Prospectus and Investment Statement

NZ Farming Systems Uruguay Limited

Prospectus and Investment Statement FOR AN OFFER OF 75 MILLION ORDINARY SHARES AT AN ISSUE PRICE OF $1.00 PER SHAREWITH PROVISION FOR OVERSUBSCRIPTIONS OF UP TO 75 MILLION ORDINARY SHARES

ABN AMRO Craigs Limited Lead Manager

Important Information 1

Investment Highlights 2

Offer Summary 7

Letter from the Chairman 8

Description of the Offer 11

Governance and Management 14

Comparison of Farming in New Zealand and Uruguay 19

Background to the Investment Opportunity 30

The Investment Opportunity 33

Financial Information 35

Valuation 49

Investment Statement Information 57

Statutory Information 66

Statutory Index 73

Glossary 74

Instructions and Terms and Conditions of Application Form 76

Application Forms 77

Directory Inside back cover

Contents

Important InformationThe information in this section is required under the

Securities Act 1978.

Investment decisions are very important. They often have

long-term consequences. Read all documents carefully.

Ask questions. Seek advice before committing yourself.

Choosing an investment

When deciding whether to invest, consider carefully the

answers to the following questions that can be found on the

pages below:

What sort of investment is this? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Who is involved in providing it for me? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

How much do I pay? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

What are the charges? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

What returns will I get? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

What are my risks? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Can the investment be altered? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

How do I cash in my investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Who do I contact with enquiries about

my investment?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Is there anyone to whom I can complain

if I have problems with my investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

What other information can I obtain

about this investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

In addition to the information in this Offer Document,

important information can be found in the current registered

prospectus for the investment. You are entitled to a copy of

that prospectus on request.1

Choosing an Investment Adviser

You have the right to request from any investment adviser a

written disclosure statement stating his or her experience and

qualifications to give advice. That document will tell you:

• whether the adviser gives advice only about particular types

of investment;

• whether the advice is limited to the investments offered by

one or more particular financial organisation; and

• whether the advisor will receive a commission or other

benefit from advising you.

You are strongly encouraged to request that statement. An

investment adviser commits an offence if he or she does not

provide you with a written disclosure statement within five

working days of your request. You must make the request at

the time the advice is given or within one month of receiving

the advice.

In addition:

• if an investment adviser has any conviction for dishonesty

or has been adjudged bankrupt, he or she must tell you this

in writing; and

• if an investment adviser receives any money or assets on

your behalf, he or she must tell you in writing the methods

employed for this purpose.

Tell the adviser what the purpose of your investment is. This

is important because different investments are suitable for

different purposes.

1 ThisisthewordingrequiredbySchedule3DtotheSecuritiesRegulations1983(NZ)whichcontemplatesaseparateinvestmentstatementandprospectus.ThisOfferDocumentcombinesaprospectusandaninvestmentstatementandaccordinglytheprospectusavailableonrequestiscontainedinthisOfferDocument.AnswerstoImportantQuestionsaresetoutonpages58–65.

NZ FARMING SYSTEMS URUGUAY L IMITED 1

•TheOfferisfor75millionpartlypaidsharesinNZFarmingSystemsUruguaywithprovisionforoversubscriptionsofafurther75millionshares.Unpaidcapitalwillbecalledbeforetheendofthecalendaryear2007,atwhichtimetheDirectorswillusetheirbestendeavourstolisttheCompanyonthemainboardoftheNewZealandExchange,theNZSX.

Investment Highlights

•NZFarmingSystemsUruguayisseekingtoraiseupto$150millioninthisOfferinordertoacquireanddevelopUruguayanfarmlandbyapplyingintensivepasturebasedfarmmanagementsystemsdevelopedinNewZealand.

•TheCompanyispromotedbyPGGWrightsonwhichwillholdamaterialstakeintheCompany,andmanageitsfarmingbusiness.Anallocationof5millionShareshasbeenreservedfortheDirectorsofNZFarmingSystemsUruguayandPGGWrightsonwhohaveindicatedthattheyintendtoparticipateintheOffer.

InformationintheInvestmentHighlightssectionissummarisedfromothersectionsofthis

OfferDocument.Sourcescanbefoundintheseothersections.

NZ FARMING SYSTEMS URUGUAY L IMITED2

■

•DespiteUruguaybeingonlytwothirdsthesizeofNewZealand,Uruguay’sfarmedareais11%greaterduetotheveryhighproportionofutilisableland.Uruguayhas11.7millionhectaresofgrazingland,mostofwhichisunimprovednativepasture.Thislandhashistoricallybeenthemainforagebaseandofferssignificantpotentialfordevelopment.1

1 See page 20 for more information and sourcing.

•ThenetproceedsoftheOfferwillbeusedtocompletedevelopmentoffarmsacquiredfromPGGWrightsonandpurchaseanddevelopadditionalfarms.PGGWrightson(throughrelatedcompanies)willmanagethefarmsanditwillhaveacornerstonestakeinNZFarmingSystemsUruguaythroughsharesthatwillbeissuedtoPGGWrightsonInvestmentsinconsiderationforsharesinthecompanieswhichownthethreefarmsPGGWrightsonInvestmentspurchasedfordevelopmentin2005.

NeitherPGGWrightson,anymemberofthePGGWrightsonGroup,theDirectors,noranyotherpersonguaranteesthereturnofcapitalinvestedortheperformanceoftheShares.


•NZFarmingSystemsUruguayhasbeenestablishedasthefirstofseveralfarmdevelopmentcompaniesthatPGGWrightsonplanstopromoteandmanage,forthebenefitofNewZealandfarmersandinvestors.

•TheBoardbelievesthatthelargesizeoffarmsinUruguay,absenteelandownershipandeasilyrealisableprofitsfromcattlegrazinghaveprovidedlittleincentiveforfarmerstoincreaseproductivity.

•TheexperienceofPGGWrightsonhasshownthatfarmlandinUruguayishighlyresponsivetoNewZealandstylepasturespeciesandintensivepasturemanagement.PGGWrightsonhasmanagedtoraisedrymatterproductionbymorethan300%,fromlessthan4,500kg/hato14,500kg/hawithoutirrigation.

•ForPGGWrightson,theimpactofimprovingpasturesatabeeffinishingfarmleasedbyithasbeensignificant.Beforeitengagedonaprogrammeofpastureimprovement,annualliveweightgainswereoftheorderof100kgperhectare.Followingcompletionofapasturedevelopmentprogramme,liveweightgainsof900kgperannumperhectarearebeingachieved.

•NewZealandersdonotownanydefensibleintellectualpropertyrightsovertheirfarmmanagementsystems.Whiletheymayhavetheexpertisetoapplythembetterthanmostothers,informationonNewZealandfarmingsystemsisfreelyavailableandNewZealandcannothopetosustainamonopolyoverthatexpertise.ThatknowledgeisalreadybeingappliedinUruguayandotherSouthAmericancountries.NewZealandfarmershavethechoiceofinvestingtocapturetheopportunitythemselvesorofallowingotherstocapturethegains.


ThetemperateclimateofUruguay,withits

mildwintersandhotsummers,isclosestto

NorthlandinNewZealandandissuitablefor

intensivepastureproductionsystems.Rainfall,

whichaveragesaround1,200mmperannum,

isreasonablywelldistributedthroughoutthe

yearbutwithsignificantlymoreraininthe

springandsummerinthewest.Seepage21formoreinformationandsourcing.

•ThelastfewyearshaveseenthefirstinvestmentsbyNewZealandfarmersintheSouthernConecountriesofSouthAmerica(Chile,Argentina,UruguayandBrazil).NZFarmingSystemsUruguaybelievesthattheseearlyinvestmentsarelikelytobefollowedbysignificantlyincreasedinterestsimilartothatseeninNewZealandjustoveradecadeagowhendairyfarmersexpandedfromtheWaikatoandTaranakitoSouthlandandCanterbury,andindeedfromNewZealandtoAustraliaoverthatsameperiod.

•PGGWrightsonhasanunmatchedcombinationofknowledge,experienceanddemonstratedcapabilityinUruguay,andtheinfrastructuretobeabletoputinplacethecomprehensivepackageofskillsandresourcesnecessarytofarmsuccessfullyinUruguay.

•BasedontheexperienceofPGGWrightsoninUruguayoverthelast7years,NZFarmingSystemsUruguaybelievesthatthereisthepotentialtomorethantripletheproductionofmilksolidsperhectarefromUruguayandairyfarmsusingNewZealandfarmmanagementsystemsandachieveanattractiverateofreturnforitsshareholdersoverthemediumterm.

•TheBoardconsidersthattheUruguayanmacroeconomicenvironmentandofffarminfrastructuresupportsaninvestmentinUruguayanfarms.Uruguayhasastabledemocracyemployingsoundeconomicpolicies,modernandefficientfarmservicecompanies,awelltrainedandhardworkinglabourforceandtechnicallyadvancedmilkandmeatprocessingfacilities.TheUruguayangovernmentishighlysupportiveofforeigninvestmentintheproductivesectorandhasahighregardforthepropertyrightsofforeigners.

Offer SummaryIssuer NZ Farming Systems Uruguay Limited.

Lead Manager ABN AMRO Craigs Limited.

Registration This Offer Document is dated 3 November 2006 and has been registered with the Registrar of

Companies together with copies of the documents required by section 41 of the Securities Act 1978

at that date (being the management agreement referred to at page 16 and the farm purchase contract

referred to at page 33, and the consents of Sr Romualdo Rodríguez of Firm Romualdo Rodríguez

Negocias Rurales of Montevideo, Uruguay and of Nimmo-Bell & Company Limited, Agricultural

Business Associates and of the auditor).

Issue price The issue price is $1.00 per Share. 50 cents per Share is payable on application, the other 50 cents per

Share will be called by the Company for payment on 14 December 2007. There are consequences for

investors not meeting the call which are detailed on page 12.

NZX Listing The Directors will use their best endeavours to list the Shares on NZSX as soon as possible after the

call on 14 December 2007. No representation is made that such listing will occur. NZX accepts no

responsibility for any statement in this Offer Document.

If such listing does not occur for any reason, there will continue to be no established market

for the trading of Shares and investors will only be able to trade Shares privately, limiting their

ability to sell Shares.

For Shareholders who need to sell their Shares in the period prior to any listing on NZSX the Company

will maintain a register and endeavour to match them with potential buyers.

Key Dates2 Offer opens Monday 6 November 2006

Offer closes Tuesday 12 December 2006

Allotment of Shares Friday 15 December 2006

Application Form Application Forms and instructions follow page 76.

For definitions of capitalised words and phrases used in this Offer Document please refer to the Glossary on page 74.

This Offer Document does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make

such an offer.

No representation in connection with the offer of Shares is made other than in this Offer Document.

No person (including any Director, agent or employee of NZ Farming Systems Uruguay, or any member of the PGG Wrightson

Group) guarantees the return of capital invested, or the performance of the Shares.

2 PleasenotethatthesedatesmaybevariedattheCompany’sdiscretion.

This Offer Document is for an offer of 75 million ordinary shares (Shares) in

NZ Farming Systems Uruguay Limited (NZ Farming Systems Uruguay or

the Company) at an issue price of $1.00 per Share (Offer) with provision for

oversubscriptions of a further 75 million shares. The maximum size of the Offer

is 150 million Shares and oversubscriptions will be accepted up to that amount.


Letter from the Chairman

Those of you who keep in touch with the international farming

scene will be well aware of the increasing competitiveness

of farming in the Southern Cone countries of South America;

Chile, Uruguay, Brazil and Argentina. This is a region which

is developing quickly and where international investment

interest is high. PGG Wrightson has a strong business in the

region, in Uruguay in particular, and is familiar with the pace

of development there.

The last few years have seen the first investments by New

Zealand farmers in these Southern Cone countries. In the

Board’s opinion, these early investments are likely to become

a ‘wave’ similar to that we saw in this country from the

Waikato and Taranaki to Southland and Canterbury just over

a decade ago, or indeed from New Zealand to Australia over

that same period.

NZ Farming Systems Uruguay has been formed by PGG

Wrightson to provide an opportunity for farmers and farming

investors to participate in this expansion, without many of the

risks inherent in individual farm development in a non-English

speaking country halfway around the world.

