at 12:00 pm (ACDT) 27 November 2015 For personal use only · 27/11/2015 · Petrina Coventry . Jim...

CHAIRMAN’S ADDRESS AT THE ANNUAL GENERAL MEETING OF BESTON GLOBAL FOOD COMPANY LIMITED

Held at

Hilton Adelaide, Level 1, 233 Victoria Square,

Adelaide South Australia. at 12:00 pm (ACDT) 27 November 2015

INTRODUCTION

Good morning Ladies and Gentlemen. As it has just turned midday, I declare this 2015 AGM open for business. I am Roger Sexton, the Chairman of the Beston Global Food Company.

On behalf of our Board and our staff, I would like to welcome you to this inaugural Annual General Meeting of the Beston Global Food Company, and thank you for attending.

I ask that you ensure that your mobile telephones are on silent mode or switched off.

With me, sitting at the front of the room, are your Directors:

Stephen Gerlach

Don Taylor

Petrina Coventry

Jim Kouts

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CHAIRMAN’S ADDRESS

As I said in my Chairman’s Statement in the printed Annual Report, this past year was the formative year for the Company wherein we brought all the pieces together to form the listed entity which we have today, and of which you are all now shareholders.

While the genesis of the Company was actually three years ago, when we formed the vision of:

“Taking healthy eating to the world’s growing communities”,

it has taken this length of time to turn the vision into reality and create the integrated closed loop, supply chain that we have today in the Beston Global Food Company.

As you are aware, an essential part of our vision was to build a business model around what I call our “three legged stool”.

That is:

• To have one leg providing security of supply by way of ownership of raw materials (farms, fishing licences, lobster pot licences, water rights and other productive real property).

• To have a second leg focussed on turning these raw materials into clean, green, naturally based food products

and

• To have our third leg focussed on marketing and distributing our products into key global consumer markets with our own employees who are committed 24/7 to our objectives of positioning our food and beverage products in these markets and building market share over the long-term.

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As all of you here today would know only too well, the world of business is changing rapidly. Change is coming faster than ever….. and will be more pervasive than ever.

Businesses need to be constantly adapting to change. And the leaders of businesses need to be constantly learning.

To be successful in business today, you need to look at the world with a microscope in one eye and a telescope in the other. In other words, we need to focus on all the key operational components of the business and ensure they are interacting efficiently, while also focussing on the core goals that we wish to achieve in the future.

These core goals are sometimes referred to in management literature as a Company’s “North Star”…the long term destination that the Company is guiding towards. The business strategy of the Company is the compass that you use to get you to your destination.

As Beston Global Food Company, we have no doubt as to our “North Star” – we have an unswerving commitment and dedication to become one of the best branded food companies in the world.

Our aim is to provide high quality, safe clean (natural and/or organic) differentiated food and beverage products to consumers via a secure supply chain and in the process, provide them with an authentic, genuine healthy food experience... not only in Asia where 51% of the world’s population now live, but also to key markets in the Middle East and Europe.

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Our strategy to achieve this aim is via the three-legged business model which I summarised earlier. Since we started the Company, we have had a great many different opportunities presented to us, both for investment purposes as well as for strategic alliances. But, if these opportunities haven’t fitted our model, or have run the risk of taking us off course from our ultimate destination… our North Star… then we have given them short shrift.

This philosophy of staying totally focussed on where we want to take the Company and sticking to our business model to get us there is the key we believe, to maximising the income and capital returns to our shareholders …and is one of the reasons that we have included a compass in our logo for the Beston Global Food Company.

Achieving all of our objectives was always going to involve a 3 to 5 year journey but I am pleased to be able to report to you today that we have made substantial progress in the short period of three months since we listed on the Australian Securities Exchange.

I will shortly hand over to our CEO, Sean Ebert, to outline some of the achievements which have been made over the past three months and to give you an understanding of the initiatives which are in place to yield revenue and profit growth during the year ahead.

But before I do so, I would like to say thank you to my fellow Directors on the Board of BGFC for all the hard work, dedication and enthusiasm which they displayed during the period when we were bringing our Company to market. As those of you would know who have been through an Initial Public Offering process in other places, it involves an extraordinary commitment of resources with months and months of long hours, and without any certainty along the way of completing the capital raising objectives.

