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AN INVESTMENT OPPORTUNITY


CONTENTS Introduction /Executive Summary

01

The history 02 The manufacturing process explained

03

The global market place for black pearls

04

The opportunity – why invest?

05

The property 06 Financial projections

07

Our future expansion plans

09

The outlook for Fiji

10

Concluding statement

11


EXECUTIVE OVERVIEW We are excited to introduce a unique and profitable business opportunity. This proposal will outline the key reasons to invest in this growing business sector. We strongly believe that Mahana Pearl has significant potential and we will provide a sound economic rationale to back this up. We will prove to the investor our heritage and expertise in the pearl industry, coupled with the real and quantifiable market opportunities available by investing in Fiji. Our vision is to deliver a viable and market leading vertically integrated business. By establishing our own production and grading facility, we will deliver significant net profit and long term capital growth. As we are looking for investors to partner with us to realise this investment, we welcome your feedback on our proposal and look forward to discussing the details of this beautiful product and the delivery of a sustainable and long term business. Our best regards Nooare Vaevae and David Malcolm

01 | MAHANA PEARL


THE HISTORY Nooare’s family have been farming pearls for nearly 30 years, after establishing the Cook Island’s first pearl farm at Manihiki in 1988, and Nooare Vaevae spent a number of years working in the business with her father. Through the successful negotiation of a number of sale deals, Nooare has already opened up strong long term marketing relationships with purchasers in international markets. The process of farming black pearls is complex, and Nooare’s family has proven skills and success.

INVESTMENT OPPORTUNITY | 02


THE MANUFACTURING PROCESS EXPLAINED The production of pearls is a natural process. However, to ensure consistent quality of product, and sustainable profitability, it requires both experience and careful site selection. Patience, long term planning and responsible and careful farming practices are required to nurture and protect these highly sensitive marine organisms and selecting the right environment is paramount to making sure the business operation is successful. The black pearl is formed by the grafting of cultivated Pinctada Margaritifera Oyster. The process begins with the purchase of shells for seeding. Once the shells have been conditioned for 5 to 6 weeks, the oysters have their nucleus inseminated with a specially sourced clam shell fragment. The seeded oyster is then hung in the ocean. Careful positioning at this stage of the process is essential to make sure the oyster and developing pearl inside are kept within optimum temperature ranges and uncontaminated ocean currents, to ensure maximum harvesting success.

03 | MAHANA PEARL

Over the next 18 months, a critical part of the process is that the oyster is regularly cleaned before the first harvest is brought in. After the first harvest, approximately 70% of the oysters are re-inseminated, with additional fresh/new oysters to replace the unuseable oysters, meaning a new process begins, with a constant growth and harvesting process delivering a regular and long term black pearl output. Occasionally, there is extreme weather in the southern pacific, but our process of farming allows for the farming network to be dropped to the ocean floor and secured there to ensure that farming can continue once a storm has passed. The intention is to begin operation with 300,000 oysters, and when harvesting begins in 18 months to 2 years, to maintain and grow the numbers of oysters farmed.


THE GLOBAL MARKET PLACE FOR BLACK PEARLS In the marketplace, the brand most associated with black pearls is the Tahitian Cultured Pearl. These products enjoy a significant price premium in the marketplace due to their authenticity being exclusively recognized through the French Polynesian Trade Association, based in Tahiti. To be officially graded and sold, these products undergo rigorous electronic testing. The market is tightly controlled and is run as a monopoly. All Tahitian Black pearls do not come from Tahiti; most are imported from other parts of Polynesia and pass through traders to get their authentication. Globally, the market for black pearls has consistently grown over the last 20 years, with the product becoming a more contemporary

solution for jewellery. Due to the relative scarcity of the product and the rigorous control of the market, prices are high and continue to grow. Most Tahitian Black Pearls are sold on the international market and active trading is undertaken with China, Japan, Dubai, Amsterdam as well as other major European and American markets. As an example, pricing for Tahiti cultured pearls range from $150 to over $200,000, and we see considerable opportunity to develop and grow an alternative quality procurement market for this rare and beautiful product.

