EFTA Document EFTA01776030

From: David Stern < Sent: Wednesday, September 7, 2011 9:33 PM To: Jeffrey Epstein Do =ou think we can set something up to buy and lease farmland in =ussia? We have the best access, control and security as well as =eam/resources locally through my girl's family =perations. South of Russia has the best soil in the world ="black earth") As global stock =arkets fluctuate wildly, private equity funds and other large =nstitutions are increasingly looking to alternative investments to =rovide balance and stability to their portfolios. Given the rapid run-up =n agricultural commodities and food prices recently, farmland =nvestments are becoming an increasingly attractive asset =lass, writes Josh Cohn, a partner at alternative investment =roup GreenWorld BVI. It is also an ideal asset class for =rivate equity firms with long time horizons, as farmland is inherently =lliquid and usually requires at least a five to ten-year minimum =olding period to be worth the investment. In the UK for example, =ver the last ten years, agricultural land has appreciated roughly 13 =er cent per year in the according to Investment Property Databank =IPD). The US and other Western countries have seen similar =armland investment returns. Farmland prices have therefore =kyrocketed, reaching as high as E17,300 (approximately $30,000) per =ectare in the northwest of England to take just one example. As = result, investors are increasingly turning their attention to areas of =he world where farmland prices are starting from a much lower base, =hereby providing much greater upside potential. One area where =his has been particularly prevalent is Africa, where hedge funds and =ther large institutions have been making large agricultural farmland =nvestments. Hedge funds and private equity funds alone have =urchased 148 million acres of farmland in just the last three =ears. Given the long history of colonial exploitation in Africa, =here has been increasing resistance to what is perceived by many =estern Non-Governmental Organisations as well as Africans as a "foreign=land grab." Whilst some of these feelings may be based on old =tereotypes rather than current conditions, there is no question that =ome abuses have occurred. In an article in Businessweek, the =uthors noted one example of a large US agribusiness firm that invested =n Kenya. According to many local Kenyans, hundreds of people have =een displaced from ancestral farming lands, and promised investments in =ealth clinics and hiring of local staff have not =aterialized. What is undoubtedly true is that frequently large =nstitutional investors make deals directly with the central governments =f African countries. Given the amount of corruption and generally =oor governance that still exists in Africa, the investment dollars =requently disappear into the pockets of corrupt local officials whilst =ocal farmers are forcibly removed from their homes and lands. By =he same token, it is far from true that all foreign investments in =frican farmland are predatory and exploitive. Global consultancy =cKinsey recently produced a report on the future of Africa which noted =hat the continent had over 25 per cent of the globe's arable land yet =roduced only ten per cent of agricultural output. McKinsey =ecommended that up to $50bn/year of African agricultural farmland =nvestment would be needed to bring the sector up to global =tandards. EFTA_R1_00090438 EFTA01776030 Given the need for investment in African agriculture, =here is no reason that foreign farmland investment on the continent =annot be structured as a win-win for both private equity investors and =he host country populations. It is actually a disservice =o those concerned with food security in Africa to simply paint all =armland investment on the continent as inherently bad. With the =ight guidelines and intentions, private equity farmland investments in =frica can be both ethical and profitable. In addition, as with many major trends in =he world today, a large reason behind the rapid run-up in food prices =s China's development. As investors we always want to be on the =orrect side of global macro trends, and whatever China needs or is =uying lots of, we want to own as investments. The question =s what are the best ways for making money from the agricultural sector? =ne way is to invest directly into agriculture stocks such as farm =quipment maker John Deere (DE), global seed giant Monsanto (MON) or =ertilizer company Potash Corp of Saskatchewan (POT). Another =ethod is to invest in agricultural futures through Exchange Traded =unds (ETFs) such as AIGA on the London Stock Exchange or DBC in the US =hich tracks an entire basket of agricultural commodities including =orn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs. These =ommodities ETFs try to track the spot price of the various commodities =hey include. The advantage of these stocks or ETFs is that they =re easily tradable by anyone who has an online brokerage account. The =isadvantage, however, is that they are still financial instruments, and =s such can fluctuate widely in price. One option most individual =nvestors tend to overlook is direct investment in farmland. In =any ways, a farmland investment is more secure, stable and tangible =hen putting money into stocks. Farmland allows investors to still =enefit from the global trends in agriculture we have discussed, whilst =roviding much greater stability then agriculture stocks or commodities =hich can fluctuate wildly. In the last 20 =ears farmland in the United States has never had a down year, as this =able from the National Council of Real Estate Investment Fiduciaries =NCREIF) in the US demonstrates. Not surprisingly, =any large institutional investors have been investing heavily in =armland the last several years. For example TIAA-CREF, one of the =argest pension funds in the world, has recently made a large move into =armland investing. Prices for farmland in the West — =articularly in Europe - have already moved up considerably, reaching as =igh E17,300 per hectare in the northwest of England to take just one =xample. Whilst there are considerable advantages in terms of =olitical stability to farmland investment in Europe or the US, the real =pportunities for spectacular gains lie in emerging markets, especially =n Africa, which holds 60% of the world's remaining arable land =uitable for farming. Whilst farmland investment has been =ominated by larger institutions historically, in just the last two =ears a number of options have been developed for individuals. The =ost common is to pool a number of individual investors' capital =ogether to purchase a large parcel of land, and then divide it into =ndividual freehold parcels. Farmland investments for individuals =enerally pay a regular yearly dividend from the sale of crops, and also =rovide the opportunity for long-term capital gains as farmland =ontinues to increase in value. We are now starting =o see options starting as low as E1,950/hectare for high quality =armland in Africa, as well as opportunities in Australian and =rgentinean farmland that are easilt accessible by =ndividuals. There are, of course, risks with any investment, but =y doing one's due-diligence and investing in the right structure with =he right people and institution, farmland investment can be both safe =nd profitable for individual investors as well as large =nstitutions. 2 EFTA_R1_00090439 EFTA01776031