Investments by institutions in primary agriculture (farmland) in Russia, Ukraine and Kazakhstan. Presentation to Finance, Food and Farmland Conference, The Hague, 25 January 2014. Ian Luyt. www.novirost.com

1. Investments by institutions in
primary agriculture in Russia,
Ukraine and Kazakhstan
IAN LUYT
Finance, Food and Farmland Conference
The Hague, 25 January 2014
International Institute of Social Studies (ISS) & Centre for the Study of
Transition and Development (CESTRAD)

2. OVERVIEW
1. Context and Estimates
2. Motives & Methods
3. Performance to date
4. Issues & Trends
o Data based on study: “Emerging investment trends in primary
agriculture: A review of equity funds and other foreign-led
investments in the CEE and CIS region (2013)”
www.eastagri.com (download from www.novirost.com)
2

3. 3
Map: www.russiamap.org
Investor focus on Black Earth regions
& Northern Kazakhstan

4. Russia, Ukraine, Kazakhstan hold 12.6% global
arable land & ~70% within CEE/ CIS
4
Indicator
Russia
Ukraine
Kazakhstan
TOTAL
TOTAL LAND 1,709.8 60.4 272.5 2,042.7
AGRICULTURAL LAND 196.3 41.3 90.2 327.8
Agric Land % of Total Land 11.5% 68.4% 33.1% 16.1%
ARABLE LAND 120.7 32.5 24.0 177.2
Arable Land % of Agric Land 62% 79% 27% 54.1%
Data sources: National Statistics Agencies, EastAgri (2013). Global arable land taken as ~1.4 billion hectares (FAOSTAT 2011)

5. Combined 5.5% of Global Agricultural GDP (2011)
5
Indicator
Russia
Ukraine
Kazakhstan
TOTAL
EU
GDP (US$ bln) $1,858 $165 $188 $3,898 $16,566
Agric % of GDP 4.5% 10.5% 5.2% 5.9% 1.8%
Agric GDP (US$ bln) $83.6 $17.4 $9.8 $230.5 $298.2
Sources: World Bank (2011), National Statistics Agencies, Eurostat (2011)
Global agricultural GDP taken as US$ 4.194 trillion, or 4% of global GDP ( IMF 2011) (World Bank estimates 2.81% of global GDP (2011))

6. CONTEXT TO LAND RIGHTS & TENURE
• Most farmland owned by individuals in small lots
• Most farmland privately owned
• Ownership highly fragmented
• Land title generally defined and documented
• Limits to foreign ownership
6
COUNTRY Basis of Reform Tenure by foreigners allowed
Russia Land Shares Freehold through local company
Ukraine Land Shares Leasehold through local company
Kazakhstan Land Shares Freehold through local company
Other CEE Restitution EU citizens and local company

7. Investment drivers follow global trends
• Two early drivers:
– Farmland appreciation
– Operating profits
– Outcomes significantly different
• Underpinned by super cycle of higher commodities prices:
– Growing world population
– Growing middle class consumption
– Diversion of crops into biofuels
7
• Other institutional drivers:
– Hedge against inflation
– Diversification - uncorrelated to broader markets
• Region-specific drivers:
– Land consolidation attracts premium
– Large farms offer efficiencies of scale
– Subsidies and tax concessions limited impact in CIS

8. Investments by funds & institutions
Estimated ~$25 bln globally
REGION
Number
of funds
Share of
funds
Investment
(US$ bln)
Share of total
investment
North America/
Latin America/
Australia/ New
Zealand
38 64.4% $20.5 bln 82.7%
CEE/ CIS* 17 28.8% $2.9 bln 11.7%
Africa 4 6.8% $1.4 bln 5.6%
TOTAL 59 100% $24.8bln 100%
8
Data source: EBRD/ FAO study 2013 (updated). * Breakdown: CIS: ~$2.0bln; CEE:~$900mln

9. Foreign-led investments in CEE & CIS since 2006
9
REGION
Estimated
investment
(US$ bln)
Land
under
control
(mln ha)
% of agri
land
% of
arable
land
CIS * ~$5.0 3.2 0.9% 1.8%
CEE ** ~$3.0 1.0 1.3% 1.9%
TOTAL ~$8.0 4.2 1.0% 1.8%
* CIS group comprises Russia, Ukraine, Belarus, Kazakhstan
Agricultural land: 336.7 million hectares
Arable land: 182.7 million hectares
** CEE group comprises Poland, Romania, Bulgaria, Croatia, Serbia, Turkey
Agricultural land: 79.9 million hectares
Arable land: 50.4 million hectares
Source: EBRD/ FAO study 2013. Data includes investments by private equity funds and other private and institutional investors
Estimated ~$8.0 bln invested in ~4.2 mln ha

10. FINANCING STRUCTURES
• Predominant structure is private investment company
• Growth funded through public listings
• Few investments through private equity funds
• Other investment structures
– Open-end private equity funds
– Real estate investment trusts (REITs)
• IFIs recent entrant (both equity & debt)
10