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All of the Directors on the Board of BGFC bought into the vision for the Company very early on, and gave of their time and expertise at all sorts of odd hours whenever called upon.

I thank them for that, and I thank them on behalf of all shareholders for their continuing, and I would say, very passionate commitment since the date of listing in helping BGFC move towards the fulfilment of our objectives.

Finally, let me also say a big than you to all of our staff. Like our Board members, our staff played a critical and integral role in taking BGFC to its public listing debut. As we have effectively been a start-up Company for much of the past three years, BGFC was not in a position to pay market rates to bring on the staff it needed. This is one of the key reasons that the Company was set up with an external management fee structure. Virtually all of the employees in the BGFC have come on board at around a third to half of the salaries that they were earning in their previous roles.

They have done so, because they have wholeheartedly embraced the goals of the Company and the business model – or compass – which we have employed to take us to the fulfilment of those goals. Our employees have bought into our sense of purpose and feel connected to our strategy. They also understand that the over-riding objective as we go on our journey towards our “North Star” is to build shareholder value.

The remuneration arrangements that have been established under our external management structure aligns the interests of our management and staff with our shareholders so that they get rewarded when our shareholders get rewarded. Part of any

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outperformance of our share price above the All Ordinaries index is shared with our staff as way of topping up their salaries to levels closer to market. Moreover, the outperformance rewards are paid in shares, not cash, in order to further align our employees with the interests of our shareholders.

I will now call on our Chief Executive, Sean Ebert to outline some of the progress made by the Company since our listing on August 28th 2015.

Our Chief Finance Officer, Richard Willson will also provide a presentation on how we are tracking before we move onto the formal business of the meeting.

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GENERAL BUSINESS

Now I would like to deal with the formalities which bring us together today:

The purpose of today’s meeting is to deal with the formal business as set out in the Notice of Meeting.

The Company Secretary has advised me that a quorum is present and that 131 proxies representing 111,755,107 Shares or 30.8% of the shares on issue have been received. The proxy votes received for each resolution will be displayed on the screen.

I wish to ask that you state your name for the record when you address the meeting or move or second a resolution.

You have all received the Notice of Meeting detailing the business to be dealt with today. If there are no objections and, in an effort to expedite proceedings, I ask that the Notice of Meeting be taken as read. Thank you.

As each item of business is considered, I will invite comments from the floor. After any discussion, I will be asking for a show of hands to vote on the item. If I consider that the show of hands does not reflect the views of the shareholders entitled to vote, I will ask for a poll on the resolution. So as not to hold up the rest of the meeting, we will conduct the poll at the conclusion of all other business of the meeting.

If you wish to raise a question, please raise the coloured card that you were issued with when you registered today. In the interest of

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giving all shareholders an opportunity to ask questions if you wish, I ask that any questions be kept to no more than 2 or 3 parts.

FINANCIAL STATEMENTS & REPORTS

The first item of business is to receive and consider the Annual Financial Report of the Company for the financial year ended 30 June 2015 together with the Declaration of the Directors, the Director’s Report, the Remuneration Report and the Auditor’s Report.

The Annual Report containing these reports has been on issue for some weeks and I hope everyone has found time to read it. As you know a large part of the document is mandated by Law and by Accounting Standards. However we do try to ensure it is useful as well as compliant. It should be noted that the Financial Statements reflect the period prior to the Company's IPO.

For now, I am happy to take questions on the Financial Statements and Reports.

Are there any questions or comments on the financial report of the Company? Shareholders are also welcome ask questions of the Company’s auditor, Mr Mark Phelps, who is present today.

We will now move to the Resolutions to be considered at this meeting.

RESOLUTIONS

Resolution 1 – Adoption of the Remuneration Report for the year ended 30 June 2015

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To consider, and if thought fit, pass the following resolution as an ordinary resolution:

“That, for the purpose of Section 250R(2) of the Corporations Act, the Company adopt the Remuneration Report for the period ended 30 June 2015 as set out in the Directors’ Report in the 2015 Annual Report.”

I now formally move the motion that Resolution 1 be put to the meeting in the form set out in the Notice of Meeting.

Is there a seconder to the motion?

Thank you Mr/s ______________.

Is there any discussion on this resolution?

I now formally put the resolution to the meeting.

Those in favour? Those against?

I declare the motion carried/not carried.

The next resolution concerns the re-election of me as a Director, I will therefore ask Mr Gerlach to take the Chair for this resolution.