New Zealand farmers have always had a strong orientation

to look outwards to the wider world. An awareness of

changes in international markets and adjusting to them have

been important in establishing New Zealand’s position as

a leading primary producer. Advanced pasture and animal

management systems and the application of sophisticated

but practical and effective technology have ensured that this

market awareness has been translated through increased

productivity into farmer returns.

Dear Farming Investor

It is my pleasure, on behalf of the Board, to introduce to you NZ Farming Systems Uruguay Limited.

The Company has been established to enable New Zealand farmers and investors to invest in farming

in a country where PGG Wrightson’s experience provides a high level of confidence that the application

of New Zealand farm and pasture management principles will translate into strong gains in farm

productivity and profitability.

But productivity gains in New Zealand farming have become

harder to secure. Competition for suitable land is strong,

with increased pressure on water supplies and environmental

issues becoming increasingly complex. Many dairy farmers

seeking suitable land have moved from the traditional areas

in the North Island to Canterbury and Southland, where much

of the potential has now been realised. Other farmers have

moved into Australia where, typically, land prices are lower

but security of water supply is more problematical. For many

farmers, Australia has set the outward boundary to international

investment for them, with cultural and legal differences and the

difficulties of managing farms over great distances ruling out

farm ownership further afield.

‘Why Uruguay?’ you might ask.3

Like New Zealand, Uruguay is a small country with a temperate

climate that is reliant on its primary sector. Unlike other

parts of South America, Uruguay has no mountains at all; its

extensive undulating farmland is largely under native pasture.

The large size of farms and easily realisable profits from

cattle grazing for absentee landowners have provided little

incentive to increase productivity. Agricultural exports are

important to the economy, though, and Uruguay’s democratic

government has indicated that it wishes to encourage foreign

investment and output and productivity growth. From an

investor’s perspective, Uruguay is now a reasonably low risk

country with a high respect for private property rights and one

where New Zealanders are viewed favourably. It has strong

rural infrastructure and, importantly, suitable land is currently

available at prices that are a fraction of those in New Zealand.


PGG Wrightson has needed to address the various issues

involved in working in Uruguay, where it owns 86% of

the country’s largest seed distributor, Wrightson Pas S.A.

In that process it has recognised a major opportunity

for New Zealand farmers and farming investors who are

interested in international investment.

In 2001, Wrightson Limited leased a small beef finishing farm

in Uruguay to demonstrate the productivity improvement

that could be achieved with new grasses and suitably modified

New Zealand pasture management. That experiment was highly

successful, with liveweight gains increasing from 100kg per

annum per hectare to 900kg.

Encouraged by this, the company proceeded to deepen its

experience, gaining an understanding of the Uruguayan

social and legal environment, and building a capable local

management team. We now have the necessary expertise,

resources and structures to invite farmers and farming investors

to participate with us in this significant opportunity.

‘Why would we invest in our competitors?’ is a question you might also ask.

Through Wrightson Pas S.A., PGG Wrightson has an established

operation in Uruguay and what it considers to be a good

understanding of the country and economy. NZ Farming

Systems Uruguay is aware of the emerging presence

of international investors and believes that Uruguay’s

transformation from being a low productivity producer is only

a matter of time. New Zealanders do not own any defensible

intellectual property rights over their farm management

systems. While they may have the expertise to apply them

better than most others, information on New Zealand farming

systems is freely available and New Zealand cannot hope to

sustain a monopoly over that expertise. That knowledge is

already being applied in Uruguay and other South American

countries. New Zealand farmers have the choice of investing

to capture the opportunity themselves or of allowing others to

capture the gains. The Company also believes that, over time,

our playing an active role in Uruguay’s development will help

develop markets for innovative New Zealand based companies

working in related areas.

NZ Farming Systems Uruguay is a unique investment

opportunity. The Board considers that PGG Wrightson has

an unmatched combination of knowledge, experience and

demonstrated capability, and the infrastructure to be able to

put in place the comprehensive package of skills and resources

necessary to create a profitable farming business in Uruguay.

I would invite farmers and others who are interested in farming

investment to take this opportunity to invest with us.

Yours sincerely

Keith Smith

Chairman


3 InformationonUruguaytakenfrom:

• www.cia.gov/cia/publications;

• www.state.gov/r/pa/ei/bgn;

• www.pwcglboal.com/extweb/challenges.nst;

• www.heritage.org;

• www.transparency.org;and

• internalPGGWrightsoninformation.


About Uruguay

– a small, agricultural country

Uruguay is a small country, two-thirds

the size of New Zealand, situated on

the northern bank of the River Plate

on the south-eastern coast of South

America. Its northern neighbour is Brazil,

while to the west, across the river, it

borders Argentina.

Its 3.2 million population, which is

growing at 0.6% pa, is very largely of

European descent. Uruguayans are

Spanish speaking and most are nominally

Roman Catholic, although the majority

do not actively practice a religion.

Literacy, at 97%, is very high and life

expectancy is long. Their Government is

democratically elected and the country

has a long history of respect for private

property rights.

Like New Zealanders, the majority

of Uruguayans live in urban areas.

Montevideo is the only large city, with a

population of 1.4 million.

Uruguay’s economy is dependent upon

agriculture. Agricultural production

directly accounts for only 12% of

GDP, but together with an industrial

sector (18% of GDP) which is based

on the transformation of agricultural

products, makes up more than half

of the country’s exports. Leading

economic sectors include meat

processing, agribusiness, wood, wool,

leather production and apparel, textiles,

and chemicals.

AllinformationintheAboutUruguaysectionsissourcedfromtheU.S.DepartmentofState,Bureauof WesternHemisphereAffairsMarch2006atwww.state.gov/r/pa/ei/bgn/209/.htm


Description of the OfferThe Offer


is offering for subscription 75 million

ordinary Shares at an issue price of

$1.00 per Share. The issue price will be

payable in two parts; half to be payable

with the Application and the other half

payable on 14 December 2007.

The minimum amount which in the

opinion of the Directors must be raised

from the Offer is $50 million.

Use of proceeds

Assuming the Offer is fully subscribed,

the total proceeds of the Offer (including

the second half of subscriptions

payable on 14 December 2007) will

be $75 million plus the value of any

oversubscriptions accepted.

The proceeds of the Offer, after

deduction of expenses, will be applied

to the purchase and improvement of

farmland in Uruguay, and development

of intensive dairying and beef farming

on that land applying New Zealand style

farming systems.

The expenses of the Offer (including

brokerage) are estimated at $2.4 million

assuming the Offer is subscribed to

100 million Shares, including the shares

issued to PGG Wrightson Investments

Limited (PGG Wrightson Investments)

in part consideration for farms (see

below), and will be paid by NZ Farming

Systems Uruguay. This includes the lead

management fee payable by NZ Farming

Systems Uruguay to the Lead Manager.

Contemporaneous purchase of farms from PGG Wrightson for Shares and cash

As its foundation investment, the

Company will acquire from PGG

Wrightson Investments three farms

known as Valle de Soba, Tambo El

Cabure and Menafra. The three farms

and associated farm assets are held

by PGG Wrightson Investments in

two Uruguayan nominee companies

– Gabefox S.A. and Gimley S.A. The

Company will acquire all of the shares in

these nominee companies. The purchase

price of US$11,926,228, which has

been agreed based on an independent

valuation, will be paid for in equal parts

by an issue of partly paid ordinary shares

and cash. The partly paid shares will

be issued on the same terms as those

offered to all other shareholders under

the Offer.

PGG Wrightson Investments intends to

use the cash it receives in part payment

for the sale of the farms to NZ Farming

Systems Uruguay to retire debt it

incurred when it purchased the farms in

2005. PGG Wrightson Investments will

also invest further in the Company when

it makes the instalment payment due on

its partly paid shares in December 2007.

PGG Wrightson Investments will

undertake not to sell these shares for

at least 3 years from the date of this

Offer Document and intends to hold its

shares as a long-term investment. More

information about the farm purchase

contract is contained on page 33.

This Offer Document is a combined Investment Statement and Prospectus in respect of

an offer of 75 million ordinary Shares in NZ Farming Systems Uruguay with provision for

oversubscriptions of up to a further 75 million ordinary Shares.

This section outlines the main terms of the Offer. Investors’ attention is also drawn to the

‘AnswerstoImportantQuestions’on pages 58 to 65.

The shares issued to PGG Wrightson

Investments will amount to 10.7% of

the total shares on issue if the Offer

proceeds amount to $150 million; 26.4%

if the Offer proceeds amount to the

minimum subscription of $50 million.

Rural Portfolio Investments Limited also

intends to apply for 10 million Shares.

That interest will be associated with

the shareholding of PGG Wrightson

Investments under the Takeovers Code.

The maximum combined interest (if the

Offer proceeds amount to the minimum

subscription of $50 million) is 41.1%.

No person (including any Director

of the Company, Rural Portfolio

Investments Limited, PGG Wrightson

Investments, or any other member of

the PGG Wrightson Group) guarantees

the return of capital invested, or the

performance of the Shares.

Offer pricing

The issue price is $1.00 per Share. All

Shares allotted under the Offer will be

issued at the issue price, paid up to 50

cents.

Initial instalment

The initial instalment of the issue price

is 50 cents per Share and is payable on

application for Shares in the Offer by

investors. Cheques will be banked on

15 December 2006.


From this brokerage the Lead Manager

will pay brokerage to PGG Wrightson,

NZX Firms and financial intermediaries

at the same rate in respect of Shares

allocated to them and duly allotted

pursuant to applications bearing

their stamp.

Priority Allocations

A Priority Allocation is a best endeavours

allocation in which there is no

obligation on PGG Wrightson, the Lead

Manager, other NZX Firms and financial

intermediaries who accept Priority

Allocations, to subscribe for any shortfall

Shares that they are unable to allocate

firm to their clients. There is therefore

no certainty that Shares in the Offer

allocated on a Priority Allocation basis

will be subscribed for.

Applications pursuant to Priority

Allocations will not be subject to scaling

by NZ Farming Systems Uruguay.

How to apply

Applications must be made on the

Application Form, completed in

accordance with the instructions on

page 76.

Applications must be received by

Computershare Investor Services Limited

at the address on the Application

Form no later than 5.00pm Tuesday

12 December 2006.

If the Offer is oversubscribed,

applications (other than those under

Priority Applications) may be subject to

scaling by the Company.

Minimum subscription

An investor must subscribe for a

minimum of 20,000 Shares.

Applications must be accompanied

by the initial instalment of 50 cents

per Share.

Allotment of shares

Allotment of Shares under the Offer will

be undertaken on 15 December 2006.

Second instalment

The second and final instalment of the

issue price is 50 cents per Share and is

payable on 14 December 2007. Investors

will be reminded prior to this time of

their obligation to pay this amount.

Investor default on second instalment

If an investor does not pay the second

instalment due on 14 December 2007,

the Board will give the investor notice

demanding payment and the following

consequences apply:

• the investor will be liable to pay a

default rate of interest on the amount

that remains unpaid, at the Reserve

Bank of New Zealand’s Official Cash

Rate (OCR) + 5% and calculated

from 14 December 2007 until the day

payment is received by the Company;

• if the investor fails to make payment

by 31 December 2007, the Board may

resolve that the Shares in relation to

which the second payment has not

been made, will be forfeited;

• NZ Farming Systems Uruguay may

then sell the forfeited Shares;

• the proceeds of the sale of any or all

of those Shares will be applied against

the payment of the second instalment

that was due plus any interest from

14 December 2007 up to the date

of sale;

• the balance of any proceeds of such

a sale, if any, will be repaid to the

investor but if the proceeds of such

a sale are insufficient to meet the

second instalment plus interest the

investor will remain fully liable to

NZ Farming Systems Uruguay for

the shortfall;

• the investor will not be entitled

to any authorised distributions

in respect of those Shares and all

rights attaching to the Shares will be

suspended (including voting rights)

until the second instalment payment

is received by the Company.

Until Shares are fully paid any Shares

transferred must be transferred on the

basis that the transferee acknowledges

its obligation to pay the second

instalment of the Share price due on

14 December 2007.

Offer structure

The 75 million Shares in the Offer

have been allocated either on a Firm

Allocation basis to institutional investors

in New Zealand and Australia, or as a

Priority Allocation to PGG Wrightson,

the Lead Manager and other NZX Firms

and financial intermediaries, for firm

allocation to their clients.

The Company will accept

oversubscriptions of up to 75 million

Shares. The maximum number of

Shares to be issued pursuant to this

Offer, including oversubscriptions, is

150 million.

