ARC FUNDS LIMITED — AGM Information 2017

Oct 11, 2017

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Australian Rural Capital Limited: Chairman’s Address AGM Brisbane, October 12, 2017

Introduction

The 2017 Financial Year has been a year of progress for ARC, albeit slow progress, which has been somewhat frustrating for us at times. The financial results of a small after- tax loss of $29,242 can be attributed to the gain on the value of our investment in Namoi Cotton and slightly higher than expected operating expenses. We do believe that we do operate with a tight control over costs.

Our NTA was approximately 55 cents at the end of September 2017, our share price has traded at 65 cents recently and the market capitalisation is now just over $8 million. We have no debt and cash levels of $1.48 million. Our capital raise in April 2017 was well supported by both existing and new shareholders to the Company. Now I want to discuss our investments and our current business development activities.

Namoi Cotton

Firstly, our investment in the now new Namoi Cotton Limited. We are pleased to report to our shareholders that on Tuesday, October 10, 2017, Namoi Cotton announced the final implementation of the schemes of arrangement and restructure of Namoi Cotton from a Co-operative to an ASX listed public company named Namoi Cotton Limited. Namoi Cotton confirms the transfer of incorporation and the Restructure has been implemented and the ordinary shares have been entered the Namoi Cotton Limited register. ARC did hold 12,000,249 Namoi Cotton Capital Stock Units and now holds 12,000,249 Namoi Cotton Ordinary shares which is 8.4% of the fully diluted capital and the second largest shareholder.

We believe this to be a great step forward in the quest to both unlock and grow value in this investment. The Independent Experts Report in the Restructure Booklet did value the Namoi Cotton Ordinary shares post the restructure on a fully diluted basis in a range of between 76 cents and 91 cents per share, with a mid-point of 83.5 cents. This is approximately twice the current trading price of the shares and we believe gives us comfort that we have significant value to be unlocked in this strategic investment stake and vindicates our view of the value within this enterprise.

Namoi has also indicated they intend to undertake an entitlement offer to raise some new equity to retire debt and facilitate the funding of some growth initiatives. We look forward to the details of this offering and will carefully consider our participation alongside our investment objectives of incremental earnings accretion and the continued process of unlocking value and growing the business consistent with their strategic plan.

We wish to congratulate and thank the Board and Management of Namoi Cotton on this achievement and note the comments from the CEO on the outlook that “recent rains have been well received and the medium-term outlook for further rainfall at this stage appears positive. These factors represent a wonderful opportunity and platform for our restructured business to embark on the full implementation of its strategic plan to reposition the business”.

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Business Development

Now I will discuss the progress of the development of the asset and funds management opportunity. As I mentioned at the full year results we are well advanced with our documentation and services agreement to launch our managed Investment vehicle which we have decided to rename to ARC Agrivest Limited to replace the former name of Australian Rural Capital Investor Limited

Nothing else changes apart from the name, the same proposed $50m raising, an unlisted public company structure and investment approach of strategic stakes in agribusiness assets and operations. Our discussions and meetings with potential investors both institutional and high net worth individuals are continuing and have been productive.

The feedback we have received on our proposed approach and investment disciplines along with the potential of the seed investment in Namoi Cotton has been encouraging. We do feel that ARC Agrivest will be a unique and new approach to investing in this sector and will have significant appeal to investors. We continue to build our advisory board with experienced professionals and look forward to moving forward with this project soon.

Having said this, we are mindful that we have reached our expected launch date which is now delayed as we are currently awaiting greater clarity and understanding of the Namoi Cotton capital raising situation, so we can objectively value and implement the best mechanism to transfer the Namoi stake into ARC Agrivest. We believe that it is in the best long- term interests of ARC shareholders to ensure we get this process right and do so in a fully informed manner. This has impacted the timing of our launch and we are now seeking to launch prior to the end of this year.

Almond Opportunity

We have been working on integrated irrigation and almond development opportunity but we continue to encounter a familiar issue in that we find it difficult to justify vendors’ valuation or price expectations so we have passed on this deal for the present time. The Almonds industry has some very compelling dynamics as we previously mentioned below

• Very high protein content and nutritional value

• Easy to handle and simple to process crop with nil waste

• Low carbon footprint in production and thru the supply chain

• High returns per megalitre of water

• Large scale is a low-cost producer in a global sense

• Highly mechanised production and harvesting

• Large scientific research and production data base and marketing from the USA

• Growing global consumption and demand

We are continuing to seek opportunities to invest in this industry.

Institutional demand for Prime Land

A growing amount of institutional capital, both foreign and domestic is seeking to acquire broad acre and scaled agricultural production operations. We believe this to be very constructive in facilitating

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capital into these industries of cotton, cereals, pulses and tree nut production. This bodes well for Australian agriculture and helps to underwrite production volumes and creates overall deeper pockets and greater certainty of future investment and production. We believe this is a positive development for ARC and fits with our view of the continuing corporatisation and scaling of agricultural production in Australia and the need for supply chain investment to match this.

Closing

We are confident that we will see value created in our current investment and we are seeking to leverage this into a greater amount of funds under our management and control. It has been a busy year in preparation of this and we believe we are closer than ever to this goal.

I wish to thank the efforts, work and input of my fellow directors and our company secretaries for their contributions and continued quality input to decision making. I recommend the re-election of Darren Anderson to shareholders at today’s meeting.

I wish to also thank our advisers BRH Lawyers, Baron Partners, Boardroom Pty Limited and Merton’s for your help in the successful entitlement offer.

Finally, the Board wishes to thank all our shareholders for your patience and support over the year whilst we continue to progress our efforts to create value.

James A Jackson

Executive Chairman

Brisbane October 12, 2017

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