Product Disclosure Statement - Offer of Units in the Australian Food & Farming Key Advantage Lamb Class - First ...
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Product Disclosure Statement
Offer of Units in the Australian Food & Farming
Key Advantage Lamb Class
Issued by:
Falcon Capital Limited
Issue Date: 15 April 2020
ABN 78 119 204 554
Level 13, 350 Collins St
Melbourne VIC 3000
AFSL 302 538
AUSTRALI AN F OOD & FAR MI N G
Important Information
General Rights and obligations attached to the Unit
This Product Disclosure Statement (‘PDS’) is dated 26 August 2019 and has Details of the rights and obligations attached to each Key Advantage Lamb
been issued by Falcon Capital Limited ABN 78 119 204 554, AFSL 302 538 Unit, and the material provisions of the Constitution, are summarised in
(‘Falcon Capital’ or ‘Responsible Entity’) as the responsible entity of the section 12.1 of this PDS. A copy of the Constitution is available, free of
First Guardian Master Fund charge, on request from the Responsible Entity.
ARSN 635 429 113 (‘Fund’). This PDS relates to the offer (‘Offer’) of
interests in the Fund consisting of units in the Australian Food & Farming
Key Advantage Lamb Class (‘Key Advantage Lamb Class’) of the First Electronic and printed PDS; website
Guardian Master Fund (‘Key Advantage Lamb Units’). This PDS is not This PDS will be available and may be viewed online at
required to be, and has not been, lodged with the Australian Securities and www.firstguardiancapital.com/managed-funds.php. The information on
Investments Commission (‘ASIC’). the website does not form part of this PDS.
The Offer constituted by this PDS in electronic form is available only to
No Investment Advice persons receiving this PDS in electronic form within Australia. Persons
In preparing this PDS and making the Offer, the Responsible Entity has who access this electronic version of this PDS should ensure that they
not taken into account the investment objectives, financial situation or download and read the entire PDS. If unsure about the completeness of
particular needs of individual investors. Investors should obtain their own this PDS received electronically, or a print out of it, you should contact the
independent advice and consider the appropriateness of the Offer having Responsible Entity. A paper copy of this PDS will be available for Australian
regard to their objectives, financial situation and needs. It is important that residents free of charge by calling +61 3 9988 7753 between 9:00am and
investors read the entire PDS before making any investment pursuant to 6:00pm (Melbourne time) on a Business Day.
the Offer. In particular, in considering the prospects of the Trust, investors
should consider the risk factors that could affect the financial performance Applications for the Key Advantage Lamb Units under this PDS may only
of the Trust. The significant risk factors affecting the Trust are summarised be made on either a printed copy of the Application Form attached to or
in section 11 of this PDS. accompanying this PDS or via the electronic Application Form attached to
the electronic version of this PDS, available at
www.firstguardiancapital.com/managed-funds.php. The Corporations
Authorised Information Act prohibits any person from passing the Application Form on to another
No person is authorised to give any information or to make any person unless it is attached to a hard copy of the PDS or the complete and
representation in connection with the Offer which is not contained in this unaltered electronic version of the PDS. If this PDS is found to be deficient,
PDS. Any information or representation not contained in this PDS may any Applications may need to be dealt with in accordance with section
not be relied on as having been authorised by the Responsible Entity in 1016E of the Corporations Act.
connection with the Offer or the Fund.
Any references to documents included on the Responsible Entity’s website
An investment in the Key Advantage Lamb Class does not represent a are provided for convenience only, and none of the documents or other
deposit with or a liability of the Responsible Entity. An investment in the information on the website is incorporated by reference into the PDS
Key Advantage Lamb Class is subject to investment risk, including possible unless stated otherwise in this PDS.
delays in repayment and loss of income or capital invested. None of the
Responsible Entity or any of their directors, advisers, agents or associates in
any way guarantee the performance of the Key Advantage Lamb Class, any Disclaimer
return of capital or any particular rate of return on an investment in the Key No person is authorised by the Responsible Entity to give any information
Advantage Lamb Class. or make any representation in connection with the Offer that is not
contained in this PDS. Any information or representation that is not
contained in this PDS may not be relied on as having been authorised
No Offer where Offer would be illegal by the Responsible Entity, its directors or any other person in connection
This PDS does not constitute an offer or invitation in any place in which, with the Offer. The Fund’s business, financial condition, operations and
or to any person to whom, it would not be lawful to make such an offer or prospects may have changed since the date of this PDS.
invitation. No action has been taken to register or qualify Key Advantage
Lamb Units in any jurisdiction outside Australia. The distribution of this Certain statements in this PDS constitute forward-looking statements.
PDS outside Australia may be restricted by law and persons who come into These forward-looking statements are identified by words such as ‘aim’,
possession of this PDS outside Australia should seek advice on and observe ‘anticipate’, ‘assume’, ‘believes’ ‘could’, ‘expects’, ‘intends’, ‘may’, ‘plan’, ‘predict’,
any such restrictions. Any failure to comply with such restrictions may ‘potential’, ‘positioned’, ‘should’, ‘target’, ‘will’, ‘would’, and other similar
constitute a violation of applicable securities law. words that involve risks and uncertainties. Investors should note that
these statements are inherently subject to uncertainties in that they
may be affected by a variety of known and unknown risks, variables and
other factors which could cause actual values or results, performance or
Cooling-off rights achievements to differ materially from anticipated results, implied values,
Under the Corporations Act, a 14 day cooling off period applies to an performance or achievements expressed, projected or implied in the
investment made in the Key Advantage Lamb Class by retail clients. If statements.
during the cooling off period an investor decides the investment does
not meet their needs, then they should advise Falcon Capital in writing or
electronically.
