opportunities for development in brownfield areas, in accordance with its no deforestation and no new planting on peat (NDP) policy. Its main strategic focus, however, is on enhancing production eciency and boosting yields through the optimisation of land use and production processes. Although the Group is striving for eciency for all of its crops, optimising yields in the production of oil palm is particularly important. Today, palm oil is one of the most important vegetable oils in the global oils and fats industry, generating significant employment and export earnings in key producing countries, including in Indonesia and Papua New Guinea. Oil palm is also highly productive, yielding as much as two to eight times more per hectare than any other vegetable oil crop. (1) It also has the lowest requirements for inputs of fertilisers, pesticides and fuel per tonne of production. Bananas also oer a number of productivity advan- tages as a crop. Banana plants can be harvested throughout the year, bear fruit within 9-12 months, and are highly productive. They are also a key crop for nutrition and global food security for more than 400 million people in producer countries, (2) and an essential source of income and employment for many households worldwide. SIPEF recognises the significant potential and importance of innovation in enhancing existing productivity potential, quality, and sustainability. The Group is committed to implementing best management practices that aim to improve soil fertility, optimise inputs to production, and further increase product quality and the yield per planted hectare. SIPEF also continues to make significant investments in research and development (R&D) and in innovative solutions that further support its production eciency goals. THE GROUP WORKS TO ENHANCE ITS PRODUCTION EFFICIENCY BY: • Optimising land use in production areas • Improving production processes • Engaging in practices and solutions focused on boosting yields 31 SIPEF Integrated Annual Report 2023 SIPEF’s operations Box: Re-using and recycling by-products and packing materials Wherever possible, SIPEF explores and adopts circular practices in its operations. Many of these are focused on optimising inputs, reusing by-prod- ucts and minimising waste from its production and processing activities, and on implementing regenerative and nature-based solutions. Some examples of these include: Using by-products from its palm oil and banana production activities, as well as from third-parties, as organic fertiliser. Organic waste and biomass, such as empty fruit bunches (EFB), treated palm oil mill effluent (POME), banana stems, and cocoa husks are applied to the fields as organic fertiliser. Generating renewable energy from the by-products of milling operations to power operations and employee compounds. Electricity is generated at all of SIPEF’s mills from the burning of fibres from palm nut mesocarp in boilers and the use of steam turbines. Additionally, at one of its mills, the Group uses methane capture from POME and a biogas generator to produce electricity. Looking ahead, SIPEF is also exploring the possi- bility of harnessing its biogas for the production of BioCNG (compressed natural gas), a renewable energy source. Re-use and recycling of packing materials from banana packing stations. Locally purchased card- board boxes and pallets are recycled by customers at destination. For some customers, re-usable IFCO crates are used for packing the bananas. Read more about how SIPEF implements circular and regenerative practices in the the chapter on environmental stewardship on page 90. Operational excellence For SIPEF, operational excellence means striving to enhance the eciency of its processes and the eectiveness of its practices, ensuring the Company is making progress towards its long-term goals. A key focus in this area is maximising the value of its activities and outputs, both in terms of the quantity and quality of its products to meet customer demands, but also in the new or added value that can be generated for the by-products of its production processes. At SIPEF, a continuous improvement philosophy is applied in the Group’s approach to making decisions, managing activities, engaging with employees, and collaborating with upstream and downstream partners in its value chain. This includes monitoring the Group’s operational suc- cess at dierent stages, and trialling and adopting new techniques and technologies. OPERATIONAL EXCELLENCE AT SIPEF MEANS: • Maximising production quantity and quality • Optimising inputs, reusing by-products, and minimising waste • Promoting a culture of continuous improvement 32 The connection to the world of sustainable tropical agriculture High-quality, sustainable, traceable, certified products Producing high-quality, sustainable, traceable, and certified palm oil and bananas has a crucial role to play in meeting the global demand for these com- modities, while protecting the natural environment and human rights, and enhancing the livelihoods of smallholders and local communities. SIPEF takes on a holistic approach to quality and sustainability, underscoring its dedication to contributing to a sustainable food system, and its role in shaping a more responsible agricultural sector. By prioritising these aspects, SIPEF can also dierentiate itself from other players on the market. INTEGRAL TO THIS LEVER IN SIPEF’S STRATEGY ARE THE FOLLOWING: • Implementing the highest food safety and quality standards • Maintaining 100% traceability for all products • Full compliance with leading sustainability standards and certifications 33 SIPEF Integrated Annual Report 2023 SIPEF’s operations Production of high-quality, virgin oil By integrating innovative techniques and improv- ing quality control measures, SIPEF is significantly reducing contaminants in its palm oil production. A key focus area here has been the successful transition to the use of H1 food grade lubricants, a programme that started in Papua New Guinea in 2022 that has shown positive results during 2023. The pilot project at the Barema palm oil mill for the separation of ‘virgin’ oil and ‘technical’ oil continued steadily in 2023, with the ocial com- missioning taking place in March 2024. Producing high-quality palm oil Implementing the highest food safety and quality standards is an important focus area in the pro- duction of palm oil products given the growing demand for high-end, controlled ingredients. This is also in view of the growing concerns in consumer countries over additives and specific contaminants in vegetable oils, alongside the requirements of European food safety regulations. SIPEF’s commitment to high-quality palm oil starts from the initial stages of production and extends throughout its supply chain. The Group has established comprehensive quality assurance protocols and conducts regular inspections and tests to ensure that its palm oil meets the strictest industry standards. In line with its ambition to become the preferred supplier of high-end, pre- mium oil palm products, uniquely positioned in the market, SIPEF aims to completely eliminate or minimise contaminants, such as chloride—a precursor for 3-MCPD Esters, Glycidyl esters (GE), and other potential impurities like mineral oil contamination (MOSH and MOAH). 34 The connection to the world of sustainable tropical agriculture Palm oil: 3-MCPD and GE contaminants 3-MCPD esters can form as a result of chemical reactions during the deodorisation stage in the palm oil refining process. Under the very high temperatures during this process, chloride can react with the glycerol backbone of lipids to produce 3-monochloropropane-1,2-diol(3-MCPD). Glycidyl fatty acid esters (GEs) is also a compound that can form from edible oil during high-temperature refining processes. 3-MCPD is considered a contaminant because the high consumption of the compound may lead to potential health concerns among younger age groups, especially infants. High levels of GEs in food is genotoxic and carcinogenic. 3-MCPD and GE are not present in the raw materials, but can appear as a result of the refining process. At the close of 2023, SIPEF successfully completed the pilot of its CPO washing facility, installed at its Mukomuko palm oil mill in Indonesia. The purpose of the washing facility is to reduce the level of chlo- ride in CPO production, one of the main precursors to causing a higher risk of 3-MCPD. With promising initial results, the washing facility will undergo further testing and monitoring throughout 2024 before facilities are installed at additional sites. 35 SIPEF Integrated Annual Report 2023 SIPEF’s operations Palm oil: Mineral Oil Hydrocarbons contaminants (MOAH and MOSH) The European Food Safety Authority (EFSA) published a reference related to Mineral Oil Hydrocarbons (MOH), indicating that it was present at several levels in nearly all foods. Subsequently, it was also determined that the dierent vegetable oil industries would need to focus on the Hazard Analysis Critical Control Point (HACCP) system, which should have special considerations towards lubricants handling in the production of the crude oils. Mineral oil components such as Mineral Oil Aromatic Hydrocarbons (MOAH) and Mineral Oil Saturated Hydrocarbons (MOSH) can enter food at dierent stages of food production including cultivation, storage, transportation, processing, and packaging. The main sources of these com- pounds include hydraulic oils used in machines, adhesives, printer inks and packaging materials. These components raise health concerns; MOSH can accumulate in the liver and lymphoid system, leading to inflammation, while MOAH is potentially carcinogenic. SIPEF recognises the significance of producing high quality premium oil with low contamination, and has commenced projects through partnerships among its internal stakeholders from its quality departments and engineering departments, focused on setting up a control programme to reduce any risk of MOSH and MOAH contamination, as well as develop mitigation measures. KNOWN HEALTH RISKS CAUSED BY MINERAL OILS MOH (Mineral Oil Hydrocarbons) MOSH (Mineral Oil Saturated Hydrocarbons) • Accumulate in the liver • Suspected carcinogenic effect • Carcinogenic effect • Genotoxic effect MOAH (Mineral Oil Aromatic Hydrocarbons) ENGINEERING CONTROL (SHORT TERM) SIPEF has identified the common sources and risk mitigation solutions in its palm oil mill operations. The key is to ensure regular equipment maintenance to eliminate lubri- cant leakages at the hotspots identified and incorporate engineering control to contain the potential leakages. FOOD GRADE LUBRICANT IN PALM OIL MILLS (LONG TERM) Since late 2022, all kernel crushing plants and palm oil mills in Papua New Guinea have replaced their mineral oil lubricants with food grade lubricants in processes that are in direct contact with the products during processing. During the course of 2023, all operations in Indonesia underwent the same process. As such, 100% of the palm oil mills have been switched to food grade lubricants by the end of 2023. 36 The connection to the world of sustainable tropical agriculture Producing high-quality bananas Quality standards in the production of sustain- able bananas are established with customers and plantations, with ongoing inspections happening on the ground through dedicated teams. Reports are provided to ensure that eective procedures and controls are in place to maintain the quality of the products. Besides quality control, Plantations J. Eglin also focuses on food safety through estab- lished implementation controls, such as, adhering to food safety certification for packaging to avoid cross-contamination, as well as best field and oper- ational practices, ensuring that any contamination from planting until the point of export to customers follow the requirements on residual controls. Traceability for palm oil and bananas SIPEF is a leader in traceability, with all commodi- ties it sells being fully traceable to their production location, either an estate managed by SIPEF or a supplier smallholder plot. Traceability is a fundamental principle for sustain- ability 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. It is also essential for ensuring food safety, meeting consumer demands for transpar- ency, complying with regulations, and improving supply chain management and eciency. In 2023, SIPEF maintained 100% traceability for its palm oil products and bananas. All of the sustainability certification schemes SIPEF complies with require full traceability on sourcing in order to claim full sustainability of a product. SIPEF’s nine mills are all certified in accordance with the Roundtable on Sustainable Palm Oil (RSPO) standard, with eight of the mills under the Identity Preserved (IP) supply chain model, and one mill, PT DIL in South Sumatra, operating under the Mass Balance (MB) model. PT DIL mill's supply chain model is MB due to a portion of its supply base undergoing the RSPO certification process. SIPEF’s palm oil mills only source from own plan- tations or from smallholders whose production locations are known and mapped. As such, while some of the palm oil supply base of PT DIL mill is not yet certified, all of it is traceable. The Group’s two kernel crushing plants under Hargy Oil Palms Ltd (HOPL) in Papua New Guinea are RSPO certified under the Segregated (SG) supply chain model with all the supply bases fully mapped. All of SIPEF’s banana plantations and packing sta- tions are certified under the IP supply chain model in accordance with requirements of Rainforest Alliance certification. 37 SIPEF Integrated Annual Report 2023 SIPEF’s operations Enhancing transparency and traceability with technology : 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, and their respective supply bases. It also provides auxiliary information, including the status of certifications where relevant, infor - mation on production capacity, and the proximity of operations to key biodiversity areas. • Geo SIPEF can be accessed at www.geosipef.com Plantations J. Eglin has developed an innovative traceability software, which uses barcodes to trace the bananas being purchased by customers back to the boxes at the packing stations. The software is currently being implemented at two packing stations, with the aim to roll out its use across all stations. As a next step, SIPEF aims to make improvements, including the development of a web- based traceability platform accessible to customers. 38 The connection to the world of sustainable tropical agriculture 39 SIPEF Integrated Annual Report 2023 SIPEF’s operations Sustainability standards and certifications Certification establishes a foundation for guiding SIPEF in its continuous improvement journey towards balanced growth. It oers a structured framework for the Group to embed sustainability and good management practices across its own operations and supply chain, positions SIPEF as a responsible participant in the global market, and drives operational improvements. Certification also fosters transparency and accountability, ena- bling the Group to demonstrate its commitment to environmental, social and governance practices through verifiable standards. Throughout 2023, SIPEF continued to maintain and progress its compliance with leading cer- tification standards for its palm oil and banana operations. Palm oil certification SIPEF is working towards its target to achieve 100% RSPO certification for all its oil palm operations. including for the smallholders in its supply chain. The Group has developed a time-bound plan to have all its mills and their supply bases certified by 2026. As of 31 December 2023, 76% of SIPEF’s own planted area is RSPO certified. All mills and kernel crushing facilities have maintained their RSPO certification. All six of the Group's mills in Indonesia are also certified in accordance with the ISPO Standard. 76% RSPO certified planted areas (own plantations) 100% RSPO certified PKO in Papua New Guinea 3 mills in Indonesia ISCC certified 6 mills in Indonesia ISPO certified 89% RSPO certified CPO 9 mills RSPO certified 2 kernel crushing plants in Papua New Guinea RSPO certified 40 The connection to the world of sustainable tropical agriculture Banana certification For its banana operations, SIPEF is committed to achieving 100% Rainforest Alliance, Fairtrade, and GlobalG.A.P certification. During the course of 2023, the company achieved Rainforest Alliance and GLOBALG.A.P certifica- tions for its new sites, Akoudié and Lumen, reinstat- ing the status of SIPEF’s banana operations as fully certified. Plantations J. Eglin has been rigorously preparing for the certification of these sites since their acquisition in 2021. In 2023, all sites that were Fairtrade certified in previous years have maintained their certifica- tion. The certifications of SIPEF’s plantations and packing stations at the two new sites, Akoudié and Lumen, are currently in progress. For the first time, the Group's headquarters in Belgium achieved certification under the GlobalG.A.P. Chain of Custody Standard and the Rainforest Alliance supply chain certification standard (2020 Sustainable Agriculture Standard: Supply Chain Requirements). Additionally, it main- tained its Fairtrade Trader Standard certification. 5 estates and 7 packing stations 1. Rainforest Alliance certified 5 estates and 7 packing stations GLOBALG.A.P certified 3 estates and 4 packing stations Fairtrade certified 41 SIPEF Integrated Annual Report 2023 SIPEF’s operations Entering new premium markets Looking to the future, SIPEF continues to explore new and improved customer and distribution chan- nels for high quality, sustainable, traceable and certified – essentially premium – bananas and palm oil. Building on long established relationships in its upstream value chain, SIPEF is now also look- ing at collaborating more closely with potential downstream players in key markets. By engaging with them on the latest quality standards, sustain- able cultivation techniques, and the reduction of contaminants, SIPEF is fostering a shared com- mitment to delivering premium, low-contaminant palm oil to existing and new customers. 42 The connection to the world of sustainable tropical agriculture Innovation and early adoption As an agribusiness company guided by the principle of continuous improvement, SIPEF recognises the immense potential of being an early adopter of innovation. The palm oil industry has started to focus on innovative ways of working to achieve higher e- ciency and productivity, whilst improving natural resource management and environmental protec- tion. Pilot projects, currently in the inception stages and expected to scale up over the next decade, focus on developing technologies that will, for example, deliver higher quality crude products, optimise waste streams, and reduce carbon impacts. Of course, external factors that may accelerate or delay such innovative developments and their eective adoption, including war, government policy, or disease outbreaks, need to be considered. SIPEF teams at dierent locations continue to move forward on testing and applying new principles and practices in its operations and value chain. The Group is making progress on its technology agenda by streamlining its IT department and starting to review digital capabilities and software applications towards the future needs of the business. By using digital technologies such as block-by-block Performance Analysis, using drones or high-res- olution imagery and GPS data, SIPEF is now able to identify each palm tree or production unit, so that a poor yield can in future, be individually dealt with. The Group also continues to invest in digitalisation and advanced technologies with the aim of developing predictive modelling capabilities that can be used to determine yield and climate impacts in the future. SIPEF is dedicated to a long-term vision and, as such, prioritises investments in research and development, and innovation. These continuing endeavours are based on a long-term view and are instrumental in advancing progress towards communal sectoral challenges: • Significantly enhancing yield per hectare annually, utilising Verdant Bioscience Pte Ltd’s innovative F Hybrids: By maximising yield, there will be eectively optimised land utilisation for oil palm cultivation, thereby alleviating pressure on further deforestation and biodiversity loss through the concept of ‘land sparing’. This stands as the leading sustainability objective, yet to be attained by the global oil palm industry as well as the agricultural sector in general. • Efficient production and processing: increasing the eciency and optimisation of the use of inputs, and repurposing by-products; • Improving quality: significantly improving the quality of planting materials and palm products (focusing on human health); • Enhancing resilience: boosting the resilience of future crops, as a key step in strengthening the capacity for adaptation to climate change. SIPEF’S PRIORITIES UNDER INNOVATION AND EARLY ADOPTION ARE: • Investing in research and development (R&D) to enable progress towards sustaina- ble and optimal land use, ecient production, higher quality products, and resilient crops • Testing and applying new prin- ciples and practices • Remaining agile and adaptable to accom- modate strategic and market shifts 43 SIPEF Integrated Annual Report 2023 SIPEF’s operations Verdant Bioscience Pte Ltd SIPEF has made strategic investments in Verdant Bioscience Pte Ltd (VBS), acknowledging the sub- stantial potential for research and development (R&D) and innovation stemming from this partner- ship. This collaboration reinforces the dedication to fostering innovation and continuous improvement as well as early adoption of new technology. Currently, there are three primary areas of ongoing research and development with significant poten- tial to enhance palm oil production: • Development of improved crop varieties; • Enhancing crop genetic resistance and resilience; • Improving agronomic and crop protection practices, including early adoption of new techniques focusing on soil health and regenerative practices. Note: The scope does not include genetic modification. 44 The connection to the world of sustainable tropical agriculture Verdant Bioscience Pte Ltd F 1 Hybrid oil palm varieties VBS continues to advance its core strategy of devel- oping and delivering high-yielding, field-proven F 1 Hybrid varieties for the oil palm industry. Recognising the escalating global demand for vegetable oil, without the option to expand oil palm cultivation areas, enhancing yield per unit area of land emerges as the primary solution. F 1 Hybrids hold the promise of potentially doubling yields per hectare, thereby mitigating the risk of further deforestation and biodiversity loss. In 2021, VBS started its field trial programme by planting 31 F 1 Hybrid crosses and then in 2022 another 42 crosses were trial planted. In 2023, a further 161 F 1 Hybrid crosses were trial planted. The objective of these trials is to ensure that VBS’ F 1 Hybrid crosses have been robustly field tested before selection and commercial release. The harvesting/yield recording of the first F 1 Hybrid trial started in January 2024. Enhancing resistance and resilience The seedlings from F 1 Hybrid crosses are screened in the nursery for disease tolerance, drought toler- ance and variation in nutrient uptake. The crosses are then field tested in a range of field environments in dierent geographic locations. Genetic pest and disease tolerance breeding is usually the most robust crop protection strategy but takes time to implement. VBS is developing commercial F 1 Hybrid crosses which will deliver high yields despite the changing rainfall patterns caused by climate change and in more marginal environments in terms of soil fer- tility. More batches of genetically diverse F 1 Hybrid crosses will be trialled each year for evaluation in SIPEF’s plantations to ensure the selection is optimised for SIPEF’s estates and management practices. 45 SIPEF Integrated Annual Report 2023 SIPEF’s operations In addition to testing genetically diverse crosses, VBS will also produce crosses from parents with complimentary traits. Therefore, producing crosses which are not only high yielding but are also toler- ant to diseases and pests and/or with traits which will allow ease of future mechanisation and ease of harvesting (late abscission bunches with long stalk). VBS remains on track to be able to market fully tested high yielding F 1 Hybrids by 2029. Improvements in agronomic practices A further VBS priority is to deliver bespoke agro- nomic recommendations to SIPEF estates which will deliver the highest returns on investment whilst regenerating soil health. To achieve this goal there are ongoing oil palm fertiliser field trials being carried out to test fertiliser treatments (major and minor nutrients) in dierent environments. The fertiliser trial results will allow further refinement of the annual fertiliser recommendations to SIPEF estates. Greater emphasis is now also being placed on regenerative practices optimising soil health by the management of legume cover crops, shrubs and trees to maximise nitrogen fixation. By committing to regenerating soil health greater value will be gained from both organic and inorganic fertilisers (higher yield per nutrient unit). VBS research work focuses on utilising organic fertilisers, such as compost derived from a blend of palm oil mill empty fruit bunches (EFB) and palm oil mill euent (POME), or solely EFB in cases where a composting facility is unavailable. These organic fertilisers serve as ecient slow-release agents, and their application in the field not only enhances soil health by boosting microbial diver- sity and activity but also fosters improved nutrient uptake. Moreover, this approach has the potential to mitigate the risk of soil-borne diseases. 46 The connection to the world of sustainable tropical agriculture Improvements in crop protection practices As research progresses, VBS promotes integrated pest and disease management strategies, prioritis- ing biological control methods and preventative measures, with minimal reliance on pesticides. In cases where biological control proves ineec- tive, VBS will only recommend the use of targeted pesticides specifically tailored to control the pest, avoiding the use of broad-spectrum pesticides whenever possible. This approach is facilitated by employing precise application techniques and selecting formulations that are best suited to the task at hand. The disease Ganoderma is the most significant Southeast Asian oil palm disease and often causes significant palm losses in second or third oil palm generations. Therefore, VBS is partnering with SIPEF estates to implement procedures which reduce the Ganoderma disease inoculum at replant- ing and also to apply other fungi species which are antagonistic to Ganoderma disease infection. SIPEF will continue to make R&D investments and explore new technologies that refine production methods and keep SIPEF at the forefront of indus- try advancements towards producing high-quality, low-contaminant palm oil. Remaining agile and adaptable to accommodate strategic and market shifts will be key for SIPEF in the long-term. 47 SIPEF Integrated Annual Report 2023 SIPEF’s operations SIPEF PALM OIL VALUE CHAIN As an upstream player, SIPEF's core activities focus on the cultivation of oil palm, and on the harvesting and processing of fresh fruit bunches (FFB) into crude palm oil (CPO), palm kernels (PK) and crude palm kernel oil (CPKO). • Seeds and plants (including Verdant Bioscience Pte Ltd) • Production resources e.g. fertilisers • Machinery, various equipment and tools • Long-term lease of land SIPEF PLANTATIONS ORGANIC FERTILISER INPUTS SMALLHOLDER PLANTATIONS SIPEF MILLS INCL. KERNEL CRUSHING PLANTS MILL WASTE + FFB SIPEF EMPLOYEES BEST MANAGEMENT PRACTICES AND CERTIFICATIONS BYPRODUCTS Third-party activities SIPEF activities SIPEF product destination 48 The connection to the world of sustainable tropical agriculture RENEWABLE ENERGY SIPEF MILLS INCL. KERNEL CRUSHING PLANTS MILL WASTE + SIPEF EMPLOYEES COMMUNITIES SIPEF provides to employees and communities: • Employment • Healthcare • Housing • Schools • Other services CUSTOMERS REFINERS & KERNEL CRUSHING PLANTS BEST MANAGEMENT PRACTICES AND CERTIFICATIONS CPO, PK & CPKO BYPRODUCTS STORAGE/ TRANSPORT • Food industry • Chemical industry • Cosmetics industry • Biofuel • Own tanks at estate • Tanks at the port • Transport over land in tanker trucks (local sales) • Shipped in tanker vessels (export sales) DISTRIBUTION NETWORK STORAGE TRANSPORT RETAILERS CONSUMERS 49 SIPEF Integrated Annual Report 2023 SIPEF’s operations Throughout the dynamic landscape of 2023, SIPEF’s oil palm plantations faced challenges of volatile weather conditions, partly influenced by the impacts of El Niño. In Indonesia, South Sumatra and Bengkulu regions faced a dry spell, in particular during the months of August and September. The consequences of this were somewhat compensated for by much antici- pated rainfall in the third and fourth quarters in North and South Sumatra. The Bengkulu region, however, continued to face a prolonged dry period. Consequently, the volatile weather conditions impacted SIPEF’s FFB cultivation and harvest, and the Group saw an overall slightly lower production in 2023, compared with the previous year. By the fourth quarter, however, Indonesia’s production had steadily recovered, complemented by a strong start of the year for the operations in Papua New Guinea. The appreciated fourth quarter increase of 7.9% in palm oil production in Indonesia was, unfor- tunately, more than oset by the cyclical decline in production in Papua New Guinea in the second quarter (-17.4%). This reduction was exacerbated by a volcanic eruption on 20 November, aecting parts of SIPEF’s estates’ planted palms and smallholder production. In 2023, own FFB production reached 1 417 031 tonnes of fruit, which was 1.83% lower compared with 2022. Total FFB production, including small- holders, resulted in 1 710 292 tonnes of fruit, which is -2.37% on last year’s production. The overall annual palm oil production of the SIPEF group was 391 215 tonnes, a decrease of 3.2% on last year. The focus on controlled growth continued in 2023, with the full integration and rehabilitation of the Batu Kuda estate in the Bengkulu region, which is adjacent to SIPEF’s existing Agro Muko operation. A total area of 1 512 hectares was integrated, with an additional 235 hectares being replanted. At Musi Rawas, an additional 2 337 hectares was replanted in compliance with RSPO in 2023, bring- ing the total area to 18 760 hectares. Finally, with the replanting of Dendymarker Indah Lestari (DIL) also completed, the Group has 28 362 newly plant- ed, maturing oil palm hectares in South Sumatra. Despite some of the challenges, SIPEF's operational teams exhibited resilience and adaptability, navi- gating through fluctuations with determination and strategic foresight. Looking forward, the Company remains committed to controlled growth, exploring opportunities to enhance eciencies and scale. PALM OIL: OPERATIONAL ACTIVITIES IN 2023 50 The connection to the world of sustainable tropical agriculture Operational activities in Indonesia Together with its subsidiary, PT Tolan Tiga Indonesia, SIPEF controls and manages its operational activities in Indonesia through the head office in Medan and three regional management offices in North Sumatra, Bengkulu and South Sumatra provinces, where its plantations and mills are located. North Sumatra 1 2 3 Kerasaan 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 7 2 3 4 5 6 1 2 1 2 3 4 Estates Mills 7 Bandar Sumatra 51 SIPEF Integrated Annual Report 2023 SIPEF’s operations INDONESIA, NORTH SUMATRA MATURE IN HECTARES IMMATURE IN HECTARES AVERAGE OIL PALM AGE FFB PRODUCED 2023 IN TONNES FFB PRODUCED 2022 IN TONNES YIELD 2023 FFB/HA IN TONNES Tolan Tiga group 11 455 2 496 13.0 282 821 303 925 24.7 Umbul Mas Wisesa group 9 924 0 14.6 186 328 220 439 18.8 Subtotal own plantations 21 379 2 496 13.7 469 149 524 364 21.9 Smallholders N/A N/A N/A 11 116 12 348 N/A TOTAL 21 379 2 496 480 265 536 712 22.5 The business unit, comprising the Tolan Tiga and Umbul Mas Wisesa (UMW) groups, includes three mills, and collectively rep- resents an established operation. The Tolan Tiga group covers 11 455 hectares of mature estates and 2 496 hectares of immature estates, and the UMW Group covers 9 924 hectares of mature estates. Throughout 2023, operations in the North Sumatra region still faced the impact of the extended drought period in 2021/2022, aecting both the mineral and organic soil estates. This resulted in decreased yields, with a total FFB production on mineral estates of 282 821 tonnes, a decline of 6.9% compared with the previous year. Similarly, FFB production on organic soil estates was 186328 tonnes, a decline of 15.5% compared with the pre- vious year. Despite these challenges, a focus on organic soil management at UMW yielded positive results in the third quarter, with a 2.4% improvement compared with the third quarter in 2022. However, fluctuating rainfall patterns, characterised by dry months in the second quarter and high rainfall for the remain- der of the year, impacted crop production as well as the extraction rates, particularly in the fourth quarter. Consequently, palm oil production on min- eral estates closed the year with a 7.15% decrease, while organic soil estates experienced a 17.60% decline. Additionally, UMW encountered extreme wet conditions from September onwards, resulting in approximately 50% of the UMW South estate being flooded. Progress in the conversion from rubber to oil palm at the Bandar Pinang estate, a part of the Tolan Tiga group, has been substantial. In 2023, a significant 500 hectares of oil palm were successfully planted, marking a successful transition from rubber to oil palm cultivation. The full conversion of rubber to oil palm across the estate is expected to be finalised by 2024. Additionally, the replanting programme within the Tolan Tiga group also progressed, with 1 159 hectares being prepared in 2023 alone. This brings the total immature hectare count from 1 244 in 2022 to 2 496, reducing the average oil palm age of the Tolan Tiga group to 13.0. Plantations 52 The connection to the world of sustainable tropical agriculture The regional business unit of is made up of Agro Muko and the Muko Muko Agro Sejahtera groups, consisting of eight plantations and two mills, which are located over two sub-regions, each delivering to its own mill. The area consists of 17484 hectares of mature estates and 4 066 hec- tares of immature estates. In 2023, the harvested FFB remained consistent with the previous year, with 362 376 tonnes of FFB against 361 096 tonnes of FFB, showing an increase of 0.4%. The year started o slow but was oset by a robust fourth quarter performance (+7.7%). Throughout the year, the region experienced significantly low rainfall levels. A four-month drought period during the second half of 2023 was experienced, with precip- itation levels dropping below 100 mm per month. The Batu Kuda estate integration was completed in December 2023, with rehabilitation efforts advancing steadily and 235 hectares successfully replanted. Additionally, harvesting activities con- tinued on 660 hectares of old plantings. In 2023, eorts resulted in the collection of nearly 5 500 tonnes of FFB, marking a notable increase of 25.7% compared with the previous year. Furthermore, 2023 saw good progress on the construction of new infrastructure, including the new housing. INDONESIA, BENGKULU MATURE IN HECTARES IMMATURE IN HECTARES AVERAGE OIL PALM AGE FFB PRODUCED 2023 IN TONNES FFB PRODUCED 2022 IN TONNES YIELD 2023 FFB/HA IN TONNES Agro Muko 14 995 3 474 11.4 323 895 330 182 21.6 Mukomuko Agro Sejahtera 2 489 592 9.1 38 481 30 914 15.5 Subtotal own plantations 17 484 4 066 11.1 362 376 361 096 20.7 Smallholders 1 083 0 N/A 17 356 17 662 16.0 TOTAL 18 567 4 066 379 732 378 758 20.5 53 SIPEF Integrated Annual Report 2023 SIPEF’s operations INDONESIA, SOUTH SUMATRA MATURE IN HECTARES IMMATURE IN HECTARES AVERAGE OIL PALM AGE FFB PRODUCED 2023 IN TONNES FFB PRODUCED 2022 IN TONNES YIELD 2023 FFB/HA IN TONNES Agro Kati Lama 4 022 779 6.2 64 387 55 924 16.0 Agro Rawas Ulu 2 405 205 5.8 35 397 28 862 14.7 Agro Muara Rupit 4 980 3 371 3.3 57 566 40 473 11.6 Dendymarker Indah Lestari 4 646 2 788 3.0 60 815 29 354 13.1 Subtotal own plantations 16 053 7 144 4.1 218 165 154 613 13.6 Smallholders 2 313 2 857 N/A 32 377 24 023 14.0 TOTAL 18 366 10 001 250 542 178 636 13.6 The developments in are organ- ised into four groups of estates, including the DIL estate. The cultivated areas in South Sumatra con- tinued to grow by 2 337 hectares to 18 760 hectares, all in compliance with RSPO. With the replanting of DIL completed, the Group has 28 362 newly planted, maturing oil palm hectares, of which 5170 are plasma hectares, in South Sumatra. In 2023, the harvested FFB increased compared with the previous year, with 218 165 tonnes of FFB against 154 613 tonnes of FFB, showing an increase of 41.1%. South Sumatra experienced very dry weather in the third quarter. August and September recorded hardly any rainfall, and the planting and manur- ing activities had to be stopped. As from October onwards, the weather patterns changed, and high rainfall in November and December helped to make up for the delays incurred in planting. The replanting of DIL was successfully completed in 2023 with the full replanting of own estates, totalling 7 434 hectares. The replanting of the plasma area was also completed, covering 2 749 hectares. In 2023, the plasma areas under the DIL estate achieved RSPO certification. The potential for the development of more than 3400 hectares remains a moving target, depending on the identified potential of the old projects, but also in adjacent areas, where opportunities are still being discovered. 54 The connection to the world of sustainable tropical agriculture In , there are six operational mills, with a seventh mill currently under construction in South Sumatra, at Agro Muara Rupit (AMR). The total own production of palm oil amounted to 231569 tonnes, compared with 226 611 tonnes in 2022. The Group's average oil extraction rate (OER) stood at 22.9%, a slight decrease from the previous year's 23.1%. In North Sumatra, where the plantations are predominantly mature and have a well-aged profile, the three mills (Bukit Maradja, Perlabian and UMW) exhibited a stable average OER, albeit slightly lower than the previous year. The OER at UMW experienced a decline of -2.15% compared with 2022, primarily attributed to the exceptionally wet weather in the fourth quarter. However, across all three mills, kernel extraction saw improvement in 2023, following the implementation of a kernel recovery programme. Mills INDONESIA, NORTH SUMATRA BUKIT MARADJA PERLABIAN UMBUL MAS WISESA 2023 2022 2023 2022 2023 2022 Capacity (tonnes FFB/h) 30 30 55 55 40 40 Actual throughput 29.0 30.3 50.7 54.3 40.2 40.2 FFB processed (tonnes) 114 090 118 867 176 404 191 668 152 673 181 137 Crude palm oil produced (tonnes) 26 952 28 129 38 865 42 378 34 985 42 420 Oil extraction rate (%) 23.62 23.66 22.03 22.11 22.91 23.42 Kernel extraction rate (%) 5.20 4.91 5.87 5.82 4.20 4.12 Free fatty acids (%) 2.59 3.28 2.76 3.60 3.44 3.52 INDONESIA, BENGKULU MUKOMUKO BUNGA TANJUNG 2023 2022 2023 2022 Capacity (tonnes FFB/h) 60 60 30 30 Actual throughput 59.7 47.4 32.1 30.5 FFB processed (tonnes) 266 301 255 366 107 941 118 469 Crude palm oil produced (tonnes) 62 574 60 088 23 610 26 530 Oil extraction rate (%) 23.50 23.53 21.87 21.39 Kernel extraction rate (%) 4.12 4.01 5.17 4.82 Free fatty acids (%) 2.95 2.72 3.3 3.61 INDONESIA, SOUTH SUMATRA DENDYMARKER INDAH LESTARI 2023 2022 Capacity (tonnes FFB/h) 60 60 Actual throughput 50.9 41.6 FFB processed (tonnes) 250 542 162 350 Crude palm oil produced (tonnes) 57 465 37 742 Oil extraction rate (%) 22.94 23.23 Kernel extraction rate (%) 3.86 3.54 Free fatty acids (%) 3.2 3.09 55 SIPEF Integrated Annual Report 2023 SIPEF’s operations The average OER in Agro Muko, across two mills, dipped marginally from 23.2% in 2022 to 23.0% in 2023, although the palm oil production remained consistent, totalling 86 185 tonnes. At Bunga Tanjung mill, the second boiler is being refur- bished, and is expected to result in performance improvements in the course of 2024. Additionally, a kernel recovery programme was implemented at the Agro Muko mills in 2023, resulting in notable improvements. The average OER in South Sumatra at DIL was 22.9%, marking a decrease of 1.34% compared with 2022. This reduction can be attributed to the extended wet season experienced in the fourth quarter, compounded by technical challenges encountered with steam distribution. Still the production of Crude Palm Oil (CPO) from own estates experienced a significant uptick, increasing by 55.48%. Total CPO production reached 57 465 tonnes, a notable increase from the 37 742 tonnes produced in the previous period by more areas coming into maturity. The construction of the AMR mill was substantial throughout 2023, with expectations for completion and operation by the second quarter of 2024. Aligned with SIPEF’s strategic focus, a compre- hensive programme was initiated in 2023 focused on enhancing the quality of oils produced by the Group’s mills. Several key initiatives have been carried out, with a strong emphasis on reducing contaminants such as chloride, MOSH/MOAH, and GE. Notably, a washing plant was installed at the Muko Muko mill in 2023, and has been successfully completed. Initial results have been promising, with the plant having achieved chloride levels below 2.5 ppm. Furthermore, eorts have commenced to transition all lubricants to food-grade standards, aligning with SIPEF’s commitment to quality and safety. Additionally, an overarching quality programme has been established, with a focus on enhancing control over critical points in the milling process. In line with SIPEF's emissions reduction strategy, a bio-compressed natural gas (Bio-CNG) plant project is set to commence in North Sumatra in collaboration with the KIS Group, and aiming to be operational by early 2025. The plant will use the captured methane and further compress this into bottled gas. In addition, boiler and steam pro- duction improvements are underway in the North Sumatra mills. 56 The connection to the world of sustainable tropical agriculture Operational activities in Papua New Guinea Hargy Oil Palms Limited (HOPL) in Papua New Guinea is operating six oil palm plantations, organised under three estates delivering to its three palm oil mills, together with 3 646 certified smallholders that also supply its mills. Estates Mills West New Britain 1 Hargy Oil Palms 1 57 SIPEF Integrated Annual Report 2023 SIPEF’s operations The Papua New Guinea operations began the 2023 year on a positive note, maintaining the perfor- mance seen over the past two years with 104 459 tonnes of FFB in the first quarter. However, pro- duction experienced a decline in the second semes- ter, aecting both own estates and surrounding smallholders. The third quarter was particularly challenging, marked by a significant decrease in production (22.3% on own estates) due to lower bunch numbers and above-average rainfall. In par- ticular, Bakada plantation, part of Pandi estate, had the largest deficit of FFB, being 20% below the 2022 performance. This could have been attributed to the prolonged drier period of four months experienced in 2022. Production saw improvement in the last quarter of the year, with 367 340 tonnes of FFB of own production, although remaining 13.5% lower than the previous year for own estates. The smallholder crop amounted to 232 414 tonnes of FFB, which was -11.3% compared with 2022. Rainfall patterns returned to normal, aligning with the five-year average, following two years of drier weather in Papua New Guinea. Precipitation was evenly distributed throughout the year, with above-average rainfall in the middle of the year and relatively dry periods during the wet season. Over the past three years, the replanting eorts have shown significant progress, with 1 845 hec- tares being replanted. This has eectively lowered the average age of palms across the entire HOPL estates to 10.5 years. Furthermore, in 2023, the transportation situation saw improvement with the arrival of new trucks onsite. These trucks have played a crucial role in supporting operations and facilitating the collec- tion of crops from both own estates and smallholder properties. The smallholder replanting programme remained active, with 234 hectares replanted by the end of August, and a yearly target of 500 hectares. Additionally, the government's contribution to HOPL smallholders, particularly through funding for seedlings, has provided an extra boost to the replanting programme, ensuring its continuity and success. HOPL, in collaboration with the communi- ties and smallholders, also initiated a new project, assisting in a landscape level High Conservation Value and High Carbon Stock Approach (HCV- HCSA) assessment to support land use planning and to determine areas which could be cultivated following the RSPO guidelines. Plantations PAPUA NEW GUINEA, WEST NEW BRITAIN MATURE IN HECTARES IMMATURE IN HECTARES AVERAGE OIL PALM AGE FFB PRODUCED 2023 IN TONNES FFB PRODUCED 2022 IN TONNES YIELD 2023 FFB/HA IN TONNES Hargy estate 4 413 0 11.0 134 558 134 341 33.4 Navo estate 5 307 1 244 9.5 157 216 182 178 33.4 Pandi estate 2 584 0 10.5 75 565 86 901 33.6 Subtotal own plantations 12 305 1 244 10.2 367 339 403 420 33.4 Smallholders 13 664 1 143 16.4 232 414 254 356 18.3 TOTAL 25 969 2 387 599 753 657 776 25.3 58 The connection to the world of sustainable tropical agriculture The volcanic eruption on 20 November of MtUlawun, situated north of the Group’s estates and surrounding smallholders, caused significant disruptions to operations. The immediate focus shifted entirely towards ensuring the safety of individuals and safeguarding assets. Due to ecient evacuation eorts for the workers and communities, no injuries or fatalities were reported. However, the impact on plantations and infrastructure was substantial. On Navo estate, 3 565 hectares out of a total of 13559 planted hectares, were aected and required rehabilitation, including the cleaning and pruning of collapsed fronds. Although there will be an ini- tial impact, the experience gained from the first eruption in 2019 will enable the teams to eectively manage the cleanup process. It is anticipated that the entire cleanup process will be completed by the end of April 2024, within only six months after the eruption. It is estimated that it will take around two years for the full recovery, but the focus on rehabilitation will continue. 59 SIPEF Integrated Annual Report 2023 SIPEF’s operations Mills PAPUA NEW GUINEA, WEST NEW BRITAIN HARGY NAVO BAREMA TOTAL 2023 2022 2023 2022 2023 2022 2023 2022 Capacity (tonnes FFB/h) 45 45 50 50 45 45 140 140 Actual throughput 44.6 45.1 49.8 50.5 45.0 44.0 139.4 139.5 FFB processed (tonnes) 78 607 70 655 181 666 214 701 107 067 117 844 367 340 403 200 FFB processed smallholders (tonnes) 91 214 103 306 44 037 46 931 97 162 104 119 232 413 254 356 Crude palm oil produced (tonnes) 40 561 43 321 55 598 66 804 50 604 56 517 146 763 166 642 Oil extraction rate (%) 23.88 24.89 24.64 25.58 24.74 25.50 24.46 25.34 Free fatty acids (%) 3.40 3.06 4.16 4.06 4.18 4.13 3.96 3.75 Crude palm kernel oil produced (tonnes) 8 337 8 946 12 493 13 802 10 400 11 168 31 230 33 916 Palm kernels produced (tonnes) 3 318 3 646 N/A N/A 9 094 9 715 12 412 13 361 Kernel extraction rate (%) 4.91 5.14 5.54 5.29 5.09 5.04 5.21 5.16 Kernel oil extraction rate (%) 1.95 2.09 N/A N/A 2.11 2.01 2.07 2.03 In , there are three mills: Hargy, Barema and Navo. Both Barema and Hargy are equipped with a kernel crushing plant. The mills faced challenges at the beginning of the year due to shipping delays from the end of 2022, which extended into the first month of 2023. These delays resulted in backlogs of crop, leading to pro- cessing delays and aecting crop delivery and free fatty acid (FFA) levels. Fortunately, the situation had normalised by March. In terms of performance, the OER decreased in 2023, dropping by 3.41% to an average of 24.5%, compared with 25.3% in 2022. Additionally, a total of 12 412 tonnes of PKO was produced, marking a decrease of 7.10% compared with 2022. In 2022, a programme was initiated to upgrade the Navo mill, aiming to increase its capacity to 60 tonnes per hour. The major works were under- taken throughout 2023, including the installation of a new turbine and a boiler, and the replacement and extension of sterilisers. Additionally, a fourth steriliser, an empty bunch press, and a chipper were installed as part of the upgrade. These enhancements not only aim to boost milling capac- ity but also to generate more biomass for the boiler, thereby reducing reliance on diesel generators and extending milling hours. Furthermore, the mill ramp expansion project com- menced in 2023 and is scheduled for completion in 2024. Upon project completion, the mill will be fully equipped to operate at the targeted capacity of 60 tonnes per hour. As part of the strategic programme aimed at controlling contaminants, all mills successfully transitioned from normal lubricants to food-grade (H1) lubricants, achieving full conversion by the fourth quarter of 2023. In addition to the lubricant conversion initiative, there is a concerted eort to implement the splitting of oil streams, with the rollout commencing at the Barema mill. This involves the separation of oil streams, with the mill working towards establishing a primary production stream for CPO and a secondary stream with lower specifications (higher FFA), suitable for technical applications. 60 The connection to the world of sustainable tropical agriculture Palm oil One hundred per cent of SIPEF’s oil palm prod- ucts are sold on the local market in Indonesia and on the European market. SIPEF’s customers are refineries. Depending on their supply chain, the oil can be used in the food industry, oleochemical industry or for green energy (biodiesel) production. SIPEF’s customers are parties who want to focus on a sustainable supply chain, who have a preference for using certified and traceable products, and who are willing to pay the premiums for such products. In 2023, the palm oil market exhibited a period of relative stability, with palm oil prices primarily following the trends set by other vegetable oil mar- kets and gasoil prices. Despite experiencing lower prices compared with 2022, the average price levels for 2023 remained historically high. The production of palm oil appeared to plateau dur- ing the year, with Malaysian production remaining largely unchanged from 2022 and Indonesian pro- duction showing only minor growth. This stagna- tion can be attributed to several factors, including an aging tree profile resulting in lower yields, a lack of replanting eorts, and limited new plantation development. The era of consistent growth in palm oil production over the past two decades seems to have come to an end. A consistent stock reduction was noted in Indonesia, as domestic biodiesel blending to B35 was fully implemented and consumed over ten million tonnes per annum. MARKETS SERVED: PALM OIL 61 SIPEF Integrated Annual Report 2023 SIPEF’s operations Biofuel in general was a big growth engine in 2023, with the United States (US) and Indonesia as driving nations, but growing numbers were also seen in Brazil, Malaysia and other vegetable oil producing nations. In the US, it was the hydrotreat- ed vegetable oils (HVO) in particular that showed stellar growth. Simultaneously, there was a massive growth in waste oil and used cooking oil (UCO) flows to the EU, and to a lesser extend the US, most- ly coming from China. Waste flows are eligible for double-counting in carbon osets in the EU. This vol- ume was replacing rape- seed oil, which is contrary to waste flows only being eligible for single-count- ing. Governments as well as certain certification bodies have started inves- tigations into this ‘sudden growth’ of waste supply. This stopped a significant share of these flows into the EU; however, there was an oversupply of rapeseed oil as a result. 2023 can be marked as a year where rather unusual price developments have been seen. For a long time, sunflower oil and rapeseed oil were known to be price premium products and seemed to run an independent course. However, the impact of the Russia-Ukraine war and the influx of the waste and UCO flows into Europe had a significant impact on the trade flows. These two liquid oils had to regain market share, so they started competing with soy- bean oil and palm oil, and traded at discounts. In that respect, palm oil was the best performer last year underscoring the balanced-to-tight supply and demand picture. Weather also played its role. Coming out of the La Niña that dominated 2022, in 2023, El Niño weather patterns appeared. During September and October 2023, hot and dry weather was defi- nitely experienced in Southeast Asia, but that soon changed to wet weather later in the year. The immediate eects were mild and it remains to be seen how the 2024 production will be impacted. In South America, there were certainly spots of drought that impacted the soybean crop, but, overall, the crop forecast is for a record high as acreage has expanded significantly in Brazil. Compared with 2022, last year was one with little government intervention in the palm producing countries. The Domestic Market Obligation (DMO) seemed to work reasonably well, support programmes for replanting for smallholders were in place, and the B35 mandate was accomplished. The political focus was on the 2024 elections in Indonesia. The average price for CPO CIF Rotterdam in 2023 was USD 955 against an average of USD 1 295 in 2022, a decrease of 26%. Historically, these were very good prices. 62 The connection to the world of sustainable tropical agriculture Palm kernel oil The lauric oil market, the generic term for palm kernel oil (PKO) and coconut oil, experienced probably its dullest price discovery mechanism in more than a decade. The entire year, PKO traded between even money and a USD 50 discount to palm oil. Coconut oil was a premium of roughly USD 100 to PKO. The average price of PKO CIF Rotterdam in 2023 was USD 950 against an average in 2022 of USD 1 500, a 37% decrease. The demand, particularly from the oleochemical industry, was simply very low and, as a result, stocks in palm kernels and PKO were building throughout the second half of 2022 and first half of 2023. The oleochemical market was struck by high energy costs hurting its profitability and, on the other hand, due to uncertain macroeconomic circumstances, particularly in China, having a direct negative impact on demand. Being relatively cheap, PKO slowly regained some market share. However, it was not enough for it to find its own course, so PKO stayed in the shadows of its sister product palm oil until the end of the year. 63 SIPEF Integrated Annual Report 2023 SIPEF’s operations SIPEF'S BANANA VALUE CHAIN • In vitro banana plants • Production resources (e.g. fertilisers) • Machinery, various equipment and tools • Electricity from the public grid for field irrigation and packing stations • Long-term lease of land and company owned land SIPEF BANANA PLANTATIONS ORGANIC FERTILISER 5 INPUT BY THIRD PARTIES INPUTS FIELD WASTE+ SIPEF EMPLOYEES BEST MANAGEMENT PRACTICES AND CERTIFICATIONS Third-party activities SIPEF activities SIPEF product destination TRANSPORTED GREEN BANANAS 1 (1) By cableway and tractor (2) In cardboard boxes and in IFCO crates (3) Transport to Africa (over land): from estate with reefer trucks (4) Shipping to Europe and Africa (overseas): in reefer containers (5) Re-use of third parties’ cocoa husks and empty palm fruit bunches and of own banana stems and empty banana bunches SIPEF's activities in banana production focus on the cul- tivation, harvesting and transportation of green banana bunches. From packing stations, SIPEF's bananas are sold to ripening and distribution centres in consumer markets. 