Table of Contents

1. Presentation of the company .............................................................................................................. 2

2. Object of activity ................................................................................................................................. 3

3. The budgeting process ........................................................................................................................ 3

3.1. Sales Budget.................................................................................................................................. 3
3.2. Selling expenses budget – details the forescast for expenditure sales activity. ............................ 5
3.3. Production budget ......................................................................................................................... 7
3.4. Purchases budget ........................................................................................................................... 9
3.5. Human resources budget ............................................................................................................. 10
3.6. Manufacturing overheads budget ................................................................................................ 11
3.7. Administrative expenses budget ................................................................................................. 12
3.8. VAT Budget ................................................................................................................................ 14
3.9. Cash flow budgets ....................................................................................................................... 15
3.10. Budgeted income statement .................................................................................................... 17
3.11. Budgeted balance sheet ........................................................................................................... 19

1
1. Presentation of the company

ALBALACT is the only Romanian dairy producer established in the old communist
industry, which, only a few years after launching its first brand, became one of the top four
players on the Romanian dairy market. The Albalact factory was opened in 1971, in a
period during which the communist regime wanted for every district in Romania to develop
its own food industry. This is where the name of the company comes from: Alba-lact. In
1999, after reaching the edge of bankruptcy, without investments and technology, the state-
owned factory was privatised and became a stock company with entirely private capital.
The Ciurtin family from Alba Iulia bought the majority share stock.
Only a few years after being privatized, with modern investments and a consolidated
marketing strategy, Albalact launched its first local brand - Fulga - which rapidly gained a
huge image capital, becoming one of the most appreciated Romanian brands. .
In 2005 the management of the company decided it was time for more important
changes. At the time, Albalact underwent a complex rebranding process. Albalact needed to
relate in a different way to the competitive environment it had entered. The corporate visual
identity was recreated, by adding a heart, a cow’s udder and a milk stream - as a corporate
promise to offer “everything that is best from milk”. The new Albalact corporate brand was
on the one hand inspired by the tradition on the market of fresh products and on the other
hand - by the quality of products coming mainly from the region which is known to be a
huge area of quality milk and from the milk processing technology. On this occasion, the
company also registered the homonym brand “De Albalact”, under which it sales various
fresh dairy products.
Furthermore, Albalact benefited from successive capital increases and significant
investments, the management was consolidated and a long-term development strategy was
developed.
One year later, Albalact also launched the brand Zuzu, which was designed in the same
friendly and playful tone like Fulga and also rapidly won over consumers.
The years 2007 and 2008 meant for Albalact major investments and a consolidation of the
position as a modern Romanian company with European vision. Albalact opened the gates
of the new factory in Oiejdea in the Alba district - one of Central and Eastern Europe’s
largest and most modern greenfield investments.
In the factory in Oiejdea, Albalact processes milk and dairy products under its three
brand names - Fulga, Zuzu and De Albalact.
Albalact followed its development plans and bought the majority stocks of the company
Raraul in Campulung Moldovenesc in 2008 in order to enter the cheese segment. The
Raraul factory in Campulung has a long tradition in the field of cheese production and is the
only one in the country accredited to export its products to the European Union. Today,
Albalact holds 99,01% of the shares of Raraul Campulung Moldovenesc.
As a natural consequence of the acquisition, Albalact launched Raraul brand in 2010 and
together with it a diverse range of milk and cheese products manufactured according to
Romanian recipes, which combine experience and tradition from Bucovina with modern
quality and technology. By launching Raraul dairy products, Albalact has transformed a
local brand into a national brand, with a new image and a new market positioning concept.

2
Raraul speakes about being natural, about health, beauty, travel and represents everything
that is special in Bucovina.

