Minutes of the Agri Invest A/S Annual
General Meeting on 2 May 2013

The Chairman bid welcome and the Board recommended Mogens Olesen as the AGM Chairman.

1. Selection of the AGM Chairman.
Mogens Olesen was selected and he declared that the meeting was lawfully convened. Birthe Dencker was selected as secretary and the accountants from Agri Nord were se-lected as vote counters.

2. The Board’s Report on the company’s activities during the past year.
CM: The group structure is unchanged from last year.
The land is our greatest asset. We are in the process of selling unwanted land and we are trying to exchange land, so that we have land together where possible.
We have established a “waste bin company” so that we can go into the areas that we have documentation for and apply for land subsidies. If there are problems, it does not affect the other companies. We need to have the documentation in place for the neighbours who are inflexible and we are waiting for the land distribution reform to get the last 20% in place.

Oravita: Westernmost and largest area – where we have a 100% degree of utilization. 570 HA are leased out for grazing, as it is very hilly. We have a very talented site manager here.

Mizil/Cilibia: Slightly smaller harvest area and a 72% degree of utilization.

Videle: Is our “problem child” with the lowest degree of utilization. We have leased out 650 HA and are looking to exchange the land here. We have the documentation in place and we can therefore have a slightly tougher approach to the neighbours, so that we can get more operation.

We have an overall utilization degree of 80% on all sites. Current land status:
Oravita = 3680 HA
Mizil/Cilibia = 3256 HA
Videle = 3779 HA

Furthermore, we have 362 HA for sale in Buzau North and 192 HA in Pietrosani.

The development of land under cultivation has gone from almost 1000 HA in 2008 to al-most 8000 HA in 2013.

The Romanian banks have shown more interest and been more flexible, and in 2012 we sold 550 HA to Romanians – bank-financed.

In 2012/2013, the crop composition consists of the following:
35% of corn, 1% sunflower, 15% rapeseed, 46% wheat and 3% winter barley.

As 80% of the cultivated land has been worked for more than 3 years, it means that there are fewer weeds in these areas. State subsidy for the purchase of lime has disappeared.

 

Site activities:

Videle: Is now finished and has a closed grain barn for harvesting. The residential property, workshop and administration have also been completed and the site manager now lives on the site.

Racasdia: The grain square is vulnerable when it is open, so it has had sides and a roof built on and it is also used as a machine house.

Amaru: The site here is finished. At all three sites we now have covered facilities for the intake conveyor/elevator systems and automated control of routing for both intake and outlet directly into/from silos or around the cleaner and dryer.

We have set-up laboratories on all sites and we have the equipment to measure and sell our crops directly. We also have a 1600 amp emergency generator at all 3 sites, as security and when the power networks do not work.

Our storage capacity is now a total of 53,000 tons.

We are in the process of rainwater drainage, which is important in relation to the heavy rainfall – otherwise there will be no major construction activities in 2013.

 

Organisation:

Last spring we recruited a new site manager at Oravita – a clear strengthening.
The number of employees has grown by 3 people and there has been a particular need in the west, where we have the largest area.

Our controller Mikkel Ludvigsen moved to Denmark and we have employed Ovidiu Nechitoi to replace him as per 1/12/2012.

Our main focus areas are; Operation, soil compaction and processing external investors.

There is currently great interest in buying and investing in land in Romania, and we have received many inquiries from agents and serious investors. If anything really interesting comes along we may be ready to act.

Questions/discussion about the report:
Bo Arvin: Regarding hectare subsidy – in the event of a dispute, do we receive any subsi-dy while the case is running?

RD: No, we don’t.

Mikkel Søndergaard: What is the strategy in relation to the Initial Public Offering?

CM: We have had this up before, but the conclusion according to external advisors is that we are too small – we have to be above one DKK billion. Also, we have to have had a track record of at least three good years and several prerequisites must be met before this is possible.

Jens Møller Nielsen: Have we made money from the land sold in the North?
RD: Yes, equivalent to an annual rate of approx. 5-6%. It has not been an incorrect acqui-sition, these are areas where we chose not to invest and to concentrate on the three exist-ing sites, and it is relatively small areas that were sold.

Ole Skårhøj: What is the general price development of land acquisition?

CM: Large areas of collective land are hard to find and there are increasing prices on larg-er areas.

Mikkel Søndergaard: Should we still be self-financing or should we instead borrow from banks that have become more willing to negotiate?

RD: No, we are still sticking to the strategy and want to be primarily self-financing.

Is the approx. 3000 HA of land a suitable size?
CM: Yes, the Board is very satisfied with the size and actually believe that the optimum is 3-4000 HA. It is important that we have land in several places and not just one place tak-ing in account vulnerability in terms of climate. One site manager cannot handle such a large area. Perhaps machine utilization could be optimized, but there are very low transport costs when we move the machines between our sites.

3. Presentation by Richardt Duus of the audited Annual Report and Management Report for approval

We were prouder of the economy last year and we hope that we won’t have to present results like 2012 again.

The year’s poor performance is mainly due to the weather – statically, it was the driest July in the last 70 years and it reduced our harvest quite substantially. We do not think it will happen again soon, but if that were the case, we must of course look at the strategy again.

