AN ARABLE INVESTMENT ANSWER: AGRICULTURE, THE NEW ASSET CLASS ON THE BLOCK

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1 AN ARABLE INVESTMENT ANSWER: AGRICULTURE, THE NEW ASSET CLASS ON THE BLOCK

2 CLOSING THE FOOD GAP Duncan Vink Joint Managing Director of UFF Agri Asset Management

3 Return Drivers in Agriculture Population Growth 400% Population Growth over 100 years Daily Population growth 2X demand for food commodities by 2050 Dietary shift 40% of global grain is for animal food 7 kg of grain required to produce 1 kg of beef 100% growth in meat consumed by Asia by Source: DGC Asset Management

4 Return Drivers in Agriculture Agriculture yields 1.1% annual Population Growth 0.5% annual increase of agricultural yield 1 Billion people currently undernourished Climate Change 4% rise in surface temperature % growth in natural disasters Source: DGC Asset Management

5 Return Drivers in Agriculture Biofuel 40% of US maize used for bio-ethanol 242% more land dedicated to biofuel by % to 50% increase in food prices Availability of farmland 14.5 hectares of land lost in urbanization in China ,000 km2 of farmland lost to soil degradation yearly 5 Source: DGC Asset Management

6 Billions Population Growth 12 Population projections % 25% 9% 16% African population Rest of the world population 6 Source: UNICEF Generation 2030/Africa, August 2014

7 Population in billions Hectare of arable Land per capita The Resulting Picture World population (lhs) Arable land in hectare/capita (rhs) 7 7 Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat

8 Undernourishment Currently Prevalence of Undernourishment ( ) Africa 20.50% Developing countries 13.50% World 11.30% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 8 Source: FAO Food and Nutrition in Numbers

9 A Hungry World: Is Agriculture The Answer? 70% total increase in agriculture production is needed to feed the more than nine billion people expected worldwide in 2050 of which 25% will be in Africa. As demands on the global food supply soar, the greatest opportunity for profits in agriculture is in Africa. Thirty-nine million hectares of agricultural land in Africa is physically suitable for irrigation, yet only 7% of this arable land is irrigated (and merely 3.7% in Sub-Saharan Africa) Africa presently spends in excess of USD25 billion annually for food import 9

10 Turning Crisis Into Opportunity Retailers and traders are increasingly looking to secure their supply lines Balance of power is moving upstream to the supplier of food, ie the farmer Security and long-term off-take by retailers translates in more predictable and stable earning creating compelling investment opportunities for long-term investors like pension and retirement funds Growth in local demand and investment by retailers across the continent creates opportunities for local value chains replacing unsustainable international food logistic chains Food independence for Africa can be supported through investment by local institutional investors 10

11 Agri Value Chain International Netherlands European Producer/Grower Packing Station Distribution Centre Exporter Amsterdam Airport Nigeria Consumer DC Retailer Client Distribution Centre Importer Lagos Airport 11

12 Agri Value Chain - Local Nigeria Producer/Grower & Packaging/Wareho use Distribution Centre Local Agent DC Retailer Client Consumer Nigeria 12

13 African Agriculture Socio-Sustainability Impact African Challenges R Food security Job creation Country security Invest local Low crop yields and degraded soils Pressure on natural resources 13

14 Translating The Opportunity To An Investable Option For Institutional Investors Investors with a long-term horizon are looking to increase their allocation to real assets such as farmland: Economic turbulence globally Low interest rate environment Search for safety as well as yield Agriculture is compelling for international investors seeking stability and higher risk-adjusted returns: Availability of low-valued, premium farmland and Agribusinesses on the continent Shortage of locally available capital 14

15 ENABLING Positive Futures Back to roots of where Old Mutual started 170 years ago Now we address issues of strategic importance Invest Local Agriculture is the life blood of African economies + = Mutual Produce & Consume Local benefit for client and country Local capital & investment 15

16 Simple Investment Model Old Mutual Agri Fund Purchase farm Fund appoints operator Operator leases farm Improve and expand farm Exit/evergreen investment R Major international investors in agriculture are : APG, TIAA-CREF, AP2, PGGM, Calpers, Caissede dépôtet placement du Québec, British Columbia Investment Management Corporation, PIC, Old Mutual 16

