KWS Group
Annual Report 2020

Plain-text annual report

1 2 0 2 | 0 2 0 2 t r o p e R l a u n n A Annual Report 2020 | 2021 KWS in Figures The KWS Group (in € millions) 2020/2021 2019/2020 2018/2019 2017/2018 2016/2017 2015/2016 Net sales and income Net sales EBITDA EBIT as a % of net sales (EBIT margin) 1 Net financial income/expenses Net income for the year Other figures on earnings R&D intensity in % 1,310.2 1,282.6 1,113.3 1,068.0 1,075.2 1,036.8 230.9 137.0 10.5 5.2 110.6 225.5 137.4 10.7 –7.8 95.2 199.7 150.0 13.5 –5.5 104.0 182.7 132.6 12.4 5.4 99.7 181.0 131.6 12.2 16.6 97.7 161.0 112.8 10.9 14.8 85.3 19.3 18.4 18.5 18.5 17.7 17.6 Key figures on the financial position and assets Capital expenditure Depreciation and amortization Equity Equity ratio in % Return on equity in % Return on assets in % Net debt 2 Total assets Capital employed (avg.) 3 ROCE (avg.) in % 4 Cash flow from operating activities Free cash flow 1 Employees Number of employees (avg.) 5 Personnel expenses Key figures for the share in € Earnings per share in € 6 Dividend per share in € 6, 7 Segments (in € millions) 81.3 93.8 1,053.7 44.3 10.9 5.7 475.6 2,376.7 1,604.7 8.5 168.3 84.2 4,549 326.3 3.35 0.80 108.0 88.2 994.5 44.5 10.1 5.3 495.7 2,235.5 1,640.5 8.4 136.2 31.5 4,317 310.1 2.89 0.70 96.6 49.7 963.5 45.5 12.1 7.6 497.9 2,115.0 1,047.1 14.3 72.9 –5.6 4,126 280.7 3.15 0.67 71.7 50.1 881.8 58.1 12.3 7.1 37.4 63.3 49.4 836.9 56.0 13.1 7.3 48.5 99.6 48.2 767.9 53.5 11.9 7.0 87.9 1,517.7 1,495.2 1,436.6 981.1 13.8 98.1 30.0 3,852 253.9 3.02 0.64 990.1 13.3 122.4 57.6 3,705 247.0 2.96 0.64 906.9 12.4 125.9 33.7 3,693 232.2 2.58 0.60 Corn Sugarbeet Cereals Vegetables Corporate – 0.2% 776 774 +6.6% 492 524 +6.3% 67 71 +2.8% 0.0% 170 175 191 191 –19.3% 26 21 – 30.3% 84 58 Net sales EBIT Net sales EBIT Net sales EBIT Net sales –8 –18 2019/2020 2020/2021 Reconciliation (in € millions) Net sales EBIT > –100.0% +29.8% +12.1% EBIT 5 6 Net sales EBIT –105 –92 Segments Reconciliation KWS Group 1,553.8 157.2 –243.6 –20.2 1,310.2 137.0 1 Adjusted for special effects from acquisition of the Pop Vriend Seeds Group. Information on interest paid changed. 2 Short-term + long-term borrowings – cash and cash equivalents – securities 3 Total capital employed at the end of the quarters (intangible assets + property, plant and equipment + inventories + trade receivables – trade payables)/4 4 EBIT/Capital Employed (avg.) 5 FTE: Full time equivalents 6 Earnings and dividend per share of previous periods adjusted due to share split 7 The dividend for 2020/2021 is subject to the consent of the 2021 Annual Shareholders‘ Meeting. l s r e d o h e r a h S r u O o T Contents 1. To Our Shareholders Foreword of the Executive Board Report of the Supervisory Board KWS on the Capital Market 2. Combined Management Report 2.1 Fundamentals of the KWS Group 2.2 Research & Development Report 2.3 Economic Report 2.4 Environmental Report 2.5 Employee Report 2.6 Corporate Governance 2.7 Social Report 2.8 Opportunity and Risk Report 2.9 Forecast Report 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration (Declaration based on the German Commercial Code (HGB)) 3. Annual Financial Statements 2 2 5 12 14 16 23 26 43 47 52 67 69 79 81 84 The cover photo shows a blooming oil radish from a catch crop in November in Brandenburg, Germany. Thanks to intensive breeding, this late-blooming catch crop is part of an effective strategy for preventing nematode infestation in sugarbeet. In connection with a nematode-tolerant sugarbeet variety, significant yield losses can be avoided in a natural way. Executive Board Felix Büchting Cereals, Oilseed Rape/Special Crops & Organic Seed, Human Resources, Farming Peter Hofmann Sugarbeet, Corn Europe, Marketing & Communications Eva Kienle Finance & Procurement, Controlling, Global Transaction Center, Legal Services & IP, IT, KWS Innovation Accelerator Hagen Duenbostel (CEO) Corn North and South America, Corn China, Strategy, Compliance, and Governance & Risk Management Léon Broers Research & Breeding, Vegetables 2 To Our Shareholders | Forword of the Executive Board Annual Report 2020/2021 | KWS GroupTo Our Share- holders Foreword of the Executive Board The past months have been challenging and often strenuous for all of us. I’m therefore all the more delighted to be able to present a good and successful year for KWS in this year’s Annual Report. The agricultural sector faces enormous challenges: It needs to create food security for the world’s growing population, yet also tackle climate change, preserve biodiversity and conserve natural resources. Plant breeding can and will play a key part in addressing those challenges. As exemplified in the HFFA study published in the spring of 2021, plant breeding helps increase yields by almost 70% as an average across all the main crops grown in the EU. Moreover, without the continuous innovations by plant breeders, global cultivation area for these crops would have had to be increased by more than 21.5 million hectares since the year 2000 – an area roughly five times the size of Switzerland. Throughout our 165-year history, we have always regarded seed as the starting point for progress in agriculture. Continuous further development is necessary to grow more food on less area and use fewer resources, as well as to enable production tailored to regional conditions. With the KWS  Sustainability Ambition 2030, we are now setting a forward-looking yardstick for that very task and will constantly measure ourselves against its concrete specifications. This plan’s guiding principle, sustainability begins with the seed, formulates our role and mission in developing solutions for efficient, yet sustainable agriculture. Foreword of the Executive Board | To Our Shareholders 3 KWS Group | Annual Report 2020/2021New and adapted varieties help reduce the use of pesticides, fertilizer and other agricultural resources on fields, while delivering high and stable yields. Moreover, KWS’ broad and growing portfolio makes an important contribution to promoting balanced crop rotations and biodiversity on fields – and providing a varied range of food on our plates. We remain convinced that modern and new breeding methods are a key tool moving ahead in enabling sustainable agriculture, a secure supply of food and achievement of the targets laid out in the European Union’s Farm to Fork Strategy. We therefore spent 19.3% of our net sales on research & development last year – expenditure that allows us to test new approaches independently and tackle projects proactively. That is our contribution to sustainability and agriculture with a viable future – and thus to ensuring KWS’ future growth. Thanks to our long-term strategy and independence, we as a company are able to keep on developing further and adapting to new conditions and circum stances. In view of the complex situation after the coronavirus pandemic broke out, we very swiftly established new ways to maintain dialogue with our employees, partners and customers. We will benefit long term from these creative solutions, which would have been inconceivable were it not for the exceptional dedication and commitment of our around 6,000 employees worldwide. That goes for our research & development as well as for our working relationship with farmers, customers and partners. We have kept our proximity to them and come even closer together thanks to new, digital technologies. After all, digitization is not new ground for us – it has been an important, forward-looking topic at KWS for years. We can therefore look ahead full of optimism and at the same time take a look back at 165 years of KWS! My heartfelt thanks go out to all employees of KWS for their magnificent desire to achieve and their flexibility, whether they work under tougher conditions in the field, in our labs or from home. I also thank you – our customers, partners and shareholders – for the excellent working relationship and for your trust in KWS. I hope you find this Annual Report both informative and interesting. Dr. Hagen Duenbostel Chief Executive Officer 4 To Our Shareholders | Foreword of the Executive Board Annual Report 2020/2021 | KWS GroupReport of the Supervisory Board Political responses to climate change have a particu- with the law, the company’s Articles of Association larly influential impact on KWS’ business model. One and the bylaws, regularly advised and monitored the example in this context is the EU’s launch of its stra- personally liable partner, represented by its Executive tegic Green Deal initiative, which envisages reducing Board, in its activities and satisfied itself that the com- the use of chemical pesticides by 50% and fertilizers pany was run properly and in compliance with the law by 20% by 2030. By the same year, 25% of arable and that it was organized efficiently and cost-effec- land in Europe is to be converted to organic farming tively. The Supervisory Board extensively discussed and a further 10% is to be rewilded. The resultant all significant business transactions and carefully loss in productivity is an enormous challenge, but accompanied the Executive Board in all fundamental also offers us as a plant breeder opportunities and decisions of importance to the company. As is cus- new potential to create value added. It is more im- tomary, the Executive Board involved the Supervisory portant than ever to compensate for that loss by Board in all key decisions. The Supervisory Board was means of innovative, resistant and nutrient-efficient provided with the necessary information in written and varieties, as well as to align the product portfolio oral form regularly, promptly and comprehensively. more strongly toward the food sector, a move KWS This included all key information on relevant ques- has already instigated by establishing the Vegetables tions, in particular relating to strategy, planning, the Segment. business performance and the situation of the com- pany and the KWS Group, including the risk situation, As an independent seed specialist with a long-term risk management and compliance. In the year under focus, KWS makes substantial investments in research & review, there were no transactions with related parties development (R&D) so that it can remain a reliable which require the Supervisory Board’s approval in provider of innovative varieties for its customers, i.e. accordance with Section 111b of the German Stock farmers, in the future. We provide you with an insight Corporation Act (AktG). into the improvements we are working on and how new technologies are contributing to advances in plant The company’s business policy, corporate and fi- breeding on page 23 et seqq. of the Annual Report. nancial planning, profitability and situation, market trends and the competitive environment, research & KWS SAAT SE & Co. KGaA and the personally liable breeding and, along with important individual proj- partner, KWS SE, both have a separate Supervisory ects, risk management at the KWS Group, in particu- Board, each with the same shareholder represen- lar in relation to preventive healthcare in the wake of tatives serving on them. The Supervisory Board the COVID-19 pandemic, were the subject of detailed of KWS SAAT SE & Co. KGaA has two employee discussions in the year under review. representatives in addition to the shareholder rep- resentatives. Both boards predominantly hold joint The Chairman of the Supervisory Board continued meetings, with the result that the employee represen- the direct discussions with the Chief Executive tatives are integrated at an early stage in upcoming Officer of KWS SE and individual members of the decisions by the personally liable partner. Executive Board in regular talks outside the meetings The Supervisory Board of KWS SAAT SE & Co. KGaA In addition, there were monthly meetings between discharged the duties incumbent on it in accordance the Chairman of the Supervisory Board and the of the Supervisory Board in the year under review. Report of the Supervisory Board | To Our Shareholders 5 KWS Group | Annual Report 2020/2021The Supervisory Board and the Management Board continued their constructive and trusting cooperation in the year under review. Executive Board as a whole, where the company’s the Supervisory Board examined and approved the current business development and, in particular, its financial statements of KWS SAAT SE & Co. KGaA strategy, occurrences of special importance and and approved the consolidated financial statements individual aspects were dealt with. The Chairman of the KWS Group as of June 30, 2020. This meeting of the Supervisory Board informed the Supervisory was followed by a joint meeting of the two boards, Board of the results of these meetings. The Super- at which the Supervisory Board heard reports on visory Board did not make use of its right to conduct the company’s anticipated business performance an examination granted by Section 111 (2) of the against the backdrop of the ongoing pandemic. German Stock Corporation Act (AktG) since the reporting by the Executive Board meant there was On December 15, 2020, the Supervisory Board dealt no reason to do so. with strategic adjustments at the Corn  Segment and with the “Strategic Planning 2031,” which had just Focal areas of deliberations been commenced and is to be adopted in December The full Supervisory Board of KWS SAAT SE 2021. It also evaluated potential acquisitions in KWS’ & Co. KGaA held five regular meetings in fiscal still young Vegetables Segment, after which the Italian 2020/2021, each of which was attended by all its vegetable breeding company GENEPLANTA, which members either in person or, due to the pandemic, mainly breeds tomatoes, was acquired in the spring via online media; the attendance rate for all Super- of 2021. The results of the breeding programs and visory Board meetings was therefore 100%. At the opportunities for expansion in the Chinese corn market beginning of the year under review, the Supervisory were on the agenda of the meeting on March 16, 2021. Board of KWS SAAT SE & Co. KGaA convened its On June 22, 2021, the Executive Board submitted as meeting to discuss the financial statements on Octo- usual the budget and medium-term planning to the ber 22, 2020. At this meeting, which was also attended Supervisory Board, which was then adopted by the by the independent auditor for fiscal 2019/2020, Supervisory Board of KWS SE. 6 To Our Shareholders | Report of the Supervisory Board Annual Report 2020/2021 | KWS GroupCorporate governance addition, the Audit Committee dealt with the results The Supervisory Board discussed compliance with of the self-assessment, which was conducted using the recommendations of the “German Commission a questionnaire. The members of the Audit Commit- for the Corporate Governance Code” and issued tee discussed in detail the quality and effectiveness a new declaration of compliance with the German of and future challenges facing the committee’s Corporate Governance Code in the version dated work. In addition, the report by Internal Auditing for December 16, 2019, in accordance with Section 161 fiscal 2020/2021 was discussed and the audit plan of the German Stock Corporation Act (AktG) togeth- for fiscal 2021/2022 was defined and adopted at the er with the personally liable partner in October 2021. meeting on May 11, 2021. The risk situation, the The Declaration of Compliance can be obtained on 9M Quarterly Report for 2020/2021 and the KWS the company’s website at www.kws.com/corp/en/ Group’s insurance program were also discussed. company/investor-relations/corporate-governance. In addition, the Audit Committee obtained the state- The Supervisory Board regularly addressed the ment of independence from the auditor, ascertained question of any conflicts of interest on the part of its and monitored the auditor’s independence and ex- members and those of the Executive Board in the amined its qualifications. The Audit Committee also year under review. In the year under review, there satisfied itself that the regulations on internal rotation were no such conflicts of interests that had to be were observed by the independent auditor and dealt disclosed immediately to the Supervisory Board with the issue of any additional services rendered by and reported to the Annual Shareholders’ Meeting. the independent auditor. Supervisory Board committees The Supervisory Board of KWS SAAT SE & Co. KGaA In the year under review, the Supervisory Board has no personnel responsibility for the management, of KWS SAAT SE & Co. KGaA had two commit- in particular for the Executive Board of KWS SE. tees: the Audit Committee and the Nominating Nevertheless, we would like to take this opportunity Committee. to inform you about the upcoming changes at the The Audit Committee convened for four joint general partner. meetings in fiscal 2020/2021, each of which was Dr. Léon Broers will leave the Executive Board of attended by all members either in person or online; KWS SE when his contract of employment ends on the attendance rate for all meetings of the Audit December 31, 2021. In view of that, the responsi- Committee was therefore 100%. In its meeting on bilities on the Executive Board, in particular those September 23, 2020, the Audit Committee discussed for Research & Development and for our young the annual financial statements and accounting Vegetables Segment, had to be reorganized. The of KWS SAAT SE & Co. KGaA and the consolidat- Committee for Executive Board Affairs of KWS SE ed financial statements of the KWS Group for the therefore dealt intensively with the issues of successor fiscal year 2019/2020, along with the Combined planning and assignment of responsibilities on the Management Report and the proposal by the Exec- Executive Board in the period under review and utive Board on the appropriation of the profits. The submitted the following proposals to the Supervisory Compliance Report and the 1st Quarterly Report Board. for 2020/2021 were discussed in particular at the meeting on November 19, 2020. The meeting on Feb- As announced at the Annual Shareholders’ Meeting ruary 17, 2021, discussed and defined the focus of on December 16, 2020, the Supervisory Board the audit for fiscal year 2020/2021 in the presence of of KWS SE decided on December 15, 2020, to the appointed independent auditor. It also discussed assign responsibility for Research & Development the situation as regards the KWS Group’s financing to Dr. Felix Büchting effective January 1, 2022. and the Semiannual Report 2020/2021 in detail. In Felix  Büchting studied agrobiology at the University Report of the Supervisory Board | To Our Shareholders 7 KWS Group | Annual Report 2020/2021of Hohenheim in Stuttgart and agricultural sciences to propose that Dr. Hagen Duenbostel be elected to and molecular biology at Oregon State University the Supervisory Board of each company when his in Corvallis, where he gained his doctorate in the Executive Board contract ends in December 2024. field of plant breeding. Felix Büchting will also Hagen Duenbostel, who has been a member of remain in charge of Human Resources, but will KWS’ Executive Board since 2003, will not renew hand over responsibility for cereals business to his contract, but has indicated that he would be Dr.  Peter Hofmann. At the same time, Peter Hofmann prepared to serve on the Supervisory Boards of will take over the Vegetables Segment from KWS SAAT SE & Co. KGaA and KWS SE. In order to Léon Broers. Léon Broers will assist him in his ensure the two-year cooling-off period required by capacity as Head of the Business Unit Vegetables the German Corporate Governance Code, it is envis- for further years from the Netherlands. aged that Hagen Duenbostel will be relieved of his duties on the Executive Board at the Annual Share- At its meeting on October 19, 2021, the Super visory holders’ Meeting of KWS SAAT SE & Co. KGaA in Board of KWS SE appointed Nicolás Wielandt as December 2022 and thus leave the management the fifth member of the Executive Board with effect team of KWS SAAT SE & Co. KGaA. However, he from January 1, 2022. Nicolás Wielandt was born in is to continue working on the boards of our joint Chile, studied agricultural sciences and has worked ventures in China and North America. at the KWS Group for 15 years, initially as a con- troller, then as Managing Director at KWS Chile, The Nominating Committees are thus making prepa- subsequently as Head of Sugarbeet Middle East/ rations for a successor to Dr. Drs. h.c. Andreas J. Africa and Eastern Europe, followed by five years Büchting, the longstanding Chairman of the Super- as Head of the Business Unit Sugarbeet. Nicolás visory Boards of KWS SAAT SE & Co. KGaA and Wielandt has been Head of the Business Unit Corn KWS SE. He has been a member and Chairman of Europe/Asia since July 1, 2019. He has been able to both since 2007 and has reached the age limit stip- deepen and broaden his expertise in corn business ulated in their bylaws. He will therefore not stand in this post and therefore has the credentials for the in the new elections for the Supervisory Boards challenging task of managing the strongly growing scheduled in December 2022. That means that an segment and ensuring its profitability. He will take interim member has to be appointed to serve during over Corn Europe from Peter Hofmann and corn the cooling- off period for Hagen Duenbostel. The business in South America from Hagen Duenbostel. Nominating Committees therefore propose that Hagen Duenbostel will remain in charge of KWS’ Philip Freiherr von dem Bussche be elected to the joint ventures in China and North America for the Super visory Boards of KWS SAAT SE & Co. KGaA time being. and KWS SE for a period of two years. Philip von dem Bussche was a member of the Supervisory In addition, the Supervisory Board of KWS SE decided Board of the then KWS SAAT AG from 2000 to that the subject areas of corporate governance, com- 2005 and moved to the Executive Board in 2005. In pliance and risk management are to be pooled under 2007, he took over as Chief Executive Officer from the responsibility of the CFO. Eva Kienle will take Andreas J. Büchting and retired from that post in them over in the current fiscal year 2021/2022. 2014. As a holder of a degree in business manage- ment, entrepreneur and farmer, Philip von dem The Nominating Committees of the Supervisory Bussche has intimate knowledge of the agricultural Boards of KWS SAAT SE & Co. KGaA and KWS SE industry in general and KWS specifically. He is a convened to discuss medium-term successor member of the Supervisory Boards of K+S Aktien- planning on both boards. Both committees intend gesellschaft and Bernhard Krone Holding SE & Co. KG. 8 To Our Shareholders | Report of the Supervisory Board Annual Report 2020/2021 | KWS GroupAndreas J. Büchting, Chairman of the Supervisory Board In addition, the Committee for Executive Board The Corn Segment’s further development in the Affairs of KWS SE has proposed to the Super- U.S. is exceptionally important in terms of the KWS visory Board that Dr. Felix Büchting be appointed Group’s earnings in the next few years. Our joint Chief Executive Officer when Hagen Duenbostel’s venture AgReliant Genetics, LLC (AgR) has made cooling- off period commences in December 2022 significant progress in renewing its product portfo- and, in view of that, that his contract be extend- lio, which will enable it to grow significantly in the ed until December 31, 2026, prior to the end of its coming years. In particular, Hagen Duenbostel was term. The Supervisory Board of KWS SE endorsed and is responsible for reorganizing the portfolio this proposal at its meeting on October 19, 2021. and for the resultant positive economic impact for With the early nomination of Felix Büchting to the KWS Group. At the proposal of the Committee succeed Hagen  Duenbostel, the appointment of for Executive Board Affairs, the Supervisory Board Nicolás Wielandt to the Executive Board of KWS SE, therefore decided to grant Hagen Duenbostel an and the above- described changes in responsibilities, additional one-year variable payment (“one-year the Super visory Board is ensuring – as required by variable payment 2”), dependent on AgR’s busi- the German Corporate Governance Code – long-term ness performance, from fiscal year 2021/2022. We succession planning for the Executive Board of the will report on that in the Compensation Report for personally liable partner of KWS SAAT SE & Co. KGaA. fiscal 2021/2022. Report of the Supervisory Board | To Our Shareholders 9 KWS Group | Annual Report 2020/2021In addition, the Committee for Executive Board Affairs 315b of the German Commercial Code (HGB)) in the dealt with the necessary adaptations to the Executive Combined Management Report were likewise audited Board compensation system pursuant to the German by the independent auditor. Act Implementing the Second Shareholders’ Rights Directive (ARUG II). The proposed adaptations were The Supervisory Board received and discussed the adopted by the Supervisory Board of KWS SE at financial statements of KWS SAAT SE & Co. KGaA its meeting on October 19, 2021, and, in agreement and the consolidated financial statements of the with the Supervisory Board of KWS SAAT SE & KWS Group and Combined Management Report Co. KGaA, were submitted for approval to the Annual of KWS SAAT SE & Co. KGaA and the KWS Group, Shareholders’ Meeting of KWS SAAT SE & Co. KGaA along with the report by the independent auditor of on December 2, 2021. We refer you to the Notice of KWS SAAT SE & Co. KGaA and the KWS Group and the Annual Shareholders’ Meeting for the content of the proposal on appropriation of the net retained the compensation system. We would only point out profit for the year made by KWS SAAT SE & Co. KGaA, here that the future Executive Board compensation in due time. Comprehensive documents and drafts system, if approved by the Annual Shareholders’ were submitted to the members of the Super visory Meeting, will apply for the first time to Executive Board as preparation. For example, all of them Board contracts concluded or extended after were provided with the annual financial statements, December 2, 2021. consolidated financial statements, Combined Man- agement Report, audit reports by the independent Annual and consolidated financial statements auditor, and the proposal by the personally liable and auditing partner on the appropriation of the profits. The Ernst & Young GmbH Wirtschaftsprüfungs- Super visory Board likewise received and discussed gesellschaft, Hanover, the independent auditor the Non-Financial Declaration (Section 289b and chosen at the Annual Shareholders’ Meeting on Section 315b of the German Commercial Code December 16, 2020, and commissioned by the Audit (HGB)), which is part of the Combined Management Committee, has audited the financial statements of Report and contains disclosures on the KWS Group KWS SAAT SE & Co. KGaA that were presented by and the parent company KWS SAAT SE & Co. KGaA, the personally liable partner, KWS SE, and prepared as well as the related audit report by the independent in accordance with the provisions of the German auditor (Section 111 (2) Sentence 4 of the German Commercial Code (HGB) for fiscal 2020/2021 and the Stock Corporation Act (AktG)) as part of a limited financial statements of the KWS Group (IFRS consol- assurance engagement. idated financial statements), as well as the Combined Management Report of KWS SAAT SE & Co. KGaA The Audit Committee convened on Septem- and the KWS Group (Group Management Report), ber 23, 2021, to discuss the annual financial state- including the accounting reports, and awarded them ments of KWS SAAT SE & Co. KGaA and the KWS its unqualified audit certificate. In addition, the au- Group’s consolidated financial statements for the ditor concluded that the audit of the financial state- 2020/2021 fiscal year and accounting, along with ments did not reveal any facts that might indicate a the Combined Management Report. The indepen- misstatement in the declaration of compliance issued dent auditor for fiscal 2020/2021 explained the re- by the personally liable partner and the Supervisory sults of its audit of the annual financial statements Board in accordance with section 161 of the German and consolidated financial statements. It pointed Stock Corporation Act (AktG) with respect to the out that there were no grounds for assuming a recommendations of the “Government Commission lack of impartiality on the part of the independent for the German Corporate Governance Code.” The auditor in its audit. The Audit Committee also dealt Non-Financial Declaration (Section 289b and Section with the proposal by the personally liable partner 10 To Our Shareholders | Report of the Supervisory Board Annual Report 2020/2021 | KWS Groupon the appropriation of the net retained profit of personally liable partner, and to the consolidated KWS SAAT SE & Co. KGaA and recommended that financial statements of the KWS Group and the the Supervisory Board approve it. Combined Management Report of KWS SAAT SE & Co. KGaA and the KWS Group and recommended The Supervisory Board also held detailed discussions that the Annual Shareholders’ Meeting on Decem- of questions on the agenda at its meeting to discuss ber 2, 2021, approve the annual financial statements the financial statements on October 19, 2021. The of KWS SAAT SE & Co. KGaA prepared by the per- auditor took part in the meeting. It reported on the sonally liable partner. The Supervisory Board also main results of the audit and was also available to endorsed the proposal by the personally liable partner answer additional questions and provide further to the Annual Shareholders’ Meeting on the appro- information for the Supervisory Board. According to priation of the net retained profit of KWS SAAT SE & the report of the independent auditor, there were no Co. KGaA after having examined it. material weaknesses in the internal control and risk management system in relation to the accounting The Supervisory Board expresses its thanks to process. There were also no circumstances that might the Executive Board and all employees of the raise concerns about a lack of impartiality on the part KWS Group for their commitment despite the difficult of the independent auditor. The independent auditor conditions still prevailing as a result of the COVID-19 did not provide any additional services. pandemic, and for their contribution to the successful further development of KWS in fiscal 2020/2021. In accordance with the final results of its own exam- ination, the Supervisory Board endorsed the results Einbeck, October 19, 2021 of the audit and of the audit of the Non-Financial Declaration, among other things as a result of the preliminary examination by the Audit Committee, and did not raise any objections. The Supervisory Board gave its consent to the annual financial statements Dr. Drs. h. c. Andreas J. Büchting of KWS SAAT SE & Co. KGaA submitted by the Chairman of the Supervisory Board Report of the Supervisory Board | To Our Shareholders 11 KWS Group | Annual Report 2020/2021 KWS on the Capital Market Performance Employee Stock Purchase Plan The COVID-19 pandemic remained the dominant issue For more than 30 years KWS has offered its impacting stock exchanges in fiscal year 2020/2021. employees the chance to become shareholders in Massive economic stimulus programs ensured that the company and thus share in its success. The the major economies recovered quickly, thus improv- content of our Employee Stock Purchase Plan ing stock market sentiment. Central banks’ continuing remained unchanged in the year under review. expansionary monetary policy also helped shore up the Our employees were able to buy up to 2,000 KWS situation. Interest rates were still low and shares there- shares at a price of €53.04 (45.92), including a fore remained an attractive investment, with the result 20% discount, which the individual employees that the leading stock indexes climbed to new peaks. must pay tax on. 592 (476) employees in eight (six) European countries took up this offer and The DAX recorded a new all-time high of 15,730 points purchased a total of 76,120 (52,315) shares, The on June 15, 2021, before closing at 15,531 points on acquired shares are subject to a lock-up period June 30, 2021 (June 30, 2020: 12,310) 1. The SDAX, in of four years. They cannot be sold, transferred or which the KWS share is listed, turned in a similar perfor- pledged during this period. As in previous years, mance and stood at 16,021 points on the balance sheet the shares used for the Employee Stock Purchase date, likewise well above the level of the previous year Plan were acquired in accordance with Section 71 (1) (11,536). No. 2 of the German Stock Corporation Act (AktG). A total of €5.6 (3.0) million was used to buy back KWS’ share posted a slightly positive performance as a the company’s own shares, giving an average whole in fiscal year 2020/2021 and had risen by just over purchase price per share (including fees) of 4% by its end. After a low of €61.10 at the end of October €73.02 (57.40). More details have been published 2020, it rose sharply to around €80 in May 2021 on the in information released for the capital market and back of increases in prices for agricultural raw materials. can be viewed on our website at www.kws.com/ KWS’ share ended June 2021 at €69.40. The average corp/en/company/investor-relations/. trading volume per day on XETRA fell from around 14,000 shares to approximately 9,000. The price of KWS’ share has more than doubled in the past ten years. The KWS share’s performance over ten years 300% 250% 200% 150% 100% 50% +210% +193% +125% +109% July 1, 2011 June 30, 2021 KWS DAX MDAX SDAX 1 Unless otherwise specified, the figures in parentheses are those for the previous year. 12 To Our Shareholders | KWS on the Capital Market Annual Report 2020/2021 | KWS Group Shareholder structure at June 30, 2021 (33,000,000 shares) Free float 30.9% 69.1% Families Büchting, Arend Oetker, Tessner (thereof 15.4% Tessner Beteiligungs GmbH) Planned appropriation of profits Key figures for the KWS share (Xetra®) In view of the company’s pleasing performance and the sharp increase in net income for the year, ISIN Share class the Executive and Supervisory Boards will propose Number of shares a dividend of €0.80 (0.70) per share for fiscal year Index 2020/2021 to the Annual Shareholders’ Meeting on December 2, 2021. €26,4 (23.1) million would thus be distributed to KWS SAAT SE & Co. KGaA’s shareholders. That corresponds to a dividend payout ratio of 23.9% (24.3%), once again in line with the KWS Group’s earnings-oriented policy of paying a dividend of 20% to 25% of its net income. Closing price June 30, 2021 June 30, 2020 High and low High (May 19, 2021) Low (October 29, 2020) DE0007074007 Non-par 33,000,000 SDAX in € 69.40 66.70 in € 80.90 61.10 Average trading volume in shares/day 2020/2021 2019/2020 9,203 14,354 Market capitalization in € million June 30, 2021 June 30, 2020 Earnings per share June 30, 2021 June 30, 2020 2,290 2,201 in € 3.35 2.89 KWS on the Capital Market | To Our Shareholders 13 KWS Group | Annual Report 2020/202114 Annual Report 2020/2021 | KWS Group 2. Combined Management Report 2020/2021 of the KWS Group 2.1 Fundamentals of the KWS Group 2.1.1 Business Model 2.1.2 Branches 2.1.3 Responsible Business Activity 2.1.4 Objectives and Strategy 2.1.5 Control System 2.1.6 Fundamentals of Research & Development 2.2 Research & Development Report 2.3 Economic Report 2.3.1 Business Performance 2.3.2 Earnings, Financial Position and Assets 2.3.3 Segment Reports 2.4 Environmental Report 2.4.1 Product Innovations 2.4.2 Product Quality and Safety 2.4.3 Emissions & Water 2.5 Employee Report 2.5.1 Employment Trends 2.5.2 Occupational Health and Safety 2.5.3 Recruitment & Employee Loyalty 2.5.4 Qualification, Further Training and Development 2.5.5 Labor and Social Standards 16 16 18 18 19 21 22 23 26 26 29 33 43 43 44 45 47 47 47 48 49 51 2.6 Corporate Governance 2.6.1 Corporate Governance and Declaration on Corporate Governance 2.6.2 Declaration of Compliance in Accordance with Section 161 AktG (German Stock Corporation Act) 2.6.3 Business Ethics and Compliance 2.6.4 Responsibility in the Supply Chain 2.6.5 Compensation Report 2.6.6 Explanatory Report of the Personally Liable Partner (KWS SE) of KWS SAAT SE & Co. KGaA in Accordance with Section 176 (1) Sentence 1 AktG (German Stock Corporation Act) on the Disclosures in Accordance with Section 289a (1) and Section 315a (1) HGB (German Commercial Code) 2.7 Social Report 2.7.1 Use of Genetic Resources 2.7.2 Social Commitment 2.8 Opportunity and Risk Report 2.8.1 Opportunity Management 2.8.2 Risk Management 2.9 Forecast Report 2.9.1 Changes in the KWS Group’s Composition that are Significant for the Forecast 52 52 52 52 54 55 64 67 67 68 69 69 70 79 79 2.9.2 Forecast for the KWS Group’s Statement of 79 Comprehensive Income 2.9.3 Forecast for the Segments 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration (Declaration based on the German Commercial Code (HGB)) 2.10.1 KWS SAAT SE & Co. KGaA 2.10.2 Combined Non-Financial Declaration for the KWS Group 79 81 81 82 t r o p e R t n e m e g a n a M d e n b m o C i 2. Combined Management Report The Combined Management Report comprises aspects of sustainability reporting in addition to content related to financial reporting. Our objective is to illustrate the relationship between ecological, social and financial factors and highlight their impact on our long-term commercial success. We refer to the report aspects required under Sections 289b et seq. and Sections 315b et seq. of the German Commercial Code (HGB) in our “Non-Financial Declaration” on page 82. The contents of the Non- Financial Declaration were not audited as part of the audit of the annual and consolidated financial statements, but underwent a voluntary external examination by an auditor. They are indicated by the acronym . The Combined Management Report also includes voluntary components that are not audited separately. These are indicated by footnotes. 2.1 Fundamentals of the KWS Group 2.1.1 Business Model The Corn Segment is the KWS Group’s largest Since it was founded in 1856, KWS has specialized segment in terms of net sales. It covers breeding, in breeding, producing and distributing high-quality production and distribution of seed for corn and seed for agriculture. From its beginnings in sugarbeet sunflowers, as well as production and distribution breeding, KWS has evolved into an innovative, of soybeans. Its operating performance depends international supplier with a broad portfolio of largely on the spring sowing season in the northern crops. The company covers the complete value hemisphere. That means most of the segment’s net chain of a modern seed producer – from developing sales are generated in the second half of the fiscal new varieties, multiplication and processing, to year (January to June). The segment generates a marketing of the seed and consulting for farmers. lower share of its revenue in the first two quarters, KWS’ core competence lies in breeding new, high- mainly from corn and soybean seed in South performance varieties that are adapted to regional America. KWS is the market leader for silage corn in needs, such as climatic and soil conditions. Targeted Europe. breeding of resistances against fungi or viruses, for example, also enables a significant reduction in The Sugarbeet Segment comprises sugarbeet seed the use of chemical pesticides in agriculture. Every breeding, production and distribution, as well as new variety delivers added value for the farmer. the development of diploid hybrid potatoes. KWS’ KWS’ business model is based on this added high-quality sugarbeet varieties are consistently value – which is ultimately attributable to breeding some of the highest-yielding in the industry. KWS progress, optimization of seed quality and pinpointed is the world market leader in sugarbeet seed, not consulting. least thanks to many innovations. Its main sales markets are the European Union, Eastern Europe, Organization and segments of the KWS Group North America and Turkey, where the company offers In fiscal 2020/2021, the KWS Group’s operational farmers efficient solutions for growing sugarbeet business consisted of five Business Units, which in the shape of locally adapted, multiple-resistant were grouped in the four product segments Corn, varieties. Sugarbeet is sown in the spring, which Sugarbeet, Cereals and Vegetables. The Business means that net sales in this segment are likewise Units Sugarbeet, Cereals and Vegetables are largely generated in the second half of the fiscal year identical to the segments of the same name. The (January to June). Corn Segment contains the Business Unit Corn Europe/Asia and the Business Unit Corn Americas. 16 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2020/2021 | KWS GroupThe Cereals Segment includes breeding, Main business processes production and distribution of seed for rye, wheat, KWS’ breeding processes are geared toward barley and rapeseed. Rye accounts for the largest exploiting plants’ potential as much as possible share of revenue from cereals (more than 40%), and leveraging that potential to tackle the major followed by rapeseed, wheat and barley (a combined challenges of modern sustainable agriculture. total of around 50%). KWS generates the remainder Whether it is plants for producing food, fodder from other crops such as sorghum, peas, catch or energy, conventional, organic or genetically crops (e.g. mustard), and oats. Farmers in KWS’ modified: KWS offers farmers a broad portfolio of core markets (Germany, Poland, the UK, France and high-performance varieties. It takes an average of Scandinavia) predominantly sow cereals seed in the eight to ten years to breed a new variety. Thanks fall. Consequently, the segment generates most of to its large network of breeding and trial stations in its revenue in the first half of the fiscal year (July to all the world’s key markets, the company can test December). the individual candidates under a wide range of climatic and local conditions to determine whether The Vegetables Segment comprises vegetable the varieties are suitable for cultivation. In most seed breeding, production and distribution. KWS is markets, variety development ends in an official the world leader in spinach seed, which accounts for approval process in which candidates have to meet around 60% of the segment’s net sales. Its portfolio high quality standards, usually in three-year field also includes seed for beans, carrots and tomatoes. trials. Seed multiplication in selected cultivation The segment generates just over one-third of its regions also takes up to two years. Only then can revenue in the U.S. KWS’ strategic objective is to the varieties be marketed via the various distribution build a significant position in the vegetable seed channels. market long term. Its focus is on the world’s five most important crops in this segment: tomatoes, peppers, Products, markets and external factors cucumbers, watermelons and melons. KWS offers its customers – farmers – a broad range of agricultural crops that have been adapted Apart from the operating segments, there is also by breeding to the conditions of their specific Corporate, a segment which by and large does location. They include corn, sugarbeet, the cereals not conduct any operational activities. Its relatively rye, wheat and barley, oil plants such as sunflower low net sales come from the revenue from our own and rapeseed, catch crops, and alternative protein farms in Germany, France and Poland. Since the sources with a highly promising future, such as KWS Group’s basic research expenditure and costs soybeans, peas and oats. Since KWS entered the for administrative functions are charged to the vegetable business, its portfolio has also included Corporate Segment, its income is usually negative. spinach, tomato and bean seed. In addition to distributing seed, its consultants are also on hand There were no significant changes in the to offer farmers advice on choosing and cultivating KWS Group’s composition and organization in varieties. Moreover, we offer expert consulting with fiscal 2020/2021. More details on the net sales and our digital services and on our website. income contributed by the segments, including our joint ventures, can be found in our segment reports Our breeding and seed multiplication activities are starting on page 33. subject to weather influences that cannot always be quickly compensated for with countermeasures. Economic policy decisions in the agricultural industry, which is strongly regulated worldwide, may also impact our business. You can find more details on these external factors in our Opportunity and Risk Report on pages 69 to 78. 2.1 Fundamentals of the KWS Group | Combined Management Report 17 KWS Group | Annual Report 2020/2021Breeding and distribution activities of the KWS Group in over 70 countries Breeding stations Test locations for trial cultivation 2.1.2 Branches 2.1.3 Responsible Business Activity * KWS SAAT SE & Co. KGaA is the parent company Mission and principles of the KWS Group. Strategic management of all As a family-run, listed company, we think across of KWS’ global activities is pooled under its roof. generations. Apart from our corporate objectives, It is headquartered in Einbeck, Germany, and responsible business activity with regard to people controls breeding of the KWS Group’s range of and the environment is therefore a firmly entrenched varieties. It conducts basic research, produces and principle of how we run our company. As a profitable distributes sugarbeet and corn seed, and is home family-run company that acts sustainably, we have to a number of central functions. There are also the necessary entrepreneurial stability and freedom currently 85 subsidiaries and associated companies to operate largely independently of short-term in 34 countries. You can find a detailed breakdown interests. of net sales by region on page 30. An overview of our subsidiaries and associated companies can be found Guidelines in the Notes on pages 139 to 141. Our guiding principles define the framework for our everyday work, so that we are able to create sustainable and profitable growth for our customers, employees and investors. Our strategic decisions and day-to-day actions in operational business are guided by the following company principles: * Not an audited part of the Combined Management Report 18 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2020/2021 | KWS Group „ We leverage genetic potential through outstanding 2.1.4 Objectives and Strategy research and top-class breeding programs. Our strategic planning is the foundation for the „ We supply our farmers with seed of the very best KWS Group’s further development. It defines quality. strategic objectives, initiatives and core measures „ We aim to be a strong partner who earns the trust for existing activities and for potential new fields of our customers. of business. The planning is based on a long-term „ We create entrepreneurial freedom and help peo- horizon (ten years) and includes an analysis and ple unfold their talents. assessment of market trends, competitors and the KWS Group’s position. Strategic planning is We also have a central policy framework (Group carried out regularly on a rolling basis. We believe Standards) with which we create a common that strategic success factors are in particular our understanding of the freedoms and decision- intensive research & breeding of new, high-yielding making processes within the KWS Group. The varieties. Group Standards are continuously improved by means of constant monitoring and feedback. They Corporate objectives of the KWS Group complement our existing guiding principles, with Our corporate objectives are divided into four core the objective of preserving KWS’ unmistakable topics: profitable growth, innovation, independence profile, also against the backdrop of the Group’s and sustainability: increasing internationalization. The KWS Group’s medium- and long-term objectives Main strategic subject areas Explanation Profitable growth „ An average increase in consolidated net Page 26 et seqq. sales of at least 5% p. a. „ EBIT-margin ≥ 10% Page 26 et seqq. „ A dividend payout ratio of 20% to 25% of the KWS Group’s net income for the year Page 137 et seqq. (Notes) Innovation „ R&D intensity of at least 17% of Page 23 et seqq. consolidated net sales Independence „ Retention of a control structure shaped by Page 64 et seqq. the family owners Sustainability „ Implementation of KWS’ Sustainability Ambition 2030 Page 43 et seqq. (NFD) and Sustainability Report 2020/2021 Profitable growth is vital for our future development. Long-term profitable growth ensures we can retain our commercial independence. Key components are the good performance of our seed and a relationship of trust with farmers. We strive to increase net sales by an average of at least 5% p.a. and achieve an EBIT margin of at least 10%. 2.1 Fundamentals of the KWS Group | Combined Management Report 19 KWS Group | Annual Report 2020/2021Innovation Sustainability drives our business model. The need for innovative Agriculture faces huge challenges globally. They technology in plant breeding continues to increase. include the world’s growing population, increasingly Climate change, significant population growth and severe consequences of climate change, and the changes in eating habits, where alternative protein preservation of biodiversity and natural resources. sources are growing in importance, pose challenges We believe that innovations in plant breeding play a for us. In addition, digitization is playing a greater key role in tackling these challenges. and greater role in agriculture. In the year under review, we devoted around €250 million to research & Throughout our 165-year history, we have always development, and thus once again a significant share regarded seed as the central starting point for of our net sales. We are tackling these challenges improvements in agriculture. Proximity to farmers with this spending and regard it as an investment in and continuous expansion of our research & future growth. Independence development activities have helped us become established as a leading seed specialist. New varieties now help reduce the use of pesticides, has always been a key corporate objective for KWS. fertilizer and other agriculture resources on fields, It is part of the shared values held by our employees. yet deliver higher and higher yields. Our independence and long-term orientation enable us in particular to invest in research and breeding With our “KWS Sustainability Ambition 2030,” we projects with an eye to the future. now define the framework for KWS’ sustainable development – economically, ecologically and socially – in the coming years. Guided by the principle that “sustainability in agriculture begins with seed,” we pursue these concrete goals: KWS Sustainability Ambition 2030 Safeguard food production Enhance crop diversity Improve operational footprint 1.5% annual yield gain for farmers through progress in plant breeding and digital farming solutions on > 6 million hectares Increase number of crops with dedicated breeding programs from 24 to 27 Reduce scope 1 and 2 emissions by 50% until 2030 and to net-zero by 2050 Establish score cards to provide transparency on ecological footprint of all seed production sites Minimize input required Support sustainable diets Foster social engagement Enable > 50% reduction of chemical crop protection (in line with European Farm to Fork Strategy). Invest > 30% p.a. of R&D budget into reduction of inputs > 25% of KWS varieties are suitable for low input cultivation > 40% of KWS varieties are suitable for predominantly direct use in human nutrition Min. 1% EBIT p.a. into social projects Measurement and continuous improvement of employee engagement Continuous decline in the number of occupational accidents/illness ratio 1 Farm-to-Fork-Strategie 20 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2020/2021 | KWS GroupWe refer you to the 2020/2021 Sustainability Report The planning is compared every quarter with the and to our homepage www.kws.com for details of company’s actual business performance and our sustainability program. the underlying general conditions. If necessary, we initiate suitable countermeasures and make Our business developed largely in line with our adjustments. We update the forecast for the current strategic objectives in the year under review. We fiscal year at the end of every quarter. At the end deal with that and other details of achievement of of each fiscal year, all the units conduct a detailed our objectives in the respective sections, which are variance analysis of the planned and actual results. referred to in the table on the corporate objectives. That serves to optimize our internal processes. 