Swiss Water Decaffeinated Coffee : 2022 Annual Information Form

SWISS WATER DECAFFEINATED COFFEE INC.

Annual Information Form

For the Year Ended December 31, 2022

March 16, 2023

SWISS WATER DECAFFEINATED COFFEE INC.
2022 Annual Information Form
TABLE OF CONTENTS
TABLE OF CONTENTS	2
CORPORATE STRUCTURE	3
GENERAL DEVELOPMENT OF THE BUSINESS	3
DESCRIPTION OF THE BUSINESS	4
General Overview of Swiss Water's Business	4
The Swiss Water® Process	5
Industry Overview	6
Competitive Strengths	7
Business Strategy	8
Customers and Markets	9
Marketing and Promotion	10
Competition	11
Production	11
Raw Materials	13
Employees and Labour Relations	13
Sustainability and environmental and social consciousness	14
Intellectual Property	15
Capital Expenditures	16
Borrowings	16
Risks Factors	18
DIVIDENDS AND DISTRIBUTION	27
CAPITAL STRUCTURE	27
MARKET FOR SECURITIES	28
DIRECTORS AND OFFICERS	29
AUDIT COMMITTEE	33
CONFLICTS OF INTEREST	35
PROMOTERS	35
TRANSFER AGENT AND REGISTRAR	36
INTERESTS OF EXPERTS	36
ADDITIONAL INFORMATION	36
FORWARD LOOKING STATEMENTS	36
APPENDIX: AUDIT COMMITTEE TERMS OF REFERENCE	38

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SWISS WATER DECAFFEINATED COFFEE INC.

2022 Annual Information Form

CORPORATE STRUCTURE

Swiss Water Decaffeinated Coffee Inc. ("Swiss Water" or the "Company"), is a company amalgamated under the Canada Business Corporations Act and its common shares are listed on the Toronto Stock Exchange under the symbol 'SWP'. The Company's registered office is located at 7750 Beedie Way, Delta, British Columbia, V4G 0A5, Canada.

Swiss Water is a result of an amalgamation, which occurred on September 28, 2018, between Ten Peaks Coffee Company Inc. ("Ten Peaks") and its 100% owned subsidiary, Swiss Water Decaffeinated Coffee Company Inc. ("SWDCC"). At the time of the amalgamation, the Company's symbol on the Toronto Stock Exchange was changed from TPK to SWP.

Ten Peaks resulted from a reorganization (the "Reorganization") effective January 1, 2011, pursuant to a plan of arrangement (the "Arrangement") involving, among others, Ten Peaks, Swiss Water Decaffeinated Coffee Income Fund ("the Fund") and SWDCC. In 2011, in response to changes to the legislation governing the taxation of income trusts which made the income trust form of structure less advantageous, the Fund converted by way of the Arrangement, to a corporation, Ten Peaks, thereby transitioning from an income trust structure to a corporate structure. Pursuant to the Arrangement, all of the Fund's then outstanding units were exchanged, on a one-for-one basis, for common shares of Ten Peaks. As part of the Arrangement, the Fund was amalgamated into Ten Peaks and all of the Fund's assets and liabilities were assumed by Ten Peaks. Following the Arrangement, the common shares of the Company began trading on the Toronto Stock Exchange under the symbol TPK.

Information herein with respect to Swiss Water includes information in respect of the Fund prior to completion of the Reorganization and Arrangement to the extent applicable unless the context otherwise requires. In addition, references to "common shares" and "shares" should be read as references to "units" for periods prior to January 1, 2011.

Intercorporate Relationships

Swiss Water is the parent company of three wholly-owned subsidiaries: Seaforth Supply Chain Solutions Inc. ("Seaforth") which was incorporated under the Canada Business Corporations Act; Swiss Water Decaffeinated Coffee Company USA, Inc. ("SWUS") which was incorporated under the laws of the State of Washington; and Swiss Water Decaffeinated Coffee Europe SARL ("SWEU") which was incorporated under the laws of France. Swiss Water and Seaforth businesses operate in the cities of Burnaby and Delta, British Columbia, Canada; SWUS operates in Seattle, Washington, USA; and SWEU operates in Bordeaux, France.

GENERAL DEVELOPMENT OF THE BUSINESS

Swiss Water and its Subsidiaries

Swiss Water Decaffeinated Coffee Inc. is the Canadian parent company, and its primary purpose is the production of chemical-free decaffeinated coffee. It is supported by its subsidiaries, Seaforth which manages coffee storage and coffee handing, while SWUS and SWEU manage the sales and marketing functions of the business.

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SWISS WATER DECAFFEINATED COFFEE INC.

2022 Annual Information Form

Swiss Water Decaffeinated Coffee

Swiss Water exclusively owns the Swiss Water® trademark and operates a decaffeination business using the Swiss Water® Process. The business of decaffeination using the Swiss Water® Process was established over thirty years ago.

Swiss Water is the primary operating entity and its business has not changed substantially over the years. Swiss Water's primary business segment is the chemical free decaffeination of green coffee utilizing its proprietary Swiss Water® Process. As described below, Swiss Water decaffeinates coffee owned by customers under toll arrangements (its "toll" business) and also buys its own premium quality Arabica coffee beans, which it decaffeinates and sells to the specialty coffee trade (its "non-toll" or "regular" business).