64 The connection to the world of sustainable tropical agriculture SIPEF BANANA PACKING STATIONS RECYCLABLE AND REUSABLE PACKING MATERIALS 7 REUSABLE IFCO CRATES 7 FIELD WASTE+ SIPEF EMPLOYEES COMMUNITIES CUSTOMERS RIPENERS AND DISTRIBUTORS BEST MANAGEMENT PRACTICES AND CERTIFICATIONS BYPRODUCTS 6 CONTAINER TRANSPORT • Warehouses • Ripening depots • Reefer truck transport (3) • Reefer container transport (4) PACKED AND PALLETISED GREEN BANANAS 2 TRANSPORTED GREEN BANANAS 1 DISTRIBUTION NETWORK RETAILERS SUPERMARKETS CONSUMERS (6) Recycling of own banana stems and empty banana bunches (7) Purchased, locally manufactured, cardboard boxes and pallets which are recycled at destination and re-usable IFCO crates SIPEF provides to employees and communities: • Employment • Healthcare • Housing • Schools • Other services 65 SIPEF Integrated Annual Report 2023 SIPEF’s operations Every year, the most crucial period in terms of banana production is the first semester, which also corresponds to the best marketing conditions in Europe. The start of 2023, however, was impacted by the Harmattan, which caused abnormally lower tem- peratures by night and dryer conditions by day, than in previous years. Following this, the second semester saw wetter conditions compared with the previous year. By 31 December 2023, banana export production to the European Union (EU) and West Africa reached 49 976 tonnes, representing a 27% increase com- pared with 2022. This great result can be attributed to the completion of the planting of the whole area on the Lumen site, as well as the ongoing devel- opments of the Akoudié site, which together will contribute to a 70% increase in hectarage, as well as three supplementary packing stations being in full operation at the end of 2023. Despite these successes, during the course of 2023, Plantations J. Eglin, its management and sta, also faced a number of challenges that were successfully overcome. The yields of SIPEF’s historical sites, Motobé, Azaguié and Agboville, underperformed in 2023, producing fewer banana bunches, with smaller than usual bananas. This was caused on the one hand by delays in the supply, impacting the spreading of both mineral and organic fertilisers during the first semester of 2023. On the other hand, these sites also battled Black Sigatoka disease, which was particu- larly problematic during the wet season, reducing the volumes of bananas that could be exported to the European markets due to quality concerns. This led to uneven distribution on European markets over the course of the year, and a reduction in price per tonne for a period of about two months. The Motobé site also faced a high mortality of tissue plants compared with the other sites. BANANAS: OPERATIONAL ACTIVITIES IN 2023 66 The connection to the world of sustainable tropical agriculture Operational Activities in Côte d’Ivoire SIPEF’s banana plantations are located across five sites within the southern Lagunes Region of Côte d’Ivoire. 1 2 3 5 4 Région des Lagunes 1 Plantations J. Eglin - Azaguié 1 & 2 2 Plantations J. Eglin - Agboville 3 4 5 Plantations J. Eglin - Motobé Plantations J. Eglin - Lumen 1 & 2 Plantations J. Eglin - Akoudié Estates Packing stations 67 SIPEF Integrated Annual Report 2023 SIPEF’s operations At the start of 2023, the total planted area was 1066 hectares. Plantations J. Eglin closed 2023 with a total planted area of 1 229 hectares. Another 120 hectares still needs to be planted on the Akoudié site to complete the business plan for SIPEF’s latest acquisition. This remaining area will be prepared in 2024. Looking ahead, it is important to consider factors that may pose a risk to SIPEF’s operational outputs in the future, and the industry more generally. Panama disease, also known as Tropical Race 4 (TR4), is a fungus that has already ravaged planta- tions in South America. Its resistance to fungicides makes it dicult to control. In Africa, the disease was detected in Mozambique in 2013, although its spread has been contained. The global banana sector is, of course, seriously concerned about the disease, and the stakeholders in Côte d’Ivoire are aligned on preventive measures. Simultaneously, research institutes and production laboratories have redoubled their eorts to improve or change banana varieties with the aim of proposing a type that is tolerant, or even resistant, to the fungus. During the last quarter of 2023, sales to SIPEF’s regional West African markets were hampered due to high congestion at the port of Dakar, SIPEF’s access gate to the Senegalese and Mauritanian markets. Consequently, parts of these planned exports were reallocated for the local market in Côte d’Ivoire, albeit at a lower price. By the last quarter of the year, Plantations J. Eglin had found an alternative route, by road, to reach its regional markets successfully. Plantations PLANTATIONS PLANTED AREA 2023 IN HECTARES PLANTED AREA 2022 IN HECTARES EXPORTED PRODUCTION 2023 IN TONNES EXPORTED PRODUCTION 2022 IN TONNES YIELD 2023 TONNES/HA YIELD 2022 TONNES/HA Azaguié 340 338 11 702 12 833 34.4 38.0 Agboville 246 233 8 003 9 383 32.5 40.3 Motobé 221 236 6 424 7 543 29.1 32.0 Lumen 291 197 12 676 2 511 43.6 12.7 Akoudié 130 62 2 171 0 16.7 0.0 TOTAL 1 229 1 066 40 976 32 270 33.3 30.3 68 The connection to the world of sustainable tropical agriculture A new packing station at the Akoudié site was successfully renovated and put into operation in September 2023. This station complements the six already established packing stations of Plantations J. Eglin: four of which are at SIPEF’s historical sites, and two of which were also renovated and put into operation in 2022, to coincide with the fruit harvest of Lumen’s two extension sites. With seven operational packing stations, SIPEF’s packaging and export potential is optimal and in the short term, Plantations J. Eglin will have the capacity to pack and export some 50 000 to 60 000 tonnes of bananas per year. All of SIPEF’s packing stations operate with the same standards in terms of equipment and operations to meet all the quality specifications required by the market. Packing stations PACKING STATIONS EU REGIONAL LOCAL TOTAL CAPACITY TONNES/DAY 2023 2022 2023 2022 2023 2022 2023 2022 Azaguié 60 9 904 10 459 1 798 2 374 1 100 887 12 802 13 720 Agboville 40 6 926 8 077 1 078 1 306 815 788 8 819 10 171 Motobé 40 5 726 6 324 699 1 219 1 080 638 7 505 8 181 Lumen 60 10 783 2 111 1 893 400 719 131 13 395 2 642 Akoudié 40 1 994 0 178 0 409 0 2 581 0 TOTAL 35 332 26 971 5 644 5 299 4 122 2 444 45 098 34 714 69 SIPEF Integrated Annual Report 2023 SIPEF’s operations Global banana markets Global export quantities of bananas saw modest growth in 2023, pointing to a recovery from the strong decline that had been experienced in 2022. Full year 2023 global export quantities reached approximately 19.2 million tonnes; a fractional 0.3% increase compared with 2022. (1) Most global banana exporting countries saw a decline in export volumes, with only a few seeing large increases. Nevertheless, demand remained firm in key glob- al import markets, driven in part by the relative affordability of bananas compared with other fruits. (2) As reported by the Food and Agricultural Organization (FAO), several factors aected the trade in bananas in 2023: (3) • Production shortages caused by adverse weather conditions in several key supplying countries; • High costs of fertilisers in 2022 and early 2023, which hampered the productivity and quality of banana cultivation in the first half of the year; • Losses and additional expenditure stemming from the spread of plant diseases, in particular the Banana Fusarium Wilt caused by TR4. These challenges aected the ability of producers and exporters to supply bananas in adequate quan- tities to import markets, and to meet the quality standards required by several key regions. In the EU and the United States of America (USA) particularly, the lower supply of bananas, combined with a firm demand, caused the price of bananas to increase substantially. In relative terms, however, bananas continued to benefit from their aordabil- ity compared with other fruits. In 2023, net imports by the EU27, the largest importer of bananas globally, and the United Kingdom (UK) remained relatively stagnant, pointing to a full year of 5 794 000 tonnes. (4) The production of bananas for Europe represented 661487 tonnes in 2023, an approximate 16% increase from 2022. (5) MARKETS SERVED: BANANAS (1) Food and Agriculture Organization of the United Nations ‘Banana Market Review Preliminary results 2023’, Table 1, p.9 Source: www.fao.org/3/cc9120en/cc9120en.pdf (2) Ibid (3) Ibid (4) Food and Agriculture Organization of the United Nations ‘Banana Market Review Preliminary results 2023’, Table 2 p.10 Source: www.fao.org/3/cc9120en/cc9120en.pdf (5) Food and Agriculture Organization of the United Nations ‘Banana Market Review Preliminary results 2023’, Figure 1 p.2 Source: www.fao.org/3/cc9120en/cc9120en.pdf 70 The connection to the world of sustainable tropical agriculture Market strategy for bananas SIPEF's commercial strategy remains unchanged from previous years, focusing on continuing to sup- ply the European market with niche, high-quality products, such as pre-packaged bananas and banan- as transported in IFCO reusable plastic crates. This focus allows the Group to finalise annual contracts, secure sales prices and supply customers with the requested volumes. In 2023, 86% of the volumes exported by Plantations J. Eglin were marketed in Europe and the UK. For these regions the Fairtrade label, for which 100% of SIPEF bananas are accredited, is of particular importance to customers. Having this label provides credibility to the markets regard- ing SIPEF’s contributions to the well-being of its employees and neighbouring communities. With 60% of volumes sold to the UK in 2023, this remains a favourite destination for SIPEF. Although the UK is not a member of the EU 27, the import rules remain identical to those practised within the EU: access for bananas coming from African, Caribbean and Pacific (ACP) regions, including from Côte d’Ivoire, remains import tax free, while bananas from dollar zone origins, such as Latin America, are subject to a customs tari equivalent to EUR 75.00 per tonne. SIPEF’s customers in the EU continued to be sup- plied by reefer containers with several weekly depar- tures from Abidjan to the ports on the Atlantic coast, all with transit times of +/- 14 days. SIPEF’s supply to the West African markets continued to be conducted by sea, with bananas packed in reefer containers, as well as by land using refrig- erated trucks. Senegal, Mauritania and Mali are SIPEF’s three key destinations in the region, which in 2023 represented some 14% of volumes export- ed. Looking ahead, these markets are becoming increasingly dynamic with a consistent increase in the purchasing power of local populations and the establishment of international standard dis- tribution networks in the capitals and large cities of West African countries. 71 SIPEF Integrated Annual Report 2023 SIPEF’s operations PHASING OUT OF RUBBER AND TEA Since 2021, SIPEF has been in the process of phas- ing out its operations in natural rubber and tea. Two of the three rubber plantations, that were also suitable for oil palm, are being converted into oil palm plantations. Besides the need for getting RSPO approval beforehand and applying all of the requirements of the RSPO New Planting Procedure (NPP), the conversion also includes the closure of the nurseries, the cessation of replanting eorts and the maintenance of the remaining areas. In line with this phase-out process, the production of rubber continued to decline to less than 1 000 tonnes in 2023. By the end of 2027, the switch to mature and cash-generating oil palm plantations should be completed. In May 2021, PT Tolan Tiga Indonesia signed the agreement related to the conditional sale of PT Melania, which owns the third rubber plan- tation and the tea plantation of the Group, to the Shamrock Group. PT Tolan Tiga Indonesia is currently working towards the HGU renewals to definitively complete the sale. Unlike the situation of MAS Palembang (the rubber plantation), Cibuni estate (the tea plantation) has been continued to be managed by PT Tolan Tiga / SIPEF. The total phasing out process will continue in 2024. In 2023, only 1% of SIPEF’s 2023 revenues came from its residual production volumes of rubber and tea in Indonesia. As a result of the condition- al sale to the Shamrock Group, the figures of the rubber and tea activities under MAS Palembang and Cibuni are since 2021 no longer incorporated in the consolidated accounts. 72 The connection to the world of sustainable tropical agriculture 73 SIPEF Integrated Annual Report 2023 SIPEF’s operations Sustainability at SIPEF SIPEF’s approach to sustainability reflects the Company’s top-down commitment to fostering a positive impact on the environment, society, and local economies. At SIPEF, this entails the responsible management of plantations and operations, robust requirements for all new developments, dedication to respecting human rights, and generating employment and development opportunities in the rural or remote areas where it operates. • Production efficiency • Operational excellence • High quality, sustainable, traceable, certified products • Innovation and early adoption BUSINESS LEVERS SUSTAINABILITY LEVERS • Environmental stewardship • Respecting employees and communities • Responsible supply chain management • Good business conduct Under SIPEF’s Balanced Growth Strategy, four levers frame the Group’s sustainability approach, which drives its environmental, social and governance activities. 74 The connection to the world of sustainable tropical agriculture Sustainability and business levers: complimentary and interconnected SIPEF’s sustainability levers complement and oper- ate together with the four core business levers of its strategy to ensure that sustainability is embedded in SIPEF’s strategic decision-making, business activities, employee engagement, and value chain relationships. A good example of this is the business lever on high quality, sustainable, traceable and cer- tified products, which aligns SIPEF’s operational, market and sustainability objectives. All of the attributes of this lever aim to strengthen SIPEF’s market position, foster long-term customer relationships, and enhance its competitive edge in serving markets that demand high-quality, verified sustainable and traceable agricultural products. Traceability and sustainability certification also remain fundamental for SIPEF in implementing its sustainability approach and strategy. They enforce good sustainability practices, foster con- tinuous improvement, and provide a solid basis for transparency and accountability. The ongoing commitment to sustainable management is a trans- formative journey, and certification and traceability play key roles in steering this process. An overview of SIPEF’s approach to traceability and sustainability certification, and updates on progress in 2023, are provided in the chapter on SIPEF's operations on pages 26-73. 75 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF MATERIALITY Assessing materiality has been instrumental in shaping the sustainability priorities and levers under SIPEF’s Balanced Growth Strategy. The process supports SIPEF in identifying and prioritising the most relevant envi - ronmental, social and governance issues and targets, from which the Group’s sustainability programmes and reporting activities continue to grow and develop. SIPEF’s evolving materiality journey Since its first materiality assessment in 2017, SIPEF has continued to learn and evolve in its materi- ality journey. In 2021, the Group’s materiality assessment focused on strengthening stakeholder engagement, consulting more than 40 internal and external stakeholders on a selection of environ- mental, social and governance topics via survey. Through this exercise, 22 material topics were identified, of which 12 were evaluated as ‘priority’ topics. In 2022, the full list of material topics was reviewed, and the assessment process was further developed with the support of independent consultants. In addition to a desktop benchmarking analysis, physical workshops were held in Indonesia and Papua New Guinea with SIPEF’s regional sustain- ability teams and other internal stakeholders. The methodology for the workshops was inspired by the materiality principles and guidance of the Global Reporting Initiative (GRI). The results were used to consolidate the 22 topics into 13 main topics, and provide local context to the impacts of SIPEF’s palm operations. Further details on the 2021 and 2022 assessments can be found in SIPEF’s 2021 Sustainability Report, and 2022 Integrated Annual Report, accessible on the Company website. • www.sipef.com/hq/investors/annual-reports 76 The connection to the world of sustainable tropical agriculture MATERIAL TOPICS 2023 LEVEL OF IMPORTANCE RELEVANT LEVERS 1 Climate Change PRIORITY HIGH - Environmental Stewardship 2 Community Rights and Development PRIORITY HIGH - Respecting Employees and Communities 3 Health and Safety PRIORITY HIGH - Respecting Employees and Communities 4 Human Rights and Labour Standards PRIORITY HIGH - Respecting Employees and Communities 5 Supply Chain Management PRIORITY HIGH - Responsible Supply Chain Management 6 Sustainable Land Use and Conservation PRIORITY HIGH - Production Eciency - Environmental Stewardship 7 Operational Eciency PRIORITY HIGH - Operational Excellence 8 Productivity and Quality PRIORITY HIGH - Production Eciency - High quality, sustainable, traceable - and certified products 9 Anti-Bribery and Anti-Corruption IMPORTANT MEDIUM - Good Business Conduct 10 Corporate Governance IMPORTANT MEDIUM - Good Business Conduct 11 R&D and Innovation IMPORTANT MEDIUM - Innovation and early adoption 12 Sustainability Standards and Certification IMPORTANT MEDIUM - High quality, sustainable, traceable - and certified products - Environmental Stewardship - Respecting Employees and Communities 13 Food Safety IMPORTANT MEDIUM - High quality, sustainable, traceable - and certified products - Innovation and early adoption SIPEF’s material topics 2023 In 2023, the list of material topics remained highly relevant and largely unchanged. Only one adjust- ment was made to the importance level of ‘Food Safety’, which has been raised from low priority to medium priority. This adjustment aligns with the Group’s strategic priority and ambition to adopt new technologies and be a first mover in producing premium quality crude palm oil, in order to meet the demands of specific premium customers and markets. The topics have continued to steer SIPEF’s sustain- ability workplan and activities during the reporting year. The Group’s approach to managing the risks and impacts linked with each of these topics are described in the various chapters of this report. 77 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF 78 The connection to the world of sustainable tropical agriculture Progress on double materiality In 2023, SIPEF initiated preparations for its group- wide double materiality assessment, a vital step towards compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD). The assessment follows the requirements of the European Sustainability Reporting Standards (ESRS), and will help SIPEF to identify the sus- tainability matters that are material from both an impact and financial perspective. Key activities include: • a materiality workshop for SIPEF’s banana operations in Côte d'Ivoire • Group-level stakeholder and value chain mapping • identification of the Group’s impacts, risks and opportunities • impact and financial materiality assessments • validation of the results by the SIPEF executive committee and board of directors The process took place over the course of Q4 2023 and Q1 2024. Through a close collaboration between the sustainability teams, the finance department, and an external consultant, SIPEF is carrying out its business risk assessment and double materiality assessment under one integrated process. Plantations J. Eglin’s materiality workshop in Côte d'Ivoire In November 2023, SIPEF’s banana producer, Plantations J. Eglin, conducted a two-day material- ity workshop. The workshop marked the start of the SIPEF’s first materiality assessment for its banana operations, focusing on mapping Plantations J.Eglin’s main stakeholders, and its key impacts, risks and opportunities. Participants included the company’s management team, sustainability team, heads of farms and other departments. The outputs of the workshop are being incorporated into the group-wide double materiality assessment. The results will also provide added insights to the material issues currently being addressed by the sustainability programmes of Plantations J. Eglin. 79 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF PALM OIL AND BANANAS: CONNECTING SUSTAINABILITY RISKS, IMPACTS AND OPPORTUNITIES Critical to the continued development of SIPEF’s strategy and sustainability approach is the con- sideration of the sustainability impacts, risks and opportunities linked with the industries of its products. These are often interlinked and require an integrated approach to be eectively addressed. In the following, a description has been provided on some of the key interrelated sustainability challeng- es and opportunities linked with the production of palm oil and bananas. Bananas Bananas are the world's favourite dessert fruit, a staple starch crop for millions, and an important source of income for producers across Asia, Africa and Latin America. However, the industry faces challenges, including key environmental and social impacts associated with unsustainable production: • : overconsumption of water, pesticides use, plastic waste and contamination of soil and water • : labour rights issues, unfair trading practices and land rights conflicts Producing bananas sustainably can bring with it positive impacts for people and the environment: • : The banana industry provides employment opportunities for local communities, often in regions where few alternatives exist. Fair labour practices, including decent wages and safe working conditions, can enhance livelihoods and contribute to social stability. • : Bananas are a nutritious and affordable food source, contributing to food security and improved nutrition in both local and global markets. Encouraging sustainable production methods is important for both mitigating environmental impacts, while securing continued access to this essential food crop. SIPEF recognises both the positive and negative impacts of oil palm and banana cultivation for SIPEF’s business, the natural environment and society. This is why the Group invests consistently in resources and programmes through which to manage its palm and banana plantations and operations in an environmentally and socially responsible way. 80 The connection to the world of sustainable tropical agriculture Palm Oil Found in half of all supermarket products, as well as in animal feed and biofuels, palm oil is one of the most consumed and widely used edible oils. As the global population grows, so does the demand for palm oil, and its market performance remains strong. Unfortunately, palm oil has also been strongly associated with adverse eects on tropical forests, biodiversity, workers in the industry, as well as local communities. As is the case with many other agricultural com- modities, when not produced sustainably, some of the potential impacts of palm oil production include: • : greenhouse gas (GHG) emissions, deforestation, biodiversity decline, loss of endangered species, as well as soil and air pollution • : labour rights issues, unsafe working conditions, displacement of local communities, food insecurity, and impacts on natural resources essential for community livelihoods When produced sustainably, the palm oil industry can provide substantial added value from both sustainability and economic standpoints: • : Oil palm production requires much less land and chemical inputs relative to other vegetable oils. It could therefore play an essential role in addressing the challenge to meet the increasing demand for vegetable oils, without causing further loss of the world’s natural forests. Enhancing yield potential through research and development (R&D) and innovative solutions could increase this production eciency, and, indirectly contribute to conservation. • : The palm oil industry provides direct and indirect employment for more than 17 million workers. Additionally, more than seven million smallholders globally make a living from oil palm. When companies operate responsibly as employers and buyers, the positive social, economic and environmental impacts can contribute to sustainable development. This is especially true when adequate wages, housing, education, medical services and extension services are provided to workers and members of communities, and smallholders are supported. 81 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF SUSTAINABILITY POLICIES Sustainability at SIPEF starts with responsible pro- duction, with a primary focus on own plantations and operations, but also in the production areas of suppliers. Guiding the Group’s sustainability com- mitments are two main policies: the Responsible Plantations Policy (RPP) and the Responsible Purchasing Policy (RPuP). In addition to the RPP and the RPuP, SIPEF upholds a number of ancillary Group-level and country-level policies, focused on specific issues, such as equal employment opportunities, freedom of association, child and forced labour, reproductive rights and occupational health and safety. SIPEF is in the process of reviewing these policies to improve alignment, and to update content to meet the latest expectations and requirements of SIPEF’s stake- holders on best practice. Read more on the progress of this review process in the good business conduct chapter on page 146. 82 The connection to the world of sustainable tropical agriculture Responsible Plantations Policy Established in 2014, SIPEF’s Responsible Plantations Policy (RPP) embodies the Group's core environmental and social commitments for sustainable production and processing. The policy is applicable to all SIPEF-managed plantations and smallholders supplying products to SIPEF mills and integrated kernel crushing plants. : • 100% certification and traceability of products; • No deforestation, no new developments on peat, and no exploitation (NDPE); • Free, Prior and Informed Consent (FPIC) of land prior to any new development; • Continuous improvement, emphasising the prompt adoption of Best Management Practices (BMPs) for optimising land use, while minimising adverse impacts. Responsible Purchasing Policy Formalised in 2020, the SIPEF Responsible Purchasing Policy (RPuP) guides the Group's responsible sourcing from third-party suppliers. SIPEF’s suppliers are exclusively smallholders that have signed a Memorandum of Understanding and whose production locations are known and mapped. The policy provides the framework for SIPEF to select, monitor and, if necessary, suspend or exclude smallholders in the Company’s supply base. : • Sourcing from RSPO-certified smallholders or those with potential for certification under the Group's RSPO Time Bound Plan; • Criteria for collaborating with smallholders linked with respecting human and labour rights, FPIC, no deforestation, no new developments on peat, and other environmental and social considerations. All policies are accessible on SIPEF’s website: • www.sipef.com/hq/sustainability/sipef-corporate-policies/ 83 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF SIPEF BOARD OF DIRECTORS Sustainability team Papua New Guinea Sustainability team Indonesia • Team North Sumatra • Team Bengkulu • Team South Sumatra Sustainability team Côte d'Ivoire Papua New Guinea Executive committee chaired by the general manager Côte d'Ivoire Executive committee chaired by the general manager Indonesia Executive committee chaired by the president director SIPEF EXECUTIVE COMMITTEE COO APAC: responsible for sustainability • SIPEF group director sustainability • Senior sustainability ocer • Senior ESG ocer • Junior sustainability analyst • Legal Counsel ESG (1) GLOBAL SUSTAINABILITY TEAM REGIONAL SUSTAINABILITY TEAMS (1) new position as from August 2023 84 The connection to the world of sustainable tropical agriculture SIPEF BOARD OF DIRECTORS Sustainability team Papua New Guinea Sustainability team Indonesia • Team North Sumatra • Team Bengkulu • Team South Sumatra Sustainability team Côte d'Ivoire Papua New Guinea Executive committee chaired by the general manager Côte d'Ivoire Executive committee chaired by the general manager Indonesia Executive committee chaired by the president director SIPEF EXECUTIVE COMMITTEE COO APAC: responsible for sustainability • SIPEF group director sustainability • Senior sustainability ocer • Senior ESG ocer • Junior sustainability analyst • Legal Counsel ESG (1) GLOBAL SUSTAINABILITY TEAM REGIONAL SUSTAINABILITY TEAMS SUSTAINABILITY GOVERNANCE SIPEF board of directors Ultimate responsibility and governance of the sustainability strategy lie with the SIPEF board of directors, with two directors having strong backgrounds in sustainability: • - : a senior economist specialising in ESG and sustainable supply chains in Southeast Asia (appointed in June 2021). • : has significant expertise in sustainable supply chains, agricultural technology, and climate-related risks and solutions (appointed in June 2023). Performance is regularly reviewed by the entire board, based on sustainability rankings and ratings, certification progress, and internal risk assessments and reporting. A sustainability brief- ing paper is provided to the board at least twice a year, and the board discusses material ESG topics during its strategic board meeting once a year. SIPEF executive committee The SIPEF executive committee is responsible for overseeing the implementation and progress of the Group’s sustainability strategy. Sustainability is led at the executive committee level by the chief operating ocer Asia-Pacific (COO APAC), Petra Meekers, who has 18 years of experience in sustainability in the palm oil industry. The executive committee is further supported by the group director sustainability, who leads the global sustainability team. SIPEF global sustainability team The global sustainability team is focused on ensuring that SIPEF’s sustainability strategy, policies and communications are consistent with the evolving expectations and requirements of key stakeholders. This includes coordinating internal and external reporting on the Group’s sustainability performance. The team is managed by the group director sustainability and overseen by the COO APAC. Regional sustainability teams The three regional sustainability teams in Indonesia, Papua New Guinea and Côte d'Ivoire coordinate and implement SIPEF’s sustainability strategy and policies at the operational level: • is led by the regional sustainability director, and comprises 19 experts, spread across four locations: the Medan Head Oce, North Sumatra, Bengkulu and Musi Rawas (South Sumatra). • is managed by the sustainability head of department and has five experts focused on dierent areas of sustainability at Hargy Oil Palms Ltd (HOPL). The sustainability head of department is also a member of the HOPL executive committee. • ' is led by a sustain- ability manager, and is made up of two experts, and five sustainability assistants (one at each site). The group director sustainability oversees the regional teams together with the respective regional executive committees and reports directly to the SIPEF executive committee. 85 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF STAKEHOLDERS, BENCHMARKS AND FRAMEWORKS Continuous improvement in sustainability requires transparent reporting, as well as collaboration across various actors. Through active engagement and collective eorts, SIPEF can better foster the development and advocacy of responsible practices and sustainable standards within the agricultural sector. Stakeholder engagement SIPEF places great importance on understanding the needs, expectations and progress of its key stakeholders. These include: customers, peers, shareholders, banks, social and environmental NGOs, governments/regulators, researchers and experts, technical consultancies, local communi - ties, and smallholders. The Group engages directly with its customers and shareholders on a regular basis through meetings and questionnaires, and conducts benchmarking analyses to review industry peer performance. Robust programmes, processes and tools have been established to ensure adequate support is provided to smallholder suppliers, and to survey with local communities any issues and impacts related to the Group's activities. SIPEF also participates in a number of sustainability and multi-stakeholder initiatives relevant for its sectors. Multi-stakeholder initiatives () SIPEF has been a member of RSPO since 2005, and holds 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. SIPEF is also co-chair member of the Jurisdictional Working Group (JWG), and an active member of the Standards Standing Committee (SSC), Compensation Task Force (CTF), Biodiversity and High Conservation Values Working Group (BHCVWG), and the No Deforestation Joint Steering Group (NDJSG). • www.rspo.org () SIPEF is a founding member of BASP and a current member of the board. BASP focuses on promoting the use of certified sustainable palm oil in the European Union (EU), but primarily in the Belgian market. • www.duurzamepalmolie.be () SIPEF is a member of the Tropical Forest Alliance. • www.tropicalforestalliance.org 86 The connection to the world of sustainable tropical agriculture Shaping conversations on CSRD and Jurisdictional Certification at RSPO RT2023 In November 2023, SIPEF attended the RSPO’s Annual Roundtable Conference (RT2023) in Jakarta, where it played a pivotal role in two panel discussions, and shared insights on critical sustain- ability topics in the palm oil industry. One of the panels focused on the CSRD and the future of doing business in Europe. It delved into the responsible investment community's perception of CSRD and explored proactive approaches for the palm oil industry to tackle sustainability risks. The second panel focused on Jurisdictional Certification serv- ing as a catalyst for the future of sustainable palm oil. Unique perspectives from key actors across the value chain were exchanged on the strategies and requirements needed to implement a Jurisdictional Approach successfully. 87 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF Benchmark scores in 2023 SIPEF communicates its sustainability progress through annual reporting, which it strives to align with leading sustainability reporting frameworks and criteria. In 2023, the Group continued to improve its scores and rankings from sustainability benchmarks and rating agencies that are the most pertinent to its business. BENCHMARK SCORES IN 2023 Ranked 11th out of 100 palm oil companies in 2023; score 88.9%, a score increase of 2.1% from 2022 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 2023; score 65.9%, a score increase of 10% from 2022 Forest 500 identifies and ranks the most influential companies and financial institutions in forest risk commodity supply chains. • forest500.org/rankings/companies 11th out of 100 palm oil companies SPOTT Sustainability Policy Transparency Toolkit CDP • 2023: () This score is aligned with the palm oil industry average performance in crop farming, and is higher than the European regional average. • 2023: () The score is an improvement from SIPEF’s 2022 score of D (Disclosure), and aligns with the average performance of the crop farming sector. CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. • www.cdp.net Forest 500 4th out of 350 companies C Climate Change 2023 B Forests 2023 88 The connection to the world of sustainable tropical agriculture United Nations Sustainable Development Goals Businesses, including SIPEF, play a vital role in achieving the Sustainable Development Goals (SDGs) through the production of sustainable agricultural commodities. As an agricultural company invested in producing sustainable palm oil and bananas, and in providing employment and development opportunities for employees and surrounding communities, SIPEF continues to support the following SDGs: An overview of SIPEF’s contributions to the SDGs at target level is available on SIPEF’s website at: • www.sipef.com/hq/sustainability/sustainable-approach/ For additional information on the SDGs, visit: • https://sdgs.un.org/goals 89 SIPEF Integrated Annual Report 2023 Sustainability at SIPEF Environmental stewardship SIPEF’s approach to environmental stewardship focuses on minimising and managing both direct and indirect impacts of its business activities on the natural envi- ronment, and on the climate. Sustainable land use and conservation are integral to this approach, as reflected in the Company’s biodiversity and conservation initiatives, and in its group-wide commitment to ‘no deforestation’ and ‘no new developments on peat’, applicable to both its own operations and its smallholder suppliers. The Group is dedicated to reducing the environmental foot- print of its operations, from plantations to processing, through the implementation of Best Management Practices (BMPs) and risk-based impact mitigation strategies, including reducing greenhouse gas (GHG) emissions. 90 The connection to the world of sustainable tropical agriculture CLIMATE CHANGE The global agricultural sector is a significant contributor to climate change, with agriculture, forestry, and other land uses collectively repre- senting about one-fifth (22%) of worldwide anthro- pogenic GHG emissions. (1) At the same time, the sector is also vulnerable to climate-related risks and impacts, including unpredictable weather patterns, more extreme weather events, heat stress, and increased incidence of pests and diseases. SIPEF has enacted various policies, initiatives and measures that aim to eectively reduce the Group’s carbon footprint, manage climate-related risks, and enhance the resilience of its production systems. Although reducing GHG emissions in agriculture poses challenges, the sector holds substantial potential for mitigation. In palm oil production, for instance, the adoption of innovation and good management practices in cultivation and process- ing—like methane capture from wastewater ponds, utilisation of methane to replace diesel emissions and optimised fertiliser use—represent key oppor- tunities for emissions reduction. SIPEF’s carbon footprint SIPEF has been calculating its carbon footprint (Scope 1 and Scope 2) at Group level since 2019, using the ISO 14064-1:2018 standard. In 2022, these calculations were verified by a certification body for a sample of SIPEF’s supply base in Indonesia, and in 2023, SIPEF has expanded the scope of verification of its carbon footprint calculation to include Scope 3 emissions. The first phase of verification has been completed, and the Group is on track to conclude the full verification in 2024. The results presented in this section include the net annual GHG emissions for the Group’s Scope 1 and Scope 2 activities for 2021-2023, which account for emissions from estates, mills, packing stations, and transport to Free on Board (FOB) point of sale for palm oil, rubber, tea, and bananas within SIPEF’s operations in Indonesia, Papua New Guinea, and Côte d'Ivoire. (1) OECD ‘Agriculture and Climate Change’, ‘Meeting of Agriculture Ministers 2022’ Background Note’, 2022. Source : www.oecd.org/agriculture/ministerial/documents/Agriculture%20and%20Climate%20Change.pdf 91 SIPEF Integrated Annual Report 2023 Environmental stewardship GHG emissions in 2023 The total net GHG emissions of SIPEF in 2023 were 651 511 tonnes of CO 2 equivalent (tCO 2 e). The majority of the Groups’ emissions (98%) fell into the category of Scope 1 and relate to emissions from owned or controlled assets. Around 2% fell under Scope 2, which account for indirect emissions, mainly coming from the consumption of purchased electricity. Palm oil is the largest contributor to SIPEF’s carbon footprint, accounting for around 98% of the Group net GHG emissions. This is due to the larger scale of the palm operations, this being SIPEF’s primary business activity. Based on the GHG emissions sources and sinks, the highest sources of emissions in SIPEF’s oil palm operations are related to land use change and palm oil mill euent (POME). Conservation areas represent carbon sinks through sequestration by vegetative growth in HCV areas within SIPEF’s concessions, which include riparian zones and High Carbon Stock (HCS) forests, as well as the conserved forests managed under SIPEF Biodiversity Indonesia (SBI). In addition, these conservation areas, there are also areas set aside for potential conversion to oil palm (i.e. rubber estates), which sequester carbon through vegetative growth, and contribute to net annual emissions. In 2023, GHG net emissions decreased slightly by 1% compared to 2022, due to lower production in oil palm operations, which led to lower through- put, and thus a lower POME production. Other significant contributors included the conversion of non-high carbon stock vegetation in Indonesia, new sites at the banana operations becoming ful- ly operational in Côte d'Ivoire, and a decrease in annualised GHG emissions from historical land use change. As a result, overall GHG emissions went down. In contrast, the emissions intensity increased by 3% in 2023 due to a lower CPO pro- duction being recorded. GHG EMISSIONS 2023 SCOPE 1 AND SCOPE 2 tCO 2 e GHG EMISSIONS tCO 2 e 2022 2023 Scope 1 645 515 636 360 Scope 2 12 756 15 151 TOTAL 658 271 651 511 15 151 645 515 12 756 636 360 SCOPE 1 98% SCOPE 2 2% 651 511 tCO 2 e in 2023 2022 2023 2022 2023 92 The connection to the world of sustainable tropical agriculture By the close of 2023, SIPEF has already achieved a reduction of 10% in its net GHG emissions intensity (Scope 1 and Scope 2) relative to its 2021 baseline of 1.88 tonnes of CPO, mainly due to the lower POME emissions. There was a slight increase between 2022 and 2023, which was due to lower produc- tion levels and an increase in production area in 2023, as well as refinements in SIPEF’s calculation methodology. In 2024, SIPEF will revise its emissions target to reflect gross GHG emissions and to include Scope 3 emissions. The revision will ensure the target is in line with the requirements of the European Sustainability Reporting Standard (ESRS) E1 Climate Change, and take into consideration the accounting rules of the Land Sector and Removals Guidance, which is expected to be published by the GHG Protocol in 2024. Calculation improvements in 2023 In 2023, the Group updated its GHG calculation methods to include scope improvements. To ensure consistency over time, this update has led to a restatement in the report of previously disclosed GHG emissions for 2021 and 2022. Key improvements include updated cultivated areas based on RSPO reviewed drainability assessments, an update of the methodology for calculating fuel usage prompted by an ISO 14064 audit in Indonesia, and the verification of the electricity consumption for Papua New Guinea. In anticipation of reporting in line with the ESRS, significant eorts were made in 2023 to prepare for the climate-related disclosures required by ESRS E1 Climate Change. This included laying down the foundation at the operational level to begin calculating the Groups’ Scope 3 GHG emissions. SIPEF’s Scope 3 emissions reporting will include indirect emissions from the Group’s value chain, such as smallholder suppliers, osite materials transport, employees’ commutes, business travel and other third-party sources. SIPEF NET GHG EMISSIONS INTENSITY SCOPE 1 & 2 PER TONNE OF CRUDE PALM OIL PRODUCED 1.64 1.68 1.88 2021 1.50 1.55 1.60 1.65 1.70 1.75 1.80 1.85 1.90 2022 2023 In 2022, the Group set its target to reduce its net GHG emission intensity (Scope 1 and 2) per tonne of crude palm oil (CPO) by 28%, against its 2021 baseline. 93 SIPEF Integrated Annual Report 2023 Environmental stewardship (1) Lorenzo Rosa and Paolo Gabrielli, ‘Achieving net-zero emissions in agriculture: A review’, Environmental Research Letters’ Vol. 18, No. 6 , May 2023. (2) Economics Climate Environment (EFECA), ‘Carbon Emissions and Palm Oil Briefing Note’, Jan 2022. Source: www.efeca.com/wp-content/uploads/2022/01/Palm-Oil-and-Carbon-Emissions_final.pdf (3) This baseline will be revised in 2024 in accordance with ESRS alignment. GHG emission reduction strategy Agriculture faces a unique and dicult challenge when it comes to reducing GHG emissions. The majority of GHG emitted by the sector comes from methane, (accounting for 54%), followed by nitrous oxide (at 28%), and carbon dioxide (at 18%). (1) GHG emissions in the palm oil industry are caused pri- marily by land use change (especially changes in high carbon stock areas), mill processing (POME) and agricultural inputs (fuel and fertiliser). The sustainable production of palm oil does not contribute to deforestation and conversion of high carbon stock areas, prohibits burning for land clearance and uses methane capture technology at mills. It therefore has a significant role to play in the mitigation of climate change. (2) For SIPEF, reducing GHG emissions is a priority for all its operations and business activities. 1. METHANE EMISSIONS REDUCTION THROUGH: • All palm oil mills equipped with methane capture facilities SIPEF's GHG emissions (Scope 1 and Scope 2) reduction and removal priorities for oil palm operations: REDUCTION Effective implementation of commitments: No deforestation and no development on peatland, fire prevention and management REMOVAL 2. DECARBONISATION OF OPERATIONAL ENERGY USE THROUGH: • Increased renewable energy sources • R&D in alterna - tive renewable en ergy options 3. SUSTAINABLE NITROGEN MANAGEMENT FOR SYNTHETIC FERTILISER EMISSIONS THROUGH: • R&D on improved farming systems to reduce reliance on synthetic fertilisers through regenerative agriculture • Nitrogen management technologies through precision agriculture CARBON DIOXIDE REMOVAL (CDR) THROUGH: • R&D on soil carbon sequestration through regenerative agriculture • Biochar for carbon removal • Enhanced rock weathering SIPEF'S TARGET IS TO REDUCE ITS GHG EMISSIONS INTENSITY PER TONNE OF CRUDE PALM OIL (CPO) BY 28% BY 2030 AGAINST ITS 2021 BASELINE (3) 94 The connection to the world of sustainable tropical agriculture Methane capture at palm oil mills SIPEF prioritises reducing GHG emissions, notably through the installation of methane capture facil- ities. These facilities are designed to trap and flare methane gas to ensure it is not being released into the atmosphere. Where biogas generators have been constructed, the facilities are also able to convert the methane into electricity. In Indonesia, one of the methane capture instal- lations generated 4 469 560 kWh of electricity in 2023, which was primarily used for operational purposes and for powering the housing compounds for employees within SIPEF's plantations. Subject to feasibility, SIPEF also plans to supply any surplus energy generated to the national grids in Indonesia and Papua New Guinea. If this option is not via- ble, alternative uses for the surplus energy will be explored. SIPEF is aiming to equip all its mills with methane biogas plants, progressively up until 2030. As of December 2023, five of SIPEF’s mills have methane capture installations out of a total of nine existing mills. Four of these are in Indonesia, and one in Papua New Guinea. Preparing for climate-related risks and opportunities Throughout 2023, SIPEF initiated eorts in all three countries where it operates to identify cli- mate-related physical and transition risks to its business. This involved collaborations with climate modelling experts and consultations with SIPEF's internal operational teams. These assessments will help predict possible future scenarios at a scale relevant to SIPEF’s operations, and to identify any significant risks that may impact the Group, and that require further mitigation and/or adaptation actions. 95 SIPEF Integrated Annual Report 2023 Environmental stewardship SUSTAINABLE LAND USE Natural forests store large amounts of carbon and host the majority of the world's terrestrial species. Operating in regions rich with tropical forests, SIPEF recognises its unique position and responsibility towards mitigating biodiversity loss and significantly reducing climate-related impacts, by decoupling deforestation and agricultural pro- duction. By doing so, SIPEF is helping to safeguard the important ecosystems in the landscapes where it operates. Policy: No deforestation and no new developments on peat (NDP) Since 2014, SIPEF has had a Group wide NDP com- mitment, upheld as part of its wider Responsible Plantations Policy (RPP). The commitment includes: • Ensuring new oil palm developments do not take place in High Conservation Value (HCV) areas, High Carbon Stock (HCS) forests, peatland, or on fragile or marginal soils. For SIPEF’s banana operations, the requirements of the relevant certification standards, Rainforest Alliance, Fairtrade, and GlobalG.A.P., are followed. • Following the RSPO New Planting Procedure (NPP) prior to any new developments in its own oil palm operations. Prior to any land development for new oil palm projects, an integrated HCV-HCSA assessments must have been completed, and consent obtained from aected communities through a robust Free, Prior, and Informed Consent (FPIC) process. • Monitoring and verifying areas under the Company’s concessions, and areas managed under third-party suppliers, for any land use change and potential illegal deforestation activities. SIPEF works with Earthqualizer Foundation, an independent non- profit organisation, for its deforestation and peat conversion monitoring. Additionally, SIPEF follows the RSPO Remediation and Compensation Procedure (RaCP) for its own oil palm operations, which focuses on assessing historical plantation development undertaken since November 2005 that has not undergone HCV assessments. The Group is committed to restoring the ecosystems and value of any areas impacted by its operations, should deforestation or conversion be identified. 96 The connection to the world of sustainable tropical agriculture Monitoring of NDP commitment SIPEF has had a system in place for monitoring compliance to its NDP commitment in its sup- ply base since 2021. In 2022, SIPEF went a step further, and engaged a third-party to monitor its estates and suppliers in Indonesia and Papua New Guinea against its NDP commitment, with a focus on observing and verifying land use change in and around the Group’s concessions. The third-party monitoring system utilises historic and real-time satellite imagery analysis to detect changes in land cover. Reports on the results are provided on a quarterly basis and include any inci- dents that have been identified and confirmed to contravene the Group’s NDP commitment. As of 2023, more than 157 700 hectares of land within SIPEF’s concessions (84%), and within the areas of its suppliers (16%) in Indonesia and Papua New Guinea, are being covered by the monitoring system. This includes the area being managed by the SIPEF Biodiversity Indonesia (SBI) programme. Based on the monitoring results for 2023, it has been confirmed and verified by the external party that no instances of deforestation or peat conver- sion occurred within the Group’s entire supply base, including its own estates and smallholders. However, out of three investigated alerts, there was one verified incident of tree cover loss in Indonesia of 6.6 hectares, which occurred outside of SIPEF’s production area. The incident was caused by encroachment by local villagers within SIPEF’s concession boundaries, but in an area that is cur- rently not under the Group’s management control. (1) SIPEF’S MONITORING AND MANAGEMENT OF NDP Alerts are received either through Earthqualizer or via SIPEF customers who use a variety of other third-party verification systems. When an alert is received, field teams first investigate the site to verify whether there has been an incident of tree cover loss. Verification is carried out to determine whether SIPEF has management con- trol over the land where the incident has occurred. If the incident is verified to have occurred, its cause 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 by subsistence farming, deforestation for timber or firewood, or conversion for the purposes of commercial farming or forestry. All illegal deforestation activities are reported to the police, illegal settlers or land users are evicted, and areas are restored with natural vegetation as soon as possible. In cases where SIPEF does not have management control, it will inform and engage with communities on the Company’s sustainable land use policies. (1) As per Free, Prior and Informed Consent (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 boundaries. 97 SIPEF Integrated Annual Report 2023 Environmental stewardship THIRDPARTY NDP MONITORING IN 2023 WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS COUNTRY / PROVINCE ALERTS VERIFIED INCIDENTS OF TREE COVER LOSS VERIFIED AREA OF TREE COVER LOSS HA ALERTS VERIFIED INCIDENTS OF TREE COVER LOSS VERIFIED AREA OF TREE COVER LOSS HA INDONESIA 3 1 6.6 0 0 0 North Sumatra 0 0 0 0 0 0 Bengkulu 2 0 0 0 0 0 South Sumatra 1 1 6.6 0 0 0 PAPUA NEW GUINEA 0 0 0 2 0 0 TOTAL 3 1 6.6 2 0 0 Historical assessment of NDP compliance SIPEF had set a target to complete a historical assessment of compliance to its NDP commitment by 2023. Earthqualizer assessed SIPEF’s historical liability against industry-wide NDP commitments between 31 December 2015 to 31 December 2023. All of SIPEF’s own estates and smallholders were assessed, a footprint totaling over 145 000 hectares. Based on this assessment a liability of 24 hectares of historical deforestation was identified in Papua New Guinea. Steps are being taken to remediate this area through the appropriate mechanisms. Peatlands management Peatlands are a type of wetland formed over thou- sands of years from partially decayed vegetation. They fall under the classification of organic soils, and in their natural state, they act as carbon sinks, host unique biodiversity, regulate water flows, and purify and store water. As per its RPP, SIPEF has strictly prohibited any new development on peat, regardless of depth, across all of its own and its suppliers’ opera- tions. Best management practices are applied for historically developed areas on peatland, as defined by the RSPO and local regulations, where relevant. Since 2018, SIPEF has been conducting drainability assessments according to the RSPO Principles and Criteria 2018. In 2023, after a three-year process, the drainability assessment for PT Dendymarker Indah Lestari (PT DIL) was finalised and approved by the RSPO. 98 The connection to the world of sustainable tropical agriculture 99 SIPEF Integrated Annual Report 2023 Environmental stewardship Fire prevention and management SIPEF strictly prohibits the use of fire for any new developments, a requirement applicable to its own estates and its suppliers. Fire detection and prevention is of critical impor- tance for SIPEF, to ensure the safety of employees, contractors and the communities surrounding its operations, as well as for the protection of its assets. The Group has well-established fire risk alert monitoring systems in Indonesia and Papua New Guinea, where the risks of fire are the highest. Firefighting is also critical to SIPEF’s management approach, and each estate has trained firefighters, dedicated resources, and vehicles fitted with water tanks and high-pressure water pumps. Water management in peatlands is also very impor- tant to prevent the risk of hotspots for fires, and particular attention is paid to these areas for fire prevention. Hotspot and fire monitoring in 2023 Due to unprecedented hot and dry weather condi- tions in Indonesia, the risk of fires was higher in 2023. SIPEF’s fire monitoring system identified 67 hotspots during the course of the year, of which 39 alerts were verified to be actual fires within SIPEF’s concession, with 160.5 hectares impacted by these incidents in Musi Rawas. Upon investigation it was found that the fires were started by local villagers in the areas that have not been purchased by SIPEF and hence are not under SIPEF’s management con- trol. Within SIPEF’s supplier areas, four hotspots were alerted, but once investigated, none were verified to be actual fires. SIPEF’S MONITORING AND MANAGEMENT OF FIRES Fire hotspots are monitored by RSPO, through a monitoring service platform provided by NASA, and using concession and smallholder data submitted by SIPEF. Automated hotspot alerts based on satel- lite imagery are generated on a continuous basis. Any fire within 100 metres of a con- cession or smallholder is detected. Each alert is investigated by SIPEF, and reported based on the field investigation. The fire risk status is updated daily and communicated to all levels of sta. Fire risk status signs are also placed at numer- ous sites on SIPEF’s estates, so that the employees and their families are kept informed of any potential or verified fires. All verified fires are immediately extin- guished, and an internal report is com- piled, which is then filed with the police. In the case of oil palm operations, these reports are also filed with RSPO. SIPEF is also committed to restoring any areas under the Group’s management control that have been impacted by fire. NUMBER OF HOTSPOTS VERSUS CONFIRMED FIRES 13 2 0 0 2 2 11 11 Within own concessions Within supplier areas Within own concessions Within supplier areas 67 39 4 0 1 0 14 6 Within own concessions Within supplier areas Within own concessions Within supplier areas Hotspots Actual fires Indonesia Papua New Guinea 2022 2023 Indonesia Papua New Guinea 100 The connection to the world of sustainable tropical agriculture In Papua New Guinea, there was one alert for a hotspot within SIPEF’s own concessions, which turned out not to be an actual fire. Within SIPEF’s supplier areas in Papua New Guinea, there were 14 hotspot alerts during the course of 2023, of which six were confirmed to be actual fires. Impacting an area of 2.2 hectares, these fires took place within land legally belonging to smallholders but not planted with palm. The areas are used by local communities for food cropping, a process which traditionally relies on fire. As these activities are outside HOPL’s jurisdiction, no action could be taken directly. However, HOPL will continue to create general awareness on the impacts of fires to the smallholders and communities engaged during its smallholder training and visits. 