2
K E Y A D VA N TA G E L A M B C L A S S
These forward - looking statements are based on current expectations, Time
estimates and projections about the business of the Key Advantage Lamb Unless otherwise stated or implied, references to time in this PDS are to
Class and the markets in which the Key Advantage Lamb Class will invest, Melbourne time.
and the beliefs and assumptions of the Responsible Entity. These forward-
looking statements are not guarantees of future performance and involve
known and unknown risks, uncertainties and other factors that are in some Miscellaneous
cases beyond the Responsible Entity’s control. As a result, any or all of the Photographs and diagrams used in this PDS that do not have descriptions
forward-looking statements in this PDS may turn out to be inaccurate. are for illustration only and should not be interpreted to mean that any
Factors that may cause such differences or make such statements person in them endorses this PDS or its contents or that the assets shown
inaccurate include, but are not limited to, the risk factors described in in them are owned by the Fund.
section 11.
References in this PDS to currency are to Australian dollars unless otherwise
Potential investors and other readers are urged to consider these factors indicated.
carefully in evaluating the forward-looking statements and are cautioned
not to place undue reliance on the forward-looking statements. The All information contained within this PDS, including data contained in
Responsible Entity do not make any assurance, express or implied, in charts, graphs and tables, is based on information that is available and
relation to whether any forward-looking statements will actually eventuate. accurate as at the date of this PDS unless otherwise stated.
These forward-looking statements speak only as at the date of this
PDS. Unless required by law, none of the Responsible Entity intends to
publicly update or revise any forward-looking statements to reflect new
information, future events or otherwise. They are provided as a general
guide only and should not be relied on as an indication or guarantee of
future performance.
Past performance, which is one of the principal components in developing
these forward looking statements, is not necessarily a guide to future
performance.
Some numerical figures in this PDS have been subject to rounding
adjustments. Accordingly, numerical figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that preceded
them.
Updated information
Information in this PDS may need to be updated from time to time. Any
updated information that is considered not materially adverse to investors
will be made available on the website:
www.firstguardiancapital.com/managed-funds.php. The Responsible
Entity will provide a copy of the updated information, free of charge to any
investor who requests a copy by calling +61 3 9988 7753 between 9:00am
and 6:00pm (Melbourne time) on a Business Day.
In accordance with its obligations under the Corporations Act, the
Responsible Entity may issue a supplementary PDS to supplement any
relevant information not disclosed in this PDS. You should read any
supplementary disclosures issued in conjunction with this PDS prior to
making any investment decision.
Industry Terms, Definitions and Abbreviations
Certain industry terms, defined terms and abbreviations used in this PDS
are explained within this PDS.
3
AUSTRALI AN F OOD & FAR MI N G 4
K E Y A D VA N TA G E L A M B C L A S S
Contents
Important Information 2
1. Key Features 6
2. About First Guardian Master Fund 10
3. Investment Strategy for Key Advantage Lamb Units 11
4. Site Operated by Australian Food & Farming 21
5. Australian Food & Farming Group’s Operations 36
6. Historical Financials and Forecasts 42
7. Regulatory Guide 232 Disclosure 44
8. Operation of the Key Advantage Lamb Class 50
9. Fees and Other Costs 55
10. Benefits 60
11. Risks 66
12. Tax Consideration 69
13. Additional Information 72
5
AUSTRALI AN F OOD & FAR MI N G
1. Key Features
What is the Offer? Under this PDS, the Responsible Entity is offering fully paid units in the Australian Food & Farming Key
Advantage Lamb Class (‘Key Advantage Lamb Class’) of the First Guardian Master Fund, ARSN 635 429
113 (‘Fund’)(‘Key Advantage Lamb Units’).
Structure The Fund is an Australian Registered Managed Investment Scheme. The Key Advantage Lamb Class
will provide investors with an opportunity to access returns through an investment in the Australian
agricultural sector, with a focus on regenerative farming. This is achieved by providing investors with an
investment exposure to Australian Food & Farming Group (‘ Australian Food & Farming’), an Australian
cropping and sheep meat producer that owns and operates agricultural assets in Western Australia.
Responsible Entity and Falcon Capital Limited
Trustee ABN 78 119 204 554
Australian Financial Services License Number 302 538
Falcon Capital Limited is the Responsible Entity of the Fund
Minimum Investment Each investor must subscribe for Key Advantage Lamb Units worth at least $20,000.
Investment Objective The Key Advantage Lamb Class aims to deliver returns of 12% to 15% p.a, comprised of both operating
income and capital gain.
This target return is only a target and may not be achieved. Investors should review the summary of key
risks set out in section 11 of this PDS.
Investment Term The Key Advantage Lamb Class is a long-term investment. Unitholders of the Key Advantage Lamb Class
are subject to a lock-in period of 2 years in respect of each investment in the Key Advantage Lamb Class
(‘Lock-In Period’). During the Lock-In Period, the Unitholder cannot make a request to withdraw any of its
investment in the Key Advantage Lamb Class.
The recommended investment period is 3 to 5 years.
What will the Key The Key Advantage Lamb Class will invest in shares in Australian Food & Farming Holdings Pty Ltd ACN 617
Advantage Lamb Class 770 591 (‘ Australian Food & Farming Holdings’).
Invest in?
Australian Food & Farming Holdings is the parent company of Australian Food & Farming Group
(‘ Australian Food & Farming’), an Australian cropping and sheep meat producer that owns and operates
agricultural assets in Western Australia.
6
K E Y A D VA N TA G E L A M B C L A S S
Applications Investors considering an investment in the Key Advantage Lamb Class should review this PDS, and return a
completed Application Form to Falcon Capital.
Fees The following fee is payable out of the Underlying Fund to FGC:
Management Fee of 0.50 % p.a. + GST of the Net Asset Value of the Underlying Fund (net of
the effect of GST) - the Management is calculated and payable on a monthly basis.
All fees outlined within this PDS are charged and collected at the Underlying Fund level. Fees are quoted
on a look-through basis.
Withdrawals The Key Advantage Lamb Class provides a limited quarterly withdrawal facility to holders of Key Advantage
Lamb Units (‘Unitholders’). The withdrawal facility is available to each Unitholder in respect of Key
Advantage Lamb Units that are no longer subject to Lock-In Period requirements. The amount available
to meet withdrawal requests in any quarter will be the 20% of the Net Asset Value of the Key Advantage
Lamb Class.
Unit Pricing The value of each Key Advantage Lamb Unit (‘Unit Price’) will be calculated on a monthly basis. The trustee
determines the price of the Key Advantage Lamb Units by calculating the value of net assets attributable
to the Key Advantage Lamb Class.
