RIVCO AUSTRALIA LTD — Interim / Quarterly Report 2020

Sep 1, 2020

==> picture [132 x 149] intentionally omitted <==

DUXTONWATER LTD (ASX:D2O)

2 September 2020

Half Year Report

1

DISCLAIMER

This presentation is prepared by Duxton Capital (Australia) Pty Ltd [ACN: 164 225 647; AFSL no. 450218] (“DC Australia”) and is only made available to “professional investors”, “sophisticated investors” and other persons not requiring a regulated disclosure document pursuant to Chapter 6D of the Corporations Act 2001 (Cth) (“Act”) (“Permitted Investors”). DC Australia is the Investment Manager of Duxton Water Limited [ACN 611 976 517] (“Duxton Water or the Company”). The content of this presentation is intended only as a source of general information for Permitted Investors and is not the basis for any contract to deal in, or an offer of, any security. Information from this presentation must not be issued in any jurisdiction where prohibited by law and must not be used in any way that would be contrary to Australian law or regulation. Specifically, this presentation shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. Particularly, this presentation and the information contained in it does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to any US person.

market, any commodity or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested. The value of interests in the securities discussed in this presentation and any derived income may fall as well as rise. Past performance or any prediction or forecast is not necessarily indicative of future performance. Returns are not guaranteed.

The securities of Duxton Water referred to in this presentation are not obligations of, deposits in, or guaranteed by DC Australia, Duxton Water or any of their respective affiliates.

All third party data (such as MSCI, S&P and Bloomberg) are copyrighted by and proprietary to the provider. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by DC Australia, Duxton Water or their respective affiliates or any of their respective directors or employees. The information and opinions contained in this presentation may also change.

information, opinions and conclusions contained in this presentation (including by omission). No Limited Party represents or warrants that this presentation is complete or that it contains all information about the Fund that a prospective investor or purchaser may require in evaluating a possible investment in the Fund. To the maximum extent permitted by law, each Limited Party expressly disclaims any and all liability, including, without limitation, any or implied, contained in, arising out of or derived from, or for omissions from, this presentation including, without limitation, any financial information, any estimates or projections and any other financial information derived therefrom. Readers agree, to the maximum extent permitted by law, that they will not seek or sue or hold the Limited Parties liable, and will not take any action they may otherwise have against each Limited Party in any respect in connection with this presentation or its contents and releases each Limited Party from such claims. Furthermore, without limitation to the foregoing, neither the receipt of this presentation by any reader nor any other matter shall be deemed to created or give rise to a fiduciary, agency or similar relationship between each Limited Party and any reader.

FINANCIAL DATA

This presentation is not intended to contain financial product advice as defined in the Act. This presentation is a statement of facts and is for general information only. This presentation is not intended to influence any person in making a decision in relation to investing in Duxton Water. This presentation does not take into account the investment objectives, financial situation or needs of any particular investors. No person should base their decision to invest in Duxton Water solely on the information in this presentation. Permitted Investors should consider the suitability of an investment in Duxton Water in view of their financial position and investment objectives and needs and should consult their professional advisors accordingly.

No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in this presentation. The forecasts and/or sensitivity analyses provided are based upon DC Australia’s opinion of the market as at the date of this presentation and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond

Copyright protection exists in this presentation. The contents of this presentation are strictly confidential and it may not be disclosed, reproduced, distributed or published by any person for any purpose without DC Australia’s written consent. To the extent permitted by applicable law, none of DC Australia or Duxton Water, their respective affiliates, or any officer or employee of DC Australia or Duxton Water accepts any liability whatsoever for any direct or consequential loss arising from any use of this presentation or its contents, including for negligence.

ADVISORS

No member of DC Australia or Duxton Water, its respective related bodies corporate, shareholders or affiliates, nor any of their respective officers, directors, employees, affiliates, partners, representatives, agents or advisers (including Bell Potter Limited and any of their respective affiliates, related bodies corporate (as that term is defined in the Corporations Act 2001 (Cth) or their respective directors, employees officers and representatives) (each a “Limited Party”) guarantees or makes any representations or warranties, express or implied, as to or takes responsibility for, the accuracy, reliability, completeness or fairness of the

All references in this presentation to “$” are to Australian currency, unless otherwise stated. A number or figures, amounts, percentages, estimates, calculations of value and fractions in this presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in the presentation.

