FARMLAND HELPING YOU NAVIGATE THE INVESTMENT UNIVERSE IN THIS NASCENT ASSET CLASS

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1 FOR WHOLESALE CLIENTS ONLY. NOT TO BE DISTRIBUTED TO RETAIL CLIENTS. NOT TO BE REPRODUCED WITHOUT PRIOR WRITTEN APPROVAL. PLEASE REFER TO ALL RISK DISCLOSURES AT THE BACK OF THIS DOCUMENT. FARMLAND HELPING YOU NAVIGATE THE INVESTMENT UNIVERSE IN THIS NASCENT ASSET CLASS AUGUST 2018 > This paper explains the potential benefits of the asset class, the different ways in which investors typically gain exposure to farmland, what we believe to be the best way to invest in the asset class and ways to address the real or perceived challenges of farmland investment.

2 DETLEF SCHOEN Detlef Schoen Head of Real Assets Detlef joined Insight in August 2017 as Head of Real Assets. Detlef is responsible for all aspects of Insight s farmland capability. Detlef has more than four decades of experience in farming and a strong track record as a senior agribusiness executive managing multi- billion-dollar enterprises. Prior to joining Insight, he was invested in and personally managed grass-fed beef farms in Australia. Preceding this he led the farmland investment team at Aquila Capital, where he was responsible for implementing a US$300m investment plan, mostly in New Zealand where he was representing the largest foreign investment in New Zealand agriculture at the time. Detlef started his career with Cargill where he was country manager, Cargill Germany, and later in charge of the European grain merchandising business. During this time Cargill was the leading exporter of grains from the EU and a significant country merchant in the UK. He then ran his own grain origination company and later the global grain book for NIDERA at the time the 6th largest grain trader worldwide. Detlef is widely known for his thought leadership and is highly respected in the institutional investment world for farmland and agribusiness.

3 FARMLAND HELPING YOU NAVIGATE THE INVESTMENT UNIVERSE IN THIS NASCENT ASSET CLASS AT FIRST GLANCE, THE NUMBER OF WAYS TO INVEST IN AGRICULTURE MAY BE OVERWHELMING. HERE WE SET OUT THE OPTIONS AVAILABLE AND THEIR BENEFITS AND FOCUS ON LARGE-SCALE CORPORATE FARMING AS WE BELIEVE THIS PROVIDES THE BEST RISK-ADJUSTED OPPORTUNITY. THE ATTRACTION OF FARMLAND INVESTMENTS For the reasons set out below, farmland is becoming a mainstream allocation for many investors. However, the multitude of investment options available in this nascent asset class may be overwhelming for some investors. This paper explains the benefits of the asset class, the different ways in which investors typically access exposure to farmland, what we believe to be the best pathway to the asset class and ways to address the real or perceived challenges of farmland investment. BENEFITS OF THE ASSET CLASS Farmland provides a number of potential benefits, including: Undercapitalisation of the sector: Every generational hand-over results in the crystallization of an ever increasing capital gain with the corresponding outflow of capital to family members and in the form of tax, with the result that there now is an equity gap in key supply geographies moving into the trillions of dollars. It is possible for investors to simply address the funding gap to generate attractive returns, without having to resort to riskier development programmes. In addition, today may be a good entry point for investors with agricultural commodity prices near a historical low relative to equities (see Figure 1). Figure 1: Agriculture versus Equities 1 Cash generation and real long-term growth Low correlations to traditional mainstream assets Exposure to attractive supply/demand dynamics An investment that naturally lends itself to the pursuit of sustainable development goals There are two further arguments, less widely known, in favour of deploying private capital in global farming: Cash generation in light of inelastic food demand: Food production can be expected to consistently generate cash over the long term because demand is largely inelastic. In other words, enough farmers need to make enough money to produce enough food to feed a growing population. As a result, top-quartile producers who can produce food at the lowest cost can be expected to be profitable over the long term. % S&P GSCI Agriculture / S&P 500 Index Average Average 1SD 1 Source: Bloomberg as at 31 January * Index (2,000 = 100).