The overriding principle in the valuation of assets is to report accurately in a transparent, impartial and
ethical manner. Unitholders may contact Falcon Capital on +61 3 9988 7753 or visit Falcon Capital’s
website at www.firstguardiancapital.com/managed-funds.php to obtain the latest Unit Price.
Distributions Any distributions in the form of realised gains will be determined and paid at six monthly intervals.
Income generated, Australian Food & Farming and the proceeds of the realisation of property owned by
Australian Food & Farming are distributed to the Underlying Fund through a combination of dividend
payments by Australian Food & Farming Holdings to the Underlying Fund, and by the redemption of
Australian Food & Farming Holdings Shares held by the Underlying Fund.
The Underlying Fund would then distribute any realised distributable income to Unitholders of the Key
Advantage Lamb Class.
Falcon Capital expects to commence distributing income to Unitholders of the Key Advantage Lamb Class
in 2021. This expected timing for the commencement of income distributions is only a target and may not
be achieved. Investors should review the summary of key risks set out in section 11 of this PDS.
Distributions will be automatically reinvested unless Falcon Capital is otherwise instructed by Unitholders
at the time of their initial application.
Reporting Unitholders will receive:
- a transaction confirmation statement for each issue or withdrawal of Key Advantage Lamb Units
relating to that Unitholder;
- periodic performance update reports - Falcon Capital intends to provide such a report at least once a
quarter; and
- an annual tax statement that provides the necessary details required for completing Australian tax
returns (Unitholders who redeemed any of their investments in any given year and who received a
distribution during that period will also receive an income tax statement).
7
AUSTRALI AN F OOD & FAR MI N G 8
K E Y A D VA N TA G E L A M B C L A S S
The Company’s
Value Proposition
- Maintains an Australia-wide perspective to aggregate properties that are
complementary and provide efficiencies through strategic development.
- A vigilant focus on constantly reducing operating risks.
- A focus not only on the standard elements of agricultural management, but the capture of
greater value through active trading operations, across products and global markets.
- Operational expertise at both a strategic and tactical level, ensuring a portfolio of
investments that spreads opportunity for value capture whilst also ensuring risk is well
managed.
- Strong linkages with Asia – regions where Australian Food & Farming’s team has deep
experience across investment and trade, combined with cultural
understanding and language proficiency.
9
AUSTRALI AN F OOD & FAR MI N G 2. About the First Guardian Master Fund 2.1 What is the Objective of the Fund? The Fund offers a range of investment strategies to retail clients. Some of these investment strategies are existing investment strategies that Falcon Capital currently offers to wholesale clients via the use of unregistered wholesale managed investment schemes. Each of these investment strategies will be offered to investors via the offer of a separate Class of Units in the Fund. Falcon Capital has appointed One Managed Investment Funds Limited (ABN 47 117 400 987, AFSL 297042) as the Custodian to hold the assets of the Fund. 2.2 Fund Structure The Fund is an Australian registered managed investment scheme governed by its Constitution, which has been registered with ASIC. One or more Classes of Units may be offered in the Fund. Falcon Capital Limited is the responsible entity of the Fund. 2.3 What is the Key Advantage Lamb Class? Pursuant to the terms of the Constitution, the beneficial interest in the assets of the Trust is divided into units (‘Units’) of a class (‘Class’) within the Trust. The Key Advantage Lamb Class is a Class of Units in the Trust. The value of the Key Advantage Lamb Class is equal to the value of the assets allocated to the Key Advantage Lamb Class less the liabilities allocated to the Key Advantage Lamb Class. The investment performance of the Key Advantage Lamb Class is directly related to the performance of the underlying assets that are attributable to the Key Advantage Lamb Class and the fees and costs applicable to the Key Advantage Lamb Class. Investors who hold Key Advantage Lamb Units will have an economic interest in the net income of the Key Advantage Lamb Class (if any) and in the net sale proceeds of the underlying assets attributable to the Key Advantage Lamb Class on their eventual disposal. In this regard, an investment in the Key Advantage Lamb Class simulates direct investment in the underlying assets attributable to the Key Advantage Lamb Class. A Unitholder’s share of the net income and net sale proceeds will be calculated as a proportion of the number of Key Advantage Lamb Units it holds relative to the total number of Key Advantage Lamb Units that have been issued. It is important to note that both the asset and income of each Class are held separately from any other Class. This means that the net income of one Class is not available to make good the losses of another Class. Likewise, the assets of one Class are not available to settle the liabilities of another Class. 10
K E Y A D VA N TA G E L A M B C L A S S
3. Investment Strategy
for Key Advantage Lamb Units
3.1 What is the Offer
The Offer comprises of an offer of Units in the Australian Food & Farming Key Advantage Lamb Class (‘Key Advantage Lamb
Units) in the First Guardian Master Trust (‘Trust’) at an issue price equal to the net asset value (‘NAV’) of Key Advantage Lamb
Class divided by the number of Key Advantage Lamb Units on issue.
3.2 Underlying Assets
The Key Advantage Lamb Class will provide investors with an opportunity to access returns through an investment in the
Australian agricultural sector, with a focus on regenerative farming. This is achieved by providing investors with investment
exposure to Australian Food & Farming Group (‘ Australian Food & Farming’), an Australian cropping and sheep meat producer
that owns and operates agricultural assets in Western Australia.
In order to achieve this strategy, the Key Advantage Lamb Class deploys a structure that is illustrated by the structure diagram
below:
`
Key Advantage Lamb
Class
Shareholding via managed fund
Australian Food & Farming Holdings Pty Ltd
Holding company for all
The Key Advantage Lamb Class will invest in units in the Australian Food & Farming Key Advantage Lamb Fund (‘Underlying
Fund’).
For each Key Advantage Lamb Unit issued to Unitholders, Falcon Capital, as Responsible Entity for the Key Advantage Lamb
Class will subscribe for one unit in the Underlying Fund.
