3.2.c. Model Memorandum de finantare by consilum advisors

S.C.S.C. POMARIUM Fruct S.R.L. Financing Memorandum

Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro

CONTENTS

IMPORTANT NOTICE ............................................................................................................................. 3

II. THE COMPANY AND OPERATIONS .................................................................................................... 4 II.1. BRIEF D ESCRIPTION OF THE COMPANY ............................................................................................. 4 II.2. MANAGEMENT ................................................................................................................................... 4 II.3. OPERATIONS .................................................................................................................................... 4 II.4. SALES ANALYSIS ................................................................................................................................ 5 III. INDUSTRY OVERVIEW ........................................................................................................................... 6 III.1.T HE ROMANIAN FRUIT MARKET....................................................................................................... 6 III.2. ROMANIAN SUPER /HYPERMARKETS .................................................................................................. 6 IV. PROFIT AND LOSS ACCOUNT ANALYSIS ........................................................................................... 8 V. BALANCE SHEET ANALYSIS .................................................................................................................. 10 V.1. THE STRUCTURE OF ASSETS ..................................................................................................... 10 V.2. THE STRUCTURE OF THE FOUNDING SOURCES ............................................................... 11 V.3. LIQUITY AND SOLVABILITY ANALYSIS .................................................................................. 12 VI. CREDIT FINANCING PROPOSAL ........................................................................................................ 14 VII. FINANCIAL FORECAST ......................................................................................................................... 15

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I. IMPORTANT NOTICE This Debt Memorandum („DM‟) has been prepared by CONSILIUM ADVISORS by order of S.C. POMARIUM Fruct S.R.L. (the “Company”) in relation to the possibility of raising bank financing for working capital investments. The present DM has been prepared using information supplied by or on behalf of the Company. This DM and its contents are confidential and the property of the Company. It is made available subject strictly to a binding confidentiality agreement. It does not constitute an offer in any form. The purpose of the DM is to assist the recipient in deciding whether it wishes to proceed with working capital financing and to assist with their decision in relation to what additional information they may require in order to proceed with further analysis and in the decision in respect of the financing terms. While the information in this DM has been prepared in good faith, no representation or warranty, express or implied, is or will be construed as having been made and no responsibility or liability, however arising is or will be accepted by the Company or any member of their respective groups or their directors, officers, employees, agents, controlling persons or advisers as to or in relation to the fairness, accuracy or completeness to of this DM or any other information supplied or made available, in writing or orally, in connection with any negotiations and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonable of any future projections, management estimates prospects or returns contained in this DM or in such other written or oral information. This DM has been delivered to interested parties for information only and on the express understanding that they will use it only for the purpose set out above. Neither the information set out in this DM nor referred to in such other written or oral information nor its delivery to any recipient shall form the basis of or be relied on in any connection with any contract. The content of this DM shall not be taken as any form of commitment on the part of the Company to proceed with any transaction.

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II. THE COMPANY AND OPERATIONS II.1. BRIEF D ESCRIPTION OF THE COMPANY “S.C. POMARIUM Fruct S.R.L.” started its operations in 2009. The company‟s shareholders are:  Mr. Suat Alpozu (50%)  Mr. Vargin Muslu (50%) The company‟s administrator is Mr. Kose Hamza. The company‟s headquarters are located in Bucharest, 4 Alba Iulia sq, floor 10, sect.3. The warehouses and operation offices are located at No. 86 DN2, Afumati, Ilfov. POMARIUM Fruct is wholesaling fruits and vegetables (CAEN code 4631), especially bananas and apples. The company also distributes the following fruits: peaches, nectarines, grapes, tangerines, oranges, lemons, kiwi and vegetables: onions, potatoes, etc. The merchandise is acquired from internal and external suppliers and sold to large and medium size distribution networks. The merchandise is acquired from international suppliers and partners from Italy and Austria.