2. Object of activity
Albalact is the largest dairy company in Romania with majority Romanian ownership
and the third biggest player on the local dairy market. Company has a tradition of more than
40 years in the dairy business and today it produces dairy products of the finest quality in
one of Central and Eastern Europe’s largest and most modern greenfield investments - the
Oiejdea factory in the Alba district. The company also produces a diverse cheese range in
the Raraul factory in Campulung Moldovenesc, which Albalact acquired in 2008. The
Raraul company also has a long tradition in the white cheese and yellow cheese production.
Albalact brings today on the Romanian market over 80 dairy varieties under its four
brand names - Fulga, Zuzu, De Albalact and Raraul.Albalact has a rich dairy products
portfolio, from fresh pasteurised and UHT milk, to plain yogurt, fruit yogurt, sour cream,
butter, sana, sour milk, kefir, flavoured milk for children, white cheese, fresh cow milk
cheese, traditional kneaded cheese, yellow cheese, processed cheese.

3. The budgeting process

3.1.Sales Budget

For many organizations, the principal budget factor is sales volume. The sales budget is
therefore often the primary budget from which the majority of the other budgets are derived.
Sales forecasting is complex and involves the consideration of a number of factors:
 Past sales patterns (accordingly with the Profit and Loss Account as at 31
December 2013, the turnover of the company was RON, 423,185,587 and
accordingly with the Annual Report for 2013, the portfolio structure was as
follows:
- Milk: 70.23%
- Yoghourt: 16.86%
- Butter: 12.03%
- Cheese: 0.88%);
 Results of market research (48% of the Romanian population is represented by
men. Albalact performed a several market studies and found the fact that the
male population is unsatisfied because all the yoghourt categories are especially
addressed to women. That is why the company decided to launch in July 2014 a
new product designed for men: Zuzu Max);
 Competition: The competitors are: Danone, Napolact, Hochland Romania, Dorna
Lactate, Albalact being the single Romanian company as the others are foreign
groups. The company holds a market share of 10% in the dairy industry in
Romania;
 Pricing policies;
 Legislation;
 Environmental factors

3
 Based on the previous year evolution (2013 vs 2012) and taking into consideration the factors mentioned above, we
forecasted that the sales will increase as follows:

Units forecasting and selling price forecasting

Q1 Q2 Q3 Q4
Units per Percentage
Products Turnover Selling Units Units Percentage Units Percentage Units Percentage Units
quarter Weight of increase
Price of increase of increase of increase

Milk 297,203,238 4.50 66,045,164 16,511,291 1L 3% 17,006,630 5% 17,856,961 6% 18,928,379 4% 19,685,514

Yoghourt 71,349,090 3.00 23,783,030 5,945,757 450g 3% 6,124,130 3% 6,307,854 4% 6,560,168 4% 6,822,575

Butter 50,909,226 6.50 7,832,189 1,958,047 200g 3% 2,016,789 2% 2,057,124 1% 2,077,696 4% 2,160,803

Cheese 3,724,033 14.00 266,002 66,501 400g 3% 68,496 3% 70,550 3% 72,667 1% 73,394

Total 423,185,587 97,926,385 24,481,596 25,216,044 26,292,490 27,638,910 28,742,286

Revenue forecasting

Products Q1 Q2 Q3 Q4 Total

Milk 76,529,834 80,356,325 85,177,705 88,584,813 330,648,677

Yoghourt 18,372,391 18,923,562 19,680,505 20,467,725 77,444,183

Butter 13,109,126 13,371,308 13,505,021 14,045,222 54,030,677

Cheese 958,939 987,707 1,017,338 1,027,511 3,991,494

Total (Monetary Units) 108,970,289 113,638,903 119,380,569 124,125,272 466,115,032

4
Sales budget (units/monetary units- first quarter)

First Quarter January February March

Monetary Monetary Monetary Monetary
Products Units Price Units Units Units
units units units units

Milk 17,006,630 4.50 76,529,834 5,668,877 25,509,945 5,110,789 22,998,551 6,226,964 28,021,339

Yoghourt 6,124,130 3.00 18,372,391 2,041,377 6,124,130 1,889,444 5,668,332 2,193,309 6,579,928

Butter 2,016,789 6.50 13,109,126 672,263 4,369,709 700,455 4,552,958 644,071 4,186,460