Resolution 2 – Re-election of Dr Roger Sexton as a Director


“That Dr Roger Sexton, having retired by rotation in accordance with clause 59 of the Company’s Constitution and being eligible and having offered himself for re-election, is re-elected as a Director of the Company.”



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Thank you Mr/s ______________.





Congratulations on your re-election Roger, I will now hand you back the Chair.

Resolution 3 – Election of Ms Petrina Coventry as a Director


“That Ms Petrina Coventry, having been appointed a director of the Company on 16 February 2015, will retire at the close of the Meeting in accordance with clause 58 of the Company’s Constitution and being eligible, be elected as a Director of the Company.”



Thank you Mr/s ______________.





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Resolution 4 – Election of Mr Jim Kouts as a Director


“That Mr Jim Kouts, having been appointed a director of the Company on 16 February 2015, will retire at the close of the Meeting in accordance with clause 58 of the Company’s Constitution and being eligible, be elected as a Director of the Company.”



Thank you Mr/s ______________.





Resolution 5 – Election of Mr Donald Taylor as a Director


“That Mr Donald Clarendon Taylor, having been appointed a director of the Company on 28 April 2015, will retire at the close of the Meeting in accordance with clause 58 of the Company’s Constitution and being eligible, be elected as a Director of the Company.”



Thank you Mr/s ______________.

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Resolution 6 – Appointment of Auditor


“That Ernst and Young, having been duly nominated by a shareholder of the Company and having consented in writing to act, be appointed as auditor of the Company.”



Thank you Mr/s ______________.





Resolution 7 – Approval of 10% Placement Facility

To consider, and if thought fit, pass the following resolution as a special resolution:

“That, for the purposes of Listing Rule 7.1A and all other purposes, Shareholders authorise the Company to have the additional capacity to issue Equity Securities comprising up to 10% of the issued capital of

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the Company under Listing Rule 7.1A calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions in the Explanatory Memorandum.”



Thank you Mr/s ______________.





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Closing Remarks

Ladies and Gentlemen, that concludes the business section of this Annual General Meeting.

Before closing the meeting however, I would like to make a few comments about our operating philosophy at BGFC.

A number of people have asked me whether we have been concerned with the fluctuations in the share price of BGFC since the listing 3 months ago, particularly when the listed food sector as a whole has been edging upwards.

I must say that I am personally bemused about why some investors would buy shares on an IPO for a Company like ours, which is a medium to long term growth story, and then immediately want to sell!

That said, the share price is what it is, and is not our daily focus.

Our daily focus at BGFC is on implementing the business strategy which we outlined in our Prospectus and building value for our 2000 or so shareholders.

When my business partner in Beston Pacific, Stephen Gerlach, and I established the Company in 1991, our intention was not to make quick rewards for ourselves.

Rather, our intention was to build companies from the ground up, which could both capitalise on long term economic trends and create

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lasting value for any investors who might participate with us in those companies.

In other words, our intention was to build long term sustainable value in all the various “Beston” companies which we created – and that has certainly been proven to be the case: right through from our initial ASX listed Beston Wine Industry Trust through to our most recent Beston Accommodation Park Trust which has become the largest caravan park company in Australia, trading as Discovery Holiday Parks.

The sustainable value of a listed company such as we have created with Beston Global Food Company, is not the short-term value as reflected by its share price but rather its economic value as reflected in the underlying fundamentals of the business. These are the fundamentals that Warren Buffett refers to as the economic “moat” around a business – the things that build unique intrinsic value or sustainable long term value for shareholders which protect it over time from “copy cats” and competitors.

So how are we doing this within BGFC? How are we putting in place the fundamentals to build sustainable, long term value for our shareholders?

We are doing so in at least four ways:

1. Firstly, we are increasing the productive efficiencies in our farms and in our factories:

Since completing our various acquisitions, we have invested capital into our farms and factories to allow them to be more productive and reduce the cost of our raw material inputs. The

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investments have included the areas of water usage and waste management.

These improvements take time to implement and obviously do not have an instantaneous effect on the bottom line, but will show up in our results over time.

An important point to note in this regard is that our efforts are not simply focussed on making our farms and factories more efficient.

A key part of our focus is on lifting the quality of the products we produce.