II.2. MANAGEMENT The shareholders are involved in the high level management of the company and have impressive experience in the wholesaling of bananas and apples in Romania. Mr. Suat Alpozu managed to set-up several banana distribution businesses with impressive results since starting his activity in Romania 25 years ago.

II.3. OPERATIONS In a nutshell, POMARIUM acquires fruits based on existing orders with virtually no merchandise returns. After purchase, the fruits are delivered to clients except for bananas that have to ripen another 5 days in warehouses. Warehousing agreements are very flexible, allowing for a charge per case as opposed to a fixed rent. Due to the high negotiation power of large retailers (super/hypermarkets) the number of accounts receivable days is between 19-30 while for other retailers it is around 10 days. The average account payable number of days is between 7 for bananas and 15 other fruits and vegetables. In order to cover this turnover gap, POMARIUM Fruct is looking for a credit line / factoring facility. POMARIUM‟s sales increased aggressively in the first year of operations. October and November 2011 were the first month with solid, stabilized results after 12 months of gaining market share and policy to enter and sign contracts with important key accounts like Metro, Lidl, Kaufland, Real, Auchan. POMARIUM is preparing for the second stage of its development: increasing its portfolio of distribution networks and improving operational performance. The recently signed contracts with Real, Lidl, Metro and Auchan will boost sales by more than 100% requiring a working capital increase.

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To handle the new sales volume POMARIUM will hire more warehouse workers in December, resulting in 25% increase in personnel expenses. POMARIUM acquired an apple sorting machine (mainly destination represent sorting and packing in casseroles with 4-8 pieces for retail market purpose) that will drop costs by 0.04 Euro/kg of packaged apples, totalling 80,000 Euro cost reduction per year after its set-up in Q1 2012. The machine cost of 67,000 Euro is financed through a 2 years leasing contract for 67,000 Euro.

II.4. SALES ANALYSIS POMARIUM exhibits an obviously increasing sales trend affected only by the apple and banana seasonality. Until October 2011 Kaufland was the only hypermarket client, while “Others” are dealing with proximity or specialty shops, etc. We present below the evolution of sales in 2011 for Kaufland and other distributors, focusing on the last 4 months. The last column represents average monthly sales adjusted for seasonality. More information on seasonality assumptions can be found in the annexes. POMARIUM Fruct Net Monthly Sales in 2011 (000 Euro)

Jan Kaufland Others Total

n/a n/a n/a

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

n/a n/a n/a

Seasonality adj. factor 1.29 n/a 445 n/a 510 n/a 955

4 mo. avg

Management predictions for 2012 are listed below: POMARIUM Fruct Forecasted Sales for 2012 (000 Euros)

Bananas 1,619 2,024 810 2,024 1,619 12,090 20,187

n/a n/a n/a n/a n/a n/a TOTAL

Apples 1,609 805 563 402 241 1,127 4,747

Other 1,836 651 651 651 651 368 4,808

TOTAL 5,065 3,480 2,024 3,077 2,512 13,585 29,742

Avg. monthly sales 422 290 169 256 209 1,132 2,479

We can see that in 2012 Kaufland average monthly sales are decreasing from 445 to 422 (000 Euro) due to a different product mix. The management targets a 122% (yoy) increase in sales to “Other” retailers fuelled by bananas.

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III. INDUSTRY OVERVIEW III.1.THE ROMANIAN FRUIT MARKET Romania has significant strengths in the fresh fruits and vegetables sector, especially the quality and safety of its products, but there are several factors that negatively affect its competitiveness. These include the high fragmentation of agricultural land and the profusion of small-scale subsistence farms, unable to produce for either the domestic or foreign market. Distribution channels of fruits and vegetables are grouped in 2 categories: 

Short distribution channel – direct sales and local producers‟ markets



Traditional distribution channel – wholesale (distributors, importers) and retail markets (hyper and supermarkets, open markets, specialized shops) Marketing and sales to the public are the most important functions at the retail level. The structure of the retail trade for fruit and vegetables offers consumers the possibility to make a choice from various points of sale, the most important being: 