Cheese 68,496 14.00 958,939 22,832 319,646 23,002 322,028 22,662 317,264

Total 25,216,044 108,970,289 8,405,348 36,323,430 7,723,690 33,541,868 9,087,006 39,104,991

3.2. Selling expenses budget – details the forescast for expenditure sales activity.

Forecasted costs for each period

Q1 Q2 Q3 Q4 Total

Labour 660,000 673,200 686,400 673,200 2,692,800

Supplies 267,500 299,600 278,200 224,700 1,070,000

Depreciation 1,780,621 1,929,006 2,003,199 1,706,429 7,419,254

Other expenses 1,296,000 1,104,000.00 1,200,000 1,200,000 4,800,000

Total 4,004,121 4,005,806 4,167,799 3,804,329 15,982,054

- the labour costs for each period have been forecasted based on an average number of 102 employees working in the sales and
distribution area (Q1 – 100, Q2 – 102, Q3 – 104, Q4 – 102) and on an average remuneration of RON 2,200;
- the cost approtionement between the main products was realized based on the percentual contribution of each product in the
company’s turnover as following: milk - 71%, yoghourt – 17%, butter – 12%, cheese – 1%;
5
Forecasting for geographical areas

Salaries, related items and/or fees Muntenia Moldova Transilvania Total

Milk 955,098 573,059 382,039 1,910,195

Yoghourt 223,702 111,851 111,851 447,404

Butter 187,285 93,642 31,214 312,141

Cheese 11,530 6,918 4,612 23,059

Total 1,377,614 785,470 529,716 2,692,800

Supplies, depreciation and other

Muntenia Moldova Transilvania Total
expenses

Milk 4,242,158 3,299,456 1,885,403 9,427,017

Yoghourt 1,324,792 662,396 220,799 2,207,986

Butter 770,226 462,135 308,090 1,540,451

Cheese 68,280 34,140 11,380 113,800

Total 6,405,455 4,458,127 2,425,672 13,289,254

Total budget 7,783,069 5,243,597 2,955,388 15,982,054

- regarding the apportionment of the forecasted costs on geographical areas, we considered that the highest percentage should be
charged on Muntenia due to the high volumes of dairy products distributed by the company to the supermarket chains;

6
 3.3.Production budget

- In order to prepare the production budget, we identified the products to be manufactured in order to ensure the sales plan and
the inventory needs and we have chosen one of the products for which we have estimated the expected physical production and the
costs implied;

Direct costs: materials

Material usage per unit of Price per unit of material Material price per unit of
Q1 January February March
Ingredients product (l, ml, g) (RON) product

Milk 0.35 2.30 0.81 4,929,925 1,643,308 1,521,002 1,765,614

Yoghourt ferments 1.25 0.30 0.38 2,296,549 765,516 708,542 822,491

Strawberries 10.00 0.07 0.70 4,286,891 1,428,964 1,322,611 1,535,317

Total 1.88 11,513,365 3,837,788 3,552,155 4,123,422

Direct costs: labour

Hours required
Rate/hour for
Hours required per unit Rate/hour for production per unit for
Production units direct Total Cost Cost/unit
for production process process direct
packaging
packaging

Q1 6,124,130 0.00008 6.34375 0.00007 2.71875 4,273 0.000697813

January 2,041,377 0.00008 6.34375 0.00007 2.71875 1,424 0.000697813

February 1,889,444 0.00008 6.34375 0.00007 2.71875 1,318 0.000697813

March 0.000697813
2,193,309 0.00008 6.34375 0.00007 2.71875 1,531

7
 Production costs budget

Elements Q1 January February March

1. Indicators
- Activity volume 6,124,130 2,041,377 1,889,444 2,193,309
- Unit cost 2.39 2.39 2.43 2.37
2. Centre expenses 14,387,370 4,795,790 4,494,857 5,096,723
a) Direct costs 12,130,051 4,043,350 3,742,418 4,344,283
- materials 11,513,365 3,837,788 3,552,155 4,123,422
- labour 4,273 1,424 1,318 1,531
- other direct costs (package) 612,413 204,138 188,944 219,331
b)Indirect costs 2,257,319 752,440 752,440 752,440
- consumables 990,000 330,000 330,000 330,000
- wages/labour 364,518 121,506 121,506 121,506