4 NAVIGATING A COMPLEX AND MULTI-FACETED AGRICULTURAL INVESTMENT UNIVERSE An investor may find farmland attractive in theory, but unlike investments in equities or bonds, the options for investment in farmland are less familiar. Building a portfolio requires specialist analysis and expertise that very few asset managers are able to offer. At first glance, an investor may be overwhelmed by the options available. Exposure to agriculture can be gained through a range of investment vehicles and types, which in turn aim to generate profits from different points in the value chain. Investment vehicles: opportunities range from venture capital and private equity funds to investments directly in agricultural projects (Figure 2 illustrates the diversity in the investment universe.) Investors may also seek exposure through mainstream financial markets in other words, via listed companies, or debt issued by companies involved in agriculture. Points in the value chain: exposure may be to businesses involved in supplying or supporting farms, to farms themselves, or even to companies that make use of agricultural products. Engagement level: investment strategies can either be active, hybrid or purely passive, and they can be upstream /mid/ downstream strategies. Figure 2: The array of investment vehicles and points in the value chain 2 Agricultural venture capital Upstream and downstream agricultural private equity Corporate farming core Corporate farming project development Family farm coinvestments Farmland buy-andlease Agricultural bonds and debt Corporate agribusiness Listed agricultural equities Agricultural commodity hedge funds Suppliers of machinery and technology Suppliers of fertiliser/ agro chemicals Suppliers of seeds and genetics Suppliers of agricultural IT Suppliers of farm infrastructure Farmland ownership Farming operations Logistics Processing Commodity trading Consumer products The agricultural value chain Active strategies Hybrid and purely passive strategies Mid/downstream strategies Before deciding to allocate to the asset class, it is important to ascertain the size of the target market. The table opposite illustrates the split across the various regions that are Insight comfort zones. These regions have been selected due to several potential advantages such as low production costs resulting from attractive climates, soil and weather patterns, proximity to the growing population of Asia, investment grade rating, free movement of capital, access to land ownership for foreign investors and our existing expertise in these countries. The table further divides the potential investment universe by the three types of farmlands: arable crops, special crops (permanent crops and horticulture) and pastures. 2 Source: Insight Investment.

5 Figure 3: Investment universe 3 m ha bn US$ Total Arable Permanent crops Pasture Ag assets Ag debt Ag GDP GDP share (%) World 4,889 1, ,364 > 10,000 US , % Canada % Australia % New Zealand % UK % Romania % Chile % Total initial Insight target geographies ,535 > 543 > 314 According to Prequin 4, only about $20bn of equity has so far been invested in the agriculture sector, and given that there is a significant equity gap, there clearly is room for a substantial allocation from institutional investors. ACCESSING FARMLAND: MOVING FROM THEORY TO PRACTICE The most common business models for upstream agricultural investments are corporate farming, focused either on a core investment strategy or agricultural project development ; buy-to-lease; or a co-investment with a family farm. Corporate farming core Summary: Owner-operator model typically focused on mature assets with regular cash flows, often undercapitalized but otherwise offering limited development potential. Benefits: This approach can offer a one-stop shop for exposure diversified across geographies and farm types, and the potential for economies of scale to boost returns and compensate for the costs introduced by a corporate overlay. Issues: The shortage of investment managers with the relevant experience, and the need to balance scale and diversity within the overall portfolio. Corporate farming project development Summary: Owner-operator model typically focused on undiscovered assets with significant development potential. Benefits: This approach can offer the potential for material private-equity-like returns. Issues: Execution risk is high and again, there is a shortage both of opportunities and of investment managers who have successfully executed such an approach. It is also less scalable than core. A combination of core and project development i.e. a strategy aimed at recapitalizing and thus generating an uplift in returns to an already existing core enterprise gives an attractive overall risk / return profile. Farmland buy and lease Summary: Passive owner model without direct exposure to farm earnings. An investment vehicle owns farm assets and leases them to tenant farmer operators typically focused on mature assets with regular cash flows, but limited development potential. 3 Source: 2016 CIA factbook, FAO 2013 (2009 data), Savills research, 2016 Statistics Canada, own research. 4 Preqin is a source of data and intelligence for the alternative assets industry.