Members of the public who wish to

apply for Shares can do so through an

NZX Firm or other financial intermediary

holding a Priority Allocation, or,

with respect to oversubscriptions,

by completing the Application Form

included in this Offer Document in


page 76 and returning the completed

Application Form to the Registrar or the

Lead Manager in time to be received by

the Registry by 5.00pm on the Closing

Date of 12 December 2006.

Brokerage fees

NZ Farming Systems Uruguay will pay

brokerage to the Lead Manager on the

allotment of Shares pursuant to this

Offer. For Shares allotted pursuant to

Firm and Priority Allocations, the rate

of brokerage is 3% of the gross value

of initial subscription proceeds (ie

the number of Shares allotted times

50 cents per Share). For Shares allotted

pursuant to oversubscriptions, the rate

of brokerage is 2% of the gross value of

initial subscription proceeds.


About Uruguay – early days and colonisation by Spain

The only inhabitants of Uruguay before European colonisation of the area were the

Charrua Indians, a small tribe driven south by the Guarani Indians of Paraguay. The Spanish

discovered the territory of present-day Uruguay in 1516, but the Indians’ fierce resistance

to conquest, combined with the absence of gold and silver, limited settlement in the region

during the 16th and 17th centuries. The Spanish introduced cattle, which became a source

of wealth in the region. Spanish colonisation increased as Spain sought to limit Portugal’s

expansion of Brazil’s frontiers.

Montevideo was founded by the Spanish in the early 18th century as a military stronghold;

its natural harbour soon developed into a commercial centre competing with Argentina’s

capital, Buenos Aires. Uruguay’s early 19th century history was shaped by ongoing

conflicts between the British, Spanish, Portuguese, and colonial forces for dominance in the

Argentina-Brazil-Uruguay region. In 1811, Jose Gervasio Artigas, who became Uruguay s

national hero, launched a successful revolt against Spain. In 1821, the Provincia Oriental

del Rio de la Plata, present-day Uruguay, was annexed to Brazil by Portugal. The Provincia

declared independence from Brazil on August 25, 1825 (after numerous revolts in 1821,

1823, and 1825) but decided to adhere to a regional federation with Argentina.

Source:Seepage10

Overseas investors

The Offer is being made to members

of the public in New Zealand. The Offer

may also be made to certain corporate

and institutional investors in New

Zealand and other jurisdictions where it

is lawful to do so.

No person may offer, invite, sell or deliver

any Shares or distribute any document

(including this Offer Document) to

any person outside New Zealand

except in accordance with all the legal

requirements of the relevant jurisdiction.

The Offer Document may not be sent

into or distributed in the United States

of America.

Unless otherwise agreed with NZ

Farming Systems Uruguay, any person

or entity subscribing for Shares in the

Offer will, by virtue of such application,

be deemed to represent that they

are not in a jurisdiction that does not

permit the making of the Offer or an

invitation of the kind contained in this

Offer Document and is not for the

account or benefit of a person within

such jurisdiction.

None of NZ Farming Systems Uruguay,

the Lead Manager, nor any of their

related parties, directors, officers,

employees, consultants, agents, partners

or advisors accepts any liability or

responsibility to determine whether a

person is able to participate in the Offer.

Disclosure of Promoters

PGG Wrightson and its directors,

except Keith Raymond Smith, Michael

Craig Norgate, Samuel Richard Maling

and Murray James Flett, who are also

Directors of NZ Farming Systems

Uruguay, are promoters of the Offer.

The directors of PGG Wrightson are:

Arthur William Baylis, Sir Selwyn John

Cushing, Richard Frank Elworthy, Murray

James Flett, Brian James Jolliffe, Samuel

Richard Maling, John Baird McConnon,

Michael Craig Norgate, Keith Raymond

Smith and William David Thomas.

Shares on issue pre and post the Offer

On the incorporation of NZ Farming

Systems Uruguay, 100 ordinary shares

were allotted to PGG Wrightson Limited.

No further shares have been allotted

prior to the date of this Offer Document.

On successful completion of this Offer

the total number of shares on issue will

comprise the 75 million Shares (plus

oversubscriptions, if any) issued under

this Offer plus the 17,934,177 partly

paid shares issued to PGG Wrightson

Investments for the purchase of the

nominee companies holding the three

farms known as Valle de Soba, Tambo

El Cabure and Menafra, and associated

farm assets.


Keith Smith,B.Com,FCA(Chairman)

Keith Smith is a director of PGG Wrightson Limited and was previously Chairman of Wrightson Limited.

Keith is a chartered accountant and until December 2005 was a partner in the national accounting

practice BDO Spicers, specialising in Directorships. He is Chairman of Tourism Holdings Limited, Skellerup

Holdings Limited and The Warehouse Group Limited. He is also a director of Macquarie Goodman

(NZ) Limited and a number of private companies, including Chairman of Lowe Corporation Limited a

major New Zealand Meat Co Products company. He is a past President of The New Zealand Institute of

Chartered Accountants.

Keith is Chairman of PGG Wrightson’s Audit Committee.

Craig Norgate,BBS,CA,FNZIM

Craig Norgate is a director of PGG Wrightson Limited and Managing Director of Rural Portfolio

Investments Limited, which owns 30% of the shares in PGG Wrightson. Prior to his involvement in

Rural Portfolio Investments, Craig had 15 years experience as a leader in the New Zealand dairy industry,

including two years as the inaugural CEO of Fonterra Co-operative Group and, prior to that, a number of

years as CEO of Kiwi Co-operative Dairies Limited.

Craig is a director of Westgate Port Taranaki Limited, Dexcel Limited, Aotearoa Fisheries Limited,

Sealord Group Limited, and a member of the Government’s Growth and Innovation Advisory Board, the

Foundation for Research, Science and Technology, and the Advisory Board for the Auckland Regional

Council’s Economic Development Unit.

Murray Flett,B.ComAg

Murray Flett is a Southland-based dairy farmer. He is a director of PGG Wrightson Limited. Murray has

spent nine years as a director in the dairy industry, including a three-year term as a Director of Fonterra

Co-operative Group, and is currently a director of several private companies in the food, printing,

importing and agricultural sectors in New Zealand and Australia. Murray has gained some understanding

of farming in Uruguay since first visiting there nearly three years ago. He is a director/shareholder of a

4,000 hectare farm in Uruguay, which is currently being developed.

Sam Maling,LLB

Sam Maling is a director of PGG Wrightson Limited, Chairman of Pyne Gould Corporation Limited and

MARAC Finance Limited, and a director of Perpetual Trust Limited. He was appointed to the Board of

Pyne Gould Guinness Limited prior to its merger with Reid Farmers. Sam practises as a barrister in

Christchurch and has over 30 years professional experience in law. He has served as a vice-president of

the New Zealand Law Society and chairman of the Broadcasting Standards Authority.

Sam is an Accredited Fellow of the Institute of Directors in New Zealand (Inc).

Governance and ManagementThe Board of NZ Farming Systems Uruguay is highly experienced and knowledgeable in

farming and farming investment, and in business more generally.


John Parker,BAgrSc.,AMP,Harvard

John Parker is an independent director of the Company. He was formerly Deputy CEO of the NZ Dairy

Board and amongst other responsibilities was Chairman of the Dairy Board’s Latin American subsidiaries

and a director of the Livestock Improvement Corporation. He started with the Dairy Board as a Consulting

Officer (farm advisor) and has owned dairy farms. John has held a number of directorships and is currently

Chairman of Port of Tauranga, Toll Owens Limited and is a director of several private companies.

David Cushing,B.ComACA

David Cushing is also an independent director of the Company. Christchurch based, David is currently a

director of New Zealand Rural Property Trust Management Limited which manages the 30 farms owned

by New Zealand Rural Property Trust. He is executive director of REL Trust Management Limited which

manages the recently formed REL Pacific Equity Trust. David is also a director of Rural Equities Limited,

Tourism Holdings Limited, Wakefield Health Limited, Red Steel Limited and H & G Limited. He was

formerly an investment banker with the Bank of New Zealand and a director of Williams & Kettle Limited.

Corporate governance

The Board of NZ Farming Systems Uruguay has adopted

Corporate Governance policies, a summary of which is

contained below. The Board will regularly review the corporate

governance policies to ensure NZ Farming Systems Uruguay’s

responsibilities and obligations are met.

Role of the board

The Board is elected by the Shareholders and is responsible for

the control of the business of the Company. It is accountable

to its Shareholders for the performance of the Company, and

compliance by the Company with laws and standards.

The Board is responsible for setting the direction of the

Company by developing a mission statement and corporate

objectives, and then developing and endorsing strategy to

achieve the objectives, ensure procedures are in place to

provide effective internal financial control, and establishing

policy in key areas.

The Board sets objectives and performance targets and

monitors management’s performance.

Board membership

The Constitution of the Company prescribes that the minimum

number of Directors that may be appointed is three and the

maximum number is seven.

At each annual meeting one third of the Directors must retire.

The Directors who retire are eligible for re-election.

The Board currently comprises six members; Keith Raymond

Smith, Michael Craig Norgate, Murray James Flett, Samuel

Richard Maling, John Suffield Parker and Bevan David Cushing.

Delegation

The Board delegates responsibility for the day to day

management of the Company to PGG Wrightson Funds

Management Limited.

Audit Committee

The Board has established an Audit Committee which

is constituted to monitor the financial and regulatory

reports produced by the Company, the external audit of the

Company’s affairs, and review and monitor the Company’s

internal controls and systems, and compliance with the

governance, legal and regulatory requirements of the Company.

The members of the Committee are John Suffield Parker,

Bevan David Cushing, Keith Raymond Smith and Samuel

Richard Maling.


Indemnity and Insurance

In accordance with the Company’s Constitution and to the

extent permitted by law, the Company indemnifies and insures

its Directors against liability to other parties (excluding a claim

by the Company itself) that may arise from their position as

Directors. The indemnification requires that the Director acted

honestly and in good faith with a view to the best interests of

the Company and that the Director had reasonable grounds for

believing that their conduct was lawful. The Company maintains

insurance for its Directors, however the insurance does not

cover a number of types of liabilities including liabilities arising

from any criminal or bad faith activities.

About the Manager

Initially, the Company will not employ staff directly; it will be

managed through contracts established with PGG Wrightson

and subsidiary companies which will ensure a high level of

expertise and support. All contracts will be at commercially-

determined prices. The structure chart shows the relationships

between the parties involved.

PGG Wrightson Funds Management Limited

This wholly-owned subsidiary of PGG Wrightson Investments

has been newly established to provide asset management and

investor relations services to NZ Farming Systems Uruguay

and for similar initiatives to be considered in other countries in

the future.

The Company has entered into a management contract with

PGG Wrightson Funds Management Limited (Manager) dated

3 November 2006.

The agreement provides for the delegation of all management,

administration and investor relations of the Company to

the Manager, in accordance with instructions policies and

procedures agreed with the Board.

The services that will be provided by the Manager include;

• Managing the strategic development of the Company’s

assets;

• Advising the Board on investment opportunities and

proposals for investment;

• Negotiating the acquisition and sale of assets;

• Providing advice on securities structuring and compliance

assurance for the Company, including development of

constituting documentation if required;

• Providing all investor relations functions for the Company,

including reporting, communications and meetings;

• Using its best endeavours to ensure that the supporting

infrastructure exists for:

– development of farms on the scale envisaged;

– the development of management infrastructure to

support the Company’s growth;

– provision of farm inputs, including labour, of the

necessary quality and quantity; and

– processing and marketing of outputs;

• Supervising the farm manager;

• Liaising with government, regulatory and industry bodies

and agencies, and local communities in order to enhance

and preserve the reputation of the Company and any of its

subsidiaries, and their relationship with such bodies, agencies

and local communities;

• Building relationships with government, agencies,

agribusiness and local communities in Uruguay that lead to

the Company being acknowledged as a positive contributor

to the economy, the agriculture sector and the community

in Uruguay; and

• Provision of all day to day administration and ensuring the

Company maintains best practice governance standards and

internal risk management.


The Manager does not guarantee the performance of the

Company or any assets of the Company.

The Chief Executive of the Manager

will be Peter Baynes. The Directors of

the Manager will be Barry Alexander

Brook, the Chief Executive Officer of

PGG Wrightson, Michael Earl Sang, Chief

Financial Officer of PGG Wrightson and

Peter Edward Baynes.

