Swiss Water Decaffeinated Coffee : 2023 Annual Information Form

SWISS WATER DECAFFEINATED COFFEE INC.

Annual Information Form

For the Year Ended December 31, 2023

March 13, 2024

SWISS WATER DECAFFEINATED COFFEE INC.
2023 Annual Information Form
TABLE OF CONTENTS
TABLE OF CONTENTS	2
CORPORATE STRUCTURE	3
GENERAL DEVELOPMENT OF THE BUSINESS	4
DESCRIPTION OF THE BUSINESS	5
General Overview of Swiss Water's Business	5
The Swiss Water® Process	5
Industry Overview	6
Competitive Strengths	8
Business Strategy	9
Customers and Markets	10
Marketing and Promotion	11
Competition	12
Production	12
Raw Materials	13
Employees and Labour Relations	14
Environment and Social Responsibility	14
Intellectual Property	16
Capital Expenditures	16
Borrowings	17
Risks Factors	19
DIRECTORS AND OFFICERS	26
DIVIDENDS AND DISTRIBUTION	31
CAPITAL STRUCTURE	32
MARKET FOR SECURITIES	32
AUDIT COMMITTEE	33
CONFLICTS OF INTEREST	35
PROMOTERS	35
TRANSFER AGENT AND REGISTRAR	35
INTERESTS OF EXPERTS	35
ADDITIONAL INFORMATION	36
FORWARD LOOKING STATEMENTS	36
APPENDIX: AUDIT COMMITTEE TERMS OF REFERENCE	38

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SWISS WATER DECAFFEINATED COFFEE INC.

2023 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, Canada, V4G 0A5.

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 was established through a strategic reorganization effective January 1, 2011 (the "Reorganization"), pursuant to a plan of arrangement (the "Arrangement") involving key entitles, including, Ten Peaks, Swiss Water Decaffeinated Coffee Income Fund ("the Fund") and SWDCC. In response to legislative changes governing the taxation of income trusts in 2011, which rendered the income trust structure less advantageous, the Fund, through the Arrangement, transitioned from an income trust structure to a corporate framework.

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.

The information herein pertaining to Swiss Water includes details about the Fund before the completion of the Reorganization and Arrangement, to the extent applicable, unless stated otherwise in the context. Furthermore, any mention of "common shares" and "shares" should be read as "units" for periods preceding January 1, 2011, reflecting the terminology applicable during that timeframe.

Intercorporate Relationships

Swiss Water is the parent company of three wholly-owned subsidiaries: Seaforth Supply Chain Solutions Inc. ("Seaforth") established under the Canada Business Corporations Act; Swiss Water Decaffeinated Coffee Company USA, Inc. ("SWUS"), 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. The operations of Swiss Water and Seaforth are based in the city of Delta, British Columbia, Canada. SWUS conducts its activities in the USA, while SWEU operates in Bordeaux, France.

Swiss Water Decaffeinated Coffee Inc.

(Canada)

Swiss Water

Decaffeinated Coffee

Company USA, Inc.

(USA)

Swiss Water

Decaffeinated Coffee

Europe SARL

(France)

Seaforth Supply

Chain Solutions Inc.

(Canada)

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SWISS WATER DECAFFEINATED COFFEE INC.

2023 Annual Information Form

GENERAL DEVELOPMENT OF THE BUSINESS

Swiss Water and its Subsidiaries

Swiss Water Decaffeinated Coffee Inc. is the Canadian parent company, specializing in the production of chemical-free decaffeinated coffee. The Company's core focus revolves around ensuring the highest quality in the decaffeination process. This central objective is complemented by the support of its subsidiaries: Seaforth, responsible for the efficient management of coffee storage and handling operations; SWUS and SWEU, each managing sales and marketing functions of the business. This strategic alignment across its subsidiaries enables Swiss Water to deliver excellence at every stage of the coffee decaffeination, storage and distribution process.

Swiss Water Decaffeinated Coffee

Swiss Water exclusively owns the Swiss Water® trademark and operates a decaffeination business using the Swiss Water® Process, a chemical-free method of decaffeination. The business of decaffeination using the Swiss Water® Process was established nearly forty years ago.