What characterizes the figures most is the crop yield. As a result of the drought, the wheat progression stopped in the middle of the period, but corn gave the greatest losses by far. It looked really good very far into the season, but the end result was very disappointing. The yield in Mizil was hardest hit with only 1½ tons per HA. The result is also influenced by the fact that almost all the rapeseed, 1200 HA, dried away in the autumn of 2011 and there-fore had to be re-sown in spring 2012.

Example showing the yields for corn and wheat versus budget:

 

BUDGET 2012 vs. ACTUAL 2012:
Budgeted / Actual gross yield corn:
     6.6 T/HA * 1120 DKK/T = 7,392 DKK/HA
2.44 T/HA * 1560 DKK/T = 3,806 DKK/HA

Budgeted / Actual gross yield wheat:
     6 /HA * 1050 DKK/T = 6,300 DKK/HA
3.47 T/HA * 1580 DKK/T = 5,483 DKK/HA

We lost DKK 3.5 million on wheat and DKK 12.8 million on corn – a total of DKK 16-17 mil-lion compared to the budget.

A lot of money was spent on soil improvements and soil preparation, and we have used 3300 tons of agricultural lime. The price fluctuates from DKK 170 per ton in the east to DKK 64 per ton in the west. There is a moderate need for lime, so we have to use it.

We end up with results with a + in the front. It is the gross yield that is the reason for the bad accounts and not higher costs.

Other operating income is largely consulting income paid by internal subsidiaries for other reasons. Personnel costs were actually reduced by DKK 600,000.

 

Financial income is to a high degree interest income and financial expenses are to a high degree exchange rate losses and paper money. Our valuables are always measured in EUR and therefore an exchange rate loss between the companies of DKK 1.4 mill. was not actual.

Assets increased in value by DKK 40 million since last year – made by an evaluation of our valuables.

Equity increased due to the revaluation of land and negative exchange rate adjustment. Equity now stands at DKK 440 million.

Land is valued by authorized assessors, who use clear rules. Where the land is in relation to the surrounding community, the quality, which qualities there are, how is the economic structure there, rail transport, electricity, water, gas nearby, is there anything in the way of drainage, restrictions, pollution, etc. Then a base price and total value are found. We have done this on all our land and the setting is not a trading price.

Capital situation = Share price has a current intrinsic value of DKK 137.

Available liquidity totals DKK 68 million including an unutilized credit facility of DKK 24,000 million.

Questions/discussion about the Annual Report:
Poul Erik Nielsen: The accounts are not impressive and neither is the way they are done. You should consider having a state-registered accountant and not internal people. The work is done ok, but should it be changed in the long-term?

RD: It has been duly noted and will be considered.

Ole Nielsen: Do the Group and the parent company’s accounts normally run together?

RD: Some of the subsidiaries are purely operational, without any assets other than inven-tory included in the direct production costs, and therefore they have negative equity. In accordance with accounting legislation, these should be not included in the consolidated results, but they are still included in the Management Report, which is a numerical calculation of the overall consolidated result. We are working towards a better and clearer presentation of the consolidated result in the Annual Report.

Jens Jørgen Andersen: Profit – it is on the 9 shares sold?
RD: Yes, the buyer and seller set the price of the shares themselves.

Comments to the Management Report: It says that it is acceptable accounting and you must never write that again for such a bad result.

 

The Report and Annual Report is approved.

 

4. Decision on the use of profit or covering of loss according to the approved An-nual Report
RD – The Board proposes that there is no dividend payment this year because of the year’s result.

Ole Nielsen: It is wise regarding dividend payment.

CM: The Board believes that dividend payments must be a certain amount – also in rela-tion to the administration costs of them. Do we need to have DKK 10-12 million in profit before dividends are paid? We do not know the outcome of 2013 yet and due diligence would not be demonstrated by paying dividends for money we have not earned. The Board will follow the decision of the AGM if there is a wish to have a vote and it shows that there is a wish for dividends to be paid.

Ole Nielsen asked for a written ballot on whether to pay a dividend of DKK 2000 per share.

The result was:
Yes: 175
No: 404
Invalid: 8

 

Bo Arvin: Would like to ask the expert about this – what sends the most positive signals? Profit and/or paying dividends?

Niels Mejnertsen and Klaus Pedersen: Submitted proposals on 20/4 about a dividend strategy that they wanted put to the vote.

 

1: Proposal.
‘Dividend Policy’
Agri Invest A/S pays 5% per year in dividends on invested capital, calculated as an aver-age over a 3-year period.

 

2: Proposal.
‘Dividend Policy’
Agri Invest A/S pay, as a minimum, 4% per year in dividends on invested capital, calculat-ed as an average over a 3-year period.

 

3: Proposal.
‘Dividend Policy’
Agri Invest A/S paid in the financial year:
• 2012: 0 % in dividends on invested capital
• 2013: 5 % in dividends on invested capital
• 2014: 6 % in dividends on invested capital
• 2015: 7 % in dividends on invested capital
• 2016: 8 % in dividends on invested capital
• 2017: 9 % in dividends on invested capital
• 2018- and onwards: 10 % in dividends on invested capital

 

MO: Point: “Consideration of submitted proposals” was missing on the agenda. Duly not-ed, but it cannot cause cancellation of the meeting.

