4.1 Report of the Supervisory Board

In this report, the Supervisory Board (the Board) provides a summary of its supervisory work performed in the 2023 financial year.

Message from the Chairman

In 2023, Nedap advanced its sustainability journey with a double materiality assessment and engaging employees through initiatives like the Step Up! Sustainability day, the company-wide Sustainability Week and an internal podcast series, thereby deepening organisation-wide sustainability awareness and practices.

At the 2023 annual general meeting, Jo van Engelen was reappointed to the Board for a final two- year term, while Marijn Pijnenborg was reappointed for four years. With the appointment of Sicco Santema at that same meeting, we have successfully completed the search for a new Board member. Sicco brings extensive management experience and strategic development expertise, particularly in B2B supply and the marketing of complex products and services. Additionally, Sicco’s experience at the intersection of education, innovation and business, coupled with his vast network in knowledge institutions, positions him to effectively bridge the gap between these institutions and the business sector, continuing the work of Jo after his departure in 2025.

The Board congratulates the Board of Directors and the employees of Nedap on the results in the 2023 financial year and is grateful for their relentless efforts and ability to deliver a strong performance in a year of geopolitical unrest, ongoing supply chain challenges and inflation. Its gratitude also goes to the shareholders and customers for placing their trust in the company. The Board is confident that this commitment and loyalty will help Nedap seize the opportunities of the future. I would also like to express my gratitude to my colleagues on the Board for their valuable and collaborative efforts in the meetings and conversations.

Peter van Bommel

Details of the members of the Supervisory Board

Relevant additional positions

• Non-executive director at SES S.A. (listed on Euronext Paris and Luxembourg)

• Member of the Board of Stichting Bernhoven

• Chair of the advisory board of the Executive Master of Finance & Control programme at Amsterdam Business School (University of Amsterdam)

• Member of the Supervisory Board of Stichting Glorieux

• Member of the advisory board of the University of Amsterdam’s Faculty of Economics and Business

Supervisory Board memberships

• Chair of the Supervisory Board of Aalberts N.V.

Relevant additional positions

• Emeritus professor of Business Development, Faculty of Economics and Business, University of Groningen

Supervisory Board memberships

• Supervisory Board member at Espria

• Supervisory Board member at Pensioenfonds Zorg & Welzijn

• Board member at Stichting Triade (UMCG)

Relevant additional positions

• Founder and director of Winc Academy

• Founder of and investor in Boralis B.V.

• Member of the board of Tanka Foundation

• Member of the advisory board of the University of Amsterdam’s Faculty of Economics and Business

Supervisory Board memberships

None

Relevant additional positions

• Member (deputy) of Netherlands Enterprise Court at the Amsterdam Court of Appeal

• Partner at Scheltema Tammenoms

• Chair of the Netherlands Eye Association

Supervisory Board memberships

• Vice-chair of the Supervisory Board of De Nederlandsche Bank N.V. (Dutch central bank) (until September 2023)

• Member of the Supervisory Board of Stichting Open Nederland

• Vice-chair of the Supervisory Board of the Netherlands Bach Society

• Vice-chair of the Supervisory Board of the Nederlands Fotomuseum

Relevant additional positions

• Board member of Stichting Aethos, promoting the 'reuse' and 'remanufacture' of aircraft materials

Supervisory Board memberships

None

Supervisory Board composition and skills matrix

The Board supervises, evaluates progress and performance, maintains a healthy and transparent system of checks and balances, and assists the Board of Directors with advice where necessary. The focus is on long-term sustainable value creation in the interest of all of the company’s stakeholders. The composition of the Board is in keeping with the profile published on Nedap’s website. The composition is as such that the members of the Board are able to operate independently of and critically towards each other, the Board of Directors, and any kind of particular interest. During the annual general meeting of 13 April 2023, Mr Van Engelen was reappointed as member of the Supervisory Board for a final term of two years. For the reasons for reappointment, please refer to the 2023 AGM agenda. In addition, Ms Pijnenborg was reappointed as Supervisory Board member for a four-year term. The annual general meeting also appointed Mr Santema as member of the Supervisory Board for a four-year term. For more information about the rotation schedule, please refer to our Corporate Governance webpage.

Supervisory Board composition and skills matrix

^{+ = possesses a sufficient level of expertise, skills and experience in the area and can make a balanced impartial judgment
++ = in addition, acknowledged as an expert in the respective areas (max. 5 per person)}

^{Explanatory notes:
The purpose of this matrix is to provide an overview of the experience and competencies that Nedap deems most relevant to its stakeholders.
The matrix represents the extent to which the company's Supervisory Board members have such experience and competencies.
For the purpose of creating this overview, each of the members of the Supervisory Board may have a maximum of five specific areas of expertise, and they are considered experts within the respective domain.}

The composition of the Supervisory Board meets current gender diversity requirements. The Board believes that the current composition constitutes a good balance between the various required skills, relevant knowledge, and experience, enabling the Board to adequately fulfil its statutory duty of supervising and advising the Board of Directors. In the Board’s view, the Board meets the requirements of independence, as specified in best practice provisions 2.1.7 to 2.1.9 inclusive of the Corporate Governance Code.

