Re. 1: Welcome by the Chairman

The Chairman bid everyone welcome to the meeting and outlined the agenda. Steen Hjemsted Pedersen is participating and will provide more detailed information about operations instead of Preben Hansen and Jørgen Stougaard.

Jens Bigum elected by the board as Chairman of the Meeting.

Re. 2: Detailed report on operations by Steen Hjemsted Pedersen, Site Manager in Videle

Steen introduced himself. He has worked in Romania since 2008, so has a great deal of experience and knowledge of the rules and of the areas.

He will also be taking over operations in Amaru from 1/12 2017, when Keld stops as Site Manager. Keld will continue working in Amaru, however, dealing with tasks involving registration of the land in cadastre.Wet autumn, especially in Amaru and Oravita – only just managed to sow the desired area, and a hard winter followed. Overwintering was OK, however.Had to re-sow following areas: 45 ha. wheat in Videle, 25 ha. rape in Oravita and 100 ha. rape in Amaru. Early spring resulted in a good growth season with a lot of precipitation and low temperatures. This was followed by a dry summer, particularly in Oravita with regard to maize and sunflower.

Then a dry autumn in Videle, and very early winter seed sown in September.

Everything has been sprayed and fertilised.

Overview of yields: Cf. attached PP

Shortfall of approx. 1000 tonnes in harvested yields, currently 38,000 against 39,000 in budget.Total cultivated area has increased from 8700 to 9100 ha. Overview of sales/prices and stock. Quoted prices are those we receive in our account after various expenses have been deducted. Prices vary slightly depending on quality and time at which sale takes place.

Very low sunflower prices in 2017.

Machines – sites:
Machine capacity OK, but a lot of maintenance required due to high average age.
Investments 2017: 2 x tractors – Fendt 939 (combine harvester traded for one of the tractors), used sprayer, weighing office in Videle and GPS tracking.
At all sites we have good sites with good people and fine storage capacity. Machinery is to be standardised to a greater extent on an ongoing basis, such that it will be the same people that carry out service, etc. It is hoped that this will save costs.

Where are we going?:
Adapt the machinery with newer and standardised machines. Synergy/interlinked operations between Videle-Amaru, also with regard to machines that can be moved between the sites in harvest periods, etc., and thereby can be exploited better. Take full advantage of GPS with Auto control, GPS tracking, survey and graduated application of lime. Continued low pH value means lime is used at many places. Make sure that our properties are presentable – this sends a good signal when people visit us.

Jørgen Kristensen: A lot of zeroes in the yield statement. What’s the reason for this?
SH: All alfalfa is in Amaru – can be resolved with MFO on areas that couldn’t otherwise be cultivated.

Valdemar Bogh: The sunflower area is diminishing? Is this where we have the greatest risks?
SH: 29 ha. are included in Videle due to the rape that has to be re-sown. Sunflower is best as a spring crop, but not as good in the autumn. Removed in Oravita and Amaru due to the climate. Doesn’t fluctuate as much percentagewise in yield as wheat, for example.Jens Gade Holm: Can SH do anything to get better results in the future than the previous Site Manager?
SH: There have been major problems with water on the properties in the east, where surface water has been very severe and caused serious problems. This has now been partially resolved by digging channels that can keep yields up and make them more stable.

We grub the soil a lot when it is dry – which is also very effective for drainage and root development.

Re. 3: Organisation / Economy by Preben Hansen

Yields have been previously compiled on the basis of harvested areas; average yields are now compiled on areas that have been sown. Problems with water have meant that considerable areas have been lost. In Amaru, Keld has dug a lot of channels, and crops are the best there have ever been in Amaru in the autumn.
Steen is trying to adjust costs better and is getting both properties in the east under greater control – thus providing better potential for interlinked operations.
In Oravita, things will be run separately due to its size (4500 ha). No advantage in operating it together with the others.

On 1/12 2017 Keld will stop as Site Manager in Amaru. For the next half year he will be working with Steen and the solicitors with a view to registering as much as possible in cadastre.

We expect a reduction in costs, although not during the first year due to the major reshuffles – bookkeeping, auditing, etc. – that have been taking place in 2017. There has been a need for all hands in order to get the new process off the ground. Missing a large amount of VAT that we had to write-down, as it was unlikely that we could claim it back.
We have tried to claim VAT back in 5 companies and got approx. 90% back in two of these. Have also tried to claim VAT in the others, but it takes a long time.
Carmen is still involved, since she has documentation from before 2017 – progress is a bit sluggish, but OK.
Must be more structured in the future and claim back every month.

Money we had not budgeted with were costs in connection with sales – due diligence, split costs, etc., which is a very heavy cost. We have hitherto had to finance DKK 1 million in costs, and there will be more in connection with completion and transfer of land. Everything has to match 100%.