2.1.5 Control System Controlling is responsible for coordinating and Detailed annual and medium-term operational plans documenting all planning processes and our current are used to control the Group and our Business expectations. It reports on compliance with adopted Units. The medium-term plan covers the time frame budgets and analyzes the efficiency and cost- of the annual plan and the three subsequent fiscal effectiveness of business processes and measures. years. It is derived from the strategic planning, which Controlling and the Finance Business Partners also covers a timescale of ten years. advise decision-makers on economic optimization measures. In particular the heads of the product The targets set in the annual and medium-term segments, the regional directors and the heads of planning are arrived at on the basis of the strategic research and breeding activities and the central planning, regional economic and legal situation, functions are responsible for the content of the anticipated market trends and assessments of the planning and current forecasts. company’s position in the market and the potential product performance. In a subsequent bottom-up The Executive Board uses various indicators for process, which also includes the development of our planning, controlling and monitoring the business joint ventures, we use these premises to plan figures performance of the KWS Group and its operating for sales volumes and net sales, breeding activities, units. The main indicators for the KWS Group are net production capacities and quantities, the allocation sales, operating profitability (EBIT margin), adjusted of resources (including capital spending and EBIT margin (when appropriate), and R&D intensity. personnel), the level of material costs and internal KWS’ product segments, which are divided into charge allocation and the resultant balance sheet Business Units, are in turn geared toward the main data, along with the financial budget. In principle, indicators of net sales and EBIT margin. part of the planning documentation is also an opportunity/risk assessment which every manager must conduct for his or her unit. 2.1 Fundamentals of the KWS Group | Combined Management Report 21 KWS Group | Annual Report 2020/2021Management and control 2.1.6 Fundamentals of Research & Development The company is a partnership limited by shares The objective of KWS’ research & development work (KGaA). The personally liable partner is responsible is to create high-performance varieties that meet for the tasks of running the business of a partnership various environmental and application requirements limited by shares. The company’s sole personally and deliver continuous value added to farmers. They liable partner is KWS SE, whose Executive Board include absolute yield, as well as issues such as yield is therefore responsible for management of the stability, resistance to diseases, resource efficiency, company’s business. cultivation characteristics or constituent properties. We accordingly continue to invest in expanding our The rights and obligations of the Supervisory Board research and breeding capacities. at a partnership limited by shares differ greatly from those at a stock corporation (AG) or a European Plant breeding is a very research-intensive and long- Company (Societas Europaea or SE). In particular, the term business. It takes an average of eight to ten Supervisory Board at a partnership limited by shares years to develop a new, high-performance variety. does not hold personnel responsibility as regards As part of that, the new varieties are adapted to the management; moreover, it cannot appoint any further specific environmental conditions of their target personally liable partners and define the contractual markets. Our breeders are assisted in that by a terms and conditions for them, enact bylaws for the global network of various breeding and trial stations. Executive Board, or define business transactions That means candidate varieties can be tested requiring its consent. under the location-specific conditions of their target markets over several years. The Annual Shareholders’ Meeting of a partnership limited by shares basically has the same rights By applying leading-edge breeding methods, which as the Annual Shareholders’ Meeting of a stock are continually optimized by the use of molecular corporation or SE. It also adopts resolutions on biology, IT or technical approaches, KWS has whether to approve the company’s annual financial created sustainable annual progress in yields statements and ratify the acts of the personally of around 1.5% for decades. The company also liable partner. Certain resolutions adopted by the increases genetic diversity by new crossings, which Annual Shareholders’ Meeting of a partnership is vital to improving crops. That is why KWS has limited by shares also require the approval of supported various gene banks in different projects the personally liable partner. The declaration on for years. By continuously improving yield and corporate governance in accordance with Section delivering new plant traits, we make a contribution to 289f of the German Commercial Code (HGB) resource-conserving, sustainable agriculture. contains detailed information on the extensive and close cooperation between the Executive Board and the Supervisory Board and has been published at www.kws.com/corp/en/company/investor-relations/ corporate-governance. 22 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2020/2021 | KWS Group2.2. Research & Development Report Key research & development figures R&D employees ¹ Share of R&D employees relative to the total workforce R&D expenditure R&D intensity ² Variety approvals 1 Average headcount 2 As a % of net sales ø in % in % 2020/2021 2019/2020 2,122 35.4 252.2 19.3 492 2,073 36.3 236.1 18.4 484 +/– 2.4% – 6.8% – 1.7% In fiscal 2020/2021, our R&D expenditure increased Our product pipeline means we are also well by around 7% to €252.2 (236.1) million. We obtained positioned in the Brazilian market moving ahead. 492 variety approvals worldwide, surpassing the A further new and highly promising corn variety, high figure of the previous year (484) and thus once K7510VIP3, gained approval in the year under review more demonstrating KWS’ innovativeness. and is about to be launched on the market. It is likewise high-yielding, is resistant to fungal diseases Success on the Brazilian market with our own and has important traits for the Brazilian market. breeding material KWS has operated in the important corn market New winter wheat varieties for Germany of Brazil since 2012 and so is a relatively young Germany is one of our core markets for winter wheat company in that country. We were initially in Europe. We maintain a separate breeding program represented there only with licensed breeding for this market due to climatic conditions, market- material, but in fiscal 2018/2019 we began selling specific quality criteria and specific requirements for the first hybrid corn variety with KWS’ own genetic agronomic properties and resistances. We were able material. K9606VIP3 is now one of the best-selling to significantly increase our success in registering corn varieties on the Brazilian market. In particular, varieties bred under the program in the year under it boasts high yield stability. Moreover, it is not only review. We obtained approval for six new varieties resistant to corn stunt, one of the main bacterial corn in the past two years alone. Four of the varieties are diseases in South America, but is also distinguished particularly high-yielding, have good resistance to by very high drought tolerance. diseases and deliver important qualities for use in baking bread. We anticipate that these new varieties will help us increase our market share in Germany sharply in the coming years. 2.2. Research & Development Report | Combined Management Report 23 KWS Group | Annual Report 2020/2021Strong hybrid rapeseed varieties gain In order to reduce the losses caused by yellowing approval in France viruses, KWS launched its first tolerant variety under Hybrid rapeseed varieties have become increasingly the integrated approach “Virus Yellow Protect” in the established in the past years. They offer the same year under review. The variety MARUSCHA KWS has or a better yield, as well as greater stability in the gained approval in the UK and Germany and all in all face of environmental factors and diseases. KWS has good tolerance to yellowing viruses, in particular has therefore geared its rapeseed program to hybrid to beet mild yellowing virus. It also impresses with far breeding. Approval of six new hybrid varieties in better yields in situations where plants are infected France last year vindicates this strategy. A KWS by viruses. Further varieties are currently undergoing variety achieved the highest yield in the official testing in official trials in France, Belgium, the variety tests. Netherlands and Switzerland. We are working long term on developing varieties that exhibit very good The variety HOSTINE not only has improved pod resistance to all yellowing viruses, yet still ensure a shatter resistance, but is also certified as having high sugar yield on fields that are not infected. greater tolerance to turnip yellows viruses and also boasts a high oil content. Our portfolio also includes Further expansion of vegetable breeding HODYSSEE, a hybrid variety with a particularly high KWS continues to expand its new business unit protein content. The results from France mean we for vegetable seed. Last fiscal year, it took over the can also expect to obtain approvals for competitive vegetable seed company Geneplanta S.r.l., Noceto/ hybrid rapeseed varieties in other markets in the Parma, Italy. The company, which was established future. in 2011, focuses on breeding tomatoes and on producing and distributing tomato seed. The main New solution for combating yellowing viruses sales regions currently include Italy and Mexico. in sugarbeet cultivation By integrating Geneplanta we gain access to high- KWS resumed its research into yellowing viruses performance genetic material and can significantly in 2015, in anticipation of changes in the law speed up development of our own tomato breeding relating to the application of pesticides containing programs. neonicotinoids. Since then, we have been working at full pace on a breeding approach to combat We are also focused on building our own tomato, viruses that cause yellowing in sugarbeet. Yellowing cucumber, melon, watermelon and pepper breeding viruses are transmitted by aphids and can result activities in Spain, Mexico, Brazil and Turkey. in harvest losses of up to 50%. These aphids have been proliferating in Europe for years due to We have also achieved progress in breeding as part climatic changes and a lack of ways to combat of the vegetable activities of Pop Vriend Seeds, them. Plant viruses themselves cannot be controlled which we acquired in 2019. By crossing in a new by pesticides. This problem, which is of existential resistance to mildew, we will be able to underpin importance in sugarbeet production, can therefore our leading market position worldwide in spinach be tackled only by developing resistant and tolerant breeding. varieties. 24 Combined Management Report | 2.2. Research & Development Report Annual Report 2020/2021 | KWS GroupInnovativeness in research enhanced Digitization and automation at KWS by genome editing Digitization is penetrating more and more areas One of the core tasks in our research work is of our research & development work. We can to gain a better understanding of the molecular increasingly make breeding decisions on the basis fundamentals of complex plant traits and leverage of big data and using algorithms. Elsewhere, we that knowledge to develop new varieties. Innovative are transferring important processes to technical technologies are vital in that. Genome editing systems so as to automate and increase the technology has injected fresh impetus here in the efficiency of workflows in the lab, greenhouse and past years. This technology allows us to identify field. genes far more quickly and test them directly in our high-performance material. Results from KWS’ global testing and trials are benefiting research can thus be incorporated sooner in product more and more from “FieldExplorer,” a geodata development. Moreover, analyses can be conducted management platform we have developed in-house. with a lower number of plants, meaning we need Around 700 KWS staffers worldwide now use the fewer greenhouse tests and field trials. We currently system and the possibility of fully digitized field use genome editing technology in KWS’ research planning and field management it offers. Further work on the crops corn, sugarbeet, wheat, rye and application modules were added to the platform in potatoes. fiscal 2020/2021. Two newly developed apps also allow it to be used on mobile devices. Our users In addition, KWS is campaigning for innovative in the field thus have access to various trial and methods like genome editing to be able to be used production data and can enter their results and in European agriculture, too. For example, we are observations on the spot. We have already been participating in the demonstration and research able to increase efficiency in our testing and trials project PILTON (which stands for “fungal tolerance significantly by using this platform. in wheat through new breeding methods”) that is funded and supported by the German Plant Breeders Digital solutions are also taking root in our Association (BDP) and 60 plant breeding companies. greenhouses. Since last fiscal year, autonomous As part of this joint project, we aim to highlight the transportation vehicles and artificial intelligence benefits of these breeding methods for resource- have helped our research into drought stress in conserving and productive agriculture with reference corn and sugarbeet plants. The self-driving vehicles to a concrete example. The aim is to develop wheat automatically take the plants to various analysis plants with improved, multiple and durable fungal stations so that their growth can be documented. We tolerance using new breeding methods. Wheat also gain insights into the water balance of plants is one of the world’s most important crops – but with the aid of hyperspectral imaging and smart without protective measures up to one-third of the image processing software. annual harvest would be lost due to fungal diseases. Multiple fungal tolerance could reduce crop failures In addition, KWS is investigating and promoting new and use of chemical pesticides. methods for precise, non-chemical weed control with the “FutureLive: Robotic weeding in the field” project, where it is testing innovative robot systems that remove weeds in a pinpointed manner thanks to artificial intelligence and high-precision GPS systems. The goal is to reduce use of pesticides long term and make organic sugarbeet cultivation more profitable. 2.2. Research & Development Report | Combined Management Report 25 KWS Group | Annual Report 2020/2021 2.3 Economic Report 2.3.1 Business Performance In spite of tougher conditions in the wake of the COVID-19 pandemic, the KWS Group again managed General developments and business in the year under review to supply farmers with seed performance of the KWS Group in good time for the spring sowing season. Guided The general macroeconomic conditions in the year by the precept of ensuring the health and safety of under review were still impacted by the COVID-19 our employees, we adapted business processes and pandemic. Following the pandemic’s outbreak rolled out new, digital formats for communicating at the beginning of 2020 and the sharp slump in with our customers. We also continued our extensive economic output, the global economy showed initial measures at our global locations based on or even signs of recovery as of the second half of the year. exceeding the recommendations and directives of The fall in infections in the course of the first half of the national and international health authorities. 2021 resulted in a sharp pickup in overall economic activity, in particular in the developed economies. Guidance versus actual business performance This trend was accompanied by higher inflation in of the KWS Group industrialized countries like Germany and the U.S. In the course of the year, there were no significant changes to our assessment for the year as a whole. The pandemic exacerbated general economic In our 9M Quarterly Report for 2020/2021, we put conditions in some emerging countries. That led a more precise figure on our earnings guidance by in some cases to a sharp devaluation in local stating that we expected an EBIT margin (excluding currencies, such as in Brazil, Argentina and Turkey, the noncash effects as part of the completed which had a negative impact on KWS. purchase price allocation for the acquisition of Pop Vriend Seeds) at the top end of the forecast of 11.0% After a lengthy spell of low prices, the agricultural to 13.0%. sector recorded price increases, in some cases on a significant scale, for agricultural commodities like The KWS Group’s consolidated net sales rose by corn and soybean in the year under review. This around 2% to €1,310.2 million and were thus in line trend helped fuel an increase in cultivation area and with the forecast, namely net sales at the level as the so was supportive to KWS’ business performance. previous year. The R&D intensity was 19.3%, slightly The rise in prices for agricultural commodities above the forecast range of 17% to 19%. was accompanied in some cases by higher seed multiplication costs. The EBIT margin was 10.5%. Excluding the noncash effects as part of the completed purchase price allocation for the acquisition of Pop Vriend Seeds, it was 12.5% and thus in line with the more precise guidance given in the 9M Quarterly Report for 2020/2021. 26 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Group Guidance versus actual business performance of the KWS Group Results in 2019/2020 Guidance for 2020/2021 Adjustments to the guidance during the year Results in 2020/2021 Annual Report 2019/2020 Q1 Report Semiannual Report 9M Report Net sales €1,283 million At the previous year’s level R&D intensity EBIT margin ¹ 18.4% 13.3% 17 – 19% 11 – 13% – – – 1 Excluding the effects of the purchase price allocation for Pop Vriend Seeds €1,310 million; +2.2% 19.3% 12.5% – – – – – At the upper end of the more precise guidance Summary of the segments’ course of business The EBIT margin was 9.2% (8.6%) and, as forecast in and comparison with the guidance¹ the updated guidance in the 9M Quarterly Report for Most of the net sales in the Corn Segment is 2020/2021, was at the level of the previous year. generated in the second half of our fiscal year (January to June) during the spring sowing season The main sales season for the Sugarbeet Segment in the northern hemisphere. A lesser share of is in the second half of our fiscal year (January to revenue is earned in South America in the first June). Our high-quality sugarbeet varieties were two quarters. Net sales at the Corn Segment were again some of the highest-yielding in the industry. €774.0 (775.7) million, i.e. at the level of the previous The segment also benefited from the success of our year and thus in line with the more precise guidance CONVISO® SMART portfolio of varieties and initial given in the 9M Quarterly Report for 2020/2021. net sales from varieties based on a new Cercospora tolerance (CR+). Cultivation area declined slightly as Exchange rate effects (in particular in relation to a whole. the Brazilian real) reduced net sales sharply by 8.5%; after adjustment for exchange rate effects, The segment’s net sales rose by 6.6% to the segment’s net sales rose by 8.3%. The main €524.3 (491.8) million, a figure that was much better contributors to this growth were the Europe region than anticipated in the more precise guidance given (in particular Southeastern and Eastern Europe) in the 9M Quarterly Report for 2020/2021 (“slight and the South American markets Argentina and increase in net sales”; previously “at the level of the Brazil. However, our U.S. joint venture AgReliant previous year”). Exchange rate effects reduced net posted lower net sales in the face of a challenging sales by 6.4%; after adjustment for exchange rate competitive environment. effects, the segment’s net sales rose by 13.0%. The EBIT margin in the Sugarbeet Segment was 33.3% and was slightly below the level of the previous year (34.6%). 1 Including equity-accounted companies. Details on the segments’ business perfor- mance and their economic environment can be found in the segment reports. 2.3 Economic Report | Combined Management Report 27 KWS Group | Annual Report 2020/2021 Every year, the fall sowing season determines the The segment’s income (adjusted for effects as part main business trends of the Cereals Segment. of the purchase price allocation for the acquisition Net sales were €191.2 (191.2) million and were thus, of Pop Vriend Seeds) fell to €7.9 (18.1) million due to as expected, at the level of the previous year. In the decline in net sales; the EBIT margin of 13.6% particular, there was an appreciable increase in was thus well below the more precise guidance net sales for wheat and rapeseed seed. Business given in the Semiannual Report 2020/2021 (“around operations with hybrid rye seed were stable, 20%”). Including noncash effects from the purchase although exchange rate effects resulted in a fall in price allocation of inventories measured at fair value net sales in nominal terms. All in all, exchange rate (€–4.1 million) and from amortization of acquired effects reduced the segment’s net sales slightly by intangible assets (€–21.9 million), the segment’s around 3%. In the year under review, net sales from income was €–18.1 million. farms totaling €1.6 million were also reassigned from the Cereals Segment to the Corporate Segment. Revenue (albeit slight) from our farms in Germany, The segment’s EBIT margin was 11.1% (13.8%), as France and Poland is grouped in the Corporate forecast slightly below the level of the previous year. Segment. Since all cross-segment costs for the KWS Group’s central functions and basic The Vegetables Segment, in which the activities research expenditure are still charged to the of Pop Vriend Seeds, the vegetable seed producer Corporate Segment, its income is usually negative. we acquired effective July 1, 2019, are consolidated, The segment’s income improved sharply to is impacted by seasonal factors only to a small €–92.0 (–104.6) million, mainly due to positive degree. Net sales at the Vegetables Segment fell exchange rate effects from financial instruments and sharply to €58.2 (83.5) million, in particular due to lower costs as a result of the pandemic, and was lower demand for spinach seed in the wake of the thus in line with the guidance (“improvement over the COVID-19 pandemic. The segment’s net sales were previous year”). thus – also due to exchange rate effects – slightly below the updated guidance in the Semiannual Report 2020/2021 (“between €60 and €65 million”). Net sales in the food service market segment in the U.S., our key sales market, declined in particular. 28 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Group2.3.2 Earnings, Financial Position and Assets Earnings Condensed income statement in € millions Net sales EBITDA EBIT Net financial income/expenses Result of ordinary activities Income taxes Net income for the year Earnings per share EBIT margin 2020/2021 2019/2020 1,310.2 1,282.6 230.9 137.0 5.2 142.2 31.6 110.6 225.5 137.4 –7.8 129.5 34.3 95.2 +/– 2.2% 2.4% –0.3% – 9.8% –7.9% 16.2% in € in % 3.35 2.89 16.1% 10.5 10.7 – Slight increase in net sales despite significant EBIT at the previous year’s level, sharp increase negative exchange rate effects in R&D expenditure The KWS Group’s net sales rose by 2.2% from The KWS Group’s operating income before €1,282.6 million in the previous fiscal year to depreciation and amortization (EBITDA) €1,310.2 million in the year under review. Negative increased in fiscal 2020/2021 by 2.4% to exchange rate effects reduced that figure sharply by €230.9 (225.5) million, while operating income 6.7%, in particular as a result of depreciation of the (EBIT) was €137.0 (137.4) million and so at the level local currencies in Brazil, Argentina, Russia, the U.S. of the previous year. and Turkey against the euro. After adjustment for exchange rate effects, net sales rose by 8.8%. The EBIT margin was 10.5% following 10.7% in the previous year. Excluding noncash effects from the The Corn and Sugarbeet Segments accounted purchase price allocation of inventories measured for a major share of total net sales, namely 40.3% at fair value (€–4.1 million) and from amortization of and 40.0% respectively. The share of the Cereals acquired intangible assets (€–21.9 million), the EBIT Segment in the year under review was virtually margin was 12.5%. constant at 14.6% (previous year: 14.9%). The Vegetables Segment accounted for 4.4% (previous The KWS Group’s cost of sales rose in the year year: 6.5%) of total net sales. under review by 3.8% to €570.7 (549.9) million, giving a cost of sales ratio of 43.6% (42.9%). The The region where we generated most of our business slight year-on-year increase in the ratio is mainly was Europe, which accounted for 65.9% of net attributable to the higher cost of sales in the Corn sales (Germany: 18.5%), while net sales from North and Sugarbeet Segments. and South America contributed 27.3% of the total. Revenues from our North American and Chinese Selling expenses declined by 1.9% to equity-accounted companies are only included at the €244.2 (248.8) million, mainly due to positive segment level (see our segment reporting starting on exchange rate effects. page 33). 2.3 Economic Report | Combined Management Report 29 KWS Group | Annual Report 2020/2021Net sales by region Total net sales €1,310.2 million 1 Rest of world 7% North and South America 27% 19% Germany 47% Europe (excluding Germany) Net sales by segment Total net sales €1,310.2 million 1 Corporate 1% Vegetables 4% Cereals 15% 40% Corn 40% Sugarbeet 1 Without sales of our at equity accounted consolidated companies Research & development expenditure rose Sharp increase in net income for the year and sharply by 6.8% in the year under review to earnings per share €252.2 (236.1) million; the R&D intensity increased Our net financial income/expenses is made up of the accordingly to 19.3% (18.5%). net income from equity investments and the interest result. One component of income from equity Administrative expenses declined slightly due investments is the income from equity-accounted to lower costs for the transformation project joint ventures, which rose to €17.4 (10.8) million. The ONEGLOBE (optimization of the administrative interest result improved to €–12.2 (–18.6) million, in functions and processes) and due to lower particular due to advantageous financing terms and costs as a result of the pandemic and were the fact that there were higher interest expenses €127.1 (129.5) million. in the previous year for interim financing as part of the company acquisition in the Vegetables At €21.1 (19.1) million, the balance of other operating Segment. Net financial income/expenses was thus income and other operating expenses was at the level €5.2 (–7.8) million. Earnings before taxes (EBT) rose of the previous year. The related individual items are by around 10% to €142.2 (129.5) million. Income explained in detail in the Notes on pages 108 to 109. taxes declined to €31.6 (34.3) million, in particular due to a non-recurring effect from adjustment of the anticipated rate of tax, giving a tax rate of 22.2% (26.5%). Overall, the KWS Group generated net income of €110.6 (95.2) million in the year under review. Given that the number of shares is 33,000,000, earnings per share were €3.35 (2.89). 30 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Group Financial situation Selected key figures on the financial position in € millions Cash and cash equivalents Net cash from operating activities Net cash from investing activities Free cash flow 2020/2021 2019/2020 222.7 168.3 –84.2 84.2 119.7 136.2 –499.9 –363.7 Net cash from financing activities 34.9 –82.5 +/– 86.0% 23.6% – – – Securing the KWS Group’s financial flexibility, (to an amount of almost €400 million) to the enabling its profitable growth and preserving its acquisition of Pop Vriend Seeds. Our capital spending independence are the core tasks of our financial in the year under review was consistent with our management. Among other things, we ensure that long-term growth plans and focused on erecting and by extensive liquidity planning, monitoring of cash expanding production and research & development flows, and hedging the risk of interest rate changes capacities. Expansion of sugarbeet seed production and currency risks. The main financial instruments in Einbeck was continued and will be completed at used by the Group in the fiscal year, apart from a the end of 2021. The focus of our capital spending syndicated credit line, were borrower’s notes and in the Corn Segment was on expanding production bilateral loan agreements (commercial papers) with and processing plants in Romania, Brazil and the different loan periods and terms. Further tranches U.S. The main emphasis in the Cereals Segment of the loan from the European Investment Bank (EIB) was again on expanding and modernizing breeding to fund research & development were also utilized. stations and production plants. Our cross-segment The maturity profile of the Group’s borrowings has a investments included new laboratory buildings in broad spread, with a high proportion of medium- and Einbeck. Total capital spending in fiscal 2020/2021 long-term financing. (excluding acquisitions, interest received and noncash additions) totaled €81.3 (108.0) million. Against the In order to secure KWS’ growth, we also consider the backdrop of the COVID-19 pandemic, the KWS Group option of a capital increase in exceptional cases, for pursued a cautious capital expenditure policy in the example to fund a further large acquisition. year under review. Depreciation and amortization increased as planned in the year under review to The net cash from operating activities rose to €93.8 (88.2) million. €168.3 (136.2) million, in particular due to the increase in earnings before depreciation and The net cash from financing activities was amortization. The net cash from investing activities €34.9 million, well above the figure for the previous totaled €–84.2 (–499.9) million in fiscal 2020/2021. year (€–82.5 million); that was mainly attributable to This high figure of the previous year was attributable cash proceeds from raised loans. 2.3 Economic Report | Combined Management Report 3131 KWS Group | Annual Report 2020/2021 Capital expenditure by segment Total capital expenditure €81.3 million 1 Corporate 28% Vegetables 2% Cereals 9% 29% Corn 32% Sugarbeet Capital expenditure by region Total capital expenditure €81.3 million 1 Rest of world 2% North and South America 14% 45% Germany 39% Europe (excluding Germany) 1 Without capital expenditures of our at equity accounted consolidated companies Assets €222.7 (119.7) million as a result of the change in The KWS Group’s balance sheet is impacted by the cash flows. Inventories likewise increased sharply seasonal nature of its business. In the course of to €266.6 (216.6) million, mainly due to higher the year, there are usually balance sheet items that prime costs in seed multiplication. differ significantly from the corresponding figures at the balance sheet date, in particular in relation to Equity increased to €1,053.7 (994.5) million, in working capital. particular due to the net income for the year. The equity ratio was virtually unchanged at Total assets at June 30, 2021, were 44.3% (44.5%). Noncurrent liabilities rose to €2,376.7 (2,235.5) million. The rise is mainly €839.0 (795.5) million due to further financial due to an increase in current assets, which borrowings aimed at ensuring KWS continues totaled €1,111.0 (961.3) million. In particular, on its growth trajectory. Net debt fell to cash and cash equivalents increased sharply to €475.6 (495.7) million. Condensed balance sheet in € millions Assets Noncurrent assets Current assets Assets held for sale Equity and liabilities Equity Noncurrent liabilities Current liabilities Total assets 06/30/2021 06/30/2020 +/– 1,265.0 1,111.0 0.7 1,053.7 839.0 484.0 1,273.7 961.3 0.4 994.5 795.5 445.5 2,376.7 2,235.5 –0.7% 15.6% 75.0% 6.0% 5.5% 8.6% 6.3% 32 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Group 2.3.3 Segment Reports Reconciliation with the KWS Group The KWS Group’s consolidated financial statements lower than the total for the segments. The earnings are prepared in accordance with the International contributed by the equity-accounted companies Financial Reporting Standards (IFRS). The segments are instead included under net financial income/ are presented in the Management Report in line expenses. Our equity-accounted companies are with our internal corporate controlling structure in included proportionately in the segment reports in accordance with GAS 20. The main difference is line with our internal corporate controlling structure. that we do not carry the revenues and costs of our equity-accounted companies in the statement of The difference from the KWS Group’s statement of comprehensive income (in accordance with IFRS 11). comprehensive income is summarized for a number The KWS Group’s net sales and EBIT are therefore of key indicators in the reconciliation table: Reconciliation table in € millions Net sales EBIT Number of employees Ø Capital expenditure Total assets Segments Recon ciliation KWS Group 1,553.8 –243.6 1,310.2 157.2 6,422 86.6 2,472.2 –20.2 –422 –5.2 –95.5 137.0 6,000 81.3 2,376.7 The reconciliation between the KWS Group’s statement of comprehensive income and the reporting by segments in fiscal 2020/2021 is impacted by our equity-accounted companies in the North American and Chinese corn markets. That applies to all key figures in the table above, with the main influences coming from North America. 2.3 Economic Report | Combined Management Report 33 KWS Group | Annual Report 2020/2021Corn Corn Segment General industry-specific conditions: Sharp and foreign demand for fodder. Corn cultivation area recovery in corn prices, high demand in Brazil there rose by around 16% year over year. Cultivation The general economic conditions for the Corn area in Argentina remained unchanged, despite Segment improved sharply as a result of higher higher prices. sales prices for agricultural raw materials and, related to that, greater demand for seed compared The segment’s performance: Exchange rate to the previous year. On the other hand, the market effects reduce net sales, income increases environment was hit only insignificantly by the The Corn Segment generated net sales of impacts of the COVID-19 pandemic. €774.0 million in the year under review, i.e. around the level of the previous year (€775.7 million); after Cultivation area in the U.S., the world’s largest adjustment for exchange rate effects, the segment’s corn producer, rose slightly as a result of higher net sales increased by 8.3%. The main contributors sales prices, which reached a multi-year high in the to this growth after adjustment for exchange rate course of the fiscal year. The agricultural industry effects were the South American markets Argentina in Brazil expanded sharply due to strong domestic and Brazil and the Europe region (Southeastern and 34 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS GroupEastern Europe). In Europe, the high-yielding hybrid In North America, net sales of our 50 : 50 joint venture varieties for grain corn we have launched in the past AgReliant declined slightly. Exchange rate effects years performed very pleasingly in particular, with from the depreciation of the US dollar against the the result that we were able to strengthen our market euro also reduced net sales sharply. In China, net position in this area significantly. Exchange rate sales at our joint venture KENFENG/KWS increased influences in the Europe region, especially in Russia, by around 6% after adjustment for exchange rate Ukraine and Turkey, reduced net sales. effects. We significantly expanded our business volume and The segment’s income rose by 6.3% to won market share in Brazil as a result of successful €71.3 (67.1) million, in particular on the back of higher commercial launch of our high-performance hybrid contributions to earnings in North America and corn varieties. However, the continuing depreciation Brazil. The segment’s EBIT margin rose slightly from of the Brazilian real against the euro reduced net 8.6% to 9.2%. sales growth by 28%. In Argentina, too, we recorded sharp growth in terms of local currency, but net Continued investment in production plant sales were reduced in part by the depreciation of the The segment’s capital spending was Argentinean peso against the euro. Argentina was €28.7 (30.9) million in the year under review. The main once more classified as a hyperinflationary economy capital spending projects included expansion and in the year under review and we therefore applied modernization of production and processing plants, IAS 29 “Financial Reporting in Hyperinflationary such as in Romania, Brazil and the U.S. Economies” again in order to compensate for the effects of inflation. Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.)¹ ROCE (avg.) ² 2020/2021 2019/2020 774.0 106.1 71.3 9.2 28.7 694.6 10.3 775.7 103.2 67.1 8.6 30.9 744.2 9.0 +/– –0.2% 2.8% 6.3% – –7.4% –6.7% – in % in % 1 Capital employed (average capital employed) = (quarterly figures at the reporting date for intangible assets + property, plant, and equipment + inventories + trade receivables – trade payables) / 4 2 ROCE = EBIT/capital employed (avg.) 2.3 Economic Report | Combined Management Report 35 KWS Group | Annual Report 2020/2021Sugarbeet Sugarbeet Segment General industry-specific conditions: Sharp in Thailand and restrictions on exports from India. In increase in sugar prices, slight decline in addition, production of ethanol from sugar cane in cultivation area Brazil increased as a result of higher crude oil prices. Sugarbeet cultivation area in our core markets of the U.S. and Germany remained stable, while it declined The segment’s performance: Increase in some EU markets and the UK. Total global in net sales and EBIT cultivation area fell by around 3% year on year. The segment’s net sales increased by 6.6% to However, the continuing COVID-19 pandemic only €524.3 (491.8) million due to the growing success had a limited impact on the industry environment of innovative KWS varieties. Demand for in the year under review. Global prices for raw CONVISO® SMART, an innovative system for and white sugar rose sharply in the course of the controlling weeds, continued in the year under fiscal year, mainly due to low availability. Factors review, and these varieties are now available in influencing that included a below-average harvest 25 countries. In addition, initial net sales were 36 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Groupgenerated from the newly launched varieties based The main focus here was on breeding natural on a new Cercospora tolerance (CR+). The need resistances, given the increasing restrictions on the to resow seed due to wintry weather conditions use of pesticides in the European Union. The EBIT in the spring of 2021 had a positive impact on net margin was 33.3% and thus slightly below the level sales, especially in France, Germany and the U.S. of the previous year (34.6%). Exchange rate effects, mainly from the price of the euro relative to the US dollar and the Turkish Focus on investments in seed production lira, reduced net sales by 6.4%; after adjustment and biologicals for exchange rate effects, the segment’s net sales We continued our multi-year capital spending rose by 13.0%. However, the continuing COVID-19 projects as planned in fiscal 2020/2021. The PIA pandemic did not have any significant impact on (Production Extension and Innovation Einbeck) sugarbeet seed business. project, in which we are expanding our seed production plant in Einbeck, will be completed at The segment’s income rose to €174.7 (170.1) million. the end of 2021. Further investments were made in This positive trend was offset by an increase in the a new production plant in Russia and in developing cost of sales, in particular due to changes in the biologicals. These useful microorganisms are applied regulatory framework, as well as higher prime costs to the seed as a protective cover, with the aim of in seed multiplication due to weather conditions. improving its stress tolerance to pests and abiotic There was also a negative impact from currency factors such as drought. The segment invested a translation here. While selling expenses declined total of €26.5 million compared to €32.3 million in the slightly due to the pandemic, our research & previous year. development expenditure was higher as planned. Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) 2020/2021 2019/2020 524.3 192.8 174.7 33.3 26.5 357.9 48.8 491.8 187.0 170.1 34.6 32.3 349.5 48.7 +/– 6.6% 3.1% 2.7% – –18.0% 2.4% – in % in % 2.3 Economic Report | Combined Management Report 37 KWS Group | Annual Report 2020/2021Cereals Cereals Segment General industry-specific conditions: The segment’s performance: Net sales stable, Sharp increase in cereal prices income lower year on year Despite the prevailing COVID-19 pandemic, the Net sales in the Cereals Segment were industry environment was robust in the period under €191.2 (191.2) million and so at the same level of the review. Stronger global demand for agricultural previous year; after adjustment for exchange rate products caused prices to rise, in some cases effects, they increased by around 3%. While barley sharply. For example, the price of wheat, one of the seed business declined slightly by 5%, mainly due world’s most important cereals, increased from €180 to the weather, net sales for rapeseed seed grew to almost €210 a ton on the Euronext in the course by 10% in the wake of rising prices. Wheat seed of the year under review. That led to an increase business likewise increased by around 10%, with in cultivation area for wheat, barley and rapeseed. the biggest growth being recorded in France and However, cultivation area for rye in the EU fell by Eastern Europe. Net sales from hybrid rye seed around 9%, since the prices paid for wheat were were slightly down (by 4%) as a result of declining better. cultivation area in the EU and adverse exchange 38 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Grouprate effects. Nevertheless, we were able to increase here was on breeding high-performance varieties sales volumes sharply in operations in our growth and their resource efficiency. KWS aims to continue regions Russia and Ukraine; after adjustment for growing, especially on the back of hybrid rye. In exchange rate effects, net sales remained stable. In particular, the Eastern Europe and North America the year under review, net sales from farms totaling regions offer additional potential here. The company €1.6 million were reassigned from the Cereals also pressed ahead with its breeding programs Segment to the Corporate Segment. for sorghum, wheat in the U.S., new rapeseed varieties in Europe and alternative protein sources However, the medium-term growth prospects for with a highly promising future, such as peas and hybrid rye remain as before due to its high yields, oats. Overall, EBIT fell to €21.3 (26.4) million. The even in arid conditions, and greater animal welfare EBIT margin was 11.1% and was thus below the level from use of rye in fodder. In addition, there was still of the previous year (13.8%). high demand for seed for peas and oats, crops that are particularly rich in protein. Investment in breeding and production continued The segment’s capital spending in the year under While net sales were at the level of the previous year, review was €7.3 (10.1) million, slightly below the figure there were higher material and production costs for the previous year. The main focus of investment and, as planned, higher selling expenses due to activity was again on expanding and modernizing numerous growth initiatives. In addition, research & production plants, in particular in Germany and development expenditure rose sharply. The focus France, and modernizing breeding stations. Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) 2020/2021 2019/2020 191.2 191.2 30.7 21.3 11.1 7.3 147.3 14.5 36.3 26.4 13.8 10.1 145.6 18.1 +/– 0.0% –15.4% –19.3% – –27.7% 1.2% – in % in % 2.3 Economic Report | Combined Management Report 39 KWS Group | Annual Report 2020/2021 Vegetables Vegetables Segment General industry-specific conditions: COVID-19 The segment’s performance: Sharp decline pandemic weighs on the market environment in net sales and income The general conditions for spinach seed – the main Net sales in the Vegetables Segment, in which sales driver in the segment, contributing around the activities of Pop Vriend Seeds, the vegetable 57% – were very challenging in the year under seed company acquired effective July 1, 2019, are review. Demand, especially for fresh spinach, in consolidated, were €58.2 million, well below the restaurants and the food service market segment previous year’s figure (€83.5 million). slumped strongly in the main market of the U.S. as a consequence of the COVID-19 pandemic. Sales of The decline is largely attributable to lower sales of spinach seed also fell sharply against that backdrop. spinach seed due to the COVID-19 pandemic and negative exchange rate effects. However, business with bean seed increased by around 13% due to stronger demand for heat-tolerant beans in the U.S. market. The most important single market was the U.S., which accounted for around 37% of the segment’s net sales. 40 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS GroupThe segment’s income (adjusted for effects as part Parma, Italy. The company, which was established of the purchase price allocation for the acquisition of in 2011, focuses on breeding tomatoes and on Pop Vriend Seeds) was €7.9 million; the EBIT margin producing and distributing tomato seed. The main of 13.6% was thus below the more precise guidance sales regions currently include Italy and Mexico. given in the Semiannual Report 2020/2021 By integrating Geneplanta we gain access to high- (“around 20%”). Including noncash effects from the performance genetic material and can significantly purchase price allocation of inventories measured speed up development of our own tomato breeding at fair value (€–4.1 million) and from amortization programs. of acquired intangible assets (€–21.9 million), the segment’s income was €–18.1 million. We are also focused on building our own tomato, Further expansion of vegetable breeding activities in Spain, Mexico, Brazil and Turkey. As KWS continues to expand its new business unit part of that, we pressed ahead with preparations for for vegetable seed. Last fiscal year, it took over the establishing breeding stations in these countries in vegetable seed company Geneplanta S.r.l., Noceto/ the year under review. cucumber, melon, watermelon and pepper breeding Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) 2020/2021 2019/2020 58.2 5.5 –18.1 –31.1 1.3 437.6 –4.1 83.5 15.5 –7.5 –9.0 1.6 479.5 –1.6 +/– –30.3% –64.5% > –100% – –18.8% –8.7% – in % in % 2.3 Economic Report | Combined Management Report 41 KWS Group | Annual Report 2020/2021Corporate Corporate Segment Key figures in € millions Net sales EBITDA EBIT Capital expenditure 2020/2021 2019/2020 6.0 –72.5 –92.0 23.0 4.6 –87.1 –104.6 38.6 +/– 30.4% 16.8% 12.1% –40.4% Net sales in the Corporate Segment totaled the Corporate Segment, its income is usually €6.0 (4.6) million. They are mainly generated from negative. The segment’s income improved sharply our farms in Germany, France and Poland. In the to €–92.0 (–104.6) million, mainly due to positive fiscal year, net sales from farms totaling €1.6 million exchange rate effects from financial instruments were reassigned from the Cereals Segment to and lower costs as a result of the pandemic. Capital the Corporate Segment. Since all cross-segment spending was €23.0 (38.6) million and thus well costs for the KWS Group’s central functions and below the previous year; the investments included basic research expenditure are still charged to new laboratory buildings in Einbeck. 42 Combined Management Report | 2.3 Economic Report Annual Report 2020/2021 | KWS Group2.4 Environmental Report 2.4.1 Product Innovations the potential that offers for reducing use of necessary Every year KWS develops new varieties that are agricultural resources, such as fertilizers and intended to meet the differing requirements of pesticides. We also strive to constantly improve the farmers and reflect the conditions at the particular resilience of our crops and varieties so as to further location and the regional climate. With our seed for reduce potential losses due to diseases or extreme sugarbeet, corn, various cereals and vegetables, environmental influences. These crop-specific rapeseed and catch crops, we offer a broad range of development objectives are agreed annually between products for conventional and organic farming. Research, the respective breeding departments, We continuously work to further develop our crops Board to decide on and reported to the Supervisory as part of our breeding programs. In fiscal 2020/2021 Board. The progress made over the past years is also we revised our breeding objectives and, as shown examined and reported on regularly as part of that. Production and Sales, submitted for the Executive in the graphic below, geared them more strongly to sustainability aspects. We aim to increase the One indicator of our breeding progress is the official share of our varieties that are suitable for human variety approvals granted every year. Only varieties consumption and expand our breeding programs that offer a clear improvement in cultivation or from 24 to 27 crops, for example. In addition, our further processing over already approved ones can focus is on increasing yields by an average of 1.5% be marketed in the EU, for example. We obtained a year, as well as on enhancing the diversity of our 492 variety approvals worldwide in the fiscal year portfolio and our varieties’ resource efficiency, with compared to 484 in the previous year. Sustainability starts with the seed Safeguard food production Enhance crop diversity 1.5% annual yield gain for farmers through progress in plant breeding and digital farming solutions on > 6 million hectares Increase number of crops with dedicated breeding programs from 24 to 27 Minimize input required Support sustainable diets Enable > 50% reduction of chemical crop protection (in line with European Farm to Fork Strategy). Invest > 30% p.a. of R&D budget into reduction of inputs > 25% of KWS varieties are suitable for low input cultivation > 40% of KWS varieties are suitable for predominantly direct use in human nutrition 2.4 Environmental Report | Combined Management Report 43 KWS Group | Annual Report 2020/2021 KWS varieties with our highly effective Cercospora Our focus in the organic farming arena in the year tolerance, which have been developed to combat under review was on variety development. As part of this leaf spot disease in sugarbeet, were awarded that, we hired new personnel with specific expertise approvals in further countries, including Germany, in organic farming for our breeding activities and for France, the UK, Spain and Poland, in the fiscal year. our trial technology. KWS has its own location for These varieties mean farmers can safeguard sugar organic farming in Germany, the Wiebrechtshausen yields even in cases of severe infection, yet do not monastery estate. In addition, we expanded our trial suffer losses in yield even when their crops are not areas and improved the quality of trials by means infected. The varieties also have the potential to of statistical analyses, enabling even more precise reduce the use of fungicides. selection of candidate varieties under ecological We are currently working on the issue of nitrogen conditions. use efficiency in relation to corn. At the beginning of 2.4.2 Product Quality and Safety 2021, the plants in the series of trials at four locations We want to offer our farmers top-quality seed. in Germany were tested under conditions where their So that we live up to that corporate principle, the supply of nitrogen was reduced (by 30–40%). That entire process from breeding to seed processing allows us to characterize our current hybrid varieties is accompanied by extensive quality testing. in terms of their nitrogen use efficiency and stress KWS keeps on developing and establishing new tolerance and improve these traits through breeding. technologies, processes and methods for improving product quality and safety. They include X-raying As part of our KWS FIT4NEXT range of catch crop untreated sugarbeet seed so as to obtain information mixtures, we offer solutions for common crop on the seedling’s development or the use of image rotations in Europe and offer farmers the possibility analysis methods in examining germination speed. of adopting other agricultural approaches or ones demanded by society, such as reducing nematodes We aim to set internal standards of quality exceeding in the soil or greening between cultivation phases. those required by law, for example with the aid of These products can also be used to prevent erosion, increase CO2 binding, assist humus formation or promote biodiversity. programs like QualityPlus for cereals. These quality assurance measures are flanked by our Group-wide Integrated Management System (IMS), in which the various quality management systems are combined. In addition, we have worked for years on biologicals The IMS not only comprises our internal rules and as an alternative or complement to chemical means regulations and extensive process descriptions, but of seed treatment. They comprise microorganisms also audit management for controlling our internal and such as fungi and bacteria, but also various external audits. Apart from the fact that the majority of substances that can be obtained from plants or its German locations hold ISO 9001 certification, KWS microorganisms. We have treated sugarbeet, is also certified in accordance with various standards. rapeseed, corn and rye seed with biologicals since One of them is SeedGuard, an industry-specific fiscal 2019/2020. We started developing biological standard relating to proper use of seed treatments. applications for further crops, such as sorghum, in Six treatment facilities in Germany currently hold the year under review. SeedGuard certification; others are to follow. 