101 SIPEF Integrated Annual Report 2023 Environmental stewardship CONSERVATION AND RESTORATION In Papua New Guinea and Indonesia, forest areas are highly biodiverse, species rich, and sustain the livelihoods of millions of people, including indigenous and local communities. Protecting and preserving these habitats, and other natural eco- systems, is a key priority for SIPEF, as is respecting the rights of the communities living in and around these areas. Identifying conservation area within SIPEF’s concessions As of 31 December 2023, SIPEF is managing a total of 15 577 hectares of conservation area across its concessions in Indonesia, Papua New Guinea, and Côte d'Ivoire. This includes HCV and HCS are- as across the Group’s concessions, but excludes the conservation area managed under SIPEF Biodiversity Indonesia (SBI). The total conservation areas in Papua New Guinea (5 625 hectares) and Indonesia (9 737 hectares) have increased due to the completion of HCV-HCSA re-assessments in 2023. In Côte d'Ivoire, Plantations J. Eglin has continued to maintain its conservation areas, which include its reforestation sites located in Azaguié and Agboville. As of 31 December 2023, the total conservation area in Côte d'Ivoire was 216 hectares. There was a reduction of 14 hectares due to the finalisation of a conservation mapping in Akoudié, which led to updates to the conservation area boundaries. In addition, there was an encroachment by local communities at one of the reforestation sites in Azaguié. A grievance process is ongoing to find a solution together with aected stakeholders. A total of 27 integrated HCV-HCSA assessments have been carried out, and have undergone the review processes of the relevant reviewer organi- sations (HCV Network or HCSA). In 2022, SIPEF had set a target to update all previous stand-alone assessments to integrated HCV-HCSA assessments by 2025. In 2023, the target was met earlier than expected, with all re-assessments, covering 24 estates in Indonesia and three estates in Papua New Guinea, having been completed. The remaining eight estates in Indonesia have already carried out HCV assessments which cover all areas that would be designated as HCS areas. In addition, as no new developments are planned for these estates, re-assessments are not currently required. CONSERVATION AREAS BY COUNTRY IN HECTARES COUNTRY 2022 2023 Indonesia 9 691.0 9 737.0 Papua New Guinea 3 623.7 5 624.5 Côte d'Ivoire 229.7 215.7 TOTAL 13 554.4 15 577.2 102 The connection to the world of sustainable tropical agriculture Monitoring conservation area and biodiversity SIPEF continues to improve its monitoring and management of the HCV areas and HCS forests within its concessions, which includes the estab- lishment of dedicated ranger restoration teams on the ground to carry out the implementation of its HCV-HCS management plans. The Group is on track to meet its target to have ranger restoration teams in Indonesia, Papua New Guinea, and Côte d'Ivoire by 2026. SIPEF plans to recruit and appoint rangers at each estate, and to further invest in capacity building through the provision of relevant trainings on monitoring and management of HCV areas and HCS forests. The trainings will focus on conducting patrols of conservation areas, observ- ing fauna and monitoring flora, rehabilitating and restoring biodiversity and native species, as well as carrying out engagement with employees and local communities. Engagement includes commu- nications on SIPEF’s biodiversity programmes and awareness raising on the importance of conser- vation, including the locations and benefits of the HCV areas and HCS forests. In addition, it includes actively involving employees and local villagers in conservation initiatives. Completion of integrated HCV-HCSA assessment in Papua New Guinea In 2023, SIPEF completed an extensive integrat- ed HCV-HCSA assessment and Social Impact Assessment (SIA) at its operations in Papua New Guinea, which covered all existing estates, small- holders, and surrounding areas. The assessment identified a total of 5 625 hectares of HCV-HCS area for conservation, as well as potential area for new development in and around existing smallholder estates. Through the SIA, extensive community engagement took place across 35 villages and 15 hamlets. The recommendations that came out of the assess- ments will be integrated into existing management plans for new developments. These focus on gener- ating smallholder and community value, addressing issues such as land scarcity and food security, and protecting sacred land sites. 103 SIPEF Integrated Annual Report 2023 Environmental stewardship Biodiversity programmes and landscape initiatives SIPEF actively contributes to development and discussion surrounding landscape level approaches in the context of sustainable palm oil production, through its involvement in the RSPO Jurisdictional Working Group (JWG). In addition, SIPEF also finances and supports a few conservation and biodiversity projects (1) in Indonesia and Papua New Guinea. SIPEF Biodiversity Indonesia (SBI) The SBI project is a 12 672-hectare licensed area of forest that acts as a buer to the Kerinci Seblat National Park. The project focuses on the protec - tion and monitoring of biodiversity, reforestation of degraded areas, and engagement with local com- munities to protect the conservation area managed under the programme. • Biodiversity monitoring: An extremely rich range of megafauna has been identified in the area, including the critically endangered Sumatran tiger (Panthera tigris sondaica). • Reforestation and enrichment: In 2023, an additional 39 hectares was reforested. Since the beginning of the SBI project, a total of 56872 trees have been planted, and 224 hectares have been reforested. As of 31 December 2023, SBI has achieved 88% of its target to restore 256 hectares by the end of 2024. • Alternative incomes for farmers: Agro- forestry creates a sustainable and alternative livelihood for local communities. In 2023, the SBI programme exceeded its 2024 target of engaging with 369 farmers to promote regenerative agricultural practices, earlier than expected. The SBI team worked with 376 farmers from 17 farmer groups in its agroforestry programme, providing them with technical support and seedlings to develop agroforestry food gardens and tree crops. The aim of this support is to help these farmers generate an alternative source of income, and mitigate illegal development in the conservation area. • Science-based conservation: SIPEF has continued its engagement with ZSL, a science- driven conservation charity, to improve its monitoring methodology, and is finalising the outputs from the monitoring activities carried out to-date, through regular meetings between both organisations. Trainings have been planned for 2024, which will focus on camera trap surveys, data analysis, and reporting together with ZSL and other local NGOs potentially interested in collaborating. SBI is one of the few conservation projects in Indonesia granted for ecosystem restoration for a term of 60 years, under the purview of the Directorate General of Sustainable Production Forest Management, Ministry of Environment and Forestry (KLHK) of the Republic of Indonesia. In December 2023, KLHK approved the 10-year management plan submitted by the SBI team, securing SBI’s existing licence to manage and conserve the area for another decade. (1) Sea turtle conservation project in Indonesia: As the new Memorandum of Understanding (MoU) is still in the process of being extended with the Balai Konservasi Sumber Daya Alam-Bengkulu (BKSDA), no progress could be reported for 2023. 104 The connection to the world of sustainable tropical agriculture Coastal area restoration In both Papua New Guinea and Indonesia, SIPEF has projects focusing on the rehabilitation of coastal areas located within its operations. Rehabilitation initiatives, such as mangrove planting, will assist in creating buffer zones to protect these areas in the estates from further erosion. Restoration activities include tree planting, oil palm removal and weeding, as well as setting aside and protecting areas to naturally let them regenerate. IN PAPUA NEW GUINEA IN INDONESIA Rehabilitation will be carried out based on an updated management plan, to be developed in accordance with the latest HCV-HCSA assess- ment completed by HOPL in 2023. This is to ensure alignment of the initiative with the final HCV-HCS maps generated by the assessment, which include the coastal rehabilitation area. Ongoing active and passive coastal restoration are being carried in the Mukomuko Estate and Tanah Rekah Estate, including activities such as tree planting, oil palm removal, weeding and natural regeneration in the designated areas. 105 SIPEF Integrated Annual Report 2023 Environmental stewardship IMPLEMENTING BEST MANAGEMENT PRACTICES SIPEF is dedicated to minimising the environ- mental impact of its operations through the implementation of Best Management Practices (BMPs). Wherever possible, the Group also engages in regenerative and circular practices, aimed at reusing by-products and waste from its production and processing activities. Management of pesticides and chemicals Integrated pest management (IPM) techniques are employed for both SIPEF’s oil palm and banana operations. Pest management is critical for pro- tecting crops and optimising yields, and IPM is an approach that encourages natural pest control mechanisms. In prioritising IPM, SIPEF aims to reduce its reliance on plant protection products, focusing on careful consideration of chemical and pesticide applications that minimise risks to people and ecosystems. Pesticides use SIPEF is committed to minimising the use of pesti- cides, while preserving soil health, and maintaining or increasing productivity per hectare. The Group prioritises the safety of employees engaged in pes- ticides application, ensuring they receive proper training and equipment, and undergo regular health assessments. Pesticides are used as a last resort when other methods 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 ecacy. There is no prophylactic use of pesticides and usage is minimised through best practices. 106 The connection to the world of sustainable tropical agriculture DIFFERENT METHODS OF NATURAL OR BIOLOGICAL PEST CONTROL Ganoderma mycelium can be suppressed by and leav- ing the chippings exposed to sunlight, enabling the ultraviolet radiation to kill the fungus. into mineral soil limits the breeding habitat of the rhinoceros beetle (Oryctes rhinoceros). includes trap- ping and infecting male Orcytes with a virus and releasing them to curb populations of Orcytes. () and formulated fertiliser are applied to the varieties of palm hybrids that best suit the sites, for healthier and more natu- rally resistant palms. - are planted to provide extra soil nitrogen and reduce noxious weeds. are established to foster populations of natural enemies, such as parasitoids, e.g. Eocanthecona furcellata, which are released. Conditions for natural predators, such as - in replanting areas, are provided. The first enemy of a banana plantation is a leafspot disease caused by a fungus called Cercospora musae, which settles on the leaves and rapidly becomes necrotic. To avoid systematic fungicide spraying, field sanitation, by is practiced. Chemical treatment will only be organised when the level of infestation is too high. , which is free of nema- todes, means there is no need to use nematicides. A , the Cosmopolites sor- didus, can be trapped using attractive pheromones, so pesticide use is no longer required in normal and con- trolled circumstances. 107 SIPEF Integrated Annual Report 2023 Environmental stewardship OIL PALM Preserving soil fertility and health At SIPEF’s palm oil operations, all land prepa- rations start with detailed topographic maps to assess the planted areas and ensure that the appropriate BMPs are implemented for soil health and conservation. In terms of oil palm diseases, the biggest risk to older estates remains that of Basal Stem Rot (BSR) caused by the fungus Ganoderma boninense. Intensive land preparation techniques before and during replanting are undertaken, combined with the rapid establishment of the cover crop, Mucuna bracteata and followed by at least a one-year fallow period in an attempt to break or at least interrupt the fungus’ life cycle. The use of ‘Gano- tolerant’ planting material has been introduced and its eectiveness is being tracked very closely. Antagonistic and beneficial fungi, such as Trichoderma and the soil improver Rhizoplex, are also being used as part of the armoury against this virulent fungus. The application of mineral and organic fertilisers is balanced, while maintain- ing the soil’s structure and managing the costs of operations. By applying compost and other biomass like EFB, cocoa or coee husks, the soil exposure is reduced. This method contributes to soil health and conservation, and reduces dependency on mineral fertilisers. SIPEF has also invested in a composting system at its Bukit Maradja operations, which processes 100% of the plantation’s EFB and POME into organic fertiliser with a high nutrient content. Preventative measures are taken to prevent soil erosion, such as planting legume cover crops, installing stop bunds (silt traps) and silt trenches, and planting bund and slope protection like veti- ver grass (Chrysopogon zizanioides). 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. 108 The connection to the world of sustainable tropical agriculture BANANAS In banana production, the main soil and root hosted pest is the nematode, which is a very tiny parasitic worm that feeds on the plants. The use of meristem tissue for young plants at replanting ensures that there will be uninfected plants, but it will only be guaranteed if the soil has passed through a fallow period of at least one year, without any regrowth of wild banana plants. By cutting them o from all food sources, the nem- atodes will die and disappear. For further improvement of the soil quality during this period, the fallow blocks are planted with Tithonia. In a few months, they form bushes two or three metres high, which are crushed at the end of the period to ensure coverage of the ground, enhancing the organic content, and avoiding erosion, until replanting operations start. 109 SIPEF Integrated Annual Report 2023 Environmental stewardship Minimising waste and pollution As part of SIPEF’s commitment to minimising waste and pollution, the Group reuses the by-prod- ucts from its oil palm and banana field activities, its palm oil production activities, as well as from third-parties. While the principal applications of these by-prod- ucts are outlined below, there are also several other uses being explored, tested, and practised within the agricultural sector. Ongoing innovation, research and development will continue to tap into the wealth of value from what was previously considered waste. OIL PALM AND BANANA PLANTATIONS PALM OIL MILLS • Empty Fruit Bunches (EFB) are applied to the fields to return the remaining nutrients and organic matter content back to the soil. • Composted EFB is beneficial for mineral soils and can be mixed with mill euent/ boiler ash/the deposits from the decanting systems to create organic fertiliser. • As soon as the fruit hands are removed from the bunch at the packing station, the banana stems as well as fruit debris are spread back on the fields, generally in the fallow areas. • Non-desirable or old leaves and necrotic areas, as well as supernumerary hands are cut and left on the ground, ensuring that as much organic matter as possible is returned to the soil • By-products from third-party cocoa farms and oil palm plantations, such as cocoa husk and EFB, are used as organic fertiliser in the banana fields. • Treated Palm Oil Mill Euent (POME) is applied in the fields as a source of nutrients for the palms. • Fibres from palm nut mesocarp are burned in the mill boilers to generate electricity through steam turbines. • Palm nut endocarp, the source of palm kernel shell, is sold to third parties as a biomass. • Palm nut endosperm, the source of palm kernel expeller, is sold as a component in animal feed. 110 The connection to the world of sustainable tropical agriculture Mitigating water pollution and managing effluent SIPEF follows all local regulations on euent limits in its palm oil mills, as part of its commitment to mitigate water pollution impacts. In 2022, the Group defined targets for maintaining the bio- chemical oxygen demand (BOD), chemical oxygen demand (COD) and total suspended solids (TSS) below legal limits at point of release. Engineering controls and water treatment systems are being utilised to ensure the levels stay within the required limits. SIPEF also maintains riparian buer zones of natural vegetation, which is important for absorbing runo and protecting waterways. In 2023, HOPL’s three palm oil mills in Papua New Guinea had incidents in which the legal limits for BOD and TSS were exceeded. These incidents were due to irregularities in the desilting programme. Mitigation actions have been taken to ensure standby machinery will be available for continuous desludging work and to closely monitor the desludg- ing process during the heavy rainfall season. BOD, COD and TSS data for 2023 are available in the Base Data section of this report, located in the Annex on page 280. 111 SIPEF Integrated Annual Report 2023 Environmental stewardship Water management SIPEF’s approach to water management is to preserve the availability and quality of water resources for the surrounding communities and environment, as well as for its own business. The Group measures and aims to optimise water usage in all of its operations. In 2023, total water usage at SIPEF's palm oil mills increased by 3%. A mill in Papua New Guinea exceeded the set target on water usage intensity due to major projects having commenced, including the installation and commissioning of boilers and sterilisers, which resulted in high water usage. In addition, more water was required to clean machin- ery of the mill more regularly, due to issues with volcanic ash from the eruption of Mt Ulawun in November 2023, which caused blockages in pipes and tanks. Bananas remain the Group’s most water-intensive product, primarily due to the use of irrigation. Sources of irrigation water used at the banana plan- tations in Côte d'Ivoire include rainwater, water discharged from packing stations stored in dams, (1) and rivers that run alongside the plantations. Water for the banana packing stations is supplied from wells, due to food health and safety require- ments. The water used is either recycled after the packing process via decantation tanks and then stored in the dams for future irrigation, or it is discharged back into the river. In 2023, there was a 19% increase in water usage intensity due to the additional planted areas of Plantations J. Eglin’s new sites and the two new packing stations in Lumen and Akoudié, which became fully operational during the reporting year. (1) Only applicable to one of the Azaguié sites (Azaguié 2) and the Agboville site. TOTAL WATER USAGE IN PALM OIL MILLS M 3 TOTAL WATER USAGE IN BANANA OPERATIONS M 3 WATER USAGE INTENSITY OF BANANA OPERATIONS M 3 /TONNE BANANAS EXPORTED 2022 2023 Indonesia Papua New Guinea 2022 2023 929 279 993 379 711 864 699 175 4 262 667 6 530 541 240 952 350 428 2022 2023 Plantations Banana packing stations 2022 2023 150 178 Plantations and packing stations 2022 2023 112 The connection to the world of sustainable tropical agriculture 113 SIPEF Integrated Annual Report 2023 Environmental stewardship Respecting employees and communities Worldwide, millions of people make a living from the agricultural sector, which also produces the food to sustain the growing global population of eight billion. While the sector has driven significant socio-economic development, it has also been associated with human rights and land-related impacts, especially in the regions where tropical agricultural commodities are produced. As an employer of thousands, SIPEF understands the profound impact it can have. The Group is committed to respecting human, labour and community rights in line with both local laws and international frameworks. Beyond compliance, this commitment extends to improving the lives of individuals in and around its operations in Indonesia, Papua New Guinea and Côte d'Ivoire. By providing jobs and access to healthcare, edu - cation and infrastructure, SIPEF underscores its support for the agricultural community and its contribution to sustainable development. 114 The connection to the world of sustainable tropical agriculture SIPEF’S WORKFORCE In 2023, SIPEF’s workforce consisted of 23 057 peo- ple, including permanent and temporary employees spread across Belgium, Luxembourg, Indonesia, Papua New Guinea, Côte d'Ivoire and Singapore. The majority of SIPEF's employees are located in Indonesia (67.4%), followed by Papua New Guinea (21.6%) and Côte d'Ivoire (10.7%), with the remain- ing 0.3% in Belgium, Luxembourg and Singapore. Based on the total breakdown of employees by gender, 25% of SIPEF’s employees are women. SIPEF hires 76% of its employees under contracts of indeterminate duration (permanent contracts), 19% under long-term contracts, and 5% under temporary contracts in its oil palm and banana operations. Temporary contractors include seasonal workers in the plantations for activities which are short- term, and function as additional support during peak seasons. In Indonesia, employees hired on long-term renew- able contracts (i.e. Perjanjian Kerja Waktu Tertentu - PKWT) and temporary contractors collectively account for 36% of employees at PT Tolan Tiga Indonesia. All temporary contractors are covered for social security following Indonesian regulations, and employees with long-term contracts are in the process of being considered to join the workforce under contract for an indefinite period of time. EMPLOYEES OVERVIEW 25% 24% 32% Employees by country (1) % women in oil palm and banana operations% women in total employees (1) 15 547 Indonesia 24 Belgium 14 Singapore 4 989 Papua New Guinea 2 483 Côte d'Ivoire 23 057 Total employees (1) (1) This also includes employees in tea, rubber activities and horticulture. 115 SIPEF Integrated Annual Report 2023 Respecting employees and communities In Papua New Guinea and Côte d'Ivoire, temporary contracts make up only 1% and 5% of total con- tracts respectively. Temporary employees in both countries receive medical benefits while they are employed. In Côte d'Ivoire, all employees, includ- ing those on temporary contracts, are required to be covered by the National Social Security Fund ("Caisse Nationale de Prévoyance Sociale" —CNPS) and by national health insurance. The benefits of the CNPS fund cover family allowance, retirement, maternity / paternity, injuries, and disabilities related to work. Employment contracts provided to employees are written up in the local language, with clearly stated salaries and conditions according to local laws. Permanent contract 76% Temporary contract 5% Long-term contract (1) 19% EMPLOYEES BY CONTRACT TYPE (1) Employees hired on long-term renewable contracts (PKWT) in Indonesia. 116 The connection to the world of sustainable tropical agriculture Employee wages SIPEF meets all local regulations for minimum wages, and complies with the Roundtable on Sustainable Palm Oil (RSPO), Rainforest Alliance and Fairtrade standards on the requirements and calculations on Living Wage. Achieving the provi- sion of a Living wage is fundamental to ensuring employees are able to sustain their livelihoods, aord basic needs and support their families. These standards use the Living Wage definition of the Global Living Wage Coalition, as well as salary matrices to identify gaps in cases where an approved benchmark has not been calculated. Related implementation guidance supports the development of improvement plans to ensure that existing gaps are closed. As part of its regular internal control processes, SIPEF conducts audits of third parties, such as local suppliers of contract labourers, to assess their compliance with local minimum wage and relevant legislation. For further information related to Living Wage according to the respective certification standards: • RSPO: Decent Living Wage Task Force – Roundtable on Sustainable Palm Oil • Rainforest Alliance: Annex S10: Living Wage Benchmarks per Country – List | Rainforest Alliance • Fairtrade: www.fairtrade.net/issue/living-wage RSPO revised Living Wage Strategy Since 2018, the RSPO Principles and Criteria (P&C) have included requirements on Living Wage. In 2023, a revised Living Wage Strategy was adopted, which takes on a stepwise approach to: 1. Develop a standardised prevailing wage calculation and wage data collection system; 2. Define a Living Wage benchmark for the oil palm sector and identify Living Wage Gaps, and; 3. Verify and close Living Wage gaps. The RSPO has decided to prioritise the initial phase, postponing the current activities related to Living Wage benchmarks. Subsequently, it will concentrate on researching Living Wage methodologies and benchmarks, commissioning and creating bench- marks for RSPO members, establishing Living Wage gap verification processes, and formulating strategies to address gaps. Meanwhile, the Living Wage calculation formulas issued by the RSPO will continue to be utilised for certification purposes. SIPEF has continued to play an active role in these discussions through its participation in the RSPO Standards Standing Committee (SSC). • For more information: https://rspo.org/a-living-wage-rspos-strategic-direction/ 117 SIPEF Integrated Annual Report 2023 Respecting employees and communities Progress towards achieving Living Wages in the banana sector In 2023, Plantations J. Eglin's management, employees, their families and community mem- bers participated in two significant studies. The first, commissioned by Fairtrade and conducted by researchers of the Anker Institute, aims to make recommendations to adapt the Living Wage calcula- tion methodology for banana cultivation workers in Côte d'Ivoire. The second, initiated by Banana Link, focuses on negotiating higher commercial market prices for bananas. Findings and recommendations of both studies will be made available in 2024, and are expected to make significant contributions to the livelihoods of banana producers worldwide. Additionally, the Federation of Banana Workers of Côte d'Ivoire (FETBACI), which was formed in 2023, includes union organisations, where Plantations J. Eglin has employee representation among its members. Within the Federation, an inter-company committee was established with the aim of streamlining and benchmarking sal- ary categories that consider both the needs and expectations of workers and producing companies. Consultations will extend into 2024, taking into account some key challenges like reconciling cal- culation dierences between Rainforest Alliance and Fairtrade and incorporating company-pro- vided premiums and services into Living Wage calculations. Plantations J. Eglin has revised its working proce- dures to increase the performance of field employ- ees and their remuneration. During the course of 2023, a number of critical strides were already made towards improving the wages of employees. These include: • a 40% increase in housing premiums; • a 12.5 % increase in rice premiums; and • an 11% base salary increase for all employees (action at national level). 118 The connection to the world of sustainable tropical agriculture HUMAN RIGHTS AND LABOUR STANDARDS Employees are the driving force behind SIPEF's business, and the Group is dedicated to treating all employees fairly, safeguarding their rights and upholding labour standards. The Group adheres to all applicable local laws, as well as internation- al 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. SIPEF’s commitments to human rights are stip- ulated in its Code of Conduct, Human Rights Policy, Responsible Plantations Policy (RPP) and Responsible Purchasing Policy (RPuP). Specific policies are also in place to address child labour, forced or tracked labour, freedom of association, occupational health and safety, equal employment opportunity and sexual harassment. Read more about these policies in the good business conduct chapter on page 146. 119 SIPEF Integrated Annual Report 2023 Respecting employees and communities No Exploitation SIPEF does not tolerate any form of child labour, forced labour or human tracking in its own oper- ations, nor in the activities of its contractors and third-party suppliers. Disciplinary action will be taken, up to and including dismissal or legal action, where applicable and if charges are substantiated. Within its own operations, local human resource departments (HRD) are responsible for verifying that no employees, or temporary contractors, are under the age of 18. Compliance with all human rights and no exploitation-related policies is moni- tored through internal audit and risk mechanisms and processes. This is in addition to the annual audits being carried out on human rights require- ments that form part of the certification standards with which SIPEF complies. As an additional and critical safeguard, SIPEF has an eective grievance mechanism in place, through which employees can report any incidents of exploitation or human rights violations, should they occur. The Group is receptive to all grievances raised by stakeholders, internal and external, and handles complaints impartially. More information on SIPEF’s grievance mechanism is available in the good business conduct chapter on page 146. Freedom of association and collective bargaining SIPEF believes that social dialogue is important for creating a constructive working environment for its employees. The Group respects the right to freedom of association and collective bargaining. All workers and contractors across SIPEF’s oper- ations, permanent or temporary, have the right to join unions and organise themselves following the respective legislation of the country of operation. SIPEF engages with union representatives and promotes dialogue through regular and structured meetings and other engagement channels. As of 31 December 2023, 51% of employees work- ing in SIPEF's palm oil and banana operations are covered by collective bargaining agreements. At the level of each country of operation, this translates into 100% of employees in Côte d'Ivoire, 60% in Indonesia and 2% in Papua New Guinea. In Papua New Guinea, although a union is available for employees, the participation rate remains low due to the perceived limited advantages of joining. Monitoring and compliance at PT Tolan Tiga Indonesia In Indonesia, the bipartisan cooperative body, Lembaga kerjasama (LKS) bipartit , conducts monthly screenings across SIPEF plantations on human rights risks, including child or forced labour. Any identified cases, includ- ing those reported to the HRD, or through SIPEF’s grievance channels, are investigated and dealt with on a case-by-case basis. The LKS also functions as a dispute settlement platform for employees at SIPEF’s operations in Indonesia. 120 The connection to the world of sustainable tropical agriculture Diversity and equal opportunity SIPEF is a non-discriminatory employer, applying strict principles and norms across the Group to uphold and promote equal opportunities for all. The Group complies with all relevant equal employment laws and regulations of the countries where it oper- ates, while also implementing internal programmes and meeting external framework requirements designed to minimise the risk of gender-related discrimination. These principles and requirements also extend to SIPEF’s smallholder suppliers. Women are an integral part of the agricultural sector worldwide. They perform a significant portion of the labour, yet are exposed to risks of discrimination, exploitation and unfair treatment. SIPEF acknowledges the specific challenges faced by women in the palm oil and banana industries, and therefore focuses many of its initiatives on creating safer and more supportive environments for women, inside and outside of the workplace. Gender and social issues committees Gender committees and equivalents have been established across the Group’s operating units and the head oces in each country of operation. The committees meet on a regular basis to discuss and address, among other issues, challenges faced by women. These include topics such as equal employment opportunities, participation in deci- sion-making, sexual harassment, reproductive rights, and women’s health and safety. 121 SIPEF Integrated Annual Report 2023 Respecting employees and communities Indonesia The Gender Committee at PT Tolan Tiga Indonesia focuses on assessing and addressing gender-re- lated issues, advising the board on relevant deci- sion-making, and offering training to promote understanding of female employees' rights. Additionally, the Committee receives and responds to events related to gender issues in the company, including those linked with equal opportunity employment and reproductive rights, as well as sexual harassment within the workplace or com - pany environment. The Committee is supported at each operating unit by a Gender Committee Contact Group, which functions as a liaison with the local workers’ community in managing gender issues at the operating unit level. Papua New Guinea In Papua New Guinea, Social Issues Committees (formerly Gender Committees) work to identify and address issues of concern to employees and members of local communities. The committees include female representatives from each depart- ment, and are guided by a Terms of Reference and an annual workplan. Initiatives in 2023 included the organisation of an International Women's Day session on 8 March, where female employees at Hargy Oil Palm Ltd (HOPL) gathered to hold open discussions on the issues aecting them. Côte d'Ivoire In Côte d'Ivoire, Plantations J. Eglin expanded the focus of its existing anti-harassment committees to encompass a broader spectrum of gender-related issues. Renamed as Gender Committees, their remit now includes, amongst others, promoting equal opportunities for women, women’s health and safe- ty, and addressing harassment issues in the work- place. The committees also play a role in advancing women at the company, actively supporting female employees to apply to dierent and higher-level positions. In addition to these developments, two new Gender Committees were set up for the new plantation sites of Lumen and Akoudié. During 2023, training on gender issues and griev- ance resolution was provided to sta in French and in local languages. Based on these engagements, a 2024 workplan was developed that includes addressing key issues through regular follow-up meetings, sensitisation programmes for all employ- ees, and further training to women on using the available grievance mechanisms. 122 The connection to the world of sustainable tropical agriculture Career development and professional growth At both the Group and country levels, SIPEF has established equal opportunity policies that prohibit any form of discrimination, whether related to ethnic or national origin, gender, gender identity, sexual orientation, religion, disability, age, union membership or political aliations. These policies also apply to recruitment and professional growth processes across all levels, including for upper and middle management positions. Various initiatives are carried out to help promote inclusivity in succession planning and support employees with career development, while address- ing organisational needs. These include: • Internal training programmes • Sponsored apprenticeships • Tertiary education support • Facilitated adult literacy programmes • Upskilling initiatives Cadet programmes In Indonesia and Papua New Guinea, the long-run- ning cadet programme is designed to support the participation of college graduates in training programmes and fast-track them to middle-man- agement roles at SIPEF’s palm oil operations. Although female participation has been compar- atively low, SIPEF actively encourages women to apply, recognising the programme's potential for positive impact in an industry traditionally domi- nated by men. In 2023, women constituted 7% and 11% of the cadets in the programmes for Indonesia and Papua New Guinea, respectively. Changing the dynamic with female leadership Diversity in leadership is crucial for fostering a gender-inclusive work environment. • In Indonesia, PT Tolan Tiga Indonesia’s sustainability department appointed its first female head of sustainability for its operations in Bengkulu. • In Papua New Guinea, a female employee was promoted to head of construction in 2023, joining three other female heads of department in the executive committee at HOPL. • In Côte d'Ivoire, three female banana plantation employees and three female packing station employees were promoted to supervisory positions. At HOPL's Navo site, an upskilling programme trained female employees to drive tractors and operate machinery, resulting in several women taking on these roles at SIPEF’s plantations in Papua New Guinea. 123 SIPEF Integrated Annual Report 2023 Respecting employees and communities Women in Leadership Award for West New Britain In June 2023, Tracey Masing, the senior commu - nity engagement ocer at HOPL, was presented with the ‘2021 Women in Leadership Award for West New Britain’, awarded by the Papua New Guinea Australia Alumni Association (PNG AAA). Presented by the Australian High Commissioner to Papua New Guinea, the award recognised her efforts to address the needs and challenges of youth and women within HOPL’s smallholder areas. Initially planned for 2022, the ceremony was postponed to 2023 due to Covid-19 restrictions. Starting with a baseline survey in 2020, Tracey identified critical issues, including a lack of water tanks and sanitary facilities, and rising unem- ployment amongst younger generations in the smallholder areas surveyed. Working with the Navo Community Engagement team, capacity build- ing and family farming training for women and youths was carried out. In cooperation with HOPL’s Business Development Section, financial literacy training was also conducted. Tracey later went on to successfully source funding from the PNG AAA Alumni Grant Scheme for sewing training for women in smallholder families and employee spouses, with the aim of providing them with new skills to increase their income opportunities. 124 The connection to the world of sustainable tropical agriculture Occupational health and safety For SIPEF, ensuring the health and safety of its workforce is of the utmost importance. The Company acknowledges the potential hazards in its operations, which are labour-intensive and involve the use of machinery, vehicles and chemicals, including pesticides that can pose risks to health. SIPEF’s Occupational Health and Safety (OHS) Policy sets the minimum requirements for all its operations, and must be followed by all employees and contractors. In Indonesia, Papua New Guinea and Côte d'Ivoire, detailed country-level policies complement these by prescribing procedures in accordance with local laws, regulations and best practices for palm oil and banana sectors. The RSPO, Rainforest Alliance, GlobalG.A.P. and Fairtrade standards, against which SIPEF’s oper- ations are audited each year, include a range of OHS requirements that must also be met. Occupational health and safety committee There is a dedicated committee responsible for OHS and environment at every operating unit in all countries of operation. Each committee consists of representatives from management, sta and other workers, who meet on a regular basis. The committees are commonly assisted by a trained safety ocer, who is responsible for implementing the operating units’ Safety Management Plan. Training and prevention SIPEF invests in regular training for all relevant employees, regardless of whether they are on per- manent contracts or contracted via third parties. The content and frequency of such training depend on the risk assessment of each activity, for which the requirements will dier. Refresher training is regularly provided for the various functions in accordance with Health and Safety Management Plans, and communications are adapted to the local languages and contexts. All necessary personal protective equipment (PPE) is provided, and medical examinations are oered at least annually, if not more regularly, for employees working with chemicals. Employees handling chemicals are also given special training, supervision and PPE. Pregnant and breastfeeding employees do not work with chemicals and are assigned to other suitable tasks. Real or potential risks are regularly analysed and assessed, and any occupational accidents are reported and investigated to ensure that the nec- essary measures are undertaken to prevent them from being repeated. 125 SIPEF Integrated Annual Report 2023 Respecting employees and communities Lost Time Injury Frequency Rate (LTIFR) LOST TIME INJURY FREQUENCY RATE BY COUNTRY COUNTRY LTIFR 2022 LTIFR 2023 TARGET 2025 Indonesia 3.53 4.34 2.07 Papua New Guinea 18.41 24.90 20.4 Côte d'Ivoire 11.97 6.13 10.97 TOTAL SIPEF records its Lost Time Injury Frequency Rate (LTIFR) across all its sites. The LTIFR refers to the number of lost time injuries occurring in a workplace per one million hours worked. LTIFR target progress SIPEF set a target in 2022, committing the Group to reducing the LTIFR across its operations by between 10% to 33% by 2025, against the 2021 baselines. In 2023, the LTIFR went up slightly by 0.81 for the Group’s operations in Indonesia. This was due to the increase in the number of employees at the Musi Rawas site, where opera- tions continue to develop, as well as infrastructural expansions to site clinics, which have led to more injuries being reported on and attended to on site. Another reason is enhanced record keeping by the OHS team, which is now engaging with the clinics on a regular basis. As part of the planning and work to reduce the LTIFR in Indonesia, OHS managers gathered and assessed data to identify the top five incidents and accidents leading to injuries. These were: trac accidents, bee / wasp stings, injuries caused by sharp objects, debris and loose fruits / palm spines falling into workers’ eyes. The OHS team is addressing these issues by review- ing safety equipment, conducting a Job Safety Analysis (JSA) with workers to identify where incidents might occur and assess risk awareness, and planning internal training based on the JSA findings. Initially focusing on the five primary LTIFR drivers, the team aims to extend this eval- uative approach to all sta operations. The LTIFR in Papua New Guinea increased by 6.49 in 2023. Investigations revealed that inconsistencies in data collection and reporting processes across dierent sites has contributed to an overstated LTIFR for Papua New Guinea. The inconsistencies are primarily due to a lack of understanding and implementation of standardised definitions (e.g., 'lost time') and formulas for calculating working hours used by medical sta. Training began during 2023 to align definitions across the 13 clinics and standardise record keeping by medical workers. 126 The connection to the world of sustainable tropical agriculture In Côte d'Ivoire, the LTIFR decreased by 5.84 during 2023 to 6.13. This is significantly lower than the LTIFR 2025 target of 10.97. Its success can be attributed to an investment in and prioritisation of internal and external OHS training at Plantations J. Eglin, as well as the adjustments made to the PPE provid- ed. For example, since 2022, caps have been used instead of goggles to protect employees in the plan- tations from eye contamination during leaf cutting, which was previously a significant contributor to the number of incidents for plantation workers. A total of 48 training sessions took place during 2023, covering 100% of all employees and con- tractors. Safety measures were well observed and applied, and regular compliance checks were conducted by the OHS team. Fatalities SIPEF regrets to report a work-related fatality in Indonesia in 2023, which resulted from a traf - fic-related accident. An employee was driving on a public road in a truck transporting FFB, and had a head-on collision with a car coming in the opposite direction. The driver was taken to hospital, but sadly passed away a few days later in the intensive care unit (ICU). Following a thorough investigation, and as a part of a wider initiative to address the more prevalent issue of trac-related accidents, PT Tolan Tiga Indonesia has implemented additional training programmes for drivers to prevent future incidents. This includes a Safety Defensive Driving training course, which is being conducted for all dump truck drivers across all three regional oces. In Papua New Guinea there were no work-related fatalities in 2023. However, in response to a fatal- ity that had occurred in 2022, when a worker had tragically fallen o the back of a tractor trailer, investments were made to adjust tractors by adding passenger seats for the safe transport of workers to and from the fields. Additionally, 24 training sessions on vehicle safety were conducted for 265 employees across operations in 2023. In Côte d'Ivoire there were no work-related fatal- ities in 2023, or in 2022. 127 SIPEF Integrated Annual Report 2023 Respecting employees and communities 128 The connection to the world of sustainable tropical agriculture RESPECTING COMMUNITY RIGHTS Worldwide, agriculture is a key driver of develop- ment in rural areas, contributing to job creation and poverty reduction. Yet, when not managed sustain- ably, it can also cause disruption and have impacts on the availability and accessibility of the land and resources on which local populations depend. SIPEF is committed to respecting the rights of communities to land, resources, territories, live- lihoods and food security. The Group engages in the necessary assessments and procedures to ensure its operations do not infringe on the legal and cus- tomary land and tenure rights of indigenous and local communities. A sustainable approach is also critical for ensuring that activities do not cause the degradation of natural resources and ecosystems on which communities depend. Free, Prior and Informed Consent Respecting community rights starts with ensuring that Free, Prior and Informed Consent (FPIC) is provided by communities that would be aected or potentially aected by operations, prior to any new developments taking place. As stipulated in SIPEF’s RPP, all of its plantations and those of its suppliers must follow the FPIC principle, as defined by the RSPO and Rainforest Alliance standards. Consent is secured through a continuous process that includes the complete involvement of the communities impacted. Communities retain the right to choose their legal representation and to say no to the development at all times during the process. Where a negative impact has been iden- tified and proven, communities have the right to compensation. FPIC does not conclude with the transfer of land ownership or rights. It represents a continual engagement and interaction with communities to ensure their voices are heard, and that their needs and feedback are considered and applied. The approach aims to reduce the negative social eects of operations, while enhancing potential positive impacts and benefits for local populations. 129 SIPEF Integrated Annual Report 2023 Respecting employees and communities Indonesia A total of 14 SIAs were conducted in 2023, covering the full scope of SIPEF’s operations in Indonesia. Surveys and interviews were carried out with nearby communities and villages to assess their perceptions on Company impacts, gather feedback, and identify and manage any potential issues. Key topics surveyed included the Company’s eects on the local economies, employment opportunities, infrastructure benefits and the environment. The assessments not only oer a valuable opportuni- ty for engagement and collaboration with local stakeholders, but they also lay the groundwork for SIPEF’s Social Responsibility Management Plan for Indonesia. Papua New Guinea In 2023, Hargy Oil Palms Ltd (HOPL) completed a comprehensive SIA alongside its latest integrated HCV-HCSA assessment, which covered its three estates, smallholders and surrounding areas. As part of a broader FPIC process in line with the RSPO NPP, the SIA facilitated widespread commu- nity engagement across 35 villages and 15 hamlets. Customary landowners participated actively by providing insights into their present land usage and outlining future land use plans. Côte d'Ivoire Engagements with local community represent- atives are regularly carried out by Plantations J. Eglin. A fund managed by the company’s human resources department is available to provide the support needed for the local communities based on these engagements. In November 2023, a study was initiated for the Lumen site, in agreement with the National Environment Agency of Côte d'Ivoire, which will lead to the development of an environmental and social management plan for the plantation. Plans are underway for the Akoudié site to follow suit in 2024. Social Impact Assessments in 2023 Community engagement Fair and transparent dialogue and a participatory approach to community engagement are crucial for SIPEF in sustaining positive relations with the communities in and around its plantations. Social Impact Assessments (SIA) are undertaken as part of the Group’s compliance with sustainability stand- ards and certification programmes. For SIPEF’s oil palm activities, SIAs are also conducted for new developments within the framework of the RSPO New Planting Procedure (NPP), and in parallel with integrated High Conservation Value and High Carbon Stock Approach (HCV-HCSA) assessments. The SIAs perform a review of the actual or potential impacts on the rights and needs of communities, as well as the positive social impacts that may result from new development plans or existing operations. Community members are engaged in the process, as well as in the design of any mitigation or man- agement plans. 130 The connection to the world of sustainable tropical agriculture Addressing land conflicts and community grievances SIPEF has established an eective grievance mech- anism, through which all stakeholders, including local and indigenous community members, can report any incidents of misconduct, labour rights or other violations. These can include, but are not limited to, land disputes and compensation for the loss of legal, customary or user rights. The process enables the expression of their concerns through chosen representative institutions, including local chiefs and committees formed within the communities. For any conflict or dispute over land issues, the extent of the disputed area is mapped out in a participatory manner with aected parties, includ- ing neighbouring communities, where relevant. Evidence is also made available to show whether compensation was accepted following a document- ed process of FPIC. SIPEF is open to all grievances, whether they are internal or external, and commits to resolving complaints transparently and with impartiality. More information on SIPEF’s grievance mechanism is available in the good business conduct chapter on page 146. 131 SIPEF Integrated Annual Report 2023 Respecting employees and communities EMPLOYEE HOUSING, CLINICS, SCHOOLS AND CHILDCARE FACILITIES AS OF DECEMBER 2023 Employee housing, education and medical services Many of SIPEF’s employees reside in rural and remote areas surrounding the Company’s oil palm and banana plantations, where basic social services and infrastructure might be limited or inaccessible. SIPEF provides all employees with housing, clean water and medical care, and ensures access to edu - cation for their children. Much of the infrastructure established by SIPEF and many of the facilities set up and run by the Company are also accessible to local community members. Other types of services and support can vary by operation location, such as the initiatives focused on food accessibility and aordability. Since 2017, the operations in Indonesia have also provided free childcare to support working families. This has the added important contribution of helping to create equal opportunities for women in the workplace. In providing these facilities and services, SIPEF respects the requirements of the RSPO, Rainforest Alliance and Fairtrade standards, as well as crucial elements of the Global Living Wage Coalition’s (GLWC) 'Living Wage' definition, such as decent standards of living, housing, clean water, education and health care. 11 828 Housing units 45 Clinics 45 Schools 42 Day care facilities All 45 schools are accessible to community children, and all 45 clinics are accessible to community members. SUPPORTING LIVELIHOODS AND COMMUNITY DEVELOPMENT SIPEF is committed to creating employment and development opportunities for both its employees and the communities residing in the areas where it operates. The Group continues to dedicate considerable resources towards services that improve the lives and well-being of its workforce and their families, and that support community development. 