Swiss Water, as the primary operating entity, has maintained a consistent business focus over the years. The core of its operations centers on the chemical-free decaffeination of green coffee, utilizing the proprietary Swiss Water® Process. Within this singular business segment, Swiss Water carries out the decaffeination process for coffee owned by customers under "toll" arrangements. Additionally, the Company procures its own premium quality Arabica coffee beans, which it decaffeinates and subsequently sells to the specialty coffee trade, as a part of the "non-toll" or "regular" business.

The Company's first state-of-the-art production line in Delta, British Columbia, was successfully completed in 2020, with its inaugural run of commercial-grade coffee in September 2020. In 2023, the Company finalized the construction of its second production line in Delta. Since the third quarter of 2023, this second production line has been fully operational, further enhancing the Company's capacity and efficiency in meeting the evolving demands of the market. Both Swiss Water® Process production lines were built using the latest technologies and equipment.

Seaforth Supply Chain Solutions

The Company's subsidiary, Seaforth, commenced operations in 2012, offering essential green coffee handling and storage services to coffee importers and roasting companies that either receive or store green coffee within the Metro Vancouver area. Swiss Water is the largest customer for Seaforth. Currently, Seaforth operates with a team of 22 employees, conducting its activities from a leased warehouse located in Delta, British Columbia.

As at the date of this Annual Information Form, Seaforth's operations were not material to Swiss Water's overall financial performance, as such, the subsequent section, "Description of the Business," predominantly focuses on the core business activities of Swiss Water.

Swiss Water USA and Swiss Water Europe sales and marketing

The Company's SWUS subsidiary operates as the dedicated marketing arm for Swiss Water. In 2019, Swiss Water expanded its presence by establishing the SWEU subsidiary, targeting growth opportunities in the

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SWISS WATER DECAFFEINATED COFFEE INC.

2023 Annual Information Form

European market. Both entities, SWUS and SWEU were created with the specific aim of capitalizing on the expanding markets in North America and Europe. As of the date of this Annual Information Form, neither SWUS nor SWEU holds significant assets.

DESCRIPTION OF THE BUSINESS

General Overview of Swiss Water's Business

Swiss Water, with its headquarters situated in Delta, British Columbia, Canada, manages a specialized 100% chemical-free water process coffee decaffeination facility. This facility, covering approximately 128,000 square feet on 5.9 acres of land, was completed in 2020. Within this property, two newly constructed, state-of-the-art Swiss Water® production lines are housed. The first production line was completed in 2020, and the second production line was completed during the third quarter of 2023.

Swiss Water® Process and the Swiss Water's decaffeination plant are certified organic by the Organic Crop Improvement Association Canada. Swiss Water's decaffeinated coffee offering also carries Kosher certification, annually verified by the Orthodox Rabbinical Council of BC. The Company's Halal certification is confirmed by the Montreal Certification Authority, World Halal Food Council. Swiss Water's Quality Management System is verified by NSF International to meet FSMS (Food Safety Management System) and aligns with ISO FSSC 22000 standards. The Company provides Fairtrade certified decaffeinated, Rainforest Alliance, UTZ, and 4C-certified coffees. The Swiss Water® Process, distinguished as the only consumer-branded decaffeination process globally, holds significant recognition within the specialty coffee trade and among consumers.

Swiss Water® Process decaffeinated green coffees are distributed to leading specialty roaster retailers, specialty coffee importers, and commercial coffee roasters throughout North America. Internationally, Swiss Water reaches customers via regional distributors, with a strategic focus on capturing the premium specialty coffee segment.

Swiss Water comprises a dedicated team of 79 full-time employees, all situated in Canada. Additionally, SWUS, its subsidiary in the United States, is supported by two full-time employees, while SWEU, the subsidiary in France, also has two dedicated full-time employees.

The Swiss Water® Process

The Swiss Water® Process uses a unique, proprietary, multi-stage process that maintains the flavor of green coffee beans. The 100% chemical-free 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. After the initial creation of the GCE, the GCE is continuously refreshed using fresh water on a regular basis. 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

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2023 Annual Information Form

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, mitigates environmental contamination risk, and keeps potentially harmful residue out of the final cup of coffee.

