MICHAEL A. DEGIGLIO – VILLAGE FARMS INCOME FUND (VFF_UN:TSX)
CEO Interview - published 02/09/2009

MICHAEL A. DEGIGLIO, Chairman, Director and Chief Executive Officer of Village 
Farms and Trustee of the Fund. He is a co-Founder of Village Farms and has 
served as Chief Executive Officer of Village Farms since its inception in 1990. 
Mr. DeGiglio joined EcoScience (the former parent company of Village Farms) upon 
its acquisition of Agro Dynamics, Inc. (ADI) in November 1992, and served as 
President and Chief Executive Officer of EcoScience from July 1995 to 2001. 
Prior to co founding ADI, Mr. DeGiglio served on active duty in the United 
States Navy as an officer and jet aviator from July 1976 through January 1983, 
and the Naval Air Reserves from 1983 to 2001, retiring at the rank of Captain 
with the United States Naval Reserve. Throughout his Naval career, he held 
various department head positions, completed a tour as commanding officer of a 
jet aviation squadron, performed multiple tours overseas, and has completed 
numerous senior advanced management courses. Mr. DeGiglio received a Bachelor of 
Science degree in Aeronautical Science and Aviation Management from Embry Riddle 
Aeronautical University in Daytona Beach, Florida.

SECTOR – FOOD

TWST: We'd like to begin with a brief historical sketch of the company and a 
picture of the things you're doing at the present time.

Mr. DeGiglio: Village Farms has been doing business for the past 20 years. Our 
primary focus is in the production, sales and marketing of high quality 
greenhouse grown hydroponic produce. Village Farms' primary crop is tomatoes, 
and we distribute bell peppers and seedless English cucumbers from third party 
growers. We grow indoors on a large scale using highly sophisticated greenhouse 
technology. Our primary footprint of 120 acres is in West Texas and we have an 
equal number of acres located just outside of Vancouver, Canada. We market 
product under our brand name Village Farms, as well as for our third party 
growers under various brands grown in their facilities in Canada, United States 
and in Mexico.. 
We are a vertically integrated corporation from seed to retail. In addition, we 
design the facilities, finance and own the assets. We grow the product, pack it 
for the end-user, facilitate all marketing, sales and fulfillment, including 
distribution and transportation, and delivery directly to retail outlets. Our 
primary customers are grocery stores located in the United States and Canada, as 
well as a limited amount of product exports to Japan. In addition, we are 
currently in the development stages of an international division that will 
provide consultation for the construction and management of high technology 
greenhouses outside of North America. 

TWST: What is the current state of the hydroponic farming industry and what is 
the outlook?

Mr. DeGiglio: The outlook for hydroponic greenhouse production technology and 
particularly the products we produce is positive for a number of reasons in the 
context of economic and environmental efficiencies. First, a sophisticated 
greenhouse growing tomatoes hydroponically can produce approximately 20-30 times 
the yield per acre compared to conventionally grown field tomatoes. This brings 
the obvious cost benefits by allowing more products to be grown in less of an 
area but further encourages land preservation. 
Second, the produce grown in an enclosed greenhouse is shielded from any outside 
conditions or Mother Nature so to speak, be it drought, severe weather. All 
climatic conditions are controlled in an enclosed environment. And because 
optimum growing conditions can be monitored and maintained in a greenhouse 
setting, higher yields are achieved as well as a higher quality product. 
Greenhouse grown produce is a cleaner, safer product free of environmental 
contaminants. 
And finally, in an enclosed greenhouse, we can affectively create the ideal 
growing conditions so we are more efficient and thus more environmentally 
friendly. For example, we filter and re-circulate our water up to five times for 
our plants. This equates to a huge water savings and, in fact, for tomatoes, 
uses only one-fifth of the amount of water per pound to grow compared to field 
grown tomatoes. We take environmental stewardship seriously and use natural 
biological controls such as integrated pest management (IPM) to control pests. 
Today when you look at worldwide population increases coupled with increasing 
demand for a reliable and sustainable food supply, there are real limitations in 
not only the availability, but quality of viable land to meet this demand. 
Hydroponics does not grow in soil, but instead in a sterile medium and, as I 
mentioned, uses less land to grow more food. There is no loss of soil due to 
erosion or threat to products grown hydroponically from soil-borne contaminates. 
The threat of food-borne illness is further eliminated by the mere fact that we 
filter our water used to grow our products and do not have to worry about run 
off or salmonella, say, from the farmer whose cow pasture is in close proximity. 
This is a problem field grown products have to contend with and just recently 
became a reality again with last summer's salmonella outbreak. So as I 
mentioned, there is no threat of ground water or soil contamination and there is 
no depletion of soil nutrients as compared to traditional outdoor farming that 
constantly grows the same crops in the same soil. Hydroponic greenhouse 
production is a very sustainable business, more so probably than any other 
segment of agriculture for those reasons and more. The technology is improving 
and eventually we will be able to locate greenhouses nearly anywhere, directly 
addressing increasing food demand due to an increasing population. 