ACCEPTANCE

The information in this presentation remains subject to change without notice. No responsibility or liability is assumed by any member of DC Australia, Duxton Water or its respective advisers for updating any information in this presentation or to inform any receipt of any new or more accurate information or any errors or mis-descriptions of which any member of DC Australia, Duxton Water or its respective advisers may become aware. By accepting, accessing or reviewing this document you acknowledge and agree to the terms set out above.

==> picture [67 x 82] intentionally omitted <==

2

~~Half Year Report Presentation~~

HALF YEAR

BOARD MEMBER

AGENDA

• Duxton Water Ltd overview

• Half year financial results

• Water as an investment

• Current conditions

• ACCC

• Shareholder questions

• Introduction to the Australian water market

==> picture [95 x 95] intentionally omitted <==

==> picture [112 x 44] intentionally omitted <==

----- Start of picture text -----

ED PETER
Chairman of the
Board
----- End of picture text -----

INVESTMENT MANAGEMENT

==> picture [97 x 97] intentionally omitted <==

ALISTER WALSH

==> picture [130 x 26] intentionally omitted <==

----- Start of picture text -----

Director of Water Assets
& Portfolio Manager
----- End of picture text -----

3

~~Duxton Water Limited~~

~~I~~ NVESTMENT THESIS

• The primary investment objective of Duxton Water is to build a portfolio of permanent water entitlements and utilise this portfolio to provide flexible water supply solutions to our Australian farming partners. 100% of Duxton Water’s portfolio is active in the supply of these products.

• The Company generates a return by offering irrigators a range of water solutions, including long-term entitlement leases, forward allocation contracts and spot allocation sales.

• Duxton supports a number of agricultural industries including viticulture, dairy, broadacre, almonds, citrus, olives and dried fruits. Our water is used in these industries to produce quality Australian food and fibre to be consumed in Australia and exported around the world.

==> picture [441 x 397] intentionally omitted <==

4

~~Duxton Water’s performance~~

~~F~~ INANCIAL RESULTS

==> picture [178 x 482] intentionally omitted <==

HALF YEAR OVERVIEW

• The underlying performance of the Duxton Water portfolio remains durable and robust and has been built to deliver consistent returns over the climatic cycle

• The portfolio delivered an operational gross profit of $1.83 million

• Continued growth of the permanent portfolio, acquiring a further 754ML and selling 59ML

• Increased the annualised leasing revenue from $9.1m to $9.5m and in further discussion to continue to grow the visible income stream from leases

• Paid a final 2019 fully franked dividend of $0.028, marking the sixth consecutive and incrementally increased dividend since listing in late 2017 for a total of 15.3c, either partly of fully franked

• Provided Shareholders with targets for the next 4 dividend payments, and are pleased to provide the fifth dividend target within this report

5

~~Duxton Water’s performance~~

~~F~~ INANCIAL RESULTS

30 June 2020

NET ASSET VALUE (NAV) PERFORMANCE

• In accordance with the Australian Accounting Standards, the water portfolio must be held at cost less accumulated impairment.

• Unable to recognise $76.40m in capital gain

• Since the beginning of 2020, the permanent entitlement market has fallen by ~6%. For context, since January 2014 water entitlement values have increased 254% which is reflective of long-term structural drivers.

• When the carrying value of these water assets revert back toward cost, the impairment is reversed, positively impacting the Statement of Profit or Loss and statutory retained earnings of the Company.

2.5

==> picture [465 x 165] intentionally omitted <==

----- Start of picture text -----

2
1.5
1
0.5
0
Dec 17 Dec 18 Dec 19 Jun 20
Statutory Year End NAV Tax adjusted NAV Non-Tax adjusted NAV
AUD ($)
----- End of picture text -----

6

~~Duxton Water’s performance~~

~~F~~ INANCIAL RESULTS

OPERATIONAL GROSS PROFIT

==> picture [512 x 314] intentionally omitted <==

----- Start of picture text -----

16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
2017 2018 2019 2020
1st Half 2nd Half
AUD ($,000)
----- End of picture text -----

Historically the Company generates a stronger profit in the second half of the financial year due to overlap of the Company’s financial year (Jan-Dec) and the water year (JulJun).

• New leases generally commence from 1 July

• New season allocation announcements against unleased entitlements largely occur in the second half of a year

• Capital deployment in the second half of 2018 & 2019 delivering returns, acquisitions of entitlement with allocation

• Specific considerations for 2020;

• the recognition of negotiated forward contracts falling in the second half

• Structural disruptions through March-May to the allocation market

7

~~Duxton Water’s performance~~

~~F~~ INANCIAL RESULTS

DIVIDENDS

• The Company is committed to providing Shareholders with a bi-annual dividend.

