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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/7/30/2019 Agro Allied Fund
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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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PROFILEOFINDICATIVE PORTFOLIO HOLDINGS
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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PROFILEOFINDICATIVE PORTFOLIO HOLDINGS
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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
Recommended