Farmers House Plc

Investor road show presentation – 2 March 2010US$30 million Debt/Equity Capital Raise

Robin Miller – Managing Director

• Originally a Farmers’ Co-op in the 1920’s;

• Property investment company formed in 1981;

• The only listed property company on the LuSE since 1996;

• Continues to focus on a growth orientated strategy, in order to establish itself as the leading property investment, development and management company in Zambia;

• The development of various properties in Lusaka has resulted in a more aggressive strategy; and

• Intends to remain listed on the LuSE and form the common entry point for all Zambian institutional investors (pension funds) & international investors into the high yielding, up-market Zambian property sector on a diversified basis.

Introduction to Farmers House

Current Shareholding

3.2%Chilanga Cement Pension Trust Fund

3.3%Sinyuka Property Development

24.8%Others – Institutions, companies & individuals

4.9%National Pension Scheme Authority

3.5%KCM Pension Trust Scheme

5.2%Stanchart Pension Trust Fund

9.8%Workers’ Compensation Fund

10.4%Barclays Bank Zambia Staff Pension Fund

34.9%Saturnia Regna

% shareholdingShareholder

Milestones and achievements to date

Issued a short-term Commercial Paper for the purpose of raising bridging finance to secure certain properties

2009

Raised US$10 million via a rights issue for the development of the Celtel/Zain Head Office – completed and operational

2006

Raised US$1.98 million via a preference share rights issue for the purpose of developing phase III of Central Park

Raised Zambia’s first bank loan (US$2.6 million) specifically for a property development – The Lusaka Stock Exchange building -secured on its’ on cash flows; fully repaid

2001

2003

Issued first LuSE listed corporate bond and raised US$1 million to develop phase II of Central Park; all converted into Equity

1999Listed on the LuSE1996MilestoneDate

Ø First ever Corporate Bond Issue in 2000• Raised US$1 million;• 85% institutional participation;• NAPSA underwriting; and• Most investors

converted to ordinary shares .

Farmers House milestonesSecured incremental capital to develop Phase I & II

Ø Zambia/LuSE’s 1st US$2 million Preference Share issue – in 2001• Traded on the LuSE;• US$ denominated;• 8% minimum coupon, 10% maximum;• Non-voting; and• Redeemable/convertible.

Ø Central Park Phase IV also completed – reticulation & parking.

Central Park - Developed Phase II & IIIFarmers House milestones

Ø Secured US$2.6 million of debt - 2003• US$ denominated;• 1st bank loan for investment property development;• Provided by Stanbic Bank; and• 5 year facility (now repaid).

Developed phase V & VI – Stock Exchange buildingFarmers House milestones

Ø Ordinary share issue – Rights Issue 2006• Kwacha denominated rights issue;• Ratio 3:1;• Issued 32,059,434 shares @ K1,350;• Gross Subscription of K43.28 billion;• Underwritten by Aflife;• Occupied by Zain; and• 15 year renewable lease.

Developed Celtel/Zain headquarters

Ø Secured a further 1 Ha. of land adjacent to Celtel/Zain site;

Ø JV with Standard Bank Properties (Pty) Limited;

Ø Secured Stanbic Bank Zambia as a tenant on long term lease;

Ø Construction began in October 2008; and

Ø All financing in place: phased hand over from June 2010.

Further FH property acquisitions

Challenges faced by Farmers House in pursuit of its growth strategy:

Ø Low market capitalisation:

As at February 2010 market cap of K102 billion at K2,400 per share (US$22 million) vs. asset value of K205 billion (US$44 million);

Ø Low liquidity due to low market capitalisation;

Ø Many institutional investors have reached their investment limits with respect to investment in FH;

Ø Price to NAV discount of 50% is problematic;

Ø Shareholder returns vs. reinvestment for growth; and

Ø Optimisation of the FH capital structure.

Growth strategy challenges

Farmers House market statistics

Note:With the exception of *, based on the FH Audited Financial Statements as at 31 March 2009

11.76%Dividend yield (at K850)%

%

KKK

K

US$’mFarmers House LuSE market

Market cap (Feb 2010)* 22.3 5,096Share price (Feb 2010)*Earnings per share“Headline” EPSPrice earnings ratio“Headline” PE ratioNBV per share

2,4002,575

132.760.93

18.084,810

17.9

Price to Book value 0.50 5.02Dividend yield (at K2,400)* 4.18 4.64

YoY capital gain in 2009 +170 +11.5

Farmers House market statistics

Note:* “Headline” PE;Small caps The 5 LuSE listed companies with the smallest market caps

(Investrust; Cavmont; Bata; Pamodzi & AEL); andLarge caps 5 largest market cap – Zain; Zambia Sugar; Lafarge & Standard

Chartered & Zambrew (excludes Shoprite).

LuSE

Weighted average %

Weighted average %

Weighted average

Weighted average

US$’m

+11.5 +2.09-36.9+1702009 YoY increase

2.76

1.57

14.2

38.5

Small caps

2.99

4.47

17.6

1,660

Large caps

Farmers House

ALSI

Total market cap 22.3 5,273

PE ratio 18.08* 17.9

PBV ratio 0.56 5.02

Dividend yield 4.18 4.64

Farmers House historical share price

2009200820072006Inc statement for periods ended 31 March (US$’000)

10,643(455)(262)654Net foreign exchange gain/(loss)

(120)Loss from equity accounted Investee

K4,120K3,950K3,950K4,270Average rate K/$

75.9%21.6%8.2%Income increase

82%102%118%Operating Income increase

15,4444,7962,8810Revaluation of investment properties (IAS40)