Swiss Water believes in the inherent sustainability of its organic-certified decaffeination process. Completely devoid of added chemicals, the Swiss Water® Process was created to provide an alternative to the various methods employed by competitors, which often rely on chemical solvents for decaffeination. This commitment underscores Swiss Water's dedication to providing a sustainable and chemical-free choice for decaffeination.

Industry Overview

The Coffee Industry

The United States is the largest coffee consuming country in the world and a key geographic market for Swiss Water. According to the National Coffee Association's ("NCA") 2023 US Coffee Data Trends Report, 63% of the population drinks coffee daily, making coffee the most consumed beverage, outpacing water, soft drinks, and tea.

Specialty coffees are premium varieties of coffees, particularly Arabica. Specialty coffee beverages include coffee brewed from high-quality coffee as well as coffee drinks such as espressos, cappuccinos, and lattes. The NCA study notes that a significant, 41% of the population, was drinking specialty coffee "in the past day".1

Decaffeinated Coffee

Of coffee drinkers, 7% drank decaffeinated coffee in the prior day, and 11% drank decaffeinated coffee in the past week.2

The NCA report indicates that younger consumers are driving the decaf drinking trend, with consumption in the 18-39 age group showing the strongest growth, with more than 13% having drank decaffeinated coffee in the past week. These same consumers are driving the growth of specialty coffee and new segments such as cold coffee.3 This is also the same segment of consumers driving the strong growth of the no/low-alcohol category, which has strong parallels with decaffeinated coffee, including the reasons

1. The National Coffee Association "National Coffee Data Trends, Specialty Coffee Report", 2023.
2. The National Coffee Association "National Coffee Data Trends, Specialty Coffee Report", 2023.
3. Studylogic U.S. Coffee Consumption Panel Data, 2018-2023.

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2023 Annual Information Form

for engagement in these categories to benefit the consumer's physical and mental health.

Decaffeinated coffee growth from 2019 to 2023 outpaced regular coffee (5-Year CAGR). Out-of-home consumption has been the growth engine for coffee, including decaffeinated coffee, leading up to the declaration of the COVID-19 pandemic, when At-Home consumption naturally increased due to Centres for Disease Control and World Health Organization guidance to stay at and work from home. In the second half of 2021, as vaccinations became more widespread, public health measures were lifted and consumers started to resume activities outside of the home, that trend started to reverse and continued through the end of 2023. The single-serve pod format continues to be a strong driver of growth for specialty decaffeinated coffee, as it allows consumers the ability to have one more cup of coffee in the afternoon.4 In Western Europe, where decaffeinated coffee represents 13% of cups consumed, the trends are similar.5

The market for decaffeinated coffee is divided into decaffeinated with and without the use of chemical solvents. According to statistics prepared by management, more than 60% of worldwide decaffeination capacity uses chemical decaffeination methods, including methylene chloride processing and ethyl acetate processing (sometimes called the "sugar cane" process). Direct chemical processing is the most prevalent method employed, whereby green coffee beans are soaked in these chemical solvents to remove caffeine. Global capacity is moving toward less chemical solvent based methods and more chemical free volume, reflecting the demands and preferences of consumers.

Most jurisdictions globally regulate the amount of permissible residual traces of the chemical solvent in the decaffeinated green coffee bean. In Japan and South Korea, methylene chloride is prohibited for use in the decaffeination process. In Canada, roasters must specify on coffee packaging if methylene chloride is used in the decaffeination process. In the U.S., the presence of methylene chloride in decaffeinated coffee has recently come under additional scrutiny. The U.S. Food and Drug Administration ("FDA") has filed two petitions by consumer advocacy groups requesting that the agency rescind approvals of four carcinogenic chemicals being used as food and/or color additives, which includes methylene chloride and specifically cites its use in coffee decaffeination.6 In addition, a bill has been proposed in California under the Food Safety Act that would prohibit methylene chloride use in the decaffeination of coffee7. Methylene chloride is a known carcinogen with the FDA having officially banned non-commercial paint strippers that contain methylene chloride after exposure to the chemical was linked to more than 60 deaths.8 The chemical also poses hazards to the environment and to workers. In 2017, a series of scientific journals published articles highlighting the risk of methylene chloride to the environment, specifically, its impact in slowing the regeneration of the ozone layer.9

1. Studylogic U.S. Coffee Consumption Panel Data, 2018-2023.
2. Studylogic Western Europe Coffee Consumption Panel Data, 2023.
3. Food Safety Magazine: FDA Files Petitions to Rescind Approvals for Four Carcinogenic Food, Color Additives; January 18, 2024
4. LegiScan: Legislative Counsel's Digest "California-2023-AB2066-Introduced, February 1, 2024
5. https://www.regulations.gov/docket?D=EPA-HQ-OPPT-2016-0231
6. New Scientist, "Ozone layer recovery will be delayed by chemical leaks", Fred Pearce, June 27, 2017

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SWISS WATER DECAFFEINATED COFFEE INC.