17 Risk Control of Investment Agricultural Risks Track-record of farm operators/tenants Operator running a diversified portfolio of farms and crops Tenant is exposed to crop risks, not the fund though landowner-tenant distinction Lease payment risk Solid financial standing and track-record of farm operators/tenants Provide fund with security on lease fee payments and any other obligations (pledge of shares, cession of crops, bank guarantee etc) Proven access to market (off-take agreements, long term sales contracts) Principal-Agent Risk Co-investment in working capital requirements (at risk position) Control mechanism for investors (IT, on-site etc) 17

18 Operator/Lessee Requirements: Take over workforce, provide adequate working environment Maintain asset and its improvements and keep it in solid condition, to be audited annually by UFF Comply with World Bank Environmental, Social and Safety Standards Comply with UFF admin and IT monitoring system, maintain monthly reporting flows Ensure workforce involvement 18

19 Estimated Capital Growth Relative To Investment In Farm Development Cumulative capital invested ($/ha) Asset value ($/ha) $10000 $9000 $8000 $7000 $6000 $5000 $4000 $3000 $2000 $1000 $0 Title Cleared Improvements Proof of concept External Infrastructure Internal Infrastructure Irrigation and water Fully integrated 19 Source: Savills Research

20 The Impact Worldbank : agricultural investments have a two- to four-times greater impact on poverty reduction than investments in any other sectors in terms of GDP FAO : a positive correlation between levels of investment in agriculture and food security and poverty reduction in developing countries. In Sub-Saharan Africa, growth in agricultural employment accounted for half of all employment growth between 1999 and

21 Impact Investing Old Mutual/UFF is a signatory to the United Nation Principles of Responsible Investments in farmland All farms are assessed and monitored on compliance to International Finance Corporations standards on Environmental, Social and Governance Standards encompassing: International Labour Organization (ILO) standards UN World Health Organization (WHO) Food and Agricultural Organization (FAO) Local legislation Each farm will implement a comprehensive education, health care and housing program for farm workers 21

22 Environmental Protection Key Environmental Priority Areas Water conservation Reducing pathogens and pesticides Use of organic matter Reducing soil erosion caused by water, wind or tillage Reducing emissions of gases that contribute to global warming Ensuring compatibility of agricultural activities with biodiversity Noting habitat availability and species at risk Reducing economic damage to agriculture from wildlife Using renewable natural resources wherever possible 22

23 African Exposure 6 MEGA FARMS USD 10547ha 170million AGRICULTURE FARM LAND 23 Source: Old Mutual Investment Group As at

24 African Pipeline Vegetables Vegetables Coffee Row crops/rice Rowcrops Wheat/barley Rice Wheat/maize Dairy Grapes Citrus 24

25 MEET JACOLENE MBALULA I am a very proud worker of Hochland Farm WORKING AT PIKETBERG S HOCHLAND FARM FOR NEARLY 20 YEARS JACOLENE AND HER FELLOW WORKERS NOW HAVE ACCESS TO: HEALTHCARE ADULT EDUCATION MANGEMENT TRAINING FORMAL HOUSING BEFORE AFTER 25

26 Africa s Untapped Goldmine

27 DISCLAIMER Futuregrowth Asset Management (Pty) Ltd ( Futuregrowth ) is a licensed discretionary financial services provider, FSP 520, approved by the Registrar of the Financial Services Board to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of The fund values may be market linked or policy based. Market fluctuations and changes in exchange rates may have an impact on fund values, prices and income and these are therefore not guaranteed. Past performance is not necessarily a guide to future performance. Futuregrowth has comprehensive crime and professional indemnity in place. Performance figures are sourced from Futuregrowth, UFF and I-Net Bridge (Pty) Ltd. This document is for information purposes only and is not intended as an offer or recommendation to buy or sell or a solicitation of an offer to buy or sell a financial product or security. The recipient is advised to assess the information with the assistance of an advisor if necessary, with regard to its compatibility with his/her own circumstances in view of any legal, regulatory, tax and other implications. Personal trading by staff is restricted to ensure that there is no conflict of interest. All employees of Futuregrowth are remunerated with salaries and standard short and long-term incentives. No commission or incentives are paid by Futuregrowth to any persons. All inter-group transactions are done on an arm s length basis. Futuregrowth has comprehensive crime and professional indemnity insurance. Futuregrowth prepared this document in good faith. Although the information in this document is based on sources considered to be reliable, Futuregrowth makes no representation or warranty, express or implied, as to the accuracy or completeness of this document, nor does it accept any liability which might arise from making use of this information.

