Minutes of Agri Invest’s Shareholder Meeting A/S on 11 November 2015

1. Welcome

Chairman Preben Hansen welcomed.

Lawyer Ole Nielsen is appointed as Meeting Chairman.

The assembly is not a quorum, as it is an information meeting.

Meeting agenda:

1. Welcome
2. Board Chairman Preben      Hansen on the operational status
3. CEO Richardt Duus on  the current economic outlook for 2015
4. Horticultural  Consultants Morten Eshøj and Jørgen Evald Jensen on operation and action  plans, etc.
5. Board Chairman Preben  Hansen on the status of the sale of the Oravita site
6. CEO Richardt Duus on  corporate and tax reforms regarding the above

Points 2, 3 and 4 gone through and debated collectively, and points 5 and 6 collectively.

2. Board Chairman Preben Hansen on the operational status

The second time we hold a shareholder meeting. Held to debate after the harvest and to focus on the Annual General Meeting, where there is also usually a major debate on the technical and operational.

We have not lived up to our own objectives, the strategy has not been successful in the rate we had hoped for and it is not satisfactory. The strategy plan runs from 2012-16 and we will therefore take our starting point in what we now have collected from experience.

We have well-managed farming, but of course there is always something that can be improved. Some of the areas after cultivation are still not good enough and it must be considered that some of the worst areas are taken out of intensive cultivation, but it is important that they are still in our own operations in order to retain ownership and increase the value of land. If the land is leased out the lessee has pre-emptive rights, which would be very stupid when we are planning to sell.

Some of the poorer areas can perhaps be included in MFO, the rules of which the Horticultural Consultants will explain. The choice of soya as an MFO crop this year was the opportunity that came in the spring and that we judged to be the best solution to comply with the rules.

The sales process regarding Oravita is in progress, so it is important that the site looks tidy and proper. Presents itself well for any buyer and there is good control of the operation.

We have not made enough money, so we have a great challenge, which has been discussed at length by the Board. There must be better yields so we can invest. A lot of money was spent on preparing the soil for operation – massive initiatives to clear the fields, and they are now clear and in good operation. New land into the operation gives significant challenges and requires large investment. Building silos, etc., is now over. We now have a normal operation and strong focus on continually adjusting costs.

Have we been too naive when we started? It has certainly taken longer than expected.

3. CEO Richardt Duus on the current economic outlook for 2015
The figures have just published in the Newsletter and as you can see, it is not so optimistic.

The yields are not satisfactory, a negative impact on the result of low yields, down to a loss of 4 million DKK is not good enough. Better price for sales of wheat could possibly help a bit.

Videle came out with the best result of the 3 sites last year. If we had done that well at the other sites, the result would have been a lot better. The site has been hit hardest this year, -5.5 million DKK for yields this year, which really means a lot. It shows how quickly results can turn in this ever-changing operation, as well as something about spreading the risk.

We have changed the organisation and saved on one administrative management position in Bucharest. On the other hand, we have employed the consultant who sat on our FEADR project as he can strengthen us. Primarily he is expected to contribute to the optimisation of revenues, which he has previously proven. We need someone to be responsible for the FEADR control period, and to employ him lowers the cost of this. Moreover, he can find alternative options, for example, purchasing, contact with authorities so the control does not incur costs, update on the regulatory, subsidy opportunities, etc.

4. Horticultural Consultants Morten Eshøj and Jørgen Evald Jensen on the operation and action plans, etc.

Jørgen Evald Jensen – affiliated to Videle and Mizil (Amaru site) as a Horticultural Consultant.

Last year’s long periods of heavy rainfall have been very problematic in terms of winter cereals.

Spring-sown cereals should primarily be maize.

With regard to Greenings requirements – could not get any instructions. The first came in April, and the application deadline was postponed a month.

Status 2015:

It has been incredibly wet since the beginning of March – could not sow and fertilise.

Rapeseed in Videle was damaged by water – 80% of the area was affected by water on the surface. It had rotted away and had severely restricted the root system.

