QSL Marketing Choice Update7 & 8 December 2016

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Disclaimer

The information provided in these slides is of a summary nature and is designedto give you an a high level update on QSL’s current marketing and pricingactivities as at the date of this presentation. While all care has been taken in thepreparation of these slides, the accuracy or completeness of the information isnot guaranteed. The presentation does not constitute financial, investment orproduct advice, a risk management strategy, a recommendation to invest in anyof the pools described in the presentation, or an offer or invitation orrecommendation with respect to any of the pools. You should seek your ownfinancial advice before making any decisions in relation to the pricing pool termsand selecting pools. Information about past performance is not an indication offuture performance. Pool performance figures included in this document areestimates at this stage, indicative only, as these pool performance figures onlybecome final on or after 30 June each year.

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Wilmar OSA Negotiations

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Wilmar OSA – Timeline to date

December 2015

• Marketing Choice legislation enacted in Qld Parliament

May 2016

• QSL gives Wilmar its standard terms sheet for OSA, based on successful MSF negotiations

July 2016

• Wilmar agrees to first meeting with QSL regarding OSA

October 2016

• Negotiations with external lawyers start

• ACCC starts investigation into Wilmar’s OSA progress

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Current status of negotiations

• Still seeking agreement on commercial terms

• Outstanding threshold items include:

1. Sugar quality

2. No ability to produce other brands of sugar

3. Potential for new tax costs for growers

4. No compensation for mill failure

5. Operational constraints on QSL at terminals

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Key issues: Sugar quality

• Wilmar is unwilling to provide sufficient assurances around the quality of sugar it delivers.

• Continues to insist QSL must accept sugar that does not meet the polarisation specification in their GEISSA, rather than being entitled to request a replacement quantity of compliant sugar.

• Potential impacts for growers include the likelihood of lower premiums for that lower quality GEI Sugar supplied on their behalf.

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Key issues: Production of other brands

• Wilmar is unwilling to produce other brands of sugar for QSL, even if QSL is prepared to pay the reasonable costs of manufacture.

• Impacts for growers include the potential of being locked out of higher-returning markets that require other brands of sugar.

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Key issues: Tax implications

• Wilmar has proposed a complicated payment mechanism which QSL is concerned may have adverse tax implications for growers

• This system also may impact on the timing of grower payments, meaning growers who choose QSL could be paid later than their Wilmar counterparts

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Key issues: Mill risk

• QSL believes that when a grower is unable to deliver committed sugar to QSL due to a mill breakdown, Wilmar should be liable for the loss suffered by QSL and the growers we represent

• Wilmar is not willing to take responsibility for its own mill performance

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Key issues: Operations

• Wilmar is seeking draconian new sugar storage requirements that have significant implications for QSL’s GEI sugar management and reducing efficiency of current storage arrangements

• They are also seeking indemnities and constraints on their own deliveries to QSL in relation to storage issues, with no reciprocal arrangements for Wilmar’s sugar

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Where are we now?

• Latest meeting on Monday

• No movement from Wilmar on sugar quality, sugar brands and mill risk

• Both parties have actions to complete to help resolve other outstanding matters

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Transitional pricing arrangement

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Transitional pricing agreement

• We have not seen Wilmar’s proposal. The first we heard of it was when they announced it to growers

• We strongly urge growers to make sure they understand the terms of any such agreement and what it locks them into

• While QSL would do its best to accept novations of forward pricing from growers in such an arrangement, there may be costs associated with these kinds of transfers

• Pricing also needs to be in an appropriate format, including QSL’s 1:2:2:1 pricing ratio, to minimise any potential costs

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In summary

• We are keen to progress an OSA

• We do not believe Wilmar’s current OSA proposal is reasonable as it brings new costs to the growers who will use it, via:– Potential lower premiums due to lower quality sugar

– Potential for new tax costs for growers

– No ability to produce other brands of sugar

– No compensation for mill failure

– Constraints at terminals

• The best way to resolve outstanding issues is to involve growers in discussions

• We have agreed to and strongly support a request from Canegrowers for tripartite negotiations

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