132 The connection to the world of sustainable tropical agriculture Indonesia • In 2023, 113 new housing units were constructed for employees and their families in Indonesia. • Three clinics were established at three estates, all accessible to anyone covered by the national health insurance programme in Indonesia (Badan Penyelenggara Jaminan Sosial Kesehatan —BPJS). Papua New Guinea • In Papua New Guinea, 350 employee housing units were built across HOPL’s three estates. • With the financial support of SIPEF, the construction of a new maternity ward was finalised at the Ulamona Health Centre. The completed ward, now under the man - agement of the local health au thorities, is expected to become operational in 2024. Côte d'Ivoire • Two new medical centres were constructed during 2023 in Akoudié and Azaguié. Both employees and community members have access to the facilities, which are expected to become operational by 2024. • A number of projects were facilitated through the use of the Fairtrade fund in 2023, including the establishment of a daycare centre and a school canteen in Motobé, and the application of an 80% subsidy on all analysis services performed at the biomedical testing laboratory in Azaguié. Key updates linked with service provision in 2023 Evacuation and emergency support during the eruption of Mt Ulawun On 20 November 2023, Mt Ulawun, a volcano on the border of the West New Britain and East New Britain provinces, erupted. Due to its close proximity to the volcano, HOPL has an emergency response plan in place. This plan was put into action to evacuate approximately 9 000 people, including employees and their dependents, to its three care centres. Additionally, HOPL provided support to communities and local residents, including transportation and supplies, facilitating the evac- uation of another 5 000 people to government-run care centres. 133 SIPEF Integrated Annual Report 2023 Respecting employees and communities Food security SIPEF is aware that the areas occupied by its oil palm and banana plantations can have an impact on local food security. The Group is committed to ensuring both physical and economic access to food for its workforce, and works to mitigate its impact on food security through its employment practices and community engagement. Aordable and accessible food for employees SIPEF pays a ‘Living Wage’ to employees under permanent contract, which ensures that the costs of living and food security are factored into their salaries. In addition, initiatives are undertaken in each country of operation, focused on increasing access and aordability of food. In Indonesia, employees and their families are supplied with up to 47 kg of rice per household every month, in addition to their salary. Residential com- pounds also oer garden areas close to employee housing for food gardening. SIPEF provides empty fruit bunches (EFB) from its mills, which serve as organic fertiliser for these gardens. In Papua New Guinea, where store-bought foods are more expensive, employees are given access to larger areas for food gardening. In Côte d’Ivoire, all employees are provided a fixed monthly subsidy for the purchase of rice. In 2023, these subsidies were increased by 12.5% from the previous year to accommodate the rising cost of food in the country. In December 2023, a decision was made to further increase the subsidy by 56% for 2024. Across all locations, residential areas have estab- lished local stores or canteens, primarily owned by workers' unions or cooperatives, and run by employ- ees and their family members. SIPEF supports these establishments by subsidising the transpor- tation of goods or oering capital when necessary. The stores are subject to cost control measures to ensure prices are kept locally competitive. INITIATIVES PER COUNTRY Indonesia: Successful mini markets have been set up by employee cooper- atives at most of SIPEF’s plantations in Indonesia. Papua New Guinea: Local opera- tors are engaged to set up stores at HOPL’s estates. The annual operating contracts specify that prices must be comparable to local prices. Côte d’Ivoire: Local stores are man- aged by cooperatives of women from employee families, and canteens are operated by individual women, often from local communities. 134 The connection to the world of sustainable tropical agriculture Food security for local communities SIPEF also engages with local communities to ensure that they continue to have access to land for producing food. In Papua New Guinea, for example, SIAs have included participatory mapping in which all areas important for providing food gardens have been identified and excluded from any future devel- opment plans. In Indonesia, the SIPEF Biodiversity Indonesia (SBI) team worked with 376 farmers from 17 farmer groups in its agroforestry programme in 2023. SBI provides these farmers with technical support and seedlings to develop agroforestry food gardens and tree crops for generating an alternative source of income. Find out more about SBI and this initiative in the environmental stewardship chapter on page 90. Local infrastructure and service provision The availability of well-maintained infrastructure, including good road networks and bridges, is crucial to running SIPEF’s operations, which rely heavily on the transport of people, materials and products. SIPEF therefore works with local authorities to maintain the public roads surrounding its areas of operation, which at the same time benefits other users, including local businesses and residents. The Groups’ teams on the ground also regularly consult with stakeholders through SIAs to determine if there are additional infrastructure projects where SIPEF can provide financial support. In 2023, SIPEF's subsidiary, HOPL, contributed to the road maintenance of the New Britain Highway in Papua New Guinea. Spanning 550 kilometres, this highway provides not only better access for HOPL’s vehicles from its Navo and Bialla sites but also enables members of the public to travel long distances more safely and quickly. In Indonesia, SIPEF is in the process of completing two significant bridge projects at its Agro Kati Lama and Batu Kuda estates, both of which are accessible to the public. In Côte d’Ivoire, Plantations J. Eglin carried out repairs and improvements on the roads at its Motobé and Akoudié plantations. Before initiat- ing these works, the company engaged with local chiefs and other community stakeholders to ensure consensus and alignment with community needs. As a result, the access roads to the communities near these sites were also upgraded to enhance accessibility. 135 SIPEF Integrated Annual Report 2023 Respecting employees and communities Responsible supply chain management Smallholders produce an estimated 25-30% of the world's palm oil supply, (1) playing a vital role in the ca- pacity of the industry to meet global palm oil demand, which is expected to rise by 0.8 to 2.8% annually. At the same time, smallholders face a number of challenges, including limited access to resources, which together with other complex factors, can lead to lower yields. These challenges are compounded by the growing sustainability requirements of international markets, which more recently include the regulation in the EU on deforestation-free products. SIPEF believes that achieving balanced growth in a responsible manner includes supporting its suppliers to become part of its sustainable supply chain, all of whom are oil palm smallholders in Indonesia and Papua New Guinea. Supporting smallholders to implement sustainable and best management practices not only has the potential to boost global productivity but also to safeguard the environment and improve their livelihoods. (1) Source: www.solidaridadnetwork.org/publications/palm-oil-barometer-2022/ 136 The connection to the world of sustainable tropical agriculture SMALLHOLDER PROGRAMMES SIPEF has established a number of programmes that oer a range of support for oil palm small- holders. Through these programmes, the Group shares Best Management Practices (BMPs), oers seedlings of the same provenance as SIPEF’s at cost price, supplies fertiliser and equipment, assists smallholders in obtaining and maintain- ing Roundtable on Sustainable Palm Oil (RSPO) certification, and provides agronomic and logistical support for crop transport. SCHEME SMALLHOLDERS INDEPENDENT SMALLHOLDERS INDONESIA INDONESIA (1) (Koperasi) 1 814 SMALLHOLDERS Under this plasma programme, SIPEF is in full control of all aspects of the management and production of the crops. (Kebun Masyarakat Desa) 283 SMALLHOLDERS Under this plasma programme, SIPEF works with surrounding villages to develop small oil palm blocks, which are fully managed by the Company. 2 522 SMALLHOLDERS These smallholders manage their own lands, and have the option to sell to SIPEF, depending on their com- mitment and progress towards RSPO certification. The vast majority of these smallholders are not physically linked to SIPEF’s supply chain, as their certi- fication and integration will take time. Many of these smallholders also receive support from SIPEF for certified seed supply. PAPUA NEW GUINEA 3 646 SMALLHOLDERS Smallholders own and manage their lands and production, but due to their geographic location, they are linked to SIPEF’s supply chain. They sell to Hargy Oil Palms Ltd (HOPL) mills, which are in the vicinity of the small- holder operations. All HOPL associated smallholders in Papua New Guinea are RSPO certified. (1) 'Smallholder cooperatives (Koperasi)' is the same programme that was formerly called ‘company managed’. 31% Independent 69% Scheme 8 265 Smallholders 5 743 Scheme smallholders 37% Indonesia 63% Papua New Guinea 137 SIPEF Integrated Annual Report 2023 Responsible supply chain management Engaging with smallholders can have a positive impact on livelihoods, through increased yields, improved production quality, higher incomes and access to international markets. With sustainability as a key focus, it can also reduce the environmental impact of their production practices on natural ecosystems. In 2023, SIPEF engaged with 8 265 smallholders, of which 5 743 (69%) are scheme smallholders and 2 522 (31%) are independent smallholders. All scheme smallholder production areas in Indonesia are developed in accordance with RSPO guidelines. They are either already RSPO certified or on track to becoming certified, depending on the status of their Cultivation Rights Title (Hak Guna Usaha – HGU). 138 The connection to the world of sustainable tropical agriculture SMALLHOLDERS IN SIPEF’S SUPPLY BASE SIPEF’s scheme smallholder supply base covers a planted area of 21 059 hectares, which accounts for 20% of the total planted area of SIPEF's own estates and its scheme smallholders. These smallholders produced 252 378 tonnes of fresh fruit bunches (FFB) in 2023, contributing 17% of SIPEF’s overall FFB production. Key trends 2023 SIPEF engages with 2 097 oil palm scheme small- holders in Indonesia. • In 2023, the total planted area of these smallholders amounted to 6253 hectares, representing 8% of the total planted area in PT Tolan Tiga Indonesia’s supply base. (1) • The total planted area managed by these smallholders increased by 21% when compared with 2022. • Scheme smallholders contributed 4% of the total FFB produced by the supply base. • The average yield per mature hectare of these smallholders increased by 3% in 2023. SIPEF’s operations in Papua New Guinea engage with 3 646 associated oil palm smallholders. These smallholders manage a production area of 14 807 hectares, representing 52% of HOPL’s total oil palm planted area. The total planted area managed by these smallholders remained the same in 2023, as when compared with 2022. In 2023, the smallholders produced around 39% of the FFB processed in HOPL’s three mills. In 2023, the average FFB yield per mature hectare of the smallholders decreased by 6%. (1) Excluding independent smallholders 139 SIPEF Integrated Annual Report 2023 Responsible supply chain management Indonesia Smallholder cooperatives (Koperasi) Under the 'smallholder cooperatives' programme (formerly the 'company managed' programme), PT Tolan Tiga Indonesia is in full control of all aspects of the management and production of the FFB. The company develops and plants the land and carries out all operational inputs and management up to and including harvesting and crop recovery. A purchase agreement is set in place for the FFB at market prices. These smallholders are given an advanced monthly payment during the immature phase, which together with development costs is recovered as part of the purchase agreement. In 2023, the smallholder cooperatives programme consisted of 1 814 smallholder members. Village smallholders (Kebun Masyarakat Desa) SIPEF works with 283 village smallholders sur- rounding its Agro Muko operations. Through this programme, smallholders’ oil palm blocks are developed and fully managed by the Company. PT Agro Muko pre-finances the development of the plots and later buys the production at market prices, with an agreed-upon deduction to pay o the low interest loan. The programme brings in significant revenue to the village cooperatives, which is often used for communal facilities and developments. Papua New Guinea Associated smallholders In Papua New Guinea the smallholders supplying SIPEF are all ‘associated smallholders’. These smallholders are essentially independent, as they own their own land 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 they have a stand- ing arrangement with HOPL’s mills. As such, they are classified as scheme smallholders. HOPL is working closely with these smallhold- ers to improve their yields by providing support in the form of training and extension services. Additionally, investments are being made in research and development services through collaboration with a local planning committee. Annual contribution to capacity building and research Both SIPEF and the associated smallhold- ers working with HOPL invest in capacity building and research initiatives, focused on consistently increasing smallholder yields over time. In 2023, these investments collectively amounted to a total of PGK 4 300 345. SIPEF's investments are allocated towards HOPL’s initiatives, which oer direct support to smallholders. The investments made by the smallholders are channelled into the Oil Palm Research Association (OPRA), the Oil Palm Industry Corporation (OPIC) and Bialla Oil Palm Growers Association (BOPGA), which provide them access to extension and research, and the development services oered by these organisations. 140 The connection to the world of sustainable tropical agriculture HOPL Hargy Oil Palms Ltd Local planning committee OPIC Oil Palm Industry Corporation OPRA Oil Palm Research Association HOPL works with smallholders both directly and through the Local Planning Committee, which is made up of representatives from OPIC, BOPGA, OPRA, the East Nakanai Local Level Government (ENLLG), and HOPL. For more information on OPRA and OPIC: • png-data.sprep.org/group/15 • www.pngopra.org Hargy Oil Palms Ltd Oil Palm Industry Corporation Bialla Oil Palm Growers Association Oil Palm Research Association East Nakanai Local Level Government DIRECT SUPPORT: Smallholder crop collection Road and bridge mainte- nance for crop collection Interest free loans for tools, fertiliser, seedlings Management, 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 141 SIPEF Integrated Annual Report 2023 Responsible supply chain management Commitments towards responsible supply chain management All of SIPEF’s third-party suppliers, consisting exclusively of oil palm smallholders, are required to adhere to the Group’s Responsible Purchasing Policy (RPuP), along with other relevant policies where applicable. The RPuP provides the basis for the criteria and procedures to select and monitor smallholders in SIPEF’s supply base. Smallholders planning to work with SIPEF undergo an initial screening based on legal and geographic criteria. This process ensures they can or have the potential to meet RSPO certification require- ments and comply, at a minimum, with SIPEF's no deforestation, no new developments on peat, and no exploitation (NDPE) commitments, as stipulated in its Responsible Plantations Policy (RPP) and RPuP. Towards a 100% RSPO certified supply base SIPEF has set a timebound target to achieve 100% RSPO certification for the Company’s supply base by 2026. As of 2023, 89% of the total scheme small- holder planted area within SIPEF’s supply base is RSPO certified. , all of the smallholders working with HOPL and supplying its three mills have maintained their RSPO certification since 2009. , all scheme smallholders supplying SIPEF have been certified, except for 632 small- holders supplying the Group in Musi Rawas. SIPEF engages with independent smallholders in Indonesia with the aim of supporting them to become a part of SIPEF’s sustainable supply chain, where possible. Independent smallholders manage their own land, have the option to sell their FFB to SIPEF, as well as to other mills outside SIPEF’s supply chain. As of 2023, 60 hectares of planted areas managed by the independent smallholders supplying SIPEF have been RSPO certified. Meanwhile, FFB from independent smallholders that are not ready for RSPO certification, or that are in the process but not yet RSPO certified, are processed separately by third-party mills. RSPO CERTIFICATION STATUS FOR SCHEME SMALLHOLDERS 21 059 Total planted HA 11% Non-certified 89% RSPO certified 142 The connection to the world of sustainable tropical agriculture Milestones reached for smallholder certification in 2023 In 2023, SIPEF achieved the following milestones from its time-bound plan for the certification of the smallholders in its supply base in Indonesia: • In July 2023, SIPEF reached its target of 100% RSPO certification for the smallholders within PT Dendymarker Indah Lestari (PT DIL), supplying the Group’s mill at PT DIL. The target was met much earlier than expected, with the original target having been set for 2025. The group of newly certified smallholders are represented by nine cooperatives with members from the surrounding villages. Together, these cooperatives form the Sei Rupit estate, which was included for the first time in the RSPO certificate of PT DIL’s mill, alongside the Sei Mandang and Sei Liam estates. • Another important advancement is the certification of the smallholders’ cooperative, Koperasi Serba Usaha Suka Makmur, in 2023. Koperasi Serba Usaha Suka Makmur, a supplier of SIPEF’s Umbul Mas Wisesa mill, this is the first independent smallholder cooperative working with and supported by SIPEF to become certified to the RSPO Independent Smallholder Standard. These achievements add approximately 3 000 hectares to the certified area of SIPEF’s supply base, moving the Group closer to its overarching goal of a fully certified supply chain by 2026. 143 SIPEF Integrated Annual Report 2023 Responsible supply chain management 144 The connection to the world of sustainable tropical agriculture Monitoring and compliance Smallholders in SIPEF’s supply base are monitored through a variety of methods, which include regu- lar outreach, support and an established internal control system. For smallholders already certified, internal audits are carried out annually to ensure continued compliance with the RSPO Principles and Criteria (RSPO P&C), as well as with SIPEF policies. This is in addition to the audits conducted each year by a certification body to externally verify compliance with the RSPO P&C. In Papua New Guinea, HOPL also provides its associated smallholders with regular training, and conducts block inspections. The block inspections evaluate the smallholder’s implementation of BMPs and are conducted by extension ocers who are part of HOPL’s Smallholder Agricultural Advisory Services (SHAAS) team. Results of internal audits and inspections are communicated to growers by the SHAAS team, which also supports the small- holders in addressing any issues of non-compliance identified. In Indonesia, training and outreach activities are provided to scheme smallholders and independent smallholders. The objective of the outreach activi- ties is to raise awareness of the Group’s policies and graduate growers into the scope of the certified sup- ply base, once they are ready for RSPO certification. Managing breaches Non-compliances are evaluated on a case-by-case basis to understand their origins and subsequently determine the appropriate actions to be taken. When a breach of policies or regulations is found, the crop is segregated from the certified supply chain. 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 eective than immediate exclusion. SIPEF’s grievance mechanism is available for smallholders, should they need to raise any concerns or have any complaints. 145 SIPEF Integrated Annual Report 2023 Responsible supply chain management Good business conduct SIPEF’s approach to good business conduct is founded on full respect for laws and regulations, and upholding the highest regard for ethical principles and standards. For SIPEF, good business conduct means prioritising ef- forts to mitigate and manage any operational, financial, reputational and legal risks associated with instances of poor practice. SIPEF's commitment to good business conduct is upheld through: • Fostering a culture of ethical conduct amongst management, sta and contractors; • Implementing systems and processes to ensure the practice of ethical conduct; • Having robust policies, procedures and measures in place to address any risks, including those associated with bribery or corruption. 146 The connection to the world of sustainable tropical agriculture OVERVIEW OF POLICIES Corporate Governance Good business conduct starts with good corporate governance. SIPEF upholds strong corporate governance by applying, amongst others, the principles of the 2020 Belgian Corporate Governance Code (the Code). The principles of the Code are reflected in SIPEF’s Corporate Governance Charter, its Remuneration policy and the Group Code of Conduct, which set out norms and expectations for responsible and ethical man- agement, and governance best practices. • Read more in SIPEF’s Corporate Governance Statement on page 154. Code of Conduct SIPEF’s Group Code of Conduct has, since 2020, formalised the minimum set of norms and standards that must be observed and complied with by all its exec- utives, employees, consultants and contractors. It states that SIPEF is committed to complying with all relevant national and international laws, as well as providing trans- parency for all its stakeholders on h ow it conducts its business. The Code of Conduct also clarifies SIPEF’s positioning on zero toler- ance towards bribery and corrup- tion, whistleblowing, handling of grievances, and the prohibition of executives and sta using Group facilities or working hours to con- duct personal business. • The Group Code of Conduct can be downloaded from SIPEF’s website at: www.sipef.com/hq/investors/ shareholders-information/ corporate-governance Responsible Plantations and Responsible Purchasing Policies SIPEF also has two main sustain- ability policies, applicable to its own operations and its smallholder suppliers. Under its commitments towards responsible cultivation and production, the Company prioritises the strict implementa- tion of its Responsible Plantations Policy (RPP) and Responsible Purchasing Policy (RPuP). • Read more about how these policies are applied, implemented and monitored in the Sustainability chapters of this report (pages 90-153). Other Group-level Policies Other Group-level policies set out the norms and expectations around workplace behaviour and specific issues, covering topics such as equal employment opportuni- ties, freedom of association, child and forced labour, reproductive rights and occupational health and safety, as well as topics such as privacy and the correct handling of data under the General Data Protection Regulation (GDPR 2016/679). • SIPEF’s Group-level policies are accessible on the Company’s website at: www.sipef.com/hq/sustainability/ sipef-corporate-policies Country-level Policies Where applicable, Group-level policies are adapted to coun- try-level policies, encompassing and reflecting the local contexts, laws and regulations in the coun- tries where SIPEF operates. These include those that govern social, environmental, labour and human rights aspects. 147 SIPEF Integrated Annual Report 2023 Good business conduct THIRDPARTY VERIFICATION Good business conduct at SIPEF also means achiev- ing credible third-party certification for its sus- tainability and responsible management practices. For the Group, external verification pushes SIPEF to go further and helps it maintain transparency and credibility amongst its value chain partners and customers. The Group prides itself on being one of the first companies to achieve RSPO certification, initially acquired in 2009 for its operations in Papua New Guinea, including all smallholders supplying these mills. By 2017, all SIPEF mills in Papua New Guinea and Indonesia had been RSPO certified. Since then, SIPEF and its subsidiaries have worked to achieve and maintain certification in accordance with the RSPO, but also various other standards. The Company also strives to go beyond the prin- ciples and criteria set out by RSPO, as well as the requirements of the other certifications, such as Fairtrade, Rainforest Alliance and ISO Standards. (1) Figures for Fairtrade, GlobalG.A.P., and Rainforest Alliance include Chain of Custody certificates. Chain of Custody certifications for GlobalG.A.P. and Rainforest Alliance standards have been achieved for the SIPEF Head Oce in Belgium for the first time in 2023. Fairtrade Chain of Custody certification has been in place since 2019. SUSTAINABILITY CERTIFICATIONS NUMBER OF CERTIFICATES PRODUCT 2023 2022 2021 2020 2019 2018 RSPO: Roundtable on Sustainable Palm Oil Palm oil 8 8 8 8 8 8 ISCC: International Sustainability and Carbon Certification Palm oil 4 4 4 4 4 5 ISPO: Indonesian Sustainable Palm Oil Palm oil 8 8 8 6 6 5 ISO 14001:2015 Palm oil 1 1 1 1 1 1 ISO 9001:2015 Palm oil 1 1 1 1 1 1 GLOBALG.A .P. Bananas 2 (1) 1 1 1 1 1 Rainforest Alliance Bananas 3 (1) 2 5 5 5 5 Fairtrade Bananas 2 (1) 2 (1) 2 (1) 2 (1) 2 (1) - Sedex Bananas 1 1 1 1 1 1 TOTAL 30 28 31 29 29 27 Further details on SIPEF’s certification progress in 2023 can be found on pages 40-41. 148 The connection to the world of sustainable tropical agriculture GOOD BUSINESS CONDUCT FOCUS AREAS 2023 Grievance Mechanism Review The SIPEF group Grievance Policy outlines SIPEF’s commitment to: • Handling any reported concerns or grievances confidentially and transparently • Addressing grievances in accordance with the laws and regulations of the countries where it operates • Protecting grievants from any form of reprisal SIPEF believes that all stakeholders, internal and external, should be confident that their grievances will be heard and handled impartially. Employees, non-employees, management, and any other stake- holders that engage with SIPEF, its subsidiaries, or operations, can submit their grievances or concerns about suspected misconduct. A thorough review was conducted during the course of 2023 to understand how SIPEF’s grievance mechanism and the linked country-level channels could be improved. This work began with gap analy- ses of grievance reporting and handling procedures at both group and country levels. The key finding of the review was that a more streamlined global policy was needed to set the same minimum standards and raise the bar for more robust and transparent procedures for eective implementation across the Group. Based on the results, the Group-level grievance policy is being revised and updated to ensure best practice. Country-level policies and procedures will sub- sequently be aligned with the Group-level policy. The new policy and revised procedures are being piloted, after which they will be amended, and then reviewed by the SIPEF executive committee and board of directors for approval. Once approved, support will be provided to the respective country teams on the communication, socialisation and implementation of the new policy in each country in 2024. 149 SIPEF Integrated Annual Report 2023 Good business conduct Current Group-level grievance process A central email address ([email protected]) and a dedicated form on the SIPEF website are accessible to all stakeholders to report any concern or grievance online at the Company's website. • www.sipef.com/hq/sustainability/report-a-grievance Grievances received from NGOs, or grievances considered to be significant, are communicated on the Grievances Dashboard of the SIPEF company website. Information published includes the status of each case, as well as whether and how cases have been resolved. The Grievances dashboard includes the most sig- nificant grievances received by SIPEF since 2013, including all complaints managed through the RSPO Complaints Mechanism. Some grievances can go through multiple phases and involve various stakeholders. When requested, a grievance will remain confidential to respect the rights of the var- ious parties involved and ensure an appeasement process. SIPEF’s Grievance Dashboard can be accessed at the Company's website. • www.sipef.com/hq/sustainability/grievances-dashboard- active-andor-progressing 150 The connection to the world of sustainable tropical agriculture Anti-Corruption and Anti-Bribery SIPEF understands that the legal, financial, reputational and operational consequences of anti-competitive behaviour, bribery, extortion and other forms of corruption are grave and can have devastating impacts for the Group. Financial penalties; negative media coverage; irreparable damage to company reputation and trust amongst stakeholders; negative impact on stock prices; and the temporary or permanent halting of operations, are all possible consequences if any risks of bribery and corruption are not identified and managed. SIPEF therefore prioritises creating and maintain- ing a transparent and fair business environment and works to ensure all management, employees and non-employees uphold ethical business prac- tices, free from any forms of bribery and corruption. In 2023, SIPEF took on an ESG legal counsel who is leading the review of the Group’s policies on anti-corruption and anti-bribery, their enforce- ment mechanisms and risk mitigation measures. The analysis revealed that a stronger Group-level anti-corruption and anti-bribery (ACAB) policy was needed to clarify and streamline definitions and standards across the Group, in line with SIPEF’s values and good business conduct practices. Subsidiary-level ACAB policies and their enforce- ment mechanisms would be required to meet such standards, as well as incorporate all relevant legal requirements of the respective countries of operation. The next step is to finalise the updated policies for approval by the SIPEF executive committee and the board. Thereafter, in-country visits will be carried out to support both the launch and internal implementation of the updated policies in Indonesia, Papua New Guinea and Côte d'Ivoire, during the course of 2024. Training in the new pro- cesses and procedures to identify, manage, mitigate and eradicate potential incidents of bribery and corruption will be done by the appropriate teams in each country, with implementation and roll out being supported by global teams. 151 SIPEF Integrated Annual Report 2023 Good business conduct POLICY MANAGEMENT AND INTERNAL CONTROL MECHANISMS Policy management The successful enforcement of company policy goes hand in hand with good policy management. It encompasses the evaluation and enhancement of procedures and processes to ensure the e- cient implementation and remediation of policies throughout SIPEF's operations. It also involves identifying and aligning any gaps across the Group. This is being done by collaborating with local teams to strengthen internal and external control mechanisms through enhanced communication, training initiatives, and continuous monitoring and evaluation eorts. In 2023, SIPEF’s ESG legal counsel coordinated, amongst others, the review of some of the Group’s key policies to ensure they remain up to date, and maintain their compliance with pertinent rules and regulations. Across 2023 and 2024, this work has been focused on reviewing, updating and improving SIPEF’s Group Grievance policy as well as its Anti-Corruption and Anti-Bribery policies. Other areas include preparing and aligning SIPEF for compliance with the good business conduct and transparency requirements set out in the European Sustainability Reporting Standards (ESRS) under the EU Corporate Sustainability Reporting Directive (CSRD). Employee outreach and training Outreach and training activities on Group-level and applicable country-level policies are conducted for employees, contractors and management across SIPEF’s operations. The purpose is to ensure that all those engaged with SIPEF’s activities under- stand both the importance and purpose of the requirements set out in the various policies, and the possible ramifications for breaching these, both for the Company and for themselves as indi- viduals. Training and communication materials on critical topics, such as occupational health and safety, working conditions and human rights, are translated into local languages, and adapted to be easily assimilated by the respective audiences. Internal sanctions, up to dismissal, are issued if necessary. Where required, cases of non-compli- ance are reported to the relevant authorities. If requested to do so, the Company co-operates fully in cases of prosecution. 152 The connection to the world of sustainable tropical agriculture Internal Audit Departments Local Internal Audit Departments (IAD) at PT Tolan Tiga Indonesia and at Hargy Oil Palms Ltd in Papua New Guinea report to their respective local audit committees four times per year. The committees assess internal audit reports for any inconsistencies, and, in the process, are able to flag and address any potential risks. Additionally, SIPEF's activities in Côte d'Ivoire will be subject to the same monitoring procedure as soon as the internal audit department is set up for Plantations J. Eglin. Anti-corruption and anti-bribery policy reviews are targeted for completion in 2024. Next steps are focused on ensuring that employees at every level of the business understand the relevance and impor- tance of these policies. The IAD in each country will play a pivotal role here, helping coordinate anti-cor- ruption and anti-bribery training for employees, as well as the implementation of procedures and processes for continuous monitoring. Annual risk assessment As part of the annual risk assessment exercise con- ducted by the SIPEF board of directors, all business risks are identified and classified on the basis of their potential importance and the likelihood they will eventuate. These include some of the key envi- ronmental, social and governance risks that could have direct or indirect impacts on SIPEF’s business conduct in line with policies and regulations. Starting in 2023, work has begun to align and inte- grate the Groups’ risk assessment processes with its sustainability materiality assessment, which will follow the Double Materiality requirements of the European Sustainability Reporting Standards (ESRS). Moving forward, this new process will enable SIPEF to conduct a more comprehensive risk assessment that includes a more detailed scope with which to detect, understand and address, both business and sustainability risks and impacts. Read more about the annual risk assessment process in the corporate governance statement on page 179. Management approvals SIPEF Group-level policies are regularly reviewed by the SIPEF executive committee and the board of directors to ensure they align with the Group’s Standards, the latest legislative requirements of the countries where SIPEF operates, as well as to ensure they uphold the highest industry specific requirements and best practices. Approving any changes to existing policies, or any new policies, is the ultimate responsibility of the board of directors. 153 SIPEF Integrated Annual Report 2023 Good business conduct Corporate governance statement 1. GENERAL The ‘Corporate governance statement’ comprises factual information with regard to the good govern- ance of the SIPEF holdings for the 2023 financial year and the subsequent period until the board meeting of 16 April 2024. The Company has a strong corporate govern- ance structure focused on responsible business, proper management, and the implementation of ever-evolving sustainability commitments The Group's good governance guidelines are sum- marised, among other things, in the Corporate Governance Charter, the Remuneration Policy and the Code of Conduct, that includes the ethics policy, to promote and support responsible and ethical behaviour. Collectively, these policies set out the Group's commitment to ethical business conduct and corporate governance best practices. BASIC ELEMENTS OF SIPEF’S CORPORATE GOVERNANCE Corporate Governance Charter The Corporate Governance Charter (Charter) defines the structure, powers and operations of the Company's governing bodies, and the obligations of the members of the board of directors and of the Company's various committees. It also contains the rules of conduct applicable to the Company's executives and sta when they carry out transactions involving SIPEF financial instruments. The Charter was approved for the first time by the board of directors in 2005 and is regularly updated in line with the evolution of the applicable regulations and good corporate governance practices. It was last amended on 13 February 2024. This amendment concerned mainly a change in the shareholding of SIPEF. The amended version of the Charter can be consulted on the website (www.sipef.com). Remuneration Policy The Remuneration Policy outlines the various components of the remuneration of the directors, the managing director, and the other members of the executive committee. It contains the criteria and methods for calculating this remuneration. It aims to (i) attract, reward and retain the necessary talent; (ii) achieve the Company's strategic objectives; and (iii) promote sustainable value creation. Code of Conduct The Code of Conduct sets out the principles of conduct regarding responsible and ethical behaviour for all sta, including consultants and contractors of SIPEF. It states that SIPEF is committed to trans- parency, combating bribery and corruption, compliance with all relevant international and national laws, and the prohibition of using Group facilities or working hours for personal business. SIPEF has also implemented the Code of Conduct in all countries where it operates. 154 The connection to the world of sustainable tropical agriculture Moreover, SIPEF applies the principles of the Belgian Corporate Governance Code 2020 (the ‘Code’), which it uses as a reference code for the application of the ‘comply or explain’ principle. • www.corporategovernancecommittee.be SIPEF’s corporate governance deviates from a limited number of recommendations of the Code: 1. - : 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 oce and at least three years after their award (Article 7.6 Code). : 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. 2. : 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). : 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. 3. (Article 3.19 Code). : 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. 4. . 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). : 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 ecient deliberation and decision-making. 155 SIPEF Integrated Annual Report 2023 Corporate governance statement 2. CORPORATE GOVERNANCE STRUCTURE ON 31 DECEMBER 2023 A strong corporate governance policy is made pos- sible by a clear governance structure, which defines the role of the highest management bodies. This strong corporate governance policy is also the result of SIPEF's stable shareholder structure, character- ised by the presence of two reference shareholders, Ackermans & van Haaren (AvH) and the Bracht Group (See p. 191 Shareholder structure). Despite this shareholder structure, no single director or group of directors exercises a dominant influence over the board's operation. Board of directors Executive committee Nomination committee Remuneration committee Managing director Audit commitee 156 The connection to the world of sustainable tropical agriculture EXECUTIVE / INDEPENDENT MEMBER MEETINGS OF THE BOARD OF DIRECTORS ATTENDANCE AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATION COMMITTEE EXECUTIVE COMMITTEE TERM OF OFFICE MEMBERS ATTENDANCE MEMBERS ATTENDANCE MEMBERS ATTENDANCE MEMBERS NUMBER OF MEETINGS IN 2023 6 4 2 3 Baron Luc Bertrand chairman 2023-2025 6/6 chairman 3/3 François Van Hoydonck managing director 2023-2027 executive 6/6 member 3/3 chairman Tom Bamelis director 2022-2026 6/6 chairman 4/4 member 3/3 Priscilla Bracht director 2022-2026 6/6 member 3/3 Alexandre Delen director 2022-2026 6/6 member 3/3 Antoine Friling director 2023-2027 6/6 member (3) 2/2 chairman 2/2 member 3/3 Gaëtan Hannecart director 2020-2024 5/6 member 3/3 Yu-Leng Khor director 2021-2025 independent 6/6 member 2/2 member 3/3 Sophie Lammerant-Velge (until 14 June 2023) director 2019-2023 (1) 3/3 member (1) 2/2 member (1) 1/2 member (1) 1/1 Giulia Stellari (from 14 June 2023) director 2023-2027 independent (2) 3/3 member (2) 1/2 member (2) 2/2 Nicholas Thompson director 2023-2027 independent 6/6 member 4/4 member 3/3 Charles De Wulf manager estates department member Thomas Hildenbrand manager fruit department member Robbert Kessels chief commercial ocer member Petra Meekers chief operating ocer APAC member Johan Nelis (until 31 December 2023, included) chief financial ocer member The term in which members have a seat on the committees in general coincides with the term of their directorship. (1) Attendance calculated up to and including the day of the ordinary general meeting of 14 June 2023 and based on the meetings during her directorship. (2) Attendance calculated from the ordinary general meeting of 14 June 2023 and based on the meetings during her directorship. (3) Attendance calculated from his appointment as member of the audit committee (15/06/2023) and based on the meetings from then on. 157 SIPEF Integrated Annual Report 2023 Corporate governance statement 1. Board of directors 1.1 Composition on 31 December 2023 Luc Bertrand chairman Tom Bamelis Antoine Friling Nicholas ThompsonGiulia Stellari François Van Hoydonck managing director Priscilla Bracht Alexandre Delen Yu-Leng KhorGaëtan Hannecart The curricula vitae of the directors are available on the Company website. • www.sipef.com/hq/about-sipef/board-management/ 158 The connection to the world of sustainable tropical agriculture 1.2 Diversity policy Term of office Yu-Leng Khor Giulia Stellari Nicholas Thompson Age profile (1) Gender diversity Independent directors (2) POLICY APPLICATION The board can only deliberate and make decisions eciently when the number of members is limited, and the appropriate diversity is present on the board. The Company applies various criteria when appointing directors: 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 agricul- tural, biochemical, financial, manufacturing, marketing and IT sectors. Sustainability being a key aspect of all activities of the SIPEF group, the Company ensures that the necessary expertise in this area is also present in the board. On 31 December 2023, four nationalities were represented by the members of the board: Belgian, British, Italian 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. In 2023, Sophie Lammerant-Velge's mandate was not renewed, and Giulia Stellari was appointed as the new female director. This way, three of the ten directors have continuously been women, number which will be increased to four in 2024 if shareholders reappoint Petra Meekers as a director in June 2024. SIPEF aspires to have a sucient number of independent directors on the board of directors. At the end of 2023, three of the ten directors were independent. < 5 years: 4 5 - 9 years: 2 10 - 14 years: 0 15 - 20 years: 3 > 20 years: 1 40 - 49 years: 3 50 - 59 years: 3 60 - 70 years: 3 > 70 years: 1 Male: 7 Female: 3 Dependent: 7 Independent: 3 (1) The age limit is set at 70 years. (2) These directors fulfil all independence criteria stated in Article 7:87§1 of the Company Code and in Principle 3 of the Code. 159 SIPEF Integrated Annual Report 2023 Corporate governance statement 1.3 Changes to the composition of the board of directors Ending and renewal of a directorship in 2024 The directorship of Gaëtan Hannecart expires at the end of the ordinary general meeting of 12 June 2024. He has applied for a new mandate of four years. Appointment of a new director It will be proposed to the general meeting of 12 June 2024 to appoint Petra Meekers as a new director for a period of four years. Her mandate will therefore expire at the end of the general meeting in June 2028 which will decide on the accounts for the 2027 financial year. 1.4 Directorships at listed companies on 31 December 2023 The Code limits the number of directorships that a director is permitted to hold in listed companies to five. The following directors have directorships at listed companies other than SIPEF on 31 December 2023: Baron Luc Bertrand: • Ackermans & van Haaren • CFE • DEME Group Tom Bamelis: • DEME Group Gaëtan Hannecart: • Financière de Tubize Yu-Leng Khor: • Rohas Technic Berhad 160 The connection to the world of sustainable tropical agriculture 1.5 Meetings in 2023 The boards of directors of February and August 2023 established the annual and semi-annual financial statements and dealt with the respective press releases. The meeting in September 2023 deliberated on the Group strategy. 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: • future strategy of SIPEF, including the phasing out of horticulture; • short-term budgets and long-term business plans for the Group; • risk analysis, internal audit and internal control within the Group; • remuneration of directors and executive committee members; • delegation of powers; • succession planning within the Group; • Environmental Sustainability and Governance (ESG); • integrated annual report 2022, including the remuneration report; • ordinary and extraordinary general meetings of 14 June 2023; • 2023 management option plan; • various corporate governance topics; • implementation of the new Enterprise Resource Planning (ERP) software in the SIPEF group. 1.6 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 suciently present. The next evaluation of the composition and func- tioning of the board and its committees will take place in 2024. 161 SIPEF Integrated Annual Report 2023 Corporate governance statement 2. Executive committee 2.1 Composition on 31 December 2023 Term of office (1) Age profile (2) Gender diversity < 4 years: 1 5 - 10 years: 5 40 - 49 years: 1 50 - 59 years: 3 60 - 65 years: 2 Male: 5 Female: 1 The picture above shows the composition of the executive committee on 1 January 2024 including Bart Cambré, who has taken up the position of CFO from then on. The curricula vitae of the members of the executive committee are available on the Company website. • www.sipef.com/hq/about-sipef/board-management/ (1) The executive committee was established in 2014. (2) The age limit is set at 65 years. 162 The connection to the world of sustainable tropical agriculture 2.2 Members of the executive committee The members of the executive management act together as the ‘executive committee’. The commit- tee 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 exec- utive committee. In autumn 2023, the board of directors noted the resignation of Johan Nelis as chief financial ocer (CFO) and member of the executive committee as from 1 January 2024. The board appointed Bart Cambré as the Group's new CFO and member of SIPEF's executive committee with effect from 1 January 2024. Charles De Wulf will also leave the executive committee on 1 April 2024 to take over responsibility for the banana business in Côte d'Ivoire as General Manager of Plantations J. Eglin. Furthermore, the managing director, François Van Hoydonck, will retire on 1 September 2024 and will no longer be part of the executive committee from that day. On that date, he will be succeeded as chairman of the executive committee and man- aging director of the Company by Petra Meekers. The Company has no intention of making any fur- ther changes to the composition of this committee in 2024. 2.3 Diversity POLICY APPLICATION The Diversity Policy, on which basis the composition of the board of directors is determined, also applies to the executive commit- tee. 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 sucient complementary competence is present. Age, gender and nationality are other criteria that are considered. They guarantee diverse ways 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. There are three dierent nationalities in the committee: French, Dutch and Belgian. SIPEF is completely open to the integration of women at all lev- els of the Company. Women hold key positions both in Belgium and abroad. This was recently rearmed by the appointment of Petra Meekers as member (06/2021) and chair (09/2024) of the executive committee. 163 SIPEF Integrated Annual Report 2023 Corporate governance statement 2.4 Meetings in 2023 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 manage- ment of the Group. It has the appropriate operation- al freedom and resources to duly perform its work. In practice, the committee prepares all decisions of the board and ensures all decisions made are imple- mented. So, each year, the committee prepares the statutory and consolidated accounts, as well as the quarterly figures of the Group. It also designs the press releases to be published. It establishes the short-term budgets and long-term business plans that are submitted to the board for approval. It also prepares the necessary sensitivity analyses as part of the strategic plan as well as for the annual budget, in order to assess the appropriate risk profile of the decisions to be made. It follows the operational and financial develop- ments of the Group and makes related presentations for the board of directors. It formulates proposals concerning the future strategy. Specifically, in 2023, the committee considered, among other things: • proposals on innovation and value chain opportunities for the SIPEF group; • installation of the new Enterprise Resource Planning (ERP) software; • double materiality analysis; • calculation and evaluation of the Group's greenhouse gas emissions (GHG); • various draft texts, including those of the half- year report and of the first and second integrated annual report, including the remuneration report; • new national, international, and European legislative initiatives on sustainability and their impact on the Group. 2.5 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 contri- bution 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. In addition, throughout the year, the board of direc- tors evaluates the executive committee based on its work and preparations for the board. The non-executive directors also give their opinions on the interaction between the board of directors and the executive committee annually, in the absence of the managing director. Their opinion on 11 August 2023 was that the relationship of the board with the executive committee is reliable and open, giving the directors a reliable and transparent view of the day-to-day operations of the Group. 164 The connection to the world of sustainable tropical agriculture 3. Committees of the board of directors 3.1 Audit committee Tom Bamelis Antoine Friling Nicholas Thompson 31 2023 All members of the audit committee have the necessary accounting and auditing skills, and the committee has collective expertise with regard to the activities of SIPEF. 2023 In February and August 2023, 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: • various accounting topics and processing; • financial covenant on the long-term loan and its evolution; • existing risks and their classification; • corporate tax strategy; • reports of the internal audit committees of the various subsidiaries; • justification for not organising an internal audit at Headquarters in Belgium; • evaluation of the auditor's relationship with management and the finance department. The auditor attended all the meetings of the com- mittee in 2023. The meetings of the audit committee were also attended by the managing director and the CFO. Moreover, a representative of the reference share- holder, AvH, attended all meetings. The internal auditors of the operational subsid- iaries did not attend the meetings of the audit committee of the mother company. The managing director and/or the CFO held meetings with the local internal audit managers in Indonesia and Papua New Guinea, in the course of the financial year 2023. The periodic assessment of the composition and functioning of the board of directors also relates to the committees of the board of directors. 165 SIPEF Integrated Annual Report 2023 Corporate governance statement 3.2 Remuneration committee 31 2023 The committee has the required expertise in remuneration policy. Giulia Stellari Antoine Friling Yu-Leng Khor 2023 In 2023, the remuneration committee considered the following issues: • benchmarking of the compensation of the Group's expatriates, managers and directors; • setting of the fixed remuneration of managers and directors; • determination of the Group's bonus pool; • individual assessment of management and proposal of variable remuneration payable in 2023; • remuneration policy and draft of remuneration report; • updating succession planning; • draft of the share option plan 2023 for the Group's managers. The managing director also attended the meetings of the remuneration committee. Moreover, a representative of each of the reference shareholders, AvH and the Bracht Group, was pres- ent at the 2023 February and November meetings. The periodic assessment of the composition and functioning of the board of directors also relates to the committees of the board of directors. 166 The connection to the world of sustainable tropical agriculture 3.3 Nomination committee 31 2023 The SIPEF nomination committee is composed of all the members of the board of directors. 2023 The board of directors in its capacity as nomination committee, expressed its opinion on the following issues: • interaction between the board of directors and the executive committee, in the absence of the managing director; • appointment of committee members; • appointment of a new independent director: • renewal of the mandate of directors. 3.4 Assessment of the committees of the board of directors The board of directors regularly assesses its own composition, scope and functioning, as well as the composition, scope 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 suciently present. The next assessment of the board of directors and its committees will take place in 2024. 167 SIPEF Integrated Annual Report 2023 Corporate governance statement 3. REMUNERATION REPORT 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 European Union (EU) directive encouraging long- term shareholder engagement. It also reflects the Remuneration Policy that was approved by the gen- eral meeting of 9 June 2021 with a majority of 95.8% of the votes. The detailed text of the Remuneration Policy is published on the Company website. • www.sipef.com The Remuneration Report provides a comprehen- sive 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 2023. 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 2023, all members of the executive committee, with the exception of Petra Meekers, benefited from a variable remuneration calculated on the basis of the 2022 recurring consolidated result and the management's performances of that year. These were characterised by some significant developments and operations which are set out under the section 'Significant events in 2022' (See Company Report 2022 pages 4-6). The highlights of 2023 will determine the variable remuneration of the executive management in respect of the 2023 financial year to be paid in 2024. In 2023, there were no major changes to the com- position of the board of directors with an impact on the remuneration of the members of the board of directors. The directors' emoluments were increased starting from 1 January 2022. However, in 2023, the remuneration of directors and mem- bers of the audit committee and remuneration committee, as well as their respective chairmen, remained unchanged as they were generally in line with the benchmark average. 