Sligro Food N : Remuneration Report

Remuneration Report 2022

2 Sligro Food Group 2022 annual report

Supervisory Board

Remuneration Report

This report explains how the remuneration policy approved by the General Meeting of Shareholders has been put into practice over the past financial year (2022), and it details the remuneration that has been paid to or accrued by the individual members of the Executive Board. Members of the Executive Board and Supervisory Board are considered key Group staff members.

Composition and results of the remuneration policy

The remuneration policy is published on the company website. There were no changes to this policy in 2022. The details of the Executive Board's remuneration are given each year in the financial statements. The key points of the remuneration policy are that:

• the policy extends to the remuneration of both the Executive Board and the Supervisory Board;
• the Supervisory Board drafts the policy and the General Meeting of Shareholders adopts it;
• the remuneration policy must be put to the General Meeting of Share- holders for re-adoption within four years of adoption of the existing policy;
• the Works Council is given the opportunity to provide its formal opinion to the Supervisory Board on the remuneration policy to be adopted;
• the policy provides the framework for attracting qualified candidates for the Executive Board;
• the remuneration policy must be competitive while also reasonable in comparison to that of the other members of management and the pay and benefits package of the other employees in the company must also be taken into account. The starting point is competitive remuneration for members of the Executive Board and other employees.

The remuneration package comprises:

• a fixed annual salary;
• participation in a short-term bonus scheme;
• participation in a long-term bonus scheme;
• participation in a share option scheme;
• pension accrual and other fringe benefits.

Remuneration of Executive Board members in office in 2022 that was charged to the result amounted to €2,019 thousand (2021: €1,294).

At the General Meeting of Shareholders held on 23 March 2022, the Remuneration Report for 2021 was put to an advisory vote. Around 97% of the votes were in favour of the Remuneration Report for 2021, which the Executive Board and the Supervisory Board considered to be a significant vote of confidence in the operation of the remuneration policy. As was discussed at the General Meeting of Shareholders on 23 March 2022, due to greater insight into certain elements of the remuneration policy,

a proposal for the amendment of the remuneration policy will be presented to the shareholders for approval at the 2023 General Meeting of Share­ holders. Given the contents of the Remuneration Report for 2022, it may be concluded that the total amount of remuneration is in line with the remuneration policy and contributes to the long-term performance of the company.

Owing to the influence of COVID-19 on the Group's operating activities and in order to comply with the conditions of the NOW wage subsidy scheme1), the Executive Board elected not to award the short-term and long-term bonus due to the Executive Board members in respect of 2021. In 2022, COVID-19 did not have a material influence on operating activities and the Group made no further use of the NOW wage subsidy scheme.

1. Tijdelijke Noodmaatregel Overbrugging Werkgelegenheid (Dutch wage subsidy scheme)

3 Sligro Food Group 2022 annual report

Supervisory Board

1. See website: www.sligrofoodgroup.nl
   - Investor relations > AGM > AGM 23 March 2022 > Presentation > sheets 50 to 53

3 On 1 January 2022, the fixed salary was increased by 10% following the three-yearly benchmark study. In the years 2020 and 2021, the increase granted during the year amounted to the lowest increment used for that group of employees. This increment was zero in 2021. The fixed salary was, however, indexed for pension compensation and there was a change to the age-related scale.

Consequently, there were no deviations from the remuneration policy or the decision-making process regarding the remuneration policy this year. Executive Board and Supervisory Board remuneration is not charged to subsidiaries. In 2022, a negligible management fee was charged to Sligro-MFS Belgium N.V. for acquisition activities.

The remuneration can be broken down as follows:

			Koen Slippens
x €1,000		2022		2021
Fixed pay	603	551
Short-term bonus	157	0
Long-term bonus	157	0
Pension premium and compensation	170	155
Value of options	0	0
Statutory social security costs		10		10
Total		1,097		716

Fixed pay

The fixed annual pay is reviewed in a three-year cycle, meaning that the remuneration package is benchmarked against a reference group of around twenty companies once every three years, with the help of an external expert. This was last done in 2021. The benchmark study performed was presented at the General Meeting of Shareholders2) of 2022.