The Underlying Fund gives effect to the investment strategy by subscribing for ordinary shares in Australian Food & Farming
Holdings Pty Ltd (‘ Australian Food & Farming Holdings’) (‘ Australian Food & Farming Holdings Shares’). Australian Food
& Farming Holdings is the ultimate holding company for all assets making up Australian Food & Farming Group.
11AUSTRALI AN F OOD & FAR MI N G
3.3 About the Group
Australian Food & Farming Group is an Australian cropping and sheep meat producer that owns and operates agricultural
assets in Western Australia. The group aims to produce year-round, quality branded sheep meat for international and domestic
consumers while maintaining a reliable cropping operation.
Australian Food & Farming currently operates on approximately 45,491 acres of land. The group owns around 40,268 acres of
land and leases a further 5,223 acres of land in Southern and Western Australian at four key sites. Australian Food & Farming
operates in reliable rainfall zones of between 330mm to 450mm of rain per year. Its operations are strategically located in four
different climates.
All of the sheep owned by Australian Food & Farming belong to the Dorper breed. The most efficient, lowest cost sheep breed
for Australian conditions in the Dorper. Dorper sheep thrive in Australian conditions. On average, Dorper ewes produce a lamb
every eight months, or three lambs every two years.
Australian Food & Farming has acquired a Dorper stud. On average, the Dorper sheep that Australian Food & Farming owns can
gain 200 to 300 grams in weight each day.
The group also conducts cropping operations on part of the land it operates on. This ensures that Australian Food & Farming
has a reliable second income stream and a mixed sheep and cropping operations, which allows the group to fully utilise the
land it operates on throughout the entire year.
There are five defining aspects to the Australian Food & Farming’s approach to operating its agribusiness:
International
Strategic farm
supply chain
development
management
Food security Low cost
solutions production
Regenerative
agriculture
12K E Y A D VA N TA G E L A M B C L A S S
The team behind Australian Food & Farming is farmer led, and backed by personnel with strong finance skills. The farmers of
Australian Food & Farming have a combined experience in agriculture of more than 100 years. Its finance team has a combined
experience of more than 40 years in Australia and Asia with top international banks and law firms.
Members of the management team of Australian Food & Farming are also equity owners. Collectively, they have invested
almost $11 million to purchase and upgrade the group’s initial properties and fund Australian Food & Farming’s operations
during its initial setup.
3.3.1 Group Structure
Australian Food & Farming employs a flat management structure, designed to maximise agility and efficiency and minimise ad-
ministrative and operating costs. The board of directors of Australian Food & Farming Holdings (‘Board’) is extremely hands-on
and devotes considerable time to the management of Australian Food & Farming. The operations of Australian Food & Farming
are overseen by the Group General Manager. Governance, strategy, stakeholder relations and corporate functions are oversee
by the Board. Farm and production managers report directly to the Group General Manager on matters relating to their areas of
responsibility.
Board of Australian Food & Farming Holdings
Tom Luckock
David Anderson
Group General Manager
Keith Wilson
Production Governance & Finance Marketing & Export Investment Committee
Keith Wilson Tom Luckock Keith Wilson Keith Wilson
Greg Ingram David Anderson David Anderson Tom Luckock
Grace Ingram David Anderson
Angus Lang
Operational Management Accounting Sales & Marketing
Targeted Production Legal Value Adding Products
Animal Welfare Investments Product Distribution
Lamb Logistics Finance and Tax Export Logistics
Production Management
The role of the Investment Committee
The Investment Committee makes recommendations to the Board in respect of any proposal to purchase or sell assets. By
including the Group General Manager as a member of the Investment Committee, the Investment Committee is critically
informed and enhanced by operational management insight.
The Investment Committee also makes decisions on budgeted spending within the limits set by the Board. For proposed
expenditure that is beyond the limits set by the Board, the decision must be made by the Board by unanimous approval. A
capex budget and project plan will be provided by the Investment Committee to the Board before any acquisition may take
place.
13AUSTRALI AN F OOD & FAR MI N G
3.4 About the Australian Food & Farming Group’s
Operations Team
Keith Wilson Greg Ingram
Group General Farm Manager
Manager
Keith is a broad acre farmer with over 40 years of experience in the Greg has 30+ years of agricultural experience. In particular he
agriculture industry. Initially working to establish land for a mixed has experience with irrigation having developed a property with
farming enterprise with a focus on wool and cropping, he has around 3000 acres of irrigation.
since developed and managed property, with a focus on sustain-
ability and production diversity. He was also one of the pioneers in Greg Ingram is our Farml Manager and is employed on a part time
the Dorper sheep meat market and built one of Australia’s leading basis. He has an engineering degree, but has always been drawn
Dorper studs.Keith has experience in dry land agriculture, growing to the land, and as soon as he could, he moved back to farming,
a range of cereal, legume, oil seed and targeted pastures. where he has been for the last 10 years. Greg plugs our irrigation
experience gap as well as being a safe pair of older hands for the
Keith also has experience in rehabilitating saline land in addition group asset management. Greg was previously general manager
to sheep production in both the wool and meat markets domesti- at Woperana Station, where he developed more than 2000 acres of
cally and overseas. With a large range of networks in the agricul- irrigation and irrigation infrastructure.
ture industry, Keith brings depth of experience, innovative ideas
connections as well as a range of intellectual resources to AFF.
Angus Lang Grace Ingram
Farming Specialist Trainee Stock person
Angus was raised on an irrigated livestock property, and is re- Grace is a trainee stock person at AFF. She has grown up on farms.
sponsible for the day to day operations at Belmont and is heavily She is a trainee and will help manage group asset in WA.
involved in all aspects of the business.
He is a qualified butcher, and has worked on large sheep proper-
ties. He has experience managing sheep, irrigation, cropping and
general farming operations.
His passion for agriculture and rural Australia is reflected in the
breadth of experience he holds across agribusiness and commod-
ities marketing.
14K E Y A D VA N TA G E L A M B C L A S S
3.4.1 What do our farmers think about?
The following are the main considerations of our operations teams in managing the Australian Food & Farming Group’s
operations:
Embracing technology
Australia has an enviable record at developing agricultural technology. CSIRO in particular has developed some of the world’s
leading agricultural technologies. However, the Australian agricultural industry in general has not done as well in implementing
and commercialising that technology. Many of our recently commercialised technologies are in use across the US and Asia, but
haven’t been adopted by local farm managers.