- social contributions 101,518 33,839 33,839 33,839

- energy and water 241,313 80,438 80,438 80,438
- depreciation 559,970 186,657 186,657 186,657
3. Settlement cost of benefits received by the
274,313 91,438 91,438 91,438
others centers
- mechanical workshop 274,313 91,438 91,438 91,438
4. Product cost (2+3), in which: 14,661,683 4,887,228 4,586,295 5,188,160
- variable costs 13,361,364 4,453,788 4,152,855 4,754,721
- fixed costs 1,300,319 433,440 433,440 433,440

- Taking into consideration that the production process is highly automatized, we presumed that the labour cost is not significant
for the production budget;
- In order to compute the hours required for 10.000 units we consider the following:
 directly involved workers: 10;

8
  hours/month/worker: 160;
 total hours: 1,600;
- For the rate/hour computation we took into consideration an average monthly wage of 1.450 RON, due to the fact that the
workers involved into production are both qualified and non qualified workers;
- The main presumption consisted in the fact that the entire production units will be sold, not taken into consideration the opening
balances for inventories;
- the other direct costs representing main packages were estimated to represent 10% of the activity volume expresed in monetary
units;
- indirect costs such as: consumables, energy and water, depreciation, settlement cost of benefits received from the mechanical
workshop (equipment maintenance) had as starting point the balance as at 31 December 2013 to which was applied the percentage
of the contribution to the turnover (16.5%);

3.4.Purchases budget

Milk (L) Yoghourt (g) Butter (g) Cheese (g) Total Q1 Q2 Q3 Q4 Total 2014

Units 17,006,630 6,124,130 2,016,789 68,496 25,216,044

Milk 39,115,248 4,929,925 22,265,346 472,620 66,783,139

Yoghourt ferments - 4,133,788 - 41,097 4,174,885

Fruits - 4,286,891 - - 4,286,891

TOTAL 39,115,248 13,350,604 22,265,346 513,717 75,244,915 75,320,160 75,470,800 75,697,213 301,733,088

- For the evolution from Q1 to the following periods we took into consideration that the company should improve its negotiation
policy with the suppliers in order to be able to obtain lower prices for greater orders for the same quality raw materials;

9
 3.5. Human resources budget

Projections on working hours and hourly rates

Direct labour:

Total hours/Worker-Quarter 480

Total hours/Quarter 69,600

Direct No of hours Direct

Portfolio's No of hours per
Product labour per product labour Q1 Q2 Q3 Q4 Total
structure unit
expense type rate/hour

Milk 70% 584,030 48,880 12 0.00100 203,199 213,359 226,160 235,207 877,925

Yoghourt 17% 140,207 11,735 12 0.00015 10,976 75,368 78,382 81,518 246,243

Butter 12% 100,041 8,373 12 0.00049 11,808 12,044 12,164 12,651 48,666

Cheese 1% 7,318 612 12 0.00025 205 211 217 219 852

Total 100% 831,596 69,600 0.00189 226,187 300,981 316,924 329,594 1,173,686

- The starting point for the direct labour expense represents the total personnel expenses from Profit and Loss as at 31 December
2013 (RON, 32,437,977). We applied the proportion of direct workers from total workers (145/707) and then we applied a haircut
of 50% due to the fact that the management and other administrative personnel's wages affects the total personnel expenses by
increasing it;

10
 3.6.Manufacturing overheads budget

Inflation Rate 3% 3% 4% 3%
Total
Administrative
expenses
Expenses expenses Q4/2013 Q1 Q2 Q3 Q4 Total Notes
Q4/2013 as
as per PL
per PL

Wages 7,277,898 1,950,012 2,008,512 2,068,767 2,151,518 2,216,064 8,444,861 Note 1

Social contributions 2,026,895 543,078 559,371 576,152 599,198 617,174 2,351,894 Note 2