INVESTMENT OPPORTUNITY | 04


THE OPPORTUNITY – WHY INVEST? As Tahitian Black Pearls are controlled by a monopoly which decides pricing and volume, we see there is an opportunity to offer an alternative source of quality pearl product in this growing market. We have undertaken significant research in the South Pacific and have identified a suitable site where we can use our skills and experience to farm a comparable quality of black pearl in strong volumes and with strong profitability. The site we have found, and entered into an exclusive leasing arrangement for, is in Fiji. Our site is large enough to be able to deliver a pristine and premium location to farm oysters. It is a location which delivers calm water, protected from weather and potential cyclones, to ensure that our expert farmers can produce the size and quality of pearl so prized by international markets. We have secured a long term lease on the identified site, and we believe we are uniquely placed for production. Crucially, we want to ensure that we control a larger portion of the sales process to ensure the maximum profitable business return, so we also have identified the need to establish our own grading facility and quality management system. When we set this up, it provides an ideal way to compete with Tahitian Cultured Pearls and offer this expanding global market another high quality source for South Sea Pearls. Due to the volume we intend to farm, part of your investment will be used to purchase the right grading machinery so that we can deliver an authenticated Fiji product. This fully vertical manufacturing process will take 3 years to start returning on investment. Once the initial set up of the farm and equipment is done, our financials show that we will be able to return to the investor market leading returns on investment over a long time frame and give this initial investor the opportunity to enjoy long term profit.

05 | MAHANA PEARL


THE PROPERTY

The area we have acquired on a long term lease has been identified by a marine biologist as the perfect location for our operation. The Buca Bay area in Sovu Sam is sheltered and cyclone protected. The owners of Mahana Pearl have excellent local relationships with the local chiefs whose influence is important to maintain a constant and happy workforce. Our relationships with local government is also strong and we have strong connections with the Fiji Federal Government.

INVESTMENT OPPORTUNITY | 06


FINANCIAL PROJECTIONS PROJECTED PROFIT AND LOSS - CONSOLIDATED

7,087,500

MAHANA PEARL PTY LTD 2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

Export Sales

-

-

-

-

-

-

Designer Label

-

-

-

-

-

-

Other Sales

-

-

7,087,500

7,441,875

7,813,969

8,204,667

Interest Income

-

-

-

-

-

-

Total Revenue

-

-

7,087,500

7,441,875

7,813,969

7,204,667

300,000

-

100,000

10,000

100,000

100,000

Accounting

7,000

12,000

21,600

25,000

25,000

25,000

Advertising

-

-

-

-

-

-

Advisory Board/Director Expenses

-

-

-

-

-

-

Bank fees

-

-

-

-

-

-

Branding and Image Development

-

-

-

-

-

-

Conferences/Trade Shows/Mkt

-

-

-

-

-

-

53,361

80,042

82,443

84,917

87,464

90,088

Consultants

-

-

-

-

-

-

Contingency

-

-

-

-

-

-

Depreciation

230,944

346,417

346,417

346,417

346,417

346,417

Fuel

198,307

297,460

306,384

315,576

325,043

334,794

5,000

5,500

6,000

6,180

6,365

6,556

282,779

349,760

349,760

349,760

349,760

349,760

Legal Fees

-

-

-

-

-

-

License Fees

-

-

-

-

-

-

Printing & Stationery

-

-

-

-

-

-

4,000

6,105

6,365

6,556

6,753

6,956

21,000

36,630

38,192

39,338

40,518

41,734

-

-

-

-

-

-

237,689

376,034

387,315

398,934

410,902

423,229

-

-

-

-

-

-

1,200

1,800

1,800

1,854

1,910

1,967

14,850

19,800

19,800

20,394

21,006

20,636

-

-

-

-

-

-

1,356,131

1,531,548

1,666,077

1,604,926

1,721,138

1,748,137

-1,656,131

-1,531,548

5,321,423

5,826,949

5,992,830

6,356,530

-

-

-

-

-

-

(1,656,131)

(1,531,548)

5,321,423

5,826,949

5,992,830

6,356,530

REVENUE

PURCHASES

EXPENSES

Consultant/Staff Expenses

Insurance Interest Expense

Rent Repairs and Maintenance Research and Development Salaries and Wages Superannuation Telephone Travel and Accommodation/Ent Workcover Total Expenses Net Income before Income Tax Income Tax Expense Net (Loss)/Profit