44 Combined Management Report | 2.4 Environmental Report Annual Report 2020/2021 | KWS GroupResponsible use of genetically modified organisms We have recorded key consumption indicators for has always been an important issue. KWS works in all German locations since fiscal 2008/2009. That compliance with the international “ETS – Excellence process was internationalized in fiscal 2017/2018 through Stewardship” industry standard, which is and continuously expanded since. In the past fiscal tailored specifically to this field. Here, too, we apply year, we adopted a new materiality analysis focusing our quality management maxim: “plan-do-check- on emissions and water consumption, among other act”: Documented processes throughout the life- things. We have also set ourselves the goal of rolling cycle, training, defined quality controls, a network of out scorecards for evaluating internal production local contact persons, internal and external audits, sites, including the processing plants and internal and a standardized approach to handling unforeseen seed multiplication areas. We can leverage greater events are key pillars of the system. The whole KWS transparency on our production sites in the future in Group has also been certified in accordance with this order to support the choice of sustainable locations standard since 2015. and investment planning. 2.4.3 Emissions & Water Production-related reasons mean that most of the In order to minimize the ecological impacts of water and energy is consumed internally at KWS its locations and operations, KWS strives to in the first phases of the agricultural value chain. continuously improve internal processes, the Cold storage cells are used in sugarbeet research & technologies it uses and internal company standards. development to simulate cold weather dormancy, The locations themselves are responsible for the while an important factor in seed multiplication is concrete application and operational implementation to supply plants with enough water, for example. of resource-conserving measures. Concrete minimum Moreover, energy and water are used in drying requirements in our global HSE (health, safety and and treating seed in the pre-cleaning and further environment) management activities ensure that processing stages. all KWS locations are governed by comparable regulations. Agricultural value chain Seed Cultivation Improvement/ processing Trade Consumer industry R&D Multiplication Cleaning Processing Packaging Sales & administration Distribution Farming Consumer KWS activities with high water and energy consumption 2.4 Environmental Report | Combined Management Report 45 45 KWS Group | Annual Report 2020/2021Emissions Water We concretized our sustainability goals last fiscal Water is an important business resource for us as a year as part of our strategic planning. In addition seed specialist and plant breeder. It is vital in every to objectives for research & development and phase of seed production – from research to the social aspects, we defined quantitative targets for finished product that is ready for sale. We believe continuously reducing the emissions caused by KWS: it is our obligation to maximize efficiency and eco- KWS aims to reduce all Scope 1 and 2 emissions it friendliness in consuming water. Apart from our HSE causes by 50% by 2030. Scope 1 and 2 emissions are Guidelines, the HSE Manual specifies that we aim to produced either directly through our own combustion work in a way that conserves resources and to avoid or indirectly by purchasing energy. The base year for process-related effluents as far as possible. In fiscal that is the past fiscal year 2020/2021. In addition, the 2019/2020 KWS also adopted guidelines stating emissions caused by KWS (Scope 1 and 2) are to be that the use of renewable resources in construction cut to net zero by 2050 in accordance with current, projects must be examined so that, for example, use science-based standards. So that we can track of groundwater can be reduced further. We also use our progress here, the current status of emissions rainwater for the sanitary facilities at our Einbeck reduction is to be reported annually to the Executive location. Board starting from the current year under review. Alongside water consumption in offices and research Recording of the emissions caused by KWS was buildings, the highest levels of fresh water are used further expanded in the period under review and in watering the fields at our trial and multiplication consolidated worldwide with the aid of a new online locations. That is necessary so as to create the best platform. That covered all companies in which KWS possible conditions for healthy seed and ensure a owns a stake of more than 50%, with the exception of high yield in multiplication. The water we need is holding companies. Moving ahead, we aim to expand taken from local water supply networks or, if possible recording of emissions to include suppliers and in a region, we use groundwater, surface water or service providers (Scope 3), for example. rainwater. Total emissions in the fiscal year were 64,455 tons of CO2e 1, of which the parent company KWS SAAT SE & Co. KGaA produced 22,897 tons. Emissions of the KWS Group Emissions of KWS SAAT SE & Co. KGaA 36,914 15,198 Emissions 1 (in tons of CO2e) 2 Scope 1 emissions – direct 3 Scope 2 emissions – indirect 27,541 7,699 the future. It is unlikely that we can minimize absolute water consumption long term, given our growing business activity and the strong variable influences of external factors (such as the temperature or precipitation). We are currently recording and consolidating our global water consumption. Development of a normative key performance indicator and suitable auditing systems was discussed by the Executive Board in fiscal 2020/2021 and we are striving to implement them in 1 Calculated in accordance with the Greenhouse Gas Protocol guidelines and using the location-based method 2 According to IPCC 2013-climate change-GWP 100a-(kg CO2-Eq) per 1 unit of reference product 3 Does not include emissions from our own use of fertilizers. Fertilizer is mainly applied by external service providers (Scope 3). 1 The total emissions also include emissions from biomass 46 Combined Management Report | 2.4 Environmental Report Annual Report 2020/2021 | KWS Group 2.5 Employee Report 2.5.2 Occupational Health and Safety We as a family business believe it is one of our  Over the generations, our employees have made core duties to ensure the health and safety of KWS what it is today: an innovative, world- our employees at all locations. To enable that, leading plant breeding company. That is due in we have internal stipulations that define local and great measure to their skills, mindsets, ideas and international standards and present statutory commitment. As a company with a tradition of family requirements transparently. One key component is ownership, we attach importance to a high degree our HSE (health, safety and environment) Guideline. of personal initiative, personal and professional It contains consistent regulations on the issues development, and a work culture marked by respect, of occupational health and safety, emergency openness, trust and team spirit. preparedness, risk prevention and protection of 2.5.1 Employment Trends the environment. Examples that can be cited here include regulations on what to do in the event of an The KWS Group employed an average of emergency, prevention of explosions or procedures 6,000 (5,709) people in the fiscal year, a year-on- relating to emission-producing facilities. year increase of around 5%. Under the HSE Guidelines, a workplace risk 2,323 (2,236), or around 39% (39%) of the assessment must be created as the foundation for all workforce, were employed in Germany. Once again, technical, organizational and personal measures. That the area that accounted for the most employees can be used as the basis for training and instruction was research & development, who made up required by law or appropriate to employees’ functions. 35.4% (36.2%) of the total workforce. In Germany, employees must take and regularly retake examinations testing their expert knowledge on the Even in the coronavirus crisis, KWS was able to subject of handling pesticides, for example. Apart from offer reliable employment conditions worldwide: efficient process engineering, employees’ occupational It did not resort to short-time work or layoffs due health and safety is a subject of continuous dialogue to COVID, nor did it stop hiring employees for key between internal specialists and external partners. Our projects. Employees by region Number of employees 6,000 non-life insurer conducts multiple risks assessments a year at the KWS Group’s locations in order to examine fire and explosion prevention measures, for example, and issues appropriate recommendations if necessary. Rest of world 183 North- and South America 1,934 2,323 Germany 1,560 Europe (excluding Germany) Employees by function Number of employees 6,000 Administration 860 Distribution 1,310 2,122 Research & Development 1,708 Production 2.5 Employee Report | Combined Management Report 47 KWS Group | Annual Report 2020/2021 The main internal stipulations are reviewed regularly We also revised the globally applicable HSE Guidelines and developed further. The Global HSE Manager and specified in more detail the role of managers in is responsible for developing the HSE standards relation to occupational health and safety. That will also further. The currently applicable HSE stipulations and involve new regulations on the issue of entrepreneurs’ updates to them are mostly communicated to the and operators’ duties as part of the applicable local companies through the local HSE Managers. procedures for the location of Germany. The location’s management is responsible for implementing them. 2.5.3 Recruitment & Employee Loyalty All in all, our global and local HSE activities were the KWS Group endeavors to win and keep suitable As an international company that continues to grow, significantly impacted by the COVID-19 pandemic in employees. the year under review. In cooperation with an incident team, HSE management used a global pandemic We use digital and traditional channels to reach out network that had been established the previous year in to potential applicants. That enables us to address order to ensure efficient implementation of consistent each target group specifically, for example on social internal and statutory requirements governing how networks such as LinkedIn, XING and Facebook. to deal with coronavirus at the company. These As a result, we were able to increase the number of stipulations are developed and communicated on an our direct followers (e.g. on LinkedIn from around ongoing basis, also because of the large differences 57,000 in June 2020 to around 84,000 in June 2021) in the pandemic’s progression and regulations relating by publishing targeted campaigns and job advertise- to it in the various regions. HSE management is the ments on these networks. Apart from using common central point of contact at the KWS Group during digital channels, we took part in virtual career fairs the pandemic. As in the previous year, KWS has in fiscal 2020/2021. That gave students the chance been able to maintain all core processes during the to participate in online presentations and workshops ongoing pandemic. and chat directly with employees. The first internationally planned HSE audits in fiscal Through the post of Global Lead of Scientific 2020/2021 had to be canceled due to the COVID-19 Affairs, we are also committed to direct dialogue pandemic. Initial locations will now undergo such with universities and research institutes in the field auditing in the coming fiscal year. Several audits of research & development in order to deepen our examining implementation of the HSE Guidelines were cooperation with them, with the goal of recruiting held in Germany in the second half of the fiscal year. employees. We also award scholarships at universities and offer induction programs. As a We also revised and expanded central recording of result, we again accompanied many young people occupational accidents at the KWS Group. As part of successfully on their path to gaining vocational that, we rolled out an adapted process relating to a qualifications in the past fiscal year. In Germany, recording system, with the objective of gaining greater 79 (82) trainees were employed in vocational training transparency globally on the number of accidents and and nine (ten) students were on dual courses of days lost in all areas of the company. Moving forward, study in the period under review.¹ KWS aims to leverage this transparency to measure annual accident rates and thus keep on improving employees’ health and safety at the workplace. 48 Combined Management Report | 2.5 Employee Report 1 The figures for the 2019/2020 financial year were subsequently corrected. Annual Report 2020/2021 | KWS GroupKeeping employees with the company is 2.5.4 Qualification, Further Training very important for us. Our goal is therefore to and Development continuously measure employee engagement in the KWS’ long-term commercial success is founded future in order to identify areas of action based on not only on its employees’ commitment and the results and to develop measures that contribute satisfaction, but also on their personal skills and to further strengthening employee engagement. professional qualifications. KWS’ range of education Our aim is to create the appropriate framework and development offerings is diverse and supports conditions for every phase of the employment various learning objectives. In particular, intercultural relationship. As part of onboarding, for example, we training, as well as knowledge transfer in various attach great importance not only to introducing new subject areas and international development of employees to their field of work and assignments, (junior) executive staff, are gaining in importance. but also integrating them culturally and socially. Parts of our onboarding process, such as the We support our employees with tailored education monthly induction event in Berlin, were held virtually and further training measures to help them build on during the pandemic. We continue to believe that their expertise and abilities. They are generally held it is important to take the changing individual life as in-person or online events, although in-person circumstances of employees into account, especially training was largely suspended in the period under as regards organization of their working time, as far review given the restrictions imposed as a result as business operations allow. Depending on their of the pandemic. To compensate for that, we field of activity, we therefore offer various working continuously expanded our range of online training time models, which also allows them to strike a from May 2020 on and concluded an additional good life-work balance. Where compatible with cooperation agreement with a large online learning their specific activity and in compliance with local platform. As a result, we can give our employees free legislation, employees who work at a computer can digital access to various learning contents during the also work remotely, an option that an increasing pandemic and beyond. number of employees took up during the pandemic. Where legally and operationally feasible, we also In regular development meetings, which are part of offer various part-time models on a temporary the annual performance and career development or permanent basis, as well as the possibility of reviews, our employees formulate perspectives for taking leave in order to care for family members, their further development at KWS together with their for example. managers. The meetings are to be used not only to jointly agree on future goals, but also to define We enhance KWS’ attractiveness as an employer concrete continuing education and development with these measures. That is evidenced by the fact measures aimed at enhancing employees’ personal that in the 2021 annual independent rankings by the and professional skills and competence. The consulting firm Universum, KWS came in 43rd (2020: restrictions due to the pandemic meant that the 59th) in the area of sciences in the list of the 100 meetings were not held exclusively in person, as is most popular employers in Germany. usually the case, but instead in part virtually. 2.5 Employee Report | Combined Management Report 49 KWS Group | Annual Report 2020/2021In addition to the individual performance and career for experienced managers will be rolled out this development reviews between employees and their fiscal year. More than 100 participants completed managers, we initiated a global talent and successor either the basic module “Leading Self” or the module management process in the year under review. As “Leading Individuals” in the current period under part of that, we identified talents up to the fourth review. tier and critical posts up to the third tier below the Executive Board in order to ensure that functions that In October 2020, we also launched a management are critical to KWS’ success are (re)filled. The annual development program specifically for managers in our Orientation Center (OC), an intensive evaluation of research & development organization. It allows them potential successors for senior management posts, to acquire management skills that promote innovation was suspended in the period under review due to and flexibility in developing solutions. Around 200 the pandemic. managers are to take part in the program over a period of three years. Its contents include issues such In the International Development Program (IDP) we as feedback and innovation culture, leadership in give identified high potentials the opportunity to uncertain times and conflict management. gain experience through cross-functional project work in an international team and to develop To support the further transition to our GLOBE their management and leadership skills. The (Global Business Excellence) target structure accompanying events were held virtually for the first for administrative functions and the related time in the past fiscal year due to the restrictions implementation of the role of Business Partner, we entailed by the pandemic. have initiated a Business Partner Academy for KWS Business Partners in all functions. The Business We are particularly committed to having all Partner Academy comprises development measures employees receive qualified leadership and support aimed at the role of Business Partner and required from their managers. That is why we are further key competencies, and focuses on imparting developing the existing competence model defining more in-depth knowledge of KWS’ business the core competencies of managers at KWS. Its activities. Approximately 50 Business Partners have objective is to support continuous development participated in the Academy’s initial modules since of the whole organization against the backdrop of October 2020. an increasingly agile and dynamic working world and also to reflect the skills that are additionally We intend to continue focusing on qualifying and required. We are also continuously expanding the developing our employees and managers in the management development program we launched at future and will expand our training portfolio nationally the end of 2018. The next module “Leading Leaders” and internationally to enable that. 50 Combined Management Report | 2.5 Employee Report Annual Report 2020/2021 | KWS Group2.5.5 Labor and Social Standards KWS is committed to the principle of non- As an international, innovation-oriented company that discrimination and to equal opportunities and rights aims to keep on growing, our mission is to provide for its employees, regardless of gender, religion good working conditions for our employees. Our goal or belief, ethnic origin, age, handicap, skin color, is to uphold labor and social standards at KWS and in language or sexual orientation. We have enshrined our supply chain. that in our Code of Business Ethics, which is binding on all employees. We believe that diversity of our Our global internal labor standards comprise employees, as displayed in their individual experience, technical, organizational and occupational health knowledge, skills and ideas, is a key value and a measures to prevent accidents and diseases at work. competitive advantage. In this connection, KWS aims KWS is committed to internationally recognized to increase the ratio of female managers further. The human rights standards, such as those of the envisaged targets of 15% in the first management tier International Labour Organization (ILO) proscribing and 10% in the second management tier have already child, forced and compulsory labor. As part of that, we been achieved. launched a project aimed at laying down new internal standards, measures and controls in the fiscal year. Employees’ interests are represented collectively to management by the locally elected Works Councils Employees of the KWS Group have a written contract and the persons entrusted with representing young of employment that complies with local labor and people and trainees. We also have a European social insurance legislation. The overall compensation Employees’ Committee (EEC), a body that represents package for KWS employees takes into account their European employees and is responsible for cross- individual expertise, professional experience and border matters within the EU. In regions where there local market circumstances. Depending on general is no collective employee representative body, we also local conditions, it consists of a basic salary, social attach importance to mutual respect and dialogue benefits, performance-related payment components between regional management and employees. (if applicable) and Employee Stock Purchase Plans where staff can buy shares in the company. Equal pay for the same activities is a fundamental principle of our basic compensation policy. 2.5 Employee Report | Combined Management Report 51 KWS Group | Annual Report 2020/20212.6 Corporate Governance That is the foundation for KWS’ compliance objectives, namely to gain and retain customers’ 2.6.1 Corporate Governance and Declaration on trust through ethical conduct and to protect the Corporate Governance* company’s employees, reputation and assets. Responsible corporate governance has always been Information, training and continuous intensive of great importance at KWS SAAT SE & Co. KGaA. consulting help integrate compliance in business Since it was founded 165 years ago, our company’s processes and support management in making successful development has been based on thinking business decisions rooted in our corporate culture. long term and acting in terms of sustainability. The Executive Board (the personally liable partner Our Code of Business Ethics, with its accompanying KWS SE, whose Executive Board is responsible for guidelines defining the basic regulations relating management of the company’s business) and the to compliance with the law, fair competition, Supervisory Board run and accompany KWS with the prevention of corruption, safety at work, protection goal of ensuring it creates sustainable value added. of the environment, and the need to treat each They once again examined in the year under review other, customers, business partners, other third whether the company complies with the stipulations parties and public authorities with respect, gives of the German Corporate Governance Code and our employees crucial guidance in their day-to-day issued the Declaration of Compliance in Accordance work. All employees undertake to comply with the with Section 161 AktG (German Stock Corporation code by signing a commitment to do so when they Act) to the effect that the company complies almost are hired and are provided with generally applicable fully with the code’s recommendations. information on compliance, as well as related information specific to their function. You can find detailed information on corporate governance in our declaration on corporate governance Our Code of Business Ethics also covers the issue in accordance with Section 289f of the German of international anti-corruption management as an Commercial Code (HGB), which is available in full integral part of our compliance system. On the basis on our website at www.kws.com/corp/en/company/ of the regulations in the code, there is a policy of investor-relations/corporate-governance. You can find zero tolerance toward any form of corruption at the the Compensation Report starting on page 55. KWS Group, and that principle is stipulated as a Group-wide standard in the Anti-Corruption Policy. 2.6.2 Declaration of Compliance in Accordance This standard applies regardless of whether bribery with Section 161 AktG (German Stock is prohibited by law, tolerated or permitted in the Corporation Act)* country in question. The Group-wide Anti-Corruption The final version of the Declaration of Compliance in Policy defines the responsibilities, processes and accordance with Section 161 AktG (German Stock regulations in relation to preventing corruption and Corporation Act) is available to shareholders on the bribery at the KWS Group. website www.kws.com/corp/en/company/investor- relations/declaration-of-corporate-governance.html. The Compliance department is the central point of contact for questions on our Code of Business Ethics 2.6.3 Business Ethics & Compliance and other related issues. It advises all divisions of The basis of our compliance concept is the the KWS Group in complying with laws, regulations implementation of our corporate culture: KWS’ and internal rules of conduct and controlling their values are practiced when the compliance rules observance. The focus is on the subjects of antitrust are applied. Compliance with basic principles of law, prevention of corruption and money-laundering, business ethics is vital to our license to operate. data protection and capital market law. Accordingly, the compliance rules apply to all employees in the KWS Group. * Not an audited part of the Combined Management Report 52 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupThe Compliance Officers regularly provide regulations resulting in disciplinary consequences information about the compliance system and its or official measures such as fines were reported to principles, as well as about the latest issues and headquarters in fiscal 2020/2021. developments, in training courses, information events and workshops. Apart from this information, a broad If an examination or report reveals indications of a range of aids is also available to our employees. compliance violation, the investigation is conducted Checklists, instructional leaflets and other guides in accordance with KWS’ regulations “Procedures of provide practical tips on observing compliance Internal Compliance Notification.” KWS’ employees rules in everyday work. All information and rules of are obligated to report suspected violations; the conduct can be accessed by employees worldwide open door principle applies to that. Employees can in the Compliance Portal on KWS’ intranet. Around supply information on suspected violations to their 81% of the total workforce has access to the supervisor, to the Chief Compliance Officer or to the Compliance Portal. In addition, all supervisors are Compliance Reporting Platform. Information can obliged to inform their employees about compliance be sent to the platform in any required language. issues. Supervisors can also enroll their employees Reports of suspected violations can also be directly in compliance training courses. In the submitted anonymously. The reported cases are year under review, the Compliance department investigated by KWS. Whistleblowers do not suffer implemented a software solution that allows any disadvantages unless they have obviously e-learning offerings on the subject of compliance to abused their right to report violations. They receive be held online. About 1,700 employees registered confirmation that their report has been received for the anti-corruption and antitrust law training from and may be contacted via the portal and asked to when the software was rolled out up to the end of provide further information. Finally, whistleblowers the fiscal year, and about 1,300, or 73%, of them are informed when the investigation has been completed it. Further e-learning offerings are being completed. prepared and will soon be rolled out. This system has proven its value, especially during the COVID-19 If suspected cases prove to be violations, the system pandemic. In addition, the entire system for of sanctions is applied. In general, it can be applied compliance training and workshops was reorganized to all types of compliance violations and is also to enable the events to be held online due to global accessible to employees. The system of sanctions travel restrictions and home office regulations. Large defines various criteria governing the measures on-site workshops were replaced by numerous to be taken, such as the gravity of the violations, smaller online events in order to maintain the the degree of the person’s breach of duty, the intensity of training. functional level, behavior after the violation – help in investigating it or attempts to cover it up – as well as Implementation and observance of individual consequences of the violation, such as the threat of compliance aspects is reviewed as part of audits. damage or actually incurred damage, among other An internal compliance audit was also held in the things. The sanctions consequently range from fiscal year; no critical deviations were identified in cautions, warnings to immediate dismissal and filing it. In addition, the Compliance Officers conduct an of charges. assessment termed risk scoring together with the Risk Management and Finance functions, the results The Executive Board and the Supervisory Board’s of which are used as the basis to make and derive Audit Committee are informed once a year about decisions for the companies under analysis. No the current status and latest developments of the violations of the international Anti-Corruption Policy Compliance Management System. or antitrust, data protection or money laundering 2.6 Corporate Governance | Combined Management Report 53 KWS Group | Annual Report 2020/20212.6.4 Responsibility in the Supply Chain Our Sourcing Policy, which defines fundamental KWS has a global sourcing and production structure principles in the procurement process and was and, like any other international company, has to updated in the period under review, and a largely deal with a wide range of different social legislation centralized process landscape are the basis for frameworks. As stated in the previous section “2.5.5 making sure that our purchasing transactions Labor and Social Standards,” observance of human worldwide can be conducted in accordance with rights is a fundamental and universal principle for our internal regulations. Standardized templates for KWS. Apart from responsibility for our internal purchase agreements relating to the supply of goods process standards, compliance with the applicable and services have been introduced and specify labor standards in the global supply chain is also an the general conditions, including application of the integral part of our corporate culture. We also aim to Code of Business Ethics for Suppliers. A central ensure that our suppliers and other service providers Seed Purchasing Policy is also being prepared. It is (termed “suppliers” in the following) also comply with expected to come into force at the beginning of the current and future standards current fiscal year. We expect our suppliers to commit to our Code KWS has further centralized its supplier data of Business Ethics for Suppliers and abide by its management over the past few years. As part of principles on ethics and socially responsible conduct. supplier onboarding, a cross-unit preliminary check The code details, for example, that our suppliers on the individual suppliers, such as whether they must not permit forced labor or child labor and must are blacklisted and what their credit score is, is comply with the regulations on the minimum age carried out so that KWS can centrally monitor and for admission to employment defined in the latest track compliance with its standards before any version of ILO Convention No. 138. They are also to substantial business is concluded with a supplier. comply with the provisions on safety at work, product All existing suppliers are screened twice a week to safety, protection of the environment and avoidance ascertain whether they appear in sanctions lists. of corruption, as well as on the requirement to ensure These processes are being expanded into a more fair competition and protection of personal data and extensive means of supplier validation (Know Your third-party know-how. Supplier Program). It was prepared in the period under review and is expected to be activated in the The organization and future review of compliance opening quarters of the next fiscal year 2021/2022. with our standards and processes is currently being The audits KWS had planned for the first time to revised. In the future, our central procurement monitor compliance with the Code of Business Ethics concept will aim at cost-efficient cooperation with for Suppliers could not be conducted during the external partners as well as maintaining specific COVID-19 pandemic. social or environmental standards such as those from the Supply Chain Act. 54 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupAs part of corporate governance, KWS employees Salient features of the compensation system for are given an overview of compliance training relating members of the Executive Board of KWS SE, the to the company’s Code of Business Ethics during managing partner of KWS SAAT SE & Co. KGaA the onboarding process. In addition, procurement The compensation system for members of the staffers are provided with training on those subjects Executive Board is geared toward the KWS and kept up-to-date on changes to the law. Several Group’s strategic planning and aims to promote the training courses for the procurement workforce were company’s successful and sustainable development held by the Global Compliance department in fiscal and largely comply with the objectives of the new 2020/2021, including on identifying and avoiding version of the German Stock Corporation Act (AktG) human rights violations and unethical labor practices. and the German Corporate Governance Code. The system also takes into account the fact that 2.6.5 Compensation Report the Executive Board has overall responsibility for The Compensation Report outlines the principles and managing the company’s business. To ascertain salient features of the compensation systems for the whether remuneration is in line with usual levels Executive Board of KWS SE, the managing partner within the company itself, the Supervisory Board of KWS SAAT SE & Co. KGaA, and its Supervisory took into account the relationship between Board. It also explains the level and structure of their the Executive Board’s compensation and the compensation. The Executive Board’s compensation compensation of senior managers and the workforce was approved by the Annual Shareholders’ Meeting in Germany as a whole, and how compensation has on December 17, 2019, and that of the Supervisory developed over time. In order to assess whether Board on December 14, 2018. the specific total compensation of Executive Board The Compensation Report takes into account the other enterprises, the following peer group of other recommendations of the applicable version of third-party entities was used as a benchmark. The the German Corporate Governance Code dated peer group was chosen based on the enterprise’s December 16, 2019. The Compensation Report size and its international orientation. members is in line with usual levels compared to also contains all the disclosures and explanations required under the German Commercial Code (HGB), including the relevant principles of German Peer group Accounting Standard No. 17 (GAS 17), and under the International Financial Reporting Standards No. Enterprise (IFRS). In addition, it partly takes into account the requirements stipulated in the new version of the German Stock Corporation Act (AktG), which would need to be applied for the first time to fiscal years starting after December 31, 2020. The Compensation Report is part of the Combined Management Report for KWS SAAT SE & Co. KGaA and the Group that has been audited by the independent auditor; these disclosures are not additionally presented in the Notes (Section 289a (2) and Section 315a (2) of the German Commercial Code (HGB)). 1 2 3 4 5 6 7 8 9 10 11 12 Symrise AG Deutz AG Qiagen NV Sartorius AG Hamburger Hafen und Logistik AG Koenig & Bauer AG Carl Zeiss Meditec AG Cancom SE Vossloh AG SMA Solar Technology AG Software AG SGL Carbon SE 2.6 Corporate Governance | Combined Management Report 55 KWS Group | Annual Report 2020/2021Development of the compensation system was Members of the Executive Board are obligated to accompanied by an independent compensation define a freely selectable amount ranging from 35% consultant. to 50% of each gross one-year variable payment for acquiring shares in KWS SAAT SE & Co. KGaA It comprises the following components: (reinvestment). The acquired shares are subject to „ A basic fixed annual salary „ A one-year variable payment a holding period of five years as of when they are acquired (usually on the first stock market trading days after the one-year variable payment has „ A multi-year variable payment (LTI) in the form of been made). an incentive based on the stock price „ Fringe benefits (in particular pension benefits and These share acquisitions by the Executive Board benefits in kind) members form the basis for the multi-year variable payment. When the holding period ends, the The gross basic annual salary is €375,000. The members of the Executive Board receive a one-off Chief Executive Officer receives an extra “CEO payment calculated on the basis of the performance bonus” of 25% on top of the basic annual salary. of KWS SAAT SE & Co. KGaA’s stock and the KWS Group’s return on sales over the holding period. The one-year variable payment is dependent on the KWS Group’s sustained earnings performance The following formula is used to calculate the multi- (“sustained net income”). The assessment period for year variable payment: average applicable share that is the last three fiscal years before payment of price of KWS SAAT SE & Co. KGaA multiplied by the the component, with the latter being adjusted for the number of acquired shares, minus any markdowns provision currently set up for the one-year variable based on the trend for average return on sales (ROS). payment. The one-year variable payment is 0.5% of The goal of that is in particular to gear compensation the KWS Group’s average net income for the year toward strategic planning and to support the in the assessment period, but at most €600,000. company’s successful and sustainable development. The maximum amount increased from €500,000 to €600,000 as of fiscal 2020/2021 because the The share price to be applied is determined on the KWS Group’s sustained net income exceeded basis of the average closing prices of KWS SAAT SE & €100 million in each of the two fiscal years 2018/2019 Co. KGaA’s share in electronic trading on the and 2019/2020. The one-year variable payment Frankfurt Stock Exchange (Xetra) at the end of each is made after submission of the consolidated quarter during the holding period. financial statements of KWS SAAT SE & Co. KGaA to the Annual Shareholders’ Meeting, i.e. usually in There is a markdown on the multi-year variable December. An individually determined amount for payment if the average return on sales (ROS), i.e. the the multi-year variable payment is deducted from KWS Group’s operating income divided by net sales, the total calculated one-year variable payment; the falls below 10% in the holding period. The segment remainder is paid out in cash. reporting of the KWS Group (including the equity- accounted companies) is the basis for determining that. The markdown is 25% if the average ROS is less than 10%, 50% if the average ROS is less than 9%, and 100% if the average ROS is less than 8%. 56 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupThe multi-year variable payment is at most 150% of the reinvestment made by each Executive Board member and at most 200% in the case of the reinvestment made by the Chief Executive Officer. KWS SE can claim back the one-year variable payment and/or multi-year variable payment (clawback option). The Supervisory Board can also take exceptional developments into account to a reasonable extent. Maximum compensation in € Dr. Hagen Duenbostel Dr. Léon Broers Dr. Felix Büchting Dr. Peter Hofmann Eva Kienle Total 1,809,940.00 1,532,000.00 1,532,000.00 1,538,224.00 1,532,000.00 7,944,164.00 Fringe benefits, such as means of transport and communication, premiums for accident and D&O Any payments made to an Executive Board insurance, payments to discharge the employer’s member due to early termination of their Executive contribution to social insurance as well as various Board activity will not exceed twice the annual pension commitments are granted without any compensation (severance cap) and shall not modification. constitute remuneration for more than the remaining term of the employment contract. If post-contractual Applying the compensation system currently in force, non-compete clauses apply, the severance payment the following maximum annual compensation will not be taken into account in the calculation of is set for members of the Executive Board (given any compensation payments. a one-year variable payment cap of €600,000). Apart from the basic salary and any CEO bonus, it Significant agreements subject to the condition of consists of the one-year variable payment, the multi- a change in control pursuant to a takeover bid have year variable payment, fringe benefits and pension not been concluded. The compensation agreements costs. If Executive Board members also serve on between the company and members of the Executive Supervisory Boards within the Group, their payment Board of the personally liable partner and governing for that is offset. If they serve on Supervisory Boards the case of a change in control stipulate that any outside the Group, their payment for that is not such compensation will be limited to the applicable offset. maximum amounts specified by the German Corporate Governance Code. An Executive Board If the contract with an Executive Board member member is not entitled to severance payment if his or is terminated, the outstanding multi-year variable her activity on the Executive Board ends by mutual payment components are usually calculated and agreement at the request of the Executive Board disbursed immediately. or there are special grounds for the company to terminate the employment relationship. 2.6 Corporate Governance | Combined Management Report 57 KWS Group | Annual Report 2020/2021Compensation for serving members of the by the basic annual salary, including fringe benefits, Executive Board of KWS SE in fiscal 2020/2021 44.0% (46.1%) by one-year variable components and The total compensation to be reported for the 20.2% (15.6%) by multi-year variable components. Executive Board in accordance with Section 314 (1) The tables below provide an overview of the total No. 6a of the German Commercial Code (HGB) in compensation granted in the fiscal year on an conjunction with German Accounting Standard individualized basis (excluding pension costs) and in No. 17 (GAS 17) was €5,898 (5,428) thousand in the previous year by way of comparison: fiscal 2020/2021. 35.8% (38.3%) was accounted for Total compensation 2020/2021 in € Cash compensation LTI FV 2 Total LTI Basic compensation Fringe benefits Performance- related bonus 1 Total Grant Cost Dr. Hagen Duenbostel 468,750.00 13,664.28 528,773.63 1,011,187.91 244,713.69 1,255,901.60 312,406.46 Dr. Léon Broers 375,000.00 25,953.78 528,773.63 929,727.41 244,713.69 1,174,441.10 298,953.62 Dr. Felix Büchting 375,000.00 22,413.30 528,773.63 926,186.93 244,713.69 1,170,900.62 35,862.47 Dr. Peter Hofmann 375,000.00 26,189.68 528,773.63 929,963.31 195,730.47 1,125,693.78 136,141.53 Eva Kienle Total 375,000.00 25,882.98 528,773.63 929,656.61 244,713.69 1,174,370.30 153,769.59 1,968,750.00 114,104.02 2,643,868.15 4,726,722.17 1,174,585.23 5,901,307.40 937,133.67 Total compensation 2019/2020 in € Cash compensation LTI FV 2 Total LTI Basic compensation Fringe benefits Performance- related bonus 1 Total Grant Cost Dr. Hagen Duenbostel 468,750.00 13,349.76 500,000.00 982,099.76 234,016.87 1,216,116.63 257,633.00 Dr. Léon Broers 375,000.00 25,801.42 500,000.00 900,801.42 235,209.96 1,136,011.38 253,567.66 Dr. Felix Büchting (since 01/01/2019) 375,000.00 21,923.70 500,000.00 896,923.70 47,610.13 944,533.83 5,084.50 Dr. Peter Hofmann 375,000.00 25,710.36 500,000.00 900,710.36 168,453.51 1,069,163.87 124,622.63 Eva Kienle Total 375,000.00 25,186.80 500,000.00 900,186.80 161,863.09 1,062,049.89 137,503.93 1,968,750.00 111,972.04 2,500,000.00 4,580,722.04 847,153.55 5,427,875.59 778,411.71 1 A maximum of 65% of this is paid out, at least 35% must be reinvested (MVV). 2 Actuarial assessment by an external third party Since 2006, KWS has had a defined contribution Pension commitments plan for pensions for Executive Board members, in € which takes the form of an annual fixed contribution to a provident fund backed by a guarantee. In fiscal 2020/2021, €378 (378) thousand was paid for pension commitments to members of the Executive Board. Dr. Hagen Duenbostel Dr. Léon Broers Dr. Felix Büchting Dr. Peter Hofmann Eva Kienle Total 06/30/2021 90,000.00 72,000.00 72,000.00 72,000.00 72,000.00 378,000.00 58 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS Group From when they began working for KWS, the provisions in accordance with IAS 19 thus changed Executive Board members Dr. Hagen Duenbostel and by €–7 (53) thousand (of which €14 thousand Dr. Peter Hofmann have also been given a defined was interest expenses and €–21 thousand from benefit pension commitment, which was concluded revaluation effects). There were thus pension before 2006. The funds to cover this commitment provisions totaling €1,612 (1,619) thousand for active are allocated in the form of a pension provision members of the Executive Board of KWS SAAT SE & on the basis of an expert report. The pension Co. KGaA. Pension commitments in € Dr. Hagen Duenbostel Dr. Peter Hofmann Total 06/30/2021 06/30/2020 Interest expenses Revaluation effects 1,191,519.00 1,198,941.00 10,191.00 –17,613.00 420,761.00 420,383.00 3,573.00 –3,195.00 1,612,280.00 1,619,324.00 13,764.00 –20,808.00 The compensation of former members of the The target compensation, including the agreed Executive Board and their surviving dependents lower and upper limits, is shown under “Grant.” The amounted to €1,238 (1,419) thousand. Pension LTI grants are assessed at the present value at the commitments in accordance with IAS 19 (2011) time of acquisition of the last tranche of shares. The recognized for this group of persons amounted to details on the receipts show the same figures as €6,780 (7,140) thousand as of June 30, 2021. The under “Grant” for the fixed compensation and fringe pension commitments for three former members of benefits. The receipt for fiscal years 2020/2021 and the Executive Board are backed by a guarantee. 2019/2020 (amounts in each case before deduction of the reinvestment in shares) is stated for the one- No loans were granted to members of the Executive year variable payment (performance-related bonus), Board and the Supervisory Board in the year as is the amount for the multi-year variable payments under review. (LTI), whose planned term ends in the year under review. In turn, the pension costs are presented in Due to the transitional period (before mandatory accordance with IAS 19 and do not constitute a application of the new SRD II for fiscal years receipt in the narrower sense, but serve to illustrate starting after December 31, 2020), we still refer the overall compensation. for the time being in the tables below to the recommendations in Clause 4.2.5 (3) of the German Corporate Governance Code (DCGK) in the version dated February 7, 2017, and present the individual awards and receipts for each member of the Executive Board. 2.6 Corporate Governance | Combined Management Report 59 KWS Group | Annual Report 2020/2021Executive Board compensation in accordance with Clause 4.2.5 of the German Corporate Governance Code (DCGK) in € Grant Receipt 2020/2021 2019/2020 2020/2021 2019/2020 Min. Max. Dr. Hagen Duenbostel (Chief Executive Officer) Fixed payment Fringe benefits Subtotal 468,750.00 468,750.00 468,750.00 468,750.00 468,750.00 468,750.00 13,664.28 13,664.28 13,664.28 13,349.76 13,664.28 13,349.76 482,414.28 482,414.28 482,414.28 482,099.76 482,414.28 482,099.76 Performance-related bonus 516,707.10 0.00 600,000.00 500,000.00 528,773.63 500,000.00 Total cash compensation 999,121.38 482,414.28 1,082,414.28 982,099.76 1,011,187.91 982,099.76 Multi-year variable payment LTI 2013/2014 LTI 2014/2015 LTI 2018/2019 LTI 2019/2020 Subtotal Pension costs ¹ 286,808.20 239,629.88 234,016.87 244,713.69 0.00 500,018.22 1,243,835.07 482,414.28 1,582,432.50 1,216,116.63 1,250,817.79 1,268,907.96 100,191.00 100,191.00 100,191.00 100,994.00 100,191.00 100,994.00 Total compensation 1,344,026.07 582,605.28 1,682,623.50 1,317,110.63 1,351,008.79 1,369,901.96 Maximum compensation ² 1,809,940.00 1,609,940.00 Executive Board compensation in accordance with Clause 4.2.5 of the German Corporate Governance Code (DCGK) in € Dr. Léon Broers Fixed payment Fringe benefits Subtotal Grant Receipt 2020/2021 2019/2020 2020/2021 2019/2020 Min. Max. 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 25,953.78 25,953.78 25,953.78 25,801.42 25,953.78 25,801.42 400,953.78 400,953.78 400,953.78 400,801.42 400,953.78 400,801.42 Performance-related bonus 516,707.10 0.00 600,000.00 500,000.00 528,773.63 500,000.00 Total cash compensation 917,660.88 400,953.78 1,000,953.78 900,801.42 929,727.41 900,801.42 Multi-year variable payment LTI 2013/2014 LTI 2014/2015 LTI 2018/2019 LTI 2019/2020 Subtotal Pension costs ¹ 257,461.80 239,629.88 235,209.96 244,713.69 0.00 375,013.67 1,162,374.57 400,953.78 1,375,967.45 1,136,011.38 1,169,357.29 1,158,263.22 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 Total compensation 1,234,374.57 472,953.78 1,447,967.45 1,208,011.38 1,241,357.29 1,230,263.22 Maximum compensation ² 1,532,000.00 1,357,000.00 1 In accordance with IAS 19R from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment. 2 The total compensation is limited individually to a maximum overall amount per fiscal year. 60 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupExecutive Board compensation in accordance with Clause 4.2.5 of the German Corporate Governance Code (DCGK) in € Dr. Felix Büchting Fixed payment Fringe benefits Subtotal Grant Receipt 2020/2021 2019/2020 2020/2021 2019/2020 Min. Max. 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 22,413.30 22,413.30 22,413.30 21,923.70 22,413.30 21,923.70 397,413.30 397,413.30 397,413.30 396,923.70 397,413.30 396,923.70 Performance-related bonus 516,707.10 0.00 600,000.00 500,000.00 528,773.63 500,000.00 Total cash compensation 914,120.40 397,413.30 997,413.30 896,923.70 926,186.93 896,923.70 Multi-year variable payment LTI 2013/2014 LTI 2014/2015 LTI 2018/2019 LTI 2019/2020 Subtotal Pension costs ¹ 244,713.69 0.00 375,013.67 47,610.13 1,158,834.09 397,413.30 1,372,426.97 944,533.83 926,186.93 896,923.70 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 0.00 0.00 Total compensation 1,230,834.09 469,413.30 1,444,426.97 1,016,533.83 998,186.93 968,923.70 Maximum compensation ² 1,532,000.00 1,357,000.00 Executive Board compensation in accordance with Clause 4.2.5 of the German Corporate Governance Code (DCGK) in € Dr. Peter Hofmann Fixed payment Fringe benefits Subtotal Grant Receipt 2020/2021 2019/2020 2020/2021 2019/2020 Min. Max. 