agro allied fund

7/30/2019 Agro Allied Fund

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October 2008

Private & Confidential

AUXANO

AGRO

-ALLIED

FUND

:

DISCUSSIONDOCUMENTWITHTHECITYOF DALLAS

December 2012

www.hudsongroup.us.com
http://www.hudsongroup.us.com/http://www.hudsongroup.us.com/


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OUTLINE

Introduction

The Opportunity

Value Proposition

Role of Nigeria

Role of city of Dallas

Fund Structure and strategy

Strategic partners


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INTRODUCTION

The Agricultural sector in Nigeria and other parts of Sub-Saharan Africa offers immense

opportunities for value creation for different agro commodities With a large domestic market(which is currently served via imports) and a growing export demand for many products, the

growth prospects for local cultivation and processing remains a key premise of economic

transformation.

The Auxano Agro-Allied Fund seeks to leverage on technical know-how, financial capacity and

strategic alliances with the city of Dallas to achieve significant agricultural transformation in

Nigeria.

In specific terms the Fund :

Will be structured as a private equity type of Fund

Has objective of delivering long term capital appreciation and superior risk-adjusted returns

Offers minimal volatility and low correlation with the Nigerian equity and fixed income market


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THE OPPORTUNITY

Nigerias rapid economic growth in recent years has resulted in increased importance of

agricultural commodities for local consumption and industrial use.

Nigeria spent NGN 991 billion importing rice and wheat in 2011;

The value of maize traded in Nigeria grew to NGN464b in 2011.

Sub-Saharan Africa imported NGN6.4 trillion worth of soft commodities in 2010;

Importation of agricultural products increased from N662,884.58 million in 2002

to N638.4bn($4.2billion)in 2011

The economic importance of these crops derives from a number of factors:

Growing demand for food and related processed products with crop inputs;

Lack of effective substitutes in the production process;

Multiple usage of many agricultural commodities e.g. as directly consumed fooditems, and as inputs for industrial processing.


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Mismatch in funding of agriculture projects short term funding for long

term projects causing failed projects Funding gap in the industry to secure critical inputs fertilizer, farm

equipments, crop spray, water via irrigation, dams and bore holes

Little synergy between key players in the industry leading to high cost,

low yield, poor economies of scale, dearth of capital intensive

infrastructure and high post harvest loss

Lack of investment in research

Poor training of human resources

Barriers to acquiring commercial agriculture land due to bureaucratic

land ownership laws/practices

Poor commodity market structure for agriculture products

Poor government policies like unnecessary agriculture input and food

importation subsidies

AGRICULTURE MARKET CONDITIONSIN NIGERIA


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VALUE PROPOSITION

The Fund is focused on exploiting opportunities in the agriculture value chain with specific

emphasis on:

Portfolio

Holdings

Storage and

warehousing

facilities

Processing

(Fruits, Rice &

Tomatoes)

Aggregationand trade of

specific crops

Acquisition andrevitalization of

the Abuja

commodities

exchange


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BENEFITTO NIGERIA

Nigeria stands to benefit from a revitalized agro-allied industry. As a country

with an agrarian population of about 70%, it will experience a direct impact onpoverty alleviation as the level of economic activity is expected to rise.

Specific outcomes will include:

Employment generation;

Important implications for poverty alleviation as farmers will earn increased

income through the out-grower scheme for the state;

Enhanced tax revenues for the state;

Positive externalities due to ginger processing operations;

Improved farm practices and productivity;

Higher disposable income for farmers.


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ROLEANDBENEFITTOTHE CITYOF DALLAS

The following highlight some of the roles that will be played by the city of

Dallas:

Implementation of farm yield enhancement techniques

Provision of technical expertise for agro-projects in Nigeria

Establishment and implement sustainable farm management and farm

community settlements

Provision of strategic and implementation for the establishment of

storage, processing and distribution capabilities Implementation agric control systems

Some of the key benefits to that the city of Dallas stands to gain include:

Employment

Expanded knowledge base


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PROFILEOFINDICATIVE PORTFOLIO HOLDINGS

FRUIT CONCENTRATEPROCESSING

Fruit concentrate production is a virgin industry in Nigeria. The Fund will seek tobridge the demand supply imbalance of the local juice manufacturing industry using

locally available fruit:

Nigeria produces 9.5 million tonnes of fruit annually and is the eight largest

producer of mango globally;

Before 2002, Nigeria imported fruit juice valued at $ 250 million;

After the ban on importation of fruit juice, Nigeria started importing fruitconcentrate for reconstitution into fruit juice in Nigeria;

The market for fruit concentrate imports has increased from 1.5 million kg in 2002

to over 30 million kg in 2010;

Estimated demand for ready to drink consumer juice is 400 million litres (2011

est.)