6 Benefits: Buy-to-lease investments offer the potential for cost efficiency and scalability, and on the surface returns are less volatile than in active strategies. Issues: They are typically limited to more mature regions with stable climates (such as the US and Canada) and predicated on the tenant farmer s ability to generate an adequate cash flow after having paid the lease. Recently, driven amongst others by significant technological advances, food supply has swung back in line with demand, which is why the gap between income from farmland and the cost of leasing land has reverted back to long-term metrics. This means that buy-and-lease strategies will typically leave the investor landlord with relatively low riskadjusted returns (see Figure 4). Family farm co-investments Summary: Passive owner model with direct exposure to farm returns. An investment vehicle owns shares in family farms but does not take an active role in their management or operations. Benefits: Possibility to combine family farm values with institutional governance and to clearly align the interests of both farmers and investors. Figure 4 demonstrates that for US row crops farm return on assets (ROA) as such and the spread of farm ROA over lease rate have reverted to long-term mean metrics and below. This has resulted in pressure on land prices, decreasing the comfort margin for the passive investor and favouring the owner-operator model. Figure 4: Cash crop EBITDA, lease income and land values 5 U$/acre Divergence = bubble Cash Crop lease Income Cash Crop EBITDA Land values Over many years Insight Farmland has built corporate farming expertise and strong institutional bridgeheads in key global agricultural geographies, with tried and tested people, processes and structures. A team of seasoned veterans offers long-term investment solutions to clients seeking inflation protection, diversification away from traditional asset classes such as bonds and equities, a broad mix of assets with adequate risk-adjusted return expectations and the possibility of adding value through an appropriate ESG framework. This means that today Insight Farmland has a significant competitive advantage which it is aiming to use for the benefit of its investors. As part of Insight Investment part of BNY Mellon, the world s largest fiduciary manager the Insight Farmland team has a strong and in this form unique skill set and the necessary experience combining hands-on farming, large scale corporate agriculture, commodity and agribusiness expertise: Three senior team members have over 100 years of combined, and successful experience in large-scale farming, agribusiness, commodity risk management and corporate transactions The team knows how to operate across all mainstream food commodity sectors in four key geographies: Oceania (Australia & New Zealand) South America (Chile, Uruguay, Peru, Colombia) Europe (EU, UK) USA In addition, there is credible ESG, financial markets, research, modelling & analytical and fiduciary expertise which provides a competitive advantage to its investors for whom Insight Farmland acts as a one-stop-shop : Investment structurer Allocator and portfolio architect Investment advisor Developer and operator (thus the core-plus ) Fiduciary manager 5 Source: Farmdoc daily as at August 2017, University of Illinois Farm Business Management Resources Illinois Farmland Values Index.

7 Figure 5: The characteristics of the different investment models for farmland investment: A practical example of how investors can combine the opportunities 6 I. Corporate farming: core II. Corporate farming: project development Typical term 10 years evergreen Typical liquidity terms Lock-up/initial lock-up with regular wighdrawal windows Typical notional cash returns 1 Typical notional IRR Potential for pursuit of sustainable development goals Typical allocation category 4% 8% Strong Real estate, natural resources, alternatives, ESG 5-8 years Lock-up <2% >10% Medium Private equity, infrastructure III. Farmland buy-and-lease years Lock-up 2% 6% Weak Real estate, natural resources, alternatives IV. Family farm co-investments years Lock-up 5% 9% Medium Private equity 6 Source: Insight Investment. For illustrative purposes only.