Technological improvements allow us to better map soil types and pastures and to overlay them against information on weight
gain using sheep tracking and performance technology. That way, Australian Food & Farming has information on what pastures
achieve weight gain on our sheep, information that is not available in the market at the moment. At present, one of the key
issues that Australian Food & Farming faces is signal strength on all of its farms. Australian Food & Farming is addressing this by
installing Wi-Fi platforms that can form the base for Australian Food & Farming to ensure better on-farm communications, to
enable Australian Food & Farming put in place cameras and drones in order to monitor sheep, water infrastructure and general
conditions, and eventually to remotely control irrigation. With this information and technology in place, Australian Food &
Farming can reduce labour costs, and improve information flow that will further refine the Australian Food & Farming Group’s
pasture mixes and sowing techniques.
Drought management
Australian Food & Farming views drought more as an opportunity than a risk. Having established bases of operations
on western coast, with access to high security water rights, we are in a fortunate position where we have a number of
management options available. By preparing well, we are able to capitalise on drought conditions, by purchasing undervalued
land and livestock that has been severely impacted by these events. Finally, the regenerative agricultural practices we apply
focus on building soil health which is more resilient against both drought and flood. We prioritise diversifying across different
rainfall zones and are exploring irrigation options in WA.
Staff and team considerations
Running a multi-faceted agricultural enterprise requires a range of skills covering mechanical, vet science, nutrition, agronomy,
trading and strategic planning. This is coupled with the requirement for personnel to have the ability to adapt to variable
conditions and manage large scale operations across different regions. It is essential to Australian Food & Farming that its teams
work well together, both as part of Australian Food & Farming and within each local community. Identifying and retaining
talented team members that meet all these criteria is an ongoing focus.
Grass feeding
Australian Food & Farming has a strong preference for natural, grass fed lamb. By establishing perennial and seasonal pastures,
Australian Food & Farming believes it can achieve highly efficient production that is both healthy and environmentally friendly.
Issues commonly identified in respect of feed-lots and grain feeding include:
- inefficient allocation of resources,
- inability to achieve significant scale,
- animal welfare due to cramped conditions, and
- significant exposure to feedstock price increases.
Sustainability
Australian Food & Farming sees its role as being a responsible steward of all the land it operates on, with an overarching goal
of building biodiversity and soil health, which then rewards Australian Food & Farming with increased productivity. Australian
Food & Farming regularly implements small-scale trials to determine suitability of new grazing techniques, seed blends and
other practices. Australian Food & Farming works with different grass species to extend its pasture window. These trials may be
run in conjunction with the Australian Food & Farming Group’s agronomist and the Department of Agriculture.
15AUSTRALI AN F OOD & FAR MI N G
3.5 About the Australian Food & Farming Group’s
Management Team
Australian Food & Farming is a specialist farming enterprise, with an established record of performance in protein production.
The capabilities of the team behind Australian Food & Farming extend into exporting and marketing of Australian products to
global consumers.
By combining specialist knowledge at an operational level, with established capabilities in finance, legal and marketing across
Australia, Asia and the Middle East, the management team is in a strong position to provide investors with an investment
opportunity that spans the value chain from production, value-added processing, marketing, sales and product distribution.
Drawing on the combined resources of its management team, the Australian Food & Farming Group’s experience spans the full
breadth of the agricultural industry. This team aggregates proven management and international business capabilities, which is
rarely available so comprehensively within the agribusiness environment.
The following are brief biographies of the members of the management team:
Tom Luckock David Anderson
Executive Chairman Managing Director
Tom Luckock is a partner with an international law firm and is also David brings over 20 years of Investment Management and com-
the Vice Chair of the Australian China Chamber of Commerce in mercial experience to AFF. He assists in project due diligence, trans-
Beijing. Tom has been based in Beijing for seventeen years and action structuring and financial management. As a fluent speaker
speaks and reads Chinese. Tom has assisted companies on more of Mandarin and Indonesian, David has established strong business
than USD20B of acquisitions in more than 40 countries, primarily in links across the Asian region, covering export markets and large
the energy and agricultural sectors. scale agricultural projects. Working closely with institutional and
direct investors, David has assisted many groups in gaining access
Tom oversees AFFs business management, corporate governance to Australian investment opportunities. Prior to forming Australian
and stakeholder relations. Tom grew up on properties in Victoria Food & Farming, David gained extensive experience within top tier
and jackerood on properties in global institutional investment managers, working on listed equity
Victoria, Zimbabwe and Queensland. transactions.
Mandy Fu
Investment Analyst
Mandy’s focus is on investment research and financial
modelling. Previously, Mandy worked with PwC in Assurance
Service. She speaks fluent mandarin and has a Master of
Management Accounting degree from the University of
Melbourne. She is an Affiliate of ACCA, a leading global body for
professional accountants. Her additional skills include project
management and financial reporting.
16K E Y A D VA N TA G E L A M B C L A S S
3.5.1 What does the management team think about?
The following are the core considerations that the management team takes into account when making decisions in respect of
the management of the Australian Food & Farming Group’s business.
Access to Capital
Australian Food & Farming is well aware of the capital-intensive nature of establishing large scale, integrated operations. The
management team focuses on ensuring the business is fully funded and capable of delivering on Australian Food & Farming’s
objectives. Australian Food & Farming’s investor base is broad, spanning domestic and some international entities, all looking to
support growth in the industry. Australian Food & Farming has secured a line of senior bank debt for ongoing funding towards
our expanding portfolio of land holdings. Australian Food & Farming’s founders continue to re-invest into the business, and
have done so since inception.
Gearing Ratios
As a capital management principle, the management team of Australian Food & Farming intends to keep gearing levels low.
Maintaining debt at a low level allows Australian Food & Farming to avoid the issues caused by over-leverage, which many
farmers have historically faced. Despite Australian Food & Farming’s geographically diverse operations, the management team
remains conscious of the risks associated with excessive debt and have resolved to avoid them.