Around 1 May the rapeseed looked good in Videle – made a good start and the channels that were dug worked incredibly well and kept the surface water away. Maize was planted late due to the conditions, but they were really good. The winter cereals did well and looked good.

In Mizil there were really good fields of rapeseed and the winter crops also looked good. Then came the drought – no water from the beginning of May to mid-June. Rainfall was about 18-31 mm between 21 April – 12/13 June, as well as 40 ^◦C during the day and 20 at night. Incredibly dry!

The soya only looked good in the wettest areas.

Yields of individual fields

Better yields:

We should have improved the bad fields – and made it even better.

At a depth of 20 cm the soil was firm and hard – water cannot drain down and the roots did not come down and form root systems.

Experiments were done in the autumn with the Great Plain Subsoiler that loosened the soil and gave less surface water. Greater root depth gives a better water supply and we can see that it works.

Focus on timeliness, very short periods of time we can work the soil – only a 1-week sowing period in spring and about 2 weeks in the autumn. We will take this into account when selecting crops.

Also see the enclosed PowerPoint from meeting!

Morten Eshøj – affiliated to the Oravita area

Very wet autumn 2014 – About 600 hectares were not sown.

Huge lack of rainfall in the spring of 2015, while high temperatures gave very dry fields.

Maize: Started well, but made worse by the drought, worst for the varieties that are late blooming.

Sunflower: Hilly areas dried out – lower land was better, because it could hold and utilise the water.

Soya: Late sowing – dry seedbed – low ph – poor germination – no tubers on the roots –

summer drought and no water. 3-400 kg/ha – bad!

Crop distribution:

Spring-sown cereals not good – so there is scope for wheat and winter rapeseed.

Improvements:

• Subsoiling down to a depth of 80-90 cm for ERMO and the other Grate Plains Subsoiler – works wonderfully well. However, the ground was so dry that it has not been possible to subsoil as much as we would like
• Increased liming
• New grain sowing machine and an extra tractor purchased in the autumn
• Timeliness is really important in these difficult soils
• Machine downtime to be shortened

The soil has been prepared and subsoiled prior to all spring-sown cereals which currently gives a better potential.

Also see the enclosed PP from the meeting!

Debate:

Ole Nielsen: How are the yields at other sites in Romania? Are they not significantly better?
Jørgen Evald: Both and – depending on how the rainfall has decreased in the areas. Average for the whole area is very poor this year.
Morten Eshøj: Soya gave about 3 tonnes last year – and 1 this year. Rainfall at the right time means a lot.

Asger Overgaard: Operation/State of the market we have two to stand on in terms of strategy.
Operationally: Stupid with over 700 HA with soya, when you know it’s problematic. Lucerne is maybe more optimal – think more creatively when you’re making a new strategy. Timeliness requires that you opt for safe crops. Should we sell the project – or do we have Cyclical wind at our back?Listen to others who are getting better results – participation in Efra groups, etc.
RD: We benefit from the experience of others and also participate greatly in Erfra groups regarding the cultivation of plants. Thank you for the good advice.

Ole Nielsen: Have you got control of your company Richardt? This is the 4^th year in a row it’s going downhill. Others have much higher yields? Almost no return for 9 years!
RD: Yes, we have control of it. We are working with an action plan and we have not reached the end of our operational improvements.

Ole Nielsen: We are disappointed every year – should we focus more on sales? Am not satisfied with this – you sit and gamble with our money.
Preben Hansen: We have taken initiatives and we have got professional help in the way we have acted. There are both some who have done it better than us, but definitely also worse. We have kept a good operation, where we have increasing values. Better results are clearly desirable, and we are working hard.

Both Horticultural Consultants spar with others in Romania. Believe we have become good to operate land, and hope we will be allowed to prove it during the next year and going forward.

700 HA with soya – found out very late what the alternatives might be – no obvious easy solutions. Had it, for example, been a good soya year – we would have had great success. Land cover must be there for HA subsidies and conditions must be right. Have been in great dialogue with operational managers, etc., and it was a clear decision.

