NZRLC - Information Memorandum - Preview

NEW ZEALAND Rural Land Co SUS TAIN ABLE AOTEAROA

Information Memorandum AS AT 30 APRIL 2020

www.nzrlc.co.nz

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Important Disclaimer - Please Read Carefully Version 17 as at 30 April 2020 This Information Memorandum is provided in relation to an opportunity (Opportunity) to subscribe for ordinary shares in New Zealand Rural Land Company Limited (NZRLC). By accepting a copy of this Information Memorandum you are acknowledging and agreeing to the below terms.

No Retail Offer This Information Memorandum does not relate to an offer of financial products to retail investors for the purposes of the Financial Markets Conduct Act 2013 (FMCA). There is no product disclosure statement available for the Opportunity. Accordingly, there are not the same disclosures or levels of protection available as under a retail offer of financial products.

Any offer of financial products for the Opportunity will only be made through a subscription agreement which is subject in all respects to the proposed investor providing certifications that they are a wholesale investor within the meaning of Schedule One to the FMCA. About this Information Memorandum Although reasonable care has been taken in the preparation of this Information Memorandum, no information has been independently verified by any person. No representation or warranty, express or implied, is made nor is any responsibility accepted with respect to the completeness or accuracy of any information contained in this Information Memorandum or any further information supplied in connection with it.

Investor Due Diligence This Information Memorandum does not contain or disclose all of the information that may be required to evaluate the Opportunity. This Information Memorandum contains forward looking statements. Such statements, estimates, projections and forecasts reflect various assumptions which may or may not prove to be correct. Actual results may differ materially.

Prospective investors should conduct their own investigations, verifications and assessment of the merits of the Opportunity, identify the information that they require, request such information from NZRLC and engage their own professional advisers.

Limited Liability Except insofar as liability under any law cannot be excluded, no person shall have any responsibility or liability arising in respect of the information contained in this Information Memorandum or in any way for errors or omissions in it (including responsibility to any person by reason of negligence).

Prospective investors must verify such information themselves and are solely responsible for their investment decisions.

Legal Effect Nothing contained in this Information Memorandum is intended to be legally binding. Only the specific terms which are contained in a final subscription agreement will have any legal effect. In no event will such a subscription agreement contain any representation(s) as to projections of any kind.

This Information Memorandum does not constitute investment, accounting, financial, legal or tax advice. Neither the delivery of this Information Memorandum nor the subsequent execution of any agreement in relation to NZRLC shall constitute a representation that there has been, or will be, no change in the information contained in this Information Memorandum or the information on which it is based.

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Definitions of Terms used in this Presentation

CAGR

FDI

NZRLM

DTA

GDP

OIO

DTI

KgMS

RBNZ

Compounded Annual Growth Rate

Debt-to-Assets Ratio

Debt-to-Income Ratio

EFS

Economic Farm Surplus

FWE

Farm Working Expenses

FTA

Free Trade Agreement

Foreign Direct Investment

Gross Domestic Product

Kilogram of Milk Solids

NPL

Non-Performing Loans

NTA

Net Tangible Assets

NZRLC

New Zealand Rural Land Company Limited

New Zealand Rural Land Management Limited

Overseas Investment Office

Reserve Bank of New Zealand

RoA

Return on Assets

RWA

Risk Weighted Assets

WALT

Weighted Average Lease Term

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Contents

5

28

47

103

128

132

INTRODUCTION

NEW ZEALAND RURAL LAND COMPANY

GLOBAL DAIRY TRENDS

RISKS

THE NEW ZEALAND STORY

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THE CURRENT OPPORTUNITY IN NZ RURAL LAND

APPENDICES

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NEW ZEALAND RURAL LAND CO INTRODUCTION

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AS THE WORLD’S POPULATION GROWS, PRODUCTIVE AGRICULTURAL LAND BECOMES INCREASINGLY IMPORTANT

NEW ZEALAND HAS A INTRODUCTION COMPETITIVE ADVANTAGE IN AGRICULTURE

NEW ZEALAND RURAL LAND COMPANY (NZRLC) SEEKS TO INVEST IN RURAL LAND ASSETS OPPORTUNISTICALLY

CURRENTLY THERE EXISTS AN OPPORTUNITY TO PURCHASE THE WORLD’S MOST SUSTAINABLE DAIRY FARMS AND NZRLC HAS A UNIQUE SOLUTION TO CAPTURE THE OPPORTUNITY

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NEW ZEALAND Rural Land Co SUS TAIN ABLE AOTEAROA

A New Zealand domiciled investment company seeking to opportunistically acquire quality New Zealand Rural Land.