26,7124,9342,999796Profit after tax(633)(163)7(29)Taxation

1,378756373171Net Operating Income(1,687)(986)(1,059)(1,153)Expenditure

3,0651,7421,4321,324Income

Farmers House PlcAudited Financial Performance Summary

Farmers House PlcTotal expenditure summary

Increase 705%1,378171Net Operating Income

2009% of income

2009US$’000

2006% of income

2006US$’000

Period ended 31 March

(1,687)(1,153)Expenditure

44.94%12.81%Net Operating Inc. %

Increase 131%3,0651,324Income

2.22%6830.89%408Finance expenses

55.06%1,68787.19%1153Total expenditure

25.76%78921.94%290Administration expenses

27.08%83034.36%455Property expenses

11.76%2.35%1.11%2.27%Dividend yield

82.25%25.61%27.63%41.24%Market cap to NAV discount

39.8529.7421.2513.15Total assets (US$’million)

36.7526.6218.786.11Net asset value (US$’million)

150%166%(40%)Dividend per share increase

K100K40K15K25Dividend per share

K5,595K3,670K4,245K3,275Year end rate K/$

38%41%207%Increase in NAV

4,2741,709641267Total dividend (K ’million)150%167%140%Total dividend increase

6.5219.8013.593.59Market cap (US$’million)

850170013501100Share price

44.94%43.39%26.04%12.81%Operating income %

2009200820072006Financial ratios as at 31 March

Farmers House Plc financial ratios

Addressing the growth challenges

Ø Farmers House’s Board has considered various strategies that will:

• enhance and maximise shareholder value;

• improve price formation of FH shares on LuSE;

• reduce the significant discount to NAV;

• provide FH with much needed critical mass;

• reduce expenses as a proportion of income; and

• retain its status as the leading property investment company in Zambia.

Strategies that have been considered in response to challenges

Ø FH Share buy-back;

Ø Claw-back rights offer; and

Ø Equity & Debt Rights Issues

Debt/equity capital raise strategy and rationale

Rationale for the capital raise was driven by the following factors:Ø To immediately finance certain identified acquisitions with the view to

increase critical mass;Ø Create a “war chest” to take advantage of future acquisition

opportunities;Ø Grow company balance sheet and increase shareholder base;Ø Restructure balance sheet and income statement to address fiscal and

geared status of FH;Ø Eliminate the negative difference between the sum of the parts and

FH’s market cap; andØ Make the company less vulnerable to unwelcome suitors.

Current status of the capital raise

Ø Shareholder permission to raise capital up to US$30 million:

• Up to US$15 million debt; and

• Up to US$15 million equity.

Ø Raised US$9 million by way of a Commercial Paper issue;

Ø Property Acquisitions underway subject to contract and/or shareholder approval:

• Counting House Square; and

• Eureka Park.

Ø Numerous potential acquisitions considered.

Future property acquisitions

Ø Farmers House’s post-capital raise Weighted Average Cost of Capital (WACC) is an

important consideration in establishing property acquisition yields;

Ø The introduction of more debt on the FH balance sheet (gearing) will reduce its WACC

by 1 - 1.5% (in USD terms), as debt funding is generally cheaper;

Ø Indicative post-capital raise WACC:

9.8%5.2%

Post tax cost

(US$)

9.7%9.5%0.2%

WACC

100%96%4%

Preweighting

274,703,11176,748,740

Post capital raise

(K’000)

100%78%22%

Post weighting

9.8%5.2%

Post tax cost

(US$)

1.1%7,823,740Debt

WACCCurrent (K’000)

8.8%7.7%205,778,111Equity

Future property acquisitions

Ø Farmers House has approved a property acquisition strategy that focuses on the following 5

development nodes, as well as considering individual opportunities outside Lusaka:

• Lusaka (Central Node) - development of buildings subject to availability of firm

tenants;

• Lusaka (Addis Ababa Node) - demarcated by existing Zain/Stanbic properties,

and potential acquisitions in that node;

• Lusaka (Thabo Mbeki Node) - demarcated by the acquisition of proposed Counting

House Square, possible acquisition of Arcades and development of the UNZA

land;

• Lusaka (Eastern Node) - demarcated by Chelston, Roma and Ibex Hill; and

• Lusaka (Southern Node) - with proposed Eureka Park property purchase, demarcated

by Baobab, Lilayi and Lusaka South multi facility economic zone.

• Other properties outside Lusaka that provide the requisite return.

Ø US$15 million Equity Rights Offer• Ratio in range of 3 – 4 new rights offer shares for every 4 – 5 shares

held at the date of last registration.

Ø US$15 million Corporate Bond Rights Offer• Indicative pricing of US$1.10 per Corporate Bond;• Ratio in order of US$1.10 of new Corporate Bonds for every 3 shares

held at the date of last registration; and• Variable rate coupon made up of a fixed yield of 8% per annum

payable semi annually in arrears plus an amount charged to the income statement of 10% of net operating income.

Debt/equity rights offer transaction

Timing of capital raise

12 April 2010Rights offer opens

7 May 2010Rights offer closes

17 May 2010New shares and Corporate Bonds listed on LuSE

Remainder of March

Road show to underwriters, prepare offer circular & obtain the necessary regulatory approvals and finalise pricing

2 March 2010Presentation to all FH shareholdersTimeActivities

Way forward

Ø Presentation to all shareholders – 2nd March 2010

Ø Expected date of publishing of Offer circular – 12th April 2010;

Ø Expected date of closing of Offer – 7th May 2010;

Ø Expected date for refund of oversubscription amounts – 14th May 2010; and

Ø Commencement of strategic rollout.

Conclusion

The Board, management and advisers of Farmers House PLC thank you for your time and attention in the support of the further

development of Farmers House PLC.