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 26,189.68 26,189.68 26,189.68 25,710.36 26,189.68 25,710.36 401,189.68 401,189.68 401,189.68 400,710.36 401,189.68 400,710.36 Performance-related bonus 516,707.10 0.00 600,000.00 500,000.00 528,773.63 500,000.00 Total cash compensation 917,896.78 401,189.68 1,001,189.68 900,710.36 929,963.31 900,710.36 Multi-year variable payment LTI 2013/2014 LTI 2014/2015 LTI 2018/2019 LTI 2019/2020 Subtotal Pension costs ¹ 75,268.36 168,453.51 0.00 195,730.47 0.00 299,948.90 1,113,627.25 401,189.68 1,301,138.58 1,069,163.87 1,005,231.67 900,710.36 75,573.00 75,573.00 75,573.00 75,883.00 75,573.00 75,883.00 Total compensation 1,189,200.25 476,762.68 1,376,711.58 1,145,046.87 1,080,804.67 976,593.36 Maximum compensation ² 1,538,224.00 1,363,224.00 1 In accordance with IAS 19R from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment. 2 The total compensation is limited individually to a maximum overall amount per fiscal year. 2.6 Corporate Governance | Combined Management Report 61 KWS Group | Annual Report 2020/2021Executive Board compensation in accordance with Clause 4.2.5 of the German Corporate Governance Code (DCGK) in € Eva Kienle Fixed payment Fringe benefits Subtotal Grant Receipt 2020/2021 2019/2020 2020/2021 2019/2020 Min. Max. 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 375,000.00 25,882.98 25,882.98 25,882.98 25,186.80 25,882.98 25,186.80 400,882.98 400,882.98 400,882.98 400,186.80 400,882.98 400,186.80 Performance-related bonus 516,707.10 0.00 600,000.00 500,000.00 528,773.63 500,000.00 Total cash compensation 917,590.08 400,882.98 1,000,882.98 900,186.80 929,656.61 900,186.80 Multi-year variable payment LTI 2013/2014 LTI 2014/2015 LTI 2018/2019 LTI 2019/2020 Subtotal Pension costs ¹ 64,743.62 95,851.95 244,713.69 0.00 375,013.67 161,863.09 1,162,303.77 400,882.98 1,375,896.65 1,062,049.89 1,025,508.56 964,930.42 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 72,000.00 Total compensation 1,234,303.77 472,882.98 1,447,896.65 1,134,049.89 1,097,508.56 1,036,930.42 Maximum compensation ² 1,532,000.00 1,357,000.00 1 In accordance with IAS 19R from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment. 2 The total compensation is limited individually to a maximum overall amount per fiscal year. The table below shows the percentage change in employees in Germany (per full-time equivalent the total compensation of Executive Board members (FTE)) over the past five fiscal years (2016/2017 to relative to EBIT and the average compensation for 2020/2021). Development of compensation in € 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 Dr. Hagen Duenbostel 1,055,597 1,089,116 1,101,737 1,216,117 1,255,902 Change from the previous year in % 3.2% 1.2% 10.4% 3.3% Dr. Léon Broers 975,083 1,014,116 1,025,966 1,136,011 1,174,441 Change from the previous year in % Dr. Felix Büchting (since 01/01/2019) Change from the previous year in % 4.0% 1.2% 10.7% 3.4% 275,000 944,534 1,170,901 243.5% 24.0% Dr. Peter Hofmann 857,072 962,741 958,176 1,069,164 1,125,694 Change from the previous year in % 12.3% –0.5% 11.6% 5.3% Eva Kienle 884,198 949,977 955,609 1,062,050 1,174,370 Change from the previous year in % 7.4% 0.6% 11.1% 10.6% EBIT in € millions 131.6 Change from the previous year in % Average employee compensation per FTE (Germany) ¹ 132.6 0.8% 150.0 13.1% 69,039 137.4 –8.4% 72,733 137.0 –0.3% 74,636 67,448 68,413 Change from the previous year in % 1.4% 0.9% 5.4% 2.6% 1 Without Executive Board 62 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupOverall target compensation for the Executive is therefore no longer linked to the company’s Board in fiscal 2021/2022 business performance, means that the Supervisory The Supervisory Board has defined a specific Board can better exercise its control function. The overall target compensation for each member compensation system for the Supervisory Board of the Executive Board in fiscal 2021/2022. The complies with the recommendations of the German Supervisory Board believes it is in reasonable Corporate Governance Code. proportion to the tasks and performance of the Executive Board members and the company’s The members of the Supervisory Board receive situation. The overall target compensation includes a fixed annual payment of €60,000 for their work. the gross basic annual salary of €375,000. The The Chairperson receives three times and the Chief Executive Officer receives an extra “CEO Deputy Chairperson one-and-a-half times said bonus” of 25% on top of the basic annual salary. amount. Members of the Supervisory Board receive In addition, the overall compensation is to include separate payment for their work on committees; a one-year variable payment of 0.5% of the KWS the Chairperson of the Supervisory Board does Group’s average net income for the past two not receive additional compensation for his or her fiscal years and take into account the net income work on committees. Members of the Supervisory budgeted for the current fiscal year – but at most Board who are members of a committee receive €600,000 – if the targets are fully achieved. The one- an additional payment of €10,000 therefor. The year variable payment for fiscal 2021/2022 will be Chairperson of a committee receives two times said limited by this maximum amount, taking into account amount. The additional compensation for members the budget assumptions. As regards the multi- of the Audit Committee is €20,000. The Chairperson year variable payment, members of the Executive of the Audit Committee receives three times said Board are obligated to reinvest a percentage of amount. Additional compensation is owed only for their (gross) one-year variable payment in shares in participation in one committee, namely at the amount KWS SAAT SE & Co. KGaA. That can be between that is the highest to which the member in question 35% and 50% of their (gross) one-year variable is entitled for his or her work on a committee. If a payment, which means that a concrete target cannot person is a member of the Supervisory Board or be defined here. However, the multi-year variable a committee or holds the office of Chairperson or payment is at most 150% of the reinvestment made Deputy Chairperson of the Supervisory Board or by each Executive Board member and at most 200% Chairperson of a committee for only part of the in the case of the reinvestment made by the Chief fiscal year or if a fiscal year is shorter than the Executive Officer. Due to the reinvestment, the multi- calendar year, the payment is granted only on a pro year variable payment exceeds the one-year variable rata temporis basis. Members of the Supervisory payment less the reinvestment in percentage terms. Board also receive reimbursement of their expenses Compensation of the Supervisory Board of and, up to the end of 2019, the value-added tax due incurred in connection with exercise of their office KWS SAAT SE & Co. KGaA on their payment. The compensation for members of the Supervisory Board is governed by the Articles of Association The total compensation for members of the and is based on the size of the company and their Supervisory Board of KWS SAAT SE & Co. KGaA in duties and responsibilities. The company believes the year under review was €620 (620) thousand. that the fixed compensation structure, which 2.6 Corporate Governance | Combined Management Report 63 KWS Group | Annual Report 2020/2021Total compensation of the Supervisory Board of KWS SAAT SE & Co. KGaA in € Dr. Andreas J. Büchting 1 Dr. Marie Theres Schnell 2 Victor W. Balli 3 Jürgen Bolduan Cathrina Claas-Mühlhäuser Christine Coenen 1 Chairman 2 Deputy Chairwoman 3 Chairman of the Audit Committee Fixed 180,000.00 90,000.00 60,000.00 60,000.00 60,000.00 60,000.00 Work on committees 0.00 20,000.00 60,000.00 20,000.00 10,000.00 0.00 Total 2020/2021 180,000.00 110,000.00 120,000.00 80,000.00 70,000.00 60,000.00 Total 2019/2020 180,000.00 110,000.00 120,000.00 80,000.00 70,000.00 60,000.00 510,000.00 110,000.00 620,000.00 620,000.00 Total compensation of the Supervisory Board of KWS SE in € Dr. Andreas J. Büchting 1 Dr. Marie Theres Schnell 2 Victor W. Balli Cathrina Claas-Mühlhäuser 1 Chairman 2 Deputy Chairwoman Fixed Attendance fee 60,000.00 45,000.00 30,000.00 30,000.00 0.00 0.00 30,000.00 0.00 Total 2020/2021 60,000.00 45,000.00 60,000.00 30,000.00 165,000.00 30,000.00 195,000.00 The total compensation for members of the in the capital stock is €3.00. Each share grants Supervisory Board of KWS SE in the year under the holder the right to cast one vote at the Annual review was €195 thousand. Shareholders’ Meeting. The rights of shareholders are governed by the German Stock Corporation Act 2.6.5 Explanatory Report of the Personally (AktG) and the Articles of Association. Liable Partner (KWS SE) of KWS SAAT SE & Co. KGaA in Accordance with Section Restrictions relating to voting rights 176 (1) Sentence 1 AktG (German Stock or the transfer of shares Corporation Act) on the Disclosures in There may be restrictions relating to voting rights Accordance with Section 289a (1) and or the transfer of shares as a result of statutory or Section 315a (1) HGB (German Commercial contractual provisions. For example, shareholders are Code) barred from voting under certain conditions pursuant The personally liable partner of KWS SAAT SE & to Section 136 of the German Stock Corporation Co. KGaA provides the following explanation on the Act (AktG) in conjunction with Section 278 (3) of the following disclosures in accordance with Section German Stock Corporation Act (AktG) or Section 44 289a and Section 315a HGB (German Commercial of the German Securities Trading Act (WpHG); the Code): bars on voting pursuant to Section 285 of the German Stock Corporation Act (AktG) must also be observed Composition of the subscribed capital for personally liable partners at a partnership limited The subscribed capital of KWS SAAT SE & Co. KGaA by shares (KGaA). In addition, no voting rights accrue is €99,000,000.00 and is divided into 33,000,000 to the company on the basis of the shares it holds bearer shares. The pro-rata share of each share (Section 71b AktG). 64 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupThe personally liable partner is not aware of any 2. The voting shares of the persons stated contractual restrictions relating to voting rights or below, including mutual allocations and transfer of shares. If there are no restrictions on allocations of voting shares of Dr. Drs. h.c. voting rights, all shareholders who register for the Andreas J. Büchting, Germany, AKB Stiftung, Annual Shareholders’ Meeting in time and have Hanover, Büchting Beteiligungsgesellschaft mbH, submitted proof of their authorization to participate Hanover, Zukunftsstiftung Jugend, Umwelt in the Annual Shareholders’ Meeting and exercise und Kultur, Einbeck, and RETOKE Holding their voting rights are authorized to exercise the Vermögensverwaltungsgesellschaft mbH & Co. KG, voting rights conferred by all the shares they hold Bad Schwartau, each exceed 10% and total 54.7%: and have registered. If members of the Executive Board of the personally liable partner or executive „ Christiane Stratmann, Germany employees of the company have acquired shares „ Dorothea Schuppert, Germany as part of the long-term incentive programs, these „ Michael C.-E. Büchting, Germany shares are subject to a lock-up period until the end of „ Annette Büchting, Germany the fifth year after the end of the quarter in which they „ Stephan O. Büchting, Germany were acquired. The lock-up period for shares that „ Christa Nagel, Germany employees have acquired as part of the Employee „ Matthias Sohnemann, Germany Stock Purchase Plans runs until the end of the fourth „ Malte Sohnemann, Germany year as of when they are posted to the employee’s „ Arne Sohnemann, Germany securities account. Direct and indirect participating interests in below, including allocations of the persons, excess of 10% of the voting rights companies and foundations named in 1. above, The company has been informed by shareholders of exceed 10% and total 69.2%: 3. The voting shares of the shareholder named the following direct or indirect participating interests in the capital of KWS SAAT SE & Co. KGaA in excess „ Hans-Joachim Tessner, Germany of 10% of the voting rights in accordance with Section 33 and Section 34 of the German Securities 4. The voting shares of the shareholder named below, Trading Act (WpHG) or elsewhere: including allocations of all the persons, companies and foundations named in 2. above, exceed 10% 1. The voting shares, including mutual allocations, of and total 55.9%: the persons, companies and foundations stated below each exceed 10% and total 69.1%: „ Dr. Arend Oetker, Germany „ AKB Stiftung, Hanover 5. The voting shares of the shareholder named below, „ Büchting Beteiligungsgesellschaft mbH, Hanover including allocations of all the persons, companies „ Zukunftsstiftung Jugend, Umwelt und Kultur, and foundations named in 2. above, exceed 10% Einbeck and total 54.8%: „ Dr. Drs. h.c. Andreas J. Büchting, Germany „ RETOKE Holding Vermögensverwaltungs- „ Dr. Marie Th. Schnell, Germany gesellschaft mbH & Co. KG, Bad Schwartau „ Johanna Sophie Oetker, Germany „ Tessner Beteiligungs GmbH, Goslar „ Leopold Heinrich Oetker, Germany „ Tessner Holding KG, Goslar „ Clara Christina Oetker, Germany „ Ludwig August Oetker, Germany 2.6 Corporate Governance | Combined Management Report 65 KWS Group | Annual Report 2020/2021Shares with special rights and voting control Under Section 6.5 of the Articles of Association of Shares with special rights that grant powers of control KWS SAAT SE & Co. KGaA, the personally liable have not been issued by the company. There is no partner shall also leave the Company by means of special type of voting control for the participating termination. Notice of termination shall be given to interests of employees. Employees who have an all the limited partners at the Annual Shareholders’ interest in the company’s capital exercise their control Meeting. Outside of the Annual Shareholders’ Meeting, rights in the same way as other shareholders. notice of termination shall be given to the Chairperson of the Supervisory Board or his or her deputy. The Appointment and removal of management notice of termination shall be at least six months The personally liable partner, KWS SE, is responsible before the end of and effective the end of a fiscal year. for managing the business of KWS SAAT SE & Co. KGaA under Section 7.2 of the Articles of Association The other statutory grounds for the personally liable of KWS SAAT SE & Co. KGaA. partner leaving the Company shall remain unaffected. In accordance with Section 6 (3) of the Articles of The members of the Executive Board of the personally Association of KWS SAAT SE & Co. KGaA, the liable partner, which is responsible for managing the personally liable partner shall leave the Company if company’s business, are appointed and removed the majority of shares in the personally liable partner by the Supervisory Board of the personally liable can no longer be held directly and/or indirectly for partner, KWS SE. Pursuant to Article 46 (1) of Council a time longer than 30 calendar days by persons Regulation (EC) 2157/2001 in conjunction with who hold a combined total of more than 15% of the Section 6 of the Articles of Association of KWS SE, Company’s capital stock directly and/or indirectly members of the Executive Board are appointed for through a company that is dependent in accordance a maximum period of six years. Members may be with Section 17 (1) of the German Stock Corporation reappointed. Act (AktG) or is controlled in accordance with Section 290 (2) of the German Commercial Code (HGB). This Amendments to the Articles of Association shall not apply if all shares in the personally liable Amendments to the company’s Articles of Association partner are held by the Company. are made pursuant to a resolution adopted by the Annual Shareholders’ Meeting in accordance with Furthermore, Section 6 (4) of the Articles of Section 278 (3) in conjunction with Section 179 of Association of KWS SAAT SE & Co. KGaA stipulates the German Stock Corporation Act (AktG). Section that the personally liable partner shall leave the 285 (2) Sentence 1 of the German Stock Corporation Company if a person who is not a family shareholder Act (AktG) stipulates that amendments to the Articles (acquiring party) obtains control over the personally of Association require the approval of the personally liable partner directly or indirectly (acquisition of liable partner. control) and does not submit to the Company’s limited partners a takeover or mandatory offer in accordance In accordance with Section 133 and Section 179 (2) of with this provision and otherwise in accordance with the German Stock Corporation Act (AktG) and Section the provisions in the German Securities Acquisition 18 (1) of the Articles of Association of KWS SAAT SE & and Takeover Act (WpÜG) within three months of Co. KGaA, a resolution by the Annual Shareholders’ acquisition of control. Meeting to amend the Articles of Association must be adopted by a simple majority of the votes cast and a simple majority of the capital stock represented in adoption of the resolution, unless obligatory statutory regulations or the Articles of Association otherwise compel. 66 Combined Management Report | 2.6 Corporate Governance Annual Report 2020/2021 | KWS GroupThe power to make amendments to the Articles of Association that only affect the wording 2.7 Social Report (Section 179 (1) Sentence 2 AktG) has been 2.7.1 Use of Genetic Resources conferred on the Supervisory Board in accordance KWS runs a broad network of worldwide stations with Section 22 of the Articles of Association of and trial fields for seed breeding. We test different KWS SAAT SE & Co. KGaA. genetic material for the respective application areas Powers of the personally liable partner, in partic- there. ular in relation to issuing or buying back shares Where this genetic material is used, the rights of The personally liable partner is authorized, with the indigenous peoples in all regions the material the consent of the Supervisory Board, to increase originates from must be respected. KWS is aware the capital stock of the Company in the period of its obligations in this regard and supports the up to midnight on December 15, 2025, once or in various international access and benefit-sharing installments by a total of up to €9,900,000.00 by frameworks. Of prime mention in this respect are issuing new shares in exchange for cash contributions the Convention on Biological Diversity with the and/or contributions in kind (Authorized Capital Nagoya Protocol and the International Treaty on 2020). As a matter of principle, shareholders have Plant Genetic Resources for Food and Agriculture a subscription right to the shares. The shares can (ITPGRFA). The latter is particularly relevant to also be assumed by one or more credit institutions regulating transfer of genetic resources. KWS works or enterprises within the meaning of Section 186 (5) through industrial associations, such as Euroseeds Sentence 1 of the German Stock Corporation Act and the International Seed Federation (ISF), to (AktG) appointed by the personally liable partner, with ensure practicable means of securing sustainable the obligation to offer them for subscription solely to access to genetic resources and preserving them the shareholders (indirect subscription right). However, now and in the future. Unfortunately, the meeting shareholders’ subscription right can be excluded of the ITPGRFA’s Governing Body was delayed with the consent of the Supervisory Board, subject to considerably due to the COVID-19 pandemic, with certain conditions defined in the authorization. the result that the preparatory working groups and Significant agreements in the event of a change Secretariat were significantly reduced compared to dialogue with government advisors and the ITPGRFA of control, compensation agreements previous years. Significant agreements subject to the condition of a change in control pursuant to a takeover bid have not We have implemented a due diligence process been concluded. The agreements with members of to ensure compliance with these guidelines. All the Executive Board of the personally liable partner employees who work with genetic material are stipulate that any commitments in the case of a obligated to digitally register all materials used, change in control are limited to the maximum amounts whereupon our Intellectual Property department specified by the German Corporate Governance Code. instigates an examination of where the genetic material has come from. Colleagues from our Legal department also provide assistance in more complex cases. In addition, new employees are offered training modules, and an annual update meeting on 2.6 Corporate Governance | 2.7 Social Report | Combined Management Report 67 KWS Group | Annual Report 2020/2021 the issue is held for all the employees involved. If an We sustained our social commitment without examination should find that the origin of the genetic restriction in fiscal 2020/2021, a year that was material or the process by which it was obtained overshadowed by the COVID-19 pandemic. We is unclear, we refrain from using it. No deviations maintained our involvement in cultural events, were identified as part of the above due diligence continued to sponsor and support artists, process in fiscal 2020/2021. As part of the Breeding and adapted events and our sponsorship as Information Circle, KWS has begun to further required. In addition, we supported social and optimize IT processes relating to the documentation educational institutions. We also provided funding and approval of access to new genetic resources. to help address requirements arising due to The Breeding Information Circle, which is currently the pandemic, such as digitization of schools being developed, is a digital platform for integrating in Northeim District so as to lastingly improve research information on all of KWS’ crops. It enables means of remote teaching and learning. At the information currently stored and used in individual initiative of the still young non-profit organization tools to be linked and aggregated. MyGatekeeper from Hanover, with the backing of KWS and in cooperation with Einbeck Council, There is regular dialogue during the year with the Northeim District Council and the association Executive Board member responsible for research Bildungsregion Südniedersachsen e.V., the project & breeding both in the context of the semiannual “#vernetzteLernregion – Gemeinschaft(lich) meetings of the ISF and also as and when required. gestalten!” (#connectedLearningRegion – Shaping An annual report to the Executive Board is only our community together!”) was launched, with the drawn up if specific issues or incidents have been common goal of enhancing media competence at identified as part of the due diligence process. No schools long term and creating a modern learning such incidents were reported in the fiscal year. environment for students. 2.7.2 Social Commitment* Through its locations, KWS is also involved in As a forward-looking international company, we are ongoing development cooperation activities in committed to living up to our responsibility toward Peru and Ethiopia, in particular with the aim of society. The content of our activity in this area is supporting young researchers in the conservation geared toward the United Nations’ Sustainable of plant genetic resources, plant breeding and the Development Goals. establishment of seed systems. KWS implements the regulations stipulated in the International Treaty on Our social engagement focuses on developing the Plant Genetic Resources for Food and Agriculture as regions around our locations, which are mostly part of that. The focus is on corn and quinoa in Peru of a rural character, at the cultural, social and and on barley and wheat in Ethiopia. socioeconomic level in order to foster the general welfare of residents and increase the locations’ In fiscal 2020/2021, KWS spent around €1.4 million – attractiveness as a whole. Children and young or approximately 1% of its operating income (EBIT) people are particularly dear to our heart. A further – on its social commitment worldwide. Of that sum, focus is on promoting education and science, in approximately €0.6 million was spent on donations particular in the field of natural and agricultural and development cooperation in Peru and Ethiopia sciences. and €0.8 million on sponsorship activities. We have set ourselves the goal of using 1% of our operating income (EBIT) for our social commitment and social projects in the future, too. * Not an audited part of the Combined Management Report 68 Combined Management Report | 2.7 Social Report Annual Report 2020/2021 | KWS Group2.8 Opportunity and Risk Report The opportunities and risks as part of our business that arise, our complex research and breeding activity as an international plant breeding company, processes are subject to risks that may result in local as well as the processes for identifying them, are weaknesses in our portfolio. They include internal described in the following. factors, such as technical problems and process 2.8.1 Opportunity Management new diseases or restrictions on the use of operating delays, and external factors such as climate change, Strategic opportunities resources. The varieties we develop must meet high quality requirements. The performance of our By strategic opportunities, we mean developments varieties is reassessed every year by management that are of major importance for the KWS Group and the Supervisory Board so that we can respond and may have a lasting positive impact on our immediately to weaknesses in our portfolio if commercial success. They are identified as part necessary. of our strategic planning. The strategic planning covers a ten-year time frame and is jointly formulated Plant breeding has great potential to keep on on a rolling basis, discussed and adopted by the making agricultural processes more and more Executive Board. Vice versa, we regard not being sustainable. The development and use of innovative able to seize strategic opportunities efficiently, in crop rotations, new cultivation systems, new good time or in full as a strategic risk. Consequently, resistances and tolerances or nutrient efficiencies the results of the strategic planning are also have the potential to stabilize yields, reduce the use incorporated in risk management. Our strategy of resources such as fertilizer, pesticide or water, processes are oriented toward identifying future and increase biodiversity. Higher yields can result trends in good time, analyzing them and translating in less cultivation area being required. In addition, them into innovative company processes by means the carbon footprint per unit yield can be reduced of strategic initiatives. We take new findings into with more efficient plant varieties. KWS is working to account by adapting our administration or opening develop new products, crop rotations and cultivation new lines of business, for example. systems to leverage this potential. We currently see diverse strategic opportunities for New data analysis methods increase efficiency in the KWS Group arising from external megatrends. plant breeding and agriculture. Agricultural areas We describe some of them by way of example in the can be farmed in a tailored way thanks to automated following. communication, big data analytics, robotics or artificial intelligence. Drones and satellites, for To succeed in achieving sustainable, profitable example, supply information that helps improve growth in the future as well, our prime goal must analysis of plant stands in the field. As a result, be to retain and increase our innovativeness. In infestation by pests or infection by diseases can particular, it is vital to increase plants’ yield potential, be detected quickly, pinpointed and combated enhance resource efficiency or develop their in a targeted manner. Pinpointing where crops resistance to detrimental influences, of whatever are infested or infected helps reduce the use of type. That requires continuous and intensive pesticides and the number of time machines have research work. It takes up to ten years for a new to run over the field. These technologies will gain variety to gain approval and be put on the market. in practical relevance in the future. We already use We therefore invest a large proportion of our net them in our research & breeding processes. We sales in research & development projects every need to develop and establish new, highly promising year, with the goal of achieving an average yield technologies in order to avoid risks such as progress of 1.5% p.a. Alongside the opportunities competitive disadvantages. 2.8 Opportunity and Risk Report | Combined Management Report 69 KWS Group | Annual Report 2020/2021 New, permanent customer needs – differing from Investing in expansion of our production capacities region to region – are emerging and that entails and modernization of our seed processing offers long-term opportunities and risks. While meat opportunities in existing and adjacent markets. consumption is declining in Europe, for example, it Further development of our variety portfolio and is steadily increasing in other countries. The product expansion of capacities are accompanied by portfolio for agriculture must therefore be broad so expansion of our international distribution structures that opportunities that arise can be seized and one- to enable tailored information and advice for our sided dependencies can be reduced. We take into customers on the possible uses of our seed and account relevant long-term trends by establishing so allow us to leverage further sales potential. In and expanding new product lines. We are also addition, continuous optimization of processes committed to expanding our direct contact with offers the KWS Group opportunities to increase customers on a lasting basis so that we can sell our productivity and digitization and improve cost products successfully. We already have a presence structures. in global sales networks and so can be reached directly by our customers. Unlike strategic opportunity management, operational opportunity management is not fully Operational opportunities integrated in risk management at present. By an operational opportunity, we understand a development that is consistent with our strategic 2.8.2 Risk Management planning and might have a positive short-term impact on our earnings, financial position and The main aspects and players in assets and has not yet been reflected fully or at all risk management at KWS in the company’s financial planning. Operational Weighing up opportunities and risks is an integral opportunities are identified and assessed by our part of all decision-making at our company. We Business Units. We leverage them by pinpointed strive to address risks openly and proactively. We investment in production capacities, research & understand the term “risks” as denoting events and development activities and expansion of distribution, potential developments, both inside and outside the for example. Group, that have a negative impact on achievement of our corporate objectives or principles. That We have opportunities as a result of our still young also includes events that impair our value chain activities in the vegetables market or expansion of and harm the environment and which we can our portfolio of corn varieties in tropical regions. Our influence. Deliberate risks can be taken if that offers corn activities in Brazil and China will enable us to opportunities that are consistent with the KWS tap additional sales potential for the KWS Group in Group’s strategic planning. If there are risks that do the medium to long term, including in other tropical not harbor relevant opportunities in return or they markets, by developing varieties tailored to their jeopardize achievement of the Group’s key financial climatic conditions. indicators, they must be avoided or their impact must be mitigated as best possible from the cost- benefit perspective. Any violation of key corporate principles, such as observance of human rights, cannot be tolerated in any shape or form. 70 Combined Management Report | 2.8 Opportunity and Risk Report Annual Report 2020/2021 | KWS GroupThe departments assess and document short-term The Risk Committee consists of representatives operational risks in monthly risk reports submitted from all divisions who have a good knowledge to company management. Medium-term risks are of the issue of risks. It convenes at least twice a ascertained as part of global risk identification at year, discusses and reviews the risks maintained least twice a year. in the risk management system and measures to control them, and formulates recommendations for The Executive Board is responsible for Group- the Executive Board, if necessary. Responsibility wide risk management. The Supervisory Board or for identifying, assessing and controlling risks lies the Audit Committee review the risk management with the divisions, while central risk management system at least once a year to assess its suitability coordinates the processes and ensures reporting and effectiveness. It is assisted in that by the to company management. Other roles in our risk independent auditor of the financial statements management are specified in the chart “Players and as part of the latter’s statutory audit assignment. systems in managing risks at KWS.” Players and systems in managing risks at KWS Supervisory Board Executive Board Risk Committee Central Risk Management Business areas Controls and monitoring Independent controls „ Business Units „ Controlling „ Internal Audits „ Research & Development (incl. early risk warning) „ Global and Group functions incl. „ Control system Transaction Center Financial Reporting „ Compliance Management „ Risk Management „ Other systems (e.g. Quality Management, Stewardship, etc.) KWS Governance (vision, mission, cornerstones, group standards, etc.) Our risk management system is based on control, documentation, monitoring of risks and the internationally recognized COSO II model risk reporting. It is conducted regularly, usually (Committee of Sponsoring Organizations of the twice a year. As part of risk identification, we record Treadway Commission). Its objective is to implement individual risks on an electronic platform and assess a consistent, continuous and Group-wide risk them qualitatively or quantitatively on the basis of management process in which all divisions (Business Group-wide standards, in each case before (gross Units, Group Functions, Global Functions, R&D, and risk) and after (net risk) any countermeasures. As the Managing Directors of significant subsidiaries) part of that, we calculate expected monetary values are integrated. Our risk management process where possible and classify them as “moderate,” consists of the phases of identification, assessment, “medium” and “significant.” We take into account 2.8 Opportunity and Risk Report | Combined Management Report 71 KWS Group | Annual Report 2020/2021 linkages between risks in assessing the likelihood of their occurrence. The individual risks are classified as below as part of assessment: Scheme for assessing individual risks ) Very low T B E > €0.1 million – €3.0 million Likelihood of occurrence Unlikely < 10 % Possible 10% – 50% Likely 50% – 90% Almost certain ≥ 90% ( t c a p m i l i a c n a n F i Low €3 million – €7.5 million Medium €7.5 million – €15 million High ≥ €15 million Risk classification for single risks Risk classes Expected loss value Moderate Relevant Significant < €1 million  > €1 million – ≤ €5 million ≥ €5 million and/or critical health risks Control and monitoring systems We meet the statutory requirements for early detection of risks with our controlling and risk management processes. The internal control and risk management system in relation to the accounting process (Section 315 (4) of the German Commercial We decide systematically on what appropriate Code (HGB)) is the responsibility of Global countermeasures to take to manage risks. They may Finance and comprises structures and processes be measures to reduce risks, constant monitoring that enable proper and effective accounting and of them or taking out insurance, for example. The financial reporting. That includes ensuring that KWS Group’s current risk situation is aggregated business transactions are included in accounting by central risk management into risk types and consistently, promptly and correctly and that all categories and reported first to the Risk Committee. statutory accounting regulations, standards and On that basis, the Risk Committee discusses how internal guidelines are implemented throughout the to deal with the risks and submits recommendations Group. A consistent system that is subject to the to company management if required. Central Group’s regulations on accounting makes it easier risk management coordinates the entire risk to ensure that the consolidated financial statements management process and supports the departments comply with the rules. The following are examined in their tasks. regularly: the completeness of financial reporting, the Group’s uniform accounting, measurement and account allocation stipulations, and the authorization and access regulations for IT systems used in accounting. Intra-Group transactions are consolidated appropriately and in full. 72 Combined Management Report | 2.8 Opportunity and Risk Report Annual Report 2020/2021 | KWS Group All subject areas that are the responsibility of the Operational risks central Compliance department are controlled by IT the KWS Compliance Management System. The The KWS Group’s business and production system is based on seven criteria in accordance processes, as well as its internal and external with IDW PS 980: culture, objectives, risks, program, communications, are run on globally networked organization, communication and monitoring. IT systems. Attacks or outages can lead to a Its goal is to prevent violations of the law and loss of confidentiality, availability, integrity and/or internal compliance regulations. The Compliance authenticity of data, information and systems. That Management System is continuously developed harbors significant risks, such as loss of know-how, further on the basis of risk analyses and findings data manipulation, loss of personal data and loss of from auditing projects, as well as to reflect new image, which we reduce by means of organizational statutory requirements. Apart from that, there are and technical measures. IT service providers other compliance topics that are controlled directly constantly examine our IT security so as to issue by the departments in question. recommendations for optimization measures on the Internal auditing is the responsibility of Global undetected loss and damage as a result of hacking Finance and is carried out by an external service and malware are still possible even if very good provider. The topics in an audit are defined annually precautionary measures are in place. basis of their risk assessment. Uncontrolled and/or on a risk-oriented and process-independent basis. Their status is reported – likewise annually – to the Product quality Audit Committee. We have established detailed checks and tests to determine the performance and quality of our Risk situation at the KWS Group seed. Quality controls, such as germination and Here we provide a summarized report on the sprouting strength tests, are conducted at all stages medium or high individual risks involving net of production. These checks and tests are also financial damage of at least €7.5 million, taking into intended to reduce risks such as claims for damages account the medium-term effects we are aware due to product liability, which may be significant, of. We group the individual risks by their type and especially in Anglo-American jurisdictions. We also category. The sequence of the risk types is based have product liability insurance to defend against on the aggregated expected monetary values of the unjustified claims and to settle justified claims. identified risks. If the risk classes of the categories Very strict requirements must be met regarding have changed compared to the previous year, we management of genetically modified products, explain that in the respective sections. Strategic in particular, to prevent GMOs becoming mixed opportunity and risk categories are derived from with conventional seed. KWS is a member of the our strategic planning and cover a ten-year time “Excellence Through Stewardship” (ETS) initiative, frame. Because of the longer time frame over which an internationally standardized quality management they are analyzed, they are not comparable to the program. other categories. Strategic opportunities and risks are therefore explained separately in the section Production, interruptions to business operations “Opportunity Management.” The changes in the KWS uses technically complex seed processing medium-term risk situation as a whole are addressed plants. Interruptions to business operations may in the overall statement on the risk situation by the have a negative impact on the volumes that are Executive Board. available for sale and represent significant risks, especially if they occur in our sales season. In There are currently no non-financial risks whose order to reduce these risks, we conduct regular occurrence is very likely and entail serious impacts risk inspections, carry out preventive maintenance, on aspects that require reporting in accordance with and have Group-wide property and business Section 289c of the German Commercial Code (HGB). interruption insurance. 2.8 Opportunity and Risk Report | Combined Management Report 73 KWS Group | Annual Report 2020/2021Seed multiplication is dependent on the weather. Health, safety and environment We reduce the risk of crop failures by multiplying Accidents, technical problems or misconduct in our seed – depending on the crop – in separate business processes may result in injury to persons locations and regions in Europe, North and South and environmental damage and are high risks. One America and Asia. We can carry out contra- measure we have taken to reduce these risks is to seasonal multiplication in the winter half-year in the implement a global health, safety and environment southern hemisphere if there are bottlenecks in the standard, which the central HSE Manager function volume of seed produced. will keep on developing. Despite the many protective All in all, the category’s risk situation fell slightly remains a significant threat to our employees. The year on year. That was mainly attributable to our category’s risk situation therefore remains high. measures we have taken worldwide, the pandemic measures to prevent production losses due to the pandemic and the elimination of short-term capacity Procurement bottlenecks in production. As part of our global sourcing processes, we are subject to price fluctuations. That may present Projects, company organization, opportunities as well as risks. We counter these process management risks by pooling our purchasing power in a So that we can continue to grow profitably and centralized Procurement Management unit and, sustainably with the support of an efficient in particular, we adopt a structured approach in organization and harmonized processes that also relation to the organization, management and long- reflect the increasing complexity of the requirements term development of supplier relationships. There demanded of our workforce, we regularly review were above-average increases in relevant price their adequacy and realign them where necessary. indexes toward the end of the year under review, Without appropriate realignment, there may be and they were the reason why this category’s risk organizational risks, such as an excessive workload situation rose. on individual departments. In turn, a realignment may entail integration risks (M&As), for example, Human Resources or temporarily result in process inefficiencies or Our HR strategy aims to recruit and keep qualified unplanned costs. Our measures to counter these employees at KWS long term, as well as to offer risks include the establishment of specialized them further development opportunities that reflect functions (such as M&A experts), rollout of a our and their needs. That may result in the risk of new standard process model and automation, not being able to fill vacancies promptly or of losing complemented by our globally applicable company employees. We counter this risk by continuously standards. There was an increase in this category’s further developing our HR strategy. Among other risk situation in the year under review due to things, we are committed to growing our brand as an temporary process inefficiencies and a greater attractive employer, fostering talents, and expanding workload. the KWS Group to new locations near where appropriate resources are available (science clusters such as St. Louis and urban centers like Berlin). In addition, short-term compensatory measures may be applied to counter personnel risks. 74 Combined Management Report | 2.8 Opportunity and Risk Report Annual Report 2020/2021 | KWS GroupPolitics and the law Compliance and scientific facts to the contrary. New breeding technologies could speed up our variety development We are exposed to potential compliance risks, and improve its precision. The EU continues to for example under antitrust, competition, anti- impose tougher regulations on important research corruption and money laundering law and data technologies and restrict the use of established protection requirements. Violations of statutory operating resources. We conduct an intensive requirements may have consequences under dialogue with all stakeholders on this issue and are criminal and civil law, including fines and other increasing the internationalization of our research – financial disadvantages. Under our compliance without reducing our commitment in the EU. policy, the Code of Business Ethics and our Group Standards, we obligate our managers and Political instability employees to undertake to act in accordance KWS faces political risks in many countries in the with laws, contracts, internal guidelines and our strongly regulated international agricultural industry. corporate values and raise their awareness in Geopolitical insecurities in the Middle East and the this regard. Regular communication, instruction still strained situation in Eastern Europe may also and training are intended to ensure compliance. have a negative impact on our business activities We rigorously investigate reports of compliance and growth plans. Although the situation as regards violations. As is expressly pointed out, sanctions are the individual political risks was very dynamic in the imposed if our compliance regulations are violated. year under review, the category’s aggregated risk situation remained largely unchanged. Intellectual property (IP) Protecting intellectual property is vital to companies General legal risks that conduct research if they wish to preserve their KWS faces risks from official proceedings and freedom of action and keep on generating value. legal disputes. Legal disputes are possible with The seed-specific property rights under “variety suppliers, licensors, customers, employees, lenders protection” ensure they are compensated for the and investors and may result in payments or other years-long process of research, breeding and obligations. There were no legal proceedings development of new varieties and that third parties involving significant amounts in fiscal 2020/2021. cannot market the same variety at no costs to themselves. KWS uses patents to protect certain Finance and capital markets plant traits, in particular if they have been developed Tax risks or produced by means of technical methods. In order KWS operates in about 70 countries and is to secure its freedom of action and avoid infringing therefore subject to an array of complex national third-party proprietary rights, KWS has implemented tax requirements and laws. Changes that are not far-reaching due diligence processes throughout the detected in time and/or incomplete implementation company. Regulatory risks of tax law, court rulings and interpretations by the fiscal authorities may have an effect on tax assets and liabilities, as well as on deferred tax assets and As part of modern agriculture and as an innovative deferred tax liabilities. That can result in significant plant breeding company, KWS also uses state-of risks, which we counter by continuously identifying the-art breeding technologies to develop new, and assessing the tax frameworks and by central resource-conserving varieties. There is still a negative coordination through our Finance department. If perception of new breeding technologies among the necessary, tax provisions are formed on the basis of general public, despite the high standards in force estimates. 2.8 Opportunity and Risk Report | Combined Management Report 75 KWS Group | Annual Report 2020/2021Currency risks changes in cultivation area – in particular where they Currency risks arise in particular from receivables affect strategically important crops and markets – and liabilities denominated in foreign currency. We have the potential to impact our market success address currency risks to a reasonable extent through significantly. They may be caused by factors such the usual hedging instruments and internal standards as a sudden drop in agricultural prices due to global in order to reduce the influence on the KWS Group’s crises or extreme weather events, or may be the earnings and assets situation. In fiscal 2020/2021, consequence of high inventories as a result of good we hedged our intra-Group loans to a large part harvests. We counter such risks in the medium and in order to reduce currency risks. We also reduce long term by diversifying our product portfolio and our transaction risks by means of natural hedging, expanding our market footprint. Risks from changes incurring expenses in the same currency in which we in cultivation area are impossible or difficult to reduce generate revenue. Liquidity in the short term, but usually impact all market players alike. Moreover, weather risks can often be insured against only at economically unfavorable The overriding goal of our liquidity management is terms and conditions, if at all. to ensure we meet our payment obligations on time. External factors, such as global crises, may restrict Market trends the availability of credit lines and/or mean we can This covers in particular local external risks that are only obtain economically disadvantageous terms closely linked to our business model and over whose and conditions. Our central Treasury department emergence we have no or currently only limited determines what funding we require in its liquidity direct influence. They include changes in demand, planning and covers those needs by providing cash, fluctuations in cultivation area, or extreme, locally promised credit lines and other financial instruments. confined weather events. We examine whether We have agreed customary financial covenants for insurance cover makes economic sense in order to part of these promised credit lines. If these covenants reduce such risks. Potential supply chain risks are are breached, the lender has the right to terminate also maintained in this category. We are currently the agreement. A short-term increase in the cost of revising how supply chain risks are controlled. The borrowing on the capital market was observed last increase in extreme weather events and growing year; however, the situation eased in the year under relevance of supply chain standards resulted in a review despite the ongoing pandemic, resulting in a slight rise in this category’s risk situation. slight reduction in the category’s risk situation. Competition and business partners Risk of counterparty defaults Strong competitive pressure, such as that due to We nurture extensive business relationships with aggressive pricing strategies by other market players, various customer groups – from the sugar industry may have a negative impact on our business success. and agricultural wholesalers to individual farmers. If, In particular, good local variety performance is the in particular, large customers are not able to meet most effective means of protecting against that. their contractual payment obligations to us, we could Acquisition or licensing of technologies – such as suffer losses. We reduce such credit risks through genetically modified traits – is customary in the our receivables management and, where possible industry and necessary in markets such as North or and expedient, by means of credit insurance. South America. We strive to reduce the related risks Markets and competition by developing our own innovations, which may also be attractive to competitors, and through long-term Cultivation areas and price trends license agreements. Slight declines and shifts in cultivation area are typical in agriculture and usually have no significant net impact on our business success. Extreme 76 Combined Management Report | 2.8 Opportunity and Risk Report Annual Report 2020/2021 | KWS GroupCategory, aggregated, ten year horizon Risk opportunity type Risk opportunity category Strategically Innovation New customer requirements Sustainability in the Agriculture Digital farming You can find a more detailed explanation in the “Opportunity Management” section. Category, aggregated, four year horizon Risk type Risk category Operational risks „ IT „ Product quality Current risk classification Substantial Substantial „ Production, interruptions to Noticeable business operations Previous year Tendency Substantial Substantial Substantial „ Projects, company Noticeable Medium organization, process management „ Health, safety and environment Substantial Substantial „ Procurement „ Human Resources Politics and legal „ Compliance „ Intellectual property (IP) Finance and capital markts „ Regulatory risks „ Political instability „ General legal risks „ Tax risks „ Currency risks „ Liquidity „ Risk of counterparty defaults Markets and competition „ Market trends „ Cultivation areas and price Medium Medium Noticeable Medium Low Low Low Noticeable Medium Low Low Medium Medium Not listed Medium Noticeable Medium Low Low Low Noticeable Medium Medium Low Medium Not listed trends „ Competition and business partners Medium Medium You can find a more detailed explanation in the “Risk situation at the KWS Group” section above. 