MO: There can only be a recommendation to the Board. An AGM this year cannot deter-mine dividends for future years. That power falls upon that particular AGM. It would also be contrary to the statutes, as the prerequisite for a proposal to be put to the vote is that it shall be announced under the same rules as the AGM. With a shorter notice there can on-ly be a discussion and no vote in MO’s view.

 

Conclusion: The Board accepts the AGM’s recommendation to strive towards a dividend policy: Agri Invest A/S pays a min. 4% per year dividend on invested capital, calculated as an average over a 3-year period.

5. Presentation of the 2013 budget
We maintain our expectation of the yield per HA.
We have used the assumptions we know and of course the framework of the 2011 figures. We have allocated DKK 7.9 million for depreciation on buildings and equipment.

Jørgen Pilegaard: How are salaries distributed?

RD: We have 43 employees, including four Danes. The salaries of the Romanian employ-ees are approx. DKK 2500-2700 per month per guard. Tractor drivers DKK 5500 – 6000. Experienced tractor drivers can earn up to DKK 8-9000 per month. The highest paid earn DKK 10,000 per month. The Danish salaries are not above the level that we have budget-ed for. We try to have good working conditions for employees – both salaries and housing. We have the staff that we can have confidence in and have a good relationship with. RD, the Chairman and the Deputy Chairman are often down there and have good dialogues. We focus on long-term employment contracts, particularly of our managers and they stay when they feel well treated and part of the company. The CEO’s salary is negotiated with the Board.
We have changed a Danish controller with a Romanian one who is really good and well-educated. They also know the rules down there and have a good network of people in public administration, etc.

 

Remuneration system for the Board? There is a rate paid to Board members for each meeting day = DKK 2000 per day. In 2011 and 2012, the Chairman has been the prime mover for the construction projects and has spent some time down there for construction meetings, etc.
Fees are negotiated with the Board annually.

Bo Arvin: DKK 2000 per meeting is a very modest fee and very reasonable.

RD: Management of soil compaction – this is really a focus area and now the gloves off.

We have sacrificed some money to have maps made, so we can show what is ours. What has been sowed should be allowed to harvest, so we have hired people to sow with the small machines so we can get started.

 

2 new corn sowing machines have been purchased for 12 rows – “It works!”
Purchased self-propelled sprayers – now 7 sprayers in total. The new sprayer is suitable for operating in high corn, which we need if there are corn borers.

Rapeseed in Oravita had a short flowering period due to hot weather. We are curious how it will turn out.

Kristian Bagge Hansen: We are just about in place down there now – are we about to sell/liquidate – what can we expect?

CM: No, but if we get a good offer we are open to negotiation. We are loyal to the strategy and we will follow it for the next 3 years and it will create some good results. We are an investment company, so if something pops that will pay attractive prices, we will listen and have a chat. But no intention to sell or liquidate.

Henrik Jensen: It is difficult to measure whether we are doing well enough – can we do bet-ter? It is difficult for shareholders to understand. Should we not have a benchmark?

RD: We have large neighbours that we are able to use as a benchmark, but the biggest Danish colleagues are not relevant and we have a hard time getting reliable data from the Austrian, German and Romanian neighbours, and at least one company has a very differ-ent profile than us. The topic is relevant and we are trying to do something.

RD – Comments: We have exchanged land with some wind turbine people as they had purchased plots that were in our fields. We have exchanged around 40 HA with them in the ratio of 1 to 2.7. Again, we have the right to cultivate the land we have exchanged where the turbines have been set up. Solar cells: We know of one, but do not know yet if it will be on our land.

 

6. Election of the Board
For election to the Board:
• Bent Hjort Knudsen
• Niels Busk
• Lars Skov Olesen and
• Jørgen Stougaard

 

All were re-elected.

 

7. Appointment of an accountant
Willy Møller was reappointed.

Per Pedersen: Is it not reasonable that a slightly larger company did the accounts?

RD: We have an accounting firm in Romania, who are registered and they are doing all the accounts down there and they finalize the accounts. Then they are sent to an independent accountant firm down there. They are doing the accounts together with the accountants in DK, state-registered accountant Ole Suhr and chartered accountant Willy Møller. The same rules and declarations are used, so it makes no difference, only the price is cheaper here.

 

8. Other business
Per Nielsen: The Board shall ensure that the proposals are sent out before the AGM and that it must changed in the statutes.

Torben Andersen: Not impressed with the accounting. With respect to the drought in the soil, the horticulture consultant Kristian has moved from DK to Romania. Try to talk to him about how we retain moisture in the soil, so as to avoid the rapeseed drying away.

RD: We know him well and we are in contact with him. A meeting has been agreed with him in June regarding and an exchange of experience.

MO: Announced that the AGM is now closed.

 

Aalborg, 15 May 2013

Mogens Olesen, AGM Chairman