DAIRY

SHEEP & BEEF

HORTICULTURE & VITICULTURE

FORESTRY & OTHER

www.nzrlc.co.nz 7

New Zealand Rural Land Company seeks to invest in rural land assets opportunistically across the cycle

DAIRY

HORTICULTURE & VITICULTURE

SHEEP & BEEF

FORESTRY & OTHER

SEE PAGE 135 FOR SUB-SECTOR ASSET CYCLE RETURNS 8

Agricultural /Rural Land is an attractive asset class An increasing global population drives demand for food production, but agricultural land is a limited resource.

• As global population grows, food production must increase to meet the nutrition demand; • However, productive agricultural land is limited; • In the past, exponential growth in food demand was met by innovation, scientific advancements and farming efficiency adding value to agricultural land; • Increasing productivity was accompanied by high farm inputs and high emissions which is no longer aligned with consumer preferences; • Going forward, increasing global appetite for food must be catered for with sustainable agricultural sources and agri-tech solutions that have lower environmental footprints; • This implies food sources that have a detrimental effect to the environment will transition and the value of productive sustainable agricultural land can be expected to increase.

Global Food Demand (kcal/day x 1015) 45

Now (2010-2050)

Then (1961-2000) Population +98% Food production +146% Yields more than doubled Arable land in use +8% Agricultural inputs rose: - Nitrogen fertiliser (x7) - Phosphate fertiliser (x3) - Irrigation water (x2)

40 35 30 25 20 15 10

+41%

increase in population (from 6.9 billion to 9.7 billion people)

+71%

increase in food required (additional 127x1015 kcal)

5 0 1500

1550

1600

1650

1700

1750

1800

1850

1900

1950

2000

2050

Total Global Agricultural Land (‘000 hectares) 5,000,000 4,900,000 4,800,000 4,700,000 4,600,000 4,500,000 4,400,000 4,300,000 4,200,000

Source: The Science of Food Security (2018) - https://www.nature.com/articles/s41538-018-0021-9.pdf; http://www.fao.org/faostat/en/#data/RL/visualize

1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

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New Zealand is one of the most sustainable, clean and green producers of primary produce in the world New Zealand’s continued success in food production lies in its natural environment allowing it to produce sustainable food products cost efficiently, resulting in New Zealand rural land being an attractive asset class.

NATURAL ENVIRONMENT

EFFICIENT & INNOVATIVE INDUSTRY

• Temperate climate, good soil and consistent rainfall provides ideal conditions for pasture growth;

• New Zealand has a long history of excellence in farming; • This has resulted in constantly improving productivity and efficiency;

• Pasture-based farming provides a cost advantage over feed-based systems;

• Our innovative Agri-tech sector supports the “New Zealand Advantage”;

• Grass-fed meat and dairy is a premium product and well aligned with changing customer preferences.

• New Zealand is a world leader in risk mitigation strategies.

New Zealand All Farm Type Price Index*

+6.52% p.a

4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0

MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP MAR SEP DEC MAR JUN SEP MAR SEP MAR SEP MAR SEP 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 15 16 16 16 17 17 18 18 19 19 * Source: REINZ Data 1996-2019

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Current Opportunity within New Zealand that NZRLC is focused on

DAIRY

SHEEP & BEEF

HORTICULTURE & VITICULTURE

FORESTRY & OTHER

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Global outlook confirms New Zealand Dairy Land is a particularly attractive asset class at present The world will be short ~30 million tons of dairy and New Zealand is well positioned to cater to the demand.

• Global dairy consumption will continue to experience secular growth both in scale and consumption per capita while global dairy production has not been keeping pace;

Demand 79 MT

Deficit/Gap -30 MT

• The demand-supply gap in global dairy is expected to widen from 6 million tons (2017) to 30 million tons (2027) of milk equivalent, increasing the value of dairy commodities;

Demand 47 MT

Deficit/Gap -6 MT

• A large share of the deficit is in Asian markets. New Zealand is well-positioned to cater to deficit markets with free trade agreements and an established supply chain;

49 MT Supply Supply

41 MT

• In addition, consumer trends indicate a higher preference for natural, healthy and sustainable dairy products;

• Global consumers will continue to rely on the export of sustainably-sourced, grass-fed, premium New Zealand dairy products.