Peter is a professional economist who,

early in his career, was Chief Economist of the National Bank.

Over the 19 years since, he has enjoyed a successful career at

CEO level in the New Zealand financial sector, most recently as

Chief Executive of Perpetual Trust.

PGG Wrightson Uruguay Limited

Management of the business in Uruguay will be undertaken

by a newly established, wholly-owned Uruguayan subsidiary

of PGG Wrightson Investments called PGG Wrightson Uruguay

Limited (PGG Wrightson Uruguay).

The Manager will enter into an agreement with PGG Wrightson

Uruguay (Farm Manager) delegating its obligation to provide

farm management services.

Pursuant to the agreement the Farm Manager is entitled

to recover the cost of on-farm services, including a normal

commercial fee commensurate with New Zealand practice

payable by the individual farm owning subsidiary companies

as appropriate.

The Chief Executive of PGG Wrightson

Uruguay is Carlos Miguel de León. The

Directors of the Manager will also be

directors of PGG Wrightson Uruguay,

together with Carlos Miguel de León.

Carlos is a well-respected businessman

and farmer. He has been PGG Wrightson’s

senior South American executive since

1999. Carlos has been largely responsible for the development

of PGG Wrightson’s successful seed operations from a zero base

to market leader.

The company will employ farm managers experienced in

New Zealand farming systems.

The term of the agreement is five years. On completion of this

term a notice period of three years is required to be given by

either party to terminate the agreement. There are rights of

termination for material breach and insolvency during the term.

The earliest the agreement can be terminated, other than for

breach or insolvency, is eight years.

The Manager will be paid a Management Fee of 1.5% per

annum on the gross asset value of the Company until 30 June

2008, thereafter reducing to 1.0% per annum. The gross asset

value of the Company will be calculated by the Manager in

accordance with generally accepted accounting standards

(based on the market value of the farm assets which are

subject to a revaluation each year).

In addition, the Manager will be paid a Performance Fee

calculated as 20% of the amount by which Share price

growth plus gross distributions exceeds 10% per annum

compounded. An adjustment will be made to ensure that

total Performance Fees paid to the Manager over time are

not enhanced by Share price volatility. Share price growth is

calculated as the percentage change in a 12 month period in

the volume weighted average market price of the Shares for the

quarter to 30 June. If the Shares do not list on NZSX by 30 June

2008, the average market price of the Shares will be determined

on the basis of the annual change in gross asset value of the

Company. The first payment of the Performance Fee will be

made in July 2008 in respect of the period from allotment to

30 June 2008 and thereafter annually in July in respect of the

previous financial year.

The Manager is responsible for its internal costs and expenses

incurred in connection with providing the services. The

Company (or its farm owning subsidiary companies) will be

responsible for costs and expenses payable to third parties,

which include printing and distribution of communications with

shareholders, Directors’ fees and expenses, audit and legal fees,

the costs of certain farm management services, and listing and

share registry fees.

The Company has agreed to indemnify the Manager against

all losses, costs and expenses suffered or incurred by the

Manager in relation to the Manager performing the Services,

except those resulting from negligence, fraud or breach of the

agreement by the Manager.


About Uruguay – an independent nation

The regional federation defeated

Brazil after a three-year war. The 1828

Treaty of Montevideo, fostered by

the United Kingdom, gave birth to

Uruguay as an independent state. The

nation’s first constitution was adopted

in 1830. The remainder of the 19th

century, under a series of elected and

appointed presidents, saw interventions

by neighbouring states, political and

economic fluctuations, and large inflows

of immigrants, mostly from Europe.

Jose Batlley Ordoñez, president from

1903 to 1907 and again from 1911

to 1915, set the pattern for Uruguay’s

modern political development. He

established widespread political, social,

and economic reforms such as a welfare

program, government participation in

many facets of the economy, and a plural

executive. Some of these reforms were

continued by his successors.

Source:Seepage10


Comparison of Farmingin New Zealand and Uruguay

Uruguay has extensive areas of farm land suitable for conversion to New Zealand style dairying and farms are of a good scale.

“Fly just about anywhere over rural Uruguay and the impression is of gently undulating Waikato/Southland type farm land as far as you can see in any direction.”

– NZ Farming Systems Uruguay Director and Southland dairy farmer, Murray Flett.


Land for development in Uruguay is abundant and very competitively priced4

Uruguay has a total area of 17.6 million hectares with 15.3

million hectares (87%) devoted to cattle, sheep and cropping

compared with 13.8 million hectares in New Zealand. Despite

the total land area being only two thirds the size of New

Zealand, Uruguay’s farmed area is 11% greater due to the very

high level of utilisable land and lower area in forest. Most of the

grazing land is unimproved native pasture, amounting to 11.7

million hectares. This has historically been the main forage base

and offers a huge potential for development. The landscape is

mostly flat to gently rolling, rising to a highest point of 513

metres. This contrasts with New Zealand’s landscape which is

predominantly mountainous with some large coastal plains.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

mm West 92 116 125 91 78 66 69 76 80 113 108 87 1099

mm Central 121 124 125 102 104 98 113 90 97 111 108 97 1287

mm East 99 107 90 72 89 99 107 111 106 98 83 62 1122

RH West 70 73 74 77 79 81 79 78 75 74 72 69 75

RH Central 65 70 73 77 80 82 82 78 76 73 70 65 74

RH East 75 77 80 83 85 85 85 83 83 82 78 76 81

Source:NationalMeteorologicalOffice,Uruguay–www.meteorologia.com.uy–InformacionClimatologia

Note:West–ColoniaWeatherStation,Central–PasodeLosTorosWeatherStation,East–RochaWeatherStation

Once a major supplier of beef to world markets, the Uruguayan

livestock industry has until recently stagnated for 30 years. The

large size of farms, absentee landowners and ready profits from

cattle grazing on native pastures have provided little incentive

to increase productivity. Land suitable for development has

been selling at less than $3,000 per hectare, although there is

some upward pressure on prices arising from investment by

neighbouring Argentinian investors for crops such as soya beans

and major forestry and pulp mill developments, mostly close to

the border in the west.

There are over 12 million cattle and 11 million sheep

in Uruguay, compared with 9.7 million and 39.5 million

respectively in New Zealand. While cattle numbers in Uruguay

have been rising gradually the national sheep flock has been

Comparison of Farming in New Zealand and Uruguay

4 Informationonland,agriculturallanduseanddevelopmentinUruguaycompiledbyNimmo-Bell&CompanyLimited


Rainfall distribution

Mean monthly rainfall (mm) and relative humidity (RH) (1961–1990)

West, central and east regions

140

120

100

80

60Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

mm West mm Central mm East RH West RH Central RH East

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Max West 27.3 27.2 25.4 21.7 18.3 14.9 14.6 16 18 20.9 23.8 26.7 21.2

Max Central 30.9 29.4 27.2 23.3 19.8 16.4 16.2 17.7 19.8 22.8 25.8 29.1 23.2

Max East 27.9 27.3 25.5 22.4 19.4 15.9 15.8 16.6 17.8 20.5 23.2 26.2 21.5

Min West 19.2 18.8 17.2 14.3 11.4 8.7 8.1 8.9 10.3 12.8 15 17.6 13.5

Min Central 18.8 18.4 16.5 12.7 9.9 7 7.2 7.8 9.3 12.1 14.5 17.2 12.6

Min East 16.1 16 14.5 11.3 8.4 6.7 6.4 6.5 7.7 9.9 11.8 14.4 10.8

Source:NationalMeteorologicalOffice,Uruguay– www.meteorologia.com.uy–InformacionClimatologia.

trending down rapidly from around 25 million in 1990 in response to the reduced

demand for wool.

The last census in 2000 showed that the country has approximately 32,000

livestock farms (somewhat fewer than New Zealand’s 47,000). Of these farms

the 9% that are over 1,250 hectares carry 51% of the stock.

Uruguay’s climate is not dissimilar to New Zealand’s

The temperate climate of Uruguay, with its mild winters and hot summers, is

closest in temperature to Northland in New Zealand and is suitable for intensive

pasture production systems. Rainfall, which averages around 1,200 mm per

annum is reasonably well distributed throughout the year with significantly more

rain in the spring and summer compared with autumn and winter in the west.

Temperatures in the summer, while at the high end of the suitable range in the

north and central regions of Uruguay, are significantly lower in the west and east.


Temperatures by region

Mean maximum and minimum monthly temperatures (1961–1990)

West, central and east regions

35

30

25

20

15

10

5


Max West Max Central Max East Min East Min Central Min West

Deg

rees

C

About Uruguay

– politics of the last 40 years

Economic, political, and social difficulties led to constitutional amendments, and the adoption of a new constitution in 1967.

In 1973, amid increasing economic and political turmoil, the armed forces closed the Congress and established a civilian-military

regime, characterised by repression and widespread human rights abuses. A new constitution drafted by the military was rejected

in a November 1980 plebiscite. Following the plebiscite, the armed forces announced a plan for return to civilian rule. National

elections were held in 1984. Colorado Party leader Julio Maria Sanguinetti won the presidency and served from 1985 to 1990.

The first Sanguinetti administration implemented economic reforms and consolidated democracy following the country’s years

under military rule.

Sanguinetti’s economic reforms, focusing on the attraction of foreign trade and capital, achieved some success and stabilised

the economy.

The National Party’s Luis Alberto Lacalle won the 1989 presidential election and served from 1990 to 1995. Lacalle executed

major structural economic reforms and pursued further liberalisation of the trade regime. Uruguay became a founding member

of MERCOSUR in 1991 (the Southern Cone Common Market, which includes Argentina, Brazil, Venezuela and Paraguay). Despite

economic growth during Lacalle’s term, adjustment and privatisation efforts provoked political opposition, and some reforms were

overturned by referendum.

In the 1994 elections, former President Sanguinetti won a new term, which ran from 1995 until March 2000. As no single party

had a majority in the General Assembly, the National Party joined with Sanguinetti’s Colorado Party in a coalition government.

The Sanguinetti government continued Uruguay’s economic reforms and integration into MERCOSUR. Other important reforms

were aimed at improving the electoral system, social security, education, and public safety. The economy grew steadily for most of

Sanguinetti’s term, until low commodity prices and economic difficulties in its main export markets caused a recession in 1999,

which continued into 2003.

The 1999 national elections were held under a new electoral system established by constitutional amendment. Primaries in April

decided single presidential candidates for each party, and national elections on October 31 determined representation in the

legislature. As no presidential candidate received a majority in the October election, a runoff was held in November. In the runoff,

Colorado Party candidate Jorge Batlle, aided by the support of the National Party, defeated Frente Amplio candidate Tabaré Vázquez.

The legislative coalition of the Colorado and National parties that held during most of Batlle s administration ended in November

2002, when the Blancos withdrew their ministers from the cabinet. Throughout most of his administration, President Batlle had

to handle Uruguay s largest economic crisis in recent history, which impacted on poverty and led to increased emigration. Aside

from successfully addressing the crisis, Batlle increased international trade, attracted foreign investment and tried to resolve issues

related to Uruguayans who disappeared during the military government.

On June 27, 2004 the parties held primary elections to select their candidates for the national elections to be held on October 31.

The Frente Amplio had already determined that Vázquez would be its candidate, the Colorados settled on former Interior Minister

Guillermo Stirling, and the Blanco Party chose Jorge Larranaga, a former state governor and senator. Vázquez won the national

election in the first round with a majority of the popular vote (50.7%) and was sworn in as President on March 1, 2005.

Source:Seepage10


Dairy profitability

Dairy farming is grass based in Uruguay with supplementary feed provided at the

dairy shed to cover variations in pasture production. Little or no reticulated water is

provided in the paddocks and the cows obtain their water from natural sources and at

the dairy shed, unlike New Zealand which is intensively watered through reticulation

to troughs throughout the farm.

The distribution of herds supplying Conaprole (Cooperativa Nacional de Productores

de Leche), the dominant producer co-operative, is given below. Milk supplied to

Conaprole is collected chilled from 2,350 farms and transported in insulated tankers.