2023 Annual Information Form

Swiss Water decaffeinates coffees without the use of chemicals. Management believes that the Swiss Water® Process is one of only three third-party 100% chemical free water processes for coffee decaffeination-and that we are the only third party decaffeinator to ensure that neither methylene chloride nor ethyl acetate are introduced to any part of our process. Management anticipates that the market for chemical free decaffeination will continue to grow in the coming years, driven by the continued trend towards health consciousness, awareness of environmentally friendly practices, and demand for sustainability. According to the NCA, 66% of coffee drinking consumers state: "it is important to limit my caffeine intake". Consumer awareness of health-related issues is increasing the appreciation for food safety, food provenance, and healthier or "better for you" food options. Demand for organic coffee continues to grow and it is the most broadly purchased certification. 39% of consumers say they are more likely to buy coffee that is Certified Organic, and 59% of consumers say they're more likely to buy coffee if it is grown in an environmentally sustainable way.10 Furthermore, consumers are becoming increasingly aware of the presence of methylene chloride in many decaffeinated coffees as a result of significantly growing media coverage of this topic.11

Competitive Strengths

Swiss Water's competitive strengths include the following:

• 100% Chemical Free Method of Decaffeinating Green Coffee - Swiss Water's decaffeination production facilities are 100% chemical free, using only time, water, carbon and temperature to extract caffeine from green coffee. The vast majority of competitive decaffeination processes use chemicals such as methylene chloride or ethyl acetate to remove and produce caffeine as a by- product of the process. To our knowledge, there are only two other decaffeination companies globally that exclusively process without the use of chemicals-bothof which primarily service their parent company brands rather than sell to third party customers; all others are also offering chemical processing.12
• Consumer Branding - Swiss Water has been successful in establishing its brand as a leading chemical free processor of green decaffeinated coffee. Consumers and participants in the coffee trade are increasingly aware of the value of the chemical free Swiss Water® Process, which include its quality and taste. Management believes that there is significant potential to continue to broaden consumer awareness of the benefits of the Swiss Water® Process.
• The Growing Specialty Coffee Market & Organic Coffee market - The Swiss Water® Process produces decaffeinated green coffee that is targeted at the specialty coffee market. The significant growth in specialty coffee and specialty organic coffee over the past 20 years has created a customer base for higher quality and differentiated products that can be priced at a premium. Specialty decaf continues to grow at a higher rate than total coffee and total specialty coffee. To management's knowledge, only four other third party processers globally have Organic certification.

1. The National Coffee Association "National Coffee Data Trends", 2023
2. Meltwater Media Monitoring Service, Traditional Media measured by Reach, 2016-2023
3. LMC International Global Markets for Decaffeinated Coffee Report 2018

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2023 Annual Information Form

• Established Customer Base - The Swiss Water® Process has an established customer base in more than 60 countries around the globe, including some of North America's largest roasters, roaster retailers and leading coffee brands.
• Broad Distribution Channels - Green coffee decaffeinated using the Swiss Water® Process is sold through the coffee market's key distribution channels: roaster retailers, commercial roasters and coffee importers. This ensures that Swiss Water accesses all key segments of the specialty coffee trade and consumer coffee markets.
• Management Expertise - Swiss Water is highly regarded in the coffee industry for its senior management team's substantial experience, its close attention to consumer trends in the specialty coffee market, and its in-depth knowledge of green and roasted coffee. In particular, Swiss Water's intense focus on premium product quality and commitment to science-driven innovation as well as data-driven insights is well recognized.

