RIVCO AUSTRALIA LTD — Net Asset Value 2020

Nov 15, 2020

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ASX CODE (Shares) D20
Shares on Issue (October) 119,597,578
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The primary investment objective of Duxton Water (“the Company”) is to build a portfolio of permanent water entitlements and utilise this portfolio to provide flexible water supply solutions to our Australian farming partners. The Company generates a return by offering Irrigators a range of supply solutions including long-term entitlement leases, forward allocation contracts and spot allocation supply.

NET ASSET VALUE PER SHARE

Duxton Water’s NAV at 31 October 2020 was $1.58 per share.

The after-tax NAV figure takes into account the provision for deferred tax on set-up costs and estimates of net tax provisions that may arise should the entire portfolio be disposed of on the above date. The Company does not expect to trigger these tax provisions through the turnover of these assets and expects to maintain its low entitlement turnover ratio. The NAV excluding tax provisions for unrealised capital gain is $1.74. The Company’s NAV is primarily the fair value of its water asset portfolio at the stated date. The Company uses an independent Fair Market Unit Value for entitlement and allocations provided by Aither Pty Ltd (‘Aither”) to undertake the NAV assessment.

NET ASSET VALUE PER SHARE – SINCE INCEPTION

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1.800
1.750
1.700 March
1.650 Dividend 2.6 cents
1.600 @100% Franked
March
1.550 August Dividend 2.8 cents
1.500 Dividend 2.5 cents @100% Franked
1.4001.4501.350 Dividend 2.4 cents @ 60% FrankedApril @ 75% Franked 10.1 millionApril Dividend 2.7 cents@100% Franked September Dividend 2.9 cents @100% Frank October ed
1.300 November Placement
1.250 Dividend 2.3 cents October
1.200 @ 75% Franked Insto Offer 7.5 million 2.45 million sharesMay
1.150 May & June SPP
1.100 March 16.4 million November
1.050 1.7 million Options Exercised10.8 million
Options Exercised Retail Offer
1.000
Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Nov-20
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PERFORMANCE*

Entitlement Portfolio Value by Region

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14%
14%
4%
<1%
68%
Murray Goulburn
Murrumbidgee Lachlan
Mallee
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Water Portfolio Diversification

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36%
64%
Unleased Leased
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1 Month 3 Months 6 Months 12 Months Inception
0.10% 0.01% -1.78% -3.27% 71.12%
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*These figures are based on NAV movements and include franked dividends for the period.

INVESTMENT UPDATE

As of the 31 October 2020, Duxton Water is invested in approximately $314.14 million of water assets with the remainder of the portfolio held in cash and net current assets. Having taken the opportunity to rebalance a portion of the portfolio recently, the Company is redeploying capital and currently has approximately 665ML ($3.45 million) of water entitlements in its acquisition pipeline at 31 October 2020.

The 20/21 water year has seen reduced trading activity as Irrigators continue to wait for the forecasted wetter period to eventuate. The BOM have been projecting above average rainfalls for large parts of Australia since early April and while system inflows have improved since late June, levels remain below the long-term average.

After a 36-40 month period of below average rainfall and inflows drawing down on the safety net of the water storages within the Murray-Darling Basin (MDB), the 19/20 water year saw significant pressure on

Water Security Breakdown

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1%
19%
80%
HS GS Bore
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DUXTON WATER LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

ASX CODE (Shares) D20 Shares on Issue (October) 119,597,578

available water supply. Prior to entering the 20/21 water year on the 1 July 2020, many Irrigators took advantage of water supply products such as leases and forward allocation contracts to assist them in the management of their water requirement. As Australia approaches the summer period, many Irrigators have or are in the process of finalising their summer cropping programs. With increased water resource available, the annual summer crop will be significantly higher than in the 19/20 water year.