Based on the benchmark study results from 2021, the fixed remuneration for both Executive Board members was increased by 10% as per

1 January 20223). In the years 2020 and 2021, an increase was granted during the year as per the collective labour agreement/general pay increase (lowest increment used for Group employees). As a result, the average annual pay rise awarded over the 2020-2022 period is 4.27%:

2020-2022		Average		2022	2021	2020
Increase3)		4.27%		10.00%		0.00%		2.80%

	Rob van der Sluijs					Total
2022	2021	2022	2021
525		479		1,128		1,030
136		0	293		0
136		0	293		0
115		89	285		244
0		0	0		0
	10		10		20		20
	922		578		2,019		1,294

4 Sligro Food Group 2022 annual report

Short-term and long-term bonus

There is one bonus scheme for the Executive Board that offers both a short- term cash bonus and a long-term bonus in the form of shares. The short- term and the long-term components of the variable remuneration are structured identically. Half of the variable remuneration depends on the extent to which the annual budgeted profit target set by the Supervisory Board has been achieved, and the other half depends on specific, short- term targets set annually by the Supervisory Board on the recommendation of the Remuneration and Appointments Committee. The short-term and long-term bonuses are both awarded based on performance in the year in question, albeit that quality-related targets have a longer horizon, as they are linked to programmes that contribute to the company's long-term strategy and value creation. Bonuses are paid out in the following year.

When 100% of the 'at-target' level is met, a short-term bonus is paid out in cash, amounting to 30% of the fixed salary, as well as a long-term bonus of 30% of the fixed salary, which (after deduction of tax) must be used to purchase Sligro Food Group shares. These shares are locked up for a period of five years (four years up to 2019).

Bonus structure for 100% at target:

	Budgeted
	net profit		Quality targets		Total	Payment
Short term	15%	15%		30%		In cash
Long term	15%		15%			30%		In shares
Total	30%		30%			60%

The budgeted profit target and other targets were set based partly on remuneration scenario analyses. Each percentage point by which the actual profit falls short of the profit target reduces both the short-term and long-term component of the bonus by 1.5 percentage points. No bonus will be paid if the actual profit is below 90% of the target. Each percentage point by which the actual profit exceeds the annual budgeted profit increases both the short-term and long-term component of the bonus by half a percentage point. Although there is no cap on the amount by which the target can be exceeded, there is a dampening effect.

Supervisory Board

5 Sligro Food Group 2022 annual report

The combination of ambitious targets, correction for excessive one-off items and the dampening mechanism when the target is exceeded has in the past never led to extensive exceeding (>10%) of the bonuses.

Quality targets have been set for 2022 for which the bonus percentage is determined on the basis of achieving:

1. ERP implementation: first version of the new ERP landscape to go live in Antwerp, Ghent and Liège in 2022.
2. Set-upand structure ready to report on 2022 in accordance with the NFRD, CSRD and EU Taxonomy standards in the 2022 report.
3. Elaboration of Sligro Food Group's digital transformation vision with step-by-step plans on an organisational (structure, people and skills), process, data and technical level.
4. 2025 CSR plan completed, embraced and upheld in the organisation, including step-by-step plans to achieve our goals, including the transition to electric transport in 2030.

Result on bonuses

In 2022, the variable remuneration was 86% of the 'at-target' level. (2021: 143%).

In 2021, COVID-19 had a major influence on Sligro Food Group's operations, revenues and results. For these reasons, and because use was made of the NOW wage subsidy scheme in the Netherlands, the Executive Board has waived its right to the short-term and long-term bonuses awarded in 2021 (as was also the case for 2019 and 2020).

The main reason why the at-target level was not met was non-achievement of the qualitative target in respect of the ERP implementation.

The site in Antwerp was the first to go live with the new ERP landscape in November 2022. This was a substantial milestone after a long and sometimes difficult build-up. However, the target that had been set for this year was more ambitious, and was not met.

Supervisory Board

With the advent of the new reporting rules on sustainability, a substantial change is needed to the design and structure of reporting and the framework that underlies it. The impact and scope of these new rules has been taken very much to heart and a brisk start was made with all necessary preparations to achieve compliance on time.

Digitisation is a topic that has been on the agenda at Sligro Food Group for several years. In its strategy, Sligro Food Group recognises that changes in this area are taking place at an ever-growing pace and that digitisation is set to play a dominant role in an increasing number of business areas and processes. These changes are not merely technical: they also have consequences for the organisational set-up, business processes and data structures that it works with. The vision that is now in place and the step-by-step plans in place to achieve it in all these areas are robust and reinforce the long-term aims in this field.

Sustainability is a topic that is widely embraced within the organisation. In 2022, an overarching plan covering all parts of the business was drawn up and partly enacted with a view to achieving long-term sustainability goals.

Although, under the impetus of new regulations, targets in a range of areas will be further refined over the years to come, Sligro Food Group is not waiting to develop initiatives to make structural improvements on the level of people, planet and product range. The establishment of an in-house transport business is under way and the first 25 electric vehicles have been purchased. At the end of 2023, Sligro Food Group and its transport partners together aim to have some 75 electric vehicles on the roads, accounting for over 10% of its fleet.

Target		Result			Allocation
ERP implementation		Not achieved	0.0
ESG legislation structure	Achieved	1.0
Digital transformation	Achieved	1.0
CSR plan 2025	Achieved		1.0
Total				3.0