Fruit concentrate is used as an input in the production of fruit juice and fruit

drinks. The market for fruit concentrate in Nigeria is estimated to be over 30

million kg annually.


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TOMATO

PROCESSING: Tomato is a staple food eaten everyday in households. Nigeria is a tomatoproducing country. It produces about 1.3% of world tomato production.

At least 50% of the tomato produced is wasted due to lack of storage facilities.

Tomato paste is imported annually to the tune of 65,809 tonnes.

COMMODITYAGGREGATION

The Fund will seek Aggregation and distribution of grains of immense economic

value across Nigeria and West Africa such as soybeans, sorghum and maize.

Maize, sorghum and soybean are among the five most traded grains in the world.

Together with sugar, rice and wheat, the FAO expects the value of imports of these

commodities to rise to $1.3 tr.

Food Processing which is 60% ofNigerias manufacturing industry is dependent on

soybean, sorghum and maize. Specific growth drivers include Increasing population ,a fast growing poultry and

brewery industry.


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COMMODITIESEXCHANGE :

The primary objective of the exchange is to create a reliable platform for off-take and sale of

agricultural commodities.

Addressable markets include international agencies and donors, agro-processing companies

and export markets.

The exchange over time will also enhance agriculture trading through the introduction of

exotic derivative instruments such as futures and options.

Presently, the Abuja commodities exchange is not performing optimally. In 2008, total

expressed demand in form of bids was about 10,000 tonnes. The exchange could only meet

25% of the demand.

The exchange will also seek to reduce market inefficiencies such as excessive price

differentials by providing easy outlet and efficient procurement channels for agricultural trade

and commodities.

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The Fund will invest in companies/projects that are capable of generating a 25%

IRR over the period of investment.

Investments will be sizeable and allow the Fund to secure board representation to

influence the activities of the enterprise and infuse value generating ideas into

the company

The Fund seeks to invest in companies that are spread across the agriculture

value chain including investment in companies engaged in servicing agriculture

entities, crop and animal production and agriculture marketing companies.

The Fund will leverage on alliances with key global players for securing critical

inputs for investments in the sector

The Fund will employ its network of agriculture input companies and technical

partners to achieve optimal result in its various portfolio investments.

Defined exit through sale, IPO or management buyout.

FUND STRUCTURE & STRATEGY


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FUND GOVERNANCE FRAMEWORK

AUXANOFUND

GOVERNANCE

FRAMEWORK

CLEARLY

DEFINED

GOVERNANCE

RULES

TRUST

ARRANGEMENT

S

DISCLOSURE

RULES

FUND

LEADERSHIP

DUTIES &

RESPONSIBILITI

ES

The Fund governance framework is put together as it helps Fund trustees and other Fund

fiduciaries to act in the best interest of fund beneficiaries. The Fund governance framework covers

five key elements


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AUXANOAGROALLIEDFUND governance framework clearly states and makes accessible

the standards that govern its conduct. This is to reduce all forms of conflict and sub-optimality between Fund Managers staff, and the Fund investors.

The fund specifies a clear leadership structure and managements disposition about the

operation of the Fund. This guarantees proper accountability to Fund investors and

effective monitoring of the Funds trustees.

The Board of Trustees possess core attributes and proficiency for optimal performance in

the exercise of their Fiduciary duties. They are well equipped to make informed decisions

that are in the best interest of Fund beneficiaries.

The Fund has adopted a disclosure policy to address issues bordering on both potential

and perceived conflicts through appropriate disclosures. This provides a defense against

the misuse of Fund assets.

Fund governance Framework

agro allied fund

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