07 | MAHANA PEARL


FINANCIAL PROJECTIONS PROJECTED CASH FLOWS MAHANA PEARL PTY LTD 2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

-

1,910,647

725,515

5,884,604

12,067,970

12,007,218

Export Sales (excl. GST)

-

-

-

-

-

-

Other Revenue Receipts

-

-

7,087,500

7,441,875

7,813,969

8,204,667

Increase/(Decrease) in debtors

-

-

-

-

-

-

6,500,000

-

-

-

(6,500,000)

-

Shares Purchased

-

-

-

-

-

-

GST Collected

-

-

-

-

-

-

6,500,000

-

7,087,500

7,441,875

1,313,969

8,204,667

1,356,131

1,531,548

2,274,827

2,604,926

2,721,138

2,748,137

-

-

-

-

-

-

(230,944)

(346,417)

(346,417)

(346,417)

(346,417)

(346,417)

3,464,167

-

-

-

-

-

Add GST on expenses

-

-

-

-

-

-

Add PAYG on wages

-

-

-

-

-

-

Payment to ATO

-

-

-

-

-

-

Income Tax Instalment

-

-

-

-

-

-

Adjusted Outflows

4,589,353

1,185,132

1,928,411

1,258,509

1,374,722

1,401,720

Closing Bank Balance

1,910,647

725,515

5,884,604

12,067,970

12,007,218

18,810,164

Opening Bank Balance REVENUE

Capital Contributed

INFLOWS

OUTFLOWS Expenses Decrease/(Increase) in creditors Depreciation Capital Items (office establishment)

INVESTMENT OPPORTUNITY | 08


THE OUTLOOK FOR FIJI ECONOMIC OVERVIEW FOR AUSTRALIAN GOVERNMENT DEPARTMENT OF FOREIGN AFFAIRS AND TRADE, 2017 The foundations of Fiji’s economy are broadly sound, and perceptions of increased transparency and accountability following Fiji’s return to democracy have boosted business confidence. Expansionary fiscal policies, particularly large infrastructure and social expenditure programs, as well as accommodative monetary policy, have supported seven years of economic growth since 2010. Fiji’s 2017-18 Budget, passed by Parliament on 13 July 2017, continues the Government’s focus on poverty alleviation, social empowerment and rural development. The Reserve Bank of Fiji estimates that Gross Domestic Product (GDP) grew by two per cent in 2016, down from an initial forecast of 3.5 per cent. The decrease has been attributed to the impact of Tropical Cyclone Winston, which caused approximately AUD1.2 billion worth of damage. GDP is forecasted to grow 3.8 per cent in 2017, 3 per cent in 2018 and 2.9 per cent in 2019. Service sectors continue to grow strongly (largely driven by the tourism industry), and along with construction, manufacturing and retail activity, are the main drivers of growth. Tourism remains Fiji’s main source of foreign exchange and visitor numbers grow steadily each year, reaching over 785,500 in 2016 – a new record. Australia remains Fiji’s largest tourism market, accounting for over 45 per cent of visitor arrivals in 2016, followed by New Zealand (21 per cent) and the US (9 per cent). Water, gold, garments, sugar and fish continue to be Fiji’s strongest merchandise exports. Agriculture is a source of (mostly informal sector) income for the bulk of the population and continues to make a moderate but far below potential contribution to growth. Forecast public expenditure for 2017-18 is FJD4.4 billion (approximately AUD2.77 billion), with a revenue of FJD3.9 billion (approximately AUD2.46 billion). This is expected to result in a budget deficit equivalent in size to 4.5 per cent of GDP.

09 | MAHANA PEARL


CONCLUDING STATEMENT Mahana Pearl is an excellent business opportunity, to become part of an expanding international market place with a product that enjoys strong investment returns and security.

We welcome the opportunity to discuss our proposal in more depth with you and share in this unique and exciting business venture.

INVESTMENT OPPORTUNITY | 10


Of fi ce U n it 1, 48 Flind ers P d e N o rt h Lakes Ql d 4509 Aust ralia + 6 1 468 919764

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