Since May 2020, entitlement prices have been relatively stable and have begun to increase in value again. This follows a 6% retracement in values from their peak in January 2020. For context since January 2014, water entitlement values have increased over 250%, reflective of the long-term structural drivers, rather than the short-term climatic conditions. Irrigators have over the last 10 years significantly enhanced their marginal return per megalitre through both more efficient use of water and conversion to higher value commodities. At the same time, we have seen significate steps taken to return water to the environment with Government purchases of between 20-22% of entitlements that were previously available to the consumptive pool. The combined impact has seen stronger demand for a reducing available water supply and subsequent increased asset prices. Irrigators themselves have been the greatest beneficiaries from this capital appreciation as they collectively own the majority of water entitlement on issue in the market.

October rainfall across the MDB was 26% above the long-term average. MDB Authority active storage levels are higher than they were 12 months ago, however they are still approximately 20% below long-term levels. Storages are now broadly past their accumulation phase and are entering the peak drawdown period for summer water use requirements. The current volume of water available within the Murray-Goulburn system is 64% of storage capacity levels; 21% higher than 12 months ago. Northern basin storage levels are currently 27%, 18% higher than 12 months ago.

Duxton Water continues to support its Irrigator partners as they prepare for peak water requirements through the 20/21 water year. This involves the provision of leases to over 70 family farming and corporate businesses. Through June we saw many Irrigators take advantage of seasonally low allocation pricing and acquire allocation to carry over into the new water year. The Company has further supported Irrigator water risk management through the provision of forward allocation contracts for the 20/21 water year. This provides Irrigators with clear water supply visibility and assists Duxton Water in hedging its allocation risk on unleased assets.

The Company actively manages its allocation holding in order to deliver on demand for spot allocation sales, meet its obligation for the provision of forward allocation sales and deliver on new entitlement lease arrangements. With lower storage levels, visible water supply through the provision of these products are a critical tool that Irrigators use to risk manage their water requirement. In the offering of these products, the Company supports market liquidity and risk management options for our Irrigator partners.

ENTITLEMENT MARKET

Duxton Water is engaged in building a targeted portfolio of water entitlements predominantly across the southern MDB. The Company has invested in both surface and ground water assets. At 31 October 2020, the Company holds approximately 81,232ML of water entitlements across 19 different asset types and classes. Recently the Company took the opportunity to rebalance a portion of the portfolio with the sale of some of its Lachlan General Security Entitlement and Victorian High Reliability Entitlement, and the acquisition of High Security Entitlement in South Australia and alternate regions in Victoria.

Entitlement pricing has remained relatively stable since May 2020 and through October we have seen approximately a 1% increase in value as transactional activity increases and demand build in the permanent entitlement market.

On the 27 June 2020, the Victorian Government released* an update to their previous work on increasing horticulture demand within the southern MDB. This report reaffirmed, with a higher degree of accuracy, the previous findings, that the continued maturity of inelastic horticultural demand in the lower Murray will create a structural shortfall under extreme dry conditions. It remains the Company’s view, that over the next 2-3 years, this demand pressure will become further evident, as a number of new projects come into full production and peak water use.

The Company uses an independent Fair Market Unit Value for allocations and dry entitlements (without allocation) provided by Aither to undertake the NAV assessment.

Notable Entitlement pricing movements through September:

•  2.6% in NSW Below Choke Murray GS (~4.6% of the portfolio)

•  2.5% in NSW Murrumbidgee GS (~5.3% of portfolio)

•  1.5% in SA Murray (~8.7% of portfolio)

•  2.5% in NSW Murrumbidgee HS (~8.5% of portfolio)

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Interstate Water Trading Zones
1 – Greater Goulburn
3 – Lower Goulburn
4a – Part Campaspe
4c – Lower Campaspe
5a – Part Loddon
6 – Vic Murray above Barmah Choke
6b – Lower Broken Creek
7 – Vic Murray from Barmah Choke
to SA Border
10 – NSW Murray above Barmah Choke
11 – NSW Murray below Barmah Choke
12 – South Australia Murray
13 – Murrumbidgee
14 –Lower Darling
15 – Lachlan
16 – Lower Lachlan Groundwater
17 – SA Mallee Groundwater
Murray Darling Basin
River
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DUXTON WATER PORTFOLIO – SMDB EXPOSURE