Consumables 942,481 252,525 260,101 267,904 278,620 286,978 1,093,602 Note 3

Energy and water 1,462,409 391,832 403,587 415,695 432,322 445,292 1,696,896 Note 4
Other third parties services
expenses (telecom, travel,
advertising, legal etc) 17,773,439 4,762,146 4,905,010 5,052,160 5,254,247 5,411,874 20,623,292 Note 5

Assurance and taxes 282,583 75,714 77,986 80,325 83,538 86,044 327,893 Note 6

Depreciation 3,328,024 891,698 918,449 946,002 983,842 1,013,358 3,861,651 Note 7

Rent for offices 494,779 132,569 136,546 140,643 146,268 150,656 574,113 Note 8

Other expenses 244,165 65,421 67,383 69,405 72,181 74,346 283,316 Note 9

Total 33,832,673 9,064,994 9,336,944 9,617,053 10,001,735 10,301,787 39,257,518

Note 1:
- The starting point represents the total wages expenses as per Profit and Loss as at 31 December 2013;
- We eliminated the direct labour expense already calculated for the Human Resources Budget;
Note 2:
- We eliminated the direct labour expense already calculated for the Human Resources Budget;

Note 3:

11
 - The starting point represents the total expenses with raw materials and consumables as per Profit and Loss as at 31 December
2013;
- Assuming that the production process is highly significant for the company's activity, we applied a haircut of 98.5%;
Note 4:
- The starting point represents the expenses with energy and water as per Profit and Loss as at 31 December 2013;
Note 5:
- The starting point represents the expenses with other third parties services as per Profit and Loss as at 31 December 2013;
- From this amount we deducted the value of the rental agreements that we decided to present separately;
Note 6:
- The starting point represents the expenses with assurance and taxes as per Profit and Loss as at 31 December 2013;
Note 7:
- The starting point represents the depreciation expense as per Profit and Loss as at 31 December 2013;
Note 8:
- The starting point represents the rent expense and the operational lease expense as per Profit and Loss as at 31 December 2013;
Note 9:
- The starting point represents the other expenses as per Profit and Loss as at 31 December 2013;

3.7. Administrative expenses budget

- General Note: In order to apportion between indirect production expenses and administrative expenses, we used as a starting
point their corresponding values disclosed in the notes as at 31 December 2013 and obtained the structure of total indirect
expenses, as following:

Administrative Expenses 24,331,094 73%

Indirect production expenses 8,905,204 27%

Total 100%
33,236,298

12
 Inflation Rate 1% 1% 3% 4%
Total
Administrative
expenses
Expenses expenses Q4/2013 Q1 Q2 Q3 Q4 Total Notes
Q4/2013
as per PL
as per PL

Wages 7,277,898 5,327,887 5,375,838 5,451,099 5,614,632 5,811,144 22,252,714 Note 1

Social contributions 2,026,895 1,483,816 1,497,171 1,518,131 1,563,675 1,618,404 6,197,381 Note 2

Consumables 942,481 689,957 696,166 705,913 727,090 752,538 2,881,707 Note 3

Energy and water 1,462,409 1,070,577 1,080,212 1,095,335 1,128,195 1,167,682 4,471,423 Note 4
Other third parties services
expenses (telecom, travel,
advertising, legal etc) 17,773,439 13,011,293 13,128,394 13,312,192 13,711,558 14,191,462 54,343,606 Note 5

Assurance and taxes 282,583 206,869 208,731 211,653 218,002 225,633 864,018 Note 6

Depreciation 3,328,024 2,436,326 2,436,326 2,436,326 2,436,326 2,436,326 9,745,306 Note 7

Rent for offices 494,779 362,210 365,470 370,586 381,704 395,063 1,512,823 Note 8

Other expenses 244,165 178,745 180,353 182,878 188,365 194,957 746,553 Note 9

Total 33,832,673 24,767,679 24,968,661 25,284,113 25,969,547 26,793,210 103,015,531