168 The connection to the world of sustainable tropical agriculture 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, remuner- ation for membership of a given committee. In 2023, the directors received the following remuneration: ON AN ANNUAL BASIS PER PERSON MEMBER CHAIRMAN Board of directors EUR 35 000 EUR 90 000 Audit committee EUR 7 500 EUR 9 750 Remuneration committee EUR 4 000 EUR 5 200 BOARD OF DIRECTORS AUDIT COMMITTEE REMUNERATION COMMITTEE TOTAL IN KEUR 2022 2023 2022 2023 2022 2023 2022 2023 Baron Luc Bertrand 90.00 90.00 0.00 0.00 0.00 0.00 90.00 90.00 François Van Hoydonck 35.00 35.00 0.00 0.00 0.00 0.00 35.00 35.00 Tom Bamelis 35.00 35.00 9.75 9.75 0.00 0.00 44.75 44.75 Priscilla Bracht 35.00 35.00 0.00 0.00 0.00 0.00 35.00 35.00 Alexandre Delen (from 8 June 2022) 17.50 35.00 0.00 0.00 0.00 0.00 17.50 35.00 Baron Jacques Delen (until 8 June 2022) 17.50 0.00 0.00 0.00 0.00 0.00 17. 50 0.00 Antoine Friling 35.00 35.00 0.00 3.75 5.20 5.20 40.20 43.95 Gaëtan Hannecart 35.00 35.00 0.00 0.00 0.00 0.00 35.00 35.00 Yu-Leng Khor 35.00 35.00 0.00 0.00 4.00 4.00 39.00 39.00 Sophie Lammerant-Velge (until 14 June 2023) 35.00 17.50 7. 50 3.75 4.00 2.00 46.50 23.25 Giulia Stellari (from 14 June 2023) 0.00 17.50 0.00 0.00 0.00 2.00 0.00 19.50 Nicholas Thompson 35.00 35.00 7.50 7.50 0.00 0.00 42.50 42.50 TOTAL 405.00 405.00 24.75 24.75 13.20 13.20 442.95 442.95 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. They benefit from director liability insurance. The outgoing and incoming directors are remunerated in accordance with the number of months they served as director in the financial year. 169 SIPEF Integrated Annual Report 2023 Corporate governance statement 3. Total remuneration of the members of the executive committee The members of the executive committee, consist - ing 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. No shares were awarded to the members of the executive committee in 2023. 2023 IN KEUR FVH CDW TH RK PM JN TOTAL % Board remuneration 35 0 0 0 0 0 35 0.6% Fixed remuneration 537 308 300 354 689 401 2 589 47.0% Variable remuneration 815 320 330 403 0 494 2 362 42.9% Pension contributions 251 46 43 0 11 46 397 7.2% Other 20 9 12 24 56 7 128 2.3% SUBTOTAL 1 658 683 685 781 756 948 5 511 100.0% Market value vested share option (begin exercise period) (1) 50 17 17 17 0 17 118 TOTAL REMUNERATION 1 708 700 702 798 756 965 5 629 Subtotal 100% 100% 100% 100% 100% 100% 100% Fixed 51% 53% 52% 48% 100% 48% 57% Variable 49% 47% 48% 52% 0% 52% 43% 2022 IN KEUR FVH CDW TH RK PM JN TOTAL % Board remuneration 35 0 0 0 0 0 35 0.8% Fixed remuneration 459 274 265 318 643 356 2 315 53.1% Variable remuneration 484 218 222 230 0 308 1 462 33.5% Pension contributions 251 46 45 0 0 46 388 8.9% Other 21 9 15 28 82 8 163 3.7% SUBTOTAL 1 250 547 547 576 725 718 4 363 100.0% Market value vested share option (begin exercise period) (1) 80 27 27 27 0 27 186 TOTAL REMUNERATION 1 330 574 574 603 725 745 4 550 Subtotal 100% 100% 100% 100% 100% 100% 100% Fixed 61% 60% 59% 60% 100% 57% 66% Variable 39% 40% 41% 40% 0% 43% 34% (1) For more details on the respective option plans (respectively, SOP 2020 and SOP 2019) see page 174 and 175. 170 The connection to the world of sustainable tropical agriculture The managing director receives emoluments for participating in the meetings of the board of directors and additional fixed remuneration for his executive duties. . The members of the executive committee receive a fixed remuneration and benefit from group insur- ance with fixed contributions. This comprises a supplementary pension, as well as disability and life insurance. In addition, the Company has tak- en out hospitalisation insurance and assistance insurance with global cover for every member. Management also benefits from a company car and meal vouchers. Until 1 October 2023, Petra Meekers was operat- ing from Singapore. Therefore, for the first nine months of 2023, Petra Meekers' fixed remuner - ation included a fixed amount per month which, in addition to the usual fixed remuneration, also covered expenses such as pension, company car and accommodation costs. During this period, she also enjoyed disability, life and health insurance and received an allowance for her children's study costs (See item 'Other'). As from 1 October 2023, she resides in Belgium and her fixed remuneration is established and structured in line with that of the other executive committee members. . The total amount of the variable remuneration paid to both the sta and the members of the executive committee from the SIPEF Headquarters 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 was not entitled to variable remuneration during the first two years of her employment at SIPEF. As she has been a member of the executive committee since 9 June 2021, she is therefore entitled to variable remuneration in 2023, pro rata temporis. The ultimate individual amount of the variable remuneration awarded to each of the members is set in a discretionary manner (based on financial and non-financial criteria) 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, among others, by objectively measurable criteria, set in advance and applied for a period of one financial year. The linking of the variable remuneration to perfor - mance in one financial year – rather than perfor- mance 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, the performance of which is linked to the price of agricultural raw materials. It is therefore logical that the remuneration of the sta 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 or div- idend is 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. 171 SIPEF Integrated Annual Report 2023 Corporate governance statement 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 of SIPEF. Furthermore, the board of directors did not award any special bonuses to any members for specific accomplishments in 2023. Besides the short-term variable remuneration, the members of the executive committee receive no long-term variable remuneration in cash. . All members of the executive committee have signed a clawback clause. This means that the Company is entitled to demand variable net remu- neration is returned if it was awarded on the basis of incorrect financial data. The Company did not trigger this clawback clause in 2023. 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 calcu- lated 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, considered to be 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, manage- ment, employees and all other stakeholders on a continual basis, and in a proper and transparent way, about developments with regard to the activi- ties, sustainability, performance and corporate gov- ernance 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, sta and management remain motivated and dedicated to achieving the long-term goals the Group has set. 172 The connection to the world of sustainable tropical agriculture 5. Stock option plan Share options have been oered to members of the executive committee every financial year since 2011. The share options offered in the SIPEF Share Option Plan 2023 have the following characteristics: • Type: SIPEF existing share options (one option gives the holder the right to one existing SIPEF share); • Time of the oer: mid-November; • Exercise price: the lower of the following two values: the price determined, based on the average closing price of the stock for 30 days prior to the oer, and the last closing price of the stock prior to the date of the oer; • 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 oer; • No performance criteria have been set for the granting or exercise of share options. 2023. On 15 November 2023, options were granted by SIPEF to the members of the executive committee. These options were accepted by the beneficiaries as follows: Another 4 000 options were granted to general managers of the foreign subsidiaries. The options granted in 2023 have the following characteristics: • Exercise price: EUR 52.70 • Expiry date: 14 November 2033 • Exercise period: At any time from 1 January 2027 up to and including 14 November 2033 NUMBER François Van Hoydonck 6 000 Charles De Wulf 2 000 Thomas Hildenbrand 2 000 Robbert Kessels 2 000 Petra Meekers 2 000 Johan Nelis 2 000 TOTAL 16 000 BREAKDOWN OF THE SIPEF STOCK OPTION PLAN SOP VESTED NOT VESTED 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Oer 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 17/11/22 15/11/23 Vesting 20/11/16 18/11/17 28/11/18 07/12/19 23/11/20 20/11/21 23/11/22 19/11/23 18/11/24 17/11/25 15/11/26 Exercise period begin: 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 01/01/26 01/01/27 Exercise period end: (1) 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 16/11/32 14/11/33 Exercise price (in EUR) 55.50 54.71 49.15 53.09 62.87 51.58 45.61 44.59 58.31 57.70 52.70 Market price begin exercise period (in EUR) 60.49 62.80 48.80 54.80 43.20 56.90 58.90 53.00 (1) latest exercise date 173 SIPEF Integrated Annual Report 2023 Corporate governance statement CHARLES DE WULF VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 2 000 2 000 2 000 6 000 Vested before the end of 2023 0 2 000 2 000 2 000 2 000 2 000 2 000 2 000 0 0 0 14 000 Exercised in 2023 0 0 0 0 0 0 0 0 0 0 0 0 Expired in 2023 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 20 000 Vested at exercise price (in EUR) 91 220 89 180 Vested at market price (in EUR) 117 800 106 000 Latent capital gain at vesting date (in EUR) 26 580 16 820 FRANÇOIS VAN HOYDONCK VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 6 000 6 000 6 000 18 000 Vested before the end of 2023 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000 0 0 0 48 000 Exercised in 2023 -1 942 0 0 0 0 0 0 0 0 0 0 -1 942 Expired in 2023 -4 058 0 0 0 0 0 0 0 0 0 0 -4 058 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 60 000 Vested at exercise price (in EUR) 273 660 267 540 Vested at market price (in EUR) 353 400 318 000 Latent capital gain at vesting date (in EUR) 79 740 50 460 THOMAS HILDENBRAND VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 2 000 2 000 2 000 6 000 Vested before the end of 2023 2 000 2 000 2 000 2 000 2 000 2 000 2 000 2 000 0 0 0 16 000 Exercised in 2023 -2 000 0 0 0 0 0 0 0 0 0 0 -2 000 Expired in 2023 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 20 000 Vested at exercise price (in EUR) 91 220 89 180 Vested at market price (in EUR) 117 800 106 000 Latent capital gain at vesting date (in EUR) 26 580 16 820 2023 174 The connection to the world of sustainable tropical agriculture ROBBERT KESSELS VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 2 000 2 000 2 000 6 000 Vested before the end of 2023 2 000 2 000 2 000 2 000 2 000 2 000 2 000 2 000 0 0 0 16 000 Exercised in 2023 0 0 0 0 0 0 0 0 0 0 0 0 Expired in 2023 -2 000 0 0 0 0 0 0 0 0 0 0 -2 000 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 20 000 Vested at exercise price (in EUR) 91 220 89 180 Vested at market price (in EUR) 117 800 106 000 Latent capital gain at vesting date (in EUR) 26 580 16 820 PETRA MEEKERS VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 0 0 2 000 2 000 Vested before the end of 2023 0 0 0 0 0 0 0 0 0 0 0 0 Exercised in 2023 0 0 0 0 0 0 0 0 0 0 0 0 Expired in 2023 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 0 0 0 0 0 0 2 000 2 000 Vested at exercise price (in EUR) 0 0 Vested at market price (in EUR) 0 0 Latent capital gain at vesting date (in EUR) 0 0 JOHAN NELIS VESTED NOT VESTED SOP 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TOTAL Oered not yet vested 0 0 0 0 0 0 0 0 2 000 2 000 2 000 6 000 Vested before the end of 2023 2 000 2 000 2 000 2 000 2 000 2 000 2 000 2 000 0 0 0 16 000 Exercised in 2023 -2 000 0 0 0 0 0 0 0 0 0 0 -2 000 Expired in 2023 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 20 000 Vested at exercise price (in EUR) 91 220 89 180 Vested at market price (in EUR) 117 800 106 000 Latent capital gain at vesting date (in EUR) 26 580 16 820 175 SIPEF Integrated Annual Report 2023 Corporate governance statement In 2023, three members of the executive com- mittee together exercised 5 942 options of the 1 2000 options from the 2013 stock option plan that were granted to the members of the executive committee. From the remaining 8 000 options of that plan, which were granted to general managers of subsidiaries, 2 500 options were exercised by the beneficiaries before 20 November 2023, the expiry date. A total of 11 558 options from the 2013 option plan were not exercised. More specifically, 7 558 options expired in 2023, including 6 058 options of executive committee members, and 4 000 options had already lapsed in the years before 2023 on the departure of general managers of subsidiaries. In 2023, 2 000 options from the 2014 option plan were also exercised by managers of subsidiaries. 6. Deviations from the remuneration policy in 2023 In 2023, 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 3.A and 3.B. These deviations were linked to the stay of Petra Meekers in Singapore, where she was stationed for the operational management of the Asia-Pacific subsidiaries of the Group. 176 The connection to the world of sustainable tropical agriculture 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 A YEARLY CHANGE IN REMUNERATION IN PERCENTAGE 2019 2020 VARIANCE 2021 VARIANCE 2022 VARIANCE 2023 VARIANCE Total board remuneration (1) (in KEUR) 359 359 0% 359 0% 443 23% 443 0% Total fixed remuneration excom 2) (in KEUR) 1 943 1 967 1% 2 424 23% 2 901 20% 3 154 9% Total variable remuneration excom 3) (in KEUR) 416 0 N/A 272 N/A 1 463 438% 2 362 61% B YEARLY CHANGE IN THE PERFORMANCE OF THE COMPANY 2019 2020 VARIANCE 2021 VARIANCE 2022 VARIANCE 2023 VARIANCE CPO market price (in USD/tonne CIF Rotterdam) 566 715 26% 1 195 67% 1 345 13% 964 -28% Produced CPO volumes (in tonnes) 312 514 329 284 5% 384 187 17% 403 927 5% 391 215 -3% Result, share of the Group (recurring) (in KUSD) -8 004 14 122 N/A 82 746 486% 108 157 31% 72 735 -33% C YEARLY CHANGE IN THE AVERAGE REMUNERATION OF THE EMPLOYEES 2019 2020 VARIANCE 2021 VARIANCE 2022 VARIANCE 2023 VARIANCE Average fixed remuneration employees SIPEF HQ (4) (in KEUR/month) 4 491 4 832 8% 5 165 7% 4 913 -5% 5 452 11% Average variable remuneration employees SIPEF HQ (5) (in KEUR/year) 7 618 0 N/A 4 955 N/A 23 613 377% 38 213 62% D RATIO HIGHEST/LOWEST REMUNERATION FTE 2019 2020 2021 2022 2023 Ratio total fixed remuneration highest member excom and lowest employee HQ (6) 9.3 9.2 9.1 15.6 15.1 (1) Remuneration as included under 2 Total remuneration of the directors (2) Fixed remuneration as included under 3 Total remuneration of the members of the executive committee (3) Variable remuneration as included under 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 8. Information on the general meeting votes on the remuneration policy and report The current Remuneration Policy was approved with a majority of 95.8% of votes by the general meeting of 9 June 2021. It was applied for the first time to the 2021 financial year. The Remuneration Report for the 2022 financial year, was welcomed by the ordinary general meeting of June 14, 2023. The current Remuneration Report for the 2023 financial year will be submitted for approval at the annual general meeting on 12 June 2024. 177 SIPEF Integrated Annual Report 2023 Corporate governance statement 4. EXTERNAL AND INTERNAL AUDIT 1. External audit The ordinary general meeting of 9 June 2021 has, based on the outcome of a private tender in accord- ance with European regulations, appointed EY Bedrijfsrevisoren BV, 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's mandate expires at the end of the ordinary general meeting of 12 June 2024. It will be proposed to this meeting that the mandate of EY Bedrijfsrevisoren BV be renewed for a new period of three years, and the remuneration be fixed at USD 120 196, excluding indexation and VAT. If the meeting approves this renewal, EY will be represented for the performance of this mandate by Christoph Oris. 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 2023 financial year regarding the statutory audit of the accounts and consolidated financial statements of SIPEF amounts to USD 129 736. The remuneration for non-audit services in 2023 came to KUSD 0. The total cost of external control of the SIPEF group paid to the EY network amounted to KUSD 597. The fees paid for advice from the same statuto- ry auditor and related companies came to KUSD0. All details regarding the fees paid to Deloitte can be found in Note 33, of the financial statements. 2. Internal audit An internal audit department has been set up at the operating units in Indonesia and at Hargy Oil Palms Ltd (HOPL) in Papua New Guinea, reporting at least four times per year to the local audit committee that assesses the internal audit reports. Recently, a similar department was also launched in Côte d'Ivoire. Furthermore, in 2023, SIPEF's board of directors confirmed its decision not to set up a separate internal audit department for the Head Office in Belgium and the SIPEF Singapore subsidiary. However, as every year, one of the group controllers at the Head Oce did conduct an internal audit of SIPEF's operations and reported to the SIPEF audit committee. The board of directors decided to have the same SIPEF group controller carry out an internal audit for the Singapore subsidiary as well from 2024. 178 The connection to the world of sustainable tropical agriculture 5. REPORT IN CONNECTION WITH INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS. The SIPEF board of directors is responsible for assessing the inherent risks of the Group and the eectiveness 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 reliabili- ty of the financial reporting and the communication process. 1. Control environment The board of directors has set up two internal com- mittees, the audit committee and the remuneration committee, and has delegated the daily manage- ment of the Company to the executive committee. The Group is divided into a number of depart- ments. 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 for delegating powers. The SIPEF board of directors has also drawn up the necessary policies, including a ‘Responsible Plantations Policy’ and a ‘Responsible Purchase Policy’ which apply to all plantation activities and raw materials. It reviews these policies every year to adapt them to the latest legal, social and environmental standards. To facilitate and encourage further growth, in the day-to-day management of its activities SIPEF pursues clear sustainable regulations that are stricter than the legal requirements of the countries in which the Company does business. That under- taking is documented by certificates and generally accepted standards (See page 148). The internal control exercised by SIPEF moni- tors compliance with all prescribed 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. 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 manageri- al responsibilities and the sta of the Group act honestly and ethically, and in accordance with the applicable rules and principles of good governance. 179 SIPEF Integrated Annual Report 2023 Corporate governance statement 2. Risk analysis and control activities Every year, the board of directors approves SIPEF’s strategic plan, which sets out the Group’s strategic, operational, financial, sustainability, fiscal and legal objectives. To ensure the appropriate management of internal or external risks that could impact the achievement of these objectives, each year, the board identifies and classifies these risks based on the audit committee’s annual risk assessment. During this assessment, a list of real and potential risks is discussed and classified on the basis of each risk’s likelihood (possibility) and severity (impact), and all risks are assigned a risk score. The approach to address each risk is also determined. Required actions are followed up by SIPEF’s management to ensure the appropriate mitiga- tion, management and monitoring procedures are being carried out by the relevant departments in the Group. Based on the 2023 risk analysis, only the 12 follow- ing 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 disclosed hereunder: As the Group is preparing to report in accordance with the EU’s Corporate Sustainability Reporting Directive (CSRD), SIPEF is working towards the integration of its risk and materiality assessment processes. The aim is to develop a cohesive risk and impact assessment approach that is aligned with the principle of double materiality and compliant with the European Sustainability Reporting Standards (ESRS). The new process will enable SIPEF to con- duct its 2024 assessment with a double materiality lens, which will include a more detailed scope of business and sustainability risks and impacts. RISKS CERTAIN VIRTUALLY CERTAIN LIKELY 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 input prices related to raw materials AVERAGE 7 Risk of not finding sucient sta in remote areas AVERAGE 8 Risk of wage rises AVERAGE 9 Risk related to climate AVERAGE 10 Risk of 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 180 The connection to the world of sustainable tropical agriculture In the following section, 6 of the aforementioned 12 principal risks are described in further detail. These risks were selected based on their relevance to the Group’s activities in the 2023 financial year. Full descriptions of the other principal risks can be accessed on the Company website. • www.sipef.com/hq/investors/risks-and-uncertainties/ RISK CONNECTED WITH THE SPREAD OF ACTIVITIES OVER A LIMITED NUMBER OF COUNTRIES AND WITH LIMITED PRODUCT DIVERSIFICATION DESCRIPTION RISKMITIGATING MEASURES SIPEF mainly produces oil palm products in Indonesia and Papua New Guinea, and bananas in Côte d’Ivoire. SIPEF’s ambition is to remain a long-term investor in the agricultural industries of the countries where it operates, having built up many years of experience in Indonesia, Papua New Guinea and Côte d’Ivoire. Through its strategic focus, and as a renowned producer of sustainable agricultural products, the Group has been able to concentrate eorts on increasing its presence and production in these countries. With its experience, SIPEF is well-prepared to navigate any country-related risks that might arise. The Group will continue to closely monitor all relevant political, social, environmental, economic and legislative developments and initiatives, in order to be able to respond as quickly and eectively as possible. SIPEF’s business activities are centred heav- ily around the cultivation of oil palms and processing of palm oil products in Indonesia and Papua New Guinea. Palm oil is by far the Group’s largest business activity, accounting for approximately 91.3% of total turnover. Consequently, if any problems arise that obstruct the cultivation or production of these products, there could be significant negative impacts on the financial results and situation of the Group. SIPEF believes that it is better to concentrate on a few high-yielding crops with good long-term prospects, than invest in multiple lower-yielding crops with uncertain prospects. As such, the Group decided in recent years to focus exclusively on the production of oil palm products (SIPEF’s primary business) and bananas, a relatively stable crop in terms of yield and price. As the most productive and ecient vegetable oil, SIPEF believes the demand for palm oil will only continue to rise alongside the growing demands of an increasing global population. With the exception of Europe, palm oil is capturing an ever-larger share of food and biofuel markets worldwide. This is in large part due to its ecient industrial processing and low-cost price compared with other vegetable oils. Moreover, palm oil yield per hectare is five to ten times higher than the yields of any other vegetable oil. This yield will only continue to improve as eciency is enhanced, and the area available for agricultural land becomes scarcer. The above-mentioned factors and trends considered, SIPEF believes that the long-term expectations for palm oil remain very favourable. 181 SIPEF Integrated Annual Report 2023 Corporate governance statement RISK OF NATURAL DISASTERS PLANTATIONS MILLS DESCRIPTION RISKMITIGATING MEASURES SIPEF’s palm operations are located in Indonesia and Papua New Guinea, regions that are prone to natural disasters. More specifically, the Group’s operations are located in Sumatra (Indonesia) and West Britain (Papua New Guinea), where there is an increased risk of volcanic eruptions, earthquakes, tsunamis, flooding, landslides, mudflows and wildfires. As an agribusiness focused on tropical agriculture, all of SIPEF’s plantations are also more vulnerable to disease and pest outbreaks. In the event of any of these disasters, SIPEF faces the risk of moderate to significant finan- cial impacts. Natural disasters can disrupt business activities, cause the loss of harvests, damage assets and compromise the safety of employees and local communities. Warning systems and evacuation plans for earthquakes, volcanic eruptions, tsunamis, flooding and wildfires are of paramount importance. SIPEF has established the appropriate systems and procedures at all operations that are at risk of these events. As part of its evacuation procedures for volcanic eruptions in Papua New Guinea, HOPL evacuates its employees to care centres and camps, set up at safe locations. Where possible, the company also provides support to communities and government-run care centres in the form of logistics and supplies. For all its oil palm operations, SIPEF has well established fire monitoring and management systems in place. These include fire towers, the use of a satellite monitoring and alert system, and trained firefighters and trucks fitted with high-pressure water pumps. To address risks of pest or disease, SIPEF employs strict measures and practices at its plantations, focused on the prevention and management of outbreaks. These include integrated pest management (IPM) practices and various methods of natural or biological pest control. Through SIPEF's investment in Verdant Bioscience Pte Ltd, the Group is also testing commercial varieties of candidate oil palms that could produce higher yields, have a higher tolerance to pests and diseases and would be able to withstand drier conditions. 182 The connection to the world of sustainable tropical agriculture RISK OF RISING INPUT PRICES RELATED TO RAW MATERIALS DESCRIPTION RISKMITIGATING MEASURES The main agricultural raw material inputs of the Group, including fertiliser, fuel and other energy sources, are susceptible to price fluc- tuations. This can have a significant impact on the Group’s costs, and subsequently an impact on the Group’s operating results. Throughout the year, the Group focuses on controlling its operating costs. This includes minimising the costs of agricultural raw material inputs as much as possible. Annual leaf samples and periodic soil samples are taken and analysed for nutrient levels. This ensures that only the required amounts of fertilisers are applied. Where possible, SIPEF will also prioritise the use of organic fertilisers. Empty fruit bunches (EFB) from SIPEF’s palm oil mills (POM) are returned to the field or mixed with Palm Oil Mill Euent (POME) to create compost, where a composting facility is available. At SIPEF’s banana operations, empty fruit bunches and cocoa husks are used as fertiliser for the banana plants. This practice has the added benefits of reducing soil exposure, improving soil health, and decreasing dependence on mineral fertilisers. Finally, SIPEF has installed facilities at five of its POM to capture methane emissions from POME. The captured methane is either flared or harnessed to generate electricity at mills that have also been fitted with a biogas plant. The electricity is used to power the mills, the houses of employees, or the surrounding communities. When feasible, it is also sold to the national grid. The Group plans to build methane capture facilities for all its POM, and where possible, biogas plants for electricity generation or conversion into bio-compressed natural gas (bio-CNG). 183 SIPEF Integrated Annual Report 2023 Corporate governance statement CLIMATE RISK DESCRIPTION RISKMITIGATING MEASURES SIPEF’s production volumes, turnover and margins can be significantly impacted by shifting climatic conditions, including changes in precipitation, temperature, sunshine and humidity. Unfavourable weather patterns can disrupt agricultural activities and have a negative impact on production and yields. Extreme weather events, like floods, droughts and severe storms, could result in significant damage to property, protracted interruptions to the operations, personal injury, and other damage to the assets and activities of the Group. The potential physical consequences of a changing climate are uncertain and may dier depending on the region and the product. SIPEF prepares as well as it can for any weather phenomena, in order to mitigate impacts. In particular, the Group focuses on changes in precipitation, which can result in flooding or droughts. Certain landscapes and soils can be particularly susceptible to the impacts of changes in rainfall. The Group engages in best management and water regulation practices in these areas to minimise the risk of waterlogging and flooding if there is heavy rain, and of fire if there is drought. This includes maintaining high water tables and conducting drainage assessments in historically developed peat areas at SIPEF’s estates. SIPEF has also invested in fire prevention, risk monitoring and firefighting, particularly at operational locations that are at a higher risk of drought and fires. The Group reports and makes great eorts to control fires that occur within the concession areas it manages. Moreover, it monitors areas outside plantation boundaries, and engages with stakeholders to prevent the starting of fires, and to stop them when they occur. Focus is also placed on maintaining and restoring riparian and buer zones around natural rivers, and within or on adjacent coastline. These zones help to maintain good vegetation, keep moisture levels high, control erosion and provide some protection to coastal areas from storm surges. Through the work of VBS, trials are also being conducted to enhance crop resistance and resilience in varying environmental conditions, e.g. rainfall amount and distribution, soil fertility, microbial diversity and moisture holding capacity. At SIPEF’s banana operations, almost 40% of irrigation water is stored in dams during the rainy season, so it can be used responsibly during the drier season. 184 The connection to the world of sustainable tropical agriculture FUTURE CLIMATE CHANGE RISK DESCRIPTION RISKMITIGATING MEASURES Climate change is linked with a range of medi- um and long-term risks for the agricultural sector, and for industry and society at large. As average temperatures rise, acute hazards, such as heat waves and floods and chronic hazards, such as drought and sea level rise, have been predicted to increase in frequency and severity. Although companies and communities are working to adapt to or mitigate the eects of cli- mate change, the pace and extent of adaptation will need to increase to manage the full scale of future physical climate risks. Climate change will shift and disrupt natural ecosystems, but also impact businesses, livelihoods, economies and global food security. Adaptation will entail increased costs, and choices will need to be made on how to build resilience. To address these challenges, policy and deci- sion makers will need to establish the appro- priate frameworks and processes, including putting into place new regulations and mech- anisms (e.g. carbon tax). Moreover, financial institutions could further align investment and credit policies with climate change risk and deny access to financial resources to companies that do not suciently integrate adaptation and mitigation in their strategies. In the last few years, SIPEF has been working to expand the scope of its sus- tainability strategy, in order to address the issues and risks of climate change from both mitigation and adaptation perspectives. As a first key step, SIPEF calculated its carbon footprint (Scope 1 and Scope 2) at Group-level using the ISO 14064 - 1:2018 standard. Following the verification of this calculation in 2022, the Group set a target to reduce its GHG emission intensity per tonne of CPO against its established baseline. The Company has since been working to develop its GHG reduction and climate transition plan. One of the key initiatives of the plan involves the expansion of methane capture facilities to cover all of SIPEF’s existing and new POM and the search for additional use of gas. SIPEF has also continued with other existing initiatives and practices, focused on reusing land and raw materials, and mitigating emissions, wherever possible. These include: • a composting plant that utilises POM by-products; • generation of electricity from renewable sources at SIPEF’s mills (steam turbines and biogas generators); and • biodiversity, conservation and restoration programmes in Indonesia, Papua New Guinea and Côte d'Ivoire. As a next step, SIPEF is undertaking a climate risk assessment in 2024-2025. The assessment will help solidify the Group’s reduction and transition plans and identify key focus areas for its climate change adaptation initiatives. 185 SIPEF Integrated Annual Report 2023 Corporate governance statement RISK CONNECTED WITH THE CONCERN FOR SUSTAINABILITY IN EUROPE AND INCREASED RSPO RESTRICTIONS DESCRIPTION RISKMITIGATING MEASURES SIPEF’s reputation in sustainable palm oil pro- duction is very reliant on RSPO certification. Given the growing consumer concern for sus- tainability, the requirements under the RSPO standard are likely to become more stringent in the coming years. In addition, it is expected that the EU and the various other authorities in the countries where SIPEF operates, will continue to impose tougher requirements on companies. SIPEF is committed to sustainability and to maintaining its RSPO certification. However, it is uncertain whether the Group and its sup- pliers will always be able to comply with new requirements. Inability to meet requirements could result in certification loss or suspension, or, in the case of regulatory requirements, fines or disruption to operational activities. In all scenarios, there could be adverse impacts on the reputation and financial situation of the Group. SIPEF is working to achieve 100% RSPO certification for its oil palm operations by 2026. At present, all of its palm oil mills and 76% of its own planted area are RSPO certified. Any remaining uncertified areas are new developments awaiting the issuance of the permanent Indonesian cultivation licence (Hak Guna Usaha - HGU) but are otherwise compliant with the requirements of the RSPO Standards, including the RSPO New Planting Procedure. Integrated High Conservation Value and High Carbon Stock Approach (HCV-HCSA) assessments and Social Impact Assessments (SIA) have been completed for these areas, and they are ready to be certified once the HGU has been obtained. SIPEF has a Responsible Plantations Policy that sets out its no deforestation, no new developments on peat and no exploitation (NDPE) commitments for all of its operations. The Company also closely follows the requirements, trends and policies of its customers, regulators and other stakeholders, to ensure their rules and expectations regarding sustainability are fulfilled at all times. Unfortunately, the sustainability eorts 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 dierent stakeholders, including well-established NGOs through multi-stakeholder platforms like the RSPO. 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 particu- lar vegetable oil. With that in mind, SIPEF 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. 186 The connection to the world of sustainable tropical agriculture 3. Information and communication A set of internal and external operational and finan- cial 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. 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 HOPL in Papua New Guinea, are responsible for the constant super- vision of the eectiveness and compliance of the existing internal control in their respective activ- ities. They propose the appropriate adjustments based on their findings. A local audit committee discusses the internal audit department reports at least quarterly. A summary of the most important recent findings is submitted annually to each audit committee of SIPEF. The activities in Côte d'Ivoire will be subject to the same monitoring procedure as soon as the internal audit department is set up there. At SIPEF Headquarters, where no separate internal audit department exists, one of SIPEF's group con- trollers conducts an internal audit of the Company's operations and reports annually to the SIPEF audit committee. In the future, the subsidiary in Singapore will also be subject to an annual internal audit by a group controller of SIPEF. 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. 5. Internal control and risk management systems related to financial reporting The process for drawing up financial reports is led by the corporate finance department, under the direct supervision of the CFO and is organised as follows: • A schedule 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 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. 187 SIPEF Integrated Annual Report 2023 Corporate governance statement • 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 International Financial Reporting Standards (IFRS). The monthly figures are compared with the budget and the same period a year earlier for each reporting entity, and significant dierences 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, in 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. In the event of exceptional events, the board of directors is also notified immediately. • An external audit verifies the individual financial statements and the technical consolidation at the end of June (limited assurance) and the end of December (full assurance). The audit of the subsidiaries is done based on the audit scope as decided by the external auditor and presented to the audit committee of the SIPEF group. The consolidated IFRS financial statements are then submitted to the audit committee for review. Based on the advice of the audit committee, the board of directors gives its opinion on the correctness of the consolidated figures before publishing the financial statements on the market. • An interim management report is published twice a year, after the first and after the third quarter, stating the trends in production volumes, global market prices and any changes in the pipeline. • The corporate finance department is responsible for monitoring any amendments to IFRS reporting standards and implementing these amendments in the Group. The monthly management reports and the legal consolidation are done in separate consolidation software with data input from SIPEF’s subsidiaries. Appropriate care is also given to anti-virus and security applications, uninterrupted backups and steps to ensure the continuity of the service. 188 The connection to the world of sustainable tropical agriculture 6. RULES OF CONDUCT CONCERNING CONFLICTS OF INTEREST The Charter describes the policy with regard to transactions between the Company or one of its aliated 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 proce- dures that are laid down in Articles 7:96 and 7:97 of the Companies Code. In 2023, 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 14 February 2023 and 14 November 2023. The legal procedure provided for by this arti- cle 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: 14 2023 “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 temporally the meeting. The Directors take notice of the evaluation and the variable remuneration proposed by the Remuneration Committee for François Van Hoydonck for the year 2022.. They confirm the recommendation issued by the Remuneration Committee. François Van Hoydonck enters the meeting room. …” 14 2023 “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 remunera- tion, 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, together with Petra Meekers, COO APAC, who is also concerned by this item leave the meeting. - It is proposed that the yearly option scheme, started in 2011, would be continued in 2023. 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 two Managers in charge of the operations of SIPEF in Indonesia and PNG. One option giving the beneficiary the right to buy one SIPEF share, 20 000 options correspond to an amount of approximately KEUR 1 054 (on the basis of a share price of EUR 52.7 per share); 6000 189 SIPEF Integrated Annual Report 2023 Corporate governance statement options (KEUR 316.2) would be offered to the Managing Director; 2 000 options (KEUR 105.4) to each of the members of the Executive Committee and the two General Managers of the operations in Indonesia and PNG. As the yearly option scheme issued in 2013 will expire on 19 November 2023, it is unlikely that the remaining 7 558 options will be exercised before due date. It is further recommended that the Company continuously covers all outstanding options by a buyback of SIPEF shares until expiry of the program, or until the exercise of all options will have taken place. It is assumed that by the end of 2023 a total of 180 000 treasury shares will be needed to cover all options, including the 2023 plan. The Directors, in the absence of François Van Hoydonck, approve these last proposals of the Committee. François Van Hoydonck and Petra Meekers enter the meeting again.” There were no other conflicts of interest in 2023. 7. 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. 190 The connection to the world of sustainable tropical agriculture 9. EVENTS AFTER THE BALANCE SHEET DATE There are no significant post-balance sheet events that have a specific impact on SIPEF group's activities and consolidated financial statements. 8. SHAREHOLDER STRUCTURE The SIPEF shareholder structure is characterised by the presence of two controlling shareholders, AvH and the Bracht Group, comprising Priscilla, Theodora and Victoria Bracht and their respective companies (Cabra P, Cabra T and Cabra V) and Cabra NV, which act together in mutual consulta- tion on the basis of a shareholder agreement that was originally entered into in 2007 for a period of 15years. On 3 March 2017, this agreement was amended and renewed for a further period of 15years. 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 8 December 2023, SIPEF received a notification regarding the threshold crossing of 40% of the voting rights of SIPEF by AvH. This movement in SIPEF's shareholding resulted from several pur- chases of SIPEF shares on the stock exchange by AvH between the previous notification of 23 August 2022 and the threshold crossing date of 4 December 2023. Following these transactions, AvH together with the Bracht Group held 52.33% of SIPEF's voting rights, of which 38.33% and 12.32% are held directly by AvH and the Bracht Group, respectively, supplemented by 1.68% treasury shares held by SIPEF. 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 4 December 2023, no other shareholder held more than 5% of the votes of SIPEF. 191 SIPEF Integrated Annual Report 2023 Corporate governance statement SIX ENVIRONMENTAL OBJECTIVES OF THE TAXONOMY REGULATION • 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: https://ec.europa.eu/info/ business-economy-euro/banking-and-finance/ sustainable-finance/eu-taxonomy-sustainable- activities_en 10. COMPLIANCE TO EU TAXONOMY 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 sus- tainable 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’. It includes definitions and criteria for the classification of economic activities that meet the six environmental objectives. As a non-financial parent undertaking, SIPEF has assessed the Taxonomy eligibility of its eco- nomic activities for the reporting period 2023. 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 six environmental objectives (climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution preven- tion and control, and protection and restoration of biodiversity and ecosystems), in accordance with the Taxonomy Regulation and Article 8 Delegated Act. 192 The connection to the world of sustainable tropical agriculture PROPORTION OF TAXONOMYELIGIBLE AND TAXONOMYNONELIGIBLE ECONOMIC ACTIVITIES IN TOTAL TURNOVER, CAPEX, AND OPEX TOTAL KUSD PROPORTION OF TAXONOMY ELIGIBLE ECONOMIC ACTIVITIES % PROPORTION OF TAXONOMY NONELIGIBLE ECONOMIC ACTIVITIES % Turnover 443 886 0% 100% Capital expenditure (Capex) 106 985 0% 100% Operating expenditure (Opex) 47 871 0% 100% SIPEF’s core business activities: Taxonomy non-eligible SIPEF has assessed the activities of the Group as an agro-industrial group based on all Taxonomy- eligible economic activities listed in the Climate Delegated Act and the Environmental Delegated Act. The Climate Delegated Act focuses on econom- ic activities and sectors that have the most potential to achieve the objectives of climate change mitiga- tion 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 agribusiness group, defines the growing of oil palm and bananas, and the production of palm oil, palm kernels and palm kernel oil as the core of its business activities. 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’s core activities are not currently covered by the Climate Delegated Act, and are 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 provid- ed in the chapter on environmental stewardship on page 90 of this report. The complete taxonomy tables are available in Annex 2 (page 272), which is an integral part of the integrated annual report. 193 SIPEF Integrated Annual Report 2023 Corporate governance statement NUCLEAR ENERGYRELATED ACTIVITIES The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. No The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. No The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. No FOSSIL GASRELATED ACTIVITIES The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. No The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/ cool and power generation facilities using fossil gaseous fuels. No The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. No Nuclear and fossil gas-related activities SIPEF has evaluated its operations across the Group and declares that it does not engage in any nuclear or fossil gas-related activities. Please see SIPF’s statements on nuclear energy-related activities and fossil-gas related activities in the template 1 as introduced by the Complementary Delegated Act below. Since SIPEF is not performing activities related to nuclear energy and fossil gas, it does not include templates 2-5 of the Complementary Delegated Act. 194 The connection to the world of sustainable tropical agriculture 195 SIPEF Integrated Annual Report 2023 Corporate governance statement SIPEF on the stock market Stock market listing The SIPEF shares are listed on the continuous market of Euronext Brussels (share code: SIP, ISIN code: BE0003898187). EVOLUTION OF STOCK MARKET DATA OF THE SIPEF SHARE IN EUR 2023 2022 2021 2020 2019 Highest stock price of the year 62.30 70.80 60.80 56.70 54.80 Lowest stock price of the year 51.30 52.70 43.85 38.00 35.25 Closing stock price per 31/12 53.00 58.90 56.90 43.20 54.80 Market capitalization per 31/12 (KEUR) 560 704 623 122 601 964 457 027 579 747 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 2 151 5 441 5 277 5 956 5 081 Average turnover per trading day (KEUR) 122 338 263 274 229 2022 32% 32% 30% 31% 31% 30% 30% 30% 30% 30% 31% 32% 17% 23% 22% 24% 21% 25% 25% 25% 2004 20172005 2006 2007 20092008 2010 2011 2012 2013 2014 2015 2016 2018 2020 2021 2023 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 0.35 2.00 3.00 2.00 15% 20% 25% 30% 35% 10% 5% 0% 0.50 1.00 1.50 2.00 2.50 3.00 3.50 0.00 2019 Gross dividend (in EUR) Pay-out ratio (in%) EVOLUTION OF THE DIVIDEND AND PAYOUT RATIO 196 The connection to the world of sustainable tropical agriculture 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. The periodical and occasional information relating to the Company and to the Group will be published before opening hours of the stock exchange. In accordance with the applicable legal require- ments, each major event that could aect the Company’s and the Group’s result is the subject of a separate press release. The main paying agent is Bank Degroof Petercam. The website (www.sipef.com) plays an increas- ingly important role in SIPEF financial com- munication. Therefore, a substantial part of the corporate website is reserved for investor relations. ANALYSTS COVERING SIPEF Bank Degroof Petercam Frank Claassen KBC Securities Michiel Declercq FINANCIAL CALENDAR 18 April 2024 Quarterly information Q1 12 June 2024 Ordinary general meeting 14 August 2024 Half-yearly financial report 17 October 2024 Quarterly information Q3 February 2025 Annual announcement 197 SIPEF Integrated Annual Report 2023 SIPEF on the stock market Financial statements Comments on the consolidated financial statements. . . . 199 Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . .205 Consolidated income statement . . . . . . . . . . . . . . . . . . . . . . . . 207 Statement of consolidated comprehensive income . . . . . .208 Consolidated cash flow statement . . . . . . . . . . . . . . . . . . . . . . .209 Statement of changes in consolidated equity . . . . . . . . . . . . 210 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 1 - Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 2 - Statement of compliance . . . . . . . . . . . . . . . . . . . . . . . . . 211 3 - Accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 4 - Use of accounting estimates and judgements . . . . . 217 5 - Group companies / consolidation scope . . . . . . . . . . 218 6 - Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 7 - Operational result and segment information . . . . . 219 8 - Goodwill and other intangible assets . . . . . . . . . . . . .223 9 - Biological assets - bearer plants . . . . . . . . . . . . . . . . . .226 10 - Other property, plant & equipment . . . . . . . . . . . . . . 227 11 - Receivables > 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230 12 - Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230 13 - Biological assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230 14 - Other current receivables and other current payables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 15 - Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .232 16 - Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . 233 17 - Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .234 18 - Pension liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .234 19 - Net financial assets/(liabilities) . . . . . . . . . . . . . . . . .236 20 - Other operating income/(charges) . . . . . . . . . . . . . . 237 21 - Financial result. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .238 22 - Share based payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 23 - Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .240 24 - Investments in associates and joint ventures. . . . 242 25 - Change in net working capital . . . . . . . . . . . . . . . . . . .244 26 - Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . .244 27 - Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .250 28 - Rights and commitments not reflected in the balance sheet. . . . . . . . . . . . . . . . 251 29 - Related party transactions . . . . . . . . . . . . . . . . . . . . . . 251 30 - Business combinations, acquisitions and divestures. . . . . . . . . . . . . . . . . . . . . . 252 31 - Earnings per share (basic and diluted) . . . . . . . . . . 253 32 - Events after the balance sheet date. . . . . . . . . . . . . . 253 33 - Services provided by the auditor and related fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 ESEF information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .254 Statutory auditor’s report on consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . 255 Parent company summarised statutory accounts . . . . . . . 261 Condensed balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Condensed income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Appropriation account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .263 198 The connection to the world of sustainable tropical agriculture COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements for fiscal year 2023 have been prepared in accordance with International Financial Reporting Standards (IFRS). These consolidated financial statements (chapter financial statements) are part of the integrated annual report and should be read togeth- er with the other chapters of the integrated annual report, including the non-financial information included in: - Chapter “Highlights of 2023”– Section “Sustainability” - Chapter “SIPEF’s operations” - Chapter “Sustainability at SIPEF” - Chapter “Environmental stewardship” - Chapter “Respecting employees and communities” - Chapter “Responsible supply chain management” - Chapter “Good business conduct” - Chapter “Corporate governance statement – Section 10 “Compliance to EU Taxonomy” - Annex 1 to 3 The Integrated Annual Report 2023 has been pre - pared taking into account the world's most widely used sustainability standards and the standards of the "Global Reporting Initiative" (GRI). 199 SIPEF Integrated Annual Report 2023 Financial statements IN KUSD 31/12/2023 31/12/2022 Inventories 47 179 48 936 Biological assets 11 122 10 936 Trade receivables 29 876 44 643 Other receivables 49 490 47 728 Current tax receivables 6 925 1 100 Derivatives 780 1 639 Other current assets 1 953 2 197 Trade payables -25 243 -29 863 Advances received -3 411 -5 698 Other payables -15 832 -14 437 Income taxes -10 605 -33 440 Other current liabilities -16 870 -15 063 NET CURRENT ASSETS, NET OF CASH 75 362 58 679 Balance sheet The total assets of the SIPEF group have increased to KUSD 1 080. The Group’s net financial position has turned negative, due to the straight loans for financing the increasing capital expenditures of KUSD 106 985 versus KUSD 79 294 in 2022, main- ly related to the continued expansion in South Sumatra. The major movements in the balance sheet over the course of 2023 should be seen as a consequence of the positive results and strategy of the group, resulting in expanding assets, supported primarily by an increase in equity. The increase in ‘biological assets – bearer plants’ and ‘other property plant & equipment’ by KUSD 55029 during 2023 was mainly due to investments in intangible and tangible fixed assets (KUSD 106985) exceeding depreciation (KUSD 52724). The ‘receivables over one year’ increased by KUSD 5942 as a result of the granting of loans to small- holders in South Sumatra to finance their new plantings. Net current assets, net of cash, increased by KUSD 16683 in total, without a major impact on the over- all structure of the balance sheet and can be broken down as follows: The increase can be broken down into the following movements: • Inventories have decreased by KUSD 1757. The number of tonnes of Crude Palm Oil (CPO) stock at the end of December 2023 was 6.9% lower compared to December 2022. Further, the CPO stock was valued at a lower cost as a consequence of the lower world market prices. This has resulted in a total KUSD 2257 decrease in stock value of finished goods compared to the year-end of 2022. 