Saturday, May 17, 2008

Agricultural Investment Schemes

The Malaysian Companies Act offers an interesting alternative for plantation owners to gain access to investment funds. This is an alternative to conventional funding methods such as bank loans or being publicly-listed. This avenue should be of particular interest to plantations that are starting-up or undergoing a major replanting programme.
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The first-ever Agricultural Investment Scheme ("AIS") approved by the Companies Commission of Malaysia ("CCM") is the Country Heights Growers Scheme ("CHGS") promoted by Tan Sri Lee Kim Yew, the creator of the upmarket gated communities of Country Heights in Kajang and Damansara and, the Mines Resort City.
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After extensive research into AIS programmes in Australia, Canada, Scotland and several other countries, I was able to conceptualise and present a concept paper on behalf of CHGS for CCM's consideration and approval.
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CHGS established 40,000 investment units known as Growers Plots. The scheme was launched in March, 2007 and to-date, the takeup rate has been so phenomenal that more than 80% of available Growers Plots have been subscribed for.
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With the success of the pioneering CHGS, plantation owners are now able to consider AIS as a fundraising option.
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AIS gives plantation owners direct access to a ready pool of investors who are interested in a direct investment in the oil palm sector. An investor may invest in shares of a listed plantation company, which offer returns in the form of dividends and, gains (or losses) in the movement of share prices. The risks and returns are obvious to all. AIS, however, offers a steadier, yet attractive, rate of return which should appeal to risk-averse investors.
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AIS is similar to a closed-end fixed yield instrument. This is one of the key features of CHGS. The annual yield payable to the investor is a range of percentages between 6% to 12% of the initial investment sum which is linked to the annual average price of crude palm oil ("CPO") published by the Malaysian Palm Oil Board ("MPOB").
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The yield computation formula is designed to achieve 2 things:-
  • It is easy for the investor to monitor his/her expected returns for the year.
  • It is an objective formula i.e. not dependent on the operational efficiency of the plantation.

The added sweetener is that there is a bonus feature in that additional yields will be paid to the investor based on the actual tonnage of fresh fruit bunches ("FFB") harvested by the plantation.

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AIS is an agricultural investment model that has arrived in Malaysia. It is worthy of consideration by plantation owners seeking access to investment funds for starting-up plantations or replanting programmes. To have a better idea of the AIS-model have a look at CHGS at http://www.chgs.com.my/.

2 comments:

satd said...

bro de minimis

i gave a proposal back in 1997 to one of the state government to ask for a land to undertake a "Pasar Rakyat Cooperative Investment Scheme" where you get your returns not just thru the investment but also thru the ability to buy cheaper produce.....

I think the "ROI" on the state land did not meet the "expectation"....

Agribusiness Investment said...

Managed investment schemes have a dark cloud hanging over them in light of a recent Australian Tax Office move to stop investors claiming a 100 percent deduction in the first year.