Note 1:
- The starting point represents the total wages expenses as per Profit and Loss as at 31 December 2013;
- We eliminated the direct labour expense already calculated for the Human Resources Budget;
Note 2:
- We applied the cummulated percentage (27.85%) of social contributions due by the employer to the wages computed as per
Note 1.
Note 3:
- The starting point represents the total expenses with raw materials and consumables as per Profit and Loss as at 31 December
2013;
- Assuming that the production process is highly significant for the company's activity, we applied a haircut of 98.5%;

13
Note 4:
- The starting point represents the expenses with energy and water as per Profit and Loss as at 31 December 2013;
Note 5:
- The starting point represents the expenses with other third parties services as per Profit and Loss as at 31 December 2013;
- From this amount we deducted the value of the rental agreements that we decided to present separately;
Note 6:
- The starting point represents the expenses with assurance and taxes as per Profit and Loss as at 31 December 2013;
Note 7:
- The starting point represents the depreciation expense as per Profit and Loss as at 31 December 2013;
Note 8:
- The starting point represents the rent expense and the operational lease expense as per Profit and Loss as at 31 December 2013;
Note 9:
- The starting point represents the other expenses as per Profit and Loss as at 31 December 2013;

3.8.VAT Budget

Q1 Q2 Q3 Q4

Output VAT 26,152,869 27,273,337 28,651,337 29,790,065

Input VAT 27,995,176 23,203,341 23,407,393 23,024,409

VAT to recover (1,842,307) - - -

VAT to pay - 4,069,996 5,243,944 6,765,656

14
 3.9.Cash flow budgets
Elements Q1 Q2 Q3 Q4 Total
1 Cash beginning balance 11,769,172 5,320,708 5,685,983 10,538,892
2 Cash receipts
3 Sales 2 months ago 5% 6,560,791 5,526,325 5,777,640 6,048,107 23,912,862
4 Sales last month 20% 24,018,612 22,416,540 23,493,336 24,508,741 94,437,228
5 Sales current month 75% 81,727,716 85,229,177 89,535,427 93,093,954 349,586,274
6 Receivables from bad debts 5,100,000 - - - 5,100,000
7 Other receivables 3,863,229 1,931,614 - 1,931,614 7,726,457
8 Total receipts, VAT excluded 121,270,348 115,103,656 118,806,402 125,582,416 480,762,822
9 Cash payments
10 Direct materials 95,671,083 75,320,160 75,470,800 77,199,077 323,661,120
11 Direct labour 226,187 300,981 316,924 329,594 1,173,686
12 Consumables 956,267 973,816 1,005,710 851,382 3,787,175
13 Energy and water 1,483,799 1,511,029 1,560,517 1,321,053 5,876,399
14 Rent 502,016 511,229 527,972 508,056 2,049,272
15 Indirect wages 2,008,512 2,068,767 2,151,518 2,216,064 8,444,861
16 Reimbursements for loans and borrowings - 5,000,000 - - 5,000,000
17 Other long term liabilities - - - 7,000,000 7,000,000
18 Indirect wages - social contributions 559,371 576,152 599,198 617,174 2,351,894
19 Other third parties services expenses (telecom, travel, advertising, legal etc) 18,033,405 18,364,352 18,965,805 16,055,471 71,419,032
20 Assurance and taxes 286,716 291,978 301,541 311,677 1,191,912
21 Other expenses 247,737 252,283 260,546 269,304 1,029,869
22 Administrative wages 5,375,838 5,451,099 5,614,632 5,811,144 22,252,714
23 Administrative wages - social contributions 1,497,171 1,518,131 1,563,675 1,618,404 6,197,381
24 Total payments, VAT excluded 126,848,099 112,139,978 108,338,837 114,108,399 461,435,314
25 VAT paid - 2,227,689 5,243,944 4,510,437 11,982,070
26 Income tax 870,713 370,713 370,713 370,713 1,982,852
27 Total payments 127,718,812 114,738,380 113,953,494 118,989,550 475,400,236
28 Net increase/decrease in cash (6,448,464) 365,276 4,852,909 6,592,866 5,362,586
29 Cash ending balance 5,320,708 5,685,983 10,538,892 17,131,758