2017

2027 Median Dairy Farm Prices Per Hectare Current price levels for dairy farms*

$50,000 Median NZ$ per hectare of dairy farm land

• Supply continues to be outpaced by demand and misaligned with consumer preferences - growing mainly in regions with low efficiency, poor animal welfare and high environmental footprints;

49 MT

Supply

$40,000

Estimated range for potential capital appreciation***

$30,000

$20,000

$10,000

$0

NZRLC indicative purchase price levels for comparable farms** Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2029

Source: A Winning Growth Strategy for Dairy, McKinsey, 2019 *Dairy Farm Median Land Prices for quarter ending August 2019 over quarter ending August 2017. Dairy farm prices referred to in the chart are median land prices which is the midway point of sale price in a 3-month period. Median is a better indicator for market trend for land prices. Outliers and skew have a lesser impact on median when compared to simple averages; The dataset is smaller - Sale volume data 13 farms have been sold in August 2019 vs 20 farms in August 2017; **NZRLC indicative price levels is based on median all farm data; average production levels and does not factor in regional and site-specific differences.

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New Zealand Dairy Land is an attractive long-term asset New Zealand’s success in dairy is attributable to its natural conditions, efficient industry, and world-leading risk management systems.

Natural Conditions

Efficient Industry

Ideal for pasture-based dairy farming

Long history of dairy production

Results in lower production costs

Focus on continuous improvement

Produces and allows for a premium grass-fed product

Supported by vibrant ecosystem for Agri-tech innovation

Lowest emissions globally for dairy*

Our “Kaitiangitanga” / “Powered by Place”**

World Leader in Managing Industry Risks

Mitigating environmental risks by reducing surface water contamination and on-farm emissions Mitigating social risks by increased transparency, community programs and respecting social license Political risks are mitigated by Dairy’s importance to regional economies and employment Focuses government attention in mitigation of biosecurity risks

* Fonterra: https://www.dairytomorrow.co.nz/wp-content/uploads/2017/12/dairy-strategy-2017-A4-booklet-Part3.pdf ** NZTE: https://toolkit.nzstory.govt.nz/assets/322923?tags=Powered%20by%20Place

Mitigating risks of climate change with focus on evidence-based transition solutions 13

Increasing milk prices, improving profitability and shrinking land supply create a positive macro story for future dairy farm land price appreciation

VS 2019

783.78 2.25 2.252.25

VS 2019

4.52 4.52 4.52 4.27 4.27 4.27

NZ$8.47 2.96 2.96 2.80 2.80 2.80 - NZ$9.422.96

2.60 2.60 2.60 0.88 0.880.88

4.90 4.90 4.90 4.20 4.20 4.20

334.33 4.20 4.20 4.20 4.20 4.20 4.20 4.07 4.074.07 3.73 3.733.73 3.64 3.643.64

0.00 0.00

PROJECTED RANGE PROJECTED PROJECTED RANGE RANGE 201314 201415 201516 201617 201718 201819Farm 14 314 201415 201415 201516 201516 201617 201718 201718 201819 201819 Average201617 price per kgMS for NZ$Surplus per kgMS Projected Farm Working Expenses and Economic FOR 2029 FORFOR 2029 2029

2019-2029*

0.00 2025

+52% TO +61%

Economic Economic Farm Farm Surplus Surplus (EFS) (EFS)(EFS) Economic Farm Surplus +16% Farm Farm Working Working Expenses Expenses (FWE) (FWE) Farm Working Expenses (FWE) TO +29%**

2.00 Land Supply for Dairy Farms 2.00 2.00 projected to decline in the 1.80 next five years 1.80 1.80 1.6 1.6 1.6 1.60 1.8 1.60 1.60 1.6 1.40 1.40 1.40 1.20 -9% 1.20 1.20 VS 2019 1.00 1.00 1.00 0.80 0.80 0.80 0.60 0.60 0.60 0.40 0.40 0.40 0.20 0.20 0.20 2025 2025

decade

Millions Millions

projected to grow in the next

Dairy Farm Profitability projected to grow in the next decade

Millions

ng king Expenses Expenses and and Economic Economic Farm Farm Surplus Surplus Farmgate Milk Prices Working Expenses and Economic Farm Surplus

million hectares of Dairy Farmland

2019 - 2029

2019-2025

Economic Farm Surplus (EFS) Farm Working Expenses (FWE)

*OECD-FAO Agricultural Outlook 2019-2028: http://www.fao.org/3/ca4076en/ca4076en.pdf; **Annualised rate of +1.7% to +2.9% per annum based on OECD-FAO Agricultural Outlook 2019-2028.

3.74

2.96

3.14

2.64

3.78

2.25

2.60

2.96

2.80

4.27

4.52 14

Three factors presently create an opportunity to acquire New Zealand Dairy Land at a discount

Overseas Investors Blocked “Foreign Buyer Ban�

Widespread Negative Sentiment on the Sector

Impacting Land Prices & Presenting an Opportunity

Banks Reducing Credit to the Sector

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