Prices paid to producers for milk are based on protein, fat and quality and are

determined in advance by the co-operative. Occasionally, a final payment has been

made after a profitable season based on the milk supplied and equity the producer

has in the co-operative. Prices paid over the last ten years are given below. The fall in

price in US$ terms in 2002 was due to an outbreak of Foot and Mouth Disease (FMD)

and the financial crisis which are discussed on pages 62 and 32. In 2004 producers

benefited from the massive devaluation when the peso was floated. Prior to this the

domestic market was more important than exports and the price of milk was kept

artificially low compared to international market prices.

Distribution of herds

Cows/farm (incl. dry) % farms No. of farms

0–9 13.8 324

10–24 25.9 609

25–49 24.4 573

50–99 17.8 418

100–199 10.5 247

200–499 6.5 153

500–999 0.9 21

1000 and over 0.2 5

Total 100.0 2,350

Source:Nimmo-Bell&CompanyLimited

Under New Zealand pasture

management systems grass

growth in Uruguay is similar to

that in New Zealand.

Based on trials conducted by PGG

Wrightson, dry matter production

from improved pasture species under

New Zealand style management is

expected to average around 14,500 kg

DM/ha compared with production of

less than 4,500 kg DM/ha from native

grasses. This level of pasture production

compares favourably with established

dairying areas in New Zealand. With

irrigation, production is expected to

exceed 20,000 kg DM/ha.

Estimates of Kg DM per Ha per month

Pasture Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Native 540 491 414 334 252 167 125 128 293 376 626 752 4498

Improved 966 963 1563 1645 897 797 725 825 1459 1832 1923 1072 14667

Source:NZFarmingSystemsUruguayestimates

Dry Matter Production in Uruguay can be boosted to New Zealand levels

Pasture productivity – Native vs Improved

3000

2500

2000

1500

1000

500


Improved Native

Kg D

M/h

a

The profitability of dairy farming in Uruguay using New Zealand technology is likely to be significantly higher than it is in New Zealand.

Uruguayan milk prices are similar to those paid in New Zealand, farm development and operating costs are lower in Uruguay and the productivity of Uruguayan farms under New Zealand management systems should be no different.


Dairy farms are individually licensed by the Uruguayan Ministry of Agriculture and

Fisheries (MGAP) for the control of critical hygiene factors (water supply, employee

medical certificates, condition of buildings and installations) plus annual control for

brucellosis, TB and mastitis.

The environmental government agency, DINAMA, runs programmes in conjunction with

the industry that have been developed over the last nine years achieving good levels

of success. The government provides finance to assist farmers in the adoption of good

environmental practices. Management of dairy effluents is a cultural issue rather than

one dictated by law at this time and farmers have been working hard to improve the

reuse of effluents and water.

About Uruguay – Government

Uruguay’s 1967 constitution institutionalises a strong presidency, subject to

legislative and judicial checks. The president’s term is five years. Thirteen cabinet

ministers, appointed by the president, head executive departments. The constitution

provides for a bicameral General Assembly responsible for enacting laws and

regulating the administration of justice. The General Assembly consists of a

30-member Senate, presided over by the vice president of the republic, and a

99-member Chamber of Deputies.

The highest court is the Supreme Court; below it are appellate and lower courts and

justices of the peace. In addition, there are electoral and administrative courts, an

accounts court, and a military judicial system.

The armed forces are constitutionally subordinate to the president through the

minister of defence. By offering early retirement incentives, the government has

trimmed the armed forces to about 14,500 for the army, 6,000 for the navy, and

3,000 for the air force. As of February 2003, Uruguay had 1,754 soldiers deployed in

11 UN peacekeeping missions. The largest groups were in the Congo, where 1,549

Uruguayan troops controlled one sector of the country, and the Sinai, where 60

troops were stationed.

Source:Seepage10

Prices paid to producers for milk

Year Average price % change Average price % change (US c/l) (Peso/litre)

1996 19.2 1.54

1997 19.1 –0.5 1.81 17.5

1998 16.4 –14.1 1.71 –5.5

1999 14.5 –11.6 1.64 –4.1

2000 14.9 2.8 1.80 9.8

2001 15.3 2.7 2.09 16.1

2002 11.2 –26.8 2.07 –1.0

2003 11.8 5.4 3.19 54.1

2004 14.4 22.0 4.27 33.9

2005 16.8 16.7 4.50 5.4


Productivity levels on Uruguayan farms utilising New Zealand management systems are expected to be similar to those achieved in New Zealand.

Per cow milk solids production on better Uruguayan farms is already similar to New Zealand’s. NZ Farming Systems Uruguay expects that as stocking rates are increased as a consequence of better pasture species and management, and increased fertility and water reticulation, per hectare milk solids production in Uruguay will be at least as good as that achieved in New Zealand.


Milk processing

The Uruguayan milk industry supplies 1,490 million litres per year of which around

1,100 million litres are processed industrially, compared with 14,600 million litres

in New Zealand (2004). Trends in milk processed by the industry are shown in the

table below. Over the nine year period from 1996 total supply has increased at an

annual average compound rate of 2.3%. Supply from Conaprole, which is more export

orientated than the rest of the industry, has grown at a faster rate than the industry as a

whole at around 4% per annum. The decrease in supply in 2000 was due to a drought in

the summer of 1999-2000, while the decrease in 2002 was due to movement controls

associated with the FMD outbreak.5

The value of milk product exports has

been growing rapidly at a compound rate

of 5% from 1998 to 2005 rising from

US$184 million to US$264 million. In

addition there has been a major shift in

destination away from Brazil and Argentina

which jointly made up 73% of exports

in 1998 to only 12% in 2005. The major

market in 2005 was Mexico at 29%, which

has grown from 5% in 1998.

While Conaprole processes 60% of all milk

produced in Uruguay and is the largest

of five milk processors based in Uruguay

by a significant margin, there are also

two Argentinian milk processors who buy

milk from Uruguay. This choice of milk

processor ensures that a competitive

environment exists for the sale of milk.

Milk processed by the industry

Year Litres (million) % change

1996 1050

1997 1100 4.8

1998 1109 0.8

1999 1134 2.2

2000 1020 –10.1

2001 1100 7.9

2002 1038 –3.6

2003 1084 4.4

2004 1202 10.9

2005 1289 7.3


Farm Performance

The following table shows a comparison of key performance data on dairy farming in

New Zealand and Uruguay.

Uruguay**

New Zealand Existing Targeted

2004/05*

Kg milk solids/cow 339 327 364

Cows/ha 2.7 0.8 2.6

Kg milk solids/ha 895 275 943

Milk price $4.44 $4.00 $4.00

Total Farm Expenses $2,441 $886 $1,418

Economic Farm Surplus/ha $950 $308 $2,384

Total Farm assets/ha $36,084 $5,144 $10,749

Economic Farm Surplus/Total Farm Assets (per ha) 2.6% 6.0% 22.2%

* Source:2004-2005EconomicSurveyofNZDairyFarmers,Dexcel2006.ThisisavailabletothepublicandcanbepurchasedfromDexcel,POBox3221,Hamilton

** PGGWrightsonestimatesatcurrentcostsandprices

5Source:Nimmo-Bell&CompanyLimited

This season, the farmer owned dairy co‑operative, Conaprole, expects to pay its suppliers the equivalent of NZ$4.00 per kg of milk solids supplied.

Conaprole’s projected payout of US$0.18/litre for the current season equates to NZ$4.00 per kilogram milk solids. Payment is made in full within 45 days of the end of the month in which milk is supplied.

Farmer owned dairy co‑operative, Conaprole, is Uruguay’s largest company and it wants to get bigger.

While six other dairy companies compete for milk supply from Uruguayan dairy farmers, 70 year old Conaprole processes about 60% of all Uruguay’s milk through seven modern plants. Conaprole is actively seeking to increase the milk volumes it processes and significant farmer investment in shares is not a prerequisite to supply.


About Uruguay – foreign relations

Uruguay traditionally has had strong political and cultural links with its neighbours and Europe. With globalisation and regional

economic problems, its links to North America have strengthened. Uruguay is a strong advocate of constitutional democracy,

political pluralism, and individual liberties. Its international relations historically have been guided by the principles of non-

intervention, multilateralism, respect for national sovereignty, and reliance on the rule of law to settle disputes. Uruguay’s

international relations also reflect its drive to seek export markets and foreign investment. It is a founding member of MERCOSUR.

Uruguay is a member of the Rio Group, an association of Latin American states that deals with multilateral security issues (under

the Inter-American Treaty of Reciprocal Assistance). Uruguay’s location between Argentina and Brazil makes close relations with

these two larger neighbours and MERCOSUR associate members Chile and Bolivia particularly important. Usually considered a

neutral country and blessed with a professional diplomatic corps, Uruguay is often called on to preside over international bodies.

Uruguay is a member of the Latin American Integration Association (ALADI), a trade association based in Montevideo that includes

10 South American countries plus Mexico and Cuba.

Over recent years, relations with the U.S. have become increasingly important. In 2002, Uruguay and the U.S. created a Joint

Commission on Trade and Investment (JCTI) to exchange ideas on a variety of economic topics. In March 2003, the JCTI identified

six areas of concentration until the eventual signing of the Free Trade Area of the Americas (FTAA) in 2005: customs issues,

intellectual property protection, investment, labour, environment, and trade in goods. In 2005, Uruguay and the U.S. signed a

Bilateral Investment Treaty and ratified an Open Skies Agreement.

Uruguay cooperates with the U.S. on law enforcement matters such as regional efforts to fight drug trafficking.

While Uruguay’s exports are focused on the Americas, New Zealand’s major markets

are now in North and South East Asia (40%), with 16% to North America and 11% to

South and Central America, primarily Mexico and Venezuela.6

Conaprole is the country’s largest private company, largest milk processor with a

60% market share, and leading exporter. It was established in 1936 by the merger of

several existing co-operatives and now has annual sales, both domestic and export,

of over US$300 million. The company processes 900 million litres annually, employs

1,450 people and produces over 300 products. By comparison, Fonterra Co-operative

Group has around a 97% market share in New Zealand, has annual sales of around

US$8.5 billion, processes over 14 billion litres of milk and has 17,400 employees.7

Source:InformationcollatedbyNimmo-Bell&CompanyLimitedbasedonindustryinformation.

6Source:Nimmo-Bell&CompanyLimited7Source:Nimmo-Bell&CompanyLimited


Mexico5% Venezuela

12%

USA4%Others

6%

Argentina6%

Brazil67%

Milk product export markets 1998 (by USD value)

Mexico29%

Venezuela10%

USA9%

Others40%

Argentina2%Brazil

10%

Milk product export markets 2005 (by USD value)

Conaprole Milk Product Exports by country (%)

1998 1999 2000 2001 2002 2003 2004 2005

Brazil 70 77 65 41 40 46 18 16

Mexico 5 7 9 24 28 18 29 21

EU 1 5 4 11 5 9 11 10

Argentina 6 1 2 8 4 7 3 3

Venezuela 1 2 0 2 1 1 5 11

Chile 1 0 4 7 2 9 10 8

Others 16 8 16 7 20 11 24 31

US$ million 117 84 103 79 91 84 107 220.2


2005 Breakdown of Exports

by value Uruguay New Zealand

Product % %

Milk powder 40 46

Cheese 33 19

Butter 10 16

UHT 8 –

Other 9 19


There are considerable differences

from New Zealand in exports by value

reflecting the higher proportion of

production consumed in the domestic

market in Uruguay.

Like the New Zealand industry Conaprole

operates modern sophisticated

factories using high end quality control

procedures. Milk is analysed with the

latest generation equipment (FOSS)

from individual producer sample testing

for composition, bacteria count, somatic

cells and the presence of antibiotics.

Beef 8

Until the late 1970s the beef slaughter and processing industry in Uruguay was

under government control. In 1978 the government opened the market to private

companies and from then private slaughter houses were allowed to operate and

domestic quotas were reduced. Capital was attracted to the industry and new, more

advanced, small and medium sized facilities were built. By 1980, the government had

quit the industry and more private firms had entered to compete in both the export

and domestic markets.

Uruguay was declared FMD free in 1995. This opened up new markets that had until

then been closed to non-cooked meats. However, in April 2001 Uruguay suspended

exports when new cases of FMD were discovered near the border with Argentina.

Export markets began to reopen when no new cases were discovered after August

2001 and Uruguay was granted “FMD-free with vaccination” status by the World

Organisation for Animal Health shortly after. In November 2001 it resumed exports

to the EU and in June 2003 to the United States. Uruguay prohibits the import

of live animals and/or genetic material from countries affected by FMD or other

exotic diseases. The country is also classified as low risk for bovine spongiform

encephalopathy (BSE) by the World Organisation for Animal Health.

