Orchard Projections (Imperial Units)

CHANDLER ORCHARDS PROJECTED INVESTMENT YIELDS

I) General Considerations: Included in the following analysis are 9 different yield and price scenarios, illustrating a range of differing outcomes. The following analysis is made in constant dollars, without adjustments for inflation. In each scenario operating costs are unchanged, illustrating the effect that the walnut price and per-acre yields have on longterm profits.

II) Annual Profits at Maturity: In each scenario, year 10 is highlighted to indicate the annual profits of a fully mature orchard plot. After reaching maturity the annual yield growth ceases and yields stabilize over the decades. In the more optimistic yield scenarios the orchard reaches maturity earlier in its li fecycle, while in the pessimistic scenario the orchard doesn’t reach maturity until the 10th year.

III) Sale In Year 80: The sale of the orchard for timber is projected in year 80 in this analysis, but could take place anytime after year 20. Liquidating the orchard for timber illustrates the increase in residual value obtained after the investor determines it is time to recover the capital invested.

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CHANDLER ORCHARDS PROJECTED INVESTMENT YIELDS

IV) ROI At Maturity: After an orchard reaches maturity, yields will stop the year over year increase and stabilize. Barring any new techniques or technology that manages to increase future yields, the only variation will be due to weather events. A hail

10 Year Projected ROI With Different Price/Yield Scenarios

o i r a n e c S e c i r P

c i t s i m i t p O l a r t u e N c i t s i m i s s e P





PROJECTED INVESTMENT CASH FLOWS Optimistic Yield Scenario: This is a projection made by the University of California Davis Agricultural Issues Center and represents optimal yields using the industry's most modern techniques and practices. Although this projection is normally used by California-based growers, the walnut industry in Mendoza closely monitors new techniques and practices used by our California counterparts. Optimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation increase in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.

Year by Year Projected Cash Flows (Per Acre Plot) Imperial Units

Year:

1

2

3

4

5

6

7

8

9

10+

80

Operating Activities Yield: Po Pounds pe per ac acre pl plot:

Optimistic Yi Yields

441

744

1,488

2,976

6,173

6,173

6,173

6,173

6,173

Waln Walnut ut Pric Price: e: $ per per lb. lb. (FOB (FOB,, in-s in-she hellll): ):

Opti Optimist m istic ic Pric Prices es

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

Gross Sales:

992

1,674

3,348

6,696

13,888

13,888

13,888

13,888

13,888

5% Management Fee:

(50)

(84)

(167)

(335)

(694)

(694)

(694)

(694)

(694)

(1,444)

(1,444)

(1,444)

(1,444)

(1,444)

Annual Orchard Expenses:

(1,444)

(1,444)

(1,444)

(1,444)

(1,444)

Net Cash Flows From Operations:

(1,444)

(502)

146

1,736

4,917

11,749

11,749

11,749

11,749

11,749

InvestmentActivities Initial Investment Sold For Timber & Residual Land Value

(15,000)

60,000





PROJECTED INVESTMENT CASH FLOWS Optimistic Yield Scenario: This is a projection made by the University of California Davis Agricultural Issues Center and represents optimal yields using the industry's most modern techniques and practices. Although this projection is normally used by California-based growers, the walnut industry in Mendoza closely monitors new techniques and practices used by our California counterparts. Neutral Price Scenario: This is a future price estimate based on the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the last two decades. It assumes future walnut prices will remain the same as historical averages. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.


Year:

1

2

3

4

5

6

7

8

9

10+

80

441

744

1,488

2,976

6,173

6,173

6,173

6,173

6,173

$1.80

$1.80

$1.80

$1.80

$1.80

$1.80

$1.80

$1.80

$1.80

Gross Sales:

794

1,340

2,680

5,360

11,116

11,116

11,116

11,116

11,116

5% Management Fee:

(40)

(67)

(134)

(268)

(556)

(556)

(556)

(556)

(556)

(1,444)

(1,444)

(1,444)

(1,444)

(1,444)



Wal Walnut nut Pri Price: ce: $ per lb. lb. (FOB (FOB,, in-sh n-shel ell): l ):

Neutr eutral al Pric Prices es


(1,444)

(1,444)

(1,444)

(1,444)

(1,444)


(1,444)

(690)

(172)

1,101

3,647

9,116

9,116

9,116

9,116

9,116


(15,000)

60,000





PROJECTED INVESTMENT CASH FLOWS Optimistic Yield Scenario: This is a projection made by the University of California Davis Agricultural Issues Center and represents optimal yields using the industry's most modern techniques and practices. Although this projection is normally used by California-based growers, the walnut industry in Mendoza closely monitors new techniques and practices used by our California counterparts. Pessimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation decrease in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.