RD: 4-5 fold increase in soya area in Romania this year, so many have chosen this as an MFO crop.Ejner Lyngby: The climate is obviously a major problem – repeats 4 out of 5 years. Suggesting it will continue – so can we make a profit at all?

Preben Hansen: We have experimented with root depth in the spring. Soil preparation is incredibly important. Subsoiling and deep harrowing gives a clear positive effect proven by simple trials.

Hans Sørensen: Timeliness – Big Brother – GPS? Can we follow the tractors here from DK? Small investment, which probably will give good returns.
RD: No, this is not established yet. We feel well informed and can actuate if, for example, a tractor is stationary.
Jørgen Stougaard: We switched to other workshops – it takes too long to get the machines fixed.
In Videle it went wrong with the rapeseed due to no subsoiling. Only now when the fields are cleared of weeds, reeds, etc., can we really see how important subsoiling is.

Jespersen: 200 HA more regarding 2016 – is that new land?
RD: We are still operating ‘swap activities’ in Videle and Mizil – trying to swap cultivation and ownership with neighbours, it gives more hectares.

Bo Arvin: Frustration over being a shareholder. Have invested millions. Thought management was professional. Made Strategy and Finance Plan 2012 – 2016, which does not stand up!

The Chairman began with that we will pull out of land that was not good enough. Have people been clever enough to buy into land? We could, for instance, lease out and get 15 million in.

A return of around 5% would have been prudent for the past 4 years, but we are far from that.

Sympathetic to the management and board, but this is not good enough. Significant changes would be made in larger companies. Some measures must be taken to satisfy investors.

The Chairman says we are in control of the operation, but drastic measures MUST be taken. For example, sale – lease (get EU subsidies). The assembly must be on their toes – something has to be done.
Meeting Chairman: Note – This assembly is not a quorum and there can be no vote today.
Preben Hansen: We haven’t done well enough, and we take responsibility for the strategic plan.
The land we buy down there, is not like at home. We were urged to buy, and we bought and bought in the east and west, and it may have been too naive. A lot is in the culture, so maybe there are 10% that is not good enough, and they will be sold. But we could not see it all from the start. Land is worth much more when it is cultivated. So we are working on congregating and cultivating the land. Yes, we have had negative results, but keep the business going. The property value is increasing, and there are both some who have done better and others worse than us. We are working on it and making changes all the time to achieve the objectives. We are not making money here and now, but we will do. Who will give us 15 million for the lease? Don’t forget the financial crisis, which forced us to cut back on the project we planned to expand by 25% financing, which was not carried out.

Bo Arvin: The 15 million are EU subsidies and the land can be leased out for free. There must control of the cultivation now – this is a catastrophe. Have you even thought about it?
Ole Nielsen: Are the strategy and budgets good enough? Make impact analyses! Every year there is a difference of 14-15 million. We are well below others in Romania. Wake up and be accountable for what you’re doing.

Kjeld Uhrenholt: Very focused on yield. We have a continental climate, where there are certain challenges with respect to climate. Make a strategy plan. The climate changes from year to year – so wager equally on all crops – for more security. There has been too much investment. I am a director of another company that operates around the same area size. The investment here is only around 20% of ours. Have seen the 3 sites and they look really good, but there is over investment, for instance, machines. With this result it gives status quo with a normal harvest. The yields are reasonable and may not be much better – we must look it in the eyes and make a new strategy. Should we realise something and sell now?

Jørgen Stougaard: The lease can bring between 8-9 million gross – and not 15. They are those who work the land that get EU subsidies, so we have to be sure to get the money if we are to enter into such an agreement. The lessee will get pre-emptive rights, which is problematic.

5. Board Chairman Preben Hansen on the status of the sale of the Oravita site

As we stated at the Annual General Meeting, there were 2 potential buyers. One is in the process of investing in animal production and perhaps not as interested as before. The second is going through all information and materials they have received from us and is very serious. In addition, in the autumn confidentiality agreements were signed with another 4 interested buyers.

There has already been a preliminary meeting with two buyers and there are further meetings next week, as well as a presentation for two serious buyers – they are well informed and aware of it.