The principal factories are ISO

9001/2000 certified. Hazard Analysis and

Critical Control Point (HACCP) system

is being implemented in all processes.

Export certification is carried out by

MGAP using ISO 9025 certified National

Technical Laboratory. Traceability

and “recall” has been established in

operating procedures.

New plants will be required in

coming years to process the additional

expected supply.

8Sourceofstatisticsintext:Nimmo-Bell&CompanyLimited


The MGAP regulates the industry and

is responsible for assuring food safety,

quality control, animal welfare (all

cattle are now vaccinated for FMD

free of charge) and environmental

control, issuing permits to slaughter

houses. The MGAP has issued approval

certificates and export permits to 37

slaughter houses. Of these, the USDA

has awarded permits to the USA to 19

facilities and the EU permits for 24 (New

Zealand has 34 beef and 39 sheep plants

licensed). These facilities use state-of-

the-art technology and highly skilled

labour to fulfil the demanding sanitary

regulations of these two major markets

based on HACCP principles. Commercial

transparency is supervised and assured

by the National Meat Institute (INAC).

From around the mid-1990s the industry

has operated at around 60% to 70% of

capacity, only a little higher than New

Zealand’s average of around 58%, which

has limited the entrance of new players.

Since 2002, the increase in demand

driven by the devaluation of the peso

and ready access to the NAFTA area has

attracted new investment in chillers,

coolers and other infrastructure. Labour

productivity has also increased as excess

labour has been removed.

Exports are concentrated in the top six

slaughter houses which accounted for

more than half of the total exports in

2005. Traditionally, slaughtered animals

have been priced on a live weight basis,

but in the last few years the trend

has been towards carcass pricing and

in 2004 almost 70% of animals were

priced in this way. A number of firms

are now moving towards new meat

grading systems to provide carcass

measurements linked to value based

marketing programs. There is also

the start of a shift to more intensive

production systems moving away from

extensive grazing and low inputs to

improved pastures producing prime

animals in 18 months as opposed to

three years under the old system. This

is in response to market demands for

younger animals.

Beef production increased following

achievement of FMD free status in 1995,

which allowed access to new markets

for meat and live animals. The expansion

was facilitated by a significant decline

in sheep numbers. Cattle slaughter

averaged 1.5 million head during the

1990s, falling to 1.37 million in 2001.

Beef exports by destination

2001 2002 2003 2004 2005

tons USD tons USD tons USD tons USD tons USD (cwe) (thd) (cwe) (thd) (cwe) (thd) (cwe) (thd) (cwe) (thd)

NAFTA 67,185 79,097 13,826 12,686 155,305 176,014 313,124 448,597 368,905 540,274

USA 22,560 30,652 10,239 9,272 93,238 112,602 265,976 372,729 344,160 497,882

Canada 40,639 42,930 3,555 3,373 62,048 63,381 46,841 75,290 24,549 42,102

Mexico 3,985 5,516 32 41 19 31 307 578 196 290

EU 37,695 58,033 55,642 85,065 33,919 67,463 35,098 91,544 47,001 124,809

Mercosur 27,842 36,103 50,165 45,511 35,889 39,089 18,638 28,309 18,796 31,524

Brazil 15,306 21,647 26,071 22,338 10,224 13,297 8,416 14,307 10,434 18,995

Chile 3,479 4,072 19,005 19,533 17,304 20,047 7,250 11,603 5,683 9,843

Argentina 9,056 10,384 5,089 3,641 8,371 5,744 2,972 2,399 2,680 2,686

Israel 31,050 39,215 40,947 45,607 30,587 33,404 13,750 20,839 10,970 18,689

Russian Fed. 18,637 11,669 11,004 6,282

Canary Islands 7,437 10,960 3,699 8,501 2,788 8,909 3,137 9,812

Algeria 37,751 33,323 25,521 23,333 2,566 3,393

Others 12,401 13,536 52,368 35,937 22,827 17,643 17,643 17,643 29,409 39,453

Total 176,173 225,984 258,136 269,089 317,545 375,737 403,696 623,502 478,218 764,561



Prior to its achieving FMD free status,

the MERCOSUR countries (the Southern

Common Market comprising Brazil,

Argentina, Paraguay, Venezuela and

Uruguay), the European Union and

Israel were the primary destinations for

Uruguayan beef. Since then the United

States has become by far the most

important export market for beef taking

around 76% on a carcass weight basis

and 65% by value. The next most

important markets are the United

Kingdom (8%), Canada (6%), and

Germany (4%). Exports to the United

States are regulated by a World Trade

Organisation negotiated tariff rate quota

(distributed to Uruguayan companies

by the Uruguayan government) which is

currently set at 20,000 tonnes each year

for chilled and frozen beef. Exports within

the quota are subject to a nominal fixed

Since then, slaughter numbers have

increased rapidly reaching a record

2.39 million head in 2005, a similar

level to New Zealand.

Meat exports play an important role

in Uruguay’s economy. In 2005, meat

exports accounted for 27% of the total

value of exports, with beef accounting

for 21%, somewhat higher than New

Zealand’s 16% and 6% respectively.

During the 10 years to 2005 total meat

export value has increased by 194%.

The FMD outbreak in 2001 reduced

beef exports to $226 million from

$479 million in the previous year. Since

2001, beef exports have trended up

to a record high of US$765 million in

2005 (478,000 tonnes carcass weight

equivalent) of which about 15% was

chilled and 80% frozen.

tariff of 4.4 cents per kilogram while

above the quota there is an ad valorem

tariff of 26.4%.

Beef exports to the European Union

amounted to approximately 25,500

tonnes in 2005. Of this 6,300 tonnes

comes under the Hilton quota which

is subject to a 20% ad valorem tariff,

while quantities above the quota pay

a significantly higher rate. Given the

tariff structure, exports to the EU

comprised mostly high-value cuts such

as tenderloin, striploin, rumps and ribeye.



Bovine meat export markets 2001 (by USD value)

Mercosur16%

Israel17%

CanaryIslands

1%

NAFTA35%

EU26%

Other5% Mercosur

4%

Israel2%

CanaryIslands

1%

NAFTA72%

EU16%

Bovine meat export markets 2005 (by USD value)

Other5%

NZ Farming Systems Uruguay has been established to enable New Zealand farmers

and investors to invest in dairy and beef farming in Uruguay, a country where, in PGG

Wrightson’s experience, the application of New Zealand farm and pasture management

expertise can translate into strong gains in farm productivity and profitability.

Wrightson Pas S.A. – genesis of the opportunity

In 1999 Wrightson Limited acquired 51% of a local Uruguayan Company, Semillas Pas,

which had been successfully operating in the Uruguayan seeds sector for seven years.

Semillas Pas was run by a group of progressive farmers who were trying to develop new

grassing technology for their own farms. They found that the new pastures produced

impressive results even with low rates of fertiliser application.

The company (which changed its name to Wrightson Pas S.A.), has had strong growth

both in turnover and returns since 2002. During the last three years its sales turnover has

increased by 58%, 60% and 30% respectively reaching US$12 million in the year to June

2006. In PGG Wrightson’s opinion it is the leader in the seeds business in Uruguay and

according to management estimates it has a 52% market share.

Wrightson Pas S.A. has based its marketing and production strategy on strategic alliances

with local producers. It is a company that is focused on adding value to farm productivity

and returns, rather than being just an input supplier.

With a promising outlook and expansion into the other Cone countries of South America in

mind, in 2005 PGG Wrightson acquired additional shares and now owns 86% of Wrightson

Pas S.A.

Background to the Investment Opportunity


Applying New Zealand farming systems – proof of concept

In 2001 Wrightson Pas S.A. leased a small beef finishing farm to demonstrate the

productivity improvement that could be achieved with new grasses and good New

Zealand pasture management. The demonstration farm was deliberately located

in an area considered to have relatively poor productivity some 120 kilometres

northwest of Montevideo, just west of Ismael Cortinas.

Without irrigation, significant productivity gains have been achieved on the

demonstration farm using a six point plan as follows:

1. Capital Fertiliser: Phosphate (P) is applied to raise available phosphate to at

least 20 ppm (parts per million), typically applying 300–400 kg per hectare

of super phosphate (available P of native grassland is around 4 ppm). This

promotes grass growth, increases drought resistance, brings forward spring

growth and extends the growing season.

2. Subdivision: Paddocks are subdivided to control pasture growth, particularly

in the spring, and to increase utilisation of what is grown. Utilisation of spring

growth is essential otherwise the new pasture runs out and productivity is lost.

3. Water Reticulation: Water is reticulated to all paddocks to ensure that cattle

have access to good water at all times. Experience in Uruguay shows that if

water is not readily available and cattle have to walk a long way, production is

lost and competition between animals increases dramatically.

4. Pasture Species: New improved pasture species are sown using direct drilling.

As a weed control measure, pastures are initially undersown with annual

ryegrass before being sown with either perennial ryegrass or tall fescue once

weeds are under control. A summer crop such as sorghum augments feed in

the summer pinch period and helps with weed control.

5. Stocking Rate: Cattle numbers are increased to utilise the additional feed.

6. Maintenance Fertiliser: Once new pasture is established fertility is maintained

through annual phosphate and urea dressings.

With irrigation it is expected that dry matter production can be raised to exceed 20,000kg/ha (primarily by increasing summer production) which will yield further significant increases in liveweight gains.

“By utilising improved pasture species, fertiliser and controlled

grazing, the experience of PGG Wrightson has shown that annual

dry matter production of less than 4,500kg/ha from native

pastures can be more than trebled, to around 14,500kg/ha in an average season.

With more animals per hectare and better feed for those animals, the consequence is

that productivity has increased from around 100kg (liveweight gain) per annum per

hectare in native pasture to an average of 900 kg.”

StatementbyPGGWrightson

Individual farmers trying to farm in Uruguay are likely to struggle.

NZ Farming Systems Uruguay believes that difficulties imposed by distance, language, culture, and lack of local knowledge mean that a large scale will be required to successfully develop and operate farms in Uruguay. The Company also believes that this favours a corporate rather than a go it alone approach to the development of New Zealand style dairy farming in Uruguay.

CarlosdeLeón,ChiefExecutiveofPGGWrightsonUruguay

NZ Farming Systems Uruguay perceives Uruguay to be a relatively low risk country to invest in.

Uruguay is a western style democratic country that PGG Wrightson has found to be similar to New Zealand but less developed, with well educated, friendly and hard working people and a government that is committed to attracting and protecting foreign investment in order to speed up development.


About Uruguay – recovery from crisis

In some respects, Uruguay is reminiscent of New Zealand emerging from its

economic and financial crisis of 20 years ago. Then, New Zealand was dependent

on a single export market and, when that had to change, came close to defaulting

on an unsustainable level of foreign debt. Similarly, until recent years Uruguay was

highly dependent on exports to its larger neighbours, Brazil and Argentina, and paid a

heavy price for that dependence when their economies ran into trouble. Devaluation

in Brazil in 1999 made Uruguayan goods less competitive; an outbreak of foot and

mouth disease in 2001 curtailed beef exports to North America, and in late 2001,

an economic crisis in Argentina dramatically reduced exports and tourist receipts

(the white sands of Punta del Este are a popular holiday destination for Argentinians).

A financial crisis developed in mid-2002 when Argentine withdrawals from Uruguayan

banks started a bank run that was overcome by major borrowing from international

financial institutions. This, in turn, led to serious debt sustainability problems. Multi-

party consensus was achieved to address the issues through a package of measures

endorsed and supported by the IMF which included floating the peso. A surge in

inflation (25.9% in 2002) and a sharp devaluation of the currency created short-term

pain but confidence was restored. Uruguay’s economy resumed growth in 2003, with a

2.5% rise in GDP. GDP grew about 12% in 2004 and around 6% in 2005. Inflation has

dropped back to around the 6% level.

Uruguay’s rapid recovery over the past couple of years has been fuelled by increased

exports, especially to North America. The U.S. became Uruguay’s largest export

market in 2004, thanks in large part to meat exports, and the country is now far less

dependent on the vicissitudes of its large South American neighbours. The manner

in which the 2002 crisis was addressed effectively through democratic processes,

together with Uruguay’s positive investment climate, strong legal system, open

financial markets and equal treatment of national and overseas investors inspire

confidence for the future.