TWST: What about price and quality when the product gets to the store?

Mr. DeGiglio: Our products do command premiums compared to field grown products. 
This is because of the significant differences in quality and flavor, 
particularly for tomatoes. For example, Village Farms tomatoes are hand picked 
and vine ripened. Vine-ripened tomatoes have a significantly higher sugar 
content and thus taste much better, with more real tomato flavor. Field 
tomatoes, for the most part, are picked green before the specific gene within 
the tomato has the opportunity to turn on the natural ripening process. This 
enables the product to be shipped greater distances and ethylene gas is used, 
similar to what bananas go through, to ripen the product on location. Since 
field tomatoes picked in this manner never really have the opportunity to ripen 
naturally, this affects taste dramatically. Our product is packed at the field 
and we can have it literally to a food chain within 24 hours. assuring a quality 
product that is at the peak of freshness and flavor. 

TWST: What impediments are there for large-scale growth of the industry? What 
could get in the way of the industry?

Mr. DeGiglio: Greenhouse production is very capital intensive compared to field 
production. This is primarily due to the fact the startup costs for the 
technology to build a greenhouse are substantial. If you're looking at field 
farming, let's just say that a particular farmer owns the land so his only costs 
are his input costs for the seed, fertilizer and labor. Hydroponic greenhouse 
technology, while more sophisticated, has a very high capital component. Most 
farmers do not have the equity or the means to build a greenhouse that can cost 
between $500,000 and $1 million plus per acre. 
Yet regardless of these costs, substantial investment has occurred in this 
industry over the past 10 years and this industry continues to see growth. The 
Canadian industry, for example, throughout the 1990s made a number of 
investments in high tech greenhouses. Another example is Mexico. Ten years ago, 
there was not much greenhouse production while today there are a number of 
investments for technology in this country. And as consumer perception is 
changing and awareness of the industry increases due to market demand there is 
certainly further growth potential. 
The market differentiation will come from not only the variability in types of 
technology being employed in the greenhouse but the expertise in operations. 
Simply put, in addition to using state of the art greenhouse technology, a 
business is only as strong as its labor capital, so you have to employ the right 
people, the best greenhouse production staff, top facility managers and an 
efficient grading and packing line. The more vertically integrated you can 
become, the more you can keep costs down throughout the chain, especially if you 
are able to do your own fulfillment, sales and marketing as Village Farms has 
been able to do successfully all these years. 
Technology is paramount. Our greenhouses are run by state of the art computer 
systems that monitor and control all of the plants' needs, including the 
irrigation — where each plant is fed individually. The CO2 and humidity levels 
in the greenhouse are constantly tweaked to the optimum climatic conditions, and 
the greenhouses are heated using energy efficient boilers. We supplement CO2 
into the greenhouse to promote plant growth because plants, as you know, during 
the process of photosynthesis, take in CO2 and in exchange produce oxygen. It 
has been our experience that this industry is dependent on a solid, knowledge 
base that is highly specialized to be successful. Globally there are large 
greenhouse holdings in places like China, Japan and Europe especially, although 
the level of technology varies greatly. Many of these countries don't have the 
climate to grow outdoors or they're looking for a much greener sustainable 
growing environment. And so due to these aforementioned factors, we see the 
outlook to be very positive globally in the long term for our industry.