8 STRUCTURING YOUR INVESTMENTS TO MITIGATE THE COMMON CHALLENGES OF FARMLAND Market dynamics and the challenges presented by investing in a nascent asset class have affected how some investors perceive investments in farmland. Some investors have misgivings about an asset class that is viewed as complex, illiquid and at the mercy of unpredictable short-term disruptions. These issues can be material, but it is possible to address them by identifying opportunities that: Offer the potential to create value through improved sustainability metrics (ESG) and long-term productivity Benefit from sustainably low production costs Are based in a region that is politically stable and where foreign investors are welcome and able to hold assets without impediment Allow to build scale and integrate vertically In our experience, through the combination of detailed top-down analysis and the involvement of an extensive network of local practitioners, it is possible to identify potential investments that exhibit all these characteristics. Below we outline four ways to structure farmland investment to maximise the chance of success. Alignment with UN Sustainable Development Goals: A focus on alignment with the UN Sustainable Development Goals can ensure that assets are managed in a way that adds value both to the portfolio and wider society. Detailed reports and metrics demonstrating progress over time will give investors confidence that their investment is fulfilling their environmental, social and governance (ESG) objectives. Combine geographical and product diversification with local farmland expertise: Whilst identifying superior local practitioners is a prerequisite, it is not sufficient given that they tend to be good at what they do and not necessarily at what the investor needs. We believe a successful strategy needs to combine a local bottom-up approach with a global top-down strategy diversified across different regions, climatic zones, production systems and products. The strategy should also recalibrate the portfolio counter-cyclically, balancing return profiles and relying on a global network of local operators to be brought in as appropriate. Long time horizon required: There is a reason for the old adage that farmers think in generations : biological processes initiated to improve resilience and return potential of specific farming assets and projects focused on safeguarding and improving sustainability can take a long time to bear fruit. From a risk-management perspective, in a diversified portfolio, fluctuations of both currencies and commodities can temporarily distort the performance of underlying assets and this can require patience on the part of the investor to allow time for such distortions to wash out. These factors, from both agronomic and risk-management standpoints, support arguments in favour of evergreen investment structures without specified maturity dates but regular liquidity windows. Evergreen structure with a degree of liquidity: It is necessary therefore to distinguish between the liquidity of farmland investment vehicles, which typically lock up investor capital for some years, and the liquidity of underlying farms. It is typically possible to sell individual farms if necessary or desirable which means that it is possible to structure an evergreen farmland investment, with regular withdrawal periods, after an initial lock-up period. Focus on scale: Compared to the family farm as the dominant structure and role model for global farmland investment, applying the governance and compliance structures required in an institutional investment management context can increase costs. This is why it is important to focus on farming systems which exhibit sufficient economies of scale to offset or even over-compensate such corporate overlay. Equally, scale is important when looking at critical mass for downstream integration (first level processing) and / or bargaining power. We use a proprietary risk/return matrix to refine our asset allocation across sectors and countries. It evaluates investments based on the risk-adjusted expected returns.

9 Figure 7: Insight Farmland proprietary allocation system risk/return matrix I 7 High 14 Australia Special Crops Eastern Europe Arable East Africa Special Crops 12 Australia Arable Insight target allocation Expected gross IRR (%) Low UK Dairy Portugal and Spain Arable Argentina and Uruguay Livestock Russia and Ukraine Livestock Low Risk High CONCLUSION We believe the most effective approach to investing in farmland is to aim for an active portfolio diversified by geographies and products, focusing on identifying opportunities that capture the benefits of scale and exhibit demonstrable competitive advantages. To make the most of an allocation to farmland and facilitate the pursuit of sustainability targets, we clearly favour an evergreen structure, without a specified maturity date but with the potential for withdrawals after an initial lock-in period. We consider this to be the effective approach for maintaining the potential for attractive returns, while also giving a portfolio the ability to develop and perform over the longer term. While there are several challenges that exist in investing farmland, these challenges can be avoided through a comprehensive investment process implemented by investment professionals who have extensive experience in identifying the superior opportunities in the asset class. As the asset class moves into the mainstream, and agricultural commodity prices are near a historical low relative to equities, now may be a good entry point for many investors. 7 Source: Insight Farmland proprietary risk/return matrix as at January Results shown gross of fees. Data based on current yields. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