Just as the quality of wine is determined by the quality of grapes in the vineyard, so too is the quality of cheese determined by what you do on the dairy farm and the way in which you handle the milk in the factory.

By focussing on production efficiencies and quality at our Beston Pure Dairies factory at Murray Bridge for example, we have been able to move up the value chain and increase our margins, in the same way as has been done at B-d Farm Paris Creek. This has been a driving objective since we acquired and took control of the factory on September 1st this year.

We have no desire to simply be a commodity cheese producer. We have already established significant points of differences with the quality of cheddar cheeses produced at Murray Bridge. We are producing Romano and Pepato cheeses which our buyers in Europe tell us are unique in their flavour and texture and hence do not have any peer competitors.

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As we progress further with the development of our dairy division, we will be focussing more and more on the production of small batch, high end cheeses where we can have a unique position in the market and achieve “price maker” profits which are not dependent on global commodity cheese prices.

I will be saying more about our plans in this area next Friday (December 4th) when the South Australian Minister of Agriculture, Hon Leon Bignell, officially re-opens our Murray Bridge Beston Pure Dairies factory.

2. Secondly, we are building a value proposition for our customers When we established BGFC, we did so with the clear intention that we would not simply be another Australian food company seeking to sell products into Asia. We recognised that real success in business is about serving others – and providing customers with what they really want.

In Asia, we recognised that consumers want high quality food and beverage products with ingredient integrity and also want assurance that the product they are buying is safe to eat.

The marketing strategies we are therefore employing in Asia are based around fulfilling these specific consumer wants. The strategies are aimed at employing long term brand loyalty, through the online e-commerce techniques we outlined earlier in this meeting, and through the unique BRANDLOK and OZIRIS technologies we have developed to distinguish the quality of our packaged products and provide the assurance about food safety that consumers are increasingly looking for when they go grocery shopping.

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3. Thirdly, we have aligned, and we are continuing to align, the interest of our employees with the interests of our shareholders

I explained earlier in the meeting how the remuneration arrangements of our employees have been set up on the basis of below market salaries but with rewards via a performance bonus arrangement which only cuts in when our shareholders get superior income and capital and capital growth returns on their investment (as measured by Total Shareholder Returns versus the index).

But the alignment doesn’t stop there. We have established a culture within BGFC whereby we encourage all of our employees to look at our business through the eyes of a shareholder – which I am pleased to say that each of them are.

Those of you who have been to our offices will know that we do not have flashy accommodation. It is basic, but functional … and it is cheap!

Each of our businesses is overseen by a small, lean, focussed team with clearly defined targets for performance and productivity improvements. We believe that this approach is the best way to get things accomplished. There is no doubt that necessity is the mother of invention and that having scarce resources is a good discipline to improve performance. The culture ingrained into our employees is to act as a lean and humble small company in their day to day activities but to think like a big company when dealing with customers in our target markets.

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Another important point, in this context of shareholder value, also, is that all of the intrinsic value which we built into BGFC by acquiring many of our assets at prices less than their market value (such as with United Diary Power), was passed on to our shareholders at the time of listing. If we were to take the previous sale prices of each of the assets and divide by the number of shares on issue, we derive a market value NTA per share of close to 70 cents per share versus the statutory NTA as in our accounts as at the date of listing of 33 cents per share. We are not suggesting that these are the prices we would receive if we put any of these assets on the market for sale today, (nor are we proposing to revalue any of our assets at this point), but based on the historical sales data, we consider that we bought extremely well when we were putting together the portfolio of assets that comprises BGFC today. There is an old saying in the property industry that “you make your profit when you buy”, and we believe that this applies equally in business. In my 40 or so years of experience in business, I have seen many examples of where the founders of a company have bought assets cheaply, then captured the capital gain or economic rent for themselves before securitising the assets via an IPO. We have not done this. We have passed on to our shareholders at the IPO, all of the upside on the assets we have bought, so

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that the founders and management are totally aligned with our shareholders at all levels.

4. Fourthly, we are building each of our operating divisions (or “industry verticals” as we call them) with the specific objective of spinning them off at some point down the track

This objective was again, explained in the Prospectus and is a fundamental part of our overall Strategy. That is, the objective is to bulk up our various operating divisions by acquiring additional businesses and/or growing them organically to achieve critical mass and then spin them off in their own right. This may be achieved by floating the companies in the industry verticals as separate IPO’s or via trade sales. We believe that we have assembled a portfolio of assets and companies that is unique in the context of the Australian agri-business sector and that each of our industry verticals have the potential to be world class, global companies when they reach sufficient size. We have a significant opportunity to make 2 + 2 = 5 for our shareholders as the sum of the parts becomes worth more than the whole.