28 DISCLAIMER Old Mutual African Agricultural Fund-I PCC ( the Fund ) has been authorised by the Financial Services Commission of Mauritius to operate as a Closed End Fund under section 97 of the Securities Act of Futuregrowth Asset Management (Mauritius) Limited ( Futuregrowth ) has been granted a CIS Manager License under section 98 of the Securities Act of 2005 and the Financial Services Rules of 2008, by the Financial Services Commission of Mauritius. Futuregrowth has been granted a Category 1 Global Business License under section 72(6) of the Financial Services Act, by the Financial Services Commission of Mauritius. UFF Management (Mauritius) Limited ( UFF ) has been granted an Investment Adviser (Restricted) License under section 30 of the Securities Act of 2005, Rule 5 of the Securities Rules of 2007 and the Financial Services Rules of Futuregrowth has been granted a Category 1 Global Business License under section 72(6) of the Financial Services Act, by the Financial Services Commission of Mauritius. Old Mutual African Agricultural Fund (Luxembourg) ( the Fund ) has been incorporated for an unlimited period under the laws of the Grand Duchy of Luxembourg as a societe d investissement a capital variable (SICAV) under the form of a societe anonyme on 31 May 2013 organized under Part II of the Law of This document is expressly not intended for persons, who due to their nationality or place of residence are not permitted access to such information under applicable law. Neither this document nor copies thereof may be sent to the United States of America, or any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a U.S. person. Neither this document nor copies thereof may be sent to the United Kingdom, or any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a citizen of the United Kingdom. More detailed information on the risks and investment strategy can be found in the respectable Preliminary Private Placement Memorandum and Prospectus

29 REGULATORY INFORMATION Old Mutual Investment Group (Pty) Limited Physical Address: Mutualpark, Jan Smuts Drive, Pinelands, 7405 Telephone number: Old Mutual Investment Group (Pty) Limited (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers ( to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance. The investment portfolios may be market-linked or policy based. Investors rights and obligations are set out in the relevant contracts. In respect of pooled, life wrapped products, the underlying assets are owned by Old Mutual Life Assurance Company (South Africa) Limited who may elect to exercise any votes on these underlying assets independently of Old Mutual Investment Group. In respect of these products, no fees or charges will be deducted if the policy is terminated within the first 30 days. Returns on these products depend on the performance of the underlying assets. Disclosures: Personal trading by staff is restricted to ensure that there is no conflict of interest. All directors and those staff who are likely to have access to price sensitive and unpublished information in relation to the Old Mutual Group are further restricted in their dealings in Old Mutual shares. All employees of the Old Mutual Investment Group are remunerated with salaries and standard incentives. Unless disclosed to the client, no commission or incentives are paid by the Old Mutual Investment Group to any persons other than its representatives. All inter-group transactions are done on an arms length basis. We outsource investment administration of our local funds to Curo Fund Services (Pty) Ltd, 50% of which is owned by the Old Mutual Investment Group. Disclaimer: The contents of this document and, to the extent applicable, the comments by presenters do not constitute advice as defined in FAIS. Although due care has been taken in compiling this document, Old Mutual Investment Group does not warrant the accuracy of the information contained herein and therefore does not accept any liability in respect of any loss you may suffer as a result of your reliance thereon. The processes, policies and business practices described may change from time to time and Old Mutual Investment Group specifically excludes any obligation to communicate such changes to the recipient of this document. This document is not an advertisement and it is not intended for general public distribution. The recipient is advised to assess the information with the assistance of an advisor if necessary, with regard to its compatibility with his/her own circumstances in view of any legal, regulatory, tax and other implications. The information herein does not constitute an offer to sell or a solicitation of an offer to buy any securities. This document is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under applicable law. Old Mutual Investment Group has comprehensive crime and professional indemnity insurance. For more detail, as well as for information on how to contact us and on how to access information please visit 29