* https://waterregister.vic.gov.au/images/documents/Water-supply-and-horticulture- . demand-in-the-sMDB-2020-Update.pdf

DUXTON WATER LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

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ASX CODE (Shares) D20
Shares on Issue (October) 119,597,578
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ALLOCATION MARKET

Prices through October have fallen in most regions as above average rainfalls across the MDB which has led to improved water resource availability and issuance of increased allocations to entitlements. Whilst allocation prices have fallen, the Company’s balanced approach to its permanent entitlement portfolio and its exposure to general security entitlements mean that it benefits with the increased allocation availability.

The closure of trading limits from the upper Murray, Goulburn and Murrumbidgee has seen price fragmentation from the lower Murray. Through October lower Murray water prices traded between $180-$200/ML. Prices in the upper Murray, Goulburn and Murrumbidgee at the end of October range from $100-$150/ML.

The current weighted average lease expiry (WALE) remains at 2.4 years. Inclusive of renewal options this pushes the WALE to 4.7 years. The Company continues to work towards its long-term goal of having 70-80% of the portfolio under lease.

DIVIDENDS

The Company paid a fully franked dividend of 2.9 cents on the 30 October 2020, with 222k shares issued under the Dividend Reinvestment Plan at a VWAP of $1.3401/Share.

The Board maintains its commitment to providing shareholders with a bi-annual dividend franked to the maximum extent possible. With the Company’s high percentage of leased entitlements, the Directors reaffirm its target for the next four dividends.

The Company has targeted fully franked payments of:

LEASES

The leased portion of the water entitlement portfolio is ~64%. This represents ~76.28% of the Company’s High Security Entitlement holding.

• 3.0 cents ($0.030) as the final 2020 dividend;

• 3.1 cents ($0.031) as the interim 2021 dividend;

• 3.2 cents ($0.032) as the final 2021 dividend; and

• 3.3 cents ($0.033) as the interim 2022 dividend.

The dividend targets are to be paid in the following reporting periods.

DAILY INFLOWS TO THE MDB

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260,000
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2016-17 2018-19 2019-20 2020-21 Long term average
for comparison to a wet water year
I-Jun I-Jul I-Aug I-Sep I-Oct I-Nov I-Dec I-Jan I-Feb I-Mar I-Apr I-May I-Jun
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Murray System Daily Inflows (excl. Snowy Darling, inter-valley trade and environmental inflows) - 5 day rolling average

DUXTON WATER LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

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ASX CODE (Shares) D20
Shares on Issue (October) 119,597,578
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CHANCE OF ABOVE-AVERAGE RAINFALL

NOVEMBER 2020 – JANUARY 2021

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80
75
70
65
60
55
50
45
40
35
30
25
20
Chance of exceeding median rainfall (%)
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MARKET UPDATE & OUTLOOK

With a La Nina event well established, above average rainfall for large parts of Australia is likely through to the end of January. In recent months the Southern Annular Mode has tended towards more positive values, which also tends to lead to higher rainfall across the MDB. It should be noted however that for the southern parts of Australia and particularly the southern MDB, summer is not a high rainfall period and requires only small increases of received precipitation to breach the average rainfall thresholds. The BOM noted in their recent outlook that: ‘While the outlooks indicate wetter than average conditions, southern parts of Australia are entering into their drier season, so rainfall is not likely to be sufficient to relieve long-term rainfall deficits.

Rainfall for the MDB for October was 26% above the average and has been a welcome change compared to the previous 36-40 months of drier conditions.

In the northern and southern MDB, storages are now at 27% and 64%, compared to 9% and 40% this time last year.

As of the 13 November, Victorian Murray and Goulburn HS entitlement holders received 77% and 93% respectively. NSW Murray and Murrumbidgee HS licences received 95% and 97% respectively on 1 July 2020 with their GS counterparts receiving 36% and 66% to date respectively. SA entitlements had received 100% allocation by 17 August 2020.