The spilt process is expected to be completed by March 2018, after which name changes will take place on lots. This process will also take time, as the authorities have notified us that they only expect to be able to process 50 lots per day, and name changes will have to take place on around 6,000 lots.

Sale of land: 175 ha. are being sold. Located in 329 small pieces of land a little further away and more northerly than Amaru. Were sold for 4000 Euro/ha. Buyer is responsible for costs to cadastre.

The first 20 ha. should be completed before Christmas. Appears to be going to plan – we have never cultivated it, so good to receive money for it. The money can be used to register other land in cadastre and perhaps purchase small pieces of land that are more concentrated and closer.

VAT money is expected to cover costs for land in cadastre over a 3-year period.

Operations:
We have a reasonably good take on costs that are incorporated into the budget. Yields in Amaru have been somewhat disappointing
(cf. overview of production value, realised versus budget).

Facing the challenge of a rather large quantity of unsold wheat, although of really good quality, so we expect to be able to sell at a price such that we are at least on a par with the budget price.

For the first time, we have some yields from organic wheat. It was a historical requirement that there should be some organic crops in order to get a subsidy for the silo facility in both Oravita and Amaru. 2017 is the final year of this scheme.

The requirement was also to be able to sell organic flour, so stone mills were established at both sites and the flour delivered for onward sale. High costs to secure this subsidy – we have learnt from this with respect to the future.In order to gain clarity about uncertainties for 2017, CB and PH will travel to Romania at the end of January, and will therefore wait before providing an estimate of the result.

Bo Arvin: With regard to the 175 ha. of land that was sold, what was the purchase price and do you have documentation with regard to completion of the sale?
PH: We don’t know the purchase price – but the sales price is 4,000 Euro/ha. The buyer can’t take over the land without the price being paid. He’s paying rent until the land is sold and he’s a good, local buyer. There’s a contract stipulating that he is to acquire the whole area, final date set, etc. No problems so far – reliable farmer
Ole E. Nielsen: What was the purchase price of the mills – and what will happen to them?
Claus Melgaard: Buzau Nord – the land was purchased at a price of 18-1900 Euro/ha. I can’t remember the purchase price of the mills. The mills and silos were both necessary to qualify for the subsidy.
Steen Hjemsted: Typically to qualify for a subsidy, you need points in the case of such investments – otherwise you won’t be considered for a subsidy.
Jens Gade Holm: Why are we owed so much VAT?
PH: You don’t get the VAT when you sell something. You have to claim it every month – it isn’t the same system as here in Denmark.PH: With regard to the sale of Oravita, we’ve really learned a lot. Everything has to be sorted out before we can sell, otherwise things get very difficult – including getting a good price. Security provides value.
Steen Hjemsted: There mustn’t be too great a percentage that isn’t in cadastre. This will make things much too difficult and will result in too much uncertainty for a potential buyer.

Bo Arvin: At the Ordinary General Meeting, you said that land that wasn’t in cadastre was entered in the accounts at full price. Is it still OK to do this?
PH: The land value was fully intact, so yes, it’s correctly valued. But it’s still important to get it registered in cadastre.

Re. 4: Presentation of working budget 2018 by Christian Brasholt, BDO
As a follow-up to a question asked earlier by Bo Arwin, CB stated that the land in Romania is valued on the basis of valuation reports in the Romanian accounts. There is a difference in pricing, and land that is not in cadastre is valued at a lower price. The final working budget will be presented at the Ordinary General Meeting in 2018; this is just a draft.

CB noted by way of introduction that there is a considerable price hike on fertiliser (approx. 30% in relation to last year) which has not been fully factored into the budget. Overall, the price of fertiliser is budgeted higher than last year, but factoring in at the current price level will have a negative effect on the budget of around DKK 1 million.

Cf. attached PP

Of the complete field plan, 240 ha. comprise alfalfa and 200 ha. are in fallow.

Per Pedersen: Why didn’t you buy fertiliser before the price rose?

SH: Fertiliser was purchased at around harvest time at normal prices, but we need fertiliser for the final 70%, which has to be purchased now. We’ve never experienced such high nitrogen prices as those seen at present, and unfortunately we hadn’t foreseen such a situation.

PH: It requires a lot of liquidity, so we were only able to buy the quantity which was due to be used in the autumn. Moreover, we don’t have enough storage space, and an inspection would have come down hard on us if the nitrogen was stored incorrectly.

A query was made about the item “Operations and maintenance” of DKK 7.5 million, whereby CB stated that apart from maintenance of machinery, the item included budgeted costs for maintenance of buildings, gravel tracks and ditches, silo installations, vehicles, agricultural contractor (harvest assistance), vehicle excise duty and transport of grain, etc.