• During the half-year ended 30 June 2020, Duxton Water paid a 2.8 cent (fully franked) dividend on 30 March 2020.

• The increased lease revenue provides great visibility to the Company’s future revenue generating capabilities and a level of hedging against future water pricing fluctuations.

• The Company is pleased to provide the next five bi-annual dividend targets, providing Shareholders with long term viability to cash returns.

==> picture [960 x 195] intentionally omitted <==

8

~~Aither entitlement index~~

~~W~~ ATER INVESTMENT

ENTITLEMENT PRICING- AITHER ENTITLEMENT INDEX

==> picture [572 x 325] intentionally omitted <==

----- Start of picture text -----

350
300
250
200
150
100
50
0
Jul/2007 Jul/2008 Jul/2009 Jul/2010 Jul/2011 Jul/2012 Jul/2013 Jul/2014 Jul/2015 Jul/2016 Jul/2017 Jul/2018 Jul/2019 Jul/2020
Aither ASX 200 Dow Jones Ausbond
----- End of picture text -----

• This graph shows the Aither Entitlement Index over the period from July 2007 to July 2020.

• The Aither index tracks the change in weighted capital value of a group of major water entitlement types across the southern Murray-Darling Basin.

• The graph indicates the movement in values since 2014, driven by major increases in permanent crop plantings.

• Entitlement values have seen a Compound Annual Growth Rate (CAGR) of 17.72% over the past five years. Since the inception of the Index an 8.48% CAGR has been observed.

9

Source: Aither Pty Ltd

~~Water returns have low correlation to traditional asset classes~~

~~W~~ ATER INVESTMENT

CORRELATION

			ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)	ASX 200 (AUD) FTSE 100 (GBP) DAX (EURO) Hang Seng (HKD) Dow Jones index USD) BACMO (AUD)
		Aus. Water Entitlements (AUD)	ASX 200 (AUD)	FTSE 100 (GBP)	DAX (EURO)	Hang Seng (HKD)	Dow Jones index USD)	BACMO (AUD)
	Aust Water Entitlement(AUD)	1.00	-0.08	-0.01	-0.10	-0.07	-0.09	0.16
	ASX 200 (AUD)	-0.08	1.00	0.75	0.77	0.72	0.62	-0.19
	FTSE 100 (GBP)	-0.01	0.75	1.00	0.79	0.79	0.65	-0.30
	DAX (EURO)	-0.10	0.77	0.79	1.00	0.79	0.67	-0.24
	Hang Seng (HKD)	-0.07	0.72	0.79	0.79	1.00	0.65	-0.28
	Dow Jones index (USD)	-0.09	0.62	0.65	0.67	0.65	1.00	-0.36
	BACMO (AUD)	0.16	-0.19	-0.30	-0.24	-0.28	-0.36	1.00

• This table shows the correlation of Australian water entitlement returns with major equities and bond indices between 2007 and July 2020.

• Australian water returns display negative correlation with the equity indices and a low correlation with bonds.

• Investment in water entitlements with a portfolio provides diversification benefits.

Confidential and private use only. Not for distribution .

10

All dollar values are in AUD unless otherwisespecifically stated. Source: Bloomberg

~~Sources of returns~~

~~W~~ ATER INVESTMENT

Payments

Balanced Entitlement Portfolio

Delivering consistent returns over the climatic cycle

Income Streams

Passive income is generated through leases:

• Stable Income

==> picture [61 x 30] intentionally omitted <==

----- Start of picture text -----

36%
64%
----- End of picture text -----

---

• High quality and diversified lessees

• Lease payments in advance

• Asset backed

Active Income is generated through allocations:

• Flexible to suit seasonal conditions

• Hedged through forward contracts

11

* targeted dividends

~~Climatic outlook and forecasting~~

~~C~~ URRENT CONDITIONS

WINTER RAINFALL OUTLOOK

BOM rainfall forecast as at 7 May 2020

==> picture [315 x 212] intentionally omitted <==

• In May, the BOM forecast expected a high chance of exceeding median rainfall over the winter period.

• Rainfall for the season was below average for much of southern Australia with rainfall on the east coast largely falling outside of the MDB.

• It was Australia’s sixth warmest winter on record.