VALUATION METHODOLOGY

The Company uses an independent Fair Market Unit Value for entitlement and allocation provided by Aither Pty Ltd (‘Aither”) to undertake the NAV assessment. Aither’s definition of fair market value is consistent with the principles of the Australian Accounting Standards Board (AASB) 13 Fair Value Measurement. It is a non IFRS measure that is not reviewed or audited by the Company’s auditor. Further information can be found at www.duxtonwater.com.au

STORAGE LEVELS IN MAJOR DAMS

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Total Murray Goulburn 42% 64%
Lake Eildon 46% 68%
Menindee Lakes 1% 26%
Lake Victoria 74% 92%
Hume 39% 80%
Dartmouth 55%60%
Total Murrumbidgee 47% 83%
Blowering 56% 84%
Burrinjuck 34% 82%
2020 2019 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
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ACCC

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

The ACCC has spent almost a year reviewing the markets operation and engaging with key stakeholders. The Commission has had an ongoing role in monitoring the Australian Water Markets, having issued reports on its operation since 2012. Whilst the Company will review the in-depth report, on a first read we believe it is a thorough and well-balanced report.

We note the ACCC has stated that:

“Water trading has brought substantial benefits to water users across the Basin. Water markets allow Irrigators to increase their water supplies, to earn income by selling their water rights when they are more valuable to someone else, to expand production, or to release capital for investment in their businesses. The benefit of water markets is demonstrated by the fact that, despite tough and volatile climatic conditions, the value of production from irrigated agriculture in the Southern Basin has trended upwards in real terms since 2010-11.”

“Water investors, meanwhile, can help Irrigators free up capital by buying and leasing out water; they can increase water market liquidity; and they can help Irrigators manage water-supply risks, by providing water products such as leases and forward contracts.”

We note the report has identified opportunities to improve governance, regulatory and operational frameworks that support Australian water markets. We believe that a focus in these areas will benefit all stakeholders and Duxton will actively engage in that process.

The interim report can be found at:

https://www.accc.gov.au/focus-areas/inquiries-ongoing/murray-darlingbasin-water-markets-inquiry/interim-report

This announcement has been authorised for release by the Board of Duxton Water Limited.

DISCLAIMER: This factsheet is prepared by Duxton Capital (Australia) Pty Ltd [ACN: 164 225 647; AFSL no. 450218] (“Duxton Capital (Australia)”). Duxton Capital (Australia) is the Investment Manager of Duxton Water Limited [ACN 611 976 517] (“Duxton Water”). This factsheet has been prepared for the purposes of providing general information only and does not constitute an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any securities in Duxton Water. Information from this factsheet must not be issued in any jurisdiction where prohibited by law and must not be used in any way that would be contrary to local law or regulation. The terms of Duxton Water are set out in the prospectus of Duxton Water (“Prospectus”), and should there be any conflict between the terms set out in this factsheet and the Prospectus, the terms in the Prospectus shall prevail. The forecasts provided are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market 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 shares/ units and their derived income may fall as well as rise. Past performance or any prediction or forecast is not necessarily indicative of future performance. No assurance is given that the investment objective or the targets will be met. This document does not constitute investment, tax, legal or any other form of advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Investors should study all relevant information and consider whether the investment is appropriate for them. If you require investment or financial advice please contact a regulated financial adviser. 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 Duxton Group or its affiliates may hold positions in the securities referred. Where stocks are mentioned, it should not be construed that these are recommendations to buy or sell those stocks. You are not authorized to redistribute this document nor qualified to make any offer, representation or contract on behalf of Duxton Capital (Australia) or its affiliates. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by Duxton Capital (Australia) or its affiliates or any of their directors or employees. The information and opinions contained may also change. Copyright protection exists in this presentation. To the extent permitted by applicable law, none of the Duxton Group, their affiliates, or any officer or employee of the Duxton Group accepts any liability whatsoever for any direct or consequential loss arising from any use of this factsheet or its contents, including for negligence.

DUXTON WATER LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500