Business Strategy

Swiss Water aims to maintain and enhance profitability and cash from operations by continuing to pursue the following business strategies:

• Offer Superior Quality, 100% Chemical Free Decaffeinated Coffees - Swiss Water supports its premium brand position by offering superior quality coffees. The process begins with the procurement of premium Arabica coffees, recognizing that the quality of the green coffee directly affects the quality of the finished product. Swiss Water then ensures the quality and integrity of the original green coffees are maintained throughout its proprietary production process, leveraging the HACCP (hazard analysis critical control points) system to manage its food safety and quality assurance programs. In addition, proprietary carbon management technology is used to capture caffeine while protecting the coffee's body and flavour characteristics. Crucially, because Swiss Water controls all aspects of caffeine removal, it can ensure that the process is 100% chemical free. Its carbon and green coffee extract never come into contact with methylene chloride or other harsh chemicals. Management believes that this is an important and relevant competitive distinction that underlies Swiss Water's chemical free positioning.
• Unused capacity to satisfy future growth - Our newly completed production assets are able to satisfy current demand and provide enough unused capacity to support our medium term growth ambitions. In addition, management is investigating alternatives available to further increase efficiency and throughput to increase capacity further.
• Continuously Improve the Production Process - Swiss Water is committed to continuous improvement throughout its production process, and to leading the coffee industry in the science of decaffeination. This dedication empowers Swiss Water to further enhance its proprietary process continually, ensuring the delivery of superior quality coffees to its customers. Through Six Sigma methodologies, statistical process controls, and lean manufacturing initiatives, Swiss Water has dramatically improved its production process, thereby improving production efficiencies while reducing defects. These advancements have generated tangible improvements in the quality of its coffees. Swiss Water® Process decaffeinated green coffees now more closely resemble regular green coffee, which makes it much easier to visually gauge the roast level and stage during the roasting process. Additionally, improvements to Swiss Water's proprietary

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carbon renewal process have resulted in notable improvements at the "cupping", or tasting, table. Swiss Water® Process coffees have better body and flavour due to better retention of chlorogenic and amino acids (naturally occurring acids and antioxidants in green coffee which form a key part of a coffee's taste profile).

• Create Consumer Demand by Developing Brand Awareness - Strong brand awareness levels, premium quality, and consumer demand encourage retailers to carry decaffeinated coffee products bearing the Swiss Water® Process brand name. Swiss Water strategically invests in regionally targeted initiatives designed to enhance awareness of the Swiss Water® Process brand and its chemical free proposition and to increase demand at the consumer level. These activities include cost effective, regionally targeted media; public relations; customer co-marketing;social media; and/or online communications and selling.
• Leverage Higher Margin Selling Proposition to Retailers - As health-awareand sustainability- focused consumers are willing to pay a premium for healthy food options, coffee retailers can improve their margins - particularly on a by-cupor by-drinkbasis - simply by switching to chemical free Swiss Water® Process coffees. This makes Swiss Water's sales proposition very attractive and is a key leverage point in its business development program with major roaster retailers and premium street retail accounts. In addition to higher margins, these retailers are ideally positioned to benefit from the significant value-addedelements of the Swiss Water® Process brand. These include Swiss Water's ongoing efforts to build brand awareness, consultative selling, extensive merchandising programs, and web-basedmerchandising material fulfillment and customer learning tools.
• Margin Improvement through Cost Management - Swiss Water is committed to the reduction of operational and overhead expenses during the period in which it is expanding its capacity. This commitment aims to generate additional cash flow, contributing to the attainment of the Company's financing goals.

Customers and Markets

Swiss Water's sole business segment is the 100% chemical-free decaffeination of green coffee. The United States constitutes its primary geographic market, followed by Canada and other international markets. In the fiscal year ending December 31, 2023, 50 % (compared to 49% in 2022) of sales were to customers in the United States, 29% (compared to 26% in 2022) to Canada, and the remaining 21 % (compared to 25% in 2022) to other countries.

Toll Processing

In 2023, 27% (2022: 29%) of Swiss Water's product volume was processed under toll arrangements whereby Swiss Water charges a fee for the decaffeination of green coffee belonging to its customers (its "toll" business). Swiss Water does not take title to the green coffee it decaffeinates under toll arrangements, and therefore the value of this coffee does not form part of Swiss Water's inventory, revenue or cost of sales. Revenue from toll arrangements consists entirely of processing revenue.

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