PH: Not that much has been purchased. Expenses are also a little high due to the age of the machines, etc. A significant part of the expenses are assigned to maintenance of the conveying equipment for the silos, some of which needed replacement.

Re. 5: Presentation of plan time/price on registration of land in the east by Steen Hjemsted
Cf. attached PP

Overview Videle: No less than 15 municipalities affiliated. May be advantageous to swap small pieces of land in order to consolidate the land closer to the farm.

Pilot project with 2 municipalities with 40-50 ha. respectively in order to find the price so that we can prepare a budget.

Realistic total expense will be DKK 8 million to get approx. 90% registered in cadastre.The surveyor is the biggest cost – nor can we avoid the other costs.Almost all the land (except for the last 70 ha.) is registered in cadastre in Oravita. Amaru and Videle are combined, so we do not have the individual figures, but a total of around 6,000 ha. is yet to be registered in cadastre.

Important also to rent land so that we can consolidate larger areas – this is well worth doing. Sell municipalities with small areas and buy something in our area for this money. The price for the small pieces of land is still 2,000 Euro/ha.

Ole Nielsen: Sell off the small pieces of land and take home the money.
PH: Buying and selling land has changed greatly during the last 10 years; today it is rare to buy land without cadastre.

Re. 6: Sale of Oravita by Preben Hansen
Unfortunately no sale yet. The Chinese were quick off the mark and began due diligence, which was completed without significant remarks to the land element. In August we applied some pressure in order to get a signature on the deal, but by then the Chinese had suddenly been forbidden to take money out of the country for major investments, so they backed out and could not sign the deal.
We remain in contact with the other potential buyers who had submitted bids – although these were lower than the Chinese bid.

The estate agent had a potential buyer who was only interested in the deal as a way of laundering money, however. So we naturally backed out of any deal in this case.

We have produced a sales presentation/description, which will be distributed with the minutes. The price is set at 30.6 million Euro.We need to be highly structured and have tried to make the description as comprehensive as possible. 900 ha. are located 25 km away – the rest lies close to the farm, which is a good sales argument.

BDO has distributed the presentation throughout its network, and funnily enough there was an enquiry from China. We have not heard any more since, but we currently have some contact with earlier estate agents, who have also submitted a bid. It just takes a long time, but we are now better prepared and have set up a computer room such that due diligence can be commenced straight away.

Ole E. Nielsen: Couldn’t we fix a price on the other 2 sites, in the event that there was any interest?
PH: Very difficult – perhaps together with Oravita. It isn’t very likely that we can sell without cadastre. It’s best to sell the land and buildings together, so that we don’t end up with something that can’t be sold.

Bo Arvin: What about selling the company?
PH: People have learned a great deal in recent years, so it’s illogical that people would buy something which doesn’t have any ownership.

Bent Hjort Knudsen: Would it be possible to get a higher price based on the fact that we had a contract to operate for 3 years when we’re already down there? This model is used elsewhere, e.g. commercial foundations and pension funds need businesses to be run, but know nothing about operating them themselves.
PH: We discussed this proposal with the previous buyer, but we aren’t losing money on what we’re operating, so perhaps we could get hold of some of the pieces of land that lie between those we manage.

Ole Skårhøj: You have a lot of focus on operations – can a return be generated if you continue operations for another 3 years?
PH: We have great faith in operations over 3 years, but at present things aren’t that good in either Romania or Denmark. With Steen, we’ve got more to work with and we hope that this will be visible in 2018. It’s the first time we’ve had such a good explanation concerning the lots, so it’s been of great benefit that Steen has been down there for several years and has a good knowledge of the situation on the ground.?: DCH has overhauled former government farms – is something similar required?
SH: Yes, they renovated old government farms very cheaply – but only the stables. They have operated 3000 ha., sold 500 ha. and rented out 500 ha. They’ve earned a lot of money on pigs, but this requires a somewhat bigger set up, as well as a great deal of labour and presence.

Kjeld Hjorth: We must be careful that we don’t wait too long with regard to a sale. Structural development is moving rapidly, and in Russia, for example, buildings today are written down to 0. Interesting to see whether we have to wait 3 years and sell everything together.
PH: We’re very open, but it’s just really difficult without proof of ownership.
Kjeld Hjorth: What about the future – what are our goals? Can a complete sale cover our investments?

PH: If we can sell at the prices we’ve estimated here, then it won’t be a problem.
Bent Hjort Knudsen: I think you’re right about making sure it’s registered in cadastre. The majority of buyers are economists that have a support base to which they’re accountable and are checked everywhere. Sell Oravita, and get the rest in order. I think you’ve got hold of the right strategy.

Re. 7: Any other business
Book value is still 114.6.

PH thanked Jens Bigum and all those attending for a good meeting.

Keeper of the minutes: Birthe Dencker Sørensen