Financial statements

PricewaterhouseCoopers Accountants N.V. (PwC) audited the financial statements and issued a comprehensive unqualified auditor's report, which is included in the report in section 5.3 ‘Audit certificate issued by the independent auditor'. The auditor also had the usual final evaluation with the Board of Directors and Group Controlling department this year, which was attended by the Audit & Risk Committee. The full Board subsequently discussed the auditor’s report and the 2023 report with the Board of Directors and the auditor, covering topics such as integrity and the quality of the company’s financial reporting, material considerations regarding reporting, and material risks and uncertainties. The outcome of this discussion was incorporated into the audit certificate where necessary. No further specifics were raised in a subsequent meeting with the auditor, which was not attended by the Board of Directors.

The Board is briefed on the company’s operations on a regular basis through financial reports with explanatory notes from the Board of Directors.

In addition, the Board receives detailed quarterly reports on the financial results achieved over the previous three months and progress made on the annual plans. The Board had regular meetings with managers and other employees from the various business units again this year to get a good idea of developments in the market and at each business unit. Based on the reports and these meetings, the Board is confident that the 2023 annual report provides a solid foundation for the Board’s accountability vis-à-vis its supervision of the Board of Directors’ management of the company.

The Board therefore advises the annual general meeting to adopt the 2023 financial statements.

Dividend

The Board of Directors and the Board consider it prudent to pay a dividend of €3.20 per share. Nedap maintains the required reserves to be able to guarantee its continuity amidst difficult market conditions and stay on the strategic course that the company has set.

As required under article 43.3 of Nedap’s articles of association, any profit not added to the reserves as per article 43.1 of Nedap’s articles of association is paid out to holders of ordinary shares in Nedap. As a result, the total amount available for payment will be €21.0 million, which means a payment of €3.20 per ordinary share (€3.00 in 2022).

Strategy

In 2023, the Supervisory Board closely monitored and contributed to Nedap’s strategic development, particularly with regard to the Step Up! strategy and its impact on driving growth across various company propositions. This strategy is rooted in collaboration, leveraging the full potential within the organisation.

Throughout the year, the Board supported and advised the Board of Directors in refining and executing this strategy. Regular discussions on sustainable long-term value creation and strategic focus and impact were held during board meetings. The Board’s involvement extended to various strategy sessions with the Board of Directors, business unit leaders, and the Markets & Propositions team. These sessions were an integral part in the development and implementation of strategies for the four key market positions identified - Healthcare, Livestock Management, Retail and Security Management. The Board assessed these strategies, ensuring alignment with Nedap's growth objectives and market realities.

In the company’s Strategic Calendar, the July Board session serves as the annual meeting where progress in the Step Up! plan is reviewed in detail. This year discussions centred around the portfolio of propositions for each key market position, scrutinising their current phase (Create, Scale or Core), goals, success indicators, management considerations, market adoption, competitive positioning and strategic risks. The Board is content with the implementation of the strategy, as well as the progress in executing the strategic roadmaps of business units and the Markets & Propositions team. The Board recognised the importance of Nedap making clear choices and decisions as part of implementing the strategic plan, exemplified by the acquisition of MediKIT, aligning with Nedap’s Healthcare strategy, the sale of Nedap Beveiligingstechniek B.V., whose operations no longer coincided with Nedap’s core activities and the scale-down of the Flux and Pigs propositions.

Leadership development was another focal point, aligning with the importance of leadership within the Nedap culture, a key factor in successful strategic execution.

In conclusion, the Board is satisfied with Nedap’s progress, particularly with the emergent strategy development approach that has been adopted. The Board welcomes the increased focus on internal control measures, preserving the organisation’s flexibility and robust soft controls while also integrating hard controls. The discussions with business unit leaders and the Markets & Propositions team underlined the importance of horizontal learning and the recognition of Nedap as more than the sum of its parts. This holistic approach, balancing professionalisation with Nedap’s unique culture, positions the company well for future growth and success. Going forward, the Board has every confidence in Nedap’s strategic direction and the capabilities of the company to successfully implement the strategy.

Sustainability as part of the long-term strategy

The Board believes that contributing to a sustainable economy is an integral responsibility for Nedap. This belief underscores the importance of recognising that actions taken in the present are crucial for securing a sustainable future globally. For the Board, advancing Nedap’s business strategies towards enhanced sustainability is a key priority, seamlessly integrated into the fabric of its business model. By adopting relevant and inspiring performance indicators, Nedap is positioned to make a significant impact on sustainability, in line with its long-term perspective.