TWST: Would you tell us about the type of research that is going on?

Mr. DeGiglio: We have an applied research division in our organization and have 
built a state of the art greenhouse adjacent to our facilities in Marfa, Texas, 
that is truly like no other in the world. Our advances in technology constantly 
strive for improving and building new systems, new designs, and we have 
developed some unique intellectual property that helps us achieve the greatest 
efficiencies and maximize yield. For example, in the 1960s, just to use a metric 
on production cycles, tomatoes produced in greenhouses on a world class level 
were about 25 kilos to 30 kilos per square meter per year. Today that level has 
increased to 60 kilos. Two years ago, our multi-million dollar research facility 
in Marfa, known as GATES, was a paradigm shift in design, totally enclosed, much 
like a biosphere, to use a comparison. And last year we had the highest yield 
recorded for annual tomato production anywhere in the world at over 100 kilos 
per square meter. 
Technology is playing a strong role in driving business. And because technology 
is, in fact, delivering on expectations. more so than any other segment of 
agribusiness, its role is key in driving our business model. 

TWST: What were the reasons for your focus on tomatoes, peppers and cucumbers?

Mr. DeGiglio: Tomatoes, cucumber and peppers are staples in almost any diet 
regardless of ethnicity. For example, the fresh tomato market in the US alone is 
a 7.5 billion pound market. This number is not inclusive of processed tomatoes. 
Tomatoes are in the number one, two and three spots respectively in sales dollar 
and volume for the fresh produce category consistently. Tomatoes are a staple 
and they are a high value product. So taking into consideration the higher 
capital costs, we are not interested in producing lower value crops like cabbage 
or broccoli. By staying with higher value products, we can differentiate within 
the product mix, choosing unique varieties, for example, further distinguishing 
our products from field grown products and promoting these value attributes to 
the consumer. So at the end of the day, the advancement in technology and 
staying on the high value side of our product mix are two very important factors 
adding to our brand's overall value and helping to define our company.

TWST: What are the main ideas on your agenda as you look out over the next two 
to three years?

Mr. DeGiglio: Today, Village Farms is the largest producer and marketer of 
greenhouse grown produce in North America. Our primary goal is to increase 
market share and we will continue to do just that. We will achieve this goal 
both through internal organic expansion and expansion of new technology. We will 
continue to market for third party growers and we are always looking to bring 
new growers into the Village Farms family. This will enable Village Farms to 
maximize efficiencies within our distribution channels while maximizing return. 
Advancing our technology will further lower our cost of production, increasing 
our profitability. Developing our intellectual property to further international 
expansion will not affect our core markets here in North America, but allow 
other countries to advance in greenhouse technology for their own countries' 
consumption and food security. 
In the past, our focus has been looking at acquisitions on the distressed side 
due to the fact that we have the necessary resources in place, human, financial 
and otherwise, to develop our own greenhouses. We look at consolidation first 
and foremost. In certain cases, if a distressed asset makes sense in terms of 
its geographical location, its critical mass and other competitive factors, we 
would look at that acquisition potential. So we see our growth happening 
organically from our advances in the area of new technology, continuing to 
expand our marketing, increasing market share and profitability, looking at 
acquisitions of distressed assets, as well as furthering the expansion of our 
international business for our technology. So ideally, our goals are that we are 
looking to really drive our costs lower and profitability higher and in the end 
increase shareholder value.

TWST: How does your success relate to the general economy? 

Mr. DeGiglio: I think on a macro level, we are a consumer product, but we are 
thankful that we are in food because food is a requirement that people must 
have, not like high end clothing. There are no perfect substitutes for fresh 
tomatoes. To that degree, I think we are in a solid position being in the fresh 
food industry and the requirements are increasing globally, with increasing food 
consumption, and several countries we are working with have no food security, 
importing virtually 99% of their food needs. We are targeting and working with 
countries in these situations, some of them in the Middle East where the 
requirements and the needs to grow outdoors are just not there due to extreme 
climate, lack of viable land and mitigated water supplies. These are all food 
production problem areas that greenhouse technology can solve. These countries 
are looking to increase their ability to grow their own food internally to 
establish food security, which means access to a year-round, consistent and 
reliable food supply. Village Farms has the technology and expertise to help 
solve these types of food security issues.