Governance
Good corporate governance is essential and is required by Australian Food & Farming’s lenders and investors. The management
team has put in place processes to ensure Australian Food & Farming follows strict governance guidelines. At the same
time, the management team ensures that Australian Food & Farming’s governance processes are practical and not overly
bureaucratic. Transparency, avoiding conflicts, independent decision making processes are important, ticking boxes is not. The
management team’s aim is to put in place big company corporate governance principles, while maintaining the flexibility and
response times of a smaller company.
Marketing
The management team believes that consumers are increasingly interested in traceability and understanding the origins of
the products they are purchasing. This is demonstrated by increased prominence on restaurant menus of details surrounding
their key suppliers, and broader awareness of differences between agricultural production methods. Australian Food &
Farming’s marketing team focuses on true paddock-to-plate messaging, with strong emphasis on our assets, and the natural
environments where Australian Food & Farming’s sheep graze.
Branding
There is great value in establishing and operating a recognised brand that can underpin a base level of consumer sales. Whilst
this has been done well in other products within the meat industry, Australia still lacks a widely available “household name”
lamb brand. When product is traced back to a farmer led model, and consumers can understand its origins and story, significant
traction and accompanying increase in sales margin can be achieved.
Processing and Export
Margins that can be derived from having branded products available for international sales are attractive, and a focus for
Australian Food & Farming. It is important to ensure Australian Food & Farming has access to processing capacity as and when
required on terms that meet its needs.
17AUSTRALI AN F OOD & FAR MI N G
At AFF we have put in place larger company
corporate governance and systems while at the same time
maintaining a nimble and opportunistic
approach to acquisitions recommended by our farmer led
management team.
Tom Luckock, Executive Chairman
18K E Y A D VA N TA G E L A M B C L A S S
3.5.2 Management Approach 3.5.3 Corporate Governance
and Structure
Australian Food & Farming draws on the experience and skill
of the management team, which consists of members with
Acquisitions specific backgrounds and recognised expertise in Australian
The Management Team will look to establish an integrated agriculture, finance and investment. Australian Food &
supply chain, by assembling a portfolio of complementary Farming is governed by the Board that is responsible for
assets, selected to achieve the objectives: investment and operational governance, with a strong focus
on the compliance, integrity and performance of all aspects
- properties selected to complement each other for of the business.
operational efficiency.
- acquisitions structured to optimise capital, cash The group recognises that investors may desire a channel
flow, taxation and environmental considerations. All to engage with and have a line of direct communication to
acquisitions will be focused on working toward our the Board. Tom Luckock is responsible for oversight of this
overall goal which is to be a producer of all year round, function.
quality branded sheep meat.
The Board’s main responsibilities are to ensure that
Australian Food & Farming is managed according to the
Operations Corporations Act and all established investment policies,
The Management Team has proven experience in operating and in the best interests of all investors in Australian Food
large-scale agricultural businesses across beef cattle, sheep & Farming. In carrying out its duties, the Board is subject to
and grains sectors within Australia, including: the Corporations Act and must, among other things:
- Training and developing operational staff. - act honestly and in the best interests of Investors;
- Adopting appropriate technologies to improve - exercise care and diligence; and
operational efficiencies. - treat all Investors equally.
- Building scale.
- Capital improvement.
- Effective risk management, financial analysis,
governance and reporting.
3.5.4 Due Diligence Process
Development and Capital Expenditure
Australian Food & Farming will apply a proportion of its The Management Team uses a proprietary investment
investment capital to develop each asset in line with a process for assessing the productivity and valuation of
strategic capital expenditure program that: assets. This approach has been tested and proven, and is
specifically tailored to the requirements of Australian cor-
- Improves production capacity through intensification. porate farming. To be considered for selection, assets must
- Reduces long-term per-unit production and operation meet the following criteria:
costs.
- Mitigates operating risk and volatility. - located in geographic regions best suited to producing
- Realises opportunities for enterprise (land-use) change. the relevant commodity.
- Improves the long-term sustainability of natural - be of sufficient scale to optimise production efficiency
ecosystems. and maximise investor returns.
- Provides enhanced marketing flexibility, product - exhibit high potential to adopt new technologies and
differentiation and competitive market positioning. to implement best practice methods, productivity
improvement and/or land use change.
- linked to secured upstream supply and/or downstream
Divestments processing and distribution markets.
The Management Team’s core strategy is one of purchasing - priced either at-market or below-market as verified by
and continuing to operate strategic, complementary assets, an independent licensed valuer.
and does not plan on making any asset sales during the 3 to
5 year term of the Key Advantage Lamb Class. Asset identification and selection ultimately depends on the
experience and proprietary knowledge of the Management
Team, the integrity of our proven due diligence systems and
the credibility of our professional network of industry and
government relationships across the Australian agricultural
community.
19AUSTRALI AN F OOD & FAR MI N G 20
K E Y A D VA N TA G E L A M B C L A S S
4. Sites Operated by the Group
Australian Food & Farming Group has designed its operation to be land rich. The group believes that Australian land, particularly
land in WA is generally undervalued and has a range of factors supporting ongoing growth. The land owned by the group also
serves as a stable asset to underpin its business and its valuation and allows Australian Food & Farming to invest long term in
the properties. The group is focused around WA. Australian land remains cheap by global standards and Western Australia
offers the cheapest land in Australia.
Australian Food & Farming Group operates its WA base from 3 sites all within 200 km of each other, Great Southern, Kulin and
Hyden.
21AUSTRALI AN F OOD & FAR MI N G
4.1 Kulin, Western Australia
The Australian Food & Farming Group’s Kulin operations are located in the Kondinin and Kulin areas of southern Western
Australia. The area offers some of the most cost efficient land for sheep meat production available in Australia. Because it is
affected by frost, the area has not attracted the focus of cropping companies and as a result pricing is cheaper than equivalent
rainfall areas in other parts of the state. Rainfall is lower than Belmont but is still well within the acceptable range for Dorper
production.