2.8 Opportunity and Risk Report | Combined Management Report 77 KWS Group | Annual Report 2020/2021Risk classification for aggregated risk categories years, we believe we have established an effective Risk classes Low Medium Total expected loss values single risks system of protection that is adequately designed to reflect the local situation as regards infections. In the ≤ €3 million  year under review, we did not suffer any significant > €3 million – €8 million  restrictions to our operations as a result. Noticeable  > €8 million – €15 million Substantial  ≥ €15 million and/or critical health risks Other changes to risks are described in the categories above. Since the effects mostly balance each other out as a whole, the risk situation for the KWS Group is unchanged by and large following the Overall statement on the risk situation increase last year. by the Executive Board We have tackled the COVID-19 pandemic since In view of the available assessments and counter- January 2020 with a wide range of measures. We measures we have initiated, risks that jeopardize have developed them further and adapted them to the company’s existence are not discernible at the situation at hand over that time. Developments present. Moreover, we see at present no indications at the KWS Group continue to be monitored locally, that interdependencies might result in risks that with details on them being pooled centrally and could jeopardize the company’s existence. We feel reported every month to our global managers. The sure that, thanks to our global footprint, innovative worldwide situation as regards infections remains strength and the quality of our products, we can uneasy in view of new mutations of the virus and very seize opportunities and successfully manage large local differences in incidence and vaccination risks as they arise. However, we cannot rule out rates. Consequently, there are still health risks for our the possibility that other factors that are currently employees despite the many protective measures. unknown or which are not assessed as significant Restrictions to KWS’ business operations are still may jeopardize the continued existence of the possible, although we assess their likelihood as KWS Group in the future. being low at present. They still include the absence of staff due to infection or quarantine measures, Announcement restrictions in seed multiplication and logistics In view of new external requirements defined in the processes, fluctuations in demand, cultivation auditing standard PS 340 and relating to measures area and market prices, the creditworthiness of by the Executive Board in accordance with customers and suppliers, uncertainties on the capital Section 91 (2) of the German Stock Corporation markets, and strong fluctuations in exchange rates. Act (AktG), we are planning to adapt our risk Aided by the measures we have implemented and the management system in fiscal year 2021/2022 and experience we have gained in the past one-and-half will explain the changes in the next Risk Report. 78 Combined Management Report | 2.8 Opportunity and Risk Report Annual Report 2020/2021 | KWS Group 2.9 Forecast Report The expectations of management outlined here are In view of the brightening mood in the agriculture based on our corporate planning and the information sector and (in some cases sharp) increases in the it takes into account, including market expectations, prices of agricultural raw materials, we assume strategic decisions, regulatory measures or that there will be growing demand for seed in fiscal ex change rate trends. They are subject to the same 2021/2022. premises as the consolidated financial statements and forecast our business performance up to the end We expect the KWS Group to grow its net of fiscal 2021/2022 on June 30, 2022. In our forecast sales by 5% to 7% over the previous fiscal year for the KWS Group’s statement of comprehensive (€1,310.2 million). We anticipate an EBIT margin of income in accordance with IFRS, we deal with around 10% and that it will be in a range from 11% the KWS Group’s anticipated net sales, EBIT and to 12% after adjustment for the noncash effects R&D intensity. Our forecast for the segments from purchase price allocations as part of company contains comments on our net sales and EBIT acquisitions. Our R&D intensity is expected to be expectations, including the contributions made by in the range of 18% to 20%. Due to the strongly our equity-accounted companies, which are included seasonal nature of our business as a result of the proportionately in the segment reports in line with great importance of the spring sowing season and our internal corporate controlling structure. external factors that are difficult to anticipate, such 2.9.1 Changes in the KWS Group’s Composition are providing ranges in our forecasts here, since more that are Significant for the Forecast detailed statements on our net sales and earnings There have not been any significant changes in the performance cannot yet be made with sufficient as the weather and fluctuations in cultivation area, we KWS Group’s composition that are of significance reliability. for the forecast for its business performance in fiscal 2021/2022. 2.9.3 Forecast for the Segments In fiscal 2021/2022, we anticipate that the Corn 2.9.2 Forecast for the KWS Group’s Statement of Segment with grow its net sales sharply over the Comprehensive Income previous year (€774.0 million), in particular on the The KWS Group’s economic performance will likely back of rising sales volumes in South America and not be impacted significantly by the effects of the Europe due to the launch of new, high-performance global COVID-19 pandemic in fiscal 2021/2022. varieties. We assume that competition will remain However, sharp increases in the prices of agricultural intense in North America. As far as can be seen at raw materials will raise the costs of multiplying seed. present, the EBIT margin is expected to be at the We also anticipate above-average price rises in a level of the previous year (9.2%). number of procurement categories. There are still significant currency risks in important markets, in particular in South America and Eastern Europe. 2.9 Forecast Report | Combined Management Report 79 KWS Group | Annual Report 2020/2021 In the Sugarbeet Segment, our high-yielding vegetable seed businesses. Assuming a recovery portfolio of varieties will likely mean another in the market environment, in particular in the food successful fiscal year for us. We assume that services segment, we expect the segment’s net sugarbeet cultivation area will remain stable all in all. sales to rise sharply compared to the previous year The segment’s business performance will benefit (€58.2 million). There are also costs for establishing from further growth due to CONVISO® SMART seed an international breeding program and the Business and the launch of new, Cercospora-tolerant (CR+) Unit in the segment. Consequently, the number varieties. We expect the segment’s net sales to be on of employees will probably increase further. We a par with the previous year (€524.3 million), as will the anticipate that the EBIT margin and the EBIT margin EBIT margin (33.3%). after adjustment for the noncash effects from the purchase price allocation as part of company We assume that net sales in the Cereals Segment acquisitions will be well above those of the previous will rise slightly compared to the previous year year. (€191.2 million). In particular, we expect rapeseed and hybrid rye seed business to boost growth here. The Revenue (albeit slight) from our farms in Germany, segment’s earnings will benefit from an increase in France and Poland is grouped in the Corporate sales of rye seed; at the same time, we are planning to Segment. Since all cross-segment costs for the expand our research & development and distribution KWS Group’s central functions and research activities further. All in all, we anticipate that the EBIT expenditure are still charged to the Corporate margin will rise slightly compared to the previous Segment, its income is usually negative. In view of year (11.1%). the planned cost developments and continuation of the transformation project ONEGLOBE, The Vegetables Segment essentially comprises we expect the segment’s EBIT to be around the net sales and earnings contributed by acquired €–100.0 (–92.0) million. Forecast for the 2021/2022 fiscal year Statement of comprehensive income of the KWS Group Net sales EBIT margin 1 R&D intensity 5 – 7% 11–12% 18 – 20% 1 Adjusted for non-cash effects from purchase price allocation in the context of company acquisitions 80 Combined Management Report | 2.9 Forecast Report 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration | Combined Management Report Annual Report 2020/2021 | KWS Group2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration (Declaration based on the German Commercial Code (HGB)) 2.10.1 KWS SAAT SE & Co. KGaA Code (HGB), which also contains the compliance declaration in accordance with Section 161 AktG References to KWS SAAT SE & Co. KGaA in the (German Stock Corporation Act), has been published KWS Group’s Annual Report in the Internet at www.kws.com/corp/en/company/ The Management Reports of KWS SAAT SE & investor-relations/. The following disclosures are Co. KGaA and the KWS Group are combined. The identical to those of the KWS Group and are printed declaration on corporate governance in accordance in this Annual Report: with Section 289f of the German Commercial References to KWS SAAT SE & Co. KGaA in the KWS Group’s Annual Report Disclosures On the Compensation Report, in accordance with Section 289 (4) of the German Commercial Code (HGB) and explanatory report of the Executive Board  On business activity, corporate strategy, corporate controlling and management, as well as explanations on business performance On the dividend On research & development On the report on events after the balance sheet date Page(s) 55 to 67 16 to 42 137 (Notes) 23 to 25 138 (Notes) KWS SAAT SE & Co. KGaA is the parent company operating income was €–46.5 million compared of the KWS Group. It is responsible for strategic to the previous year’s figure of €–42.1 million, management and, among other things, multiplies a reduction that was attributable in particular to and distributes sugarbeet and corn seed. It finances higher costs of sales as a result of crop failures due basic research & breeding of the main range to the weather in our seed multiplication activities. of varieties at the KWS Group and provides its Net financial income/expenses is made up of subsidiaries with new varieties every year for the the net income from equity investments and the purpose of multiplication and distribution. interest result. Net income from equity investments Earnings rose sharply to €378.1 (30.8) million. The year-on- year change was mainly due to dividend payouts Net sales at KWS SAAT SE & Co. KGaA in fiscal from retained profits of foreign subsidiaries in 2020/2021 rose to €618.0 (571.2) million, in particular connection with intra-Group financing. The interest on the back of an increase in the Sugarbeet result improved to €–4.1 (–8.5) million, in particular Segment. Research & development expenditure, as a result of lower interest expenses payable to which is pooled at KWS SAAT SE & Co. KGaA, affiliated companies due to refinancing. Taking into was increased as planned to €204.5 (194.4) million. account tax expenditures, the net income for the Selling expenses fell to €73.1 (75.1) million. Most of year was €321.4 million (previous year: a net loss of the administrative expenses at the KWS Group are €27.9 million). incurred at KWS SAAT SE & Co. KGaA. General and administrative expenses in the year under review Financial position and assets totaled €120.3 (121.0) million. The balance of other KWS SAAT SE & Co. KGaA’s total assets in fiscal operating income and other operating expenses 2020/2021 increased to €1,623.1 (1,554.5) million. was €8.2 (4.4) million. KWS SAAT SE & Co. KGaA’s Fixed assets at the balance sheet date were 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration | Combined Management Report 81 KWS Group | Annual Report 2020/2021 €1,016.3 (1,014.8) million. Inventories rose 2.10.2 Combined Non-Financial Declaration to €79.8 (66.3) million on the back of higher for the KWS Group production, Receivables and other assets were In accordance with Sections 289b et seq. and €495.7 (462.4) million. Liabilities to affiliated Sections 315b et seq. of the German Commercial companies at the balance sheet date fell to Code (HGB), KWS is obliged to prepare a Non- €914.3 (1,121.2) million. KWS SAAT SE & Co. KGaA’s Financial Declaration for the parent company equity increased to €531.3 (233.0) million due to KWS SAAT SE & Co. KGaA and the Group disclosing the net income for the year, giving an equity ratio of details of the business model and related material 32.7% (15.0%). Employees corporate social responsibility (CSR) aspects (environmental issues, social issues, employee issues, human rights, and prevention of corruption An average of 1,633 (1,544) people were employed and bribery), where these are necessary for an at KWS SAAT SE & Co. KGaA in the year under understanding of the course of business, business review. results, the situation of KWS SAAT SE & Co. KGaA and the KWS Group, and the effects on said aspects. Risks and opportunities The disclosures in the Combined Non-Financial The opportunities and risks at KWS SAAT SE & Declaration relate to both KWS SAAT SE & Co. KGaA Co. KGaA are essentially the same as at the KWS and the KWS Group, unless otherwise specified. Group. It shares the risks of its subsidiaries and associated companies in accordance with its In order to identify issues that need to be reported respective stake in them. You can find a detailed in the Non-Financial Declaration, the relevant description of the opportunities and risks and issues based on a GRI materiality analysis in fiscal an explanation of the internal control and risk year 2020/2021 were systematically reassessed management system (Section 289 (4) of the German to determine their impact on the environment and Commercial Code (HGB)) on pages 69 to 78. society and on the position of the KWS Group. On Forecast Report the basis of this analysis, the individual issues of innovative and sustainable product development, KWS SAAT SE & Co. KGaA generates the main product quality and safety, emissions, water, part of its net sales from sugarbeet and corn seed occupational health and safety, recruitment and business and royalties from basic corn seed. Its employee loyalty, qualification, further training further development depends, among other things, and development, employee engagement, human on the performance of our varieties, cultivation and labor rights, business ethics and compliance, areas in our key markets and developments in our responsibility in the supply chain, and use of growth markets in Eastern Europe. We currently genetic resources were identified as material anticipate a slight increase in net sales, mainly within the meaning of the statutory regulations. from corn business. KWS SAAT SE & Co. KGaA’s Material effects of the COVID-19 pandemic on the operating income is mainly impacted by the costs non-financial issues are reported in the respective of central functions of the KWS Group and cross- sections, where necessary. Given that we aim to segment research & development activities. As a conduct the GRI materiality analysis every two years, result of the anticipated higher spending on research the next one is scheduled for fiscal 2022/2023. & development and on distribution activities, In the year under review, the Executive Board KWS SAAT SE & Co. KGaA’s EBIT will likely be well adopted a comprehensive sustainability program below that of the year under review. with corresponding goals and KPIs. They are explained in the Management Report (page 20 in section 2.1.4 Objectives and Strategy; Sustainability). They are to be implemented at the company in coming reporting periods, and their relevance for controlling is to be examined. 82 Combined Management Report | 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration Annual Report 2020/2021 | KWS GroupThe table below gives an overview of the CSR report aspects stipulated by law in accordance with Section 289c of the German Commercial Code (HGB) and other associated issues that require reporting, as well as references to the sections in which the required disclosures on concepts, results, risks and key performance indicators are made. We did not identify any risks that exceeded the statutory materiality threshold defined in Section 289c (3) of the German Commercial Code (HGB). In addition, the KWS Group has not defined any non-financial performance indicators relating to controlling at present. As part of preparation of the Non-Financial Declaration, we were guided by the GRI standards in conducting the materiality analysis. We did not use any other framework apart from that. Index for the Non-Financial Declaration Required HGB disclosures Business model Environmental issues Employee issues Material issues for KWS Reference to sections – Innovative & Sustainable Product Design Product Quality and Safety Emissions Water Occupational Health and Safety Recruitment & Employee Loyalty Qualification, Further Training and Development Employee Engagement Human and Labor Rights 2.1 Fundamentals of the KWS Group 2.4.1 Product Innovations 2.4.2 Product Quality and Safety 2.4.3 Emissions & Water 2.5.2 Occupational Health and Safety 2.5.3 Recruitment and Employee Loyalty 2.5.4 Qualification, Further Training and Development 2.5.5 Labor and Social Standards Corruption and bribery Business Ethics & Compliance 2.6.3 Business Ethics & Compliance Human rights Responsibility in the Supply Chain Human and Labor Rights 2.6.4 Responsibility in the Supply Chain Social issues Use of Genetic Resources 2.7.1 Use of Genetic Resources Einbeck, September 23, 2021 KWS SE Dr. Hagen Duenbostel | Dr. Léon Broers | Dr. Felix Büchting | Dr. Peter Hofmann | Eva Kienle 2.10 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration | Combined Management Report 83 KWS Group | Annual Report 2020/20213. Annual Financial Statements for the KWS Group 2020/2021 Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes for the KWS Group 2020/2021 1. General Disclosures 2. Standards and Interpretations Applied for the First Time 3. Accounting Policies 4. Consolidated Group and Changes in the Consolidated Group 5. Segment Reporting for the KWS Group 6. Notes to the Income Statement 7. Notes to the Balance Sheet 8. Notes to the Cash Flow Statement 9. Other Notes Independent Auditor’s Report Independent Auditor’s Limited Assurance Report Declaration by Legal Representatives Additional Information 86 87 88 90 92 92 92 93 102 104 107 114 136 137 144 151 153 154 s t n e m e t a t S l i a c n a n F i l a u n n A Statement of Comprehensive Income July 1 to June 30 in € thousand I. Income statement Net sales Cost of sales Gross profit on sales Selling expenses Research & development expenses General and administrative expenses Other operating income Other operating expenses Operating income Interest and similar income Interest and similar expenses Income from equity-accounted financial assets Net financial income/expenses Earnings before taxes Taxes Net income for the year II. Other comprehensive income Changes in reserve for currency translation differences on foreign operations Income from equity-accounted financial assets Items that may have to be subsequently reclassified as profit or loss Net gain/(loss) on equity instruments designated at fair value through other comprehensive income Remeasurement gain/(loss) in defined benefit plans Items not reclassified as profit or loss Other comprehensive income after tax III. Comprehensive income (total of I. and II.) Net income after shares of minority interests Share of minority interests Net income for the year Comprehensive income after shares of minority interests Share of minority interests Comprehensive income Note no. 2020/2021 2019/2020 6.1 6.1 6.1 6.1 6.1 6.2 6.3 6.4 6.5 6.8 7.9 7.9 7.9 7.9 7.9 6.8 1,310,232 1,282,552 570,690 739,542 244,218 252,226 127,142 71,446 50,369 137,032 6,145 18,338 17,374 5,181 142,214 31,624 110,590 –38,993 –912 –39,905 2,666 4,073 6,738 549,899 732,653 248,821 236,102 129,451 81,250 62,163 137,366 5,482 24,097 10,773 –7,842 129,524 34,305 95,220 –39,596 1,469 –38,127 1,313 –5,148 –3,835 –33,167 –41,962 77,423 110,609 –19 110,590 77,442 –19 77,423 53,258 95,331 –111 95,220 53,333 –75 53,258 Diluted and basic earnings per share (in €) 6.8 3.35 2.89 86 Annual Financial Statements | Statement of Comprehensive Income Annual Report 2020/2021 | KWS GroupBalance Sheet Assets in € thousand Goodwill Intangible assets Right-of-use assets Property, plant and equipment Equity-accounted financial assets Financial assets Noncurrent tax assets Other non-current receivables Deferred tax assets Noncurrent assets Inventories Biological assets Trade receivables Cash and cash equivalents Current tax assets Other current financial assets Other current assets Current assets Assets held for sale Total assets Equity and liabilities Subscribed capital Capital reserve Retained earnings Minority interest Equity Long-term provisions Long-term borrowings Noncurrent lease liabilities Trade payables Deferred tax liabilities Other noncurrent financial liabilities Other noncurrent liabilities Noncurrent liabilities Short-term provisions Short-term borrowings Current lease liabilities Trade payables Current tax liabilities Other current financial liabilities Contract liabilities Other current liabilities Current liabilities Liabilities Total equity and liabilities Note no. 06/30/2021 06/30/2020 7.1 7.1 7.15 7.2 7.3 7.5 7.15 6.5 7.6 7.6 7.7 7.8 7.7 7.7 7.7 4 7.9 7.9 7.9 7.10 7.9 7.11 7.11 7.15; 7.11 7.11 6.5 7.11 7.11 7.11 7.12 7.12 7.15; 7.12 7.12 7.12 7.12 7.12 7.12 7.12 122,643 353,701 43,671 506,267 173,736 9,436 606 7,330 47,642 117,290 368,361 46,349 494,179 161,960 6,230 674 8,072 70,590 1,265,033 1,273,705 266,606 5,546 449,501 222,745 91,546 40,592 34,488 216,606 15,869 432,569 119,737 83,409 63,391 29,741 1,111,024 961,321 686 441 2,376,743 2,235,467 99,000 5,530 949,188 0 1,053,718 132,500 601,080 37,465 242 66,359 62 1,301 99,000 5,530 889,830 139 994,498 140,074 521,744 39,896 264 92,265 207 1,014 839,009 795,465 39,455 97,225 10,961 52,467 93,663 11,404 153,748 109,747 31,503 14,203 25,234 111,687 484,016 1,323,025 2,376,743 41,840 17,133 19,191 100,059 445,504 1,240,969 2,235,467 Balance Sheet | Annual Financial Statements 87 KWS Group | Annual Report 2020/2021Statement of Changes in Equity July 1 to June 30 in € thousand Subscribed capital Capital reserve Accumulated Group equity from earnings Parent company Comprehensive other Group income Reserve for currency translation differences on foreign operations –53,225 Reserve for currency trans lation differences on at equity accounted financial assets 5,747 06/30/2019 Dividends paid Net income for the year Other comprehensive income after tax Total consolidated gains (losses) Change in shares of minority interests Capital increase from company funds Other changes 06/30/2020 07/01/2020 Dividends paid Net income for the year Other comprehensive income after tax Total consolidated gains (losses) Change in shares of minority interests Other changes 06/30/2021 99,000 5,530 955,651 –22,110 95,331 99,000 99,000 5,530 5,530 –39,596 95,331 –39,596 0 0 2,256 1,031,127 1,031,127 –23,100 110,609 0 0 0 –92,821 –92,821 –38,993 110,609 –38,993 0 5,016 0 0 99,000 5,530 1,123,652 –131,814 1,469 1,469 0 0 0 7,216 7,216 –6,635 –6,635 0 0 581 Parent company Group equity Minority interest Comprehensive other Group income Total Net gain/ (loss) on equity instruments designated at fair value Reserve for cash flow hedge on at equity financial assets through other Revaluation of accounted comprehensive defined benefit income 873 plans –52,731 0 0 0 0 0 0 0 0 0 0 2,186 2,186 –57,879 –57,879 5,723 5,723 2,666 2,666 4,073 4,073 0 0 0 0 0 960,845 –22,110 95,331 0 0 2,256 994,360 994,360 –23,100 110,609 –33,167 77,442 0 5,016 0 0 0 0 0 2,702 0 –111 36 –75 0 0 0 0 139 139 –19 –19 –120 0 0 963,547 –22,110 95,220 –41,926 53,294 0 2,256 994,498 994,498 –23,100 110,590 –33,167 77,423 –120 5,016 1,313 1,313 –5,148 –41,962 –5,148 53,369 –2,488 –2,488 5,723 4,852 –53,806 1,053,718 1,053,718 88 Annual Financial Statements | Statement of Changes in Equity Annual Report 2020/2021 | KWS GroupStatement of Changes in Equity July 1 to June 30 in € thousand Subscribed capital Capital reserve Accumulated Group equity from earnings Parent company Comprehensive other Group income Reserve for currency translation differences on foreign operations –53,225 Reserve for currency trans lation differences on at equity accounted financial assets 5,747 –39,596 95,331 –39,596 955,651 –22,110 95,331 0 0 2,256 1,031,127 1,031,127 –23,100 110,609 0 5,016 –92,821 –92,821 –38,993 0 0 0 0 0 110,609 –38,993 1,469 1,469 0 0 0 7,216 7,216 –6,635 –6,635 0 0 581 99,000 5,530 99,000 99,000 5,530 5,530 06/30/2019 Dividends paid Net income for the year Other comprehensive income after tax (losses) Total consolidated gains Change in shares of minority interests Capital increase from company funds Other changes 06/30/2020 07/01/2020 Dividends paid Net income for the year Other comprehensive income after tax (losses) Total consolidated gains Change in shares of minority interests Other changes 06/30/2021 Parent company Minority interest Group equity Comprehensive other Group income Total Reserve for cash flow hedge on at equity accounted financial assets Net gain/ (loss) on equity instruments designated at fair value through other comprehensive income Revaluation of defined benefit plans 0 0 0 0 0 0 0 0 873 –52,731 960,845 –22,110 95,331 –5,148 –41,962 –5,148 53,369 1,313 1,313 0 0 0 0 0 0 2,186 2,186 –57,879 –57,879 5,723 5,723 0 0 2,666 2,666 0 0 4,073 4,073 0 0 0 0 2,256 994,360 994,360 –23,100 110,609 –33,167 77,442 0 5,016 99,000 5,530 1,123,652 –131,814 5,723 4,852 –53,806 1,053,718 2,702 0 –111 36 –75 963,547 –22,110 95,220 –41,926 53,294 –2,488 –2,488 0 0 139 139 0 –19 0 –19 –120 0 0 0 2,256 994,498 994,498 –23,100 110,590 –33,167 77,423 –120 5,016 1,053,718 Statement of Changes in Equity | Annual Financial Statements 89 KWS Group | Annual Report 2020/2021Cash Flow Statement July 1 to June 30 in € thousand Net income for the year Depreciation/amortization and impairment on fixed assets Increase/decrease (–) in long-term provisions Increase/decrease (–) in short-term provisions Net gain (–)/loss (+) from the disposal of assets Income tax expense (+)/-income (–) Income tax payments (–)/-refunds (+) Interest expense (+)/Interest income (–) Increase (–)/decrease in inventories, trade receivables and other assets not attributable to investing or financing activities Increase/decrease (–) in trade payables and other liabilities not attributable to investing or financing activities Proceeds and payments (+) from/for equity-accounted companies Other noncash expenses/income (–) Net cash from operating activities Proceeds from disposals of intangible assets Payments (–) for capital expenditure on intangible assets Proceeds from disposal of fixed assets Payments (–) for capital expenditures for fixed assets Proceeds from disposals of financial assets Payments (–) for capital expenditure on financial assets Receipts from the disposal of consolidated subsidiaries and other business units Cash outflows (–) for the acquisition of additional interests in subsidiaries Interest received (+) Net cash from investing activities Note no. 2020/2021 2019/2020 110,590 93,828 –1,660 –12,430 –465 31,382 –37,347 10,885 95,220 88,429 –3,596 750 –563 34,305 –33,526 17,093 –75,173 –77,879 50,402 5,609 –7,298 168,322 154 –12,269 1,876 –68,644 –518 0 0 –8,285 3,524 27,464 5,408 –16,949 136,157 12 –14,939 1,852 –99,001 152 –492 3,075 –395,254 4,733 –84,161 –499,863 90 Annual Financial Statements | Cash Flow Statement Annual Report 2020/2021 | KWS GroupJuly 1 to June 30 in € thousand Note no. 2020/2021 2019/2020 Dividend payments (–) to owners and minority shareholders Payment (–) of principal portion of lease liabilities Payment (–) of interest portion of lease liabilities Interest paid (–) incl. transaction costs on issuance of promissory notes and borrowings 7.9 7.15 7.15 Proceeds from long-term borrowings Repayment of long-term borrowings Changes from proceeds (+)/repayments (–) of short-term borrowings Net cash from financing activities Net cash changes in cash and cash eqivalents and restricted cash Changes in cash and cash equivalents and restricted cash due to exchange rate, consolidated group and measurement changes Cash and cash equivalents, including restricted cash, at beginning of year Cash and cash equivalents, including restricted cash, at end of year Plus/Minus cash deposited in a trust account for the acquisition of Pop Vriend Seeds Group Cash and cash equivalents at end of year thereof restricted cash and cash equivalents at end of year –23,100 –11,905 –876 –11,572 206,201 –116,695 –7,123 34,930 119,091 –22,110 –14,376 –1,184 –16,619 0 –36,500 8,304 –82,484 –446,190 –16,083 –8,501 119,737 222,745 0 8 222,745 46 159,757 –294,935 414,672 119,737 91 Cash Flow Statement | Annual Financial Statements 91 KWS Group | Annual Report 2020/2021Notes for the KWS Group 2020/2021 1. General Disclosures 2. Standards and Interpretations Applied for the First Time The consolidated financial statements of KWS SAAT SE & Co. KGaA and its subsidiaries were prepared under the The following standards and interpretations have been assumption that the operations of the companies will adopted and applied for the first time in fiscal year be continued and applying Section 315e of the German 2020/2021: Commercial Code (HGB). They comply with the International Financial Reporting Standards (IFRS) as applicable in the European Union (EU). Standards and interpretations applied for the first time KWS SAAT SE & Co. KGaA, the ultimate parent company of the KWS Group, is an international company based in Germany, has its headquarters at Grimsehlstrasse 31, 37574 Einbeck, Germany, and is registered at Göttingen Local Court under the number HRB 205722. Since it was founded in 1856, KWS has specialized in developing, producing and distributing high-quality seed for agriculture. KWS covers the complete value chain of a modern seed producer – from breeding of new varieties, multiplication and processing to marketing of the seed and consulting for farmers. KWS’ core competence is in breeding new, high- performance varieties that are adapted to regional needs, Financial reporting standards and interpretations Amendments to References to the Conceptual Framework in IFRS Standards IFRS 3 – Amendments to Business Combinations: Definition of a Business IFRS 9, IAS 39, IFRS 7 – Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (Phase 1) Amendments to IFRS 16 “COVID-19-Related Rent Concessions” Amendments to IAS 1 “Presentation of Financial State- ments” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”: Definition of Material such as climatic and soil conditions. At the date of signing, all amendments to the financial reporting standards and interpretations, applied as of The Executive Board of KWS SE, the personally liable July 1, 2020, do not have a significant impact on the partner of KWS SAAT SE & Co. KGaA, prepared the consolidated financial statements of the KWS Group. consolidated financial statements on September 23, 2021, and released them for distribution to the Supervisory Board. Standards and interpretations to be applied in future The Supervisory Board has the task of examining the The IASB has issued the following standards and consolidated financial statements and declaring whether amendments to standards whose application was not it approves them. yet mandatory for the 2020/2021 fiscal year and for some of which the European Union had not yet completed the endorsement process. The following standards have not yet been applied by KWS Group: 92 Annual Financial Statements | Notes for the KWS Group | 1. General Disclosures Annual Report 2020/2021 | KWS Group Standards and Interpretations to be applied in future Financial reporting standards and interpretations Amendments to IFRS 4 “Insurance Contracts” IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform (Phase 2) Annual Improvements to IFRSs 2018 – 2020 Cycle Amendments to IFRS 3 “Business Combinations” Amendments to IAS 16 “Property, Plant and Equipment” Mandatory first-time application Fiscal year 2021/2022 Fiscal year 2021/2022 Fiscal year 2022/2023 Fiscal year 2022/2023 Fiscal year 2022/2023 Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” Fiscal year 2022/2023 IFRS 17 – “Insurance Contracts” and amendments to IFRS 17 “Insurance Contracts” Fiscal year 2023/2024 Amendments to IAS 1 “Presentation of Financial Statements”: Classification of Liabilities as Current or Non-current – Deferral of Effective Date Fiscal year 2023/2024 Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” Fiscal year 2023/2024 Fiscal year 2023/2024 Based on an analysis, the standards and interpretations to the two items that make up cash and cash equivalents be applied in future are not expected to have a significant (cash and cash equivalents, and securities) have been impact on the consolidated financial statements of the KWS grouped together in fiscal 2020/2021 to better facilitate the Group. 3. Accounting Policies reconciliation between the balance sheet and cash flow statement. In addition, the presentation of the statement of changes in equity was revised in the year under review in order to ensure a more understandable presentation. 3.1 Consistency of accounting policies The disclosures for the previous year have been adjusted Consistent accounting policies are applied in the annual accordingly. financial statements of the companies included in the consolidated financial statements. There were no changes 3.2 Companies consolidated in the KWS Group to accounting policies from the previous financial year, with The consolidated financial statements of the KWS Group the exception of the standards to be applied for the first include the single-entity financial statements of time. KWS SAAT SE & Co. KGaA and its subsidiaries in Germany and other countries, as well as joint ventures and All estimates and assessments as part of accounting and associated companies, which are carried using the equity measurement are continually reviewed; they are based method, and joint operations. A company is a subsidiary on historical patterns and expectations about the future if KWS SAAT SE & Co. KGaA currently has existing rights regarded as reasonable in the particular circumstances. that give it the ability to control its relevant activities. Relevant activities are the activities that significantly affect Starting with this fiscal year, the short-term and long-term the company’s returns. Control therefore only exists if lease liabilities are disclosed separately in the balance KWS SAAT SE & Co. KGaA has the ability to use its power sheet in order to enhance transparency and consistency in to affect the amount of the variable returns. Control can how the right-of-use assets are presented. The disclosures usually be derived from holding a majority of the voting for the previous year have been changed accordingly. rights directly or indirectly. Details on the changes in the In the previous year, these amounts were carried under consolidated group are provided in section 4, Consolidated the other short-term and long-term liabilities. In addition, Group and Changes in the Consolidated Group. KWS Group | Annual Report 2020/2021 2. Standards and Interpretations Applied for the First Time | Notes for the KWS Group | Annual Financial Statements 93 3.3 Consolidation methods The basis for a joint operation is likewise a contractual The single-entity financial statements of the individual agreement with a third party to manage the company’s subsidiaries included in the consolidated financial activities jointly. In this case, the parties have rights to statements and the single-entity financial statements of the the assets that can be ascribed to the agreement and joint ventures and associated companies included using obligations in respect of the liabilities. The assets and the equity method and of the proportionately consolidated liabilities and revenue and expenses are included in the joint operations were uniformly prepared on the basis consolidated financial statements proportionately in of the accounting and measurement policies applied at accordance with the KWS Group’s stake (50%). KWS SAAT SE & Co. KGaA. For business combinations, capital consolidation is performed according to the Deferred taxes on consolidation transactions recognized acquisition method by allocating the cost of acquisition to in income are calculated at the tax rate applicable to the the Group’s interest in the subsidiary’s remeasured equity company concerned. These deferred taxes are aggregated at the time of acquisition. Any excess of interest in equity with the deferred taxes recognized in the separate over cost is recognized as an asset, up to the amount by financial statements. which fair value exceeds the carrying amount. Any goodwill remaining after first-time consolidation is recognized as As part of the elimination of intra-Group balances, an intangible asset. Costs incurred as part of the business borrowings, receivables, liabilities, and provisions are combination are recognized as an expense and carried as netted between the consolidated companies. Intercompany administrative expenses. profits not realized at Group level are eliminated from intra-Group transactions. Sales, income, and expenses are According to IAS 36, goodwill is not amortized, but tested netted between consolidated companies, and intra-Group for impairment at least once a year at the end of the year distributions of profit are eliminated. (impairment-only approach). Investments in insignificant unconsolidated subsidiaries are carried at fair value. Non-controlling interests are recognized in the amount of the imputed percentage of equity in the consolidated Joint ventures are consolidated using the equity method companies. in application of IFRS 11 and IAS 28. The basis for a joint venture is a contractual agreement with a third party to 3.4 Currency translation control and manage a venture collectively. In the case of Under IAS 21, the financial statements of the consolidated joint ventures, the parties who exercise joint management foreign group companies that conduct their business as have rights to the net assets of the agreement. financially, economically, and organizationally independent entities are translated into euros using the functional In the case of joint ventures carried in accordance with the currency method and rounded in accordance with standard equity method, the carrying amount is increased or reduced commercial practice as follows: annually by the equity capital changes corresponding to the KWS Group’s share. In the case of first-time consolidation „ Income statement items at the average exchange rate for of equity investments using the equity method, differences the year on a monthly basis; from first-time consolidation are treated in accordance „ Balance sheet items at the exchange rate on the balance with the principles of full consolidation. The changes in the sheet date. proportionate equity that are recognized in profit or loss are included, along with impairment of goodwill, under the The following exchange rates were applied in the item “Income from equity-accounted financial assets” in the consolidated financial statements for the main foreign net financial income/expenses. Associated companies in currencies relative to the euro: which the KWS Group exerts a significant influence because it holds a stake of between 20% and 50% are likewise measured using the equity method. 94 Annual Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2020/2021 | KWS Group Exchange rates for main currencies 1 EUR/ ARS 1 BRL GBP RUB UAH USD Argentina Brazil UK Russia Ukraine USA Rate on balance sheet date Average rate 06/30/2021 06/30/2020 2020/2021 2019/2020 113.68300 78.85460 113.68300 78.85460 5.89340 0.85775 6.05730 0.91360 6.42570 0.88650 5.01039 0.87829 86.20260 78.68120 89.03760 74.32688 32.30180 29.95000 33.22300 28.08884 1.18900 1.12100 1.19280 1.10569 1 The average rate corresponds to the rate at balance sheet date due to application of IAS 29 for KWS ARGENTINA S.A. The difference resulting from the application of annual The KWS Group’s contracts with customers do not usually average rates on a monthly basis to the net profit for the have any significant separable performance obligations period in the income statement at the rate on balance apart from the delivery of seed. Consequently, splitting sheet date is taken directly to equity. According to IAS 21, of the transaction price is not required for most of the exchange differences resulting from loans to foreign KWS Group’s contracts with customers. The total purchase subsidiaries are recognized in the Other comprehensive price must be recognized at a point in time. income and are not reclassified to profit or loss until disposal of the net investment. The accumulated amount If the contracts specify further performance obligations, is recognized in the income statement only when the net such as granting of discount coupons, credit memos for investment is disposed of. returned goods and bonus points, in addition to seed delivery, they must be measured separately. The KWS Argentina was still classified as a hyperinflationary economy Group uses empirical country-specific and seasonal figures this fiscal year, as a result of which IAS 29 “Financial and information on already announced returns to estimate Reporting in Hyperinflationary Economies” was applied the anticipated returns. to KWS ARGENTINA S.A. Gains and losses from current inflation of non-monetary assets and liabilities and of equity The level of the promised consideration is not adjusted by are recognized in the income statement. the effects of a financing component because the period for The IPC was 321.97 points on July 1, 2020, and rose by 50.2% in the current fiscal year to 483.60 points on The incremental costs of obtaining a contract are June 30, 2021. recognized as a current expense in the period. payment is usually less than twelve months. 3.5 Classification of the statement of comprehensive Revenue from service transactions is recognized over the income period of time in which the service is provided and measured The KWS Group has prepared the income statement using on an output-oriented basis using the percentage of the cost-of-sales method. The costs for the functions completion method. Other income, such as interest, royalties include all directly attributable costs, including other taxes. and dividends, is recognized in the period in which it accrues as soon as there is a contractual or legal entitlement to it. 3.6 Recognition of income and expenses Revenue from contracts with customers is primarily Performance-based public grants are carried under the generated from the sale of seed. It is recognized when other operating income as part of profit/loss. the KWS Group transfers control over products to the customer. That is usually the time when risk passes to the Operating expenses are recognized in the income statement customer. The revenue is recognized at the amount of the upon the service in question being used or as of the date on consideration promised in the contract. which they occur. 3. Accounting Policies | Notes for the KWS Group | Annual Financial Statements 95 KWS Group | Annual Report 2020/20213.7 Intangible assets In addition to directly attributable costs, the cost of self- Purchased intangible assets are carried at cost less produced plant or equipment also includes a proportion of straight-line amortization and impairment losses. It is the overheads and depreciation/amortization. necessary to examine whether the useful life of intangible assets is finite or indefinite. Goodwill has an indefinite useful Useful life of property, plant and equipment life. Goodwill and intangible assets with an indefinite useful life are not amortized, but tested for impairment at least once a year. Buildings Operating equipment and other facilities Intangible assets acquired as part of business combinations Technical equipment and machinery are carried separately from goodwill if they are separable Laboratory and research facilities according to the definition in IAS 38 or result from a contractual or legal right. Other equipment, operating and office equipment Useful life 10 – 50 years 5 – 25 years 5 –15 years 5 –13 years 3 –15 years The useful life of intangible assets is as follows: Useful life of intangible assets Breeding material, proprietary rights to varieties and trademarks Other rights Software Distribution rights Customer relationships Low-value assets are fully expensed in the year of purchase; they are reported as additions and disposals in the year Useful life of purchase in the statement of changes in fixed assets. If there is evidence of a possible impairment, an impairment 10–30 years test on the property, plant, and equipment or at a cash- 3–10 years generating unit is carried out in accordance with IAS 36. 3–8 years An impairment is recognized if the recoverable amount for 5–20 years 1–5 years the asset/cash-generating unit has fallen below the residual carrying amount. The recoverable amount is the higher of the fair value less costs to sell or the value in use. If the reason for an earlier impairment loss on property, plant, 3.8 Property, plant, and equipment and equipment no longer applies, its value is increased to Property, plant, and equipment is measured at cost less up to the amount that would have resulted if the impairment straight-line depreciation over its expected useful life and loss had not occurred, taking depreciation into account. In impairment losses. Depreciation of an asset commences accordance with IAS 20, government grants for assets are when the asset is at its location and is in the condition deducted from the costs of the asset. Any deferred income necessary for it to be capable of operating in the manner is not recognized. intended by management. Depreciation of an asset ends when the asset has been fully expensed or is classified as The residual values, useful economic lives and methods held for sale in accordance with IFRS 5 or at the latest when of depreciation for property, plant, and equipment are it is derecognized. reviewed at the end of each fiscal year and adjusted prospectively if necessary. If property, plant, and equipment is sold or scrapped, the profit or loss from the difference between the proceeds In accordance with IAS 23, borrowing costs are capitalized if and residual carrying amount is recognized under the other they can be classified as qualifying assets. operating income or other operating expenses. 96 Annual Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2020/2021 | KWS Group 3.9 Leases When financial assets are initially recognized, they are A lease is an agreement whereby the lessor conveys the assigned to one of the following three categories for the right to use an asset for an agreed period of time to the purpose of subsequent measurement: at amortized cost, lessee in exchange for a payment or a series of payments. at fair value through other comprehensive income, or at fair value through profit or loss. If the KWS Group is the lessee, leases are recognized as a right-of-use asset and lease liability in the balance Equity instruments are generally measured at fair value sheet in accordance with the regulations of IFRS 16. In through profit or loss, unless an option to classify them subsequent periods, the right-of-use asset is depreciated irrevocably as being measured at fair value through other over the lease’s term. This depreciation is recognized in the comprehensive income is exercised when they are initially respective function costs. Interest expense is accrued on recognized. Such an option is available if the financial the lease liability in the course of the lease and the liability is investments in equity instruments are neither held for reduced by the lease payments that have been made. The trading nor constitute a contingent consideration as part of effect from the accrued interest is recognized in the interest a company acquisition. The debt instruments are classified expense under net financial income/expenses. taking into account the KWS Group’s business model for The lease payments for short-term leases and leases of flow characteristics for the financial instrument. A financial low-value assets are recognized as operating expenses in asset is measured at amortized cost if it is held with the accordance with the available exemption. objective of collecting contractual cash flows and the latter controlling these financial assets and the contractual cash The right-of-use assets are recognized to the amount of financial assets are held as part of the business model the corresponding lease liabilities, adjusted for any prepaid to collect contractual cash flows and sell the financial or accrued lease payments if applicable. The right-of-use instruments, these are classified as being measured at fair assets are reported in the balance sheet under a separate value through other comprehensive income. All the other comprise solely payments of interest and principal. If the item. financial instruments are classified in the category “at fair value through profit or loss.” There is also the option of If the KWS Group is the lessor and the main risks and designating the debt instrument as being measured at fair rewards from use of the leased object are transferred to the value through profit or loss under certain conditions when it contractual partner, the lease is deemed to be a financial is carried for the first time. lease. The net investment in the lease is recognized as a receivable. The financial assets consist of bank balances and cash on hand, trade receivables, loans, fund shares, securities, If the KWS Group acts as a lessor as part of an operating derivatives and other financial assets. Regular-way lease, the lease payments are recognized as operating purchases and sales of financial assets are recognized or income in the income statement on a straight-line basis derecognized in general at the settlement date. Because over the lease’s term. fund shares have the characteristics of equity, they are classified irrevocably as being measured at fair value The KWS Group’s leases primarily relate to lease through other comprehensive income. The changes to agreements for office space, land and vehicles. fair value in subsequent measurement are recognized as unrealized gains and losses directly in other comprehensive 3.10 Financial instruments income. Classification and measurement The other financial assets are measured at amortized cost. Apart from equity instruments, financial instruments are The carrying amount of receivables, money market accounts financial assets and financial liabilities. and cash are assumed as the fair value. 