TWST: What would you expect the company to look like in about three years?

Mr. DeGiglio: We are positioned as a growth company. I really can't make 
predictions as a public entity, but I believe that we would like to see 
consistent double-digit growth for our revenue stream, in turn driving 
profitability. We are a fixed cost business in the farming sector such that if 
we can continue to increase our yields, reduce our input costs and maintain or 
increase our selling prices, we will enhance our profitability and grow the 
business. We think that the ability to drive growth, especially in today's 
economic times, makes us attractive not only in our industry segment but makes 
us much more viable compared to other segments.

TWST: Would you tell us about your background and expertise and the same for one 
or two of your colleagues?

Mr. DeGiglio: Our organization has a tremendous amount of talent with a combined 
expertise in the agricultural industry across all disciplines. Chiefly, we have 
numerous years of expertise in greenhouse production and the technical facets of 
the business, We are fortunate enough to have people who have spent their entire 
careers in greenhouse production on a global scale throughout Europe, the Middle 
East and North America. We are very fortunate to employ and retain a highly 
rated talent pool within the production side of the business. 
The same can be said of our sales organization. Because of the nature of our 
business, perishables are extremely challenging for any sales organization. This 
is because from the moment you harvest the product, you're on the clock because 
it is perishable. Some companies may struggle with having too much inventory, 
but it is not perishable. So while inventory carrying costs can be a detriment, 
the fact is, you cannot keep fresh produce around too long or it will spoil. So 
there's a different mindset in how we market and sell the products we produce. 
We have a lot of talent within our sales force, marketing and distribution team 
to deal with the limitations and challenges presented in selling a fresh 
product.
Myself, I have a military background. I was a naval officer and aviator for 26, 
including actual and reserve time, but I've been in the agricultural industry on 
the supply and biotech side and in the greenhouse sector for about 25 years. My 
knowledge base is in operating the organization and my knowledge of agriculture 
comes from experience gained from surviving in this industry for as long as I 
have. I am a co-founder of Village Farms along with the President of the 
company, Albert Vanzeyst.

TWST: What occupies your own attention most on a day-by-day basis?

Mr. DeGiglio: It really varies by quarter, by year and by cycle of the company. 
There are times when I drill down quite a bit, but I think I certainly like to 
drive and support more of the vision and direction of the company and provide 
the managers and the personnel with the tools they need to fulfill their 
obligations to the company. I focus equally on production as well as on the 
sales and marketing strategy and the tactics that are used. I visit our 
customers as well. I'm very concerned with how employees are aligned with the 
company and try to maintain a level of clarity in the direction that we're all 
marching and help align us all with consistent goals and a primary vision. We're 
still somewhat of a small company and there's not one particular area that I 
focus on all the time; it varies, but ultimately it must drive shareholder 
value. 

TWST: How many employees do you have?

Mr. DeGiglio: We have around 1,500 employees.

TWST: Do you see any need to improve the company's capital structure?

Mr. DeGiglio: Not immediately, but in time. We are unique in that we are an 
income trust in Canada. Due to changes in Canadian legislation, all income 
trusts will be abolished by December 2010. Our intention is to remain a public 
company and to convert our units to common stock. So right now we are in a 
pretty good position balance sheet wise, cash wise, and with our debt to equity 
ratio. But as we do go forward, I think we will be looking at raising additional 
capital to implement our growth strategies.

TWST: Would you tell us about the situation with income trusts. Why are they 
going to disappear?

Mr. DeGiglio: The income trust structure was created in Canada. It's a dividend-
based type of structure where it pays out dividends on a fairly consistent basis 
and impacts the corporation as dividends pass through to shareholders and are 
taxed at that level. There were so many companies transitioning into an income 
trust structure that the Canadian government believed that their tax revenue 
base would shrink pretty dramatically, so they passed legislation two years ago 
to end any more income trusts and grandfathered the existing trusts for four 
years. 