200 The connection to the world of sustainable tropical agriculture IN KUSD 31/12/2023 31/12/2022 Other investments and deposits 1 10 208 Cash and cash equivalents 11 549 34 148 Financial liabilities > 1 year 0 -18 000 Leasing liabilities > 1 year -1 974 -2 320 Current portion of amounts payable > 1 year -18 000 -18 000 Financial liabilities -22 319 -5 323 Leasing liabilities < 1 year -675 - 590 NET FINANCIAL POSITION 31 418 122 • The methodology used to measure the fair value of the biological assets did not change compared to 2022. The total of the biological assets has remained stable however, the biological assets of palm oil have decreased by KUSD 1785 following lower palm oil prices and lower productions, particularly in Hargy Oil Palms Ltd which has been aected by the volcanic eruption. On the other hand, the biological assets of bananas have increased by KUSD 1971 following the expansion in Lumen and Akoudié. • Trade receivables have decreased by KUSD 14767 following lower sales due to the decrease in production and selling price. Also, the accounts receivable at year-end 2022 was higher than usual, while the outstanding trade receivables at end 2023 were more in line with historical averages. • The net tax payable (current tax receivable and income taxes) has decreased by KUSD 28660 due to the high tax prepayments in 2023 which are based on last years' exceptional high results which will only be recovered in 2024/2025. Taxes paid during 2023 (KUSD 56216) were considerably higher than the current income tax charge of this year (KUSD 33 171). • The ‘advances received’ decreased by KUSD 2287 mainly related to the sale of PT Melania for which costs are paid during the year and which are subsequently deducted from the advance already received. The assets held for sale of KUSD 13520 concerned the estimated net sales value of the part of PT Melania owned by the Group until all conditions for a final sale are met. The net financial position decreased by KUSD 31540, mainly due to the straight loans, and amounted to KUSD -31 418 at the end of 2023. The long-term loan, at low hedged interest rates, only has 1 year remaining for a total amount of KUSD 18 000. This loan is being replaced by short term loans at prevailing interest rates. 201 SIPEF Integrated Annual Report 2023 Financial statements Result Total sales decreased by 15.8% versus 2022 to KUSD 443886. Palm oil sales dropped by 32.4%. The decline in volumes sold was mainly due to the significantly lower world market price for crude palm oil (“Crude Palm Oil” - CPO). In addition, the total tonnes of CPO produced decreased by 3.2%. Sales in the banana and horticulture segment expressed in euro, the functional currency, increased by 47.4%, mainly due to higher unit selling price (+17.9%) and a rise in volumes product and sold (+27.0%) due to the maturing of the new expansions in Lumen and Akoudié. The total cost of sales declined by KUSD 13798 in 2023 in comparison with last year. The main reason for this decrease were: • Operating costs for the own plantations and mills decreased by KUSD 13 855 or 8.9%. This was mainly due to lower fertiliser costs and harvesting costs as a consequence of the smaller production volumes and the devaluation of the IDR against the USD which is beneficial for the estate operating costs. These decreases are oset by the further maturing of the South Sumatra plantations, resulting in an increase of total estate operating costs for the South Sumatra plantations by KUSD 5 417. • Third-party purchases of Fresh Fruit Bunches (FFB) from Hargy Oil Palms Ltd decreased by KUSD 18701 or 37.8%, largely due to lower purchase prices of FFB, of which the price is related to CPO, and lower production volumes. • Finally, there was a negative impact on the total cost of sales 2023 of KUSD 1916 following the lower closing stock as of 31 December 2023, due to smaller quantities and an overall lower market price of CPO and PKO. The 'changes in the fair value of biological assets’ concerned the eects of valuing the hanging fruits at their fair value (IAS41R). Gross profit decreased from KUSD 221 031 at the end of 2022 to KUSD 149 673 at the end of 2023, a decrease of 32.3%. Palm segment’s gross profit dropped by KUSD 71 616 to KUSD 149 632, mainly due to lower net ex-mill gate CPO prices. The average realised net ex-mill gate CPO price of USD 830 per tonne was 16.7% lower than that of USD 996 per tonne last year. The gross profit of the banana and horticulture activities rose from KUSD 2 294 to KUSD 4 357, as a consequence of an increase in selling prices and a rise in volumes produced resulting from the expansion of planted areas. The average ex-mill gate unit cost for mature oil palm plantations increased slightly (+1.4%) in 2023 compared with 2022, mainly due to decreased pro- ductions compared to last year, where it should be noted that last year was marked by record produc- tions, especially in Hargy Oil Palms Ltd. The average ex-mill gate cost for the mature banana plantations over the same period, expressed in euro, the functional currency, increased by 11.8%. This sharp increase was due to higher input costs and the start-up costs in the Lumen and Akoudié expansion zones. 202 The connection to the world of sustainable tropical agriculture 'General and administrative expenses' increased in comparison with last year, mainly as a result of the further deployment of the Singapore branch oce to centralise the internal IT services of the Group, the size increase in Plantations J. Eglin and general inflation. The increase is partially oset by a decrease in the provision for variable remuneration for sta and management. The other operating income/expenses have increased by KUSD 3 804, relating primarily to a reversal on the historical impairment on our subsidiary PT Citra Sawit Mandiri for a total of MUSD 2.8. The historical impairment was recorded due to delays in obtaining the ‘Hak Guna Usaha’ (‘HGU’, i.e. the long-term licence to operate). This HGU has been obtained in the second half of 2023, after which the full impairment could be reversed. The ’operating result’ amounted to KUSD 107978 compared with KUSD 178312 last year. ‘Financial income’ of KUSD 1809 includes interests from receivables on smallholders in South Sumatra (KUSD 1295) and interest received on deposits (KUSD 514). ‘Financial costs’ were mainly related to interests on short-term financing and a discounting on smallholder receivables (KUSD 402). The positive 'exchange dierences’ (KUSD 1108) mainly concerned the hedging of the expected div- idend payable in euro, the devaluation of the PGK against the USD and the exchange impact on the revaluation of loans to smallholders and pension provision in Indonesia denominated in IDR. The ‘result before tax’ amounts to KUSD 108817 for 2023, compared with KUSD 172557 at the end of 2022. The eective tax rate amounted to 28.6%. This is higher than the theoretical tax rate of 26.0%. The ‘tax expense’ (KUSD 31 128) includes the impairment of deferred tax assets for fiscal losses (KUSD 2558), the usual disallowed expenses of about KUSD 502 and non-deductible interest charges due to the thin cap law in Indonesia (KUSD 433). In addition, due to the volcanic eruption in Papua New Guinea, it was decided to temporarily cancel the scheduled dividend from Hargy Oil Palms Ltd to the Belgian parent company, by consequence there is no with- holding tax on the dividend like there was in 2022. The 'share of profit and loss of associated compa- nies and joint ventures' (KUSD -1335) included the limited negative contribution of the research activities centralised at PT Timbang Deli Indonesia and Verdant Bioscience Pte Ltd. The ‘result for the period’ 2023 was KUSD 76354, a decline by 32.1% against last year. Net profit, share of the Group, amounted to KUSD 72735 (USD 6.99 per share) against KUSD 108157 (USD 10.40 per share) last year. 203 SIPEF Integrated Annual Report 2023 Financial statements Cash flow Following the reduction in operating profit, 'cash flow from operating activities before change in net working capital' decreased from KUSD 216712 as of 31 December 2022, to KUSD 162768 at 31 December this year. The variation of the working capital of KUSD 16080 mainly relates to the decrease in trade receivables and trade payables, and a decreased variable renu- meration provision. In January 2023, the withholding tax on the dividend relating to 2022 from Hargy Oil Palms Ltd of KUSD 7 500 was paid. Furthermore, tax prepayments in Indonesia and Papua New Guinea, under local prevailing rules, are based on last year’s (exceptionally) high results. These are the main reasons why the taxes paid (KUSD -56216) are significantly higher than the taxes to be paid (KUSD 33170). The 'acquisitions intangible and tangible assets' (KUSD -106986) related to the usual replacement investments in the existing operations and in the new developments in South Sumatra (KUSD -40114). In addition, to the further expansion of the planted areas and the associated infrastructure such as houses and roads, investments are being made in South Sumatra in particular in the construction of the Agro Muara Rupit mill (KUSD -13630 up to December 2023) with a processing capacity, in the first phase, of 45 tonnes of FFB per hour. Additional loans (KUSD -7799) were also made during the year to surrounding smallholders in South Sumatra and Bengkulu. The ‘proceeds from sales of property, plant and equipment’ (KUSD 889) relates mostly to the sale of seedlings of own nurseries to smallholders in the Musi Rawas area and other tangible fixed assets. The ‘proceeds from sale of financial assets’ (KUSD – 2924) relates to the expenses made during the year to fulfil the requirement for the sale of PT Melania. 'Free cash flow' for the year 2023 amounted to KUSD 5813, compared with KUSD 79511 for the same period last year. The ‘cash flow from financing activities' (KUSD -38619) mainly include buy-back and sale trans- actions on treasury shares (net KUSD -93), partial repayments of long-term financing (KUSD -18000 for the long-term loans and KUSD -528 for the leasing debt), an increase of short-term financing (KUSD +17671), last year record dividend payment to SIPEF shareholders (KUSD -33765) and divi- dend payments to minority shareholders (KUSD -2796). 204 The connection to the world of sustainable tropical agriculture IN KUSD NOTE 2023 2022 Non-current assets 907 847 847 168 Intangible assets 8 138 226 Goodwill 8 104 782 104 782 Biological assets - bearer plants 9 326 656 316 714 Other property, plant & equipment 10 425 018 379 931 Investment property 0 0 Investments in associates and joint ventures 24 1 697 3 032 Financial assets 112 98 Other financial assets 112 98 Receivables > 1 year 34 229 28 287 Other receivables 11 34 229 28 287 Deferred tax assets 23 15 214 14 097 Current assets 172 395 215 055 Inventories 12 47 179 48 936 Biological assets 13 11 122 10 936 Trade and other receivables 79 366 92 371 Trade receivables 26 29 876 44 643 Other receivables 14 49 490 47 728 Current tax receivables 23 6 925 1 100 Investments 1 10 208 Other investments and deposits 19 1 10 208 Derivatives 26 780 1 639 Cash and cash equivalents 19 11 549 34 148 Other current assets 1 953 2 197 Assets held for sale 30 13 520 13 520 TOTAL ASSETS 1 080 242 1 062 223 CONSOLIDATED BALANCE SHEET 205 SIPEF Integrated Annual Report 2023 Financial statements IN KUSD NOTE 2023 2022 Total equity 888 819 850 144 Shareholders' equity 15 853 777 817 803 Issued capital 44 734 44 734 Share premium 107 970 107 970 Treasury shares (-) - 11 681 -11 588 Reserves 723 733 687 933 Translation dierences - 10 978 -11 246 Non-controlling interests 16 35 042 32 341 Non-current liabilities 78 466 89 665 Provisions > 1 year 524 767 Provisions 17 524 767 Deferred tax liabilities 23 52 454 48 131 Trade and other liabilities > 1 year 26 0 0 Financial liabilities > 1 year (incl. derivatives) 19 0 18 000 Leasing liabilities > 1 year 27 1 974 2 320 Pension liabilities 18 23 515 20 448 Advances received > 1 year 0 0 Current liabilities 112 957 122 414 Trade and other liabilities < 1 year 55 093 83 438 Trade payables 26 25 243 29 863 Advances received 26 3 411 5 698 Other payables 14 15 832 14 437 Income taxes 23 10 605 33 440 Financial liabilities < 1 year 40 994 23 913 Current portion of amounts payable after one year 19 18 000 18 000 Financial liabilities 19 22 319 5 323 Leasing liabilities < 1 year 27 675 590 Derivatives 26 0 0 Other current liabilities 16 870 15 063 Liabilities associated with assets held for sale 0 0 TOTAL EQUITY AND LIABILITIES 1 080 242 1 062 223 206 The connection to the world of sustainable tropical agriculture IN KUSD NOTE 2023 2022 Revenue 7 443 886 527 460 Cost of sales 7 -294 400 -308 198 Changes in fair value of biological assets 7 186 1 769 Gross profit 149 673 221 031 General and administrative expenses 7 -46 204 -43 424 Other operating income/(expenses) 20 4 509 705 Operating result 107 978 178 312 Financial income 1 809 1 300 Financial expenses -2 079 -3 803 Exchange dierences 1 108 -3 251 Financial result 21 839 -5 754 Profit before tax 108 817 172 557 Tax expense 23 -31 128 -59 536 Profit after tax 77 689 113 021 Share of profit/loss of an associate and joint venture 24 -1 335 - 566 Result from continuing operations 76 354 112 455 Result from discontinued operations 0 0 Profit for the period 76 354 112 455 Attributable to: - Non-controlling interests 16 3 619 4 298 - Equity holders of the parent 72 735 108 157 CONSOLIDATED INCOME STATEMENT EARNINGS PER SHARE IN USD NOTE 2023 2022 FROM CONTINUING AND DISCONTINUED OPERATIONS Weighted average shares outstanding 30 10 403 105 10 401 938 Basic operating result per share 30 10.38 17.14 Basic earnings per share 30 6.99 10.40 Diluted earnings per share 30 6.98 10.36 Cash flow from operating activities after tax 30 11.79 15.89 207 SIPEF Integrated Annual Report 2023 Financial statements IN KUSD NOTE 2023 2022 Profit for the period 76 354 112 455 Other comprehensive income: Items that may be reclassified to profit and loss in subsequent periods - Exchange dierences on translating foreign operations 15 268 - 580 - Cash flow hedges - fair value result for the period 26 - 855 2 147 - Income tax eect (cash flow hedges) 26 214 - 537 Items that will not be reclassified to profit and loss in subsequent periods - Remeasurement gain/(loss) on Defined Benefit Plans 18 - 512 - 126 - Income tax eect 113 28 Total other comprehensive income for the year - 773 932 Other comprehensive income attributable to: - Non-controlling interests - 14 - 7 - Equity holders of the parent - 759 939 Total comprehensive income for the year 75 581 113 387 Total comprehensive income attributable to: - Non-controlling interests 3 606 4 291 - Equity holders of the parent 71 975 109 096 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME 208 The connection to the world of sustainable tropical agriculture CONSOLIDATED CASH FLOW STATEMENT IN KUSD NOTE 2023 2022 OPERATING ACTIVITIES Profit before tax 108 817 172 557 Adjusted for: Depreciation 8,9,10 52 724 47 939 Movement in provisions 17 2 300 -2 326 Stock options 163 140 Changes in fair value of biological assets - 186 -1 769 Other non-cash results -2 963 947 Hedge reserves and financial derivatives 26 3 -1 558 Financial income/(expenses) 270 620 Result on disposal of property, plant and equipment 1 641 162 Cash flow from operating activities before change in net working capital 25 162 768 216 712 Change in net working capital 25 16 080 -6 455 Cash flow from operating activities after change in net working capital 178 848 210 257 Income taxes paid 23 -56 216 -44 964 Cash flow from operating activities 122 632 165 293 INVESTING ACTIVITIES Acquisition intangible assets 8 - 9 0 Acquisition biological assets 9 -32 556 -29 429 Acquisition property, plant & equipment 10 -74 421 -49 864 Financing plasma advances 11 -7 799 -4 504 Proceeds from sale of property, plant & equipment 889 1 517 Proceeds from sale of financial assets 11,29 -2 924 -3 502 Cash flow from investing activities -116 819 -85 782 Free cash flow 5 813 79 511 FINANCING ACTIVITIES Equity transactions with non-controlling parties (1) - 415 -5 500 Acquisition of treasury shares 22 - 701 - 176 Sale of treasury shares 22 608 109 Repayment in long-term financial borrowings 19 -18 528 -18 642 Increase in long-term financial borrowings 19 182 755 Repayment short-term financial borrowings 19 - 590 -7 154 Increase short-term financial borrowings 19 17 671 106 Last year's dividend paid during this book year -33 765 -22 280 Dividends paid by subsidiaries to minorities 16 -2 796 -1 720 Interest received - paid - 285 - 631 Cash flow from financing activities -38 619 -55 133 Net increase in investments, cash and cash equivalents 19 -32 806 24 378 Investments and cash and cash equivalents (opening balance) 19 44 356 19 977 Eect of exchange rate fluctuations on cash and cash equivalents 19 0 0 Investments and cash and cash equivalents (closing balance) 19 11 550 44 356 Of which: 19 Other investments and deposits 19 1 10 208 Cash and cash equivalents 19 11 549 34 148 (1) Reclassification in prior year figures from investing activities to financing activities related to the purchase of the 5% shares in PT Agro Muko. 209 SIPEF Integrated Annual Report 2023 Financial statements STATEMENT OF CHANGES IN CONSOLIDATED EQUITY IN KUSD ISSUED CAPITAL SIPEF SHARE PREMIUM SIPEF TREASURY SHARES DEFINED BENEFIT PLANS IAS19 CONSOLI DATED RESERVES TRANSLATION DIFFERENCES SHARE HOLDER EQUITY NON CONTROLLING INTERESTS TOTAL EQUITY JANUARY 1, 2023 44 734 107 970 -11 588 -5 124 693 057 -11 246 817 803 32 342 850 144 Result for the period 72 735 72 735 3 619 76 354 Other comprehensive income - 386 - 642 268 - 759 - 14 - 773 Total comprehensive income 0 0 0 - 386 72 093 268 71 975 3 606 75 581 Last year's dividend paid -33 765 -33 765 -2 796 -36 560 Equity transactions with non-controlling parties -2 305 -2 305 1 890 - 415 Other (note 22) - 93 163 70 70 DECEMBER 31, 2023 44 734 107 970 -11 681 -5 510 729 243 -10 978 853 777 35 042 888 819 JANUARY 1, 2022 44 734 107 970 -11 521 -5 033 601 846 -10 666 727 329 38 854 766 183 Result for the period 108 157 108 157 4 298 112 455 Other comprehensive income - 91 1 610 - 580 939 - 7 932 Total comprehensive income 0 0 0 - 91 109 767 - 580 109 096 4 291 113 387 Last year's dividend paid -22 280 -22 280 -1 720 -24 000 Equity transactions with non-controlling parties (5% PT AM) 3 583 3 583 -9 083 -5 500 Other - 67 140 73 73 DECEMBER 31, 2022 44 734 107 970 -11 588 -5 124 693 057 -11 246 817 803 32 342 850 144 210 The connection to the world of sustainable tropical agriculture 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 2023 comprise SIPEF and its subsidiaries (together referred to as ‘SIPEF group’ or ‘the Group’). Comparative figures are for the financial year 2022. The consolidated financial statements have been established by the board of directors on 13 February 2024. The events after the reporting period were updated and approved for issue by the directors on April 16, 2024. These financial statements will be presented to the shareholders at the general meeting of June 12, 2024. A list of the directors and the statutory auditor, as well as a description of the principal activities of the Group, are included in the chapters “Corporate governance statement” and “SIPEF’s operations” of the integrated 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 2023. The following standards or interpretations are applicable for the annual period beginning on 1 January 2023: • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction • Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules • IFRS 17 Insurance Contracts • Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information 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 1: non-current liabilities with covenants and classification of liabilities as current or non-current (deferred), effective January 1, 2024 • Amendments to IAS 7 / IFRS 7: Disclosures Suppliers Finance Arrangements, effective January 1, 2024 • Amendments to IFRS 16 leases: lease liability in a sale and leaseback, effective January 1, 2024 • Amendments to IAS 21: Lack of Exchangeability, effective January 1, 2025 At present, the Group does not expect the initial adoption of these standards and interpretations to have a material effect on the Group's financial statements. 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. 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; and • 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. 211 SIPEF Integrated Annual Report 2023 Financial statements 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. 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 The biological asset 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. SIPEF group has opted to measure biological assets 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, as it is 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 biological assets of bananas are 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. At the time of harvest, fresh fruit bunches, rubber and bananas are measured at their fair value less costs to sell and transferred to inventories. 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 and bearer plants, 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. 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. All costs relating to the maintenance of the bearer plants, including fertilisation, is capitalised as long as the bearer plants are immature. Depreciation commences when the bearer plants have become mature and the production of biological assets starts. 212 The connection to the world of sustainable tropical agriculture Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets: Buildings 5 to 30 years Infrastructure 5 to 25 years Installations and machinery 5 to 30 years Vehicles 3 to 20 years Office equipment and furniture 5 to 10 years Other property, plant and equipment 2 to 20 years Bearer plants 20 to 25 years Land and ‘construction in progress’ are 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. The renewal costs of land rights are also recognized as land rights and are amortized over the term of the renewal. 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. The interest rate implicit in the lease could not be determined. All cash flows relating to the leases are included in the increase/decrease of the short term or long-term financial borrowings (financing activities) in the cash flow statement. 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 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-N ew-Guinea land rights In the Group’s subsidiary Hargy Oil Palms Ltd in Papua-New- Guinea, a part of the land rights includes 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 tonnes 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 (including bearer plants) 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 an impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. If the 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: 213 SIPEF Integrated Annual Report 2023 Financial statements • 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 measured at amortised cost; • Trade receivables measured at amortised cost; • Cash and cash equivalents, and; • Other investments and deposits. 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 FVOCI. Investments in equity instruments at FVOCI 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. 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. 214 The connection to the world of sustainable tropical agriculture 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 12 month 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. 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 payables 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 less than three months. Negative cash balances are recorded as liabilities. Other investments and deposits Investments are measured at their amortized value and include short term deposits with an original maturity of three months or more or other short-term monetary investments that are readily convertible into a known amount of cash and with an insignificant risk of change in value. 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. At the time of harvest, agricultural produces are measured at fair value less costs to sell and transferred to inventories. Costs incurred in growing the agricultural produces, including any applicable harvest costs, are recognised as part of cost of sales. 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. 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 215 SIPEF Integrated Annual Report 2023 Financial statements 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. 1. 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 i n Other Comprehensive Income. 2 . Defined contribution plans The Group pays contributions to publicly or privately administered insurance plans. Since the Group is obliged to m ake additional payments if the average return on t he em ployer’s contribution and on the employees’ contributions is not attained, those plans should be treated as “defi ned benef it plans” in accordance with IAS 19. Share based payment Stock option plans exist within the SIPEF group, giving beneficiaries 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. 216 The connection to the world of sustainable tropical agriculture 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: The main areas in which estimates are used 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. 217 SIPEF Integrated Annual Report 2023 Financial statements 5. GROUP COMPANIES / CONSOLIDATION SCOPE The ultimate parent of the Group, SIPEF NV, 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 95.00 PT Citra Sawit Mandiri Medan / Indonesia 95.00 95.00 PT Toton Usaha Mandiri Medan / Indonesia 95.00 95.00 PT Agro Rawas Ulu Medan / Indonesia 100.00 95.00 PT Agro Kati Lama Medan / Indonesia 100.00 95.00 PT Agro Muara Rupit Medan / Indonesia 100.00 100.00 Hargy Oil Palms Ltd Bialla / Papua N.G. 100.00 100.00 Plantations J. Eglin SA Azaguié / Côte d'Ivoire 100.00 100.00 Jabelmalux SA Luxembourg / G.D. Luxemburg 100.00 100.00 Sipef Singapore Pte Ltd Singapore / Republic of Singapore 100.00 100.00 PT Agro Muko Medan / Indonesia 100.00 95.05 PT Dendymarker Indah Lestari Medan / Indonesia 100.00 95.05 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 The Group consists of Sipef NV and a total of 21 investees. Of these 21 investees, 17 are fully consolidated and 3 are accounted for under the equity method, while the other investee does not meet the criteria of significance. In accordance with the concept of materiality, companies which are insignificant, have not been included in the consolidation scope. They are measured at cost and tested for impairment on an annual basis, which is considered a good proxy of their fair value. 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. In a first phase, 40% was sold so that the SIPEF group now owns only 55% of the share capital. However, 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, equalling 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 and therefore not included in note 24 ‘investments in associates and joint ventures’. 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 euro (EUR) 218 The connection to the world of sustainable tropical agriculture 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 2023 2022 2023 2022 EUR 0.9060 0.9393 0.9237 0.9533 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 PT Melania in Indonesia and which the SIPEF group buys and sells. • Bananas and horticulture: Includes all sales of bananas and horticulture originating from Côte d’Ivoire. • 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 difference with IFRS consolidation is: • Instead of revenue the gross margin per segment is used as the starting point. In KUSD 2023 2022 Gross margin per product Palm 149 632 221 248 Rubber -5 861 -4 105 Tea 139 195 Bananas and horticulture 4 357 2 294 Corporate 1 405 1 397 Total gross margin 149 673 221 031 General and administrative expenses -46 204 -43 424 Other operating income/(expenses) 4 509 705 Financial income/(expenses) - 270 -2 503 Exchange differences 1 108 -3 251 Result before tax 108 817 172 557 Tax expense -31 128 -59 536 Effective tax rate -28.6% -34.5% Result after tax 77 689 113 021 Share of results of associated companies -1 335 - 566 Result for the period 76 354 112 455 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. 219 SIPEF Integrated Annual Report 2023 Financial statements Gross profit by product Changes in the 2023 – KUSD Revenue Cost of sales Gross profit % of total fair value Palm 405 380 -253 962 -1 785 149 632 100.0 Rubber 1 487 -7 348 0 -5 861 -3.9 Tea 3 060 -2 921 0 139 0.1 Bananas and horticulture 32 555 -30 169 1 971 4 357 2.9 Corporate 1 405 0 0 1 405 0.9 Total 443 886 -294 400 186 149 673 100.0 Changes in the 2022 – KUSD Revenue Cost of sales Gross profit % of total fair value Palm 495 737 -274 646 157 221 248 100.1 Rubber 3 821 -7 926 0 -4 105 -1.9 Tea 4 286 -4 090 0 195 0.1 Bananas and horticulture 22 219 -21 536 1 611 2 294 1.0 Corporate 1 397 0 0 1 397 0.6 Total 527 460 -308 198 1 769 221 031 100.0 The Group’s total ‘revenue’ amounted to KUSD 443 886 as per 31 December 2023 and dropped by KUSD 83 574 or 15.8% against 31 December 2022. The palm segment’s revenue in particular dropped (KUSD -90 357), mainly as a result of the greatly reduced unit selling price (- 16.8%). In addition, the total tonnes of produced CPO have decreased by 3.2%. The 2023 ex-mill gate unit selling price was USD 739 per tonne for Indonesia (2022: USD 840 per tonne), USD 988 per tonne for Papua New Guinea (2022: USD 1 222 per tonne) and USD 830 per tonne for the Group (2022: USD 996 per tonne). Banana segment revenue expressed in euro, the functional currency, rose by 47.4% mainly due to an increase in the average unit selling price (+17.9%) and a rise in volumes produced and sold (+27.0%) due to the maturing of the new expansions in Lumen and Akoudié. The total ‘cost of sales’ declined by KUSD 13 798 in 2023 in comparison with last year. The main reason for this decrease were: • Operating costs for the own plantations and mills decreased by KUSD 13 855 or 8.9%. This was mainly due to lower fertiliser costs and harvesting costs as a consequence of the smaller production volumes and the devaluation of the IDR against the USD which is beneficial for the estate operating costs. These decreases are offset by the further maturing of the South Sumatra plantations, resulting in an increase of total estate operating costs for the South Sumatra plantations by KUSD 5 417. • Third-party purchases of Fresh Fruit Bunches (FFB) from Hargy Oil Palms Ltd decreased by KUSD 18 701 or 37.8%, largely due to lower purchase prices of FFB, of which the price is related to CPO, and lower production volumes. • Finally, there was a negative impact on the total cost of sales 2023 of KUSD 1 916 following the lower closing stock as of 31 December 2023, due to smaller quantities and an overall lower market price of CPO and PKO. The ‘changes in the fair value of biological assets’ concerned the effects of valuing the hanging fruits at their fair value (IAS41R). Gross profit decreased from KUSD 221 031 at the end of 2022 to KUSD 149 673 at the end of 2023, a decrease of 32.3%. Palm segment’s gross profit dropped by KUSD 71 616 to KUSD 149 632, mainly due to lower net ex-mill gate CPO prices. The average realised net ex-mill gate CPO price of USD 830 per tonne was 16.7% lower than that of USD 996 per tonne last year. The gross profit of the banana and horticulture activities rose from KUSD 2 294 to KUSD 4 357, as a consequence of an increase in selling prices and a rise in volumes produced resulting from the expansion of the new planted areas. 220 The connection to the world of sustainable tropical agriculture Gross profit by geographical region Changes in 2023 – KUSD Revenue Cost of sales Other income Gross profit % of total the fair value Indonesia 225 360 -153 088 779 - 72872 322 48.3 Papua New Guinea 184 567 -111 143 0 -1 05672 367 48.4 Côte d’Ivoire 32 555 -30 169 0 1 971 4 357 2.9 Europe 626 0 0 0 626 0.4 Total 443 107 -294 400 779 186 149 673 100.0 Changes in 2022 – KUSD Revenue Cost of sales Other income Gross profit % of total the fair value Indonesia 260 957 -161 780 968 128 100 272 45.4 Papua New Guinea 242 888 -124 880 0 29 118 036 53.4 Côte d’Ivoire 22 219 -21 537 0 1 611 2 293 1.0 Europe 429 0 0 0 429 0.2 Total 526 492 -308 198 968 1 769 221 031 100.0 Total cost of sales can be split up in the following categories: 1. Estate charges – includes all charges relating to the field work to produce the base agricultural products (i.e. fresh fruit bunches, latex, bananas, horticulture) ; 2. Processing charges – includes all charges relating to the processing of the base agricultural products to the finished agricultural commodities (i.e. palm oil, rubber, ...); 3. FFB/CPO/latex purchases – includes all purchases from third parties (smallholders) or associates; 4. Stock movement – includes the variance in stock; 5. Changes in fair value – includes the changes in the fair value of the biological assets of palm oil and bananas; 6. Sales charges – includes all direct costs attributable to the sales of the year (i.e. transport charges, palm oil export tax/levy, ...); 7. General and administrative expenses – includes all costs related to the overall organisation (i.e. general management, financial department, marketing, internal audit, sustainability, etc.). In KUSD 2023 2022 Estate charges 178 489 171 824 Processing charges 34 456 34 363 FFB/CPO/latex purchases 42 651 75 145 Stock movement finished products 2 535 -1 771Changes in fair value 186 1 769 Sales charges 35 895 25 098 Cost of sales 294 214 306 429 General and administrative expenses 46 204 43 424 Total cost of sales and general and administrative expenses 340 417 349 853 E state charges have increased compared to last year due to: • higher fertilizer cost in the first half of 2023; • higher local transporting costs in Hargy Oil Palms Ltd; • the additional mature hectares in the Musi Rawas region, whereby estate charges are now increasing annually; • the additional mature hectares in Plantations J. Eglin SA; • a general increase in costs due to inflation. The processing charges remained in line with last year despite the decrease in processed FFB. 221 SIPEF Integrated Annual Report 2023 Financial statements Purchases of FFB/CPO/Latex decreased by KUSD 32 494, mainly due to the decrease in purchases of FFB from third parties at Hargy Oil Palms Ltd (-8.6%), which decreased by KUSD 18 701 or 37.8%, largely due to lower purchase prices of FFB, the price of which is related to CPO. Stock levels were in line with prior year resulting in a minor stock movement. Sales charges have increased due to the higher transportation and freight prices on the world market in 2023 compared to 2022. Total depreciation amounts to KUSD 52 724. Most of the depreciation was included in the estate and processing charges (KUSD 48 092). In addition, a total of KUSD 4 349 of depreciation charges is recorded in the ‘General and administrative expenses’ and KUSD 284 in ‘other operating income/(expenses)’. 'General and administrative expenses' increased in comparison with last year, mainly as a result of the further deployment of Sipef Singapore Pte Ltd to centralise the internal IT services of the Group, the size increase in Plantations J. Eglin SA and general inflation. The increase is partially offset by a decrease in the provision for variable remuneration for staff and management. Revenue by location of the debtors In KUSD 2023 2022 Indonesia 228 348 246 604 Switzerland 152 279 91 059 United Kingdom 14 613 7 494 The Netherlands 12 884 133 570 Belgium 12 653 12 112 France 9 646 10 250 Côte d'Ivoire 4 875 3 538 Ireland 2 990 2 004 Spain 2 230 69 Afghanistan 985 992 United Arab. Emirates 697 494 China 513 1 388 Pakistan 393 693 Singapore 336 1 512 Germany 216 4 018 Malaysia 126 10 970 Other 101 99 United States 0 593 Total 443 886 527 460 The revenue of the Group is realised against a relatively small number of first-class buyers: per product about 90% of the revenue from contracts with customers is realized with a maximum of 10 clients. For additional information, we refer to note 26 – financial instruments. 222 The connection to the world of sustainable tropical agriculture Segment information – geographical information 2023 In KUSD Indonesia PNG Côte d'Ivoire Europe Singapore Total Intangible assets 0 0 0 138 0 138 Goodwill 104 782 0 0 0 0 104 782 Biological assets 246 770 79 182 705 0 0 326 656 Other property, plant & equipment 292 988 119 050 11 572 594 813 425 018 Investments in associates and joint ventures -1 426 0 0 0 3 123 1 697 Other financial assets 46 0 51 15 0 112 Receivables > 1 year 34 229 0 0 0 0 34 229 Deferred tax assets 12 691 0 910 1 613 0 15 214 Total non-current assets 690 081 198 232 13 238 2 360 3 937 907 847 % of total 76.01% 21.84% 1.46% 0.26% 0.43% 100.00% 2022 In KUSD Indonesia PNG Côte d'Ivoire Europe Singapore Total Intangible assets 0 0 0 226 0 226 Goodwill 104 782 0 0 0 0 104 782 Biological assets 236 406 79 844 464 0 0 316 714 Other property, plant & equipment 267 239 101 664 9 723 503 801 379 931 Investments in associates - 769 0 0 0 3 801 3 032 Other financial assets 46 0 37 15 0 98 Receivables > 1 year 28 287 0 0 0 0 28 287 Deferred tax assets 11 762 0 558 1 776 0 14 097 Total non-current assets 647 753 181 508 10 783 2 521 4 603 847 168 % of total 76.46% 21.43% 1.27% 0.30% 0.54% 100.00% The assets of Indonesia relate almost entirely to the palm segment. The assets of PNG relate 100% to the palm segment. The assets of Côte d’Ivoire relate 100% to the bananas and horticulture segment. The assets of Singapore relate primarily to Verdant Bioscience Pte Ltd conducting research into and developing high-yielding seeds. The assets of Europe do not relate specifically to one product segment. 8. GOODWILL AND OTHER INTANGIBLE ASSETS 2023 2022 Intangible Intangible In KUSD Goodwill Goodwill assets assets Gross carrying amount at January 1 104 782 767 104 782 767 Acquisitions 0 9 0 0 Sales and disposals 0 - 39 0 0 Transfers 0 0 0 0 Translation differences 0 0 0 0 Gross carrying amount at December 31 104 782 737 104 782 767 Accumulated amortization and impairment losses at January 1 0 - 541 0 - 419 Depreciations 0 - 97 0 - 122 Sales and disposals 0 39 0 0 Transfers 0 0 0 0 Remeasurement 0 0 0 0 Accumulated amortization and impairment losses at December 31 0 - 599 0 - 541 Net carrying amount January 1 104 782 226 104 782 348 Net carrying amount December 31 104 782 138 104 782 226 223 SIPEF Integrated Annual Report 2023 Financial statements 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. 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 2023. This consists of the following items: Assets (in KUSD) 2023 Biological assets – bearer plants 325 952 Other fixed assets 413 445 Goodwill 104 782 Current assets – current liabilities 16 299 Total 860 478 * 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. The starting point is the operational plans of the Group, which look a decade ahead (to 2033) 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 820/tonne) 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 as well as the impact of the eruption of ‘Mount Ulawun’ in November 2023. The average palm oil price used in the goodwill impairment amounts to USD 820/tonne, whereas the spot price per 31 December 2023 amounted to USD 940/tonne. 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 10.31% and utilises the local tax rates of 22%-30%, depending on the countries in the which the cash flows are generated. 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) Scenario 1 USD 770/tonne CIF Rotterdam Scenario 2 (base case) USD 820/tonne CIF Rotterdam Scenario 3 USD 870/tonne CIF Rotterdam WACC Scenario 1 9.31% Scenario 2 (base case) 10.31% Scenario 3 11.31% 224 The connection to the world of sustainable tropical agriculture Summary assumptions of 2023: PO / WACC 9.31% 10.31% 11.31% USD 770/tonne CIF Rotterdam Scenario 1 Scenario 4 Scenario 7 USD 820/tonne CIF Rotterdam Scenario 2 Scenario 5 (base case) Scenario 8 USD 870/tonne CIF Rotterdam Scenario 3 Scenario 6 Scenario 9 S ummary assumptions of 2022: PO / WACC 10.56% 11.56% 12.56% USD 750/tonne CIF Rotterdam Scenario 1 Scenario 4 Scenario 7 USD 800/tonne CIF Rotterdam Scenario 2 Scenario 5 (base case) Scenario 8 USD 850/tonne CIF Rotterdam Scenario 3 Scenario 6 Scenario 9 The decrease of the WACC compared to previous year is primarily due to a decrease in country risk premiums (CRP). For the sensitivity analysis, the price is increased and decreased by USD 50/tonne. The WACC is 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 per 31 December 2023 WACC/PO price (in KUSD) 9.31% 10.31% 11.31% USD 770/tonne CIF Rotterdam 765 876 663 372 582 922 USD 820/tonne CIF Rotterdam 1 016 097 882 175 777 073 USD 870/tonne CIF Rotterdam 1 214 783 1 055 965 931 322 Value of underlying assets 860 478 860 478 860 478 * 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) 9.31% 10.31% 11.31% USD 770/tonne CIF Rotterdam - 94 602 - 197 106 - 277 555USD 820/tonne CIF Rotterdam 155 619 21 697 - 83 405USD 870/tonne CIF Rotterdam 354 305 195 488 70 845 Green = base scenario We also calculate the breakeven palm oil price based on the various WACCs. Breakeven price 9.31% 10.31% 11.31% USD/tonne 789 $/tonne 815 $/tonne 852 $/tonne M anagement 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. Eruption of ‘Mount Ulawun’ volcano Volcano ‘Mount Ulawun’ erupted near Hargy Oil Palms Ltd in Papua New Guinea on November 20, 2023. No injuries or deaths were reported, but surrounding communities were evacuated and one palm oil extraction mill was temporarily closed. The main damage was caused by the ash rain that destroyed the palm fronds of the mature trees in the affected area to a greater or lesser extent. This has limited the production potential of these palms in the coming period. For 2024, Hargy Oil Palms’ budgeted own volumes of palm products would fall by a maximum of 20%, or by about 18 500 tonnes of palm oil and 1 500 tonnes of palm kernel oil. Based on the same 20% decrease for fruits purchased from third parties and at current selling prices, the total financial impact on 2024 profit, after tax, would be a decrease of maximum USD 14.7 million. By analogy with the previous volcanic eruption, the negative impact on production would be fully absorbed after 2.5 to 3 years. However, SIPEF hopes to shorten this period thanks to its accumulated experience. 225 SIPEF Integrated Annual Report 2023 Financial statements 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: In KUSD 2023 2022 Gross carrying amount at January 1 439 851 416 487 Change in consolidation scope 0 0 Acquisitions 32 556 29 429 Sales and disposals - 9 897 - 6 145 Transfers - 1 923 161 Translation differences 70 - 82 Gross carrying amount at December 31 460 656 439 851 Accumulated depreciation and impairment losses at January 1 - 123 136 - 109 116 Change in consolidation scope 0 0 Depreciation - 21 382 - 19 228 Sales and disposals 10 566 5 140 Transfers 0 0 Translation differences - 48 68 Accumulated depreciation and impairment losses at December 31 - 134 000 - 123 136 Net carrying amount January 1 316 715 307 371 Net carrying amount December 31 326 656 316 715 226 The connection to the world of sustainable tropical agriculture 10. OTHER PROPERTY, PLANT AND EQUIPMENT 2023 Office Land, Installations equipment, In Land In KUSD buildings and and Vehicles Leasing Total furniture progress rights infrastructure machinery and others Gross carrying amount at January 1 220 362 199 873 74 240 36 070 4 373 7 735 139 143 681 795 Acquisitions 11 656 13 102 14 785 4 092 334 16 954 13 497 74 421 Sales and disposals - 1 270 - 7 311 - 6 538 - 2 490 0 - 3 002 0 - 20 610 Transfers 5 050 1 417 525 447 0 - 5 509 - 7 1 923 Other 376 19 212 230 0 0 2 047 2 884 Translation differences 585 144 91 48 0 73 8 948 Gross carrying amount at December 31 236 759 207 245 83 316 38 396 4 707 16 250 154 689 741 362 Accumulated depreciation and impairment losses at January 1 - 88 987 - 126 587 - 57 384 - 24 479 - 1 588 0 - 2 841 - 301 866 Depreciation - 10 136 - 11 758 - 6 053 - 2 720 - 571 0 - 7 - 31 245 Sales and disposals 1 030 7 432 6 484 2 464 0 0 0 17 411 Transfers 0 0 0 0 0 0 0 0 Other - 19 - 10 - 46 - 7 0 0 0 - 83 Translation differences - 366 - 93 - 60 - 35 0 0 - 7 - 562 Accumulated depreciation and impairment losses at December 31 - 98 479 - 131 016 - 57 059 - 24 778 - 2 158 0 - 2 855 - 316 345 Net carrying amount January 1 131 374 73 287 16 856 11 591 2 785 7 735 136 302 379 930 Net carrying amount December 31 138 280 76 229 26 258 13 618 2 549 16 250 151 834 425 018 The total of the investments in tangible assets (KUSD 74 421) relates to the usual replacement investments in the existing operations and in the new developments in South Sumatra (KUSD 40 114). In addition, to the further expansion of the planted areas and the associated infrastructure such as houses and roads, investments are being made in South Sumatra in particular in the construction of the Agro Muara Rupit mill (KUSD 13 630 up to December 2023) with a processing capacity, in the first phase, of 45 tonnes of FFB per hour. The remaining assets in progress mainly relate to the continued investments in the immature areas, which will be transferred to the bearer plants upon their coming to maturity. 227 SIPEF Integrated Annual Report 2023 Financial statements 2022 Office Land, Installations equipment, In Land In KUSD buildings and and Vehicles Leasing Total furniture progress rights infrastructure machinery and others Gross carrying amount at January 1 200 834 187 855 72 622 34 867 3 551 12 794 131 411 643 933 Acquisitions 12 947 10 912 7 451 1 260 822 8 730 7 744 49 864 Sales and disposals - 1 521- 2 470 - 6 112- 158 0 - 338 0 - 10 598Transfers 8 782 3 730 405 160 0 - 13 238 0 - 161Other - 10 13 0 0 0 0 0 3 Translation differences - 670- 167- 126- 57 0 - 213- 13- 1 247Gross carrying amount at December 31 220 362 199 873 74 240 36 070 4 373 7 735 139 143 681 795 Accumulated depreciation and impairment losses at January 1 - 81 651- 118 542 - 57 856- 22 192- 963 0 - 2 834 - 284 038Depreciation - 8 858- 10 906 - 5 690- 2 493- 624 0 - 19- 28 590Sales and disposals 981 2 713 6 077 153 0 0 - 1 9 923 Transfers 0 0 0 0 0 0 0 0 Other 0 0 0 0 0 0 0 0 Translation differences 541 149 85 53 0 0 13 840 Accumulated depreciation and impairment losses at December 31 - 88 987- 126 587 - 57 384- 24 479 - 1 588 0 - 2 841 - 301 866Net carrying amount January 1 119 183 69 313 14 766 12 675 2 588 12 794 128 577 359 896 Net carrying amount December 31 131 374 73 287 16 856 11 591 2 785 7 735 136 302 379 931 228 The connection to the world of sustainable tropical agriculture 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 3 200 Concession 2023 Oil palm PT Kerasaan Indonesia 2 380 Concession 2023 Oil palm PT Bandar Sumatra Indonesia 1 189 Concession 2024 Rubber and oil palm 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 2 423 Concession 2045 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 7 437 Concession 2044 Oil palm PT Agro Muko 2 171 Concession 2047 Oil palm PT Agro Muko 1 515 Concession 2022 Oil palm PT Agro Muko 2 100 Concession 2047 Rubber 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) 385 Concession 2024 Oil palm PT Mukomuko Agro Sejahtera (BKDE) 1 513 Concession 2057 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 34 Concession 2077 Oil palm Hargy Oil Palms Limited 7 Concession 2079 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 694 Concession 2106 Oil palm Hargy Oil Palms Limited 1 Concession 2110 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 Plantations J. Eglin SA 817 Provisional concession n/a Bananas and horticulture Total 86 598 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 PT Mukomuko Agro Sejahtera 385 In negotiation - Oil palm Total 36 383 * All documentation for the renewal of the land rights which matured in 2022 and 2023 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 7 289 hectares of surveyed area (of which 4 095 hectares planted) on subleased land, with renewal dates between 2036 and 2046. 229 SIPEF Integrated Annual Report 2023 Financial statements 11. RECEIVABLES > 1 YEAR In KUSD 2023 2022 Receivables > 1 year – smallholder receivables 34 229 28 287 The ‘receivables over one year’ consists out of loans to smallholders in South Sumatra to finance the development of their new plantings. When the smallholders plantations start to mature, the smallholders are obliged to sell their harvests to the Group and a portion of the resulting proceeds will be used to repay the loans. The smallholder receivables will be gradually repaid from the moment the smallholders become a going concern plantation whereby proceeds of the FFB sales will be partly used to repay the loan. Smallholder receivables are divided into interest bearing and non-interest bearing. The non-interest-bearing smallholder receivables are discounted upon recognition. The total discounting cost up to December 31, 2023, amounts to KUSD 2 240 with a cost of KUSD 402 for 2023. The total unwinding of the discount amounts to a gain of KUSD 45 for 2023. The Group has calculated the expected credit loss in accordance with IFRS 9 and has done an impairment test on the outstanding smallholders’ receivables which showed no basis for impairment based on the long-term repayment plans. The repayment of the smallholders’ loans will be determined largely by the plasma fruit production and world palm oil prices over the next years and is also dependent 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 3 074 – included in the current other receivables - and a long-term smallholder receivable of KUSD 34 229. 12. INVENTORIES Analysis of inventories: In KUSD 2023 2022 Raw materials and supplies 24 681 24 181 Finished goods 22 498 24 755 Total 47 179 48 936 The remaining stock of raw materials and supplies has increased slightly with KUSD 500 in comparison to prior year. This is mainly related to timing of fertilizer purchases. The decrease in finished goods is mainly due to the lower CPO prices at year-end compared to prior year (940 USD/tonne in 2023 compared to 1 070 USD/tonne in 2022) which results in a lower overall stock value, as the stock finished goods includes biological assets measured at fair value less cost to sell at the date of harvest. The quantity of CPO stock was in line with last year. 13. BIOLOGICAL ASSETS The total biological assets at the end of the year are presented below: In KUSD 2023 2022 Biological assets - palm oil 4 679 6 464 Biological assets - bananas 6 443 4 472 Total 11 122 10 936 The biological asset 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 harvest of 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 margin from processing is excluded from the calculation of biological assets. The fair value of the biological assets calculated at the closing value on the 31st of December 2023 is based on level 2 data input. 230 The connection to the world of sustainable tropical agriculture At 31 December 2023, the total biological assets of palm oil amounted to KUSD 4 679 compared to KUSD 6 464 at 31 December 2022. Impact of the estimated quantity of available oil -10%Carrying amount +10%Carrying value of the biological assets - palm oil 4 211 4 679 5 147 Gross Impact income statement (before tax) - 468 468 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 decrease compared to prior year is mainly related to the impact of the volcanic eruption on the productions in Hargy Oil Palms Ltd. in November 2023. The biological assets at the end of December also contain the consumable biological assets of bananas of our subsidiary Plantations J . Eglin SA. The biological assets of bananas are 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 t o determine the estimated biological assets. The net selling price to value the biological assets is determined as the current market prices reduced by the remaining costs to sell the biological assets. The balance of 2023 amounted to KUSD 6 443 (2022: KUSD 4 472) and has increased due to the maturing of the new plantations in Akoudié and Lumen as well as an increase in the net selli ng p rice used . Impact of the estimated quantity of available bananas -10%Carrying amount +10%Carrying value of the biological assets - bananas 5 799 6 443 7 088 Gross Impact income statement (before tax) - 644 644 There are no restrictions, pledges or commitments in relation to the biological assets of the Group. 14. OTHER CURRENT RECEIVABLES AND OTHER CURRENT PAYABLES The ‘other receivables’ have increased with KUSD 1 762 from KUSD 47 728 in 2022 to KUSD 49 490 in 2023. The other receivables mainly consist of VAT receivables in the various entities, but also include a current account with Verdant Bioscience PTE Ltd (KUSD 10 054 in 2023 and KUSD 9 073 in 2022), a current account with PT Melania as it is classified as ‘asset held for sale’ and the smallholder receivables in Hargy Oil Palms Ltd. The increase in ‘other receivables’ is explained by an increase in the outstanding loan to Verdant Bioscience Pte Ltd (VBS) with KUSD 981, some significant VAT settlements in our Indonesian subsidiaries (KUSD 510), a decrease of KUSD 2 456 in the current account towards PT Melania and an increase in the GST receivable (VAT receivable) in Hargy Oil Palms Ltd (KUSD 1 457).The remaining movements consist of various smaller items in the 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 15 832 in 2023 and KUSD 14 437 in 2022) mainly concern social obligations (salaries to be paid, provisions for holiday pay and bonus) and other non-trade related payables. The increase, in comparison to prior year, is primarily due to the expenses related to the implementation of the new ERP project and partly offset by the decrease in variable numeration due to the lower results in 2023 compared to 2022. 231 SIPEF Integrated Annual Report 2023 Financial statements 15. SHAREHOLDERS’ EQUITY Capital stock and share premium The issued capital of the company as at December 31, 2023, amounts to KUSD 44 734, represented by 10 579 328 fully paid ordinary shares without nominal value. 2023 2022 Difference Number of shares 10 579 328 10 579 328 0 In KUSD 2023 2022 Difference Capital 44 734 44 734 0 Share premium 107 970 107 970 0 Total 152 704 152 704 0 2023 2022 2023 2022 KUSD KUSD KEUR KEUR Treasury shares - opening balance 11 588 11 521 9 549 9 490 Acquisition/sale treasury shares 93 67 92 59 Treasury shares - ending balance 11 681 11 588 9 641 9 549 S ince the start of the share buy-back program on 22 September 2011, SIPEF has a total of 180 000 own shares for an amount of KEUR 9 641, corresponding to 1.7014% of the total shares outstanding, as cover for a share option plan for the management. For additional information see note 22. Authorised capital The extraordinary general meeting of shareholders on June 14, 2023, 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: Acting in concert Number of shares Date Denominator % Ackermans & Van Haaren NV 4 234 956 04/12/2023 10 579 328 40.030 Cabra NV 1 001 032 04/12/2023 10 579 328 9.462 Cabra P 100 000 04/12/2023 10 579 328 0.945 Cabra T 100 000 04/12/2023 10 579 328 0.945 Cabra V 100 000 04/12/2023 10 579 328 0.945 Theodora Bracht 2 000 04/12/2023 10 579 328 0.019 Priscilla Bracht 0 04/12/2023 10 579 328 0.000 Victoria Bracht 0 04/12/2023 10 579 328 0.000 Total votes acting in concert 5 537 988 52.346 * Including 180 000 own shares ** Group Bracht *** Latest transparency declaration 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 268). In KUSD 2023 2022 Opening balance at January 1 -11 246-10 666Movement, full consolidation 268 - 580Ending balance at December 31 -10 978-11 246 Dividends On February 13, 2024, a dividend of maximum KEUR 21 159 (EUR 2.00 gross per ordinary share) has been proposed 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, 2023. 232 The connection to the world of sustainable tropical agriculture 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 1. 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 . 2. C hain of control above Cabra NV Priscilla Bracht, Theodora Bracht and Victoria Bracht exercise joint control over Cabra NV. 3. 