10 IMPORTANT INFORMATION RISK DISCLOSURES Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations. Any target performance aims are not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected. Portfolio holdings are subject to change, for information only and are not investment recommendations. Forecast returns are estimates based on data that is currently available. As such, they are not a reliable indicator of future performance. Any projections or forecasts contained herein are based upon certain assumptions considered reasonable. ASSOCIATED INVESTMENT RISKS Farmland Investments in emerging markets can be less liquid and riskier than more developed markets and difficulties in accounting, dealing, settlement and custody may arise. Farmland is exposed to the impact of government policy. Subsidies, renewable fuels, trade agreements and attitudes to ownership rights can vary between markets, and may change over time. Farmland is an inherently illiquid asset subject to the range of risks associated with primary production. Land values, like commodities, will experience large deviations from the equilibrium as a result of a range of market forces such as returns across other assets, level of interest rates, and investor sentiment. The investment manager may invest in instruments which can be difficult to sell when markets are stressed.

11 FIND OUT MORE Insight Investment Level 2, 1-7 Bligh Street, Sydney NSW Bruce Murphy Director, Australia and New Zealand bruce.murphy@insightinvestment.com Adam Kibble Product Specialist adam.kibble@insightinvestment.com This document is a financial promotion and is not investment advice. This document must not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or otherwise not permitted. This document should not be duplicated, amended or forwarded to a third party without consent from Insight Investment. Insight does not provide tax or legal advice to its clients and all investors are strongly urged to seek professional advice regarding any potential strategy or investment. For a full list of applicable risks, and before investing, investors should refer to the Prospectus or other offering documents. Please go to Unless otherwise stated, the source of information and any views and opinions are those of Insight Investment. Telephone calls may be recorded. For clients and prospects of Insight Investment Management (Global) Limited: Issued by Insight Investment Management (Global) Limited. Registered in England and Wales. Registered office 160 Queen Victoria Street, London EC4V 4LA; registered number For clients and prospects of Insight Investment Funds Management Limited: Issued by Insight Investment Funds Management Limited. Registered in England and Wales. Registered office 160 Queen Victoria Street, London EC4V 4LA; registered number For clients and prospects of Insight Investment International Limited: Issued by Insight Investment International Limited. Registered in England and Wales. Registered office 160 Queen Victoria Street, London EC4V 4LA; registered number Insight Investment Management (Global) Limited, Insight Investment Funds Management Limited and Insight Investment International Limited are authorised and regulated by the Financial Conduct Authority in the UK. Insight Investment Management (Global) Limited and Insight Investment International Limited are authorised to operate across Europe in accordance with the provisions of the European passport under Directive 2004/39 on markets in financial instruments. For clients and prospects based in Singapore: This material is for Institutional Investors only. This documentation has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, it and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ) or (ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. For clients and prospects based in Australia and New Zealand: This material is for wholesale investors only (as defined under the Corporations Act in Australia or under the Financial Markets Conduct Act in New Zealand) and is not intended for distribution to, nor should it be relied upon by, retail investors. Both Insight Investment Management (Global) Limited and Insight Investment International Limited are exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 in respect of the financial services; and both are authorised and regulated by the Financial Conduct Authority (FCA) under UK laws, which differ from Australian laws. If this document is used or distributed in Australia, it is issued by Insight Investment Australia Pty Ltd (ABN , AFS license number ) located at Level 2, 1-7 Bligh Street, Sydney, NSW Insight Investment. All rights reserved

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