TWST: How well understood is Village Farms by the investment community?

Mr. DeGiglio: Not very well at all. We were privately held and we did an 
acquisition two years ago of the largest Canadian greenhouse company and when we 
bought that company, we assumed the income trust. We decided we would focus on 
digesting the acquisition, which two years later has gone extremely well for us. 
This year we have done what we said we would do and our numbers reflect that. We 
will be communicating more to shareholders in 2009 about our direction..

TWST: What would be the two or three best reasons for the long-term investor to 
look closely at Village Farms?

Mr. DeGiglio: One for sure is the segment we're in. As I said earlier, being in 
high value food and in food in general — I wouldn't say it's recession proof, 
because it's not. We may feel downward pressure in pricing. However, provided 
that the industry doesn't have an overcapacity situation, people need to eat. I 
was reading an article recently outlining a less than favorable forecast for 
consumer products companies for 2009 and 2010, but food is an area that is 
different and as the population increases globally and domestically, the 
requirement for more food supply is a given. The fact that we're in fresh food 
is ideal compared to processed food, due to the ever-increasing trends toward 
health and wellness combined with consumer demand for fresh, wholesome and safe 
food. 
Hydroponic greenhouse grown produce is some of the safest food available today, 
free from any environmental containments. Our facilities undergo strict third 
party audits for food safety several times a year. We have achieved consistently 
the highest food safety scores in the industry today. During our most recent GAP 
(Good Agricultural Practices) audit we recorded scores of 100% across the board 
for all categories. I would have to say from a hygiene perspective, food safety 
perspective, nutritional perspective, health perspective, as well as 
environmental responsibility, we're right in that sweet spot. And as food safety 
remains a salient theme in the eyes of the consumer, we are positioned well and 
work to remain on the forefront in our industry in this category.
I believe that we are leveraged correctly and we have a clear vision on where we 
need to go. We have people who have been in our organization for up to 20 years 
with very little turnover, so they understand the job and they're very aligned 
with the company. We are committed to the retention as well as the corporate 
well being of our talent pool.

TWST: The potential would seem to be great in the Middle East, considering the 
aridity of the soil and the amount of money that is flowing around there.

Mr. DeGiglio: I agree. When it's 140 degrees outside, it's difficult to sustain 
plant growth in sand. I think in countries like that, their mindset is changing. 
After a lot of the money came in, you have seen places like Dubai that have 
invested tremendous amounts of money in building infrastructure and they're 
really coming back down now to look at food and food security and things of that 
nature. Of course, the climate, as you said, is difficult with scarce resources 
not to mention lack of viable land. 

TWST: Is there anything that you would like to add?

Mr. DeGiglio: I think people could always go to our Website. Everything is on 
our Website, all our policies, all our financials. It illustrates the type of 
production facilities we have and how sophisticated they are in the products we 
produce. So I think that would give someone a pretty good overview of who we 
are. 

TWST: Your own personal level of satisfaction must be pretty high, being in such 
a useful and interesting industry.

Mr. DeGiglio: From a corporate balance sheet perspective, we contribute a lot. 
We've been sustainable from day one by the nature of our business, as this is 
the most efficient way to operate and has the benefit of being environmentally 
friendly. We like to say at Village Farms, "what is good for the earth is good 
for business." 
We take a lot of pride in the fact that we've been operating with an eye on 
environmental stewardship from day one, which makes us a good corporate citizen. 
We take a lot of pride in being able to be successful, being a good citizen in 
the surrounding communities where we operate our facilities as well. But at the 
end of the day, the success that I feel is really driven by implementation 
strategies that can eventually generate profits and increase shareholder value. 
That's really what I'm concerned with and what I concentrate on the most.

TWST: Thank you. (MC)

MICHAEL A. DEGIGLIO
Chairman & CEO
Village Farms Income Fund
7 Christopher Way
Eatontown, NJ 07724
(732) 676-3000
(732) 676-3032 – FAX 
www.villagefarms.com

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