Source:Seepage10

New Zealand style dairy farms can be established in Uruguay for about 25% of the per hectare cost of buying an established dairy farm in New Zealand.

High quality Uruguayan farm land can be purchased for around NZ$3,000 per hectare and converted to a New Zealand style intensive dairy farm for around NZ$5,000 per hectare.

NZ Farming Systems Uruguay has first mover advantage.

While still cheap by New Zealand standards, the price of Uruguayan farm land has increased significantly during the last year as a result of competition from other foreign investors buying land for other uses, most notably forestry and soya beans. These price increases favour an early entry by investors looking to benefit from the introduction of New Zealand style dairy farming to Uruguay. Only NZ Farming Systems Uruguay is currently in a position to offer New Zealand farmers and investors a passive opportunity to participate in such a development.


The Investment Opportunity

The net proceeds of the Offer will be applied in part to

further development of the three farms being purchased from

PGG Wrightson Investments and in part to purchasing and

developing unimproved prime agricultural land in Uruguay for

development into high class beef and dairying operations.

The three farms being purchased from PGG Wrightson

Investments are known as Valle de Soba, Tambo El Cabure

and Menafra and will be acquired for a total purchase price

of US$11,926,228. The three farms and associated farm

assets are held by PGG Wrightson Investments in two

Uruguayan nominee companies – Gabefox S.A. and Gimley

S.A. The Company will acquire all the shares in these nominee

companies. The farms, including livestock and machinery, were

acquired by PGG Wrightson Investments for US$7.6 million.

This figure is not directly comparable with the current valuation

owing to expenditure on farm development and the increased

stocking rate that accompanied it. The increase reflects in part

an increase in capital value resulting from the development

that has been undertaken during the period of PGG Wrightson’s

ownership.

PGG Wrightson Investments purchased these farms in 2005

to further demonstrate the value of the New Zealand pasture

based intensive system on a larger scale. Allied with this

was the need to learn about the intricacies of developing

Uruguayan farms. A key part of gaining this broader experience

has been the development of a team of Uruguayan managers

and advisors that provides valuable local experience in farm

purchase, development and operations including dealing with

government, regulatory, banking, legal and tax issues. These

units are now at the mid-point of their development and have

shown a dramatic uplift in performance.

The three farms have been valued independently on

30 October 2006 by a leading Uruguayan agribusiness

company, Firm Rodríguez Romualdo Negocias Rurales. The

valuation which is set out on pages 49 to 56, was prepared

on a current market value basis, assuming a willing buyer

and willing seller, on joint instruction from PGG Wrightson

Investments, as vendor, and the Company, as purchaser. The

valuation assesses the value of the farm owning subsidiary

companies, Gabefox S.A. and Gimley S.A., at US$9,303,028

and an additional US$2,414,400 for livestock to be acquired,

and a further US$208,800 for plant and machinery used for all

three farms. The valuation for the farms is allocated as follows:

Valle de Soba, US$2,186,348; Tambo El Cabure, US$4,413,749;

and Menafra, US$2,702,931. A conditional purchase contract

has been entered into between PGG Wrightson Investments

and NZ Farming Systems Uruguay to buy the farm owning

subsidiary companies (which own the farms, and farm assets

including livestock) at this agreed valuation.

Consideration for the purchase will be by an issue of partly paid

ordinary shares and cash, in equal parts. The partly paid shares

will be issued at the same price and on the same terms as

those issued in this Offer.

PGG Wrightson Investments intends to use the cash it receives

in part payment for the sale of the farms to NZ Farming

Systems Uruguay, to retire debt it incurred when it purchased

the farms in 2005. PGG Wrightson Investments will also

invest further in the Company when it makes the instalment

payment due on its partly paid shares in December 2007.

PGG Wrightson Investments will undertake not to sell shares

issued in consideration for the farms it sells to NZ Farming

Systems Uruguay for at least three years from the date of this

Offer Document and intends to hold its shares as a long-term

investment. Settlement for the sale of farm owning subsidiary

companies (which own the farms, and farm assets including

livestock) from PGG Wrightson Investments to NZ Farming

Systems Uruguay will be on 15 December 2006, the date

Shares will be allotted under this Offer.

The farm purchase contract is conditional on a minimum

amount of $50 million being raised under the Offer. Further

information about the farm purchase contract is contained

on page 70.

The ownership of the three freehold farms to be acquired

from PGG Wrightson Investments will continue to be through


the nominee companies, Gabefox S.A. and Gimley S.A., which

currently own the farms and farm assets. NZ Farming Systems

Uruguay will acquire the shares in those nominee companies.

The farms are located in the Rio Negro region, just north of the

provincial town of Young near the Argentinian border. This land

is some of the best in Uruguay and is keenly sought after by

Argentinian investors for soya bean cropping. The farms are in

close proximity with a total area of 2,686 hectares.

A brief summary of development by PGG Wrightson of the

three farms is as follows:

Valle de Soba, (624 hectares). This property is currently grazing

dairy heifers. Approximately half the farm area was under-

sown during March 2006 and a further 15% was over-sown

at the same time. An initial base dressing of 150–200kg super

phosphate was also applied and a further 100kg/ha of fertiliser

(Nitrogen:Phosphorus:Potassium N:P:K 20:40:0) was applied

with the grass seed. Paddocks on this property have also been

extensively subdivided and drinking troughs provided.

Tambo El Cabure, (1,161 hectares). This property is currently

milking 1,100 cows through a modern 48 bail rotary cowshed.

PGG Wrightson started milking on this farm in January 2006

and an average of 959 cows were milked until the end of May

with average per cow production of 14.1 litres per day (0.96 Kg

Milk solids). This production was achieved without irrigation or

water troughs in paddocks.

Approximately 70% of the farm area was under-sown with

a mixture of ryegrass, lotus, white clover and fescue over the

period late February to May 2006. The balance of the farm was

over-sown at the same time and a fertiliser programme similar

to that used on Valle de Soba was applied.

Stock numbers will continue to be increased as paddocks are

subdivided, water is reticulated and a centre pivot irrigation

system is installed. Water for irrigation is plentiful and a storage

dam is to be built.

Menafra, (901 hectares). This property is currently grazing

steers and dairy heifers and is being developed for dairying.

New pastures have been and are being under-sown, and

capital fertiliser has been applied. Plans are also in place for the

construction of two new cowsheds, and dams and centre pivot

irrigation systems. Consistent with these plans, paddocks are

being subdivided and drinking water reticulated.

Future development

The initial development programme for these farms plans

for 60% of each unit in dairy production with 20% each in

heifer rearing and steer beef production. Around half the

dairy area is to be irrigated most probably utilising water

harvesting techniques rather than bores. Quotations have

been secured for centre pivot irrigation at an average cost of

US$1,250 per hectare.

Once initial development has been completed a decision

will be made as to whether the area in dairy on each unit will

be expanded.

Prospective stocking rates are a maximum of 2.6 cows per

hectare. The heifer and steer units will be stocked at around

3.5 head per hectare and calves will be stocked at around seven

head per hectare.

Internal subdivision aims to provide an average paddock size of

around 12 hectares and consists of two wire electric fences at a

cost of less than US$1.00 per metre erected. Each paddock is to

have permanent water via a reticulated trough system.

An indication of the infrastructure available for development

is given by the fact that on the three farms, 1,500 hectares of

land were sown in new pasture species over a 10-day period

in February 2006. High capacity machinery used for cropping

can be contracted at the ideal time for sowing pasture at very

competitive prices as it is not being used at this time of the

year. Labour cost is significantly lower than in New Zealand and

all other inputs, such as plastic water pipes and tanalised posts

are available.

Purchase and development of additional farms

In addition to the three farms being acquired from PGG

Wrightson Investments, the Company plans to source and

purchase additional farms and undeveloped farmland using

money raised in the Offer and develop these farms by applying

the six point programme discussed on page 31. Farms that

are acquired will generally be divided into units of between

600 and 1,000 hectares and will be developed over a period of

several years into high class beef and dairying operations.

Under New Zealand management systems, dairy farm operating costs in Uruguay are expected to be about 40% lower than they are in New Zealand.

It has been PGG Wrightson’s experience that compared with New Zealand, most farm input costs are significantly cheaper in Uruguay, most notably the big ticket items of labour and feed.


Financial Information

Financial returns are expected to increase over time as the

Company purchases farms, completes its development

programmes and reinvests retained earnings into further farm

purchases and development.

Subject to available profits and normal prudential

requirements, the Company’s dividend policy will reflect

a desire to pay a minimum dividend to shareholders that

equates to an after tax yield to investors of 6% on the initial

investment. It is expected that the first dividend will be paid in

respect of the financial year ending 30 June 2009.

The Company does not intend to undertake long-term

borrowing in its first year, however, it is likely to use vendor

financing and short-term bridging finance to provide flexibility

in its operations. It may also borrow to finance the purchase

of suitable farms in anticipation of receipt of the second

instalment of Offer proceeds.

The risks to which returns are subject are discussed in What are

my risks? on page 60.

Securities Act exemption

Under the Securities Act (NZ Farming Systems Uruguay

Limited) Exemption Notice 2006 (Exemption Notice) the

Company has been exempted from compliance with certain

provisions of the Securities Act 1978 and the Securities

Regulations 1983. These relate to the acquisition by the

Company, from PGG Wrightson Investments of Gabefox S.A.

and Gimley S.A., which own the three farm properties and

related farm assets at Valle de Soba, Tambo El Cabure and

Menafra (Farms).

Specifically, the Company is exempted from the requirement to

include in this Offer Document historical financial information

for the five years to the date of this Offer Document in respect

of the businesses carried out by Gabefox S.A. and Gimley S.A.

In addition, the Company is exempted from the requirement to

set out the net tangible asset backing per Share offered in this

Offer Document, calculated on the basis that the farm owning

subsidiary companies had been acquired, and all Shares offered

had been allotted by the Company.

The Exemption Notice requires that the following statements

appear in this Offer Document in respect of the purchase of

the Farms.

The directors of PGG Wrightson Investments have

warranted that no external valuations were sought prior to

the purchase of the Farms by PGG Wrightson Investments,

that the decision to purchase the Farms was based on

internal business case analysis, and that no other financial

information was available to them regarding the historical

performance of the Farms when they were purchased by

PGG Wrightson Investments.

The material information available to PGG Wrightson

Investments in preparing the internal business case

referred to above was general background information

on farm land in Uruguay, including soil index and type,

condition of land, location, water access and topography.

Coupled with this PGG Wrightson understood that an

offer had been made for the farms by another prospective

purchaser at US$2,000 per hectare.

The Directors are also required under the Exemption

Notice to confirm that the five year historical information

referred to above cannot be provided in the Offer Document

because the Company has no financial information

relating to the Farms prior to their acquisition in 2005,

and has only internal management financial information

relating to the Farms and the farm owning subsidiary

companies subsequent to their acquisition. The effect of

this is that the Company is instead including prospective

financial information contained in this section of the Offer

Document, and the valuation referred to on pages 49 to 56.


Further, the Directors are required by the Exemption Notice

to state why they believe that it is reasonable, in their opinion

to present the prospective pro-forma statement of financial

position as at 15 December 2006 on the basis of an assumption

that 100 million Shares will be allotted. The Directors confirm

that it is reasonable in their opinion that a mid-point between

the minimum subscription amount of $50 million, and the

maximum offer amount of 150 million Shares, was required

to be used by the Company in the prospective financial

information contained in this Offer Document. Based on

confidential market research, the Directors believed the Offer

would be modestly oversubscribed and set this at a 10% over

subscription level – of 82 million Shares. Taking into account

shares to be issued in part consideration for the farm purchase,

this amounts to 100 million Shares on a rounded basis.

As a condition to the Exemption Notice, the Company is

required to include prospective financial information in

accordance with FRS-42: Prospective Financial Information in

relation to:

• Prospective pro-forma statement of financial position at

15 December 2006.

• Prospective statements of financial position at 30 June 2007,

and 30 June 2008.

• Prospective statements of financial performance for the

seven month period ending 30 June 2007, and the year

ending 30 June 2008.

• Prospective statements of cash flows for the seven month

period ending 30 June 2007, and the year ending 30 June

2008.

This prospective financial information is presented for the NZ

Farming Systems Uruguay Group (the Group), comprising the

Company and all its operating subsidiaries in Uruguay. The

Group’s business is to acquire and develop Uruguayan farmland

applying intensive pasture based farm management systems

developed and refined in New Zealand.