15
 Q1 Q2
January February March Total April May June Total

Sales 2 months ago 5% 2,372,310 2,372,310 1,816,171 1,893,982

1,816,171 6,560,791 1,816,171 5,526,325

Sales last month 20% 9,489,240 7,264,686 7,264,686 7,575,927

7,264,686 24,018,612 7,575,927 22,416,540

Sales current month 75% 27,242,572 27,242,572 28,409,726 28,409,726

27,242,572 81,727,716 28,409,726 85,229,177

Q3 Q4
July August September Total October November December Total

Sales 2 months ago 5% 1,893,982 1,893,982 1,989,676 2,068,755

1,989,676 5,777,640 1,989,676 6,048,107

Sales last month 20% 7,575,927 7,958,705 7,958,705 8,275,018

7,958,705 23,493,336 8,275,018 24,508,741

Sales current month 75% 29,845,142 29,845,142 31,031,318 31,031,318

29,845,142 89,535,427 31,031,318 93,093,954

- For the year 2014, the company Albalact estimated cash receipts especially from sales. In the current month it receives 75% of
revenues, the rest of 30% are credit sales that will be received as follows: 20% in the next month; 5% in the next 2 months;

- At 31 december 2013 the company has a balance of RON 47,446,199 on credit sales account. 30% are received in Q1, the rest of
70% (RON 33,212,339) represents bad debts. Another amount of RON 5,100,000 is received in Q1;

- At 31.12.2013 the company has a balance of RON 40,852,335 RON on trade payables account, paid during the year 2014 as
follows: 50% in Q1 and 50% in Q4;

- We assumed that the liabities from Q4 were paid in proportion of 75%, excluding wages that were paid 100%;

16
 3.10. Budgeted income statement

Expenses functions
Result according to the Result according to
Expenses nature Cost of goods sold Admin Expenses Selling Expenses Notes
nature the function

Revenue 466,115,032 466,115,032

Raw Materials (301,733,088) 301,733,088 Note 1

Third party expenses (83,222,153) 22,894,301 60,327,852 Note 2

Wages and social contributions (40,747,407) 12,297,313 25,757,294 2,692,800 Note 3

Taxes and assurance (1,191,912) 327,893 864,018 Note 4

Operating depreciation (13,606,957) 3,861,651 2,326,051 7,419,254 Note 5

Consumables (5,045,309) 1,093,602 2,881,707 1,070,000 Note 6

Other operating expense (5,829,869) 283,316 746,553 4,800,000 Note 7

Cost of sales 342,491,164 (342,491,164)

Administrative expenses 92,903,477 (92,903,477)

Selling expenses 15,982,054 (15,982,054)

Result from operating activities 14,738,337 14,738,337

Income tax 2,358,134

Profit of the year 12,380,203

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Note 1:
- This balance represents the amount of the purchases performed during 2014;

Note 2:
- Please refer to Indirect Production budget and Aministrative Budget (Other third party expenses and Rent expense);
Note 3:
- The sources of cost of goods sold balance are: Human Resources Budget and Indirect production budget;
Note 4:
- Please refer to Indirect Production budget and Aministrative Budget;
Note 5:
- Please refer to Indirect Production budget, Aministrative Budget and Selling Expenses Budget;
Note 6:
- Please refer to Indirect Production budget, Aministrative Budget and Selling Expenses Budget;
Note 7:
- Please refer to Indirect Production budget, Aministrative Budget and Selling Expenses Budget;

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 3.11.Budgeted balance sheet

Elements 2013 2014 Budgeted Notes

Intangible assets 556,007 293,968 Note 1

Property, plant and equipment 114,604,889 101,292,792 Note 2
Financial Assets 38,970,389 35,073,350 Note 3

Non-current assets 154,131,285 136,660,110

Inventories 18,445,550 16,600,995 Note 4

Trade receivables 47,446,199 (453,702,505) Note 5
Other receivables 7,726,457 - Note 6
Short term investments 5,402,251 3,781,576 Note 7
Cash and cash equivalents 11,769,172 17,131,758 Note 8
Prepaid expenses 217,148 696,266 Note 9