Specialized fruit and vegetables shops;



Hyper / supermarkets;



Open-air markets;

 Producers / farmers. Domestic supply could be structured in two main categories: local production and imports. There are two season peaks: summer and winter. Imports are frequently used during the winter season, when supply is mainly provided by distributors and specialized companies. Internal offer is not covering the entire 12 months of the year, so there are some shortages between summer and winter. Moreover, changing climate has affected the products quality, so that local producers cannot comply with the standards requested by retailers. In this context, domestic demand is covered by significant imports. There is a visible change in Romanian consumers‟ behavior. These consumers request high quality products and, ultimately, they are willing to pay a higher price for a good product. There is also a relatively limited consumers segment which is loyal to cheap products, the quality factor being ignored. The main fruits sold by retailers in Romania remain the bananas, followed by oranges, apples and raisin. During 2003-2007, Romanian fruits exports value rose, in average, by 9%. Yet, during 2008, it registered a 22.8% decline compared to year ago and compared to a 3.3% rise in 2006. Main importing countries of Romanian fruits in 2008 were Germany (34.2% of total Romanian fruits exports), Italy, Turkey, Slovenia, Croatia, Russian Federation, Hungary, Bosnia & Herzegovina and Croatia. Main fruits exported by Romania on these markets were walnuts, apricots, cherries, peaches, plums, berries and apples.

III.2. ROMANIAN SUPER/HYPERMARKETS Since the arrival of the first international store in 1996, the structure of Romanian retail has changed dramatically and rapidly. By the end of 2005, 182 huge new international supermarkets and hypermarkets were in operation, with numbers still continuing to increase. Initially concentrated around Bucharest, the supermarket chains have now expanded to other towns and cities across Romania. Comfortable shopping environments - warm in winter and air-conditioned in summer – Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro 6|P a g e

they offer a wide range of competitively priced products to attract customers. Supermarkets and hypermarkets now capture more than 1/3 of all consumers spending in Romania. The majority of large retail chains in Romania have central buying and distribution centers based in Bucharest, that are responsible for purchasing products for all the stores in the Romanian chain. This system of centralized buying, combined with the rise in the volumes of products being sold in supermarkets and hypermarkets, has resulted in: i)

a small number of individuals/retail buyers responsible for buying huge volumes of food products, and

ii) a significant reduction in the number of buyers for products retailed in Romania. In addition, strong price competition between the many retail chains to attract consumers, has resulted in downward pressure on prices paid to suppliers.

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IV. PROFIT AND LOSS ACCOUNT ANALYSIS As we described in Chapter one of this report, the company‟s past activity is not significant in judging its prospects as the business to be developed will be much larger than the current one. Moreover, the company will be able the gain larger margins given that it has a sales record and will get better prices from suppliers. However, the Profit and Loss Account main figures are available while the appropriate comments are discussed within this chapter. October-10

PROFIT & LOSS ACCOUNT (Values in EUR)

(%)

NET SALES

100%

Less: Cost of Goods Sold Merchandise

100% 98%

Utilities (water, energy, gas)

Ripening & Storage Transportation Other COGS GROSS PROFIT ON SALES Add: Other Operating Revenues Less: Selling and Marketing Expenses Less: General and Administrative Expenses Rent Depots and Offices Salaries expenses Banking & Financial Services Other operating expenses Add: Other income/expenses (net) (f/x, discounts) EBITDA Less: Depreciation + Provisions NET OPERATING PROFIT (LOSS) - EBIT Less: Financing Expenses (net) Add: Gain/loss from extraordinary items NET PROFIT (LOSS) BEFORE INC. TAXES Less: Income Taxes Add: Minority Interest NET PROFIT (LOSS) AFTER INC. TAXES

0% 0% 2% 0% 0% 0% 1% 0% 0% 0% 0% 0% -1% 0% -1% 0% 0% -1% 0% 0% -1%

December-10 (%)