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 Brach t. 4. Chain of control above SIPEF Ackermans & van Haaren NV and Group Bracht jointly exercise control over SIPEF. 16. NON-CONTROLLING INTERESTS The table below presents the non-controlling interests per company, as well as their share of the equity and the profit of the year. 2023 2022 Share of Share of % Non-% Non-Share of the profit Share of the profit In KUSD controlling controlling the equity of the the equity of the interests interests year year PT Tolan Tiga Indonesia 5.00 22 834 824 5.00 21 823 1 106 PT Eastern Sumatra Indonesia 9.75 7 507 696 9.75 6 813 709 PT Kerasaan Indonesia 45.85 4 553 1 344 45.85 6 197 2 029 PT Bandar Sumatra Indonesia 9.75 868 - 1489.75 1 018 - 121PT Melania Indonesia 2.75 235 0 2.75 235 0 PT Mukomuko Agro Sejahtera 14.26 - 524- 7514.26 - 447- 104PT Umbul Mas Wisesa 5.00 94 158 5.10 - 68 469 PT Citra Sawit Mandiri 5.00 - 66 112 5.10 - 182 18 PT Toton Usaha Mandiri 5.00 279 40 5.10 244 86 PT Agro Rawas Ulu 0,00 0 0 5.00 - 330- 136PT Agro Kati Lama 0,00 0 0 5.00 - 974- 277PT Agro Muara Rupit 0,00 - 1 0 5.10 - 564- 300PT Agro Muko 4.95 1 996 738 5.00 1 344 1 170 PT Dendymarker Indah Lestari 4.95 -2 733- 685.00 -2 710- 351Jabelmalux SA 0.00 - 1 0 0.11 - 58 0 Total 35 042 3 619 32 341 4 298 The non-controlling interest's share of the property, plant and equipment (including biological assets - bearer plants) amounts to KUSD 23 347 in 2023 (2022: KUSD 29 787). In 2023, SIPEF did a capital restructuring within the Group. The SIPEF group purchased the remaining shares from the minority shareholders in PT Agro Rawas Ulu, PT Agro Kati Lama and PT Agro Muara Rupit. The total consideration paid amounted to KUSD 415. Furthermore, a capital increase in Jabelmalux SA was done in 2023 impacting the controlling interest percentages in the subsidiaries PT Umbul Mas Wisesa, PT Citra Sawit Mandiri, PT Toton Usaha Mandiri and PT Agro Muara Rupit. 233 SIPEF Integrated Annual Report 2023 Financial statements The movements of the year can be summarized as follows: In KUSD 2023 2022 At the end of the preceding period 32 341 38 854 Profit for the period attributable to non-controlling interests 3 619 4 298 Remeasurement gain/(loss) on Defined Benefit Plans - 14 - 7 Distributed dividends -2 796 -1 720 Equity transactions with non-controlling parties 1 890 -9 083 Other 0 0 At the end of the period 35 042 32 341 The distributed dividends to non-controlling interests consist of: In KUSD 2023 2022 PT Kerasaan Indonesia 2 795 1 720 Jabelmalux SA 1 0 Total 2 796 1 720 The dividend from PT Kerasaan and Jabelmalux SA has been declared and paid in 2023. 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 2023 2022 Provision 524 767 The provisions are entirely related to a VAT dispute in Indonesia. During 2023, there have been a number of court cases which were settled mainly in SIPEF’s favour. It is difficult to make an estimate of the settlement time of the dispute. The remaining provisions is estimated based on the ratio of the settled court cases in favour of SIPEF compared to the total court cases remaining. 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 10 194. 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 2022 and 2023: Pension Translation In KUSD 2022 Payment Exchange 2023 cost difference Indonesia 19 802 3 740 -1 450 379 0 22 471 Côte d’Ivoire 646 427 - 53 0 24 1 044 Total 20 448 4 167 -1 503 379 24 23 515 234 The connection to the world of sustainable tropical agriculture The following assumptions are used in the pension calculation of Indonesia: 2023 2022 Discount rate 7.00% 7.25% Future salary increases 5.00% 5.00% Assumed retirement age 55 years or 30 years of seniority 55 years or 30 years of seniority P ension liabilities in Indonesia have changed as follows: In KUSD 2023 2022 Opening 19 801 21 498 Service cost 2 056 -116Interest cost 1 445 1 366 Benefits paid -1 450-1 064Actuarial gains and losses 239 126 Exchange differences 379 -2 009Closing 22 471 19 801 Ac tuarial gains and losses consist of the following components: In KUSD 2023 2022 Experience adjustments -752-345Changes in assumptions used 991 471 Total actuarial gains and losses 239 126 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. The amounts relating to the pension cost of Indonesia are as follows: In KUSD 2023 2022 Service cost 2 056 - 116Interest cost 1 445 1 366 Pension cost 3 501 1 250 Actuarial gains and losses recorded in Other Comprehensive Income 239 126 Total pension cost 3 741 1 375 Thes e costs are included under the headings cost of sales and general and administrative expenses of the income statement. Estimated benefit payments cumulates to KUSD 1 442 in 2024. 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: Impact of the change in discount rate In KUSD +1%Carrying amount -1%Pension liability of the Indonesian subsidiaries 20 464 22 471 24 768 Gross impact on the comprehensive income 2 006 -2 297 I mpact of the change in future salary increase In KUSD +1%Carrying amount -1%Pension liability of the Indonesian subsidiaries 24 885 22 471 20 333 Gross impact on the comprehensive income -2 4152 138 235 SIPEF Integrated Annual Report 2023 Financial statements 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 2 152 by the end of December 2023 (2022: KUSD 1 966) compared to the total minimum guaranteed reserves of KUSD 1 827 at 31 December 2023 (2022: KUSD 1 648). Contributions paid regarding the defined contribution plans amount to KUSD 493 (2022: KUSD 463). SIPEF is not responsible for the minimum guaranteed return on the contributions paid for the members of the executive committee (KUSD 429). 19. NET FINANCIAL ASSETS/(LIABILITIES) Net financial assets/(liabilities) (non-GAAP measure) can be analysed as follows: In KUSD 2023 2022 Short-term obligations - credit institutions -22 319 -5 323 Financial liabilities > 1 year (incl. derivatives) 0 -18 000 Current portion of amounts payable after one year -18 000 -18 000 Other investments and deposits 1 10 208 Cash and cash equivalents 11 549 34 148 Lease liability -2 649 -2 910 Net financial assets/(liabilities) -31 418 122 Analysis of net financial assets/(liabilities) 2023 per currency: In KUSD EUR USD Others Total Short-term financial obligations -5 519 -34 800 0 -40 319 Other investments and deposits 0 1 0 1 Cash and cash equivalents 1 103 9 226 1 220 11 549 Financial liabilities > 1 year 0 0 0 0 Lease liability - 306 -2 343 0 -2 649 Total 2023 -4 721 -27 917 1 220 -31 418 Total 2022 -4 559 3 957 724 122 The short-term financial obligations relate to the commercial papers for a total amount of KUSD 5 519. This financial obligation has been completely hedged at an average rate of EUR 1 = USD 1.1018. Further, the short-term financial obligations are related to a straight loan of KUSD 16 800. Other investments and deposits mainly include bank deposits with original maturities of more than 3 months but less than one year. The financial liabilities with an original maturity of more than one year include an USD 85.5 million loan of which USD 67.5 million has already been repaid between 2019 - 2023. The remaining KUSD 18 000 will be repaid during fiscal year 2024. 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 (IRS). It should be noted that in 2020 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 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. There have been no breaches of the financial covenants of any interest-bearing loans and borrowing in the current period. The financial covenant ratio will remain at 2.50 on 30 June 2024 and 31 December 2024. 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 2024. 236 The connection to the world of sustainable tropical agriculture Covenant ratio 2023 2022 Operating result 107 978 178 312 Exceptional items -2 801 0 Recurring operating result 105 177 178 312 Depreciation and result on sale FA 54 364 48 101 REBITDA 159 541 226 413 (-) minorities recurring -3 619-4 298REBITDA group share 155 922 222 115 Net Senior Leverage 0.20 0.00 R econciliation of the net financial assets/(liabilities) and cash flow: In KUSD 2023 2022 Net financial position at the beginning of the period 122 -49 192Decrease in long-term borrowings 18 528 18 642 Increase in long-term borrowings - 182- 755Decrease in short-term financial obligations 590 7 154 Increase in short-term financial obligations -17 671- 106Net movement in cash and cash equivalents -32 80624 379 Net financial assets/(liabilities) at the end of the period -31 418 122 R econciliation of the total financial liabilities: In KUSD 2023 2022 Financial liabilities at the beginning of the period 44 233 69 168 Decrease in long-term financial obligations -18 528-18 642Increase in long-term financial obligations 182 755 Decrease in short-term financial obligations - 590-7 154Increase in short-term financial obligations 17 671 106 Financial liabilities at the end of the period 42 968 44 233 20. O THER OPERATING INCOME/(EXPENSES) The other operating income/(expenses) can be detailed as follows: 2023 2022 Equity Equity Non-Non-holders holders In KUSD controlling Total controlling Total of the of the interests interests parent parent VAT claim Indonesia 485 26 510 548 30 578 VAT claim Belgium 0 0 0 274 0 274 Accelerated depreciation oil palms PT Dendymarker 0 0 0 - 385- 20- 405Reversal impairment PT Citra Sawit Mandiri 2 661 140 2 801 0 0 0 Impairment PT Umbul Mas Wisesa biopellet project -1 140- 60-1 200 0 0 0 Rental income tank storage capacity 588 31 619 270 14 284 Other income/(charges) 1 689 89 1 778 18 - 44- 26Other operating income/(expenses) 4 284 225 4 509 725 - 20 705 237 SIPEF Integrated Annual Report 2023 Financial statements The other income/charges mainly consist out of: • the movement in the provision for the Indonesian VAT claim (KUSD +510) mainly in favour of SIPEF; • the reversal on the historical impairment (KUSD +2 801) in PT Citra Sawit Mandiri as the HGU has been obtained; • the impairment of the ‘bio pellet project’ next to the mill of PT Umbul Mas Wisesa (KUSD -1 200); • the tank rental income generated by rentals of tank storage capacity (KUSD +619); • the stock adjustments for obsolete stock; • 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 unwinding of the discounting of the ‘receivables > 1 year’. The financial expenses concern the interests on long term and short-term borrowings as well as bank charges, the discounting of the long-term smallholders receivables and other financial expenses. In KUSD 2023 2022 Interests received 1 809 1 300 Discounting of receivables > 1 year - 402 -1 883 Financial expenses -1 677 -1 920 Exchange result 1 112 -4 809 Financial result derivatives - 3 1 558 Financial result 839 -5 754 22. SHARE BASED PAYMENT Number of Number of Number of Grant date Opening balance options Ending Balance options granted options expired exercised 2013 16 000 -8 442 -7 558 0 2014 18 000 -2 000 16 000 2015 18 000 18 000 2016 18 000 18 000 2017 18 000 18 000 2018 20 000 20 000 2019 20 000 -2 000 18 000 2020 18 000 18 000 2021 18 000 -2 000 16 000 2022 20 000 -2 000 18 000 2023 0 20 000 20 000 Balance 184 000 20 000 -10 442 -13 558 180 000 2023 2022 Weighted Weighted Number of share Number of share average exercise average exercise options options price (in EUR) price (in EUR) January 1 184 000 53.2 178 000 51.5 Granted during the year 20 000 52.7 20 000 57.7 Forfeitures of rights and expiries during the year -13 558 54.8 -12 000 59.1 Exercised during the year -10 442 55.3 -2 000 59.1 December 31 180 000 52.9 184 000 53.2 Exercisable at December 31 126 000 128 000 238 The connection to the world of sustainable tropical agriculture Options outstanding Options Exercisable Weighted Weighted Weighted Range of exercise prices Number of average average Number average (EUR) outstanding remaining life contractual exercisable exercise price (years) price 44.59 - 45,61 36 000 6.5 45.1 36 000 45.1 49.15 – 53.09 76 000 5.2 51.4 56 000 51.3 54.71 – 57.70 34 000 5.3 56.3 16 000 54.7 58.31 - 62.87 34 000 5.9 60.7 18 000 62.9 180 000 126 000 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 2014 - 2023 (valued at the fair value at the moment of granting), amounts to KUSD 1 463 and is calculated based on an adjusted Black & Scholes model of which the main characteristics are as follows: Estimated Black & Share price (in Grant date Dividend yield Volatility Interest rate expected Scholes Value EUR) lifetime (in EUR) 2013 57.7 2.5% 29.7 1.4% 5.0 12.7 2014 47.7 2.5% 24.8 0.2% 5.0 5.3 2015 52.8 2.5% 22.3 0.1% 5.0 8.0 2016 60.5 3.0% 19.4 -0.4% 5.0 8.4 2017 62.8 3.0% 18.9 -0.1% 5.0 5.6 2018 48.8 3.0% 18.6 -0.1% 5.0 3.5 2019 54.8 3.0% 19.6 -0.3% 5.0 8.1 2020 43.2 3.0% 23.4 -0.7% 5.0 4.6 2021 56.9 3.0% 24.1 -0.3% 5.0 6.7 2022 58.9 3.0% 25.9 2.8% 5.0 11.7 2023 53.0 3.0% 26.0 2.3% 5.0 9.8 In 2023, 20 000 new stock options were granted with an exercise price of EUR 52.7 per share. The fair value when granted was fixed at KUSD 216 and is recorded in the profit and loss accounts over the vesting period of 3 years (2024-2026). The total cost of the stock options included in the income statement is KUSD 163 in 2023 (2022: KUSD 140). To cover the outstanding option liability, SIPEF has a total of 180 000 treasury shares in portfolio. Average Total Total Number of shares purchase/selling purchase/selling purchase/selling price (in EUR) price (in KEUR) price (in KUSD) Opening balance 31/12/2022 178 933 53.4 9 549 11 588 Acquisition of treasury shares 11 509 56.6 651 701 Disposal of treasury shares -10 442 53.4 - 559 - 608 Ending balance 31/12/2023 180 000 53.4 9 641 11 681 The extraordinary general meeting of shareholders on June 14, 2023, 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. 239 SIPEF Integrated Annual Report 2023 Financial statements 23. INCOME TAXES The reconciliation between the tax expenses and tax at local applicable tax rates is as follows: In KUSD 2023 2022 Profit before tax 108 817 172 557 Tax at the applicable local rates -28 251 -45 989 Average applicable tax rate -25.9% -26.7% Withholding tax on the dividend of Hargy Oil Palms Ltd 0 -7 500 Non-taxable result reversal historical impairment PT Citra Sawit Mandiri 616 0 Permanent differences - 935 -3 796 Losses of the year for which no DTA is recognised 0 - 128 Profits of the year for which no DTA is recognised 571 0 Impairment losses recognised on DTA recognised in previous years -3 566 -2 003 Reversal of impairment losses on DTA recognised in previous years 437 105 Corrections prior year 0 - 225 Tax expense -31 128 -59 536 Average effective tax rate -28.6% -34.5% The non-taxable result in PT Citra Sawit Mandiri relates to the reversal of the historical impairment recorded in PT Citra Sawit Mandiri. The permanent differences consist mainly of disallowed expenses for tax purposes and have decreased due to lower permanently rejected interest cost expenses in the SIPEF group due to the thin capitalisation regulation in Indonesia. The withholding tax on the dividend of Hargy Oil Palms Ltd in prior year related to a 15% withholding tax payable on a dividend of USD 50 million paid by Hargy Oil Palms Ltd to SIPEF NV. We received from the Indonesian tax authorities the formal approval, which 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. 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 2023 2022 Deferred tax assets 15 214 14 097 Deferred tax liabilities -52 454 -48 131 Net deferred taxes -37 240 -34 034 The movements in net deferred taxes (assets - liabilities) are: In KUSD 2023 2022 Opening balance -34 034 -33 400 Variation (- expense) / (+ income) through income statement 2 043 - 109 Tax impact of IAS 19 through comprehensive income 124 28 Tax impact hedge accounting via OCI 214 - 537 Impact accelerated fiscal depreciations Hargy Oil Palms Ltd -5 614 0 Change in consolidation scope 0 0 Other 27 - 16 Closing balance -37 240 -34 034 240 The connection to the world of sustainable tropical agriculture Deferred taxes in the income statement are the result of: In KUSD 2023 2022 Addition/(utilization) of tax losses brought forward -1 091 149 Origin/(reversal) of temporary differences - IAS 41 revaluation 521 236 Origin/(reversal) of temporary differences - fixed assets 2 685 - 466Origin/(reversal) of temporary differences - pension provision 463 - 401Origin/(reversal) of temporary differences - other - 536 373 Total 2 042 - 109 Total deferred tax assets are not entirely recognized in the balance sheet. The breakdown of total recognized and unrecognized deferred taxes is as follows: 2023 In KUSD Total Not recorded Recorded Biological assets - 902 0 - 902Property, plant and equipment, including bearer plants -47 854 0 -47 854Inventories -5 7770 -5 777Pension provision 4 944 0 4 944 Tax losses 15 975 6 683 9 292 Others 3 057 0 3 057 Total -30 5576 683 -37 240 The majority of the unrecognized deferred tax assets at the end of 2023 are located at the companies of the South Sumatra group (KUSD 5 675) and the Tolan Tiga group rubber activities (KUSD 1 008). 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: 2023 In KUSD Total Not recorded Recorded 1 year 9 321 5 432 3 889 2 years 21 771 18 909 2 862 3 years 13 505 4 424 9 081 4 years 9 349 807 8 542 5 years 9 211 807 8 404 Unlimited 8 220 0 8 220 Total 71 376 30 378 40 998 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 2021 and partly on the results of 2022 which were both higher than the results of 2023. Therefore, the prepayments of taxes of KUSD 56 216 were higher the taxes to be paid of KUSD 33 171. In KUSD 2023 2022 Taxes to receive 6 925 1 100 Taxes to pay -10 605-33 440Net taxes to receive/ (to pay) -3 681-32 340 In KUSD 2023 2022 Net taxes to receive/ (to pay) at the beginning of the period -32 340-17 877Transfer 5 614 0 Taxes to pay -33 171-59 427Paid taxes 56 216 44 964 Net taxes to receive/ (to pay) at the end of the period -3 681-32 340 241 SIPEF Integrated Annual Report 2023 Financial statements Taxes paid as presented in the consolidated cash flow statement are detailed as follows: In KUSD 2023 2022 Tax expense -31 128 -59 536 Deferred tax -2 043 109 Current taxes -33 171 -59 427 Variation prepaid taxes -5 825 369 Variation payable taxes -17 221 14 094 Paid taxes -56 216 -44 964 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: 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 consist of Verdant Bioscience 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 via Verdant Bioscience Pte Ltd a 36.10% participation in PT Timbang Deli, a company located on the island of Sumatra in Indonesia. PT Timbang Deli is engaged in cultivation of palm oil and provides the practical operation of the Group's research activities. 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. The total section "investments in associates and joint ventures" can be summarized as follows: In KUSD 2023 2022 Verdant Bioscience Pte Ltd 3 123 3 801 PT Timbang Deli Indonesia -1 426 - 769 Total 1 697 3 032 The total section "Share of profit/loss of an associate and joint venture" can be summarized as follows: In KUSD 2023 2022 Verdant Bioscience Pte Ltd - 678 - 546 PT Timbang Deli Indonesia - 657 - 20 Total result -1 335 - 566 242 The connection to the world of sustainable tropical agriculture Below we present the condensed statements of financial position of the associated companies. These are prepared in accordance with IFRS and are before intercompany eliminations and excluding goodwill. Verdant Bioscience Pte Ltd PT Timbang Deli In KUSD 2023 2022 2023 2022 Biological assets 0 0 3 249 3 546 Other non-current assets 23 835 23 886 5 650 6 275 Current assets 14 527 13 723 987 892 Cash and cash equivalents 108 248 255 206 Total assets 38 470 37 856 10 141 10 919 Non-current liabilities - 14 - 14 1 371 1 341 Long term financial debts 0 0 0 0 Current liabilities 24 105 21 707 14 957 13 945 Short term financial debts 0 0 0 0 Equity 14 379 16 162 -6 187 -4 367 Total equity and liabilities 38 470 37 856 10 141 10 919 The associates had no contingent liabilities or capital commitments as at 31 December 2023 and 2022. Below we present the condensed income statements of the associated companies. These are prepared in accordance with IFRS and are before intercompany eliminations and excluding goodwill. Verdant Bioscience Pte Ltd PT Timbang Deli In KUSD 2023 2022 2023 2022 Inclusion in the consolidation: 38.00% 38.00% 36.10% 36.10% Revenue 0 0 5 315 5 905 Depreciation 50 48 813 841 Interest income 203 200 3 5 Interest charges 0 0 - 203 - 200 Total comprehensive income -1 784 -1 436 -1 820 - 56 Share in the consolidation - 678 - 546 - 657 - 20 Total share of the group - 678 - 546 - 657 - 20 Total share minorities 0 0 0 0 Total - 678 - 546 - 657 - 20 Reconciliation of the associated companies 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 PT Timbang Deli In KUSD 2023 2022 2023 2022 Equity without goodwill 14 379 16 161 -6 187 -4 367 Share of the group 5 464 6 141 -2 233 -1 576 Goodwill 0 0 807 807 Equity elimination PT Timbang Deli -2 340 -2 340 0 0 Total 3 123 3 801 -1 426 - 769 Dividends received from associated companies During the year no dividends were received from associated companies. There are no restrictions on the transfers of funds to the Group. 243 SIPEF Integrated Annual Report 2023 Financial statements 25. CHANGE IN NET WORKING CAPITAL Cash flow from operating activities decreased from KUSD 216 712 in 2022 to KUSD 162 768 in 2023, in line with the decrease in operating profit. The variation of the working capital of KUSD 16 080 mainly relates to the decrease in trade receivables and trade payables, and a decreased variable renumeration provision. 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, environmental changes, agricultural activity, 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 bananas. A change of the palm oil price of USD 10 CIF per tonne has an impact of about KUSD 3 091 (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, Côte d’Ivoire 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. 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 20 819 22 900 25 445 Gross impact income statement 2 082 -2 544 The pension liability in Indonesia consists of KUSD 22 900 from fully consolidated subsidiaries and of KUSD 430 from equity consolidated companies (PT Timbang Deli). The long-term receivables on the Indonesian smallholders 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% Smallholder receivables 35 949 39 544 43 937 Gross impact income statement -3 595 4 394 244 The connection to the world of sustainable tropical agriculture On February 13, 2024, the board of directors has proposed the payment of a dividend of maximum 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 4 forward exchange contracts for the sale of KUSD 21 141 for KEUR 19 200 (average exchange rate of 1.1011) 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 19 266 21 192 23 547 Gross Impact income statement -1 9272 355 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 1 st 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 2023, the Group’s net financial assets/(liabilities) amounted to KUSD -31 418 (2022: KUSD 122), of which KUSD 40 994 short-term financial liabilities (2022: KUSD 23 913), KUSD 0 long term financial liabilities (2022 KUSD: 18 000) and KUSD 11 745 net short-term cash and cash equivalents (2022: KUSD 44 356). The ‘financial liabilities > 1 year’ (incl. derivatives) amount to KUSD 1 974 (2022: KUSD 20 320). Considering that only the 'short-term obligations - credit institutions’ (KUSD 5 519, refer to note 19) 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 using 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. Environmental risk The Group manages key environmental-related risks that are linked with land use and conservation through its group-wide commitment to ‘no deforestation’ and ‘no new development in peat areas’ (NDP). The scope of this commitment includes SIPEF’s smallholder suppliers. SIPEF is using a third-party monitoring platform to ensure effective implementation of this NDP policy. In addition, climate-related risks are being assessed in consultation with experts, with a focus on climate change mitigation (GHG emissions), climate physical risk and climate transition risk, as part of its work to develop and finalise the Group’s climate change mitigation and adaptation strategy. The production volumes, the turnover and margins realised by SIPEF are influenced by climatic conditions such as rainfall, sunshine, temperature and humidity. The potential physical impact of climate change is uncertain and may vary by region and product. SIPEF monitors water tables to design systems to deal with water retention, maintains buffer zones and invests in fire prevention / monitoring. With the growing concern over sustainability, tighter rules may be imposed on companies. SIPEF’s palm oil plantations adhere to the RSPO standards and comply with the RSPO principles and criteria. If SIPEF is unable to continue to meet stricter requirements, it may lose its certification, or this may be suspended. Agricultural activity risk The primary financial risk associated with the Group’s agricultural activity occurs due to the length of time between expending cash on capital expenditures, the purchase or planting and maintenance of the core products and on harvesting and producing the products, and ultimately receiving cash from the sale of the core products to third parties. The Group’s strategy to manage this financial risk is to actively review and manage its working capital requirement. In addition, the Group maintains credit facilities at a level sufficient to fund its working capital during the period between cash expenditure and cash inflow. At 31 December 2023, the Group has unused credit facilities in the form of short-term loans of KUSD 101 755. 245 SIPEF Integrated Annual Report 2023 Financial statements 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 2023 2022 Receivables from the sale of palm oil 26 617 42 891 Receivables from the sale of bananas and plants 3 259 1 752 Total 29 876 44 643 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 revenue from contracts with customers is realized with a maximum of 10 clients. For palm oil there is one client who represents over 30% of the 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 2023 2022 Not yet due 2 115 852 Due < 30 days 736 823 Due between 30 and 60 days 391 49 Due between 60 and 90 days 0 0 Due > 90 days 16 28 Total 3 259 1 752 D uring 2023 and 2022, 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. 246 The connection to the world of sustainable tropical agriculture The following table gives the contractually determined (not-discounted) cash flows resulting from liabilities at balance sheet date: Carrying Contractual Less than More than2023- In KUSD 1-2 years 2-3 years 3-4 years amount cash flows 1 year 5 years Financial obligations > 1 year (incl. derivatives) 0 0 0 0 0 0 0 Leasing liabilities > 1 year 1 974 -3 389- 57- 695- 601- 443-1 593Advances received > 1 year 0 0 0 0 0 0 0 Trade & other liabilities < 1 year Trade payables 25 243 -25 243-25 243 0 0 0 0 Advances received 3 411 -3 411-3 411 0 0 0 0 Financial liabilities < 1 year Current portion of amounts payable > 1 year 18 000 -18 327-18 327 0 0 0 0 Financial liabilities 22 319 -22 519-22 519 0 0 0 0 Leasing liabilities < 1 year 675 - 718- 718Derivatives 0 0 0 0 0 0 0 Other current liabilities 0 0 0 0 0 0 0 Total liabilities 71 623 -73 607-70 275- 695- 601- 443-1 593 Carrying Contractual Less than More than2022 - In KUSD 1-2 years 2-3 years 3-4 years amount cash flows 1 year 5 years Financial obligations > 1 year (incl. derivatives) 18 000 -18 771- 475-18 296 0 0 0 Leasing liabilities > 1 year 2 320 -3 817- 50- 639- 601- 548-1 979Advances received > 1 year 0 0 0 0 0 0 0 Trade & other liabilities < 1 year Trade payables 29 863 -29 863 -29 863 0 0 0 0 Advances received 5 698 -5 698-5 698 0 0 0 0 Financial liabilities < 1 year Current portion of amounts payable > 1 year 18 000 -18 296-18 296 0 0 0 0 Financial liabilities 5 323 -5 396-5 396 0 0 0 0 Leasing liabilities < 1 year 590 - 628 - 628Derivatives 0 0 0 0 0 0 0 Other current liabilities 0 0 0 0 0 0 0 Total liabilities 79 794 -82 468-60 405-18 935- 601- 548-1 979 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 142 074 (2022: KUSD 159 292). In 2023, same as in previous years, there were no infringements on the conditions stated in the credit agreements nor were there any shortcomings in repayments. 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. 247 SIPEF Integrated Annual Report 2023 Financial statements Fair values of derivatives are: In KUSD 2023 2022 Interest rate swaps 495 1 350 Forward exchange transactions 285 289 Fair value (+ = asset; - = liability) 780 1 639 I n 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 t he m easurement 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 interest rate swap (IRS) has a notional amount of KUSD 18 000. The carrying amount is recorded on the derivatives (assets) for an amount of KUSD 855, the deferred tax assets for an amount of KUSD -214 and the other comprehensive income in the equity for an amount of KUSD 642. The notional amount from the forward exchange transactions amounts to KUSD 20 636. 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 fair value of the forward exchange contracts and interest rate swap calculated at the closing value at 31 December 2023 were also incorporated in level 2. 248 The connection to the world of sustainable tropical agriculture Financial instruments per category The following table presents the financial instruments per category as per end 2023 and end 2022: Carrying IFRS 9 Fair value 2023 - In KUSD Fair value amount category hierarchy Financial assets Other investments 112 AC 112 Level 2 Receivables > 1 year Other receivables 34 229 AC 34 229 Level 2 Total non-current financial assets 34 341 34 341 Trade and other receivables Trade receivables 29 876 AC 29 876 Level 2 Other receivables 49 490 AC 49 490 Level 2 Investments Other investments and deposits 1 AC 1 Level 2 Cash and cash equivalents 11 549 AC 11 549 Level 2 Derivatives 285 FVPL 285 Level 2 Hedge Derivatives 495 accounting 0 Level 2 Total current financial assets 91 696 91 201 Trade and other obligations > 1 year 0 AC 0 Level 2 Financial obligations > 1 year (incl. derivatives) 0 AC 0 Level 2 Leasing liabilities > 1 year 1 974 AC 1 974 Level 2 Advances received > 1 year 0 AC 0 Level 2 Total non-current financial liabilities 1 974 1 974 Trade & other obligations < 1 year Trade payables 25 243 AC 25 243 Level 2 Other payables 15 832 AC 15 832 Level 2 Advances received 3 411 AC 3 411 Level 2 Financial obligations < 1 year Current portion of amounts payable > 1 year 18 000 AC 18 000 Level 2 Financial obligations 22 319 AC 22 319 Level 2 Leasing liabilities < 1 year 675 AC 675 Level 2 Derivatives 0 FVPL 0 Level 2 Hedge Derivatives 0 accounting 0 Level 2 Total current financial liabilities 85 481 85 481 249 SIPEF Integrated Annual Report 2023 Financial statements Carrying IFRS 9 Fair value 2022 - In KUSD Fair value amount category hierarchy Financial assets Other investments 98 AC 98 Level 2 Receivables > 1 year Other receivables 28 287 AC 28 287 Level 2 Total non-current financial assets 28 385 28 385 Trade and other receivables Trade receivables 44 643 AC 44 643 Level 2 Other receivables 47 728 AC 47 728 Level 2 Investments 0 Other investments and deposits 10 208 AC 10 208 Level 2 Cash and cash equivalents 34 148 AC 34 148 Level 2 Derivatives 289 FVPL 289 Level 2 Hedge Derivatives 1 350 accounting 1 350 Level 2 Total current financial assets 138 366 138 366 Trade and other obligations > 1 year 0 AC 0 Level 2 Financial obligations > 1 year (incl. derivatives) 18 000 AC 18 000 Level 2 Leasing liabilities > 1 year 2 320 AC 2 320 Level 2 Advances received > 1 year 0 AC 0 Level 2 Total non-current financial liabilities 20 320 20 320 Trade & other obligations < 1 year Trade payables 29 863 AC 29 863 Level 2 Other payables 14 437 AC 14 437 Level 2 Advances received 5 698 AC 5 698 Level 2 Financial obligations < 1 year Current portion of amounts payable > 1 year 18 000 AC 18 000 Level 2 Financial obligations 5 323 AC 5 323 Level 2 Leasing liabilities < 1 year 590 AC 590 Level 2 Derivatives 00 FVPL 0 Level 2 Hedge Derivatives 00 accounting 0 Level 2 Total current financial liabilities 73 911 73 911 27. Leasing 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 and Singapore. 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 2023 2022 Current lease liabilities 675 590 Non-current lease liabilities 1 974 2 320 Total lease liability as at 31 December 2 649 2 910 250 The connection to the world of sustainable tropical agriculture The movement during the year of the lease liability can be summarised as follows: In KUSD 2023 2022 Lease commitments disclosed as at 1 January 2 910 2 691 Acquisitions 337 822 Financial expense/(income) 220 219 Lease repayments - 792- 804Exchange result - 27- 17Lease liability recognised as at 31 December 2 649 2 910 The lease commitments are included in the increase in long term (KUSD 182) and short term (KUSD 155) financial borrowings in the cash flow. The lease repayments are included in the decrease in long term (KUSD 630) and short term (KUSD -162) financial borrowings in the cash flow. The right-of-use assets can be classified as follows: Movement (in KUSD) 2023 2022 Total right-of-use assets as at 1 January 2 785 2 587 Acquisition 334 822 Depreciation -571- 624Total right-of-use assets as at 31 December 2 549 2 785 Land rights Office rent Car rent Total Total right-of-use assets as at 31 December 2022 833 1 693 259 2 785 Total right-of-use assets as at 31 December 2023 822 1 428 299 2 549 The total depreciation of the right-of-use assets until 31 December 2023 amounts to KUSD 571 and the financial expenses to KUSD 220. Of the depreciation, KUSD 11 was recorded in the cost of sales of the palm segment of Papua New Guinea and KUSD 560 KUSD in the ‘general and administrative expenses’. There are no material expenses related to short term and low value leases. There are no material extension options not included in the calculation. 28. 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 no guarantees have been issued to a third party for the account of subsidiaries. Significant litigation Nil. Forward sales The commitments for the delivery of goods (palm products, 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. 29. 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 2023 2022 Directors' fees 480 465 Fixed fees 2 803 2 429 Variable fees 2 557 1 534 Post-employment benefits 429 406 Other 139 171 Market value vested stock option (on vesting date) 127 195 Total 6 535 5 200 251 SIPEF Integrated Annual Report 2023 Financial statements The amounts are paid in EUR. The amount paid in 2023 amounts to KEUR 6 036 (2022: KEUR 4 957). The increase of KEUR 1 079 is mainly a consequence of the higher variable fee paid in 2023 compared to 2022. 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 220 (2022 KUSD 194) and KUSD 89 (2022 KUSD 81) 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 2023 2022 2023 2022 Total sales during the financial year 0 0 0 0 Total purchases during the financial year 0 0 2 117 2 510 Total receivables as per 31 December 10 056 9 028 12 9 Total payables as per 31 December 300 300 128 193 30. Business combinations, acquisitions and divestures I n 2023, the SIPEF group purchased the remaining shares from the minority shareholders of PT Agro Rawas Ulu, PT Agro Kati Lama and PT Agro Muara Rupit. The total consideration paid amounted to KUSD 415. In 2021, SIPEF 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. Before the transaction, SIPEF controlled 95% of PT Melania through its Indonesian 95% subsidiary, PT Tolan Tiga. The remaining 5% is 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 was sold for a payment of USD 19 million. After this first stage the Shamrock Group took 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 land rights (HGU) for the whole of the rubber and tea business. The gross transaction price for 100% of the shares is USD 36 million. At 31 December 2022, a total of KUSD 3 502 has already been paid relating to the costs associated with the SPA. During 2023, an additional amount of KUSD 2 924 has been paid. This brings the total paid amount to KUSD 8 348 at 31 December 2023. The total has been deducted from the advance that was already received at CD 1 (KUSD 9 167). 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. 252 The connection to the world of sustainable tropical agriculture 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 as was done at the time of sale in 2021: 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 At 31 December 2023, the Group still considers the net selling price and the subsequent capital gain of KUSD 11 640 as recorded in the financial statements of 2021 to be correct. However, any change in the estimated costs related to the sale will impact the final capital gain in either a positive or a negative way. The group aims to finalise the sale of the second tranche of 60% of the shares (of which 55% are held by SIPEF) in the first half of 2024. Nonetheless the timing remains uncertain and mainly depends on the exact timing of the renewal of the land titles of PT Melania 31. EARNINGS PER SHARE (BASIC AND DILUTED) From continuing and discontinued operations 2023 2022 Basic earnings per share Basic earnings per share - calculation (USD) 6.99 10.40 Basic earnings per share is calculated as follows: Numerator: net result for the period attributable to ordinary shareholders (KUSD) 72 735 108 157 Denominator: the weighted average number of ordinary shares outstanding 10 403 105 10 401 938 The weighted average number of ordinary shares outstanding is calculated as follows: Number of ordinary shares outstanding at January 1 10 400 395 10 401 328 Effect of shares issued / share buyback programs 2 710 610 Effect of the capital increase 0 0 The weighted average number of ordinary shares outstanding at December 31 10 403 105 10 401 938 Diluted earnings per share Diluted earnings per share - calculation (USD) 6.98 10.36 The diluted earnings per share is calculated as follows: Numerator: net result for the period attributable to ordinary shareholders (KUSD) 72 735 108 157 Denominator: the weighted average number of dilutive ordinary shares outstanding 10 417 254 10 443 064 The weighted average number of dilutive ordinary shares outstanding is calculated as follows: The weighted average number of ordinary shares outstanding at December 31 10 403 105 10 401 938 Effect of stock options on issue 14 149 41 126 The weighted average number of dilutive ordinary shares outstanding at December 31 10 417 254 10 443 064 32. EVENTS AFTER THE BALANCE SHEET DATE There are no significant post-balance sheet events that have a specific impact on SIPEF group's activities and consolidated financial statements. 33. SERVICES PROVIDED BY THE AUDITOR AND RELATED FEES The statutory auditor of the SIPEF group is Ernst & Young 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 130 in 2023 (2022: KUSD 115). For the Group, EY has provided services for KUSD 597 in 2023 (2022: KUSD 568), of which KUSD 0 (2022: KUSD 0) are for non-audit services. 253 SIPEF Integrated Annual Report 2023 Financial statements ESEF information 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 oce Calesbergdreef 5, 2900 Schoten, Belgium Principal place of business Indonesia, Papua New Guinea and Côte d’Ivoire 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 v Length of life of limited life entity Period covered by financial statements 254 The connection to the world of sustainable tropical agriculture Statutory auditor’s report on consolidated financial statements year ended 31 December 2023 In the context of the statutory audit of the Consolidated Financial Statements of SIPEF NV (the and its , we report to you as statutory auditor . This report includes our opinion on the consolidated balance sheet as at 31 December 2023, the consolidated income statement, the statement of consolidated comprehensive income, the consolidated cash flow statement and the statement of changes in consolidated equity for the year ended 31 December 2023 and the disclosures including material accounting policy information (all elements together the Financial Financial Statements of the Integrated Annual Report 2023, 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 Statements for the year ending 31 December 2023. We performed the audit of the Consolidated Financial Statements of the Group during 3 consecutive years. 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 2023, the consolidated income statement, the statement of consolidated comprehensive income and the consolidated cash flow statement of the year and the disclosures ,including material accounting policy information, which show a consolidated balance sheet total of USD 1.080.242 thousand and of which the consolidated income statement shows a profit for the year of USD 76.354 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 2023, 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 . Basis for the unqualified opinion Key audit matters 255 SIPEF Integrated Annual Report 2023 Financial statements of SIPEF NV as of and for the year ended 31 December 2023 (continued) 256 The connection to the world of sustainable tropical agriculture o f SIPEF NV as of and for the year ended 31 December 2023 (continued) Responsibilities of the Board of Directors for the preparation of the Consolidated Financial Statements 257 SIPEF Integrated Annual Report 2023 Financial statements of SIPEF NV as of and for the year ended 31 December 2023 (continued) Our responsibilities for the audit of the 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 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 ISA s, 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 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 Dire -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 going concern. 258 The connection to the world of sustainable tropical agriculture o f SIPEF NV as of and for the year ended 31 December 2023 (continued) 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 Statements. Responsibilities of the auditor In the context of our mandate and in accordance with the additional standard to the ISA s applicable in Belgium, it is our responsibility to verify, in all the Consolidated Financial Statements, the non- financial information (non-financial information as defined on page 199 in the Integrated Annual Report 2023) report, as well as to report on these matters. report In our opinion, after carrying out specific 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 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 Statements. The Company has prepared this non- financial information based on Global Reporting . 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 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"). 259 SIPEF Integrated Annual Report 2023 Financial statements o f SIPEF NV as of and for the year ended 31 December 2023 (continued) 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/stori). 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. 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 2023 included in the annual financial report available on the portal of the FSMA (https://www.fsma.be/en/stori) are, in all material respects, in accordance with the ESEF requirements under the Delegated Regulation. Other communications 260 The connection to the world of sustainable tropical agriculture 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. 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 2023 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 2023 amounts to KUSD 412 045 compared to KUSD 433 578 in previous year. The ‘financial assets – receivables from affiliated companies’ increased with KUSD 38 970, and at the same time the ‘amounts receivable within one year’ decreased by KUSD 30 748. The ‘receivables from affiliated companies’ have increased mainly due to the capital increases in the subsidiaries PT Agro Rawas Ulu, PT Agro Kati Lama and Jabelmalux SA. The amounts receivable within one year have decreased by KUSD 30 748 because of the repayments by the subsidiaries of SIPEF. It must be noted that the trade receivables at year end 2022 were higher than usual, while the outstanding trade receivables at end 2023 were more in line with historical average. On the liabilities side, the decrease in amounts payable after more than one year is related to the repayment of the long-term financial loan. The net financial debt payable within one year increased with KUSD 16 996 because the long-term financial debt were replaced by short-term financial debts. The other amounts payable within one year decreased mainly due to a lower dividend payable (KUSD -9 478) per year-end. The equity of SIPEF before profit appropriation amounts to KUSD 299 929, which corresponds to USD 28.35 per share. The individual results of SIPEF are large determined by dividends and financial income from interests received on intragroup current accounts. 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 2023 amounts to KUSD 10 806 compared to a profit of KUSD 50 737 in the previous year. On February 13, 2024, a dividend of maximum 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 13, 2024 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 3, 2024. Taking into account the number of treasury shares held on the date of establishment of the annual report (180 000 shares), the board of directors proposes to allocate the result (in KUSD) as follows: • Profit carried forward from previous year: KUSD 120 623 • Profit of the year: KUSD 10 806 • Total available for appropriation: KUSD 131 429 • Addition to the legal reserve: KUSD 0 • Addition to the other reserves: KUSD 0 • Dividend: KUSD -22 957 • Result to be carried forward: KUSD 108 472 261 SIPEF Integrated Annual Report 2023 Financial statements Condensed balance sheet (after appropriation) In KUSD 2023 2022 Assets Fixed assets 341 590 302 696 Formation expenses 0 0 Intangible assets 138 226 Tangible assets 257 244 Financial assets 341 196 302 226 Current assets 70 454 130 882 Amounts receivable after more than one year 0 0 Stocks and contracts in progress 1 233 780 Amounts receivable within one year 55 284 86 033 Investments 11 153 36 873 Cash at bank and in hand 2 167 6 429 Other current assets 618 767 Total assets 412 045 433 578 Liabilities Equity 276 973 289 123 Capital 44 734 44 734 Share premium account 107 970 107 970 Reserves 15 796 15 796 Profit/ (loss) carried forward 108 472 120 623 Provisions and deferred taxation 0 0 Provisions for liabilities and charges 0 0 Creditors 135 072 144 455 Amounts payable after more than one year 0 18 000 Amounts payable within one year 133 609 126 455 Accrued charges and deferred income 1 463 0 Total liabilities 412 045 433 578 262 The connection to the world of sustainable tropical agriculture Condensed income statement In KUSD 2023 2022 Operating income 234 096 295 643 Operating charges - 229 832 - 292 425 Operating result 4 264 3 218 Financial income 11 463 53 260 Financial expenses - 2 294 - 4 050 Financial result 9 169 49 210 Result for the period before taxes 13 433 52 428 Income taxes - 2 628 - 1 691 Result for the period 10 806 50 737 Appropriation account In KUSD 2023 2022 Profit/ (loss) to be appropriated 131 429 153 840 Profit / (loss) for the period available for appropriation 10 806 50 737 Profit / (loss) brought forward 120 623 103 121 Appropriation account 131 429 153 840 Transfers to legal reserve 0 0 Transfers to other reserves 0 0 Result to be carried forward 108 472 120 623 Dividends 22 957 33 217 Remuneration to directors 0 0 263 SIPEF Integrated Annual Report 2023 Financial statements NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 1 Corporate Governance Business ethics and transparency of grievance mechanism. Update Grievance dashboard as required. Ongoing On Track For more information see: SIPEF’s Grievance Dashboard. • www.sipef.com/hq/ sustainability/grievances- dashboard-active-andor- progressing/ 2 Productivity and Quality Enhancing productivity, quality, and circularity. Continue with Best Management Practices (BMPs) in existing operations. Ongoing On Track SIPEF continues to implement BMPs. For more info see: chapter on environmental stewardship. Support research linked with maximising yields, new regenerative and nature positive agricultural techniques and methods. Ongoing On Track SIPEF continues to invest in advancing research opportunities. For more info see: chapter SIPEF's operations. Annex 1 – Sustainability targets and achievements SIPEF's sustainability targets aligned with material topics identified. New Target set On Track Achieved Not Achieved Cancelled 264 The connection to the world of sustainable tropical agriculture NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 3 Sustainability Standards and Certification Achieve RSPO certification for SIPEF’s own estates. 100% RSPO certification for SIPEF’s own estates. 2026 On Track Achieved 76% RSPO certified planted areas for own estates. 4 Food Safety Innovation on mitigating contamination of palm products. 3-monochloropropane- 1,2 -diol (3-MCPD) and glycidyl esters (GE): Complete pilot for CPO washing facility for the Mukomuko Palm Oil Mill. Third quarter 2023 Achieved Completed the pilot for CPO washing facility at the Mukomuko Palm Oil Mill in Q4 2023. The result is currently undergoing testing. Establish control programme on Mineral Oil Aromatic Hydrocarbons (MOAH) contamination. Compliance with EU regulation Achieved Established control programme on Mineral Oil Hydrocarbons (MOAH and MOSH) contamination. Since January 2024, all of SIPEF’s palm oil mills in Indonesia and Papua New Guinea, as well as all kernel crushing plants in Papua New Guinea have transitioned from mineral oil lubricants to food-grade lubricants (H1) in operations that are in direct contact with the products during processing. Establish control programme on Mineral Oil Saturated Hydrocarbons (MOSH) contamination. 5 R&D and Innovation Utilise empty fruit bunches (EFB) for conversion into biopellets. 100% conversion of EFB into biopellets for Umbul Mas Wisesa operations. Cancelled Cancelled The project has been cancelled. 265 SIPEF Integrated Annual Report 2023 Annex NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 6 Health and Safety No work- related fatalities. Zero incidence of work-related fatalities. Ongoing Not Achieved One work-related fatality in 2023. For more info see: chapter Respecting Employees and Communities. 7 Health and Safety Reduce Lost Time Injury Frequency Rate (LTIFR). Reduce percentage of LTIFR by 2025 against 2021 baseline, by country: · Papua New Guinea: 10% (Target: 20.40) · Indonesia: 15% (Target: 2.07) · Côte d’Ivoire: 33% (Target: 10.97) 2025 On Track LTIFR in 2023: · Papua New Guinea: 24.90 · Indonesia: 4.34 · Côte d’Ivoire: 6.13 For more info see: chapter on respecting employees and communities. 8 Human Rights and Labour Standards Annual monitoring of Human Rights compliance. One annual external assessment per business unit. Annual On Track Social Impact Assessments were carried out in 2023: 14 in Indonesia, 1 in Papua New Guinea. An environmental and social management plan was launched in Côte d’Ivoire. 9 Climate Change Reduce carbon footprint of SIPEF group. Reduce GHG emission intensity (Scope 1 and 2) per tonne of CPO by 28% against 2021 baseline. 2030 On Track 10% reduction in 2023 against 2021 net GHG emissions intensity. 10 Sustainable Land Use and Conservation Annual monitoring of Responsible Plantations Policy implementation. Annual external verification of no deforestation and no new plantings on peat commitment (NDP commitment) conducted in own concession areas and suppliers. Ongoing On Track SIPEF continued to engage EQ to monitor all of its estates and suppliers against NDP commitment in Indonesia and Papua New Guinea. 266 The connection to the world of sustainable tropical agriculture (1) Concession areas that are under SIPEF’s management control are the total areas that have already been acquired by SIPEF. NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 11 Sustainable Land Use and Conservation Historical assessment of compliance to NDP commitment. Historical assessment of compliance to NDP commitment completed along with any recovery plans, as required for SIPEF’s own estates and its suppliers’ areas. Internal review and report published by 2023. 2023 Achieved SIPEF has completed its historical assessment of compliance to NDP commitment with the cut-o date of 31 December 2015 for all SIPEF’s oil palm operations in Indonesia and Papua New Guinea with support from EQ. SIPEF will update its commitment on NDP with the cut-o date of the assessment 31 December 2015, that is aligned with most of the oil palm companies’ commitments. 12 Sustainable Land Use and Conservation No deforestation identified within HCV/HCS areas in own concessions under the Company’s management control. Zero hectares of annual tree cover loss identified within own concession areas under the Company’s management control. (1) Ongoing Achieved External monitoring partner validated that no instances of deforestation or peat conversion occurred within the Group’s entire supply base. The tree cover loss of 6.6 hectares reported in 2023 was due to encroachment by local villagers, not clearing by SIPEF. 13 Sustainable Land Use and Conservation No deforestation identified within HCV/HCS areas in supplier areas. Zero hectares of annual tree cover loss identified within supplier areas. Ongoing Achieved External monitoring partner validated that no instances of deforestation or peat conversion occurred within the Group’s entire supply base. 267 SIPEF Integrated Annual Report 2023 Annex NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 14 Sustainable Land Use and Conservation Improve management of High Conservation Value (HCV) and High Carbon Stock (HCS) areas within concessions. All previous standalone assessments updated to integrated HCV-HCSA assessments along with the respective management plans. 2025 Achieved As of 31 December 2023, HCV-HCSA assessments completed covered all the key estates in Indonesia and Papua New Guinea. · Indonesia: 24 estates · Papua New Guinea: 3 estates The remaining eight estates in Indonesia have carried out HCV assessments which already cover all areas that would be designated as HCS areas. In addition, as no new developments planned for these estates, no further re-assessment will be required. 15 Sustainable Land Use and Conservation Improve management of High Conservation Value (HCV) and High Carbon Stock (HCS) areas within concessions. Ranger/Restoration teams established for all regions to monitor and manage HCV/HCS areas in alignment with the principles of citizen science. · North Sumatra · Bengkulu · South Sumatra · Papua New Guinea · Côte d’Ivoire 2026 On Track Progress on establishment of teams as summarised below: · Indonesia: In Bengkulu, a ranger is designated in each estate. · Papua New Guinea: An ocer is designated in each estate and will be trained to monitor/ manage HCV/HCS areas. · Côte d’Ivoire: Sustainability assistant of the site designated to monitor conservation area identified. 268 The connection to the world of sustainable tropical agriculture NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 16 Sustainable Land Use and Conservation Make advance- ments in SIPEF Biodiversity Indonesia (SBI) programme on conservation, management, and monitoring. Restore 256 hectares of degraded land within SBI. 2024 On Track Restored 224 hectares as of 2023. Engage with 369 farmers on regenerative agricultural methods within SBI. 2024 Achieved Engaged 376 farmers as of 2023 and have achieved target ahead of target timeline. Review and improve biodiversity monitoring methodology, specifi- cally for the Sumatran tiger, using a scientific sampling design and protocol. 2024 On Track SIPEF continued to engage with an external expert to improve its monitoring methodology. Continual monitoring using the revised design and protocol. Ongoing 17 Sustainable Land Use and Conservation Protect coastal shorelines and prevent flooding. Restore 14 hectares of coastal areas. 