There are clear signs that land prices are steadily rising all the time now. Buyers are characterised by being long-term and believe in further price increases.

With a possible sale, at least one potential buyer wants the seller to run it for a period after the deal and we will also be able to do that – we are going for the best price.

6. CEO Richardt Duus on corporate and tax reforms regarding the above

The purpose of the process:

• Creating a legal unit(s) that can be sold separately
• Avoid profit taxation of land and other assets
• Avoid problems  with the VAT adjustment obligation
• Avoid problems with pre-emptive rights to the land. May cause problems, as it must be advertised by municipalities, etc. We avoid this by not selling the whole company
• Being able to repatriate the sale proceeds to the parent company without taxation in Romania

REGULATORY FRAMEWORK

• Romanian company legislation
• Romanian tax legislation
• Romanian/Danish double taxation treaty – important we can use it
• (Danish Tax legislation) Have very little influence in getting the proceeds home without taxation

MEANS:      

• Branch demerger (not single asset) Land ownership given over to one of Oravita companies
• Get professional help to do this
• One of the existing companies – run as a partial activity
• In exchange for land,  shares are issued to Agri Consortium’s owner – Agri Invest A/S. The value and the share capital is moved to make it shares sold tax-free, and the proceeds go tax-free into Agri Invest A/S
• Acquisition of VAT adjustment obligation in order to avoid payment of VAT on the sale

CHALLENGES:

• Transfer pricing (We do not avoid transactions between our Romanian companies. Must be worked out)
• Owner deadline in relation to tax-free branch demerger (no problems)
• Owner deadline in relation to Agri Invest A/S tax-free sale of shares (no problems)

Cost estimated at approximately 800,000 DKK. Biggest charge is tax/fee for registration in Romanian. This avoids a menacing tax in the region around 10-20 million DKK.

DEBATE:

Asger Overgaard: Great report. How do we get the money out to shareholders without taxation, or will they also be branch demerger here in DK?RD: The objective is to get money into the parent company tax-free. Then we are faced with the challenges surrounding distribution where one solution can be a capital reduction. We aren’t ruling out that we can do it. A number of conditions must be met – must be applied for with the tax authorities.

Jens Møller Nielsen: 10-20 million in sales – how in terms of tax savings?
RD: It’s a combination of tax savings and tax deferral. Also depends on shareholders’ own circumstances. A direct saving that at least we avoid other registration taxes when we have the aforementioned costs, so no real extra expense.
Ole Nielsen: Have we got a proper accounting firm?

RD: A new one can be chosen at the Annual General Meeting, but we have entered into an agreement with BDO – one of the partners has expertise in what we are working with now concerning the Oravita the site, and who is involved in consulting, planning and execution in this and the two companies here.

Kjeld Uhrenholt: Positive about proceeds? How much and where will it be put?
RD: We are working with many interested buyers and trying to process the serious. Very good meeting last week. We meet much more serious buyers now and feel optimistic about prices.

Kjeld Uhrenholt: How is the price set?

RD: 4 factors: Land, yard facility with storage, etc., machinery and the cultivation value: that it can be cultivated with good logistics. A high value if the land is congregated. Here we have a great asset in Oravita.

Kjeld Uhrenholt: Does the selling price weigh 20 or 40% of the total investment.
RD: More than 20%.

Bo Arvin: What is the price of agricultural land in Romania?

Asger Overgaard: 5000 Euro/HA for land in operation and 2000 Euro/HA not in operation, reported in 2014. Probably increased up to approximately 30% since.

Bo Arvin: How large an area are we talking about selling?
RD: 3750 HA – where 90 HA is in some doubt.

Ole Nielsen: Can the remaining carry the value of the company? Should we not sell everything?
RD: Everything is for sale for the right buyer who will pay an attractive price, but important to make the right decision on the strategy in this.

Preben Hansen: Thank you for the good attendance and good dialogue.

From the start we took the decision to invest in this company and we hope we have something good to announce next time.

Minute-taker Birthe Dencker Sørensen