3. Accounting Policies | Notes for the KWS Group | Annual Financial Statements 97 KWS Group | Annual Report 2020/2021 Impairment losses The loss rate is the percentage loss in the event of default The credit risk is the risk that a contractual partner does and corresponds to the amount of the unpaid receivables not fulfill its payment obligations as part of a financial less an expected recovery rate. The KWS Group applies a instrument. The risks of default are monitored and controlled uniform recovery rate determined regardless of customer constantly and reflected by means of impairment losses. group, due date and country over a long period of time and The KWS Group ascertains the need to recognize an over a broad total number of company insolvencies. impairment loss for all financial assets not classified in the category “at fair value through profit or loss.” That Changes to the level of the risk provision must be carried in is calculated on the basis of the expected losses. The the income statement as a reversal of an impairment loss or expected losses are in general the present value resulting as an impairment loss. from the difference between the cash flows defined in the contract and the cash flows the KWS Group expects to Cash and cash equivalents are exposed only to an receive. insignificant risk of fluctuations in their value. The seasonal nature of the KWS Group’s liquidity situation over the fiscal In general, a two-stage model must be applied in year only permits short-term cash deposits in the period calculating the expected losses. If the credit risk for from May to August. The bank balances and short-term financial instruments has not increased significantly, the cash deposits are mainly with banks that have high and risk provision is recognized only on the basis of losses stable creditworthiness. Given the external credit rating for resulting from default events within the next twelve months. these banks, the KWS Group’s cash and cash equivalents In the case of financial instruments whose credit risk has are regarded as low-risk. Moreover, bank balances increased significantly since first-time recognition, the entire are spread over multiple banks in order to avoid any remaining lifetime is used to calculate the expected losses. concentration of them. The KWS Group uses a simplified approach under IFRS 9 Financial assets are mainly derecognized once the to determine the expected losses because the financial contractual rights to obtain cash flows from financial assets assets mainly consist of short-term trade receivables. have expired or the financial assets with all their risks Measurement and first-time recognition of the receivables and rewards have been transferred to a third party. When and also their subsequent measurement therefore take into the contractual rights are transferred, the KWS Group account expectations of default on the item in question over assesses whether and to what extent risks and rewards its entire lifetime. associated with ownership of them remain with the Group. If the risks and rewards are not transferred in full, the KWS The KWS Group determines the expected counterparty Group continues to recognize the asset to the extent of its default on the basis of the probability of default and the loss continuing involvement. In that case, a related liability is also rate in the event of default. recognized. The probability of default is generally determined on the The financial liabilities mainly comprise trade payables, basis of customer-specific ratings. The probability of default loans from banks, derivatives and other financial liabilities. relates to a year, which is usually the maximum lifetime of When financial liabilities are initially recognized, they are receivables at the KWS Group. Since specific ratings are classified as being measured at fair value through profit not available for all customers, an average rating based or loss or at amortized cost. KWS Group adopts first on all classified customers is calculated for each country, time measurement at fair value. The fair value of financial regardless of the receivables per customer. It is then applied liabilities with a long-term fixed interest rate is determined to the total amount for all the receivables in the country in as present values of the payments related to the liabilities, question. If that information is not available for a country, using a yield curve applicable on the balance sheet date. the average rating of a country with a comparable risk is applied. 98 Annual Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2020/2021 | KWS GroupAll financial liabilities at the KWS Group, with the exception 3.13 Deferred taxes of derivative financial instruments, are measured at Deferred taxes are calculated in accordance with IAS 12. amortized cost using the effective interest method. The Deferred taxes are calculated on differences between the liabilities are derecognized at the time they are settled or carrying amounts of assets and liabilities between the IFRS when the reason why they were formed no longer exists. and their tax base, including differences from consolidation Financial instruments in level 1 are measured using quoted and interest carryforwards. Since it is not permissible prices in active markets for identical assets or liabilities. In to recognize deferred tax liabilities arising from initial level 2, they are measured by directly observable market recognition of goodwill, the KWS Group does not calculate measures, and on tax loss carryforwards, tax credits inputs or derived indirectly on the basis of prices for similar any deferred taxes on them. instruments. Finally, input factors not based on observable market data are used to calculate the value of level 3 Deferred taxes are measured on the basis of the applicable financial instruments. 3.11 Derivatives local income tax rates anticipated at the time the asset is realized or the liability is settled. Deferred tax assets and liabilities are measured based on the tax rates/laws that The KWS Group (with the exception of the equity-accounted apply or have been enacted or substantively enacted by the joint venture AGRELIANT GENETICS LLC.) has not balance sheet date. No discounting is carried out. Deferred designated any existing derivatives as a hedging instrument. taxes and actual taxes are generally recognized as an expense, unless they relate to transactions or events that Derivative instruments are measured at fair value; they are recognized outside of profit or loss. can be assets or liabilities. Common derivative financial instruments are essentially used to hedge interest rate Deferred tax assets are netted off against deferred tax and foreign currency risks. The fair value of the financial liabilities if there is a legally enforceable right to set off instruments is measured on the basis of the market actual tax refund claims against actual tax liabilities and if information available on the balance sheet date and using the deferred taxes relate to income taxes levied by the same recognized mathematical models, such as present value taxing authority. or Black-Scholes, to calculate option values, taking their volatility, remaining maturity and capital market interest Deferred tax assets are recognized if it is considered rates into account. The instruments must also be classified probable that there will be sufficient future taxable profit in a level of the fair value hierarchy. against which the deductible temporary differences, tax loss The changes in their market value are recognized in the be offset. Deferred tax liabilities must be recognized for all income statement. Derivatives are derecognized on their taxable temporary differences. All deferred taxes must be day of settlement. assessed individually at each balance sheet date. carryforwards, tax credits and interest carryforwards can 3.12 Inventories and biological assets Deferred tax liabilities on taxable temporary differences Inventories are measured at the lower of cost or net realizable associated with investments in subsidiaries, branches and value less an allowance for obsolescent or slow-moving associated companies, and interests in joint arrangements, items. In addition to directly attributable costs, the cost of are not recognized if the entity is able to control the timing of sales also includes indirect labor and materials including the reversal of the temporary differences and it is probable depreciation under IAS 2. Biological assets mainly result that the reversal will not occur in the foreseeable future. from the KWS Group’s farming activities at its locations in Germany, France and Poland. Under IAS 41, biological assets are measured at fair value less the estimated costs to sell. If their fair value cannot be reliably determined, they are measured at cost. Immature biological assets are carried as inventories as of the time they are harvested. 3. Accounting Policies | Notes for the KWS Group | Annual Financial Statements 99 KWS Group | Annual Report 2020/20213.14 Income tax liabilities 3.15 Provisions for pensions and other employee The income tax liabilities comprise obligations from actual benefits income taxes. The actual income taxes are calculated The provisions for pensions and other employee benefits on the basis of the respective national taxable profit are calculated using actuarial principles in accordance and regulations for the year. In addition, the actual taxes with the projected unit credit method. Actuarial gains recognized in the fiscal year also include adjustments for and losses must be recognized directly in equity in Other any tax payments or refunds in respect of years that have comprehensive income. The service costs (including not yet been definitively assessed, but excluding interest past service costs) are recognized in operating income payments, interest refunds and penalties on payments of in accordance with the employees’ assignment to the tax arrears. functions. If there are plan assets and the relevant requirements for netting them off are met, they are netted If there is uncertainty over the income tax treatment, the off against the associated obligations. KWS Group measures actual or deferred tax claims or liabilities in accordance with the regulations of IAS 12 and The provisions for semi-retirement include obligations from IFRIC 23. The KWS Group decides on a case-by-case basis concluded semi-retirement agreements. Payment arrears whether the uncertain tax treatment should be considered and top-up amounts for semi-retirement pay and for the independently or collectively together with one or more contributions to the statutory pension insurance program other uncertain tax treatments, depending on which are recognized in measuring them. approach provides better predictions of the resolution of the uncertainty. 3.16 Other provisions Provisions are recognized for present legal and constructive If it is considered improbable that the tax authority will obligations arising from past events that will likely give rise accept an uncertain tax treatment, the KWS Group to a future outflow of resources, provided that a reliable recognizes the effects of the uncertainty at the amount estimate can be made of the amount of the obligations. of the anticipated tax payment (the expected value or most likely amount of the tax treatment). Tax assets from Provisions are measured at their expected amount or most uncertain tax positions are recognized if it is probable likely amount, depending on whether they comprise a large that they can be realized. No tax liability is recognized number of items or constitute a single obligation. Provisions for these uncertain tax positions only if there is a tax loss are reviewed regularly and adjusted to reflect new findings carryforward or an unused tax credit; instead, the deferred or changes in circumstances. If it is no longer likely that asset is adjusted for the unused tax loss carryforwards and economic outflow of a provision will occur, or the conditions tax credits. for why it was recognized no longer apply, the provision is reversed by the corresponding amount and the resulting In assessing whether and how an uncertain tax treatment income recognized in the operating expense item(s) in which affects determination of the taxable profits/taxable losses, the original charge was recognized If the reversal amount is tax bases, unused loss carryforwards, unused tax credits material and so the effect not related to the period must be and tax rates, the KWS Group assumes that a tax authority classified as material, the reversal is carried as income from will examine the amounts it is authorized to examine and the reversal of provisions under other operating income not has full knowledge of all related information as part of such related to the period. examinations. The KWS Group operates in a large number of countries and future cost increases and using a market interest rate that is therefore subject to various tax jurisdictions. Determining adequately reflects the risk, provided the interest effect is the tax liabilities requires a number of assessments by material. Long-term provisions are discounted taking into account management. Management has conducted an extensive assessment of tax-related uncertainties; however, it is not possible to rule out a deviation from the results of that and the actual outcome of the uncertainties. Any deviations may impact the amount of tax liabilities or deferred taxes in the year the decision is made. 100 Annual Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2020/2021 | KWS Group3.17 Contingent liabilities Estimates are based on historical experience and other The contingent liabilities result from debt obligations where assumptions that are considered reasonable under given outflow of the resource is not probable or the level of the circumstances. They are continually reviewed but may vary obligation cannot be estimated with sufficient reliability from the actual values. or from obligations for loan amounts drawn down by third parties as of the balance sheet date. 3.19 Impact of the coronavirus pandemic The coronavirus pandemic impacted the global economy 3.18 Significant accounting judgments, estimates and in 2020/2021. In view of its influence on the KWS Group’s assumptions activities, the potential impacts on assets, financial position In preparing the consolidated financial statements, and earnings are continuously assessed. A more detailed management has to make certain assumptions and explanation of the effects can be found in the Group estimates that may substantially impact the presentation of Management Report. the Group’s financial position and/or results of operations. Essential estimates and assumptions that may affect The general macroeconomic conditions were taken into reporting in the various item categories of the financial consideration in the measurement policies applied at statements are described in the following: June 30, 2021. „ Calculation of the expected returns from customers at the Goodwill and intangible assets with an indefinite useful life balance sheet date (section 3.6 of the Notes) underwent an annual impairment test at June 30, 2021, while „ Determination of the useful life of the depreciable asset the changes in the market situation due to the coronavirus (sections 3.7 and 3.8 of the Notes) pandemic were reflected in the adopted budget and „ Determination of the fair value of intangible assets, medium-term planning. All in all, there were no impairments tangible assets and liabilities acquired as part of a for the cash-generating units and intangible assets with an business combination and determination of the service indefinite useful life. lives of the purchased intangible assets and tangible assets (section 4 of the Notes) The effect on other assets, such as trade receivables and „ Assessment by management of whether deferred tax inventories, was continually examined with regard to the assets can be realized, taking into account the time impact of coronavirus on the economic environment. The at which deferred tax liabilities are reversed and the KWS Group’s business model is seasonal in nature, which is anticipated future taxable income in the period under why it generates most of its net sales by the end of the third review (section 6.5 of the Notes) quarter and collects a large proportion of the receivables „ Assessment of uncertain tax positions in accordance with owed to it in the fourth quarter. As regards customers’ IFRIC 23 (section 6.5 of the Notes) solvency, no circumstances justifying impairment of the „ Definition of measurement assumptions and future receivables above and beyond the existing approach were results in connection with impairment tests, above all for identified. Potential industry and country specific risks capitalized goodwill and brands with an indefinite useful were, and will continue to be, considered in assessing the life (section 7.1 of the Notes) potential impact of the coronavirus pandemic on trade „ Determination of the need to recognize impairment losses receivables. on inventories (section 7.6 of the Notes) „ Definition of the parameters required for measuring pension provisions (section 7.12 of the Notes) „ Measurement of other provisions (section 7.12 of the Notes) „ Determination whether there is reasonable certainty as to whether extension or termination options as a part of a lease will be exercised or not (section 7.15 of the Notes) 3. Accounting Policies | Notes for the KWS Group | Annual Financial Statements 101 KWS Group | Annual Report 2020/2021 4. Consolidated Group and Changes in the Consolidated Group The number of companies consolidated in the KWS Group decreased from 88 at June 30, 2020, to 86 at June 30, 2021. Number of companies including KWS SAAT SE & Co. KGaA Germany Abroad Total Germany Abroad Total 06/30/2021 06/30/2020 Fully consolidated Equity method Joint operation Total 13 0 0 13 60 5 8 73 73 5 8 86 13 0 0 13 63 4 8 75 76 4 8 88 Fair Value of the identifiable assets and liabilities as at the date of acquisition Acquisition of KWS VEGETABLES ITALIA S.R.L. (formerly GENEPLANTA S.R.L.) As part of expansion of its business unit for vegetables, the KWS Group took over all of the shares in KWS VEGETABLES ITALIA S.R.L., Noceto/Parma, Italy, on in € thousand Assets Intangible assets March 9, 2021. The company, which was established in Property, plant and equipment 2011, focuses on breeding, producing and distributing Financial assets tomato seed. Its main sales regions include Italy and Deferred tax assets Mexico. The transferred consideration was €8,086 thousand and is composed of a cash component of €7,886 thousand and a purchase price tranche of €200 thousand, which is due in September 2022. The net assets acquired in return at the time of initial consolidation are composed as follows: Cash and cash equivalents Other assets Liabilities Long-term financial liabilities Short-term financial liabilities Trade payables Short-term provisions Other short-term liabilities Deferred tax liabilities Total identifiable net assets at fair value Goodwill arising on acquisition 03/09/2021 5,095 4,144 40 683 180 11 37 1,959 289 80 66 295 203 1,026 3,136 4,950 The acquired intangible assets identified as part of the purchase price allocation relate to customer relationships (€3,600 thousand) and technologies (€529 thousand). The amortization periods for the intangible assets are between four and ten years. 102 Annual Financial Statements | Notes for the KWS Group | 4. Consolidated Group and Changes in the Consolidated Group Annual Report 2020/2021 | KWS GroupThe goodwill from acquisition of the company totals The subsidiary KWS VEGETABLES MEXICO S.A. DE C.V. €4,950 thousand and mainly reflects access to markets (Mexico) was founded on September 2, 2020, for the and synergy potentials that will significantly speed up purpose of establishing future vegetable seed breeding. development of KWS’ own global tomato breeding In addition, the subsidiary BETASEED RUS LLC (Russia) programs. The goodwill is not tax-deductible. was established on November 23, 2020, for the purpose The deferred tax liabilities from acquisition of the company TECHNOLOGY CO., LTD (China) was established on relate exclusively to intangible assets and inventories and November 24, 2020. Its objective is to strengthen future have been taken into account at a tax rate of 24%. expansion of breeding business in China. of distributing sugarbeet seed. KWS SEED SCIENCE & KWS VEGETABLES ITALIA S.R.L. generates net sales and The KWS Group’s stake in the company IMPETUS income solely for the Vegetables Segment. The consolidated AGRICULTURE, INC. was diluted to less than 50% as a financial statements of the KWS Group contain net sales of result of a capital increase on December 29, 2020. The €305 thousand and income after taxes of €–154 thousand KWS Group’s stake at June 30, 2021, was 38.82%. As a from KWS VEGETABLES ITALIA S.R.L. Assuming that the result, the KWS Group lost the possibility of controlling the company had been acquired effective July 1, 2020, net sales company. After disposal of assets (€64 thousand), liabilities at the Vegetables Segment would have increased by 1.4% (€1 thousand) and minority interests (€116 thousand), re- and there would have been an insignificant change to the classification of currency gains (€123 thousand) recognized consolidated net income for the year. in the Other comprehensive income, and first-time at- Other changes in the consolidated group was a deconsolidation gain of €1,099 thousand. This was KWS SERVICES EAST GMBH was merged with KWS carried as other operating income. From now on, IMPETUS AUSTRIA SAAT GMBH on February 10, 2021, retroactively AGRICULTURE, INC. is included in the consolidated effective July 1, 2020. financial statements as an associated company using the equity measurement at fair value (€923 thousand), there On August 14, 2020, the KWS Group participated in equity method. establishing KWS FIDC and acquired 100% of the equity The companies POP VRIEND RESEARCH B.V., BELAMI B.V., interests in the company. The initial capital contribution POP VRIEND VEGETABLES SEEDS B.V., POP VRIEND was €7,720 thousand. The company is included as a fully PRODUCTION B.V. and POP VRIEND SEEDS USA B.V. consolidated subsidiary in the consolidated financial were merged with POP VRIEND SEEDS B.V. effective statements. The company uses most of its funds to December 31, 2020. CHURA B.V. was also merged with purchase receivables. POP VRIEND HOLDING B.V. (formerly BIRIKA B.V.), likewise effective December 31, 2020. 4. Consolidated Group and Changes in the Consolidated Group | Notes for the KWS Group | Annual Financial Statements 103 KWS Group | Annual Report 2020/20215. Segment Reporting for the KWS Group In accordance with its internal reporting and controlling The Executive Board is the main decision-making body and system, the KWS Group is primarily organized according to is responsible for allocating resources and assessing the the following business segments: earnings strength of the business segments. The segments „ Corn „ Sugarbeet „ Cereals „ Vegetables „ Corporate and regions are defined in compliance with the internal controlling and reporting systems (management approach). The accounting policies used to determine the information for the segments are adopted in line with those used for the KWS Group. The only exception relates to consolidation of the equity-accounted joint ventures and associated companies that are assigned to the Corn Segment, namely The core competency for the KWS Group’s entire product AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC., range, plant breeding, including the related biotechnology FARMDESK B.V. and KENFENG – KWS SEEDS CO., LTD. research, is essentially concentrated at the parent company In accordance with internal controlling practices, they are KWS SAAT SE & Co. KGaA in Einbeck. The breeding included proportionately as part of segment reporting. material for Sugarbeet and Corn, including the relevant information and expertise about how to use it, is owned The presentation of net sales, income, depreciation and by KWS SAAT SE & Co. KGaA, and for Cereals it is owned amortization, other noncash items, operating assets, by KWS LOCHOW GMBH. Product-related R&D costs are operating liabilities and capital expenditure on noncurrent carried directly in the product segments Corn, Sugarbeet assets by segment have been determined in accordance and Cereals. The activities of the Vegetables Segment with the internal operational controlling structure. The are aggregated in KWS VEGETABLES B.V. in Wageningen allocation of the above joint ventures and associated (the Netherlands) and its subsidiaries. Centrally controlled companies are consolidated proportionately (management corporate functions are grouped in the Corporate Segment. approach) on the same basis. In order to permit better The distribution and production of oil and field seed are comparability, they have been reconciled with the figures in reported in the Cereals and Corn Segments, in keeping with the consolidated financial statements. the legal entities currently involved. 104 Annual Financial Statements | Notes for the KWS Group | 5. Segment Reporting for the KWS Group Annual Report 2020/2021 | KWS GroupSales per segment in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segments acc. to management approach Elimination of equity-accounted financial assets Segments acc. to consolidated financial statements Segment sales Internal sales External sales 2020/2021 2019/2020 2020/2021 2019/2020 2020/2021 2019/2020 774,167 524,370 776,093 491,898 191,581 191,348 58,268 18,702 83,523 18,207 120 63 342 30 423 52 185 0 12,712 13,593 774,047 524,307 775,669 491,846 191,240 191,163 58,238 5,990 83,523 4,615 1,567,088 1,561,069 13,266 14,253 1,553,822 1,546,816 –243,590 –264,264 1,310,232 1,282,552 Segment sales contains both net sales from third parties Technology revenues from genetically modified properties (external sales) and net sales between the segments (“tech fees”) are paid as a per-unit royalty on the basis of (intersegment sales). The prices for intersegment sales are the number of units sold, due to their growing competitive determined on an arm’s-length basis. Uniform royalty rates importance. per segment for breeding genetics are used as the basis. Earnings, depreciation and amortization and other non-cash items per segment in € thousand Segment earnings Depreciation and amortization Other noncash items Corn Sugarbeet Cereals Vegetables Corporate Segments acc. to management approach Elimination of equity-accounted financial assets Segments acc. to consolidated financial statements Net financial income/expenses Earnings before taxes 2020/2021 2019/2020 2020/2021 2019/2020 2020/2021 2019/2020 71,292 174,748 21,290 –18,106 –91,976 67,072 170,062 26,357 –7,543 –104,626 34,852 18,064 9,435 23,633 21,707 36,143 16,897 9,917 23,083 17,489 –10,957 –36,047 –1,742 –1,701 –2,220 1,254 –6,169 –1,135 –14,722 –11,133 157,247 151,323 107,692 103,528 –31,342 –53,230 –20,214 –13,957 –13,864 –15,377 29,600 47,922 137,032 137,366 93,828 88,151 –1,742 –5,308 5,181 –7,842 142,214 129,524 The income statements of the consolidated companies income of each segment is reported as the segment result. are assigned to the segments by means of profit center The segment results are presented on a consolidated basis allocation. Operating income, an important internal and include all directly attributable income and expenses. parameter and an indicator of the earnings strength in the Items that are not directly attributable are allocated to KWS Group, is used as the segment result. The operating the segments on the basis of an appropriate formula. Depreciation and amortization charges allocated to the segments relate exclusively to intangible assets and property, plant, and equipment. 5. Segment Reporting for the KWS Group | Notes for the KWS Group | Annual Financial Statements 105 KWS Group | Annual Report 2020/2021 The other noncash items recognized in the income statement relate to noncash changes in the allowances on inventories and receivables, and in provisions. Operating assets and operating liabilities per segment in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segments acc. to management approach Elimination of equity-accounted financial assets Segments acc. to consolidated financial statements Others Operating assets Operating liabilities 2020/2021 2019/2020 2020/2021 2019/2020 787,432 389,606 138,734 437,148 213,708 759,323 371,019 137,992 454,552 207,211 1,966,627 1,930,096 –216,076 –232,576 1,750,551 1,697,521 626,192 537,946 151,699 149,741 82,461 41,036 7,969 112,724 395,888 –39,696 356,193 966,832 71,612 33,498 8,223 117,770 380,845 –58,066 322,779 918,190 KWS Group acc. to consolidated financial statements 2,376,743 2,235,467 1,323,025 1,240,969 The operating assets of the segments are composed The operating liabilities attributable to the segments include of intangible assets, property, plant, and equipment, the borrowings reported on the balance sheet in accordance inventories, biological assets and trade receivables that can with the management approach, less financial liabilities, be charged directly to the segments or indirectly allocated provisions for taxes and the portion of other liabilities that to them by means of an appropriate formula. cannot be charged directly to the segments or indirectly allocated to them by means of an appropriate formula. Investments in long-term assets by segment 1 in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segments acc. to management approach Elimination of equity-accounted financial assets Segments acc. to consolidated financial statements 1 Excluding Right-of-Use assets according to IFRS 16 2020/2021 2019/2020 28,601 26,464 7,264 1,273 22,971 86,573 –5,235 81,337 30,901 32,308 10,088 1,568 38,583 113,449 –5,415 108,034 The capital expenditure in the Corn Segment mainly in the Cereals Segment mainly relates to expansion and relates to expansion and modernization of production and modernization of production plants, in particular in Germany processing plants, such as in Romania, Brazil and the U.S. and France, and modernization of breeding stations. The The Sugarbeet Segment’s capital expenditure relates mainly capital expenditure in the Corporate Segment relates, to continued expansion of sugarbeet seed production at among other things, to expansion of a new laboratory the Einbeck location. Further investments were made in a building in Einbeck, but was well below the figure for the new production plant in Russia. The capital expenditure previous year. 106 Annual Financial Statements | Notes for the KWS Group | 5. Segment Reporting for the KWS Group Annual Report 2020/2021 | KWS GroupDisclosures by region assets comprise goodwill, other intangible assets, property, The disclosures on the regional composition of net sales plant, and equipment, and financial assets. and noncurrent operating assets have been made in accordance with the accounting policies to be applied to The external net sales by sales region are broken down on the consolidated financial statements of the KWS Group the basis of the country where the customer is based. No and thus without proportionate consolidation of the equity- individual customer accounted for more than 10% of total accounted financial investments. Noncurrent operating net sales in the current and the previous fiscal years. External sales by region in € thousand Germany Europe (excluding Germany) thereof in France North and South America thereof in Brazil thereof in the U.S. Rest of world KWS Group Long-term assets by region in € thousand Germany Europe (excluding Germany) thereof in France thereof in the Netherlands North and South America thereof in Brazil thereof in the U.S. Rest of world KWS Group 2020/2021 2019/2020 242,468 620,869 122,678 358,189 109,152 194,623 88,706 239,835 573,205 112,449 378,527 110,187 222,410 90,985 1,310,232 1,282,552 2020/2021 2019/2020 318,919 627,590 60,932 453,390 257,007 35,214 197,867 5,937 313,829 621,712 63,820 465,558 252,110 29,921 199,521 6,719 1,209,454 1,194,370 6. Notes to the Income Statement 6.1 Net sales and function costs Sugarbeet Segments. The total cost of goods sold was Net sales increased by 2.2% to €1,310,232 (1,282,552) €400,215 (357,408) thousand. thousand. Net sales are mainly generated from seed deliveries (€1,200,594 thousand; previous year: €1,174,301 The impairment losses on inventories and the decreases in thousand) and royalties (€81,025 thousand; previous year: the impairment loss, which are carried as a reduction in the €81,276 thousand). A breakdown by segments and regions cost of materials in the period, are as follows: is provided in the segment reporting in section 5 of the Notes. The cost of sales increased by 3.8% to €570,690 (549,899) thousand, or 43.6% (42.9%) of sales. The key factors in this development were higher cost of sales in the Corn and July 1 to June 30 in € thousand Impairment losses Decreases in impairment loss 2020/2021 2019/2020 6,883 4,597 8,666 5,441 6. Notes to the Income Statement | Notes for the KWS Group | Annual Financial Statements 107 KWS Group | Annual Report 2020/2021The impairment losses relate mainly to unsold seed. They amounted to €252,226 (236,102) thousand. That was 19.3% are based on, among other things, empirical values and (18.4%) of sales. Development costs for new varieties are expectations as to their substitution by new varieties. not recognized as an asset because evidence of future economic benefit can only be provided after the variety Selling expenses decreased by €4,603 thousand to has been officially certified. €244,218 (248,821) thousand, or 18.6% (19.4%) of sales. The fall is mainly attributable to exchange rate effects. General and administrative expenses decreased by Research & development is recognized as an expense lower costs as a result of the pandemic; they represent in the year it is incurred; in the year under review, this 9.7% of sales, after 10.1% the year before. €2,309 thousand to €127,142 (129,451) thousand due to 6.2 Other operating income July 1 to June 30 in € thousand Foreign exchange gains Performance-based public grants Income from the reversal of provisions Income from reversal of valuation allowance for trade receivables and recovery of written off receivables Income from sales of fixed assets Other income related to previous periods Unrealized gain on derivatives measured at fair value through profit or loss Income from loss compensation received Gain on net monetary position (hyperinflation) Miscellaneous other operating income Total 2020/2021 2019/2020 33,197 9,910 5,607 3,505 2,940 1,405 239 14 0 14,629 71,446 42,355 8,200 1,560 6,591 846 2,742 1,289 400 651 16,615 81,250 The other operating income mainly comprises foreign reversal of provisions includes the partial reversal of a exchange gains, government grants, and income from the provision totaling €4,000 thousand to a current level of reversal of allowances on receivables. The performance- €1,000 thousand due to a reassessment of possible license based government grants mainly relate to breeding price payments in connection with the development of allowances and farm payments. The income from the hybrid potatoes. 6.3 Other operating expenses July 1 to June 30 in € thousand Foreign exchange losses Valuation allowance on receivables Loss on net monetary position (hyperinflation) Unrealized loss on derivatives measured at fair value through profit or loss Expenses relating to previous periods Other expenses Total The other operating expenses mainly comprise foreign exchange losses and valuation allowances on receivables. 108 Annual Financial Statements | Notes for the KWS Group | 6. Notes to the Income Statement 2020/2021 2019/2020 35,799 6,754 541 148 2 7,127 50,369 42,310 11,870 0 2,810 38 5,135 62,163 Annual Report 2020/2021 | KWS Group 6.4 Net financial income/expenses July 1 to June 30 in € thousand Interest expenses Interest income Interest effects from pension provisions Interest expenses for lease liabilities Interest expense for other long-term provisions Income from other financial assets Interest result Result from equity-accounted financial assets Net income from equity investments Net financial income/expenses 2020/2021 2019/2020 16,151 6,132 1,273 876 38 14 21,514 5,462 1,294 1,184 105 20 –12,193 –18,615 17,374 17,374 5,181 10,773 10,773 –7,842 Net financial income/expenses improved, mainly due Net financial income/expenses from the equity-accounted to better financing terms in Germany and exchange joint ventures improved sharply year on year due to higher rate effects in Brazil. The interest effects from pension earnings by AGRELIANT GENETICS LLC. provisions comprise interest expenses (compounding) and the planned income. 6.5 Taxes Income tax expenses in € thousand Actual income taxes thereof from previous years Deferred taxes Income taxes 2020/2021 2019/2020 36,174 6,624 –4,550 31,624 45,101 6,102 –10,797 34,304 The KWS Group pays tax in Germany at a rate of 29.8% The profits generated by group companies outside Germany (29.8%). Corporate income tax of 15.0% (15.0%) and are taxed at the rates applicable in the country in which they solidarity tax of 5.5% (5.5%) are applied uniformly to are based. The tax rates in foreign countries vary between distributed and retained profits. In addition, trade tax is 5.0% (6.0%) and 34.4% (34.4%). payable on profits generated in Germany. Trade income tax is applied at a weighted average rate of 14.0% (14.0%), resulting in a total tax rate of 29.8% (29.8%). 6. Notes to the Income Statement | Notes for the KWS Group | Annual Financial Statements 109 KWS Group | Annual Report 2020/2021 The deferred taxes that are recognized relate to the following balance sheet items and tax loss carryforwards: Deferred taxes in € thousand At 06/30/2020 Recog- nized in profit or loss Other Compre- hensive Income Currency Recog- nized in other compre- hensive income –352 85 –268 –292 69 –222 157 –1,570 –43 –37 372 374 10 119 –1,189 –1,196 –33 –2,091 499 –1,592 –1,808 –1,561 Deferred tax assets Deferred tax liabilities 438 826 0 2,242 11,602 19,143 47,259 23,782 22,030 78,452 19,254 4 3,211 4,978 20,768 6,939 0 2,265 Net value –78,014 –18,428 –4 –969 6,624 –1,625 40,320 23,782 19,765 103,540 135,871 10,656 0 –43,606 –43,606 –32,331 10,656 0 11,722 –106 4 1,247 959 372 –1,270 –2,736 9,655 –5,105 0 70,590 92,264 –21,675 4,550 –2,091 499 –1,592 Intangible assets Property, plant and equipment Biological assets Financial assets Inventories Current assets Noncurrent liabilities of which pension provisions Current liabilities Deferred taxes recognized (gross) Tax loss carryforward Setting off Deferred taxes recognized (net) in € thousand At 06/30/2021 Deferred tax assets Deferred tax liabilities Intangible assets Property, plant and equipment Biological assets Financial assets Inventories Current assets Noncurrent liabilities of which pension provisions Current liabilities Deferred taxes recognized (gross) Tax loss carryforward Setting off Deferred taxes recognized (net) 298 276 0 5,062 11,757 10,598 43,306 21,316 20,738 92,034 5,552 –49,943 47,642 66,858 18,809 0 5,005 4,174 11,731 5,983 0 3,741 116,302 0 –49,943 66,359 Net value –66,559 –18,534 0 56 7,583 –1,133 37,323 21,316 16,996 –24,268 5,552 0 –18,717 110 Annual Financial Statements | Notes for the KWS Group | 6. Notes to the Income Statement Annual Report 2020/2021 | KWS Group Due to the use of tax loss carryforwards and tax credits on companies, and interests in joint arrangements, where the which no deferred taxes were recognized in the past, the KWS Group is able to control the timing of the reversal of actual tax expense fell by €113 (332) thousand. the differences and it is probable that the reversal will not occur in the foreseeable future. There is a deferred tax expense of €2,304 (3,413) thousand from the allowance for deferred taxes on tax loss In the year under review, there were surpluses of carryforwards and temporary differences in the year under deferred tax assets from temporary differences and loss review. The first-time recognition of deferred taxes and carryforwards totaling €17,052 (46,198) thousand at group use of deferred taxes on loss carryforwards that had not companies that made losses in the past period or the previously been recognized result in deferred tax income of previous period. These were considered recoverable, since €5 (602) thousand. it is assumed that the companies in question will post taxable profits in the future. The fact is taken into account No deferred taxes were formed for tax loss carryforwards here that the KWS Group may realize income with a delay totaling €14,337 (5,561) thousand that have not yet been due to the long-term nature of research & development utilized. Of these, €72 (923) thousand must be utilized within spending. a period of five years. Loss carryforwards totaling €14,265 (4,638) thousand can be utilized without any time limit. The reconciliation of the expected income tax expense to No deferred taxes were recognized on temporary the consolidated income before taxes and the nominal tax differences totaling €25,290 (41,806) thousand associated rate for the Group of 29.8% (29.8%), taking into account the with investments in subsidiaries, branches and associated following effects: the reported income tax expense is derived on the basis of Reconciliation of income taxes in € thousand Earnings before income taxes Expected income tax expense1 Reconciliation with the reported income tax expense Differences from the Group’s tax rate Effects of changes in the tax rate Tax effects from: Expenses not deductible for tax purposes and other additions Tax-free income Other permanent deviations Reassessment of the recognition and measurement of deferred tax assets Tax credits Taxes relating to previous years Other effects Reported income tax expense Effective tax rate 1 Tax rate in Germany: 29.8% (29.8%) 2020/2021 2019/2020 142,214 42,422 129,524 38,637 –8,313 –8,216 6,451 –9,430 –353 2,186 –505 8,093 –710 31,624 22.2% –6,613 –73 4,203 –8,391 –435 –162 –568 7,757 –51 34,304 26.5% 6. Notes to the Income Statement | Notes for the KWS Group | Annual Financial Statements 111 KWS Group | Annual Report 2020/2021Income taxes relating to other periods include in particular Employees by region effects from field tax audits that have been completed and future field tax audits at the KWS Group. Effects from changes in tax rates relate in particular to the Dutch companies. The future realization of recognized deferred taxes for the Netherlands takes into account the influence of research & development activities on the effective tax. Excluding the changes to tax rates, the effective tax rate in the year under review would have been 28.0%. Employees Germany Europe (excluding Germany) North and South America Rest of world Total Trainees and interns Germany 2020/2021 2019/2020 1,978 1,475 913 183 4,549 1,857 1,417 879 164 4,317 109 97 There is no definitive tax assessment in respect of several With our joint ventures and associated companies years at the Group. The KWS Group believes it has consolidated proportionately, the number of employees was made adequate provisions for these years where the tax 5,004 (4,780). assessment is not concluded. Future legislation or changes in the opinions of the fiscal authorities mean that it is 6.7 Share-based payment not possible to rule out that there may be tax refunds or payments of tax arrears for past years. Employee Stock Purchase Plan Other taxes, primarily real estate tax, are allocated to the Purchase Plan. All employees who have been with the The KWS Group has established an Employee Stock relevant functions. company for at least one year without interruption and have an employment relationship that has not been terminated 6.6 Personnel costs/employees at a KWS Group company that participates in the program July 1 to June 30 in € thousand Wages and salaries Social security contributions, expenses for pension plans and benefits Total are eligible to take part. That also includes employees who are on maternity leave or parental leave or who are in 2020/2021 2019/2020 semi-retirement. 259,697 246,215 66,600 63,858 326,297 310,073 Each employee can acquire up to 2,000 shares. A bonus of 20% is deducted from the purchase price, which depends on the price applicable on the key date. The shares are subject to a lock-up period of four years beginning when they are posted to the employee’s securities account. The right to a dividend, if declared by KWS SAAT SE & Co. Personnel costs went up by 5.2%. The number of KGaA, exists during the lock-up period. Holders can also employees increased from 4,317 to 4,549, or by 5.4%. Of exercise their right to participate in the Annual Shareholders’ the 4,549 (4,317) employees, 4,307 (4,052) are permanent Meeting during the lock-up period. They can dispose freely employees and 242 (265) are temporary employees. The of the shares after the lock-up period. number of trainees and interns is recorded separately and not included in the headcount (the previous year’s figures In the year under review, 76,120 (52,315) shares were have been adjusted accordingly). There were 109 (97) repurchased for the Employee Stock Purchase Plan at trainees and interns at KWS at June 30, 2021. a total price of €5,558 (2,957) thousand and transferred directly to the employees. The total cost for issuing shares at a reduced price was €1,521 thousand in the past fiscal year (previous year: €555 thousand). 112 Annual Financial Statements | Notes for the KWS Group | 6. Notes to the Income Statement Annual Report 2020/2021 | KWS GroupLong-term incentive (LTI) 6.8 Net income for the year The stock-based compensation plans awarded at the The KWS Group’s net income for the year was KWS Group are recognized in accordance with IFRS 2 €110,590 (95,220) thousand on operating income of “Share-based Payment.” The incentive program, which was €137,032 (137,366) thousand and net financial income/ launched in fiscal 2009/2010, involves stock-based payment expenses of €5,181 (–7,842) thousand and after taxes totaling transactions with cash compensation, which are measured €31,624 (34,305) thousand. The return on sales (net income at fair value at every balance sheet date. Members of for the year relative to net sales) was 8.4% (7.4%), well up the Executive Board are obligated to acquire shares in over the previous year. Net income for the year after minority KWS SAAT SE & Co. KGaA every year in a freely selectable interest was €109,450 (95,331) thousand. Diluted/undiluted amount ranging between 35% and 50% of the gross earnings per share are calculated by dividing the net income performance-related bonus. Along with that, members for the year (€110,590 thousand) by 33,000,000 shares and of the first management level below the Executive Board was €3.35 (2.89). likewise take part in an LTI program. As part of this program, they are obligated to invest in shares in KWS SAAT SE & Co. KGaA every year in a freely selectable amount ranging between 10% and 40% of the gross performance-related bonus. The shares acquired under the LTI program may be sold at the earliest after a regular holding period of five years beginning at the time they are acquired (end of the quarter in which the shares were acquired). In addition to the shares being unlocked, the entitled persons are paid a long-term incentive (LTI) in the form of cash compensation after the holding period for the tranche in question. Its level is calculated on the basis of KWS SAAT SE & Co. KGaA’s share performance and on the KWS Group’s return on sales (ROS), measured as the ratio of operating income to net sales, over the holding period. For persons with contracts as of July 1, 2014, the cash compensation for members of the Executive Board is a maximum of one-and-half times (for the Chief Executive Officer two times), and for members of the first management level below the Executive Board a maximum of two times their own investment (LTI cap). The costs of this compensation are recognized in the income statement over the period and, taking the cash compensation in January 2021 into account, were €737 (1,163) thousand in the period under review. The provision for it at June 30, 2021, was €2,920 (2,560) thousand. The LTI fair values are calculated by an external expert. 6. Notes to the Income Statement | Notes for the KWS Group | Annual Financial Statements 113 KWS Group | Annual Report 2020/20217. Notes to the Balance Sheet 7.1 Intangible assets Reconciliation of carrying amount of intangible assets in € thousand Gross book values: 07/01/2020 Currency translation Change in consolidation scope Additions Disposals Transfers At 06/30/2021 Amortization and impairment: 07/01/2020 Currency translation Additions Impairment Disposals Transfers Gross book values: 06/30/2021 Net book values: 06/30/2021 Net book values: 06/30/2020 in € thousand Gross book values: 07/01/2019 Currency translation Change in consolidation scope Additions Disposals Transfers At 06/30/2020 Amortization and impairment: 07/01/2019 Currency translation Additions Impairment Disposals Transfers Gross book values: 06/30/2020 Net book values: 06/30/2020 Net book values: 06/30/2019 114 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Patents, industrial property rights and software 460,327 178 4,144 12,417 3,200 3,608 477,474 91,966 232 33,092 2,223 3,046 –694 123,773 353,701 368,361 Patents, industrial property rights and software 139,200 –4,594 320,277 14,080 8,683 47 Goodwill 117,289 403 4,950 0 0 0 122,642 –1 0 0 0 0 0 –1 122,643 117,290 Goodwill 26,190 –4,027 95,126 0 0 0 Intangible Assets 577,616 581 9,094 12,417 3,200 3,608 600,116 91,965 232 33,092 2,223 3,046 –694 123,772 476,344 485,651 Intangible Assets 165,390 –8,620 415,403 14,080 8,683 47 460,327 117,289 577,616 73,315 –4,306 31,626 0 8,671 2 91,966 368,361 65,885 0 –1 0 0 0 0 –1 117,290 26,190 73,315 –4,307 31,626 0 8,671 2 91,965 485,651 92,075 Annual Report 2020/2021 | KWS Group Intangible assets include purchased varieties, rights The impairment test uses the expected future cash flows to varieties and distribution rights, brands, customer on which the medium-term plans of the companies, which relationships, software licenses for electronic data are grouped in segments, are based; these plans, which processing, and goodwill. The current additions of €12,417 cover a period of four years, have been approved by the (14,080) thousand related to software licenses and patents, Executive Board. They are based on historical patterns and as well as implementation of a new ERP system. The expectations about future market development. impairments for intangible assets totaling €2,223 thousand relate to software implementation projects for which no For all of the KWS Group’s sales markets, the key longer-term use is intended anymore. The impairment is assumptions on which corporate planning is based include included in the administrative expenses of the Corporate assumptions about price trends for seed, in addition to Segment. Amortization of intangible assets amounted to the development of market shares and the regulatory €33,092 (31,626) thousand. framework. Average net sales growth in the mid-single digit percentage range has been assumed for the KWS Group’s The POP VRIEND brand is regarded as having an indefinite detailed planning horizon. Company-internal projections useful life, since the KWS Group intends to keep on using take the assumptions of industry-specific market analyses, it and the period of time in which the brand yields an company-related growth perspectives and appropriate cost economic benefit can therefore not be determined. The efficiencies into account. carrying amount is €20,752 thousand, as in the previous year. The recoverable amount for the POP VRIEND brand The discount rate at the KWS Group has been derived as is calculated separately using the license price analogy the weighted average cost of capital (WACC). method, allowing for the POP VRIEND Group’s sales planning, for which average annual net sales growth in the mid-single digit percentage range has been assumed, and applying a WACC before taxes of 5.24% (5.22%). A growth rate of 1.5% (1.5%) has been assumed for extrapolation beyond the detailed planning horizon. Sensitivity analyses were also carried out, in which a 10% reduction in future net Sugarbeet sales, a 10% increase in the cost of capital, and a reduction Cereals in the long-term growth rate to 1% were assumed. The Vegetables sensitivity analyses did not reveal the need to recognize an impairment loss. WACC before taxes Business Unit in % 2020/2021 2019/2020 Corn America Corn Europe/Asia 8.63 7.08 7.02 6.85 7.29 6.10 6.29 6.28 6.30 7.72 In order to meet the requirements of IFRS 3 in combination Corn America is mainly attributable to the increase in the with IAS 36 and to determine any impairment of goodwill, underlying country risk premium. A growth rate of 1.5% cash-generating units have been defined in line with internal (1.5%) has been assumed here beyond the detailed planning budgeting and reporting processes. In the KWS Group, horizon in order to allow for extrapolation in line with the The change in the WACC before taxes of the Business Unit these are the Business Units. To test for impairment, the expected inflation rate. carrying amount of each Business Unit is determined by allocating the assets and liabilities, including attributable The impairment tests conducted at the end of fiscal year goodwill and intangible assets. An impairment loss is 2020/2021 confirmed that the existing goodwill is not recognized if the recoverable amount of a Business Unit is impaired. less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use of a cash-generating unit. The recoverable amount in fiscal 2020/2021 was determined on the basis of the value in use of the respective cash-generating unit excluding the Business Unit Vegetables. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 115 KWS Group | Annual Report 2020/2021Goodwill in € thousand Vegetables Corn America Cereals Others Total 06/30/2021 06/30/2020 100,076 16,185 3,989 2,392 95,126 15,966 3,866 2,333 122,643 117,290 Sensitivity analyses were also carried out for all cash- generating units to which goodwill is allocated. As part of that, it was assumed that the future cash flows would fall by 10%, the weighted average cost of capital would increase by 10% and the long-term growth rate would fall by 1 percentage point. The sensitivity analyses did not reveal the need to recognize an impairment loss for any cash-generating unit. 7.2 Property, plant, and equipment Reconciliation of carrying amount of property, plant and equipment in € thousand Technical equip- ment and machinery Operating and office equipment Prepayments and assets under construction Property, plant and equipment Land and buildings Gross book values: 07/01/2020 389,360 299,341 130,179 36,889 Currency translation Adjustment for hyperinflation IAS 29 Change in consolidation scope Additions Disposals Transfers At 06/30/2021 Depreciation and impairment: 07/01/2020 Currency translation Adjustment for hyperinflation IAS 29 Additions Impairment Disposals Transfers Gross book values: 06/30/2021 Net book values: 06/30/2021 Net book values: 06/30/2020 –6,103 3,028 10 13,768 1,303 21,444 420,204 105,120 –999 637 12,801 0 1,011 9,438 125,987 294,218 284,240 –5,426 1,964 20 11,520 6,312 6,431 307,538 174,559 –2,790 730 21,481 0 5,616 145 188,509 119,029 124,782 –1,994 1,171 11 10,386 2,593 –5,400 131,760 81,912 –830 593 11,701 0 2,302 –2,986 88,089 43,671 48,267 –214 –260 0 33,246 131 –20,181 49,349 0 0 0 0 0 0 0 0 49,349 36,889 855,769 –13,738 5,904 40 68,920 10,340 2,295 908,851 361,591 –4,619 1,961 45,983 0 8,929 6,597 402,585 506,266 494,178 116 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group in € thousand Gross book values: 07/01/2019 Currency translation Adjustment for hyperinflation IAS 29 Change in consolidation scope Additions Disposals Transfers At 06/30/2020 Depreciation and impairment: 07/01/2019 Currency translation Adjustment for hyperinflation IAS 29 Additions Impairment Disposals Transfers Gross book values: 06/30/2020 Net book values: 06/30/2020 Net book values: 06/30/2019 Land and buildings 343,058 –5,550 3,174 8,442 19,893 1,289 21,633 389,360 102,746 –1,296 446 11,589 0 8,468 104 105,120 284,240 240,312 Technical equip- ment and machinery Operating and office equipment Prepayments and assets under construction Property, plant and equipment 253,941 –5,969 1,281 2,136 25,594 4,429 26,787 299,341 160,950 –3,429 541 20,216 0 4,060 341 174,559 124,782 92,991 124,332 –4,064 739 172 12,181 4,892 1,710 130,179 75,439 –1,790 382 12,714 0 4,387 –447 81,912 48,267 48,893 62,318 –3,120 –806 0 36,267 7,594 –50,176 36,889 0 0 0 0 0 0 0 0 36,889 62,318 783,649 –18,703 4,389 10,750 93,934 18,204 –47 855,769 339,135 –6,516 1,370 44,519 0 16,915 –2 361,591 494,178 444,514 The main focus of the KWS Group’s capital spending in the 7.3 Equity-accounted financial assets year under review remained on increasing production and research & development capacities. There was an expansion Equity-accounted joint ventures of the plants for sugarbeet seed production in Germany The joint ventures AGRELIANT GENETICS LLC. and and Russia, as well as investment in the completion of AGRELIANT GENETICS INC., which the KWS Group the research building in Einbeck and of the greenhouse in operates together with its joint venture partner Vilmorin, Lochow, as well as in breeding stations. and drying and are recognized at equity. They are both classified together production capacities for corn seed were increased further as significant joint ventures. in South America, in particular in Brazil. The joint ventures AGRELIANT GENETICS LLC. and AGRELIANT GENETICS INC. are closely affiliated operating units. The main business activity of the two joint ventures is the production and sale of corn and soybean seed in North America. The following disclosures relate to the two joint ventures, which KWS runs with its joint venture partner Vilmorin and an identical management team. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 117 KWS Group | Annual Report 2020/2021 Disclosures on equity-accounted joint ventures (with the partner Vilmorin) Disclosures on significant associated companies accounted for using the equity method in € thousand 06/30/2021 06/30/2020 in € thousand 06/30/2021 06/30/2020 Stake in the joint ventures 50% 50% Current assets 275,652 286,724 thereof cash and cash equivalents Noncurrent assets Current liabilities thereof current financial liabilities (excluding trade payables and other liabilities and provisions) Noncurrent liabilities Net assets (100%) Group share of net assets (50%) Goodwill Carrying amount for the stake in the joint ventures Net sales Depreciation and amortization Net income for the year Comprehensive income (100%) Comprehensive income (50%) Group share of comprehensive income Dividend payment 32,584 213,537 194,684 34,605 241,357 247,475 105,527 123,398 2,646 291,859 145,929 8,802 154,731 466,908 26,207 24,070 21,062 10,531 10,531 5,837 3,971 276,634 138,317 8,802 147,119 510,621 28,707 12,664 16,147 8,073 8,073 5,936 Stake in the associated company Current assets thereof cash and cash equivalents Noncurrent assets Current liabilities Noncurrent liabilities Net assets (100%) Group share of net assets (49%) Carrying amount for the stake in the associated company Net sales Depreciation and amortization Net income for the year Comprehensive income (100%) Comprehensive income (49%) Group share of comprehensive income Dividend payment 49% 28,657 11,493 15,864 8,087 124 36,309 17,792 17,792 42,770 1,566 11,333 10,125 4,961 4,961 5,491 49% 22,000 11,410 16,471 8,951 260 29,259 14,337 14,337 40,524 1,629 9,081 9,637 4,722 4,722 4,980 In addition, in the year under review, IMPETUS AGRICULTURE, INC. was included as an insignificant associated company in the KWS Group’s consolidated In addition, FARMDESK B.V. was included as an insignificant financial statements using the equity method. joint venture in the KWS Group’s consolidated financial statements using the equity method. 7.4 Proportionately consolidated joint operations Equity-accounted associated companies the joint operations are included proportionately (at 50%) In the year under review, the Chinese joint venture in the consolidated financial statements. The main activity KENFENG – KWS SEED CO., LTD. was classified as a of the proportionately consolidated GENECTIVE S.A., significant associated company and is included in the including its subsidiaries, is development of its own traits KWS Group’s consolidated financial statements using for genetically improving crops. The proportionately The assets and liabilities and revenue and expenses from the equity method. consolidated joint operation AARDEVO B.V., including its subsidiaries, specializes in developing potato seed. 118 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group7.5 Financial assets 7.7 Current receivables and other assets This item mainly comprises the investments in the capital investment fund MLS Capital Fund II (financing of Current receivables and other assets projects/access to biotechnology developments) totaling €8,777 (5,450) thousand, which are measured at fair value through other comprehensive income due to the long-term nature of the investment. The remainder relates to a large number of financial investments that – taken individually – are insignificant, such as other interest-bearing loans, shares in cooperatives, and other securities. in € thousand Trade receivables Current tax assets Other current financial assets Other current assets Total 06/30/2021 06/30/2020 449,501 432,569 91,546 40,592 34,488 83,409 63,391 29,741 616,127 609,109 7.6 Inventories and biological assets The trade receivables include €12,999 (10,331) thousand in receivables from joint ventures and joint operations. Inventories and biological assets in € thousand Raw materials and consumables Work in progress Immature biological assets Finished goods Right of return Total 06/30/2021 06/30/2020 This item also includes trade receivables totaling 43,721 114,042 5,546 32,990 70,843 15,869 106,118 110,219 2,725 2,553 272,152 232,475 €14,554 thousand that were transferred to third parties under factoring agreements. Transferred receivables were not derecognized, since all the risks remain with the KWS Group. In this connection, a liability toward the factoring company was recognized to the same amount and carried under short- term financial liabilities. All the receivables sold to factoring companies are due in less than one year, which means that the fair value of the receivables and related liabilities equals the carrying amount in each case. Inventories and biological assets increased by €39,677 thousand, or 17.1%, a figure that includes The need to recognize impairment losses at June 30, 2021, cumulative impairment losses on the net realizable value was analyzed using the provision matrix on the basis of totaling €49,280 (51,559) thousand. Immature biological the expected losses. To enable that, the receivables were assets relate to living plants in the process of growing grouped by geographical region and the length of time they (before harvest) at the farms. The field inventories of the were overdue and multiplied by appropriate default rates. previous year have been harvested in full and the fields have Receivables that are overdue by more than 360 days and been newly tilled in the year under review. Public subsidies are no longer subject to an enforcement measure have been of €1,744 (€1,872) thousand, for which all the requirements classified as uncollectible and written off in full. were met at the balance sheet date, were granted for agricultural activity in the fiscal year. Future public subsidies depend on the further development of European agricultural policy. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 119 KWS Group | Annual Report 2020/2021The maximum exposure to the risk of default from trade receivables is the carrying amount reported on the balance sheet and is as follows at June 30, 2021: Credit risk exposure on trade receivables in € thousand 06/30/2021 Expected credit loss rate Total gross amount at default Expected credit loss 06/30/2020 Expected credit loss rate Total gross amount at default Expected credit loss not overdue 1–180 days 181–360 days > 360 days Total Overdue in days 0.97% 397,702 –3,839 0.83% 391,315 –3,258 3.86% 54,204 –2,094 5.15% 42,066 –2,168 53.33% 7,260 –3,872 44.86% 6,518 –2,924 99.35% 21,316 –21,177 96.15% 26,517 –25,497 480,482 –30,982 466,417 –33,848 The credit risks were reflected by the following allowances 7.8 Cash and cash equivalents at June 30, 2021, and in the previous year: This item comprises cash and cash equivalents in the Change in allowances on receivables in € thousand 07/01 Changes in consolidation scope and exchange rates Addition Disposal Reversal 06/30 2020/2021 2019/2020 33,848 32,909 993 5,947 6,328 3,479 –3,900 12,193 1,101 6,252 30,981 33,848 form of cash on hand, checks, and immediately available balances at banks, as well as securities. Cash and cash equivalents at June 30, 2021, were €177,169 (91,472) thousand. Securities amounting to €45,577 (€28,266) thousand relate to money market accounts of our U.S. subsidiaries. The change in cash and cash equivalents compared to the previous year is explained in the cash flow statement. At June 30, 2021, the KWS Group had firmly promised loans it had not used totaling €250,000 (200,000) thousand. 120 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group 7.9 Equity for equity-accounted financial assets, the reserve for the The fully paid-up capital of KWS is still €99,000 thousand. changes in value of the cash flow hedges of the equity- The no-par bearer shares are certificated by a global accounted joint venture, and the reserve for revaluation of certificate for 33,000,000 shares. The company does not at equity instruments (with changes in value in the other hold any shares of its own. KWS has Authorized Capital of comprehensive income) are also carried here. up to €9,900 thousand at the balance sheet date. The capital reserves essentially comprise the premium of foreign business operations into the currency used obtained as part of share issues. by the group in reporting (euro) are carried in the item Differences from translation of the functional currency Reserve from currency translation differences on foreign The other reserves and net retained profit essentially operations. The item Revaluation of net liabilities/assets comprise the net income generated in the past by from defined benefit plans includes the actuarial gains the companies included in the consolidated financial and losses on defined benefit plans. Differences from statements, minus dividends paid to shareholders, and the translation of the functional currency of equity-accounted net retained profit. The reserve for currency translation, foreign business units into the currency used by the group the reserve for remeasurement gains and losses on in reporting (euro) are carried in the reserve for currency defined benefit plans, the reserve for currency translation translation for equity-accounted financial assets. Other comprehensive income in € thousand Items that may have to be subsequently reclassified as profit or loss Changes in reserve for currency translation differences on foreign operations Changes on reserve for currency translation differences on at equity accounted financial assets Items not reclassified as profit or loss Net gain/(loss) on equity instruments designated at fair value through other comprehensive income Revaluation of net liabilities/assets from defined benefit plans Other comprehensive income 2020/2021 2019/2020 Before taxes Tax effect After taxes Before taxes Tax effect After taxes –39,905 –38,993 –912 8,813 0 0 0 –2,074 –39,905 –38,127 –38,993 –39,596 –912 6,738 1,469 –5,630 0 0 0 825 –38,127 –39,596 1,469 –3,835 3,300 –635 2,666 1,891 –354 1,313 5,513 –31,092 –1,439 –2,074 4,073 –7,521 –33,167 –43,757 1,179 825 –5,148 –41,962 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 121 KWS Group | Annual Report 2020/2021The objective of the KWS Group’s capital management to optimize the average cost of capital. Another goal is a activities is to pursue the interests of shareholders and balanced mix of equity and debt capital. Consolidated income employees in accordance with the corporate strategy and (after taxes and minority interests) is €109,450 (95,331) earn a reasonable return on investment. One main goal is thousand. However, there was a total dividend payout of to retain the trust of investors, lenders and the market so as €23,100 (22,110) thousand in December 2020. This ensures the to strengthen the company’s future business development. adequate financing of future operating business expansion in The KWS Group’s capital management activities intend the long term. Capital structure in € thousand Equity Long-term financial borrowings Other noncurrent liabilities Short-term borrowings Other noncurrent liabilities Total capital Equity ratio 06/30/2021 06/30/2020 1,053,718 601,080 237,929 97,225 386,791 994,498 521,744 273,721 93,663 351,841 2,376,743 2,235,467 44.3% 44.5% The focus in selecting financial instruments is on In addition, borrower’s note loans totaling €53,000 thousand financing with matching maturities, which is achieved by were repaid in the course of the fiscal year. Consequently, controlling the maturities. Long-term financial borrowings the remaining liabilities from borrower’s note loans, using increased by €64,999 thousand (previous year: increase of the effective interest method, were €346,506 thousand at €339,474 thousand). June 30, 2021, and have remaining maturities through 2029. 7.10 Minority interests There are no minority interests in the KWS Group at Noncurrent liabilities June 30, 2021. 7.11 Noncurrent liabilities Noncurrent liabilities increased by €29,207 (431,087) thousand. KWS utilized a loan of €150,000 thousand from the European Investment Bank (EIB) in the current fiscal year. The financing provided by the EIB is specifically intended for research & development activities in the EU and has a term of twelve years. in € thousand 06/30/2021 06/30/2020 Long-term provisions Long-term borrowings Trade payables 132,500 601,080 242 140,074 521,744 264 Deferred tax liabilities 66,359 92,265 Other noncurrent financial liabilities Lease liabilities Other noncurrent liabilities Total 62 37,465 1,301 207 39,896 1,014 839,009 795,465 122 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group Long-term provisions in € thousand 06/30/ 2020 Changes in the consoli- da ted group, currency Interest ex penses from com- pounding Adjust- ment not affecting profit or loss Addition Con- sumption Reclassi- fication Reversal 06/30/ 2021 Pension provisions Other provisions Total 129,098 –1,056 1,274 11,706 –5,513 13,059 0 62 122,388 10,976 140,075 –80 38 3,326 0 1,819 –1,136 1,311 15,032 –5,513 14,878 –2,328 –2,328 0 62 10,111 132,500 The other provisions mainly comprise provisions by 0.89% compared with 0.85% the year before, 2.95% in the the German companies for semi-retirement and loyalty U.S. compared with 2.85% the year before, and between bonuses. 0.25% and 1.65% (0.30% and 1.40%) in the rest of the The pension provisions are based on defined benefit world. obligations, determined by years of service and pensionable The following mortality tables were used at June 30, 2021: compensation. They are measured using the accrued benefit method under IAS 19, on the basis of assumptions „ In Germany: The 2018 G mortality table of Klaus Heubeck about future development. The assumptions in detail are „ Abroad: Mainly Pri-2012 Private Retirement Plans that wages and salaries in Germany will increase by 3.00% Mortality Table Projection Scale MP-2020 and INSEE (3.00%) annually, in the U.S. by 3.50% (3.50%) annually and TD/TV 15-17. in the rest of the world by 2.00% to 2.10% (2.00% to 2.40%) annually. An annual increase in pensions of 2.00% (2.00%) A retirement age of 65 years is imputed for Germany, a is assumed in Germany. The discount rate in Germany was retirement age of 65 years is imputed for the U.S., and a retirement age of 66 years is imputed for France. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 123 KWS Group | Annual Report 2020/2021 Nature and scope of the pension benefits The pension plans are mainly subject to the following risks: In Germany The following benefits are provided under a company Investment and return agreement relating to the company retirement pension The present value of the defined benefit obligation from the program: pension plan is calculated using a discount rate defined on the basis of the returns on high-quality fixed-income „ An old-age pension at the age of 65 corporate bonds. If the income from the plan assets is „ An early retirement pension before the age of 65, coupled below this rate of interest, the result is a shortfall in the with benefits from the early retirement pension from the plan. The corporate bonds and share funds are chosen to statutory pension insurance program ensure risk diversification and managed by an external fund „ An invalidity pension for persons who suffer from manager. occupational disability or incapacity to work as defined by the statutory pension insurance program Change in interest rates „ A widow’s or widower’s pension The fall in the returns on corporate bonds and thus the For benefit obligations backed by a guarantee which is only partly compensated for by a change in the discount rate will result in an increase in the obligations, by an insurance company toward three former value of the plan assets. members of the Executive Board, the plan assets of €8,776 (10,361) thousand correspond to the present value Life expectancy of the obligation. In accordance with IAS 19, the pension The present value of the defined benefit obligation from the commitments are netted off against the corresponding plan is calculated on the basis of the best-possible estimate plan assets. Abroad using mortality tables. An increase in the life expectancy of the entitled employees results in an increase in the plan liabilities. The defined benefit obligations abroad mainly relate to pension commitments in the U.S. Share funds and bonds Salary and pension trends were mainly invested as plan assets to cover them. All The present value of the defined benefit obligation from the employees who have reached the age of 21 are entitled to plan is calculated on the basis of future salaries/pensions. benefits. In addition, each employee must have worked at Consequently, increases in the salary and pension of least one year and at least 1,000 working hours to earn an the entitled employees results in an increase in the plan entitlement. liabilities. The following benefits are granted from the pension plan: In previous years, the KWS Group countered the usual risks of direct obligations by converting the pension obligations „ An old-age pension at the age of 65 from defined benefit to defined contribution plans. As a „ An early retirement pension before the age of 65 – to result, subsequent benefits will be provided by a provident be eligible, the employee must be at least 55 and the fund backed by a guarantee. The existing obligations, minimum vesting period is five years which are partly covered by plan assets, are funded from „ A pro-rata pension if the employee reaches the minimum the operating cash flow and are subject to the previously vesting period of five years, but is below 55. mentioned measurement risks. 124 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group Changes in accrued benefit entitlements in € thousand 2020/2021 2019/2020 Germany Abroad Total Germany Abroad Total Accrued benefit entitlements from retirement obligations on July 1 Service cost Interest expense Actuarial gains (–)/losses (+) of which due to a change in financial assumptions used for calculation of which due to demographic assumptions of which due to experience adjustments Pension payments made Exchange rate changes Other changes in value Accrued benefit entitlements from retirement obligations on June 30 Change in planned assets in € thousand Fair value of the planned assets on July 1 127,760 32,318 160,078 127,401 26,924 154,325 789 1,099 –1,650 1,723 789 –474 2,512 1,888 –2,125 881 1,138 3,335 1,516 895 3,473 2,396 2,034 6,808 –758 –435 –1,193 1,970 3,502 5,472 0 –892 –5,133 0 –878 838 –736 –1,644 32 –878 0 –54 –5,870 –1,644 32 1,365 –4,994 0 –363 334 –778 340 –52 –363 1,700 –5,772 340 –52 122,864 32,007 154,871 127,760 32,318 160,078 Germany Abroad Total Germany Abroad Total 2020/2021 2019/2020 10,361 20,620 30,981 10,191 18,386 28,577 Interest income 85 529 614 94 646 740 Income from planned assets excluding amounts already recognized as interest income Pension payments made Contributions to plan assets Exchange rate changes Other changes in value Fair value of the planned assets on June 30 –997 –673 0 4,385 –639 0 3,388 –1,312 0 –1,134 –1,134 –54 –54 743 –667 0 68 –608 1,873 272 –17 811 –1,276 1,873 272 –17 8,776 23,707 32,483 10,361 20,620 30,981 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 125 KWS Group | Annual Report 2020/2021In order to allow reconciliation with the figures in the balance sheet, the accrued benefit must be netted off with the plan assets. Reconciliation with the balance sheet values for pensions in € thousand 2020/2021 2019/2020 Germany Abroad Total Germany Abroad Total Accrued benefit entitlements from retirement obligations on June 30 Fair value of the planned assets on June 30 Balance sheet values on June 30 122,864 32,007 154,871 127,760 32,318 160,078 8,776 114,088 23,706 8,301 32,482 122,389 10,361 117,399 20,619 30,980 11,699 129,098 The following amounts were recognized in the statement of comprehensive income: Effects on the statement of comprehensive income in € thousand Service cost Net interest expense (+)/income (–) Amounts recognized in the income statement Gains (–)/losses (+) from revaluation of the planned assets (excluding amounts already recognized as interest income) Actuarial gains (–)/losses (+) due to a change in financial assumptions used for calculation Actuarial gains (–)/losses (+) due to a change in demographic assumptions Actuarial gains (–)/losses (+) due to experience adjustments Amounts recognized in other comprehensive income Total (amounts recognized in the statement of comprehensive income) 2020/2021 Germany Abroad 789 1,013 1,723 260 Total 2,512 1,274 Germany Abroad 881 1,045 1,516 249 2019/2020 Total 2,396 1,294 1,802 1,983 3,785 1,925 1,765 3,690 997 –4,385 –3,388 –743 –68 –811 –758 –878 –1,636 1,970 3,502 5,472 0 –435 –435 0 –363 –363 –892 838 –54 1,365 334 1,700 –653 –4,859 –5,513 2,592 3,405 5,997 1,149 –2,876 –1,727 4,517 5,170 9,687 The service cost is recognized in operating income in the respective functional areas by means of an appropriate formula. Net interest expenses and income are carried in the interest result. 126 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS GroupThe fair value of the plan assets was split over the following investment categories: Breakdown of the planned assets by investment category in € thousand 2020/2021 2019/2020 Germany Abroad Corporate bonds Equity funds Consumer industry Finance Industry Technology Health care Other Cash and cash equivalents Reinsurance policies Planned assets on June 30 8,776 8,776 6,398 15,714 2,874 2,391 1,808 2,950 1,897 3,794 1,595 Total 6,398 15,714 2,874 2,391 1,808 2,950 1,897 3,794 1,595 8,776 Germany Abroad 5,496 13,751 2,546 2,010 1,525 2,288 1,988 3,394 1,373 20,620 10,361 10,361 Total 5,496 13,751 2,546 2,010 1,525 2,288 1,988 3,394 1,373 10,361 30,981 23,707 32,483 The plan assets abroad relate mainly to the U.S. The following sensitivity analysis at June 30, 2021, shows how the present value of the obligation would change given There is no active market for the reinsurance policies in a change in the actuarial assumptions. No correlations Germany. There is an active market for the other plan between the individual assumptions were taken into assets: the fair value can be derived from their stock account in this, i.e. if an assumption varies, the other market prices. 65.81% (previous year: 62.8%) of the assumptions were kept constant. The projected unit credit corporate bonds have an AAA rating. method used to calculate the balance sheet values was also used in the sensitivity analysis. Sensitivity analysis in € thousand Discount rate Anticipated annual pay increases Anticipated annual pension increase Life expectancy 1 Lower limit 0% Effect on obligation in 2020/2021 Effect on obligation in 2019/2020 Change in assumption Decrease Increase Change in assumption Decrease Increase +/– 100 bps 1 +/– 50 bps +/– 25 bps +/– 1 year 27,767 –21,655 –1,263 1,361 –3,585 –5,510 3,755 5,656 +/– 100 bps 1 +/– 50 bps +/– 25 bps +/– 1 year 29,169 –22,682 –1,333 1,467 –3,762 –5,754 3,941 5,908 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 127 KWS Group | Annual Report 2020/2021 The following undiscounted payments for pensions (with their due dates) are expected in the following years: Anticipated payments for pensions in € thousand 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027 – 2030/2031 Anticipated payments for pensions in € thousand 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 – 2029/2030 Germany Abroad 4,936 4,955 5,005 4,990 4,929 24,373 933 995 1,012 1,207 1,238 8,039 Germany Abroad 5,070 5,038 5,070 5,110 5,079 24,935 937 917 1,050 1,050 1,229 6,997 2020/2021 Total 5,869 5,950 6,017 6,197 6,166 32,412 2019/2020 Total 6,007 5,955 6,120 6,160 6,308 31,932 The weighted average time at which the pension obligations have to be recognized for them, since there are no further are due is 15.5 (15.8) years in Germany and 21.0 (19.8) years obligations above and beyond payment of the contributions abroad. (defined contribution plans). These comprise benefits that are funded solely by the employer and allowances for Defined contribution plans conversion of earnings by employees. Apart from the above-described pension obligations, there are other old-age pension systems. However, no provisions The total pension costs for fiscal 2020/21 were as follows: Pension costs in € thousand Germany Abroad Total Germany Abroad Total 2020/2021 2019/2020 Cost for defined contribution plans Service cost for the defined benefit obligations Pension costs 2,855 789 3,643 838 3,693 2,925 1,011 3,936 1,723 2,561 2,512 6,204 881 3,806 1,516 2,527 2,396 6,333 In addition, contributions of €15,799 (15,965) thousand were guarantee. The contributions to this pension plan were paid to statutory pension insurance institutions. €2,968 (2,718) thousand. In addition, the benefit obligation from salary conversion was backed by a guarantee that The costs for defined contribution plans in Germany exactly matches the present value of the obligation of mainly related to the provident fund backed by a €5,223 (4,885) thousand. 128 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group 7.12 Current liabilities Current liabilities in € thousand Short-term provisions Current liabilities to banks Other current financial liabilities Short-term borrowings Trade payables Tax liabilities Other current financial liabilities Lease liabilities Other current liabilities Contract liabilities Total 06/30/2021 06/30/2020 39.455 92.694 4.531 97.225 52.467 63.074 30.589 93.663 153.748 109.747 31.503 14.203 10.961 111.687 25.234 484.016 41.840 17.133 11.404 100.059 19.191 445.504 The tax liabilities of €31,503 (41,840) thousand include amounts for the year under review and the period for which the external tax audit has not yet been concluded. Short-term provisions in € thousand 06/30/2020 Changes in the consoli- dated group, currency Addition Consump- tion Reclassifi- cation Reversal 06/30/2021 Obligations from sales transactions Other obligations Total 29,040 23,428 52,468 –387 –195 –582 3,222 9,419 12,641 11,187 9,527 20,714 –2,172 3,422 1,250 1,565 4,042 5,607 16,950 22,505 39,455 The obligations from sales transactions essentially relate to obligations for services received that have not been invoiced (licenses) and sales commission obligations, where they are not contained in the trade payables. The other obligations relate to litigation risks, provisions from procurement transactions, such as compensation for breeding areas, and other provisions that cannot be assigned to the group of sales transactions. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 129 KWS Group | Annual Report 2020/20217. Notes to the Balance Sheet 7.13 Derivative financial instruments Hedging transactions in € thousand Currency hedges Interest-rate hedges Total 06/30/2021 06/30/2020 Nominal volume Net book values Fair value Nominal volume Net book values Fair value 16,634 8,000 24,634 205 –62 143 205 –62 143 218,341 31,000 249,341 –2,616 –197 –2,812 –2,616 –197 –2,812 As in the previous year, all currency hedges have a accessible markets for identical assets and liabilities, where remaining maturity of less than one year. The interest rate the fair value results from quoted prices that are observable hedges have a remaining maturity of more than five years. (level 1 input factors). The KWS Group did not hold any financial instruments that can be assigned to level 1 in the 7.14 Financial instruments year under review. In general, the fair values of financial assets and liabilities are calculated on the basis of the market data available on The level 2 input factors relate to derivative financial the balance sheet date and are assigned to one of the three instruments that have been concluded between KWS Group hierarchy levels in accordance with IFRS 13. The principal companies and banks. The prices can thus be derived market, i.e. the market with the largest volume of trading and indirectly from active market prices for similar assets and the greatest business activity, is used to calculate the fair liabilities. The level 3 input factors cannot be derived from value. If this market does not exist for the asset or liabilities observable market information. in question, the market that maximizes the amount that would be received to sell the asset or minimizes the amount The carrying amounts and fair values of the financial assets that would be paid to transfer the liability, after taking into (financial instruments), split into the measurement categories account transaction costs, is used. These are active and in accordance with IFRS 9, are as follows: 06/30/2021 in € thousand Fair values Financial assets Carrying amounts At amortized cost At fair value through other comprehensive income At fair value through profit and loss Total carrying amount Financial assets Financial assets Other non-current receivables Trade receivables Cash and cash equivalents Other current financial assets of which derivative financial instruments Total 9,433 7,330 449,501 222,745 40,592 239 729,602 2 7,330 449,501 222,745 40,352 0 719,932 9,433 0 0 0 0 0 9,433 0 0 0 0 239 239 239 9,436 7,330 449,501 222,745 40,592 239 729,604 130 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS Group06/30/2020 in € thousand Fair values At amortized cost At fair value through other comprehensive income At fair value through profit and loss Total carrying amount Financial assets Carrying amounts Financial assets Financial assets Other noncurrent financial assets Trade receivables Cash and cash equivalents Other current financial assets of which derivative financial instruments Total 6,230 8,072 432,569 119,737 63,391 849 629,999 0 6,230 8,072 432,569 119,737 62,542 0 622,921 0 0 0 0 0 6,230 0 0 0 0 849 849 849 6,230 8,072 432,569 119,737 63,391 849 629,999 The financial assets and derivative financial instruments are The fair value of derivative financial instruments is the measured and carried at fair value. The fair value of trade present values of the payments related to these balance receivables, other current financial assets, and cash and sheet items. These instruments are mainly forward cash equivalents is the same as the carrying amounts as a exchange deals. They are measured on the basis of quoted result of the short time in which these instruments are due. exchange rates and yield curves available from the market The fair value of the long-term fund shares contained in the financial assets is measured using generally accepted The carrying amounts and fair values of the financial methods based on directly and indirectly observable market liabilities (financial instruments), split into the measurement inputs (level 2). categories in accordance with IFRS 9, are as follows: data and allowing for counterparty risks (level 2). 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 131 KWS Group | Annual Report 2020/202106/30/2021 in € thousand Fair values Financial liabilities Carrying amounts At amortized cost At fair value through other comprehensive income Financial liabilities Long-term borrowings Long-term trade payables Other noncurrent financial liabilities of which derivative financial instruments Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments Total 06/30/2020 in € thousand Financial liabilities Long-term borrowings Long-term trade payables Other noncurrent financial liabilities of which derivative financial instruments Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments Total Total carrying amount 601,080 242 62 62 97,225 153,748 14,203 34 866,559 0 0 62 62 0 0 34 34 96 615,308 601,080 242 0 0 97,225 153,748 14,169 0 866,463 242 62 62 97,225 153,748 14,203 34 880,786 Fair values Financial liabilities Carrying amounts At amortized cost At fair value through other comprehensive income 527,379 521,745 264 207 207 93,663 109,747 17,133 3,661 748,394 264 0 0 93,663 109,747 13,472 0 738,891 0 0 207 207 0 0 3,661 3,661 3,868 Total carrying amount 521,745 264 207 207 93,663 109,747 17,133 3,661 742,759 The fair value of long-term borrowings was calculated on the Due to the generally short times by which trade payables basis of discounted cash flows. To enable that, interest rates and other current financial liabilities (excluding derivatives) for comparable transactions and yield curves were used. are due, it is assumed that their carrying amounts are equal to the fair value. 132 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS GroupThe following table shows the financial assets and liabilities measured at fair value: Assets and liabilities measured at fair value in € thousand 06/30/2021 06/30/2020 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Derivative financial instruments without application of hedge accounting under IFRS 9 Financial assets Financial assets Derivative financial instruments without application of hedge accounting under IFRS 9 Financial liabilities 0 0 0 0 0 239 9,433 9,673 96 96 0 0 0 0 0 239 9,433 9,673 96 96 0 0 0 0 0 849 6,230 7,078 3,868 3,868 0 0 0 0 0 849 6,230 7,078 3,868 3,868 The table below presents the net gains/losses carried in Credit risks the income statement for financial instruments in each The credit risk is the risk that a business partner does not measurement category: Net gain/losses of financial instruments in € thousand 2020/2021 2019/2020 fulfill its obligations as part of a financial instrument or contract with a customer, resulting in a financial loss. The KWS Group is exposed to credit risks in its operational activities mainly in relation to trade receivables. Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Financial assets measured at amortized cost Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss In order to control the credit risks resulting from receivables 2,666 1,313 from customers, a regular creditworthiness analysis is conducted in accordance with the credit volume. If a –239 –1,289 customer’s credit risk is classified as high, it is reduced by means of security. This includes, in particular, credit 2,883 182 insurance, prepayments, down payments, promissory –16,153 –21,391 148 2,810 notes and guarantees. Depending on the contract’s design, reservation of ownership of goods is agreed with our customers. Credit limits are defined for our customers. Credit limits, outstanding claims and the collection of receivables are analyzed in regular meetings of the Credit The net gains for assets measured at fair value through Committee. For details of the exposure to the risk of default other comprehensive income include income from non- at June 30, 2021, please refer to section 7.7 of the Notes. terminable interests in investment funds. Credit risks from financial transactions are controlled The net losses from financial assets and net gains in centrally by the Treasury department. In order to minimize financial liabilities measured at fair value through profit risks, financial transactions are exclusively conducted or loss solely comprise changes in the market value of within defined limits with banks and partners who always derivative financial instruments. have an investment grade. Compliance with the risk limits is constantly monitored. The limits are adjusted depending on The net gains from financial assets measured at cost the credit volume only subject to the approval of the regional mainly include effects from changes in the allowances for or divisional management and the Executive Board. impairment. The net losses from financial liabilities measured at amortized cost result mainly from interest expense. 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 133 KWS Group | Annual Report 2020/2021Liquidity risks been agreed as part of specific interest-bearing loans and Liquidity risk is the risk that funds to settle due payment relate to the capital structure. The lenders have the right to obligations cannot be obtained on time or at all. terminate the loan agreements in question immediately if these requirements are not met. The KWS Group complied Liquidity is managed in the Eurozone by the central Treasury with all agreed financial covenants in the fiscal year. unit using a cash pooling system. Liquidity requirements are generally determined by means of cash planning and are The table below shows the KWS Group’s liquidity analysis covered by cash and promised credit lines. for non-derivative and derivative financial liabilities. The As part of its liquidity management, the KWS Group ensures payment flows (interest and payments of principal): that it complies with the financial covenants that have table is based on contractually agreed, undiscounted Fiscal year 2020/2021 in € thousand Book value Liquidity analysis of financial liabilities 06/30/2021 06/30/2021 total Financial liabilities Trade payables Other financial liabilities Lease liabilities 698,305 723,402 153,989 153,989 14,169 48,426 14,169 49,908 Due in < 1 year 86,138 153,748 14,169 18,277 Nonderivative financial liabilities 914,889 941,469 272,331 Payment claim Payment obligation Derivative financial liabilities Fiscal year 2019/2020 in € thousand 96 Book value 13,685 13,806 121 13,685 13,540 –145 Due in > 1 year and < 5 years Cash flows Due in > 5 years 333,048 304,217 242 0 20,685 353,975 0 206 206 0 0 10,946 315,163 0 61 61 Due in < 1 year 85,166 109,747 16,922 11,614 223,450 165,981 171,971 5.991 Due in > 1 year and < 5 years 306,584 264 207 23,811 330,866 0 126 126 Cash flows Due in > 5 years 233,639 0 0 18,585 252,224 0 18 18 Liquidity analysis of financial liabilities 06/30/2020 06/30/2020 total Financial liabilities Trade payables Other financial liabilities Lease liabilities Nonderivative financial liabilities Payment claim Payment obligation 615,407 625,390 110,012 110,012 17,340 51,300 17,129 54,010 794,058 806,540 165,981 172,115 Derivative financial liabilities 3.868 6.135 The cash flows of the derivative financial liabilities mainly relate to forward exchange deals and are presented as an undiscounted gross amount. These derivative financial instruments are settled in gross. 134 Annual Financial Statements | Notes for the KWS Group | 7. Notes to the Balance Sheet Annual Report 2020/2021 | KWS GroupCurrency risks Interest rate sensitivity is a measure for showing the Currency risks are where the fair value or future cash interest rate risk. The interest rate sensitivity analysis was flows of a financial instrument are subject to fluctuations conducted for the portfolio of financial instruments with a due to exchange rate changes. The KWS Group is mainly variable interest rate at the balance sheet date and shows exposed to currency risks as part of its financing activities the hypothetical effect on income for one year. The variable- with foreign subsidiaries. Derivative financial instruments interest components of the KWS Group’s interest expenses (forward exchange deals and currency swaps) are and interest income were determined to calculate it. In concluded to hedge against currency risks from intra-Group a scenario analysis, the effects of an increase/reduction financing. The company ensures that the derivative financial of one percentage point (100 base points) in the relevant instrument is commensurate with the risk to be hedged. underlying capital market interest rate on the interest result were calculated. An increase in all relevant rates of interest In order to assess the currency risk, the sensitivity of a of 1 percentage point would result in additional interest currency to fluctuations was determined. The calculated expense of €243 (700) thousand. Due to the contractual figures relate to the portfolio of financial instruments at the arrangements relating to negative interest rates, a reduction balance sheet date and show the hypothetical effect on in the rates of interest of 1 percentage point would not have income and equity for one year. After the euro, the US dollar any significant impact on net income for the year. is the most important currency in the KWS Group. All other currencies are of minor importance. The currency risk 7.15 Leases mainly results from intra-Group receivables and liabilities from financing activity. The average USD/EUR exchange rate Book values of right-of-use assets in the fiscal year was 1.19 (1.11). If the US dollar depreciated by 10%, the extra expense would be €1,005 thousand (previous year: extra income of €23,562 thousand). If the US dollar appreciated by 10%, the extra income would be €1,005 thousand (previous year: extra expense of €23,562 thousand). The net income for the year would change accordingly. in € thousand Land and buildings Technical equipment and machinery Operating and office equipment Total 06/30/2021 06/30/2020 34,592 37,678 664 689 8,415 43,671 7,982 46,349 Risk of changes in interest rates The risk of changes in interest rates is where the fair value Additions to rights of use for leased assets totaling or future cash flows of a financial instrument are subject to €8,703 (30,590) thousand were recognized in fiscal fluctuations due to changes in market interest rates. 2020/2021 and the amortization on them was as follows: The risk of changes in interest rates is controlled by means of a balanced portfolio of fixed-interest and variable-interest loans. Interest rate swaps are concluded if there is a high risk of interest rate variability in the portfolio. As part of them, the KWS Group exchanges the difference between fixed-interest and variable-interest amounts determined with reference to a previously agreed nominal amount with a contractual partner at defined intervals of time. Depreciation of right-of-use assets in € thousand Land and buildings Technical equipment and machinery Operating and office equipment Total 2020/2021 2019/2020 5,874 5,194 420 384 4,275 10,569 5,059 10,637 7. Notes to the Balance Sheet | Notes for the KWS Group | Annual Financial Statements 135 KWS Group | Annual Report 2020/2021 Expenses for short-term leases and for leases relating to low- 7.16 Contingent liabilities and other financial obligations value assets totaled €14,426 (12,437) thousand in the period The obligations from uncompleted capital expenditure under review. projects, mainly relating to property, plant, and equipment, and other capital commitments amount Short-term lease liabilities totaled €10,961 (11,404) thousand to €16,661 (29,439) thousand. and long-term lease liabilities €37,465 (39,896) thousand at June 30, 2021. The maturity analysis of the lease liabilities There are guarantees with respect to third parties is presented in section 7.14 of the Notes. Lease payments amounting to €76,412 (95,537) thousand. As in previous totaled 11,905 (14,376) thousand in fiscal 2020/2021. Interest years, they are mainly guarantees KWS has given to banks expenses from interest accrued on the lease liabilities were for the credit lines of the subsidiary KWS SEMENTES LTDA. €876 (1,184) thousand. There are still guarantees toward a non-Group third party for the license payments of the joint venture AGRELIANT In general, lease agreements are concluded without GENETICS, LLC. The likelihood that these guarantees will extension or termination options. Possible cash outflows of be utilized is seen as slight, based on the experience of €20,880 (20,683) thousand for existing options to extend a previous years. No claims have yet been made. property rental agreement were not included in determining the lease liabilities since there is no reasonable certainty as to As in the previous year, there are no other contingent whether the options will be exercised. liabilities that need to be reported at the balance sheet date. The KWS Group also acts as a lessor. There is currently a long-term sublease agreement, which has been classified as a financial lease in relation to the main lease agreement. The interest income was €55 (25) thousand. The sublease is 8. Notes to the Cash Flow Statement reported under the other noncurrent receivables to an amount The cash flow statement shows the changes in cash and of €4,328 (4,682) thousand and under the other current cash equivalents of the KWS Group in the three categories receivables to an amount of €598 (586) thousand. The annual of operating activities, investing activities and financing income from the sublease is €692 (589) thousand. The lease activities. The effects of exchange rate changes and agreement contains a clause permitting annual adjustment of changes in the consolidated group have been eliminated the lease payment depending on market circumstances. from the respective balance sheet items, except those affecting cash and cash equivalents. As in previous years, cash and cash equivalents are composed of cash (on hand and balances with banks) and current securities. Financial liabilities changed as follows: Changes in financial liabilities in € thousand 06/30/2020 Cash flows Changes in the scope of consolidation Non-cash- effective changes New IFRS 16 contracts Currency Financial liabilities 615,407 82,383 Lease liabilities 51,300 –11,905 355 0 74 557 0 8,703 136 Annual Financial Statements | Notes for the KWS Group | 8. Notes to the Cash Flow Statement Other effects 06/30/2021 86 –229 698,305 48,426 Annual Report 2020/2021 | KWS Group9. Other Notes 9.1 Proposal for the appropriation of net retained profits In fiscal year 2020/2021, total Executive Board The net retained profits of KWS SAAT SE & Co. KGaA are compensation amounted to €5,820 (€5,428) thousand. €321,395 thousand (previous year: net retained profits of The variable compensation, which is calculated on the €23,100 thousand). basis of the net profit for the period of the KWS Group, is made up of a bonus and a long-term incentive. The bonus A proposal will be made to the Annual Shareholders’ totals €2,562 (2,500) thousand; there are contributions Meeting that an amount of €26,400 thousand (previous from the long-term incentive tranche for 2020/2021 totaling year: €23,100 thousand) should be used to pay a dividend €1,175 thousand (tranche for 2019/2020: €847 thousand). of €0.80 (previous year: €0.70) for each of the 33,000,000 Pension provisions totaling €1,612 (1,619) thousand shares. were formed for two members of the Executive Board at KWS SAAT SE & Co. KGaA. 9.2 Total remuneration of the Supervisory Board and the Executive Board and of former members of Compensation of former members of the Executive the Supervisory Board and the Executive Board of Board and their surviving dependents amounted KWS SAAT SE & Co. KGaA to €1,238 (1,419) thousand. Pension provisions The compensation of the members of the Supervisory Board recognized for this group of persons amounted to was converted to a purely fixed compensation pursuant to €13,809 (14,837) thousand as of June 30, 2021, before the resolution adopted by the Annual Shareholders’ Meeting being netted off with the relevant plan assets. in December 2017. Members of the Supervisory Board who are members of a committee – with the exception of the 9.3 Related party disclosures Chairman of the Supervisory Board – receive an additional Transactions with related parties in accordance with IAS 24 fixed payment therefor. The total compensation for members are all business dealings that are conducted with the of the Supervisory Board amounts to €620 (620) thousand, reporting entity by entities or natural persons or their close excluding value-added tax. The total compensation family members, if the party or person in question controls for members of the Supervisory Board of KWS SE, the the reporting entity or is a member of its key management personally liable partner of KWS SAAT SE & Co. KGaA, in personnel, for example. the year under review amounted to €195 (185) thousand, excluding value-added tax. Pursuant to the change in legal form to a partnership limited by shares on July 2, 2019, the personally liable partner KWS SE provides business management services on behalf of KWS SAAT SE & Co. KGaA. Related parties in € thousand KWS SE At equity accounted joint ventures At equity accounted associated companies Other related parties Deliveries and services provided Received deliveries and services Receivables Payables 2020/2021 2019/2020 2020/2021 2019/2020 2020/2021 2019/2020 2020/2021 2019/2020 0 0 5,885 5,330 0 556 3,721 0 4,919 3,134 5,106 10,906 5,463 25,072 2,552 1,897 6,602 37 6,546 18 0 116 0 117 6,366 6,283 0 0 100 947 0 1,058 9. Other Notes | Notes for the KWS Group | Annual Financial Statements 137 KWS Group | Annual Report 2020/2021 9. Other Notes As part of its operations, the KWS Group procures goods 9.5 Audit of the annual financial statements and services worldwide from a large number of business On December 16, 2020, the Annual Shareholders’ Meeting partners. They also include companies in which the of KWS SAAT SE & Co. KGaA elected the accounting firm KWS Group has an interest and on which representatives Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, of the KWS Group’s Supervisory Board exert a significant Hanover, to be the Group’s auditors for fiscal year 2020/21. influence. Business dealings with these companies are always conducted on an arm’s length basis and are not material in terms of volume. As part of Group financing, short- and medium-term loans are taken out from and granted to subsidiaries at market interest rates. The compensation of members of the Executive Board comprises short-term employee benefits, share-based payment benefits and post-employment benefits. Individualized disclosures on the compensation of members Fee paid to the external auditors under Section 314 (1) No. 9 HGB in € thousand 2020/2021 2019/2020 a) Audit of the consolidated financial statements b) Other certification services c) Tax consulting d) Other services Total fee paid 927 60 0 0 1,370 50 0 0 987 1,420 of the Executive Board and the Supervisory Board are Other certification services in fiscal 2020/2021 essentially presented in the Compensation Report, which is part of the comprised non-audit services as part of the voluntary audit Combined Management Report. of the Non-Financial Declaration. There were also no business transactions or legal 9.6 Report on events after the balance sheet date transactions that required reporting for related parties in There have been no events of particular significance that fiscal 2020/2021. 