2024 On Track Indonesia: Ongoing active and passive coastal restoration are being carried out in Muko Muko Estate and Tanah Rekah Estate including activities such as tree planting, oil palm removal, weeding and natural regeneration. Papua New Guinea: Rehabilitation will be carried out based on the updated management plan to be developed according to the latest HCV-HCSA assessment completed. 18 Sustainable Land Use and Conservation No use of fires to clear or cultivate land in own concessions under the Company’s management control. Zero incidence of fires in own con- cession areas under the Company’s management control. Ongoing Not Achieved No incidents in Papua New Guinea, but 39 hotspots were verified in Indonesia, which impacted 160.5 hectares, started by external actors. 269 SIPEF Integrated Annual Report 2023 Annex NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 19 Sustainable Land Use and Conservation No use of fires to clear or cultivate land in total supplier areas. Zero incidence of fires in supplier areas. Ongoing Not Achieved No incidents in Indonesia, but there were six verified cases in Papua New Guinea that impacted 2.2 hectares, linked to burning by the local communities for gardening. 20 Operational Eciency Adherence to local regulations on euent limits in palm oil mills. Biochemical Oxygen Demand, Chemical Oxygen Demand and Total Suspended Solids maintained below legal limits at point of release. Ongoing Not Achieved Seven out of nine mills achieved the targets in 2023. 21 Operational Eciency Improve water use management at SIPEF’s palm oil mills. Water usage intensity per tonne of FFB, by palm oil mill (POM): Indonesia · Bukit Maradja (BMPOM) . . . . ≤1 · Mukomuko (MMPOM) . . . . . . ≤1 · Bunga Tanjung (BTPOM) . . . . ≤1 · Dendymarker Indah Lestari (DILPOM) . . . . . . . . . . . . . . . ≤1 · Perlabian (PLPOM) . . . . . . .≤1.2 · Umbul Mas Wisesa (UMWPOM) . . . . . . . . . . . .≤1.5 Papua New Guinea · Hargy (HPOM). . . . . . . . . . . . ≤1 · Navo (NPOM) . . . . . . . . . . . . ≤1 · Barema (BPOM) . . . . . . . . . .≤1.5 Ongoing Not Achieved Eight out of nine mills achieved the targets in 2023. 22 Supply Chain Management Achieve RSPO certification for all smallholders supplying to SIPEF in Musi Rawas. 100% RSPO certification for smallholders supplying SIPEF in PT Dendymarker Indah Lestari. 2025 Achieved Sei Rupit estate, the group of newly certified smallholders was certified in July 2023. With that latest addition to the RSPO certified supply base, 100% of smallholders supplying PT Dendymarker Indah Lestari, much earlier than expected. 270 The connection to the world of sustainable tropical agriculture NO. MATERIAL TOPICS COMMITMENTS TARGETS TARGET YEAR STATUS IN 2023 23 Supply Chain Management Achieve RSPO certification for all smallholders supplying to SIPEF in Musi Rawas. 100% RSPO certification for smallholders supplying SIPEF in PT Agro Kati Lama, PT Agro Muara Rupit and PT Agro Rawas Ulu. 2026 On Track Following RSPO timebound plan. 24 Supply Chain Management Establish small- holder groups for relevant oper- ational units in Indonesia accord- ing to Indonesian law. 100% of smallholders to have signed a Memorandum of Understanding (MoU) for all operational units prior to renewing HGUs. Ongoing On Track Following Indonesia regulation on HGU renewal. 25 Community Rights and Development Contributing to community development programmes. Continue contribution for com- munity development programmes such as health, education, child- care, and other initiatives. Ongoing On Track SIPEF continues to contribute to community development. For more info see: chapter on respecting emplyees and communities. 271 SIPEF Integrated Annual Report 2023 Annex Annex 2 – EU Taxonomy Accounting policies Turnover KPI 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 denomi - nator of the turnover KPI is based on the Group’s consolidated net turnover in accordance with IAS 1.82(a). Further details on the Group’s accounting policies regarding the Group’s consolidated net turnover, can be found in the consolidated financial statements. With regard to the numerator, SIPEF has not iden- tified any Taxonomy-eligible activities as explained above. Reconciliation The Group’s consolidated net turnover can be rec- onciled to the consolidated financial statements, in the income statement (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 2023). Goodwill is not includ- ed in Capex as it is not defined as an intangible asset in accordance with IAS 38. Further details on the accounting policies regarding the Group’s Capex can be found in the consolidated financial statements. 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 utilised in this process are described as follows: 272 The connection to the world of sustainable tropical agriculture Reconciliation The Group’s total Capex can be reconciled to the consolidated financial statements as the total of acquisition of intangible assets, acquisition of bio- logical assets and acquisition of property, plant and equipment in the consolidated cash flow. Opex KPI The Opex KPI is defined as Taxonomy-eligible Opex (numerator) divided by the total Opex (denomina- tor). 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, mainte- nance 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 devel- opment expenditures concentrated in its mi- nority subsidiaries Verdant Bioscience Pte Ltd and PT Timbang Deli, which are included in the consolidation as equity consolidated companies and are not included in 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. Further information can be found in the note on leasing of the consolidated financial statements. Maintenance and repair and other direct ex- penditures 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 re- pair costs allocated to the respective assets. The maintenance of the biological assets - bearer plants contain all costs related to keeping the biological assets (bearer plants) in a good pro- ductive 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 the 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, these costs include 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 property, plant and equipment. As the SIPEF group has not identified Taxonomy- eligible economic activities, the Group does not record Capex/Opex-related assets or processes that are associated with Taxonomy-eligible economic activities in the numerator of the Capex KPI and the Opex. These tables are an integral part of the Integrated Annual Report. 273 SIPEF Integrated Annual Report 2023 Annex FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 TURNOVER 3 PROPORTION OF TURNOVER, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. TURNOVER, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. TURNOVER OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities 443 886 088 100% B. TURNOVER OF TAXONOMYNONELIGIBLE ACTIVITIES 443 886 088 100% TOTAL A+B 443 886 088 100% PROPORTION OF TURNOVER/TOTAL TURNOVER PER OBJECTIVE TAXONOMYALIGNED PER OBJECTIVE TAXONOMYELIGIBLE PER OBJECTIVE Climate Change Mitigation 0% 0% Climate Change Adaptation 0% 0% Water and Marine Resources 0% 0% Circular Economy 0% 0% Pollution Prevention and Control 0% 0% Biodiversity and Ecosystems 0% 0% Turnover 274 The connection to the world of sustainable tropical agriculture FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 TURNOVER 3 PROPORTION OF TURNOVER, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. TURNOVER, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. TURNOVER OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities 443 886 088 100% B. TURNOVER OF TAXONOMYNONELIGIBLE ACTIVITIES 443 886 088 100% TOTAL A+B 443 886 088 100% 275 SIPEF Integrated Annual Report 2023 Annex FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 CAPEX 3 PROPORTION OF CAPEX, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. CAPEX, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Capex of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Capex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. CAPEX OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Capex of Taxonomy-non-eligible activities 106 985 373 100% B. CAPEX OF TAXONOMYNONELIGIBLE ACTIVITIES 106 985 373 100% TOTAL A+B 106 985 373 100% Capital Expenditure (Capex) PROPORTION OF CAPEX/TOTAL CAPEX PER OBJECTIVE TAXONOMYALIGNED PER OBJECTIVE TAXONOMYELIGIBLE PER OBJECTIVE Climate Change Mitigation 0% 0% Climate Change Adaptation 0% 0% Water and Marine Resources 0% 0% Circular Economy 0% 0% Pollution Prevention and Control 0% 0% Biodiversity and Ecosystems 0% 0% 276 The connection to the world of sustainable tropical agriculture FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 CAPEX 3 PROPORTION OF CAPEX, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. CAPEX, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Capex of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Capex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. CAPEX OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Capex of Taxonomy-non-eligible activities 106 985 373 100% B. CAPEX OF TAXONOMYNONELIGIBLE ACTIVITIES 106 985 373 100% TOTAL A+B 106 985 373 100% 277 SIPEF Integrated Annual Report 2023 Annex FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 OPEX 3 PROPORTION OF OPEX, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. OPEX, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Opex of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Opex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. OPEX OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Opex of Taxonomy-non-eligible activities 47 870 837 100% B. OPEX OF TAXONOMYNONELIGIBLE ACTIVITIES 47 870 837 100% TOTAL A+B 47 870 837 100% Operating Expenditure (Opex) PROPORTION OF OPEX/TOTAL OPEX PER OBJECTIVE TAXONOMYALIGNED PER OBJECTIVE TAXONOMYELIGIBLE PER OBJECTIVE Climate Change Mitigation 0% 0% Climate Change Adaptation 0% 0% Water and Marine Resources 0% 0% Circular Economy 0% 0% Pollution Prevention and Control 0% 0% Biodiversity and Ecosystems 0% 0% 278 The connection to the world of sustainable tropical agriculture FINANCIAL YEAR 2023 SUBSTANTIAL CONTRIBUTION CRITERIA DNSH CRITERIA DOES NOT SIGNIFICANTLY HARM ECONOMIC ACTIVITIES 1 CODES 2 OPEX 3 PROPORTION OF OPEX, YEAR N 4 CLIMATE CHANGE MITIGATION 5 CLIMATE CHANGE ADAPTATION 6 WATER 7 POLLUTION 8 CIRCULAR ECONOMY 9 BIODIVERSITY 10 CLIMATE CHANGE MITIGATION 11 CLIMATE CHANGE ADAPTATION 12 WATER 13 POLLUTION 14 CIRCULAR ECONOMY 15 BIODIVERSITY 16 MINIMUM SAFEGUARD 17 PROPORTION OF TAXONOMYALIGNED A.1. OR ELIGIBLE A.2. OPEX, YEAR N1 18 CATEGORY ENABLING ACTIVITY 19 CATEGORY TRANSITIONAL ACTIVITY 20 USD % Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y;N; N/EL (b)(c) Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMYELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) N/A 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% - - Opex of environmentally sustainable activities (Taxonomy-aligned) (A.1.) 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% - - Of which Enabling 0 0% 0% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% E - Of which Transitional 0 0% 0% - - - - - N/A N/A N/A N/A N/A N/A N/A 0% - T A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A 0 0% N/A N/A N/A N/A N/A N/A - - - - - - - 0% - - Opex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2.) 0 0% 0% 0% 0% 0% 0% 0% - - - - - - - 0% - - A. OPEX OF TAXONOMY ELIGIBLE ACTIVITIES A.1+A.2 0 0% 0% 0% 0% 0% 0% 0% 0% B. TAXONOMYNONELIGIBLE ACTIVITIES Opex of Taxonomy-non-eligible activities 47 870 837 100% B. OPEX OF TAXONOMYNONELIGIBLE ACTIVITIES 47 870 837 100% TOTAL A+B 47 870 837 100% 279 SIPEF Integrated Annual Report 2023 Annex Annex 3 – Base Data ABOUT SIPEF Group production (in tonnes - excluding PT Melania) FRESH FRUIT BUNCHES PRODUCED YTD 2023 YTD 2022 % CHANGE OWN Indonesia 1 049 691 1 040 074 0.92% Tolan Tiga group 282 821 303 925 -6.94% Umbul Mas Wisesa group 186 328 220 439 -15.47% Agro Muko group 362 376 361 096 0.35% South Sumatra group 218 165 154 613 41.10% Papua New Guinea 367 340 403 419 -8.94% Hargy Oil Palms Ltd 367 340 403 419 -8.94% TOTAL OWN 1 417 031 1 443 493 1.83% OUTGROWERS Indonesia 60 848 54 033 12.61% Tolan Tiga group 10 304 11 217 -8.14% Umbul Mas Wisesa group 812 1 131 -28.22% Agro Muko group 17 356 17 662 -1.73% South Sumatra group 32 377 24 023 34.77% Papua New Guinea 232 414 254 356 -8.63% Hargy Oil Palms Ltd 232 414 254 356 -8.63% TOTAL OUTGROWERS 293 262 308 389 4.91% TOTAL FRESH FRUIT BUNCHES PRODUCED 1 710 292 1 751 883 2.37% FRESH FRUIT BUNCHES SOLD YTD 2023 YTD 2022 % CHANGE Indonesia 42 588 66 250 -35.72% Tolan Tiga group 2 631 4 608 -42.90% Umbul Mas Wisesa group 34 467 40 433 -14.76% Agro Muko group 5 490 4 924 11.50% South Sumatra group 0 16 286 -100.00% TOTAL FRESH FRUIT BUNCHES SOLD 42 588 66 250 35.72% 280 The connection to the world of sustainable tropical agriculture OIL EXTRACTION RATE YTD 2023 YTD 2022 % CHANGE Indonesia 22.9% 23.1% -0.85% Tolan Tiga group 22.7% 22.7% -0.21% Umbul Mas Wisesa group 22.9% 23.4% -2.15% Agro Muko group 23.0% 23.2% -0.61% South Sumatra group 22.9% 23.2% -1.34% Papua New Guinea 24.5% 25.3% -3.41% Hargy Oil Palms Ltd 24.5% 25.3% -3.41% TOTAL OIL EXTRACTION RATE 23.5% 24.0% 2.11% FRESH FRUIT BUNCHES PROCESSED YTD 2023 YTD 2022 % CHANGE Indonesia 1 067 951 1 027 857 3.90% Tolan Tiga group 290 494 310 534 -6.45% Umbul Mas Wisesa group 152 673 181 137 -15.71% Agro Muko group 374 242 373 834 0.11% South Sumatra group 250 542 162 351 54.32% Papua New Guinea 599 754 657 776 -8.82% Hargy Oil Palms Ltd 599 754 657 776 -8.82% TOTAL FRESH FRUIT BUNCHES PROCESSED 1 667 705 1 685 632 1.06% 281 SIPEF Integrated Annual Report 2023 Annex PALM KERNELS YTD 2023 YTD 2022 % CHANGE OWN Indonesia 46 579 44 278 5.20% Tolan Tiga group 15 912 16 686 -4.64% Umbul Mas Wisesa group 6 388 7 432 -14.04% Agro Muko group 15 792 15 202 3.89% South Sumatra group 8 487 4 959 71.13% TOTAL OWN 46 579 44 278 5.20% OUTGROWERS Indonesia 2 353 1 877 25.34% Tolan Tiga group 385 312 23.10% Umbul Mas Wisesa group 28 25 9.86% Agro Muko group 755 748 0.94% South Sumatra group 1 186 792 49.76% TOTAL OUTGROWERS 2 353 1 877 25.34% TOTAL PALM KERNELS 48 932 46 156 6.02% PALM OIL YTD 2023 YTD 2022 % CHANGE OWN Indonesia 231 569 226 611 2.19% Tolan Tiga group 64 044 68 975 -7.15% Umbul Mas Wisesa group 34 832 42 272 -17.60% Agro Muko group 82 490 83 075 -0.70% South Sumatra group 50 202 32 289 55.48% Papua New Guinea 90 060 102 479 -12.12% Hargy Oil Palms Ltd 90 060 102 479 -12.12% TOTAL OWN 321 629 329 090 2.27% OUTGROWERS Indonesia 12 883 10 675 20.68% Tolan Tiga group 1 773 1 532 15.76% Umbul Mas Wisesa group 152 148 2.81% Agro Muko group 3 695 3 542 4.32% South Sumatra group 7 263 5 453 33.18% Papua New Guinea 56 703 64 162 -11.63% Hargy Oil Palms Ltd 56 703 64 162 -11.63% TOTAL OUTGROWERS 69 586 74 837 7.02% TOTAL PALM OIL 391 215 403 927 3.15% 282 The connection to the world of sustainable tropical agriculture PALM KERNEL OIL YTD 2023 YTD 2022 % CHANGE Papua New Guinea 12 412 13 361 -7.10% Hargy Oil Palms Ltd - Own 7 690 8 185 -6.05% Hargy Oil Palms Ltd - Outgrowers 4 722 5 176 -8.77% TOTAL PALM KERNEL OIL 12 412 13 361 7.10% RUBBER YTD 2023 YTD 2022 % CHANGE OWN Indonesia 827 1 368 -39.55% Tolan Tiga group 151 387 -60.98% Agro Muko 676 981 -31.09% TOTAL OWN 827 1 368 39.55% OUTGROWERS Indonesia 141 555 -74.59% Tolan Tiga group 141 555 -74.59% TOTAL OUTGROWERS 141 555 74.59% TOTAL RUBBER 968 1 923 49.66% BANANAS YTD 2023 YTD 2022 % CHANGE Côte d'Ivoire 26 129 29 759 -12.20% Azaguié 11 702 12 832 -8.81% Agboville 8 003 9 384 -14.72% Motobé 6 424 7 543 -14.83% Lumen 12 676 2 511 404.80% Akoudié 2 171 0 - TOTAL BANANAS 40 976 32 270 26.98% 283 SIPEF Integrated Annual Report 2023 Annex 2023 2022 MATURE IMMATURE PLANTED MATURE IMMATURE PLANTED OIL PALMS 67 222 14 949 82 171 64 953 13 401 78 354 Indonesia 54 917 13 705 68 621 52 886 11 880 64 766 Tolan Tiga group 11 455 2 496 13 950 11 524 1 244 12 768 PT Tolan Tiga 6 960 1 075 8 035 7 029 640 7 669 PT Eastern Sumatra 2 500 593 3 093 2 500 357 2 857 PT Kerasaan 1 994 327 2 322 1 994 247 2 242 PT Bandar Sumatra 0 500 500 0 0 0 Umbul Mas Wisesa group 9 924 0 9 924 9 924 0 9 924 PT Umbul Mas Wisesa 7 043 0 7 043 7 043 0 7 043 PT Toton Usaha Mandiri 1 135 0 1 135 1 135 0 1 135 PT Citra Sawit Mandiri 1 746 0 1 746 1 746 0 1 746 Agro Muko group 17 484 4 066 21 549 18 512 2 607 21 119 PT Agro Muko 14 995 3 474 18 469 15 796 2 001 17 798 PT Mukomuko Agro Sejahtera 2 489 592 3 081 2 716 606 3 322 South Sumatra group 16 054 7 143 23 197 12 926 8 028 20 954 PT Agro Kati Lama 4 022 779 4 801 3 775 633 4 407 PT Agro Muara Rupit 4 980 3 371 8 352 4 021 2 585 6 606 PT Agro Rawas Ulu 2 405 205 2 610 2 173 426 2 599 PT Dendymarker Indah Lestari 4 646 2 788 7 434 2 957 4 384 7 341 Papua New Guinea 12 305 1 244 13 550 12 067 1 521 13 588 Hargy Oil Palms Ltd 12 305 1 244 13 550 12 067 1 521 13 588 RUBBER 1 901 0 1 901 1 954 0 1 954 Indonesia 1 901 0 1 901 1 954 0 1 954 Tolan Tiga group 649 0 649 696 0 696 PT Bandar Sumatra 649 0 649 696 0 696 Agro Muko group 1 251 0 1 251 1 258 0 1 258 PT Agro Muko 1 251 0 1 251 1 258 0 1 258 BANANAS 1 229 0 1 229 906 160 1 066 Côte d'Ivoire 1 229 0 1 229 906 160 1 066 Plantations J. Eglin SA 1 229 0 1 229 906 160 1 066 PINEAPPLE FLOWERS 29 0 29 23 8 31 Côte d'Ivoire 29 0 29 23 8 31 Plantations J. Eglin SA 29 0 29 23 8 31 TOTAL 70 381 14 949 85 329 67 836 13 568 81 404 Planted Area (in hectares) Total planted area of consolidated companies excluding PT Timbang Deli and PT Melania. 284 The connection to the world of sustainable tropical agriculture TOTAL BENEFICIAL INTEREST % SHARE OF THE GROUP OIL PALMS 82 171 94.54% 77 685 Indonesia 68 621 93.46% 64 135 Tolan Tiga group 13 950 83.74% 11 682 PT Tolan Tiga 8 035 95.00% 7 633 PT Eastern Sumatra 3 093 90.25% 2 792 PT Kerasaan 2 322 54.15% 1 257 PT Bandar Sumatra 500 90.25% 451 Umbul Mas Wisesa group 9 924 95.00% 9 428 PT Umbul Mas Wisesa 7 043 95.00% 6 691 PT Toton Usaha Mandiri 1 135 95.00% 1 078 PT Citra Sawit Mandiri 1 746 95.00% 1 659 Agro Muko group 21 549 93.72% 20 196 PT Agro Muko 18 469 95.05% 17 554 PT Mukomuko Agro Sejahtera 3 081 85.74% 2 641 South Sumatra group 23 197 98.41% 22 829 PT Agro Kati Lama 4 801 100.00% 4 801 PT Agro Muara Rupit 8 352 100.00% 8 351 PT Agro Rawas Ulu 2 610 100.00% 2 610 PT Dendymarker Indah Lestari 7 434 95.05% 7 066 Papua New Guinea 13 550 100.00% 13 550 Hargy Oil Palms Ltd 13 550 100.00% 13 550 RUBBER 1 901 93.41% 1 775 Indonesia 1 901 93.41% 1 775 Tolan Tiga group 649 90.25% 586 PT Bandar Sumatra 649 90.25% 586 Agro Muko group 1 251 95.05% 1 189 PT Agro Muko 1 251 95.05% 1 189 BANANAS 1 229 100.00% 1 229 Côte d'Ivoire 1 229 100.00% 1 229 Plantations J. Eglin SA 1 229 100.00% 1 229 PINEAPPLE FLOWERS 29 100.00% 29 Côte d'Ivoire 29 100.00% 29 Plantations J. Eglin SA 29 100.00% 29 TOTAL 85 329 94.60% 80 718 Planted Area (in hectares) (1) Total planted area of consolidated companies (share of the Group) excluding PT Timbang Deli and PT Melania. (1) Actual planted hectares 285 SIPEF Integrated Annual Report 2023 Annex Age Profile (in hectares) OIL PALMS YEAR TOLAN TIGA GROUP UMBUL MAS WISESA GROUP AGRO MUKO GROUP SOUTH SUMATRA GROUP HARGY OIL PALMS TOTAL 2023 1 277 0 2 342 2 078 369 6 066 2022 647 0 1 052 2 056 875 4 632 2021 597 0 1 066 2 924 673 5 259 2020 0 0 114 3 167 63 3 344 2019 278 0 1 519 3 110 335 5 242 2018 303 0 1 067 2 430 547 4 346 2017 397 45 971 2 614 596 4 624 2016 328 185 397 2 553 219 3 682 2015 679 69 1 071 1 269 741 3 828 2014 709 0 1 014 740 1 386 3 849 2013 434 0 1 240 255 947 2 877 2012 745 202 1 503 0 1 628 4 079 2011 754 755 26 0 811 2 346 2010 625 1 525 357 0 619 3 126 2009 103 1 658 536 0 294 2 590 2008 397 1 954 223 0 239 2 813 2007 319 2 139 330 0 1 557 4 346 2006 619 365 900 0 896 2 780 2005 551 1 004 516 0 188 2 258 2004 116 0 730 0 158 1 004 2003 725 0 120 0 130 975 2002 233 0 63 0 278 575 2001 296 0 549 0 0 845 2000 302 0 725 0 0 1 027 1999 370 0 1 469 0 0 1 839 1998 400 0 767 0 0 1 166 Before 1998 1 747 24 883 0 0 2 654 13 950 9 924 21 549 23 197 13 550 82 171 AVERAGE AGE 12.99 14.59 11.08 4.09 10.17 9.71 286 The connection to the world of sustainable tropical agriculture 2023 2022 2021 2020 2019 ACTIVITIES Total own production of consolidated companies (in tonnes) palm oil 321 629 329 090 316 740 271 472 264 641 rubber 968 1 923 3 182 5 300 5 495 bananas 40 976 32 270 32 200 31 158 32 849 Average market price (USD/tonne) palm oil (1) 964 1 345 1 195 715 566 rubber (2) 1 577 1 810 2 071 1 728 1 640 bananas (3) 830 762 616 628 662 Own FFB production (in tonnes/ha) Indonesia (excl. DM) 19.11 19.67 19.86 18.74 19.52 Papua New Guinea 29.85 33.43 28.51 21.16 20.79 Palm oil extraction rate (in %) Indonesia (excl. DM) 22.89% 23.09% 22.99% 22.79% 23.23% Papua New Guinea 24.47% 25.33% 25.58% 24.64% 23.35% STOCK EXCHANGE SHARE PRICE IN EUR Maximum 62.30 70.80 60.80 56.70 54.80 Minimum 51.30 52.70 43.85 38.00 35.25 Closing 31/12 53.00 58.90 56.90 43.20 54.80 Stock Exchange capitalisation at 31/12 (in KEUR) 560 704 623 122 601 964 457 027 579 747 RESULTS IN KUSD Turnover 443 886 527 460 416 053 274 027 248 310 Gross profit 149 673 221 031 169 218 62 357 37 162 Operating result 107 978 178 312 139 416 30 778 4 940 Share of the group in the result 72 735 108 157 93 749 14 122 -8 004 Cash flow from operating activities after taxes 122 632 165 295 160 311 73 262 33 988 Free cash flow 5 813 79 511 112 270 21 299 -27 751 BALANCE SHEET IN KUSD Operating fixed assets (4) 751 674 696 645 667 267 670 637 665 413 Shareholders' equity 853 777 817 803 727 329 638 688 628 686 Net financial assets (+)/obligations (-) -31 418 122 -49 192 -151 165 -164 623 Investments in intangible and operating fixed assets (4) 106 985 79 294 68 692 51 763 66 546 DATA PER SHARE IN USD Number of shares 10 579 328 10 579 328 10 579 328 10 579 328 10 579 328 Number of own shares 180 000 178 933 178 000 160 000 160 000 Equity 82.10 78.63 69.93 61.30 60.34 Basic earnings per share (5) 6.99 10.40 9.00 1.36 -0.77 Cash flow from operating activities after taxes (5) 11.79 15.89 15.39 7.03 3.26 Free cash flow (2) 0.56 7.64 10.78 2.04 -2.66 (1) Oilworld price data (2) World bank commodity price data (3) CIRAD price data (in EUR) (4) Operating fixed assets = biological assets - bearer plants, other property, plant & equipment and investment property (5) Denominator 2023 = weighted average number of shares issued (10 403 105 shares) Evolution of key data over 5 years 287 SIPEF Integrated Annual Report 2023 Annex SUSTAINABILITY APPROACH RSPO certified planted area of oil palm operations (1) OIL PALM OPERATIONS HECTARES 2023 2022 SIPEF GROUP RSPO certified planted area - own plantations 65 522 61 622 RSPO certified planted area - scheme smallholders 18 639 15 909 TOTAL RSPO CERTIFIED PLANTED AREA 81 161 77 531 INDONESIA RSPO certified planted area - own plantations 48 972 48 034 RSPO certified planted area - scheme smallholders 3 832 1 102 RSPO CERTIFIED PLANTED AREA 52 804 49 136 PAPUA NEW GUINEA RSPO certified planted area - own plantations 13 550 13 588 RSPO certified planted area - scheme smallholders 14 807 14 807 RSPO CERTIFIED PLANTED AREA 28 356 28 395 (1) The table is updated to focus on RSPO certified planted areas for own plantations and scheme smallholders. OIL PALM OPERATIONS TONNES 2023 2022 SIPEF GROUP RSPO certified FFB - own plantations 1 219 857 1 273 922 RSPO certified FFB - scheme smallholders (2) 252 378 272 007 RSPO certified FFB - independent smallholders (2) 679 643 TOTAL RSPO CERTIFIED FFB 1 472 914 1 546 572 INDONESIA RSPO certified FFB - own plantations 852 517 870 503 RSPO certified FFB - scheme smallholders (2) 19 964 17 651 RSPO certified FFB - independent smallholders (2) 679 643 RSPO CERTIFIED FFB 873 160 888 797 PAPUA NEW GUINEA RSPO certified FFB - own plantations 367 340 403 419 RSPO certified FFB - scheme smallholders 232 414 254 356 RSPO CERTIFIED FFB 599 754 657 775 (2) Smallholders categorised by scheme and independent smallholders. Exclude PT Timbang Deli. RSPO certified FFB production volumes of oil palm operations 288 The connection to the world of sustainable tropical agriculture RSPO and ISPO certification progress of palm oil mills and kernel crushing plants PALM OIL OPERATIONS NUMBER OF MILLS AND KERNEL CRUSHING PLANTS 2023 2022 INDONESIA RSPO certified mills - Identity Preserved 5 5 RSPO certified mills - Mass Balance 1 1 ISPO certified mills 6 6 PAPUA NEW GUINEA RSPO certified mills - Identity Preserved 3 3 RSPO certified kernel crushing plants 2 2 PALM OIL OPERATIONS TONNES 2023 2022 RSPO CERTIFIED CPO PRODUCTION Indonesia 201 534 206 959 Papua New Guinea 146 763 166 641 TOTAL RSPO CERTIFIED CPO PRODUCTION 348 297 373 600 RSPO CERTIFIED PK PRODUCTION Indonesia 41 708 41 700 Papua New Guinea 31 230 33 916 TOTAL RSPO CERTIFIED PK PRODUCTION 72 938 75 616 RSPO certified CPO and PK volumes STANDARDS & CERTIFICATIONS NUMBER OF CERTIFICATES PRODUCT 2023 2022 2021 2020 2019 2018 RSPO: Roundtable on Sustainable Palm Oil Palm oil 8 8 8 8 8 8 ISCC: International Sustainability and Carbon Certification Palm oil 4 4 4 4 4 5 ISPO: Indonesian Sustainable Palm Oil Palm oil 8 8 8 6 6 5 ISO 14001:2015 Palm oil 1 1 1 1 1 1 ISO 9001:2015 Palm oil 1 1 1 1 1 1 GLOBALG.A .P. Bananas 2 (1) 1 1 1 1 1 Rainforest Alliance Bananas 3 (1) 2 5 5 5 5 Fairtrade Bananas 2 (1) 2 (1) 2 (1) 2 (1) 2 (1) - Sedex Bananas 1 1 1 1 1 1 TOTAL 30 28 31 29 29 27 (1) Figures for Fairtrade, GlobalG.A.P., and Rainforest Alliance include Chain of Custody certificates. Chain of Custody certifications for GlobalG.A.P. and Rainforest Alliance standards have been achieved for the SIPEF Head Oce in Belgium for the first time in 2023. Fairtrade Chain of Custody certification has been in place since 2019. Sustainability standards and certification 289 SIPEF Integrated Annual Report 2023 Annex ENVIRONMENTAL STEWARDSHIP SIPEF net GHG emissions per year (Scope 1 and Scope 2) GHG EMISSIONS tCO e 2023 2022 2021 Scope 1 636 360 645 515 719 810 Scope 2 15 151 12 756 8 953 TOTAL NET GHG EMISSIONS PER YEAR 651 511 658 271 1 728 762 1 (1) Net GHG emission of the financial year 2022 and the financial year 2021 are restated to reflect the improvement of scope of GHG calculations. The rest of the net GHG emissions and intensity in this section are restated in line with this improvement. More information available in the Environmental Stewardship section of this report. GHG EMISSIONS tCO e/TONNE CPO 2023 2022 2021 Crude palm oil 1.68 1.64 1.88 INTENSITY 1.68 1.64 1.88 RENEWABLE ENERGY GENERATED kWh 2023 2022 PALM OIL MILLS BIOGAS FACILITIES STEAM TURBINES BIOGAS FACILITIES STEAM TURBINES Indonesia 4 469 560 15 966 122 4 600 051 19 330 979 Papua New Guinea N/A 12 954 378 N/A 12 944 742 TOTAL RENEWABLE ENERGY GENERATED 4 469 560 28 920 500 4 600 051 32 275 721 GHG EMISSIONS tCO e 2023 2022 2021 Oil palm 656 553 662 667 721 640 Rubber (2) -19 040 -14 809 -7 400 Tea 8 536 8 680 8 889 Bananas 5 461 1 733 5 633 TOTAL NET GHG EMISSIONS PER CROP 651 511 658 271 728 762 (2) The trend of the emissions from rubber operations is due to SIPEF’s phasing out from rubber and is in the process of converting rubber plantations to oil palm plantations. The unharvested rubber stands are sequestering carbon. SIPEF net GHG emissions per crop (Scope 1 and Scope 2) SIPEF GHG emissions intensity per tonne of CPO (Scope 1 and Scope 2) Energy generated from renewable sources 290 The connection to the world of sustainable tropical agriculture 2023 TREE COVER LOSS MONITORING WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS BY COUNTRY/PROVINCE EQ ALERTS VERIFIED INCIDENTS VERIFIED AREA IN HECTARES EQ ALERTS VERIFIED INCIDENTS VERIFIED AREA IN HECTARES Indonesia 3 1 6.6 0 0 0 North Sumatra 0 0 0 0 0 0 Bengkulu 2 0 0 0 0 0 South Sumatra 1 1 6.6 0 0 0 Papua New Guinea 0 0 0 2 0 0 Papua New Guinea 0 0 0 2 0 0 TOTAL 3 1 6.6 2 0 0 2022 TREE COVER LOSS MONITORING WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS BY COUNTRY/PROVINCE EQ ALERTS VERIFIED INCIDENTS VERIFIED AREA IN HECTARES EQ ALERTS VERIFIED INCIDENTS VERIFIED AREA IN HECTARES Indonesia 2 2 14.6 0 0 0 North Sumatra 0 0 0 0 0 0 Bengkulu 2 2 14.6 0 0 0 South Sumatra 0 0 0 0 0 0 Papua New Guinea 1 1 28.0 0 0 0 Papua New Guinea 1 1 28.0 0 0 0 TOTAL 3 3 42.6 0 0 0 Tree cover loss monitoring by country/province 291 SIPEF Integrated Annual Report 2023 Annex Hotspots and fire monitoring by country/province 2023 HOTSPOT AND FIRE MONITORING WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS BY COUNTRY/PROVINCE HOTSPOTS ACTUAL FIRES AREAS IMPACTED IN HECTARES HOTSPOTS ACTUAL FIRES AREAS IMPACTED IN HECTARES Indonesia 67 39 160.5 4 0 0 North Sumatra 0 0 0 0 0 0 Bengkulu 4 0 0 4 0 0 South Sumatra 63 39 160.5 0 0 0 Papua New Guinea 1 0 0 14 6 2.2 Papua New Guinea 1 0 0 14 6 2.2 TOTAL 68 39 160.5 18 6 2.2 2022 HOTSPOT AND FIRE MONITORING WITHIN OWN CONCESSIONS WITHIN SUPPLIER AREAS BY COUNTRY/PROVINCE HOTSPOTS ACTUAL FIRES AREAS IMPACTED IN HECTARES HOTSPOTS ACTUAL FIRES AREAS IMPACTED IN HECTARES Indonesia 13 2 2.0 0 0 0 North Sumatra 2 0 0 0 0 0 Bengkulu 3 0 0 0 0 0 South Sumatra 8 2 2.0 0 0 0 Papua New Guinea 2 2 0.5 11 11 5.3 Papua New Guinea 2 2 0.5 11 11 5.3 TOTAL 15 4 2.5 11 11 5.3 SBI BIODIVERSITY MONITORING AS AT 31 DECEMBER UNIT 2023 2022 Agroforestry growers engaged number of individuals 376 339 Trees planted number of trees 56 872 48 330 Degraded area restored hectares 224 185 SIPEF Biodiversity Indonesia (SBI) programme 292 The connection to the world of sustainable tropical agriculture WATER USAGE IN CUBIC METRES 2023 2022 PALM OIL MILLS Indonesia 993 379 929 279 Papua New Guinea 699 175 711 864 TOTAL 1 692 554 1 641 143 BANANA OPERATIONS Plantations 6 530 541 4 262 667 Banana packing stations 350 428 240 952 TOTAL 6 880 969 4 503 619 2023 2022 REFORESTATION AREA PLANTED IN HECTARES TREES PLANTED NUMBER OF TREES AREA PLANTED IN HECTARES TREES PLANTED NUMBER OF TREES Agboville 86.0 95 546 86.0 95 546 Gmélina 65.0 72 215 65.0 72 215 Teak 21.0 23 331 21.0 23 331 Azaguié 38.2 42 389 42.2 46 833 Gmélina 38.2 42 389 42.2 46 833 TOTAL 124.2 137 935 128.2 142 379 Reforestation programme in Côte d'Ivoire Water usage in palm operations and banana operations PALM OIL MILLS CUBIC METRES/TONNE FFB PROCESSED TARGET 2023 2022 Indonesia Bukit Maradja ≤ 1.0 0.89 0.91 Bunga Tanjung ≤ 1.0 0.50 0.63 Dendymarker Indah Lestari ≤ 1.0 0.99 0.99 Mukomuko ≤ 1.0 0.84 0.89 Perlabian ≤ 1.2 0.92 0.74 Umbul Mas Wisesa ≤ 1.5 1.35 1.31 Papua New Guinea Barema ≤ 1.5 0.94 0.96 Hargy ≤ 1.0 0.90 0.96 Navo ≤ 1.0 1.56 1.27 Palm oil mill water usage intensity 293 SIPEF Integrated Annual Report 2023 Annex 2023 2022 PALM OIL MILLS DISCHARGE POINT LEGAL LIMITS BOD LEGAL LIMITS COD LEGAL LIMITS TSS UNIT BOD EXCEEDED LIMIT COD EXCEEDED LIMIT TSS EXCEEDED LIMIT BOD EXCEEDED LIMIT COD EXCEEDED LIMIT TSS EXCEEDED LIMIT INDONESIA Bunga Tanjung Discharge into water body 100 350 250 mg/l 0 0 0 0 0 0 Mukomuko Discharge into water body 100 350 250 mg/l 0 0 0 0 0 0 Dendymarker Indah Lestari Discharge into water body 100 350 250 mg/l 0 0 0 0 0 0 Umbul Mas Wisesa Discharge into water body 100 350 250 mg/l 0 0 0 0 0 0 Bukit Maradja Land applica- tion and use for compost 5 000 N/A N/A mg/l 0 N/A N/A 0 N/A N/A Perlabian Land application 5 000 N/A N/A mg/l 0 N/A N/A 0 N/A N/A PAPUA NEW GUINEA Hargy Discharge into water body 100 N/A 500 mg/l 1 N/A 3 5 N/A 5 Barema Land application 4 000 N/A 1 000 mg/l 0 N/A 0 0 N/A 4 Navo Land application 4 000 N/A 1 000 mg/l 0 N/A 1 0 N/A 0 BANANA OPERATIONS CUBIC METRES/TONNE BANANAS EXPORTED 2023 2022 Plantations and packing stations 178.12 149.98 Banana operations water usage intensity Legal limits of POME discharge and application: BOD, COD, TSS for palm oil mills 294 The connection to the world of sustainable tropical agriculture RESPECTING EMPLOYEES AND COMMUNITIES Employees by gender (1) at Group level EMPLOYEES BY GENDER NUMBER OF EMPLOYEES 2023 2022 Male 17 212 16 612 Female 5 846 5 545 TOTAL EMPLOYEES BY GENDER 23 057 22 157 (1) This also includes the total employees in tea, rubber activities and horticulture. Employees by country EMPLOYEES BY COUNTRY NUMBER OF EMPLOYEES 2023 2022 Belgium 24 23 Indonesia 15 547 15 403 Papua New Guinea 4 989 4 706 Côte d'Ivoire 2 483 2 015 Singapore 14 10 TOTAL EMPLOYEES BY COUNTRY 23 057 22 157 EMPLOYEES BY GENDER, BY CROP NUMBER OF EMPLOYEES 2023 2022 FEMALE MALE FEMALE MALE Oil palm 4 360 14 048 4 384 13 522 Bananas 776 1 674 591 1 385 TOTAL EMPLOYEES 5 136 15 722 4 975 14 907 EMPLOYMENT TYPE BY CROP NUMBER OF EMPLOYEES 2023 2022 PERMANENT LONG TERM CONTRACT 2 TEMPORARY PERMANENT LONG TERM CONTRACT 2 TEMPORARY Oil palm 13 575 3 993 839 13 595 2 923 1 388 Bananas 2 332 0 118 1 912 0 64 TOTAL EMPLOYEES 15 907 3 993 957 15 507 2 923 1 452 (2) In Indonesia, employees hired on long term renewable contracts (i.e. Perjanjian Kerja Waktu Tertentu (PKWT)) are in the process to be considered to join workforce under contract for an indefinite period of time. Employees by gender, by crop Employees by employment contract, by crop 295 SIPEF Integrated Annual Report 2023 Annex CADET PROGRAMME NUMBER OF CADETS 2023 2022 FEMALE MALE FEMALE MALE Indonesia 2 27 8 38 Papua New Guinea 1 8 1 9 TOTAL CADETS 3 35 9 47 HOUSES PROVIDED BY SIPEF NUMBER OF UNITS 2023 2022 Indonesia 8 346 8 233 Papua New Guinea 2 716 2 366 Côte d'Ivoire 766 766 TOTAL NUMBER OF HOUSES 11 828 11 365 SCHOOLS ESTABLISHED NUMBER OF SCHOOLS 2023 2022 Indonesia 38 38 Papua New Guinea 3 3 Côte d'Ivoire 4 4 TOTAL NUMBER OF SHOOLS 45 45 COVERAGE OF CBAs NUMBER OF EMPLOYEES 2023 2022 Oil palm 8 169 8 319 Bananas 2 450 1 976 TOTAL EMPLOYEES 10 619 10 295 Gender composition of Cadet programme by country Employees covered by Collective Bargaining Agreements (CBAs) in oil palm and banana operations Houses provided to employees Schools established by SIPEF Clinics provided by SIPEF CLINICS PROVIDED NUMBER OF CLINICS 2023 2022 Indonesia 25 22 Papua New Guinea 13 13 Côte d'Ivoire 7 5 TOTAL NUMBER OF CLINICS 45 40 296 The connection to the world of sustainable tropical agriculture LTIFR RATE PER 1 000 000 HOURS WORKED 2023 2022 Indonesia 4.34 3.53 Papua New Guinea 24.90 18.41 Côte d'Ivoire 6.13 11.97 WORKRELATED FATALITIES NUMBER OF CASES 2023 2022 Indonesia 1 1 Papua New Guinea 0 1 Côte d'Ivoire 0 0 DAY CARE FACILITIES PROVIDED NUMBER OF FACILITIES 2023 2022 Day care facilities 42 40 TOTAL NUMBER OF DAY CARE FACILITIES 42 40 SCHOOLS ESTABLISHED BY SIPEF NUMBER OF SCHOOLS 2023 2022 Facilities accessible to employee children 45 45 Facilities accessible to community children 45 45 CLINICS PROVIDED BY SIPEF NUMBER OF CLINICS 2023 2022 Facilities accessible to employees 45 40 Facilities accessible to community 45 27 Day care facilities provided by SIPEF Schools accessible to community children Clinics accessible to community Lost Time Injury Frequency Rate (LTIFR) by country Work-related fatalities 297 SIPEF Integrated Annual Report 2023 Annex 2023 2022 SMALLHOLDER PROGRAMMES NUMBER OF SMALL HOLDERS NUMBER OF RSPO CERTIFIED SMALL HOLDERS PLANTED AREA IN HECTARES RSPO CERTIFIED PLANTED AREA IN TONNES NUMBER OF SMALL HOLDERS NUMBER OF RSPO CERTIFIED SMALL HOLDERS PLANTED AREA IN HECTARES RSPO CERTIFIED PLANTED AREA IN TONNES SIPEF GROUP Scheme smallholders 5 743 5 111 21 059 18 639 5 741 4 165 19 973 15 909 TOTAL GROUP 5 743 5 111 21 059 18 639 5 741 4 165 19 973 15 909 INDONESIA Smallholder cooperative (Koperasi) 1 814 1 182 5 666 3 245 1 805 231 4 594 (2) 493.7 Village smallholders (Kebun Masyarakat Desa) 283 283 587 587 291 289 572 608.7 TOTAL INDONESIA 2 097 1 465 6 253 3 832 2 096 520 5 166 1 102 PAPUA NEW GUINEA Associated smallholders 3 646 3 646 14 807 14 807 3 645 3 645 14 807 14 807 TOTAL PAPUA NEW GUINEA 3 646 3 646 14 807 14 807 3 645 3 645 14 807 14 807 (1) Table updated to focus on scheme smallholders separately and RSPO planted areas. (2) Total planted area for scheme smallholders in Indonesia is updated as some unplanted areas were included in the previous reporting. 2023 2022 SMALLHOLDER PROGRAMMES NUMBER OF SMALL HOLDERS NUMBER OF RSPO CERTI FIED SMALL HOLDERS RSPO CERTIFIED PLANTED AREA IN TONNES NUMBER OF SMALL HOLDERS NUMBER OF RSPO CERTI FIED SMALL HOLDERS RSPO CERTIFIED PLANTED AREA IN TONNES INDONESIA Independent smallholders 2 522 30 60 2 622 30 60 TOTAL INDONESIA 2 522 30 60 2 622 30 60 (3) Table updated to focus on independent smallholders separately and RSPO planted areas. RESPONSIBLE SUPPLY CHAIN MANAGEMENT Oil palm smallholder programmes by country SIPEF scheme smallholders programme (1) SIPEF independent smallholders programme (3) 298 The connection to the world of sustainable tropical agriculture 299 SIPEF Integrated Annual Report 2023 Annex Other information about the Company Ter m The Company exists for an indefinite term. Capital Subscribed capital SIPEF has been granted ocial 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 2023 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. 300 The connection to the world of sustainable tropical agriculture Authorised capital The extraordinary general meeting of 14 June 2023 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 24 July 2023, the date of publication in the Appendices to the “Belgisch Staatsblad”, up to and including 23 July 2028. The extraordinary general meeting of 14 June 2023 decided that, if the Company receives an announce- ment 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 14 June 2023 up to and including 13 June 2026. At 31 December 2023 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. Treasury shares The extraordinary general meeting of 14 June 2023 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 24 July 2023, the date of publication in the Appendices to the Belgisch Staatsblad, up to and including 23 July 2028. 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 24 July 2023, the date of publica- tion in the Appendices to the Belgisch Staatsblad, up to and including 23 July 2026. The purchase and sale of own shares in 2023 are described in Note 22 of this integrated annual report. At 31 December 2023, SIPEF owns 180 000 treasury shares (1.70% of the total number of outstanding shares) which are reserved for the exercise of grant- ed and not yet exercised options. 301 SIPEF Integrated Annual Report 2023 Other information about the Company Documents available to the public Access to the information for the shareholders and website SIPEF has a website where shareholders can access all information on the Company. • www.sipef.com 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. Places where documents accessible to the public can be consulted 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 oce 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 avail- able for public inspection can be consulted at the Company’s registered oce. 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 oce. The annual reports of the three most recent finan- cial years and all other documents mentioned in this paragraph can be consulted on the Company’s website. 302 The connection to the world of sustainable tropical agriculture General Glossary Biochemical oxygen demand (BOD) -- The amount of oxygen needed by bacteria and microorganisms in an anaerobic environment to decompose organic matter. Chemical oxygen demand (COD) -- The amount of oxygen that can be consumed by reactions in a given volume of a solution, that measures oxidisable contaminants in surface water and wastewater. CDP -- CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. CIF Rotterdam -- Cost, Insurance and Freight 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. Code of conduct -- The SIPEF Code of Conduct contains the defined set of rules, principles, values and expectations for employees, set out by SIPEF for the Group to achieve responsible behaviour and integrity. Collective Bargaining Agreements (CBA) -- Collective Bargaining Agreements are legal contracts that regulate the terms and conditions of employees at work. Corporate governance -- The organisation and processes of the managing bodies that define the strategy and monitor its implementation. CPKO -- Crude Palm Kernel Oil is an edible plant oil derived from the kernel of the oil palm. 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 independent- ly 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. CSRD -- The Corporate Sustainability Reporting Directive is a European Union legislation that amends the existing Non- Financial Reporting Directive (NFRD), modernising and strengthening the requirements regarding the social and environmental information that companies falling within its scope must report on an annual basis. Double Materiality -- Double materiality is a concept that empha- sises the importance of reporting both the financial impacts of environmental, social and governance issues on a company and the company's impacts on society and the environment, ensuring a comprehensive view of a company's sustainability performance. Double materiality is required under the CSRD, as an assessment through which companies determine which material impacts, risks and opportunitites must be included in their non-financial reporting. EFB -- Empty Fruit Bunches are the remains of the Fresh Fruit Bunches (FFB) after the fruit has been removed for palm oil pressing. ESG -- Environment, Social and Governance. ESRS -- The European Sustainability Reporting Standards (ESRS) set out the ocial sustainability reporting requirements that EU companies falling in scope of the CSRD must follow. EUDR -- The European Union Deforestation Regulation (EUDR) is an EU regulation on deforestation free products. EU Taxonomy -- EU Taxonomy is the regulation that determines which investments can be classified as ‘green’ and which contribute to the realisation of the EU Green Deal. The clas- sification is based on technical screening criteria (TSC) and minimum criteria for the avoidance of significant harm (‘DNSH’ or 'Do No Significant Harm’). 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 -- Free on Board is the selling price indicating that the seller pays for the transportation of the goods to the port of shipment 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. 303 SIPEF Integrated Annual Report 2023 Glossary Forest 500 -- Forest 500 identifies the 350 companies and 150 financial institutions with the greatest exposure to tropical deforestation risk, and annually assesses them on the strength and implementation of their deforestation and human rights commitments. FPIC -- Free, Prior and Informed Consent 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 aect them or their territories. GE -- Glycidyl esters are contaminants formed during food produc- tion and preparation at high temperatures. GHG -- Greenhouse gases are gases present in and/or emitted into the Earth's atmosphere, including among others, carbon dioxide and methane, that contribute to the greenhouse eect and can lead to changes in temperature. GHG emissions - scope 1 -- All direct emissions from sources that are owned or controlled by the Company (e.g. combustion of fuel and natural gas). GHG emissions - scope 2 -- All indirect emissions from the production of electricity that is purchased by the Company. Scope 2 emis- sions physically occur in the installation where the electricity is generated. GHG emissions - scope 3 -- All indirect emissions from activities of a company occurring in its value chain, such as emissions from the production of sourced products (upstream) or from products, services or projects sold by the Company (downstream). GLOBALG.A.P. -- This 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 is an independent internation- al organisation that has pioneered sustainability reporting since 1997. The GRI helps businesses and governments worldwide understand and communicate their impact on critical sustain- ability 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. HCS -- High Carbon Stock. 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 deforest- ation in the tropics, while ensuring the rights and livelihoods of local peoples are respected. HCV -- The High Conservation Value concept was originally devel- oped by the Forest Stewardship Council (FSC) in 1999 for use in forest management certification. In 2005, the HCV Network (HCVN, formally 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. HGU -- Hak Guna Usaha is a cultivation licence issued by the Indonesian Government. Integrated landscape approach -- This approach uses HCV-HCSA assessment, including FPIC , to distinguish areas for conserva- tion from degraded areas that have potential for development. Inti -- The nucleus estate of a plantation company in Indonesia is referred to as inti. They are stated as ‘own’ in the Group pro- duction figures. IP -- Sustainable palm oil from a single identifiable certified source, which is kept separately from ordinary palm oil throughout the supply chain. A mill is deemed to be Identity Preserved 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 dierent management strategies and practices to grow healthy crops and minimise the use of pesticides. 304 The connection to the world of sustainable tropical agriculture 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. ISPO -- The Indonesian Sustainable Palm Oil system is a pol- icy adopted by the Ministry of Agriculture on behalf of the Indonesian Government. The aims are to improve the compet- itiveness of Indonesian palm oil in the global market; reduce GHG emissions; 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. 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 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. MOAH -- Mineral Oil Aromatic Hydrocarbons. MOSH -- Mineral Oil Saturated Hydrocarbons. PK -- The Palm Kernel is the edible seed of the oil palm fruit. PKO -- Palm Kernel Oil is an edible vegetable oil derived from the kernel of the oil palm fruit. PKWT -- Perjanjian Kerja Waktu Tertentu (Bahasa Indonesia: Provision of Work, Time Certain; labour agreement) refers to long-term renewable contracts. 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. POME -- Palm Oil Mill Euent 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 busi- ness, 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. Reporting -- Relates to financial and non-financial reporting, with emphasis on material aspects. Risk management -- Risk management is the structured handling of risks (by audit & control, procedures, manuals, committees, etc.). 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 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. RSPO NPP -- The RSPO New Planting Procedure 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 NPP ensures that all indicators of the RSPO Principles and Criteria (P&C), related to new developments, are being implemented. 305 SIPEF Integrated Annual Report 2023 Glossary SDGs -- Sustainable Development Goals, 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 aect outcomes in others, and that development must balance social, economic and environmental sustainability. SOP -- Standard Operating Procedures are 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 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. Total suspended solids (TSS) -- The dry weight of suspended particles in a sample of water that can be trapped by a filter. ZSL -- Zoological Society of London is a science-driven conservation charity, working to restore wildlife in the United Kingdom and around the world. 3-MCPD -- 3-monochloropropane-1,2-diol is a common contaminant formed in heat-processed fat-containing foods from glycerol or acyl glycerides in the presence of chloride ions. 3-MCPDE are the esters formed during the same process. 306 The connection to the world of sustainable tropical agriculture Finance IFRS Terminology AC -- Amortised Cost (AC) is one of the three classification categories for financial assets under IFRS 9. 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 (palm and rubber trees, 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. Capital expenditure -- Cash paid for the acquisition of tangible and intangible assets presented in cash flows from investing activ- ities, and cash paid on the lease liabilities (excluding interests paid), presented in cash flows from financing activities. 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]. FVOCI -- Fair Value through Other Comprehensive Income (FVOCI) is one of the three classification categories for financial assets under IFRS 9. FVPL -- Fair Value through Profit or Loss (FVPL) is one of the three classification categories for financial assets under IFRS 9. GAAP -- The Generally Accepted Accounting Principles (GAAP) are a set of accounting rules, standards, and procedures issued and frequently revised by the Financial Accounting Standards Board (FASB). IAS -- International Accounting Standards. IFRS -- International Financial Reporting Standards are a set of accounting rules adopted by the European Union for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world. The IFRS are issued by the London-based Accounting Standards Board (IASB) and address record keep- ing, account reporting, and other aspects of financial reporting. Since 2005, all publicly listed companies within the European Union need to comply with these standards in their external financial reporting. Investments -- Investments is the amount paid for the acquisition of ‘intangible assets’ and ‘property, plant and equipment’. Reference is made to the consolidated cash flow from investing activities. IRS -- Interest Rate Swap. Joint ventures -- Entities that are controlled jointly. These companies are consolidated following the equity method. KUSD -- Rounded o of financial figures to the nearest thousand in United States dollar. Level 1 -- 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 -- 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 -- Level 3 inputs are unobservable inputs for the asset or liability. Materiality -- Organisations are faced with a wide range of topics on which they could report. The relevant topics are those that may reasonably be considered important for reflecting the organisation’s economic, environmental, and social impacts, or influencing the decisions of stakeholders, and therefore potentially merit inclusion in an annual report. Materiality is the threshold at which topics become suciently important that they should be reported. 307 SIPEF Integrated Annual Report 2023 Glossary Net financial position/debt -- Cash and cash equivalents + other investments and deposits - interest bearing financial debts at more than one year - interest bearing financial debts within the maximum of one year -. It is a key measure of the strength of the Group’s financial position and is widely used by credit rating agencies. OCI -- Other Comprehensive Income. Revenues, expenses, gains, and losses that are excluded from net income on the income statement. Segment -- A segment is an aggregation of operating activity lines to report on. More information about the dierent SIPEF segments and their nature can be found in the financial statements of this Integrated Annual Report. SPA -- Sale and Purchase Agreement. Subsidiaries -- Fully consolidated entities under SIPEF control. USD -- The United States dollar is the legal tender currency of the United States, and also serves as a global reserve currency in international trade and financial markets. WACC -- Weighted Average Cost of Capital. Financial performance measures EBIT -- Earnings Before Interest and Taxes. Operating results + profit/loss from equity companies. EBITDA -- Earnings Before Interest and Taxes, Depreciation, and Amortisation. EBIT + depreciation and additional impairments/ increases on assets. Market capitalisation -- Closing price x total number of outstanding shares. REBITDA -- Recurring Earnings Before Interest, Taxes, Depreciation, and Amortisation. EBITDA – exceptional items. Working capital -- Inventories + trade receivables + other receivables + recoverable taxes - trade payables - payables taxes - other payables. 308 The connection to the world of sustainable tropical agriculture Responsible persons Responsibility for the financial information François Van Hoydonck managing director Bart Cambré chief financial ocer Declaration of the persons responsible for the financial statements and for the management report 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 2023 were drawn up in accordance with the ‘International Financial Reporting Standards’ (IFRS) and pro- vide an accurate picture of the consolidated fi- nancial position and the consolidated results of the SIPEF group and its subsidiary companies that are included in the consolidation. the financial report provides an accurate over- view of the main events and transactions with aliated parties, which occurred during the financial year 2023 and their eects on the finan- cial position, as well as a description of the main risks and uncertainties for the SIPEF group. Statutory Auditor EY Bedrijfsrevisoren BV Represented by Christoph Oris and Wim Van Gasse, Borsbeeksebrug 26 2600 Antwerpen (Berchem) Belgium 309 SIPEF Integrated Annual Report 2023 For further information SIPEF 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 Geïntegreerd Jaarverslag is ook verkrijgbaar in het Nederlands. Translation: this Integrated 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 eort to avoid any discrepancies between the dierent language versions. However, should such discrep- ancies exist, the Dutch version will take precedence. The ocial Integrated 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 unocial versions of the Integrated 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 310 The connection to the world of sustainable tropical agriculture 311 SIPEF Integrated Annual Report 2023 www.sipef.com 549300NN3PC8KDD43S242023-12-31549300NN3PC8KDD43S242022-12-31549300NN3PC8KDD43S242023-01-012023-12-31549300NN3PC8KDD43S242022-01-012022-12-31549300NN3PC8KDD43S242021-12-31549300NN3PC8KDD43S242022-12-31ifrs-full:IssuedCapitalMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:IssuedCapitalMember549300NN3PC8KDD43S242023-12-31ifrs-full:IssuedCapitalMember549300NN3PC8KDD43S242022-12-31ifrs-full:SharePremiumMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:SharePremiumMember549300NN3PC8KDD43S242023-12-31ifrs-full:SharePremiumMember549300NN3PC8KDD43S242022-12-31ifrs-full:TreasurySharesMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:TreasurySharesMember549300NN3PC8KDD43S242023-12-31ifrs-full:TreasurySharesMember549300NN3PC8KDD43S242022-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300NN3PC8KDD43S242023-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300NN3PC8KDD43S242022-12-31SIP:RetainedEarningsAndOtherReservesMember549300NN3PC8KDD43S242023-01-012023-12-31SIP:RetainedEarningsAndOtherReservesMember549300NN3PC8KDD43S242023-12-31SIP:RetainedEarningsAndOtherReservesMember549300NN3PC8KDD43S242022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300NN3PC8KDD43S242023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300NN3PC8KDD43S242022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300NN3PC8KDD43S242023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300NN3PC8KDD43S242022-12-31ifrs-full:NoncontrollingInterestsMember549300NN3PC8KDD43S242023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember549300NN3PC8KDD43S242023-12-31ifrs-full:NoncontrollingInterestsMember549300NN3PC8KDD43S242021-12-31ifrs-full:IssuedCapitalMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:IssuedCapitalMember549300NN3PC8KDD43S242021-12-31ifrs-full:SharePremiumMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:SharePremiumMember549300NN3PC8KDD43S242021-12-31ifrs-full:TreasurySharesMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:TreasurySharesMember549300NN3PC8KDD43S242021-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300NN3PC8KDD43S242021-12-31SIP:RetainedEarningsAndOtherReservesMember549300NN3PC8KDD43S242022-01-012022-12-31SIP:RetainedEarningsAndOtherReservesMember549300NN3PC8KDD43S242021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300NN3PC8KDD43S242021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300NN3PC8KDD43S242021-12-31ifrs-full:NoncontrollingInterestsMember549300NN3PC8KDD43S242022-01-012022-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:USDxbrli:sharesiso4217:USDxbrli:shares
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.