Year:

1

2

3

4

5

6

7

8

9

10+

80



441

744

1,488

2,976

6,173

6,173

6,173

6,173

6,173

Waln Walnut ut Pric Price: e: $ per per lb. lb. (FO (FOB, B, in-s in-she hellll): ):

Pess Pessim imis isti tic Pric Prices es

$1.35

$1.35

$1.35

$1.35

$1.35

$1.35

$1.35

$1.35

$1.35

Gross Sales:

596

1,006

2,012

4,023

8,344

8,344

8,344

8,344

8,344

5% Management Fee:

(30)

(50)

(101)

(201)

(417)

(417)

(417)

(417)

(417)

(1,444)

(1,444)

(1,444)

(1,444)

(1,444)


(1,444)

(1,444)

(1,444)

(1,444)

(1,444)


(1,444)

(878)

(489)

466

2,377

6,482

6,482

6,482

6,482

6,482


(15,000)

60,000





PROJECTED INVESTMENT CASH FLOWS Neutral Yield Scenario: This is a projection for a new walnut plantation in Mendoza, Argentina made by Leandro Moreno, the agronomist that supervises our orchard. It represents his estimate of the yields that should be obtained according to the local techniques and practices. No losses due to severe weather events such as frost or hail are contemplated in this scenario. Optimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation increase in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.


Year:

1

2

3

4

5

6

7

8

9

10+

80

441

661

1,323

2,756

4,740

5,512

5,512

5,512

5,512

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

$2.25

Gross Sales:

992

1,488

2,976

6,200

10,664

12,400

12,400

12,400

12,400

5% Management Fee:

(50)

(74)

(149)

(310)

(533)

(620)

(620)

(620)

(620)

(1,444)

(1,444)

(1,444)

(1,444)

(1,444)

Operating Activities Yield: Pounds per acre plot:

Neutral Yields

Waln Walnut ut Pric Price: e: $ per per lb. lb. (FOB (FOB,, in-s in-she hellll): ):

Opti Optimist m istic ic Pric Prices es


(1,444)

(1,444)

(1,444)

(1,444)

(1,444)


(1,444)

(502)

(31)

1,383

4,446

8,686

10,336

10,336

10,336

10,336


(15,000)

60,000







PROJECTED INVESTMENT CASH FLOWS Neutral Yield Scenario: This is a projection for a new walnut plantation in Mendoza, Argentina made by Leandro Moreno, the agronomist that supervises our orchard. It represents his estimate of the yields that should be obtained according to the local techniques and practices. No losses due to severe weather events such as frost or hail are contemplated in this scenario. Neutral Price Scenario: This is a future price estimate based on the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the last two decades. It assumes future walnut prices will remain the same as historical averages. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.


Operating Activities

Year:

1

2

3

4

5

6

7

8

9

10+

80





PROJECTED INVESTMENT CASH FLOWS Neutral Yield Scenario: This is a projection for a new walnut plantation in Mendoza, Argentina made by Leandro Moreno, the agronomist that supervises our orchard. It represents his estimate of the yields that should be obtained according to the local techniques and practices. No losses due to severe weather events such as frost or hail are contemplated in this scenario. Pessimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation decrease in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.



Year:

1

2

3

4

5

6

7

8

9

10+

80





PROJECTED INVESTMENT CASH FLOWS Pessimistic Yield Scenario: This is a pessimistic scenario that takes into account two extreme climate events: (1) a once in hundred years “winter kill” frost event in the first year of the plantation, resulting in a 70% loss of trees and (2) a severe hailstorm and deadly autumn frost in the 4th year which necessitates the removal of the Chandler scion in 30% of the trees. The damaged scions are removed from the rootstock and field grafts are performed on the 4-year old rootstocks. Optimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation increase in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.



Year:

1

2

3

4

5

6

7

8

9

10+

80





PROJECTED INVESTMENT CASH FLOWS Pessimistic Yield Scenario: This is a pessimistic scenario that takes into account two extreme climate events: (1) a once in hundred years “winter kill” frost event in the first year of the plantation, resulting in a 70% loss of trees and (2) a severe hailstorm and deadly autumn frost in the 4th year which necessitates the removal of the Chandler scion in 30% of the trees. The damaged scions are removed from the rootstock and field grafts are performed on the 4-year old rootstocks. Neutral Price Scenario: This is a future price estimate based on the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the last two decades. It assumes future walnut prices will remain the same as historical averages. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.



Year:

1

2

3

4

5

6

7

8

9

10+

80





PROJECTED INVESTMENT CASH FLOWS Pessimistic Yield Scenario: This is a pessimistic scenario that takes into account two extreme climate events: (1) a once in hundred years “winter kill” frost event in the first year of the plantation, resulting in a 70% loss of trees and (2) a severe hailstorm and deadly autumn frost in the 4th year which necessitates the removal of the Chandler scion in 30% of the trees. The damaged scions are removed from the rootstock and field grafts are performed on the 4-year old rootstocks. Pessimistic Price Scenario: This is a future price estimate that assumes a 1-standard deviation decrease in the inflation-adjusted FOB in-shell price for Southern Cone walnut exports over the coming decades. Other Assumptions: We assume (1) annual orchard expenses will remain stable over time, (2) we receive the FOB price when exporting.



Year:

1

2

3

4

5

6

7

8

9

10+

80

Orchard Projections (Imperial Units)

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