The Company's second, newly constructed facility, in Delta, BC, was completed in 2020. It houses one newly constructed, state-of-the-art Swiss Water® Process production line, and this line completed its first production run of commercial-grade coffee in September 2020. The Company is currently in the construction stage of a second production line at its Delta location, which is expected to be completed and fully commissioned in towards the end of Q3 2023.

Seaforth Supply Chain Solutions

The Company's Seaforth subsidiary began its activities in February 2012 and it provides green coffee handling and storage services to coffee importers and coffee roasting companies who receive or store green coffee in the Metro Vancouver area. Swiss Water is Seaforth's largest customer. Seaforth employs 24 people and operates out of one leased warehouse in the city of Delta, British Columbia, Canada. As at the date of this report, Seaforth's operations were not material to Swiss Water's overall performance or operations, as such, the following section, "Description of the Business", focuses on Swiss Water's business.

Swiss Water USA and Swiss Water Europe sales and marketing

The Company's SWUS subsidiary acts as Swiss Water's marketing and sales subsidiary. In 2019, Swiss Water incorporated the SWEU subsidiary with the purpose of expanding growth opportunities in the European market. As of the date hereof, neither SWUS nor SWEU have significant assets.

DESCRIPTION OF THE BUSINESS

General Overview of Swiss Water's Business

Swiss Water, headquartered in Delta, British Columbia, Canada, operates two specialized 100% chemical free water process coffee decaffeination plants. Swiss Water's operations are carried out of two leased facilities in BC, Canada. The first facility is located in Burnaby, which comprises approximately 38,000 square feet of space and houses two Swiss Water® Process production lines. The second facility is in Delta, BC and it was completed in 2020. It comprises approximately 96,000 square feet of space on 5.9 acres of land. The Delta location houses one newly constructed, state-of-the-art Swiss Water® Process production line, and this line completed its first production run of commercial-grade coffee in September 2020. The Company is currently in the construction stage of a second production line at its Delta location, which is

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SWISS WATER DECAFFEINATED COFFEE INC.

2022 Annual Information Form

expected to be completed and fully commissioned in 2023.

Swiss Water® Process and Swiss Water's decaffeination plants are certified organic by the Organic Crop Improvement Association Canada. Swiss Water's decaffeinated coffee offering is certified Kosher and this certification is verified on an annual basis by the Orthodox Rabbinical Council of BC. Swiss Water's decaffeinated coffee is also Halal certified, and this certification is verified by Montreal Certification Authority, World Halal Food Council. Swiss Water's Quality Management System is confirmed by NSF International to meet FSMS (Food Safety Management System) and complies with the ISO FSSC 22000 standards requirements. The Company offers Fairtrade certified decaffeinated, Rainforest Alliance, UTZ and 4C certified coffees. The Swiss Water® Process is also the world's only consumer branded decaffeination process and enjoys substantial recognition in the specialty coffee trade and with consumers.

Swiss Water® Process decaffeinated green coffees are sold to many of North America's leading specialty roaster retailers, specialty coffee importers, and commercial coffee roasters. Swiss Water also sells coffees internationally through regional distributors and its target market is the premium specialty coffee segment.

Swiss Water has 86 full-time employees, all of whom are employed in Canada. Swiss Water's subsidiary, SWUS, has three full-time employees based in the United States, while SWEU has one full-time employee based in France.

The Swiss Water® Process

The Swiss Water® Process uses a unique, proprietary, multi-stage process that maintains the flavor of green coffee beans. The process has been developed through years of refinement and capital investment and requires substantial technological and operational expertise. The Swiss Water® Process uses fresh water from British Columbia's coastal mountains.

The Swiss Water® Process starts with premium quality green coffee beans, which are soaked in water to saturate the water with soluble coffee solids including caffeine. This liquid is known as "green coffee extract" or "GCE". The Company's sustainable process is built around natural, renewable elements. The Company creates our GCE just once, with fresh water and all the soluble solids within green, unroasted coffee beans. Next, the GCE is decaffeinated with activated carbon, which is specially formulated to adsorb virtually nothing but caffeine. For decaffeination, green coffee is immersed in GCE until there is no more than 0.1% of caffeine remaining in the coffee beans. Over time, this effectively decaffeinates the green coffee, as caffeine migrates naturally from the coffee beans into the GCE. The caffeine is then removed from the GCE through a proprietary carbon filter system, while the carbon is regenerated to remove all caffeine so that it can be reused. Since the GCE is rich in soluble coffee solids such as amino and chlorogenic acids, only the caffeine migrates. This process allows the caffeine to be removed with minimal disruption of flavor chemistry.

The Swiss Water® Process is a chemical free method that uses only pure water and carbon, as opposed to chemical decaffeination methods that use methylene chloride or ethyl acetate. Because Swiss Water does not add chemicals, more than 80% of the water used in its process can be safely returned as clean water to local waterways. The lack of harmful chemicals also keeps the Company's employees safer, mitigated environmental contamination risk, and keeps potentially harmful residue out of the final cup of coffee.

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