Australian Food & Farming leases two properties, Jilakin and Mallee Hill, and an option to purchase Mallee Hill at a fixed price
which can be exercised at any time prior to 30 June 2021. Australian Food & Farming has also acquired 760 arable acres
adjoining Mallee Hill. The Kulin operations houses the group’s stud ewes and also runs around 2,000 ewes, with about 2,500
acres cropped for cereal crops.
Key statistics for Kulin Operations
Average rainfall 360mm
Average rainfall (last 20 years) 340mm
Growing season 155mm
Lowest 10% decile 261mm
Production 1.5 tonnes of wheat per ha, or around 0.8 sheep per acre increasing as pastures
improve.
Other Area is affected by frost which creates a risk for cropping. Some areas also
affected by salt.
Benchmark Pricing We purchased the adjoining acreage at AUD400 per arable acre ( equivalent of under
USD500 per tonne of wheat).
Expansion There are limited opportunities to expand in Kulin. We are currently
considering the negotiation of the purchase of 1,200 acres. A further 1,000 acres may
come up for sale at the northern end of the property in the next 24 months.
22K E Y A D VA N TA G E L A M B C L A S S
4.1.1 Jilakin Downs, Kulin
Jilakin Downs is a well-developed property in the Eastern Overview
Wheatbelt region of Western Australia. This region is on the
edge of WA’s wheat belt. It sits next to Mallee Hill.
Location “Jilakin Downs, Kulin”
- The property is well set up as a prime lamb breeding Carmody Road,
property with additional infrastructure to maintain the Kulin, WA 6365
stud. Arable Land Area 4,199 acres
- Existing on-farm infrastructure is excellent, with very Improvements Stud holding yards
limited upgrading necessary given current stocking
numbers. Soil Type Predominately harder soil types with
both hard and soft clays in addition to
- Excellent and consistent town water to all areas of the red and black loam country. There is
property coming off the main water line. Additional some light sand country on the east side
dams located in large paddocks to more effectively of the property and 200 ha of mixed soil
facilitate large mobs. An increase in stocking intensity types.
will require additional tanks to provide water through
Lease Property Leased for three years.
the demand heavy summer period.
- Secure fencing throughout the property and along
all boundaries, with easy access to all areas of the
property.
- Sheep yards and facilities to complete a large artificial
breeding program available. Integration with overall portfolio
- Accommodation facilities for workmen to rent include; Jilakin is set up to serve as the initial home of the Dorper
2 bedroom, 1 bathroom cottage and an additional stud. In particular the sheep are isolated from
dwelling with 1 bedroom and 1 bathroom. the remainder of the commercial herd which is
important to stop the spread of disease and maintain
- Fully utilisable storage facilities for chemical genetics.
(dry and liquid), grain, machinery and other equipment.
23AUSTRALI AN F OOD & FAR MI N G
Location
Jilakin Downs, Kulin is located roughly 280km south east of Perth in the Eastern Wheatbelt region of Western
Australia. The nearby towns include:
- Newdgate; and
- Lake Grace.
Annual temperatures and rainfall
Mean daily maximum temp
Mean daily minimum temp
Mean monthly rainfall
* See each explanation on page 22.
24K E Y A D VA N TA G E L A M B C L A S S
4.1.2 Mallee Hill, Kulin
Mallee Hill is an excellent sheep and cropping Overview
property located in the shire of Kondinin within the ‘Wheat-
belt South’ region of Western Australia. The property is
Location “Mallee Hill, Kondinin”
located within 17km of Jilakin Downs.
Taylors Road,
- The property is well fenced with a small portion in need Kondinin, WA 6367
of maintenance. Arable Land Area 5,295 acres
- Workers housing is located on the property and can be Irrigation No irrigation. We cannot irrigate on this
lived in at the current point, with property.
improvements to be made in the near future.
Improvements - Sheep yards
- Storage facilities for machinery and equipment are - Fencing
located on the property. The property has two full ma- - Machinery shedding
chinery sheds and a workshop, a super shed and 2 silos. - Grain silos
There are 3 additional silo pads located on the property - House
for additional silo’s to be located.
Soil Type The majority of the property is lighter
soils, predominately sand plains.
Integration with overall portfolio
Mallee Hill serves as a breeding operation with serradella,
biserrula and cadiz pastures planted in 2018. It can also be
easily cropped.
25AUSTRALI AN F OOD & FAR MI N G
Location
Mallee Hill, Kondinin is located in the Wheatbelt region of Western Australia, roughly 270km east of the state
capital Perth on the Brookton Hwy. The nearby towns include:
- Corrigin; and
- Hyden.
Annual temperatures and rainfall
Mean daily maximum temp
Mean daily minimum temp
Mean monthly rainfall
* See each explanation on page 22.
26K E Y A D VA N TA G E L A M B C L A S S
4.2 Great Southern
Australian Food & Farming’s Great Southern operations are located at Pingrup in southern Western Australia. The area offers a
slightly higher rainfall than Australian Food & Farming’s other sites and is also less remote than the Hyden and Kulin operations,
meaning it is easier to attract labour.
Echidna Ridge has been a well-run primarily cropping operation. It is well serviced by more than 30 dams, fencing is in
reasonable condition and its fertilizer and lime history is reasonable. Australian Food & Farming will continue to crop while
proceeding with a staged transition to a sheep operation over a three year period.
Key statistics for our Great Southern Operations
Average rainfall 358mm
Average rainfall (last 20 years) 308mm
Growing season 187mm
Lowest 10% decile 237mm
Production 1.8 to 2.2 tonnes of wheat per ha.
Other Serviced by two abattoirs and a larger town of Jerramungup.
Benchmark Pricing Echidna Ridge was acquired for $540 per arable acre (this is equivalent to around
USD550 per tonne of wheat).
Echidna Ridge
Duckworths
Gavins
27AUSTRALI AN F OOD & FAR MI N G
4.2.1 Echidna Ridge, Pingrup
Echidna Ridge is located 42km south - east of Pingrup. Overview
Pingrup is a small agricultural - based country town 359km
south east of Perth and 195km north east of Albany
Location “Echidna Ridge,”
renowned for its annual race day. The surrounding areas
Pingrup” Townsend Road,
produce wheat and other cereal crops.