9.4 Disclosure might have an impact on the presentation of the KWS Group’s earnings, financial position and assets since the end of the fiscal year. The following subsidiaries with the legal form of a corporation within the meaning of Section 264 (3) and 9.7 Declaration of compliance with the German 264b of the German Commercial Code (HGB) have utilized Corporate Governance Code the exemption provided in Section 264 (3) of the German KWS SAAT SE & Co. KGaA has issued the declaration of Commercial Code (HGB) as regards preparation of financial compliance with the German Corporate Governance Code statements and their publication: required by Section 161 of the Aktiengesetz (AktG – German „ KWS LOCHOW GMBH, Bergen shareholders on the company’s home page at www.kws.com. Stock Corporation Act) and made it accessible to its „ KWS LANDWIRTSCHAFT GMBH, Einbeck „ BETASEED GMBH, Frankfurt am Main „ KWS SAATFINANZ GMBH, Einbeck „ DELITZSCH PFLANZENZUCHT GMBH, Einbeck „ KANT-HARTWIG & VOGEL GMBH, Einbeck „ AGROMAIS GMBH, Everswinkel „ KWS Berlin GMBH, Berlin „ KWS INTERSAAT GMBH, Einbeck „ EURO-HYBRID GESELLSCHAFT FÜR GETREIDEZÜCHTUNG MBH, Einbeck „ KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH, Northeim-Wiebrechtshausen „ RAGIS KARTOFFELZUCHT- UND HANDELSGESELLSCHAFT MBH, Einbeck KWS SAAT SE & Co. KGaA prepares the consolidated financial statements for the largest and smallest group of companies. 138 Annual Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2020/2021 | KWS Group9.8 List of shareholdings List of shareholdings in accordance with Section 313 (2) HGB (German Commercial Code) Fiscal year 2020/2021 Name and Company’s registered office Currency Interest held Total in % Footnote Fully consolidated subsidiaries (direct) Germany KWS LOCHOW GMBH, Bergen KWS INTERSAAT GMBH, Einbeck AGROMAIS GMBH, Everswinkel KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH, Northeim-Wiebrechtshausen KWS LANDWIRTSCHAFT GMBH, Einbeck RAGIS KARTOFFELZUCHT- UND HANDELSGESELLSCHAFT MBH, Einbeck KWS SAATFINANZ GMBH, Einbeck DELITZSCH Pflanzenzucht GMBH, Einbeck EURO-HYBRID GESELLSCHAFT FÜR GETREIDEZÜCHTUNG MBH, Einbeck BETASEED GMBH, Frankfurt am Main KANT-HARTWIG & VOGEL GMBH, Einbeck KWS BERLIN GMBH, Berlin Foreign KWS SRBIJA D.O.O., New Belgrade/Serbia SEMILLAS KWS CHILE LTDA., Rancagua/Chile KWS SEMENA S.R.O., Bratislava/Slovakia KWS BULGARIA EOOD., Sofia/Bulgaria KWS ARGENTINA S.A., Balcarce/Argentina Fully consolidated subsidiaries (indirect) Foreign KWS MAGYARORSZÁG KFT., Gyo˝ r/Hungary KWS FRANCE S.A.R.L., Roye/France KWS SUISSE S.A., Basel/Switzerland KWS ITALIA S.P.A., Forlì/Italy KWS POLSKA SP.Z O.O., Poznan´/Poland KWS OSIVA S.R.O, Velké Mezirici/Czech Republic KWS SJEME D.O.O., Osijek/Croatia KWS BENELUX B.V., Amsterdam/Netherlands KWS AUSTRIA SAAT GMBH, Vienna/Austria KWS MAIS FRANCE S.A.R.L., Champol/France KWS R&D INVEST B.V., Emmeloord/Netherlands BETASEED FRANCE S.A.R.L., Bethune/France KWS SEEDS LLC (former BETASEED INC.), Bloomington/U.S. € € € € € € € € € € € € RSD CLP € BGN ARS HUF € CHF € PLN CZK HRK € € € € € USD 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 1 1 1 1 1 1 1 27 28 3 3 3 3 3 3 3 3 3 3 3 3 24 9. Other Notes | Notes for the KWS Group | Annual Financial Statements 139 KWS Group | Annual Report 2020/2021Currency Interest held Total in % Footnote USD USD GBP PEN RON DKK RUB RUB € USD TRY UAH PLN USD € € € € TRY TRY € TRY CNY € € MAD BRL BRL USD UAH CNY € € PYG RUB 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 4 4 3 5 25 3 23 7 3 3 3 23 3 4 16 18 18 18 19 20 3 3 8 6 3 9 29 30 4 10 8 11 3 12 7 Fiscal year 2020/2021 Name and Company’s registered office GLH SEEDS INC., Bloomington/U.S. KWS CEREALS USA LLC, Champagne/U.S. KWS UK LTD., Thriplow/United Kingdom KWS PERU S.A.C., Lima/Peru KWS SEMINTE S.R.L., Bukarest/Romania KWS SCANDINAVIA A/S, Guldborgsund/Denmark KWS RUS O.O.O., Lipezk/Russia KWS R&D RUS LLC, Lipezk/Russia KWS SEMILLAS IBÉRICA S.L., Zaratán/Spain KWS SEEDS INC., Bloomington/U.S. KWS TÜRK TARIM TICARET A.S., Eskisehir/Turkey KWS UKRAINA T.O.V., Kiew/Ukraine KWS LOCHOW POLSKA SP.Z O.O., Kondratowice/Poland KWS GATEWAY RESEARCH CENTER LLC, St. Louis/U.S. POP VRIEND HOLDING B.V., Amsterdam/Netherlands POP VRIEND SEEDS B.V., Andijk/Netherlands EUROPSEEDS B.V., Enkhuizen/Netherlands POP VRIEND INTERNATIONAAL B.V., Andijk/Netherlands POP VRIEND TOHUMCULUK VE TARIM ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI , Istanbul/Turkey PV TOHUMCULUK TARIM ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI, Izmir/Turkey KWS SEMILLAS CANARIAS S.L.U., Gran Canaria/Spain BTS TURKEY TARIM TICARET LIMITED SIRKETI, Eskisehir/Turkey KWS AGRICULTURE RESEARCH & DEVELOPMENT CENTER, Hefei/China KWS INTERNATIONAL HOLDING B.V., Emmeloord/Netherlands KWS VEGETABLES B.V., Heythuysen/Netherlands KLEIN WANZLEBENER SAATZUCHT MAROC S.A.R.L.A.U. Casablanca/Morocco KWS SEMENTES LTDA., Curitiba/Brasil KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA., São Paulo/Brasil KWS SERVICES NORTH AMERICA LLC, Bloomington/U.S. KWS PODILLYA T.O.V., Kiew/Ukraine BEIJING KWS AGRICULTURE TECHNOLOGY CO., LTD., Beijing/China KWS MOMONT RECHERCHE S.A.R.L., Mons-en-Pévèle/France KWS MOMONT S.A.S., Mons-en-Pévèle/France KWS PARAGUAY SRL, Asunción/Paraguay KWS KUBAN O.O.O., Krasnodar/Russia 140 Annual Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2020/2021 | KWS GroupFiscal year 2020/2021 Name and Company’s registered office Currency Interest held Total in % Footnote SEED PLANT KWS O.O.O., Lipetsk/Russia KWS INTERNATIONAL HOLDING II B.V., Emmeloord/Netherlands KWS VEGETABLES MEXICO S.A. de C.V., Mexico City/Mexico BETASEED RUS LLC, Moscow/Russia KWS VEGETABLES ITALIA S.R.L A SOCIO UNICO, Noceto/Parma/Italy KWS Seed Science & Technology (Sanya) Co., Ltd., Sanya/China KWS FIDC, Rio de Janeiro/Brasil Equity-accounted joint ventures AGRELIANT GENETICS INC., Chatham/Canada AGRELIANT GENETICS LLC, Westfield/U.S. FARMDESK B.V., Antwerp/Belgium Equity-accounted associated companies KENFENG - KWS SEEDS CO., LTD., Beijing/China IMPETUS AGRICULTURE INC., Lewes/U.S. Joint operations (proportionately consolidated) GENECTIVE S.A., Chappes/France GENECTIVE CANADA INC., Montreal/Canada GENECTIVE TAIWAN LTD., Taipeh City/Taiwan GENECTIVE USA Corp., Weldon/U.S. GENECTIVE Japan K.K., Chiba/Japan GENECTIVE KOREA, Sangdaewon-dong/Korea AARDEVO B.V., Nagele/Netherlands AARDEVO NORTH AMERICA LLC, Boise/U.S. Unconsolidated subsidiaries KWS R&D PRIVATE LIMITED, Hyderabad/India VAN RIJN BALCAN S.R.L., Vulcan/Romania RUB € MXN RUB € CNY BRL CAD USD € CNY USD € CAD TWD USD JPY KRW USD USD RS RON 100.00 100.00 100.00 100.00 100.00 100.00 100.00 50.00 50.00 50.00 49.00 38.82 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 100.00 100.00 7 3 31 32 16 3 33 13 22 21 26 26 26 26 26 14 15 2 2 1 Profit and loss transfer agreement 2 In liquidation 3 Subsidiary of KWS INTERNATIONAL HOLDING B.V. 4 Subsidiary of KWS SEEDS INC. 5 Subsidiary of SEMILLAS KWS CHILE LTDA. and KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. 6 Subsidiary of KWS INTERSAAT GMBH 7 Subsidiary of KWS RUS O.O.O. 8 Subsidiary of EURO-HYBRID GMBH 9 Subsidiary of KWS BENELUX B.V. 10 Subsidiary of KWS UKRAINA T.O.V. 11 Subsidiary of KWS MOMONT S.A.S. 12 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. and KWS SEMENTES LTDA. 13 Participation of GLH SEEDS INC. 14 Participation of RAGIS RAGIS KARTOFFELZUCHT- UND HANDELSGESELLSCHAFT MBH 15 Subsidiary of AARDEVO B.V. 16 Subsidiary of KWS VEGETABLES B.V. 17 Subsidiary of POP VRIEND HOLDING B.V. and KWS VEGETABLES B.V. 18 Subsidiary of POP VRIEND HOLDING B.V und CHURA B.V. 19 Subsidiary of POP VRIEND INTERNATIONAL B.V. 20 Subsidiary of POP VRIEND TOHUMCULUK VE TARIM ÜRÜNLERI SANAYI VE TICARETLIMITED SIRKETI 21 Subsidiary of KWS R&D INVEST B.V. 22 Participation of KWS INTERNATIONAL HOLDING B.V. 23 Subsidiary of EURO-HYBRID GMBH and KWS SAATFINANZ GMBH 24 Subsidiary of KWS SEEDS LLC. 25 Subsidiary of KWS INTERSAAT GMBH and of KWS SAATFINANZ GMBH 26 Subsidiary of GENECTIVE S.A. 27 Subsidiary of KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH 28 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. 29 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. and KWS INTERSAAT GMBH 30 Participation of KWS INTERNATIONAL HOLDING B.V. and KWS SAATFINANZ GMBH 31 Subsidiary of KWS INTERNATIONAL HOLDING B.V. and KWS VEGETABLES B.V. 32 Subsidiary of KWS INTERNATIONAL HOLDING B.V. and KWS INTERNATIONAL HOLDING II B.V. 33 Subsidiary of KWS SEMENTES LTDA. 9. Other Notes | Notes for the KWS Group | Annual Financial Statements 141 KWS Group | Annual Report 2020/20219.9 Supervisory and Executive Boards of KWS SAAT SE & Co. KGaA in fiscal 2020/2021 Other seats 2020/2021 Membership of comparable German and foreign oversight boards: „ DR. SCHNELL Chemie GmbH, Munich (member of the Advisory Board) Membership of comparable German and foreign oversight boards: „ Givaudan SA, Vernier (Switzerland) (member of the Board of Directors, the Audit Committee and the Compensation Committee) „ Medacta International SA, Frauenfeld (Switzerland) (member of the Board of Directors and Chairman of the Audit Committee) „ Hemro AG, Bachenbülach (Switzerland) (member of the Management Board) „ Sika AG, Baar (Switzerland) (member of the Board of Directors and Chairman of the Audit Committee – since March 2019) „ Louis Dreyfus Holding B.V., Amsterdam (Netherlands) (member of the Supervisory Board and Audit Committee) Membership of other legally mandated supervisory boards: „ CLAAS KGaA mbH, Harsewinkel (Chairwoman) Membership of comparable German and foreign oversight boards: „ CLAAS KGaA mbH, Harsewinkel (Chairwoman of the Shareholder's Committee) 9.9.1 Supervisory Board Members Dr. Drs. h. c. Andreas J. Büchting Göttingen Agricultural Biologist Chairman of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Dr. Marie Theres Schnell Munich Graduate in Communications Deputy Chairman of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Victor W. Balli Zurich (Switzerland) Chemical Engineer Chairman of the Audit Committee of KWS SAAT SE & Co. KGaA and KWS SE Jürgen Bolduan Einbeck Seed Breeding Employee Member of the Supervisory Board of KWS SAAT SE & Co. KGaA Chairman of the Central Works Council of KWS SAAT SE & Co. KGaA Cathrina Claas-Mühlhäuser Frankfurt am Main Businesswoman Member of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Christine Coenen Einbeck Interpreter Member of the supervisory board of KWS SAAT SE & Co. KGaA Chairwoman of the European Employees’ Committee (EEC) of KWS SAAT SE & Co. KGaA Dr. Arend Oetker Berlin Honorary member of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE 142 Annual Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2020/2021 | KWS Group9.9.2 Supervisory Board committees Committee Audit Committee Victor W. Balli Chairman/Chairwoman Members 2020/2021 Nominating Committee Dr. Marie Theres Schnell Dr. Drs. h. c. Andreas J. Büchting Jürgen Bolduan Dr. Drs. h. c. Andreas J. Büchting Cathrina Claas-Mühlhäuser Other seats Membership in other legally required supervisory boards: „ Hero AG, Lenzburg (Switzerland) (member of the Board of Administration) „ C.H. Boehringer Sohn AG & Co. KG, Ingelheim (member of the advisory group) Membership in other legally required supervisory boards: „ Zumtobel Group AG, Dornbirn (Austria) (member of the Supervisory Board and Chairwoman of the Audit Committee) 9.9.3 Executive Board Members Dr. Hagen Duenbostel Einbeck Chief Executive Officer Corn North and Southamerica, Corn China, Group Compliance, Group Strategy, Group Governance & Risk Management Dr. Léon Broers Einbeck Research & Breeding, Vegetables Dr. Felix Büchting Einbeck Cereals, Oilseed Rape/Special Crops & Organic Seed, Human Resources, Farming Dr. Peter Hofmann Einbeck Sugarbeet, Corn Europe, Cereals, Marketing & Communications Eva Kienle Göttingen Global Finance & Procurement, Global Controlling, Global Transaction Center Global Legal Services & IP, IT, KWS Digital Innovation Accelerator Einbeck, September 23, 2021 KWS SE Dr. Hagen Duenbostel | Dr. Léon Broers | Dr. Felix Büchting | Dr. Peter Hofmann | Eva Kienle 9. Other Notes | Notes for the KWS Group | Annual Financial Statements 143 KWS Group | Annual Report 2020/2021Independent Auditor’s Report To KWS SAAT SE & Co. KGaA Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that Report on the audit of the consolidated financial compliance of the consolidated financial statements and of statements and of the group management report the group management report. our audit has not led to any reservations relating to the legal Opinions Basis for the opinions We have audited the consolidated financial statements of We conducted our audit of the consolidated financial KWS SAAT SE & Co. KGaA, Einbeck, and its subsidiaries statements and of the group management report in (the Group), which comprise the consolidated statement of accordance with Sec. 317 HGB and the EU Audit Regulation comprehensive income for the fiscal year from 1 July 2020 (No 537/2014, referred to subsequently as “EU Audit to 30 June 2021, and the consolidated balance sheet as at Regulation”) and in compliance with German Generally 30 June 2021, consolidated statement of changes in equity Accepted Standards for Financial Statement Audits and consolidated cash flow statement for the fiscal year from promulgated by the Institut der Wirtschaftsprüfer [Institute 1 July 2020 to 30 June 2021, and notes to the consolidated of Public Auditors in Germany] (IDW). Our responsibilities financial statements, including a summary of significant under those requirements and principles are further accounting policies. In addition, we have audited the group described in the “Auditor’s responsibilities for the audit management report of KWS SAAT SE & Co. KGaA, which of the consolidated financial statements and of the group was combined with the management report of the Company, management report” section of our auditor’s report. We are for the fiscal year from 1 July 2020 to 30 June 2021. In independent of the group entities in accordance with the accordance with the German legal requirements, we have not requirements of European law and German commercial and audited the content of the parts of the group management professional law, and we have fulfilled our other German report listed in the appendix to the auditor’s report. professional responsibilities in accordance with these In our opinion, on the basis of the knowledge obtained in the of the EU Audit Regulation, we declare that we have not requirements. In addition, in accordance with Art. 10 (2) f) audit, provided non-audit services prohibited under Art. 5 (1) of the EU Audit Regulation. We believe that the audit evidence „ the accompanying consolidated financial statements we have obtained is sufficient and appropriate to provide comply, in all material respects, with the IFRSs as a basis for our opinions on the consolidated financial adopted by the EU, and the additional requirements of statements and on the group management report. German commercial law pursuant to Sec. 315e (1) HGB [“Handelsgesetzbuch”: German Commercial Code] and, in Key audit matters in the audit of the consolidated finan- compliance with these requirements, give a true and fair cial statements view of the assets, liabilities and financial position of the Key audit matters are those matters that, in our professional Group as at 30 June 2021 and of its financial performance judgment, were of most significance in our audit of the for the fiscal year from 1 July 2020 to 30 June 2021, and consolidated financial statements for the fiscal year from „ the accompanying group management report as a 1 July 2020 to 30 June 2021. These matters were addressed whole provides an appropriate view of the Group’s in the context of our audit of the consolidated financial position. In all material respects, this group management statements as a whole, and in forming our opinion thereon; report is consistent with the consolidated financial we do not provide a separate opinion on these matters. statements, complies with German legal requirements and appropriately presents the opportunities and Below, we describe what we consider to be the key audit risks of future development. Our opinion on the group matters: management report does not cover the content of the parts of the group management report listed in the appendix to the auditor’s report. 144 Annual Financial Statements | Independent Auditor’s Report Annual Report 2020/2021 | KWS Group(1) Revenue recognition from the sale of seed Reference to related disclosures With regard to the recognition and measurement policies Reasons why the matter was determined to be a key applied for the recognition of revenue from the sale of seed, audit matter refer to the disclosure in note 3.6 “Recognition of income In the consolidated financial statements of KWS SAAT SE & and expenses” in section 3 “Accounting Policies” in the Co. KGaA, revenue from the sale of seed is recognized notes to the consolidated financial statements. when control is transferred to the customer, allowing for contractually agreed returns. In light of the large number of (2) Impairment testing of goodwill and brands different contractual agreements and the resulting judgment exercised in assessing expected returns, we consider Reasons why the matter was determined to be a key revenue recognition to be complex and therefore to pose an audit matter elevated risk of misstatement. Pursuant to IAS 36, the internal management and reporting Auditor’s response During our audit, we considered, based on the criteria structure serves as the basis for designating cash-generating units to which the respective items of goodwill are allocated. defined in IFRS 15, the accounting policies applied in At KWS SAAT SE & Co. KGaA, goodwill and brands are accordance with the internal accounting instructions in monitored and managed at divisional level. the consolidated financial statements of KWS SAAT SE & Co. KGaA for the recognition of revenue. Our response Goodwill and brands are tested for impairment as of 30 June included an examination of whether control was transferred each year. The result of these tests is highly dependent on to the customers upon the sale of seed. We analyzed the executive directors’ estimate of future cash flows and the the process implemented by the Executive Board of respective discount rates used. KWS SAAT SE & Co. KGaA and the accounting and valuation requirements for the recognition of seed sales, In light of the definition of the cash-generating units, the in particular taking into account knowledge about actual complexity of the valuation and the judgment exercised during returns. Based on analytical procedures defined group- valuation, the impairment tests for goodwill and brands were a wide, we examined whether the significant revenue items key audit matter. for fiscal year 2020/2021 correlate with the corresponding trade receivables to identify any irregularities in the Auditor’s response development of revenue. With a view to the recognition During our audit, among other things, we obtained an of revenue on an accrual basis, we also obtained balance understanding of the methods used to carry out the confirmations from customers and performed data analyses impairment tests including an examination of the suitability to identify any irregularities in comparison with the prior of the procedure for performing an impairment test in year. We analyzed the recognition of revenue based on accordance with IAS 36. In doing so, we analyzed the the contractual arrangements on a sample basis with planning process and the operating effectiveness of the regard to the requirements of IFRS 15. Based on analytical controls implemented therein. We discussed the significant procedures carried out on historical data and the analysis planning assumptions with the executive directors and of the underlying contracts, we examined the calculation of compared these with the results and cash inflows realized expected returns of seed and their deduction from revenue. in the past. Our assessment of the results of the impairment tests as of 30 June was based among other things on a Overall, our procedures relating to the recognition comparison with general and industry-specific market of revenue from the sale of seed did not lead to any expectations underlying the expected cash inflows. Based on reservations. our understanding that even relatively small changes in the Independent Auditor’s Report | Annual Financial Statements 145 KWS Group | Annual Report 2020/2021discount rates used can at times have significant effects on Auditor’s response the amount of the business value calculated, we analyzed the The executive directors of KWS SAAT SE & Co. KGaA inputs used to determine the discount rates and reperformed regularly engage external tax experts to validate their the calculation with regard to the relevant requirements of own risk assessment. We called on our tax specialists IAS 36. In addition, we analyzed the sensitivity analyses to consider these tax assessments. Our specialists performed by the executive directors of KWS SAAT SE & also analyzed the correspondence with the competent Co. KGaA on the goodwill impairment tests in order to estimate tax authorities and the assumptions used to calculate any potential impairment risk associated with a reasonably provisions for current taxes and deferred taxes, considering possible change in one of the significant assumptions used in in particular the applicable transfer prices, based on their the valuation. knowledge and experience of how the authorities and courts currently apply the relevant legal provisions. In addition, we We obtained evidence that the divisions represent the lowest involved tax specialists from our international network with level within the Group at which independent cash inflows are the relevant knowledge of the respective local jurisdictions generated and goodwill is monitored for internal management and regulations. We critically assessed the assumptions purposes. on the recoverability of deferred tax assets, in particular by analyzing the assumptions with respect to projected Our procedures did not lead to any reservations relating to future taxable income and by comparing them to the the valuation of goodwill and brands. internal business plan. Our auditor’s response also included Reference to related disclosures statements of KWS SAAT SE & Co. KGaA on current and the disclosures in the notes to the consolidated financial With regard to the recognition and measurement policies deferred income taxes. applied for goodwill and brands, refer to the disclosure on intangible assets in section 3 “Accounting Policies” in Our procedures did not lead to any reservations relating to the notes to the consolidated financial statements. For the the recognition of current and deferred income taxes. related disclosures on judgments by the executive directors and sources of estimation uncertainty as well as the Reference to related disclosures disclosures on goodwill, refer to note 7.1 “Intangible assets” With regard to the recognition and measurement policies in section 7 “Notes to the Balance Sheet” in the notes to the applied for current and deferred income taxes, refer to consolidated financial statements. the disclosure on deferred taxes and income tax liabilities (3) Current and deferred income taxes consolidated financial statements and, with regard to the information on income taxes, no. 6.5 “Taxes” in section Reasons why the matter was determined to be a key 6 “Notes to the Income Statement” in the notes to the audit matter consolidated financial statements. in section 3 “Accounting Policies” in the notes to the The KWS SAAT SE & Co. KGaA Group operates in different legal jurisdictions with the resulting complexity of matters Other information affecting the recognition of current and deferred income The Supervisory Board is responsible for the Report of taxes, namely the transfer prices used, changes in tax the Supervisory Board. In all other respects, the executive legislation and intragroup financing. To calculate the directors are responsible for the other information. The other provision for tax obligations and deferred tax items, the information comprises the parts of the group management executive directors of KWS SAAT SE & Co. KGaA must report listed in the appendix to the auditor’s report as well as exercise judgment in assessing tax matters, estimating the other parts of the annual report, except for the audited tax risks and with regard to the realization of deferred tax consolidated financial statements and group management assets. report and our auditor’s report, in particular the Declaration 146 Annual Financial Statements | Independent Auditor’s Report Annual Report 2020/2021 | KWS Groupby Legal Representatives pursuant to Sec. 297 (2) Sentence Furthermore, the executive directors are responsible for 4 HGB, the “Foreword of the Executive Board” section of the preparation of the group management report that, the annual report and the Report of the Supervisory Board as a whole, provides an appropriate view of the Group’s pursuant to Sec. 171 (2) AktG [“Aktiengesetz”: German position and is, in all material respects, consistent with Stock Corporation Act]. We obtained a version of this other the consolidated financial statements, complies with information prior to issuing our auditor’s report. German legal requirements, and appropriately presents the opportunities and risks of future development. In Our opinions on the consolidated financial statements and addition, the executive directors are responsible for such on the group management report do not cover the other arrangements and measures (systems) as they have information, and consequently we do not express an opinion considered necessary to enable the preparation of a or any other form of assurance conclusion thereon. group management report that is in accordance with the applicable German legal requirements, and to be able to In connection with our audit, our responsibility is to read the provide sufficient appropriate evidence for the assertions other information and, in so doing, to consider whether the in the group management report. other information „ is materially inconsistent with the consolidated financial Group’s financial reporting process for the preparation of statements, with the group management report or our the consolidated financial statements and of the group The Supervisory Board is responsible for overseeing the knowledge obtained in the audit, or management report. „ otherwise appears to be materially misstated. Auditor’s responsibilities for the audit of the Responsibilities of the executive directors and the consolidated financial statements and of the group Supervisory Board for the consolidated financial management report statements and the group management report Our objectives are to obtain reasonable assurance about The executive directors are responsible for the preparation whether the consolidated financial statements as a whole of the consolidated financial statements that comply, are free from material misstatement, whether due to fraud or in all material respects, with IFRSs as adopted by error, and whether the group management report as a whole the EU and the additional requirements of German provides an appropriate view of the Group’s position and, commercial law pursuant to Sec. 315e (1) HGB, and that in all material respects, is consistent with the consolidated the consolidated financial statements, in compliance financial statements and the knowledge obtained in the with these requirements, give a true and fair view of audit, complies with the German legal requirements and the assets, liabilities, financial position and financial appropriately presents the opportunities and risks of performance of the Group. In addition, the executive future development, as well as to issue an auditor’s report directors are responsible for such internal control as they that includes our opinions on the consolidated financial have determined necessary to enable the preparation statements and on the group management report. of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance In preparing the consolidated financial statements, the with Sec. 317 HGB and the EU Audit Regulation and in executive directors are responsible for assessing the compliance with German Generally Accepted Standards Group’s ability to continue as a going concern. They for Financial Statement Audits promulgated by the Institut also have the responsibility for disclosing, as applicable, der Wirtschaftsprüfer (IDW) will always detect a material matters related to going concern. In addition, they are misstatement. Misstatements can arise from fraud or responsible for financial reporting based on the going error and are considered material if, individually or in the concern basis of accounting unless there is an intention to aggregate, they could reasonably be expected to influence liquidate the Group or to cease operations, or there is no the economic decisions of users taken on the basis of realistic alternative but to do so. these consolidated financial statements and this group management report. Independent Auditor’s Report | Annual Financial Statements 147 KWS Group | Annual Report 2020/2021We exercise professional judgment and maintain and the additional requirements of German commercial professional skepticism throughout the audit. We also: law pursuant to Sec. 315e (1) HGB. „ Obtain sufficient appropriate audit evidence regarding the „ Identify and assess the risks of material misstatement of financial information of the entities or business activities the consolidated financial statements and of the group within the Group to express opinions on the consolidated management report, whether due to fraud or error, financial statements and on the group management design and perform audit procedures responsive to those report. We are responsible for the direction, supervision risks, and obtain audit evidence that is sufficient and and performance of the group audit. We remain solely appropriate to provide a basis for our opinions. The risk responsible for our audit opinions. of not detecting a material misstatement resulting from „ Evaluate the consistency of the group management report fraud is higher than for one resulting from error, as fraud with the consolidated financial statements, its conformity may involve collusion, forgery, intentional omissions, with [German] law, and the view of the Group’s position it misrepresentations, or the override of internal control. provides. „ Obtain an understanding of internal control relevant „ Perform audit procedures on the prospective information to the audit of the consolidated financial statements presented by the executive directors in the group and of arrangements and measures (systems) relevant management report. On the basis of sufficient appropriate to the audit of the group management report in order audit evidence we evaluate, in particular, the significant to design audit procedures that are appropriate in the assumptions used by the executive directors as a basis circumstances, but not for the purpose of expressing an for the prospective information, and evaluate the proper opinion on the effectiveness of these systems. derivation of the prospective information from these „ Evaluate the appropriateness of accounting policies used assumptions. We do not express a separate opinion on by the executive directors and the reasonableness of the prospective information and on the assumptions used estimates made by the executive directors and related as a basis. There is a substantial unavoidable risk that disclosures. future events will differ materially from the prospective „ Conclude on the appropriateness of the executive information. directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a We communicate with those charged with governance material uncertainty exists related to events or conditions regarding, among other matters, the planned scope and that may cast significant doubt on the Group’s ability timing of the audit and significant audit findings, including to continue as a going concern. If we conclude that a any significant deficiencies in internal control that we identify material uncertainty exists, we are required to draw during our audit. attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the group We also provide those charged with governance with management report or, if such disclosures are inadequate, a statement that we have complied with the relevant to modify our respective opinions. Our conclusions are independence requirements, and communicate with them based on the audit evidence obtained up to the date of all relationships and other matters that may reasonably be our auditor’s report. However, future events or conditions thought to bear on our independence and where applicable, may cause the Group to cease to be able to continue as a the related safeguards. going concern. „ Evaluate the overall presentation, structure and content From the matters communicated with those charged with of the consolidated financial statements, including the governance, we determine those matters that were of disclosures, and whether the consolidated financial most significance in the audit of the consolidated financial statements present the underlying transactions and statements of the current period and are therefore the key events in a manner that the consolidated financial audit matters. We describe these matters in our auditor’s statements give a true and fair view of the assets, report unless law or regulation precludes public disclosure liabilities, financial position and financial performance of about the matter. the Group in compliance with IFRSs as adopted by the EU 148 Annual Financial Statements | Independent Auditor’s Report Annual Report 2020/2021 | KWS GroupOther legal and regulatory requirements control systems set forth in IDW Standard on Quality Control: “Requirements for Quality Control in Audit Firms” Report on the assurance in accordance with Sec. 317 (IDW QS 1). (3b) HGB on the electronic reproduction of the consoli- dated financial statements and the group management Responsibilities of the executive directors and the report prepared for publication purposes Supervisory Board for the ESEF documents Opinion The executive directors of the Company are responsible for the preparation of the ESEF documents including We have performed assurance work in accordance with the electronic reproduction of the consolidated financial Sec. 317 (3b) HGB to obtain reasonable assurance about statements and the group management report in whether the reproduction of the consolidated financial accordance with Sec. 328 (1) Sentence 4 No. 1 HGB and statements and the group management report (hereinafter for the tagging of the consolidated financial statements in the “ESEF documents”) contained in the attached accordance with Sec. 328 (1) Sentence 4 No. 2 HGB. electronic file KWS SAAT SE_KA_KLB_ESEF_30.06.2021 and prepared for publication purposes complies in all In addition, the executive directors of the Company material respects with the requirements of Sec. 328 (1) HGB are responsible for such internal control as they have for the electronic reporting format (“ESEF format”). considered necessary to enable the preparation of ESEF In accordance with German legal requirements, this documents that are free from material non-compliance assurance only extends to the conversion of the information with the requirements of Sec. 328 (1) HGB for the electronic contained in the consolidated financial statements and reporting format, whether due to fraud or error. the group management report into the ESEF format and therefore relates neither to the information contained in this The executive directors of the Company are also responsible reproduction nor to any other information contained in the for the submission of the ESEF documents together with abovementioned electronic file. the auditor’s report and the attached audited consolidated In our opinion, the reproduction of the consolidated financial report as well as other documents to be published to the statements and the group management report contained in operator of the Bundesanzeiger [German Federal Gazette]. the abovementioned attached electronic file and prepared for publication purposes complies in all material respects The Supervisory Board is responsible for overseeing the with the requirements of Sec. 328 (1) HGB for the electronic preparation of the ESEF documents as part of the financial financial statements and the audited group management reporting format. We do not express any opinion on the reporting process. information contained in this reproduction nor on any other information contained in the abovementioned file beyond Group auditor’s responsibilities for the assurance work this reasonable assurance opinion and our audit opinion on the ESEF documents on the accompanying consolidated financial statements Our objective is to obtain reasonable assurance about and the accompanying group management report for the whether the ESEF documents are free from material non- fiscal year from 1 July 2020 to 30 June 2021 contained compliance with the requirements of Sec. 328 (1) HGB, in the “Report on the audit of the consolidated financial whether due to fraud or error. We exercise professional statements and of the group management report” above. judgment and maintain professional skepticism throughout the engagement. We also: Basis for the opinion We conducted our assurance work on the reproduction „ Identify and assess the risks of material non-compliance of the consolidated financial statements and the group with the requirements of Sec. 328 (1) HGB, whether due to management report contained in the abovementioned fraud or error, design and perform assurance procedures attached electronic file in accordance with Sec. 317 (3b) HGB responsive to those risks, and obtain assurance evidence and the Exposure Draft of IDW Assurance Standard: that is sufficient and appropriate to provide a basis for our Assurance in Accordance with Sec. 317 (3b) HGB on the assurance opinion. Electronic Reproduction of Financial Statements and „ Obtain an understanding of internal control relevant Management Reports Prepared for Publication Purposes to the assurance on the ESEF documents in order to (ED IDW AsS 410). Our responsibilities under that standard design assurance procedures that are appropriate in the are further described in the “Group auditor’s responsibilities circumstances, but not for the purpose of expressing an for the assurance work on the ESEF documents” section. assurance opinion on the effectiveness of these controls. Our audit firm applied the requirements for quality Independent Auditor’s Report | Annual Financial Statements 149 KWS Group | Annual Report 2020/2021 „ Evaluate the technical validity of the ESEF documents, Furthermore, we have not audited the content of the i. e., whether the electronic file containing the ESEF following disclosures extraneous to management reports. documents meets the requirements of Delegated Disclosures extraneous to management reports are such Regulation (EU) 2019/815, in the version valid as of the disclosures that are not required pursuant to Secs. 315, reporting date, on the technical specification for this 315a HGB or Secs. 315b to 315d HGB: electronic file. „ Evaluate whether the ESEF documents enable an XHTML „ Section 2.1.3 “Responsible Business Activity” reproduction with content equivalent to the audited „ Section 2.4 “Environmental Report” consolidated financial statements and to the audited „ Section 2.5.2 “Occupational Health and Safety” group management report. „ Section 2.5.3 “Recruitment and Employee Loyalty” „ Evaluate whether the tagging of the ESEF documents with „ Section 2.5.4 “Qualification, Further Training and Inline XBRL technology (iXBRL) enables an appropriate Development” and complete machine-readable XBRL copy of the „ Section 2.5.5 “Labor and Social Standards” XHTML reproduction. „ Section 2.6.3 “Business Ethics and Compliance” „ Section 2.6.4 “Responsibility in the Supply Chain” Further information pursuant to Art. 10 of the „ Section 2.7 “Social Report”. EU Audit Regulation We were elected as group auditor by the Annual Hanover, 23 September 2021 Shareholders’ Meeting on 16 December 2020. We were engaged by the Supervisory Board on 11 July 2021. We Ernst & Young GmbH have been the group auditor of KWS SAAT SE & Co. KGaA Wirtschaftsprüfungsgesellschaft without interruption since fiscal year 2016/2017. We declare that the opinions expressed in this auditor’s report are consistent with the additional report to the audit Ludwig Dr. Janze committee pursuant to Art. 11 of the EU Audit Regulation Wirtschaftsprüfer Wirtschaftsprüfer (long-form audit report). [German Public Auditor] [German Public Auditor] German Public Auditor responsible for the engagement The German Public Auditor responsible for the engagement is Dr. Christian Janze. Appendix to the auditor’s report: Parts of the group management report whose content is unaudited We have not audited the content of the following parts of the group management report: „ The combined non-financial declaration for KWS SAAT SE & Co. KGaA and the KWS Group contained in section 2.10.2 “Combined Non-Financial Declaration for the KWS SE & Co. KGaA Group” of the group management report, including any information in other sections referred to in this declaration. The respective sections are marked “NFE” in the margin. „ The information in section 2.6.1 “Corporate Governance Report and Declaration on Corporate Governance.” 150 Annual Financial Statements | Independent Auditor’s Report Annual Report 2020/2021 | KWS Group Independent Auditor’s Limited Assurance Report The assurance engagement performed by Ernst & Young (EY) relates exclusively to the German PDF version of the combined non-financial statement 2020/2021 of KWS SAAT SE & Co. KGaA. The following text is a translation of the original German Independent Assurance Report. To KWS SAAT SE & Co. KGaA, Einbeck We have performed a limited assurance engagement on the Our audit firm applies the national statutory regulations group non-financial statement of KWS SAAT SE & Co. KGaA and professional pronouncements for quality control, in according to § 315b HGB (“Handelsgesetzbuch”: German particular the by-laws regulating the rights and duties of Commercial Code), which is combined with the  non-financial Wirtschaftsprüfer and vereidigte Buchprüfer in the exercise statement of the parent company according to § 289b HGB, of their profession [Berufssatzung für Wirtschaftsprüfer consisting of the chapter “2.10.2 Combined Non-Financial und vereidigte Buchprüfer] as well as the IDW Standard on Declaration for the KWS Group” in the combined Quality Control 1: Requirements for Quality Control in audit management report and the chapters “2.1 Fundamentals of firms [IDW Qualitätssicherungsstandard 1: Anforderungen the KWS Group”, “2.4.1 Product Innovations”, “2.4.2 Product an die Qualitätssicherung in der Wirtschaftsprüferpraxis Quality and Safety”, “2.4.3 Emissions and Water”, (IDW QS 1)]. “2.5.2 Occupational Health and Safety”, “2.5.3 Recruitment and Employee Loyalty”, “2.5.4 Qualification, Further Training Auditor’s responsibility and Development”, “2.5.5 Labor and Social Standards”, Our responsibility is to express a limited assurance “2.6.3 Business Ethics and Compliance”, “2.6.4 Responsibility conclusion on the combined non-financial statement based in the supply chain” and “2.7.1 Use of Genetic Resources” on the assurance engagement we have performed. in the combined management report being incorporated by reference (hereafter combined non-financial statement), for We conducted our assurance engagement in accordance the reporting period from 1 July 2020 to 30 June 2021. with the International Standard on Assurance Engagements Management’s responsibility than Audits or Reviews of Historical Financial Information, The legal representatives of the Company are responsible issued by the International Auditing and Assurance for the preparation of the combined non-financial statement Standards Board (IAASB). This Standard requires that we in accordance with §§ 315c in conjunction with 289c to plan and perform the assurance engagement to obtain (ISAE) 3000 (Revised): Assurance Engagements other 289e HGB. limited assurance about whether the combined non- financial statement of the Company has been prepared, This responsibility includes the selection and application of in all material respects, in accordance with §§ 315c in appropriate methods to prepare the combined non-financial conjunction with 289c to 289e HGB. In a limited assurance statement as well as making assumptions and estimates engagement the assurance procedures are less in extent related to individual disclosures, which are reasonable in than for a reasonable assurance engagement and therefore the circumstances. Furthermore, the legal representatives a substantially lower level of assurance is obtained. The are responsible for such internal controls that they have assurance procedures selected depend on the auditor's considered necessary to enable the preparation of a professional judgment. combined non-financial statement that is free from material misstatement, whether due to fraud or error. Within the scope of our assurance engagement, which has Auditor’s declaration relating to independence and performed amongst others the following assurance and been conducted between June and September 2021, we quality control other procedures: We are independent from the Company in accordance with the provisions under German commercial law and „ Inquiries of employees and inspection of documents professional requirements, and we have fulfilled our other regarding the selection of topics for the combined non- professional responsibilities in accordance with these financial statement, the risk assessment and the concepts requirements. of the parent company and the group for the topics that have been identified as material, Independent Auditor’s Report | Annual Financial Statements 151 KWS Group | Annual Report 2020/2021  „ Inquiries of employees responsible for data capture and Engagement terms and liability consolidation as well as the preparation of the combined The “General Engagement Terms for Wirtschaftsprüfer non-financial statement, to evaluate the reporting and Wirtschaftsprüfungsgesellschaften [German Public processes, the data capture and compilation methods Auditors and Public Audit Firms]” dated 1 January 2017 are as well as internal controls to the extent relevant for the applicable to this engagement and also govern our relations assurance of the combined non-financial statement, with third parties in the context of this engagement (www. „ Identification of likely risks of material misstatement in the de.ey.com/general-engagement-terms). In addition, please combined non-financial statement, refer to the liability provisions contained there in no. 9 and „ Inspection of relevant documentation of the systems to the exclusion of liability towards third parties. We assume and processes for compiling, aggregating and validating no responsibility, liability or other obligations towards third relevant data in the reporting period and testing such parties unless we have concluded a written agreement to documentation on a sample basis, the contrary with the respective third party or liability cannot „ Analytical evaluation of disclosures of the parent company effectively be precluded. and on Group level as well as selected sites relating to the quality of the reported data, We make express reference to the fact that we do „ Inquiries and inspection of documents on a sample not update the assurance report to reflect events or basis relating to the collection and reporting of selected circumstances arising after it was issued unless required to qualitative statements and data, do so by law. It is the sole responsibility of anyone taking „ Evaluation of the presentation of disclosures in the note of the result of our assurance engagement summarized combined non-financial statement. in this assurance report to decide whether and in what way Assurance conclusion this result is useful or suitable for their purposes and to supplement, verify or update it by means of their own review Based on our assurance procedures performed and procedures. assurance evidence obtained, nothing has come to our attention that causes us to believe that the combined Munich, 23 September 2021 non-financial statement of KWS SAAT SE & Co. KGaA for the period from 1 July 2020 to 30 June 2021 has not Ernst & Young GmbH been prepared, in all material respects, in accordance with Wirtschaftsprüfungsgesellschaft §§ 315c in conjunction with 289c to 289e HGB. Intended use of the assurance report We issue this report on the basis of the engagement Nicole Richter Annette Johne agreed with KWS SAAT SE & Co. KGaA. The assurance Wirtschaftsprüferin Wirtschaftsprüferin engagement has been performed for the purposes of the [German Public Auditor] [German Public Auditor] Company and the report is solely intended to inform the Company as to the results of the assurance engagement and must not be used for purposes other than those intended. The report is not intended to provide third parties with support in making (financial) decisions. 152 Annual Financial Statements | Independent Auditor’s Report Annual Report 2020/2021 | KWS Group Declaration by Legal Representatives We declare to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, financial position and earnings of the Group in compliance with the generally accepted standards of consolidated accounting, and that an accurate picture of the course of business, including business results, and the Group’s situation is conveyed by the Group Management Report, which is combined with the Management Report of KWS SAAT SE & Co. KGaA, and that it describes the main opportunities and risks of the Group’s anticipated development. Einbeck, 23 September 2021 KWS SE Hagen Duenbostel Léon Broers Felix Büchting Peter Hofmann Eva Kienle Declaration by Legal Representatives 153 KWS Group | Annual Report 2020/2021Additional Information Financial calendar Date November 18, 2021 December 2, 2021 February 14, 2022 May 12, 2022 September 28, 2022 KWS share Key data of KWS SAAT SE & Co. KGaA Securities identification number ISIN Stock exchange identifier Transparency level Index Share class Number of shares Dividend Quarterly Report Q1 2021/2022 Annual Shareholders’ Meeting Semiannual Report 2021/2022 Quarterly Report 9M 2021/2022 Publication of 2021/2022 financial statements, annual press and analyst conference 707400 DE0007074007 KWS Prime Standard SDAX Non-par 33,000,000 Dividend payment and dividend ratios of the past ten years 0.60 0.60 0.60 0.60 0.56 0.80 0.64 0.64 0.70 0.67 25% 20% 21.7 19.6 24.7 23.6 23.2 24.3 23.9 21.6 21.2 21.3 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 Dividend proposal 2021 Dividend payment in € Dividend ratio (total dividends/net income) in % 154 Additional Information Annual Report 2020/2021 | KWS Group About this report The Annual Report can be downloaded on our Internet sites at www.kws.de and www.kws.com. The KWS Group´s fiscal year begins on July 1 and ends on June 30. Unless otherwise specified, figures in parentheses relate to the same period or date in the previous year. There may be rounding differences for percentages and numbers. Contact Investor Relations and Press Financial Press Peter Vogt Gina Wied press@kws.com Sustainability Marcel Agena Editor KWS SAAT SE & Co. KGaA sustainability@kws.com Grimsehlstrasse 31 investor.relations@kws.com Phone: +49 5561 311-1427 Phone: +49 5561 311-1393 P.O. Box 1463 Phone: +49 (0) 30 816914-490 Safe harbor statement 37555 Einbeck Germany This Annual Report includes forward-looking statements based on the assumptions and estimates of KWS SAAT SE & Co. KGaA’s management. These forward-looking statements may be identified by words such as “forecast,” “assume,” “believe,”“assess,” “expect,” “intend,” “can/may/might,” “plan,” “should” or similar expressions. These statements are based on current assessments and forecasts of the Executive Board and the information currently available to it and are subject to certain elements of uncertainty, risks and other factors that may result in significant deviations between expectations and actual circumstances. These factors may be, for example, changes in the overall economic situation, the general statutory and regulatory framework, and the industry. KWS SAAT SE & Co. KGaA does not warrant that the future development and actual results achieved in the future match the assumptions and estimates expressed in this Annual Report and shall not assume any liability if they do not. Forward- looking statements must therefore not be regarded as a guarantee or pledge that the developments or events they describe will actually occur. KWS SAAT SE & Co. KGaA does not intend, nor does it assume any obligation, to update forward-looking statements in order to adapt them to events or developments after the date of this report. Photos/illustrations Manuel Babolin Paul Epp Andrea Favarin Frank Stefan Kimmel Karsten Koch Roman Thomas Date of publication: October 20, 2021 This translation of the original German version of the Annual Report has been prepared for the convenience of our English-speaking shareholders. The German version is legally binding. 1 2 0 2 | 0 2 0 2 t r o p e R l a u n n A KWS SAAT SE & Co. KGaA Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck/Germany www.kws.com 

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