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What we are doing in effect, with the Beston Global Food Company, we believe, is achieving a strategic transformation of the agri-business sector in Australia. This is not something that is new to us. We have done it before in other industries, as I touched on earlier – such as in the wine industry with the Beston Wine Industry Trust which we listed on the ASX in 1999 (and which was subsequently acquired by Challenger Financial Group and then Li Kai Shing) and our caravan park business the Beston Accommodation Parks Trust, which trades as Discovery Holiday Parks (and was subsequently acquired by Macquarie Bank and then SunSuper). Beston Pacific has been a first mover in accumulating, corporatising and securitising assets in these, and other, industries over the past 20 years. Indeed, as one commentator said to me recently, our track record in these areas has shown that we have been very successful in recognising the opportunity to put “patterns of order into industries characterised by fragmented chaos”. I hadn’t thought about it quite like this before, but the comments certainly encapsulate our modus operandi in developing some very successful companies over the past 20 years. This is what we are doing in the food industry in Australia with the business model and strategy we have put together in the Beston Global Food Company.

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Two weeks ago, I was invited to attend the Fortune Global Forum in San Francisco which focussed on the challenges of innovation, disruption and transformation facing businesses over the next 5 years. A major part of the Forum was devoted to the topic of Food – the reason being that consumers around the world are changing their buying habits when it comes to the type of food they purchase, so much so that the major packaged food companies lost USD 4 billion in market share in 2014. On top of that, currently 1 in 9 people on the earth don’t have enough food to eat to lead an active, healthy life… and are forced to spend an ever increasing proportion of their household expenditures on food. And, it is only going to get worse. By 2050, it is estimated that the world will need to double its food production in order to feed the additional 3 billion people who will live on our earth.

The challenge is to achieve this outcome with a shrinking footprint due to less arable land being available (with increased urbanisation) and much less water to go around.

The planet is simply not big enough to produce the increased food requirements without change in the way in which we do things.

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We will need more and better quality food in the future. We know from consumer surveys taken around the world, also that, consumers will pay more for food that is known to be safe to eat.

As you will have seen from the presentations today, we are very pleased to say that our Beston Global Food Company is leading the way in a number of these critical areas. It is an exciting journey for BGFC and we are delighted that you have chosen to be a part of it by becoming an investor in our Company.

Before closing, I would like to record a final “thank you”. I would like to pay tribute to the Founders and Owners of our investee companies – B.d Paris Creek, Ferguson Seafood, Scorpio Meats and Neptune Bio-Innovations. In particular, I would like to thank:

• Ulli and Helmut Spranz (B-d Paris Creek) • Deb and Andrew Ferguson (Ferguson Australia) • Ian and Thomas Patterson (Scorpio Meats)

and • VJ and Ganthi Rajendram (Neptune Bio Innovations)

All of these investee companies were family companies before we came along and invited them to join us on our journey with the Beston Global Food Company.

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All of these owners have built their companies from very small beginnings – and along the way, I know that they rejected numerous overtures from acquisitive companies and from various joint venture suitors and other parties. They have all demonstrated their faith and trust in our team at BGFC – and our vision – with their decisions to allow us to invest in their companies and engage with our corporate objectives. Thank you all for your trust. We are delighted that you have seen fit to be a part of the Beston Global Food Company and we look forward to working with you to make your businesses even more successful- and bigger – over the coming years. I would like to invite you now to join with our Board members and staff in sampling some of our products in the BGFC portfolio together with some of the wines produced by one of our other Beston family companies. We have cheese, lobster, oysters and other premium delicacies at the various tables at the back of the room. So please enjoy and take the opportunity to get to know our staff and the co-owners/operators of our investee companies. Ladies and Gentlemen, I thank you all for your attendance. I now close the meeting.

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at 12:00 pm (ACDT) 27 November 2015 For personal use only · 27/11/2015 · Petrina Coventry . Jim...

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Transcript of at 12:00 pm (ACDT) 27 November 2015 For personal use only · 27/11/2015 · Petrina Coventry . Jim...