Pingrup, WA 6343
- Echidna Ridge benefits from a more southern location,
Arable Land Area 14,725 acres
which puts it in a milder climate that is different to our
Kulin and Hyden properties further north. Improvements • Homestead
• Workers cottage
- The easy working soils are predominately sandy mallee • Sheds and silos
loams and gravels, sand over clay with some clay areas.
Soil Type The soils are predominately sandy mallee
- Fully fenced into 25 good sized paddocks which are
loams and gravels, sand over clay with
ideal for broad acre farming of cereals, canola, lupins
some clay areas.
and hay production as well as sheep and production.
Dams need to be cleaned out, and fences and pastures
improved.
Integration with overall portfolio
- There is a full complement of farm infrastructure which
has supported the consistent production levels of
Echidna Ridge will serve as a cropping operation and over
Echidna Ridge, being all sheds, yards, silos, fuel & water
time will also breed and fatten sheep. It will be developed
tanks, house and quarters.
as a core part of our southern, operations closer to the
- Duckworths and Gavins Place ( which now form part of coast.
Echidna Ridge ) do not have as good a fertiliser history
as the original Echidna Ridge, and fertiliser and lime will
be required.
28K E Y A D VA N TA G E L A M B C L A S S
Annual temperatures and rainfall
Mean daily maximum temp
Mean daily minimum temp
Mean monthly rainfall
* See each explanation on page 22.
29AUSTRALI AN F OOD & FAR MI N G
4.3 Hyden
Australian Food & Farming’s Hyden operations are centered around the Rockwater aggregation, south of Hyden.
Hyden has reliable rainfall of around 340mm per annum, which is slightly lower than the Great Southern operations. The area is
affected by frost, although it is still a well-established cropping operation. The Hyden operations are the most remote of all of
our operations and this makes the labour risk more significant. Given this, the Hyden operations are supported by labour from
Kulin and Great Southern.
Work is being conducted in respect of the Hyden operations to improve fencing, water fertiliser and in particular to improve
pastures and remove weeds. The Hyden operations forms the core base for Australian Food & Farming’s breeding operations.
Key statistics for our Hyden Operations
Average rainfall 342mm
Growing season 155mm
Lowest 10% decile 247mm
Production 1.5 tonnes of wheat per ha.
Other Major town of Hyden.
Benchmark Acquired for $500 per arable acre (this is equivalent to around USD 600 per tonne of
wheat).
30K E Y A D VA N TA G E L A M B C L A S S
4.3.1 Rockwater, Hyden
Rockwater (also known as Gittos and Minni Downs), is Overview
situated approximately 60km South East of the rural town
of Hyden. Hyden is a vibrant wheat- belt town home to a
Location “Rockwater and Fretwells, Hyden”
thriving tourist industry for Wave Rock.
Pearce-Varone Road,
- Newdgate is approximately 55km south of the property Hyden, WA 6359
and Perth is 373km west. Access to the property is via Arable Land Area 16,400 acres
Pearce-Varone Road, and the main Hyden-Lake King
Road. Improvements There are two houses and workers cot-
tages on Rockwater.
- Predominantly gently undulating sand plain
country, originally timbered with mallee and Soil Type The majority of the property is lighter
salmon gum. soils, predominately sand plains.
- Highly arable and highly suited to broad acre grain,
oilseed and livestock production.
- Set in a typically Mediterranean style climate with a
reliable 340mm annual rainfall. Integration with overall portfolio
- Fully fenced and watered throughout with steel post Rockwater will initially be a cropping operation. Over a
and ring-lock fencing which subdivides the property three year period as fencing and pastures are improved
into some main paddocks with several smaller holding it will be transitioned across to, in part, a breeding site
paddocks around the main homestead and sheds. servicing our other operations.
- The property is also very well watered via 46 significant
dams which either have constructed catchments or on
existing water courses. The property has been cleared
and developed with grain production the key, so easy
access for plant movement with internal roads, and
clean open paddocks with long seeding runs.
- 2 main comfortable brick homesteads with all modern
amenities in excellent condition.
- Multiple silos and rain water tanks.
31AUSTRALI AN F OOD & FAR MI N G
Location
Rockwater is situated approximately 60km South East of the rural town of Hyden. The nearby towns and cities include:
- Bendering;
- Kondinin; and
- Karlgarin.
Annual temperatures and rainfall
Mean daily maximum temp
Mean daily minimum temp
Mean monthly rainfall
* See each explanation on page 22.
32K E Y A D VA N TA G E L A M B C L A S S
4.4 Selection criteria for new land
Australian Food & Farming may in the future decide to acquire additional land to expand the size of its operations. The following
are the main considerations that Australian Food & Farming would take into account if it decides to acquire additional land:
Location WA. Ideally Australian Food & Farming’s properties should be located within 200km of
each other to ensure ease of inspection. Australian Food & Farming would also take into
account the availability of nearby schooling and towns as that impacts Australian Food &
Farming’s ability to attract labour.
Valuation Standard Australian Food & Farming would generally aim to consider land that cost under
AUD1,200 per tonne of wheat produced post improvement capex.
Access The property should have clear access to the road and surrounding infrastructure for
B-Double trucks and for road train transport.
Rainfall Requirement Australian Food & Farming would aim to choose properties that have reliable rainfall.
(minimum) Australian Food & Farming assess this by considering the lowest ten percentile rainfall
and the rainfall during drought periods for a property. Australian Food & Farming would
generally aim to ensure that its property have rainfall of around 220mm at a minimum.
Climate change risk is also important shown in deterioration over the last 20 years.
Scale Australian Food & Farming would generally only consider properties that have at least
8,000 arable acres. Australian Food & Farming would consider the neighbouring land
and whether they are likely to come up for sale. Ideal operating sizes are above 20,000
acres in WA.
Current Operational Status The property should be suited for cropping and sheep. Australian Food & Farming
would generally not consider property in areas with a large dog population unless dog
fencing can be erected cost effectively. Dogs can do significant damage to lambing
numbers. Dog areas are in the Northern part of Western Australian.
Potential Improvements Australian Food & Farming would consider whether the property can be used in a
manner that compliments Australian Food & Farming’s existing operations.
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