Current assets 91,006,777 (415,491,910)

Trade payables 40,852,335 40,852,335 Note 10

Other liabilities 65,189,995 66,780,438 Note 11

Current liabilities 106,042,330 107,632,773

Current assets minus current liabilities (15,035,553) (523,124,683)

Total assets minus current liabilities 139,095,732 (386,464,573)

Loans and borrowings 8,790,013 3,790,013 Note 12

Other long term liabilities 27,492,839 20,492,839 Note 13
Provisions 208,663 208,663 Note 14
Deferred income/revenue 4,117,034 4,000,000 Note 15

Non-current liabilities 40,608,549 28,491,515

Share capital 64,860,057 64,860,057

Reserves 24,226,308 24,226,308
Retained earnings 1,485,204 9,400,818
Result of the year 8,400,362 -
Distribution of profit 484,748 500,000

Equity 98,487,183 97,987,183

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Note 1:
- The intangible assets are presented at net value, by deducting the depreciation recorded in
2013 as it is a fixed amount charged anually;
Note 2:
- The tangible assets are presented at net value, by deducting the depreciation recorded in
2013 as it is a fixed amount charged anually;
Note 3:
- We assumed the fact that the financial assets owned by the company are subject to
impairment due to market evolution, reason why we deducted 10% of the last year balance;
Note 4:
- We assumed that the company will sell all the production obtained during the year;
- The company applies the FIFO inventory valuation method, reason why the outstanding
balance as at 31 December 2013 will be first sold during 2014;
- In accordance with the company's accounting policy, the safety inventory level at year
end must be maintained between RON, 15.000.000-20.000.000;
- We also applied an impairment percentage of 10% taken into consideration that the
company's products are perishables;
Note 5:
- The closing balance of the receivables represents: the opening balance as at 1 January
2014 + the receivables from sales (Source: Sales budget) minus the receipts during 2014
(Source: Cash Flow Budget);
Note 6:
- The opening balance as at 1 January 2014 represents the value of sale agreements
concluded with related parties (Raraul SA and Prefera SRL) for the period 2012-2013;
- We assumed that the receivables classified as short term will be cashed in during 2014;
Note 7:
- The short term investments are valuated at fair value which decreased during 2014 with
30% comparing with the previous balance;
Note 8:
- Please refer to the Cash Flow Budget;
Note 9:
- The starting point for budgeting the prepaid expenses represents the closing balance as at
31 December 2013;
- We increased this amount with the almost 300% due to the fact that the company has
concluded IT services and maintenance which include prepayment clauses;
Note 10:

Source Liability source Amount

Purchases Budget Purchases 301,733,088

Administrative Expenses Budget Consumables 2,881,707

Administrative Expenses Budget Energy and water 4,471,423

Administrative Expenses Budget Other third parties services expenses 54,343,606

Administrative Expenses Budget Rent 1,512,823

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 Indirect Production Budget Consumables 1,093,602

Indirect Production Budget Energy and water 1,696,896

Indirect Production Budget Other third parties services expenses 20,623,292

Indirect Production Budget Rent 574,113

Total liabilities 388,930,551

Cash Flow Budget Payments to suppliers 406,792,998

Note 11:
- The amount of RON 7,953,704 represents the net balance of the VAT to pay recorded in
2014 (Source: VAT Budget). The paid amount related to VAT liability during 2014 is RON
6,363,261;
Note 12:
- The amount of RON 5,000,000 represents reimbursement for loans and borrowings
(Please refer to Cash Flow Budget);
Note 13:
- The amount of RON 7,000,000 represents reimbursement for other long term liabilities
from financial leasing agreement (Please refer to Cash Flow Budget);
Note 14:
- The balance as at 31 December 2014 reprents the corresponding amount for a provision
from litigation;
Note 15:
- The opening balance as at 1 January 2014 was reduced with RON, 117,034 due to
reversal to income of the subsidies;

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