Winter rainfall deciles

==> picture [315 x 218] intentionally omitted <==

Source: Bureau of Meteorology http://www.bom.gov.au/climate/current/statement_archives.shtml http://www.bom.gov.au/jsp/sco/archive/index.jsp?map=rain

12

~~MDB inflows and storage conditions~~

~~C~~ URRENT CONDITIONS

MURRAY SYSTEM DAILY INFLOWS

(Excluding Snowy Darling, Inter-valley trade and environmental inflows)

==> picture [516 x 383] intentionally omitted <==

• 2019 saw the Murray Darling Basin experience the driest period on record.

• The Murray System inflows continue to track well below the long-term averages, with the BoM predicting less than a 60% chance of the region exceeding median rainfall in the next 3 months.

• It is expected that the consumptive

• water supply may reach levels not seen since the millennium drought.

13

Source: Murray Darling Basin Authority

~~MDB inflows and storage conditions~~

~~C~~ URRENT CONDITIONS

MDBA ACTIVE STORAGE- JUNE 2000 TO PRESENT

==> picture [559 x 336] intentionally omitted <==

----- Start of picture text -----

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
Maximum Storage Long-term Average Active Storage Current Level
End of Month Storage (GL)
Jul 2000 Jul 2001 Jul 2002 Jul 2003 Jul 2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009 Jul 2010 Jul 2011 Jul 2012 Jul 2013 Jul 2014 Jul 2015 Jul 2016 Jul 2017 Jul 2018 Jul 2019 Jul 2020
----- End of picture text -----

• The MDBA total active storage at 29 July 2020 was at 47% capacity with recent rains only providing a small increase in storage volume. This is compared to 43% capacity at this time last year.

• The current storage levels are well below the average levels represented by the black line.

• Recent BOM rainfalls are projecting above average rainfall across much of Australia however climate drivers are yet to lock into the wetter part of their cycle.

14

Source: Murray Darling Basin Authority

~~Duxton Water’s performance~~

~~C~~ URRENT CONDITIONS

VOLUME OF ALLOCATED WATER AND PRICING

==> picture [528 x 312] intentionally omitted <==

==> picture [372 x 14] intentionally omitted <==

The water market and allocation price is solely a reflection of resource availability collectively to entitlement holders and the structural industry demand from water users.

The last 10 years this has been impacted by the high marginal return per megalitre that irrigators have been able to generate and lower levels of allocation available to the consumptive pool due to government buybacks of entitlement for environmental purposes

15

~~ACCC INQUIRY INTO MURRAY-DARLING BASIN WATER MARKETS~~

~~A~~ CCC ENQUIRY

ACCC INQUIRY

On 30 July 2020, the ACCC released their interim report into the Southern Murray Darling Basin Water Market.

The Directors of Duxton Water believe it is a thorough and well-balanced report that identified opportunities to improve governance, regulatory and operational frameworks that support Australian water markets.

The report also stated, “water trading has brought substantial benefits to water users across the basin” and that returning to a system where water was tied to land, “would be to the detriment of the Australian economy and would significantly diminish the value of water entitlements.”.

Duxton Water will continue to be an active participant in the ACCC’s review. The final report is due to be released in November 2020.

Public forums held across Australia Release of Interim Report Final Report released Public submissions Public comments due August 28 Request for stakeholder information and data

16

1 ACCC, 2020, Murray-Darling Basin water markets inquiry interim report

SHAREHOLDER QUESTIONS

17

~~What is the Australian water market?~~

~~A~~ USTRALIAN WATER MARKET

Southern Murray Darling Basin

• The Australian water market is spread across contained or interconnected river and ground water systems.

• Australia’s most active water market is the southern Murray Darling Basin (sMDB) where 80% of trade occurs.

• The entitlements in the sMDB are valued at ~$27bn. In the 2018/2019 water year, the market turnover in entitlements and allocation was ~$1.5bn. 1

• The sMDB is considered the food bowl of Australia, diversified across permanent and annual crops and a major contributor to Australia’s agricultural industry.

==> picture [441 x 397] intentionally omitted <==

1 [Aither Pty Ltd, 2019 + estimateof internal NSW Irrigation Company turnover.]

18

~~Water market mechanics~~

~~A~~ USTRALIAN WATER MARKET

Water Entitlements

• Water entitlements are perpetual rights to an annual share of water within a system.

• There are more than 150 different types of entitlements in the basin, with 30-40 entitlements making up the vast majority of volume traded.

Zones

• Water entitlements are defined by zones – which are classified into river systems or ground water sources.