11. INVESTOR PROFILES
• Predominance of European institutions
• Largest private equity investor is US-based
• Most are financial investors
• Few global strategic & commodity trading houses
– Vertical integration: Sucden (sugar), Olam (milk), Poldanor (pigs)
– However, recent investment by Cargill in Ukrlandfarming
• Sovereign investors
– Recent acquisition of CFG
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12. Most large farmland firms are local
Rank Company Country
Hectares
under control
1 Ivolga Kazakhstan/ Russia ~1.3 mln
2 Alibi-Agro Kazakhstan ~1.0 mln
3 Kazastykexport Kazakhstan ~1.0 mln
4 NCH Ukraine/ Russia 762,000
5 Ukrlandfarming Ukraine 670,000
6 Prodimex Russia 570,000
7 Vamin Russia 468,000
8 AK Bars Russia 466,000
9 Rosagro Russia 450,000
10 Razgulay Russia 412,000
15 Black Earth Farming Russia 308,000
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Source: Novirost research/ company data where available

13. Performance insights
7 listed ‘pure-play’ farmland companies reviewed
13
COMPANY Location Listing
Date
Listed
Land Bank
(hectares)
Market Cap
(US$ mln)
Share price
performance
since IPO
AGROGENERATION Ukraine Paris May 2010 50,000 $73.5 -10%
AGROTON Ukraine Frankfurt Nov 2010 171,000 $63.1 -65%
ALPCOT AGRO
Russia
Ukraine
Stockholm Oct 2009 281,300 $101.7 -63%
BLACK EARTH
FARMING
Russia Stockholm Dec 2007 318,000 $286.5 -76%
CONTINENTAL
FARMING GROUP
Ukraine
Poland
London &
Dublin
June 2011 23,700 $64.7 +4%
INDUSTRIAL MILK
COMPANY
Ukraine Warsaw May 2011 82,700 $159.1 +9%
TRIGON AGRI
Russia
Ukraine
Stockholm May 2007 172,000 $100.8 -50%
TOTAL 1,098,700 $849.4
Sources: Bloomberg; London Stock Exchange. Market capitalization as at 22 December 2012
Share price analysis: Foyil Securities (share prices as at 19 November 2012)

14. 14
Underperformance as asset class – but a few stars
0
50
100
150
200
250
300
350
Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12 Oct-12
Comparativepriceindex
IMC CFG Trigon Agri AgroGeneration Agroton Alpcot Agro BEF
Sources: Foyil Securities (data analysis), Bloomberg. Share prices as at November 9, 2012.
At Nov 2012,
only 2 shares
above index level
Share prices indexed at June 2011
- date of latest IPO (CFG)
Key lesson: Strategic management as critical as operational management

15. CIS farmland companies have also
underperformed global benchmarks
15
Data source: Foyil Securities - Share prices as at 31 December 2012
0
500
1000
1500
2000
2500
31-Jul-07
31-Dec-07
31-M
ay-08
31-Oct-08
31-M
ar-09
31-Aug-09
31-Jan-10
30-Jun-10
30-Nov-10
30-Apr-11
30-Sep-11
29-Feb-12
31-Jul-12
31-Dec-12
CIS Farmland Index Rogers Int'l Agri Index
DAX Agri Index S&P GSCI Agri Index
+ CIS Farmland Index tracks the share price performance of 10 listed farmland companies in CEE and the CIS
+ Rogers International Commodities Index - Agriculture Sub-Index is based on 22 commodity futures contracts
+ DAX Global Agribusiness Index tracks the performance of 40 leading agricultural companies
+ S&P GSCI Agriculture & Livestock Index tracks soft commodities price movements
Share prices indexed
to value 1000 at July
2007

16. FACTORS IMPACTING FUTURE INVESTMENTS
• Country risk perceptions
• Ability to manage volatility/ risks
– Climatic (crop insurance)
– Market (hedging options)
– Skills development
• Malcolm Gladwell’s ‘10,000 hours’?
– R&D (private/ state roles)
• Availability of investable opportunities
– Lack of ‘institutional quality managers’
• Performance to date unconvincing
– Large scale model must be shown as consistently profitable
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17. INVESTMENT TRENDS
• Existing investors: consolidation/ optimization
• Only 3 funds set up since ‘08 crisis
• Limited appetite for farmland?
– Aquila survey: only “11.4% to increase exposure over next 5 years”
• New classes of investors – new dynamic?
– Sovereign Investors – Saudi acquisition of CFG (March 2013)
– Global Traders - Cargill investment in Ukrlandfarming (Dec 2013)
– IFIs – EBRD in Kazexportastyk; IFC (maybe) in IMC
• Investments more niche-focused
– VTB’s irrigated farming in Russia
• CIS holds most institutional-scale potential
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18. Thank You
18
IAN LUYT
NOViROST Limited
ian.luyt@novirost.com
www.novirost.com