Over the past year, sustainability policy plans and initiatives were regularly discussed with the Board. For more information, see sections 1.6 'Sustainability' and 2.3 'Progress on our sustainable impact' and the paragraph on Consolidated non-financial statement in section 3.3.

In 2024, in anticipation of the Corporate Sustainability Reporting Directive, the Board will continue to keep close track of the further integration of sustainability into the company’s long-term strategy. In line with the Board’s duty to supervise the integrity and quality of sustainability reporting by Nedap, the Board will be looking specifically at responsibilities and obligations with respect to sustainability and transparency. Additionally, the Board will continue to engage with the company on transparently achieving the sustainability targets.

Diversity, Equity and Inclusion (DEI)

The Board acknowledges and commends the significant progress made by Nedap in developing a comprehensive DEI story, a narrative that resonates across every level, from the Board of Directors and the Board itself to every employee within the organisation. The Board appreciates the thoughtful and effective approach reflected in this DEI policy, as established by the Board of Directors in collaboration with senior management and the DEI taskforce. This policy has received the Board’s approval and has been formally adopted. The progress in DEI initiatives represents an important step in Nedap’s journey towards greater inclusivity, equity and representation at all organisational levels.

Collaboration and responsibilities

In the financial year, the Board continued its practice of engaging in discussions with both managers and employees across the various business units. These dialogues continued to foster new insights and further enhanced the dimensions of communication and collaboration between the business units, the Board of Directors and the Board. Similar to previous years, ongoing conversations with the works council were instrumental in providing the Board with a more comprehensive understanding of developments throughout the company.

In 2023, the Board again participated in Nedap Life online sessions with Nedap employees globally. These sessions remained a vital platform for gaining insights into the company’s distinctive culture and for experiencing first-hand the energy and positivity of Nedap’s workforce. The Board appreciates the efforts and contributions of employees that make these sessions both meaningful and successful. Additionally, in 2023, the Board valued the Technology Day organised by Nedap’s technical experts. The Board found the Technology Day to be an enriching experience, offering valuable insights into the technological advancements driving the industry and furthering the Board’s understanding of the company’s technical expertise and innovation capabilities.

Risk management

In 2023, the Board maintained its active oversight of risk management at Nedap, with a particular focus on the evolving landscape of technological advancements and business unit dynamics. Regular reviews of the principal risks and trends were conducted, consistent with the Board’s commitment to thorough supervisory duties. Nedap made significant progress in enhancing its risk management approach, notably through the formation of an internal risk taskforce and by taking substantial steps to further integrate risk management into its strategic planning process. This initiative involved comprehensive engagement with business units and departments.

The year saw a shift in risk priorities, with a reduction in supply chain risks and advancements in talent management. However, the pace of technological change has introduced increased risks. The Board also took note of emerging compliance risks due to evolving and increasing regulations. Nedap has maintained its focus on IT business continuity and cybersecurity risks. The organisation has undertaken various steps, including external tests, to strengthen its IT business continuity. Furthermore, to enhance employees’ awareness of cybersecurity risks, Nedap has continued to implement measures such as security awareness training through e-learning programmes, along with the execution of a cyber crisis management exercise. In addition, the company has expanded its cybersecurity strategy by further deploying an advanced enterprise-level security solution, aimed at detecting and mitigating cyber threats.

Notably, the introduction of the double materiality analysis process represented a key step in integrating risk and opportunity assessments and considering both financial and non-financial impacts. This approach aimed to yield new insights and strengthen the overall risk management framework. The Board recognised the importance of making these analyses actionable and relevant at various organisational levels.

In summary, the Board acknowledged the structured and proactive approach adopted by the organisation in risk management and endorsed the updated Risk Control Framework, as detailed in chapter 3 'Risk & Governance', reaffirming its commitment to comprehensive and effective risk management at Nedap.

Committees

The Board is experiencing increasing regulatory pressure in various areas, which takes up much of the full Board’s time. In December 2023, the Board decided to establish two committees, the Audit & Risk Committee and the Remuneration Committee, as of 1 January 2024. The aim of the committees is to keep the execution of tasks, decision-making, and meetings of the Board efficient and effective, with the right focus.

Internal auditor

The internal audit function is intended to provide independent assurance on the effectiveness of governance, risk management and control processes, including compliance with and effectiveness of internal controls, thus adhering to best practice principle 1.3 of the Corporate Governance Code.

The internal audit function was set up bearing in mind the Institute of Internal Auditors’ (IIA) Three Lines Model, which is used to manage governance and the risk management structure within an organisation and is aligned with the COSO framework for internal control. In this Three Lines Model, the internal auditor is the third line.