Security

• Throughout a season, the Government distributes allocation against entitlements. The approved allocation is handed down based on entitlement security: firstly to the high security entitlements and then to general security.

• High security - receives an allocation in most years, wet or dry.

• General security - typically, only receives allocation in medium to wet seasons.

==> picture [448 x 192] intentionally omitted <==

• High security entitlements trade at a higher value to general security entitlements because of their capability to receive an allocation in most years.

19

~~Drivers of Water price increases~~

~~A~~ USTRALIAN WATER MARKET

A Growing Demand for water caused by factors such as:

• Demand from farmers and institutional investors pursuing higher value permanent crop strategies that require substantially more water.

• The maturity of the Australian water market has led to the development of more sophisticated water supply products (such as long-term leases), which have delivered farmers with a capital light approach of risk managing this key input to their business.

A Constrained Supply of water due to factors such as:

• Water entitlements are s a regulated and limited resource (cap and trade system).

• Addressing the imbalance between consumptive and environmental requirement through the implementation of voluntary water buyback & water efficiency programs. Through combined State and Federal holdings approximately 30% of the consumptive pool has been acquired for environmental purpose, 20-22% over the last 10 years.

• Variability of climate and seasonal conditions effect the supply available to the consumptive pool.

20

~~Increased demand from permanent horticulture~~

~~S~~ TRONG UNDERLYING TRENDS

ALMOND PLANTING AND WATER DEMAND

==> picture [549 x 345] intentionally omitted <==

----- Start of picture text -----

70,000 900,000
800,000
60,000
700,000
50,000
600,000
40,000
500,000
400,000
30,000
300,000
20,000
200,000
10,000
100,000
- -
Bearing Non Bearing New Plantings Water requirement
Almond Plantings (ha)
Water Requirement (ML)
----- End of picture text -----

• There are 14.9x more mature almond orchards since 2000, with over 15,000ha planted between 2016 and 2018 alone.

• At planting stage, trees demand 3ML/ha, and build up to 14ML/ha at maturity (6+ years).

• When the trees are at full maturity, this equates to a total industry demand of ~800GL of water to sustain production, assuming no further plantings.

• This represents over a third of High Security entitlements available to Irrigators. This percentage could be significantly higher depending on annual allocation volumes.

*Based on full maturity of Almond Board of Australia expectations

21

http://www.theland.com.au/story/5226905/favourable-projections-for-australian-cotton/?cs=4936 Source: Australian Almonds, Orchard Size Statistics

~~Constrained permanent water supply~~

~~S~~ TRONG UNDERLYING TRENDS

SMDB ENTITLEMENTS ON ISSUE FOR CONSUMPTIVE USE

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

==> picture [7 x 4] intentionally omitted <==

----- Start of picture text -----

-
----- End of picture text -----

==> picture [478 x 329] intentionally omitted <==

• This reduction of consumptive water has been a key driver to the price of allocation.

• This is because there are significantly less high security entitlements available, which are key to long-term water security particularly for permanent plantings.

==> picture [494 x 26] intentionally omitted <==

----- Start of picture text -----

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Ent on Issue HSHigh Security LSGeneral Security
----- End of picture text -----

22

~~Horticulture planting and water demand~~

~~S~~ TRONG UNDERLYING TRENDS

WATER AVAILABILITY & HORTICULTURE DEMAND IN THE LOWER MURRAY REGION

• It is estimated that existing permanent horticulture in the Lower Murray will demand ~1,250 GL of irrigation water per annum at full maturity.

• In the Lower Murray, during an average to dry year the water demand from existing horticulture may only be 100-250 GL less than the total water volume available for consumptive use.

• The analysis suggests that under an extremely dry scenario, the water supply within the Lower Murray may only meet 40% of existing permanent horticulture water demand (at full maturity).

• Supply shortfall will need to be met through carryover

• from wetter years and the trade of water from other valleys.

• Upward pressure is placed on allocation prices as demand is increased and supply declines.

Source: State of Victoria Department of Environment, Land, Water and Planning, 2020,

23

KEY CONTACTS

==> picture [650 x 404] intentionally omitted <==

Alister Walsh Duxton Capital (Australia) Director of Water Assets alister.walsh@duxtonam.com +61 427 282 250 +61 8 8130 9520 Bridget Johnson Duxton Capital (Australia) Business Development Bridget.johnson@duxtonam.com +61 475 045 434 +61 8 8130 9500

Tim Young Duxton Capital (Australia) Business Development tim.young@duxtonam.com +61 400 523 188 +61 8 8130 9500

24