The internal audit function reports to Nedap’s CEO. The Board oversees the internal audit function and has regular contact with the internal auditor. Nedap’s Board of Directors assesses the internal auditor’s performance on an annual basis, for which they also seek the Board’s opinion.

In early 2023, the Board reviewed and approved the work plan for the year 2023 in collaboration with the internal auditor. This plan was developed with input from the external auditor. Throughout the year, the Board was regularly updated on the progress of the various audit activities undertaken by the internal auditor. Additionally, the internal auditor kept the external auditor informed about the ongoing progress. The outcomes of the 2023 work plan are scheduled for evaluation in early 2024. The internal control activities in 2023 primarily focused on SaaS subscription management and integrity investigations, and also included follow-up actions from previous audits and analyses.

Meetings and attendance

Throughout the year, the Board had six ordinary meetings with the Board of Directors. Three brief meetings were held to discuss the quarterly updates and the half-yearly report. As mentioned above, the Board was also involved in the strategy event held in July 2023 to discuss progress made on the Step Up! plan. All the above meetings were attended by all the members of the Board. Several of the ordinary meetings were preceded by internal deliberations by the Board. The brief meetings were conducted online, while the ordinary meetings primarily took place in person, with some being hybrid. Away from the meetings, the Board regularly liaised with the Board of Directors by email, telephone or video call to discuss various topics. Where relevant, Supervisory Board members paid working visits to the organisation to keep up to date with the latest state of affairs at the company and with market developments. The intensive and open communications enabled timely and prudent decision-making.

Education

In 2023, the Board identified key areas where both the Board of Directors and the Board require further education, particularly in ESG governance and technological developments. In line with this, a workshop centred on double materiality assessment in the context of ESG governance was held in September 2023, facilitated by a renowned global professional services firm. Additionally, a technology day, with a primary focus on RFID technology, to enhance our understanding of current technological trends was organised by Nedap experts. These educational activities align with the best practice provisions from the corporate governance code, reflecting our dedication to maintaining expertise in sustainability and digitalisation, which is crucial for effective corporate governance.

Evaluation and appraisal

One of the principles of the Dutch Corporate Governance Code says that the Board is collectively responsible for its own performance. In this context, the Dutch Corporate Governance Code considers self-evaluation a best practice. In 2023, the Supervisory Board’s self-evaluation of its performance was organised by an external adviser. The external adviser initiated the self-evaluation with interviews with Nedap’s senior management and a visit to the headquarters in Groenlo. The adviser then conducted interviews with members of both the Board of Directors and the Board, supplemented by a review of the company’s articles of association and regulations. Upon analysing the findings, a final presentation was prepared and discussed with the Board. The Board in turn shared the key findings with the Board of Directors.

The main takeaways are the following:

• Nedap’s governance is well-developed, with a balanced approach between soft controls and hard controls, essential for managing growth.

• The Board is appropriately composed, ensuring efficient performance with mutual respect and recognition from the Board of Directors.

• Roles within the Board are adequately filled, emphasising a strong understanding of key business risks and a proactive risk management approach.

• Board meetings are thoroughly prepared and conducted in an organised manner, ensuring comprehensive discussions and effective follow-up.

• As Nedap enters a new phase of growth, the Board has played a significant role in refining and overseeing the strategic process.

• The anticipated growth of Nedap requires careful attention to the development and continuity of senior management.

• The process of professionalisation and change is ongoing, with the Board of Directors playing a key role. This area continues to receive the Supervisory Board’s attentive guidance and support.

Without the Board of Directors present, the Board evaluated and assessed the performance of the Board of Directors and the individual members. In the Board’s view, the Board of Directors demonstrated a robust and effective performance in 2023. The evaluation of the Board and its individual members took place by way of individual meetings with the Board of Directors as a whole and with the individual members, a delegation of the Nedap Alignment team and the works council. Topics such as communication with the Supervisory Board, individual targets, cooperation within the Board, the Nedap Alignment team and the business units and staffing departments, as well as potential company risks and culture and behaviour were discussed.

Other

Finally, further topics covered by the Board over the past year include PwC’s audit plan for 2023, the implementation of the updated 2022 Dutch Corporate Governance Code, business continuity management, and operational and legal affairs. The Board has signed off on the tax policy, as set out in the annual report chapter 3 'Risk & Governance', the amended insider trading policy and the amended whistle-blower policy.

Groenlo, the Netherlands, 21 February 2024

The Supervisory Board
Mr P. A. M. van Bommel, chairman
Mr J. M. L. van Engelen, vice-chairman
Ms M. Pijnenborg
Mr S. C. Santema
Ms M. A. Scheltema