During the periods presented in the prospective financial

information the Group is expected to complete the

development of the three farm units to be purchased (by the

purchase of farm owning subsidiary companies) from PGG

Wrightson Investments, and is projected to acquire a further

10 farm units for development and conversion into dairy units

over the prospective period.

The prospective financial information has been the subject

of due diligence by the Directors. Although due care and

attention has been taken in preparing the prospective financial

information, the Directors cannot provide assurance that the

prospective financial information will be achieved.

The prospective financial information has been presented in

order to assist potential investors in making their decision as

to whether to invest in the Company. The prospective financial

information has been prepared using assumptions which, in the

opinion of the Directors, have a reasonable and supportable

basis. Actual results may vary from the prospective financial

information due to the non-occurrence of anticipated events

or alternatively events occurring that were not anticipated and

any variations may be material. Investors must consider the

assumptions described below in order to fully understand the

prospective financial information.

The prospective financial information contained within this

Offer Document is not intended to be updated subsequent to

the registration of this Offer Document.

General assumptions

Economic environment

There will be no material change in the general economic

environments of New Zealand or Uruguay.

Legislative and regulatory environment

There will be no material change in the legislative or regulatory

environments in which the Group operates.

Industry conditions

There will be no material changes to competitive activity,

industry structure, general industry conditions or the employee

and independent contractor environments in the markets in

which the Group operates.

Competitive environment

There will be no material change to the competitive markets

in which the Group operates, nor any change in competitor

activity. No new entrants will materially change the

competitive environment.

Taxation

There will be no change to the New Zealand corporate tax

rate of 33%. The Uruguayan corporate tax rate is assumed to

reduce to 25% as a result of the proposal currently before the

Uruguayan Parliament.


Overriding Key Assumptions

Structural and business model

1. Funding: The Company raises from the markets

approximately $82 million, which at the assumed

exchange rate of US$0.66 to the $1 is the equivalent of

US$54 million under this Offer. PGG Wrightson Investments

sells its three properties in Uruguay for US$12 million, and

in return receives approximately 18 million partly paid

shares to 50 cents, and US$6 million cash.

It is assumed that a total of 100 million $1.00 Shares are

issued on 15 December 2006. This represents approximately

10% oversubscriptions on the Offer of $75 million,

and allows for the issue of shares to PGG Wrightson

Investments in part consideration for the purchase of the

three farms. 50% of the subscription monies are due to be

paid on 12 December 2006, with the balance payable on

14 December 2007.

A US$/NZ$ exchange rate of US$0.66 cents to $1, being

the Forward Foreign Exchange Buy NZ$/Sell US$ wholesale

rate at 18 October 2006 for 15 December 2006, has been

assumed for the purposes of translating the funds raised

under this issue.

In accordance with New Zealand International Financial

Reporting Standards (NZ IFRS) the final instalment

payment due on 14 December 2007 in relation to the

Shares issued has been discounted by an assumed cost of

debt at 6.4% based upon the one year US$ LIBOR (London

Inter-Bank Offer Rate) ask rate at 18 October 2006, plus a

margin of 1% for the purposes of financial reporting. This

results in interest income being recorded by the Company

of US$2 million.

On 15 December 2006 the Company will have issued

capital of $98 million, paid up to $50 million. A further

$50 million will be called up on 14 December 2007. At

that time, after allowing for the impact of the instalment

arrangements, the Company will have, before issue

expenses, issued capital of 100 million shares, each

fully paid up to $1.00, representing paid up capital of

$98 million, or a US$ equivalent of US$64 million, based

on the above exchange rates.

Based upon advice received from parties associated with

this issue, and where applicable, contractual agreements

with the Lead Manager and other parties associated with

this issue, issue costs of $2.4 million have been provided in

the prospective financial information presented in this Offer

Document. Such costs have been based upon the Company

raising $82 million under this Offer.

2. Surplus funds: In the first few periods whilst properties

are acquired and developed, the Group will have surplus

funds. The surplus funds are assumed to be placed on

deposit with financial institutions which have Standard

& Poors’ ratings that are investment grade. For the

purposes of these projections it has been assumed

that these surplus funds will return an interest rate of

5% per annum of funds on deposit.

3. Dividend policy: It is not assumed that any dividend will

be paid in the period covered by the prospective financial

information, with the first dividend assumed for the

financial year ending 30 June 2009.

4. Management fees and Overhead operating costs:

Management fees payable to PGG Wrightson have been

set at the rate of 1.5% of total assets of the Group in

accordance with the management agreement to be entered

into between PGG Wrightson Funds Management and the

Company. Other ongoing operating costs outlined on page

16 associated with the management of the Company have

been assumed at $1.97 million (US$1.3 million) per annum.

5. Farm ownership: The properties in Uruguay will be

purchased by companies incorporated in Uruguay, which

will be 100% owned by the Company. It is assumed that

the property acquisitions in the early years will be funded

entirely from the funds raised in this Offer. The Uruguayan

entities will be fully funded through equity from the

Company in New Zealand.

6. Business model: It is assumed that three properties will be

purchased from PGG Wrightson Investments (through farm

owning subsidiaries owned by PGG Wrightson Investments)

on 15 December 2006. Thereafter farming units will be

purchased, which are assumed to average 1,000 hectares

each. The table following models the performance the

Group anticipates from a typical 1,000 ha farm based

on the experience of PGG Wrightson, applying current

management and farming philosophies and practices.

Figures are in United States (US) Dollars.


Five Year Summary for 1000 hectare farm property

Year 1 Year 2 Year 3 Year 4 Year 5

Hectares farmed

Dairy – – 300 600 600

Heifer unit – 600 350 160 160

Steer unit – 400 210 100 100

Calf unit – – 140 140 140

– 1,000 1,000 1,000 1,000

Average number of cows milked – – 660 1,320 1,320

Litres milk produced – – 3,300,000 7,500,000 8,300,000

$US $US $US $US $US

Operating receipts

Cash received from milk sales – – 500,000 1,200,000 1,500,000

Cash received from livestock sales (less purchases) – 750,000 440,000 400,000 400,000

Cash received from operations – 750,000 940,000 1,600,000 1,900,000

Operating payments – 400,000 600,000 700,000 700,000

Net cash from operations – 350,000 340,000 900,000 1,200,000

Capital Expenditure

Land purchase and associated costs 2,170,000 – – – –

Livestock 770,000 – – – –

Plant and machinery 80,000 340,000 – – –

Development Costs 800,000 1,300,000 – – –

Total capital expenditure 3,820,000 1,640,000 – – –

Net cash flow prior to interest and taxation (3,820,000) (1,290,000) 340,000 900,000 1,200,000

Closing Balance Sheet

Assets

Livestock 770,000 860,000 1,040,000 1,040,000 1,040,000

Land, improvements and plant & Machinery 3,050,000 4,590,000 4,470,000 4,340,000 4,220,000

Total Assets 3,820,000 4,590,000 5,510,000 5,380,000 5,260,000

Closing livestock numbers

Head count Head count Head count Head count Head count

Milking Cows 825 1,650 1,650 1,650

Heifers 2,100 1,225 560 560 560

Steers 1,400 735 350 350 350

Calves 825 1,650 1,650 1,650


Key management and farming assumptions underpinning the

illustration above are set out below and have been determined

by PGG Wrightson in conjunction with New Zealand based farm

consultants (Agricultural Business Associates and Nimmo-Bell &

Company Limited).

a) Based upon New Zealand experience with dairy conversions

and the establishment of intensive farming systems in the

year of acquisition the property is largely out of production

whilst the development of the farm takes place. Such

development includes pasture renewal, irrigation, sub-

division, fencing, roading and water reticulation. While it

is expected that stock will be grazed during this period, no

revenues are projected to be generated during that year.

b) The typical farm illustrated assumes the following

capital costs:

In the year of acquisition:

• Land acquisition costs – US$2,000 per hectare, plus

associated costs;

• Livestock purchases – Initial stocking of unit comprises

2,100 heifer calves (cost US$235 per heifer) and 1,400

steers (cost US$200 per steer); and

• Development costs – Commencement of the development

of milking shed, irrigation, pasture development, electricity

roading and fencing.

In the year immediately following acquisition:

• Plant and machinery – General farm machinery purchase;

and

• Development costs – Completion of the above dairy

conversion and development activities and the building of

a milking shed.

The land acquisition costs have been based upon the

average current market values in Uruguay for undeveloped

land in the regions that the Company intends to undertake

operations. The assumed cost of US$2,200 per hectare has

been reviewed and confirmed as reasonable by Sr Romualdo

Rodríguez of Firm Romualdo Rodríguez Negocias Rurales.

Livestock purchase values have been based upon current

market values for such stock in Uruguay as advised by

PGG Wrightson. Development costs have been determined

by PGG Wrightson in conjunction with New Zealand

based farm consultants Agricultural Business Associates

and Nimmo-Bell & Company Limited drawing together

local knowledge of costs and prices in Uruguay and

New Zealand expertise in dairy conversions and intensive

farming systems.

c) Where properties are 100% irrigated and fully regrassed

on conversion (based upon New Zealand experience

in Canterbury for example in dairy and intensive use

conversions), near potential productivity can be reached

within 18 months. In developing the prospective financial

information the Directors have taken into account the

partial irrigation strategy and the relatively young herd

age, and have consequently conservatively assumed that

it will take three years to reach near optimum production

levels. As pastures become established and develop through

regrassing, application of fertiliser, rotational grazing

and irrigation the land use changes from cattle raising

to intensive dairy production. At the completion of the

development phase the property will have 60% of the

available land under dairy production (50% of which is

irrigated). During the early stages of development the farm

will run a combination of heifers and steers, which changes

as the property matures. The assumed change in mix is

illustrated below:

d) The initial stocking of the unit is assumed to provide the

basis of the dairy herd once both the livestock have matured,

and pastures have been developed. It is assumed, in keeping

with New Zealand farm management practices that herd

replacement will come from future progeny and that after

suitable growth and fattening that steers and surplus heifers,

together with older or non performing dairy cows will be sold

in the normal course of events.

e) In keeping with New Zealand experience on intensive dairy

units on similar quality land it is assumed that once fully

developed each 1,000 hectare unit will be approximately

60% in dairy, with the 600 hectares running approximately

1,650 cows. Farms in Uruguay typically milk throughout the

year. It is assumed that on average 2.2 cows will be milked

per hectare (with a maximum of 2.6) under dairy production

throughout the year. In keeping with land becoming available

for dairy production as set out under (c) above, in the first

year of dairy production 660 cows are assumed to be milked,

with assumed maximum production of 1,320 cows occurring

in the following year. PGG Wrightson notes that the Lincoln

University dairy farm at Lincoln University New Zealand is

currently carrying 4 cows per hectare and is producing in

excess of 1,770kg of milk solids per hectare, adopting the

farming practices proposed for Uruguay.

Number of Hectares per Unit – 1,000

Year 1 Year 2 Year 3 Year 4 Year 5

Land(hectares)

%ofhectaresperBusinessUnit

Dairy Unit 0% 30% 60% 60% 60%

Heifer Unit 60% 35% 16% 16% 16%

Heifer/Steers Calf Unit 14% 14% 14% 14%

Steer Unit 40% 21% 10% 10% 10%

Total 100% 100% 100% 100% 100%


f) Daily milk production per cow is assumed to average

17.3 litres at full production, which equates to 943kg of

milk solids per hectare. This compares to production on

similar quality land and well managed properties in New

Zealand of around 1,000kg of milk solids per hectare.

Milk sales are assumed to realise US$0.18 per litre, which

is in line with current returns being paid by Conaprole, the

dominant producer co-operative in Uruguay. At an average

milk solids content of 6.8%, this equates to $4.00 per

kilogram of milk solids.

g) Operating costs are assumed to include labour costs,

pasture management and summer feed, animal health,

breeding, electricity, insurance, repairs and maintenance and

general administration costs. These have been based upon

PGG Wrightson’s experience in New Zealand and Uruguay.

7. Livestock valuation: For the purposes of the prospective

financial information in this Offer Document it has been

assumed that livestock values remain constant throughout

the period presented.

8. Currency and inflation: The model has been prepared in

current dollars, and does not take into account inflation as

it is assumed that cost increases will be more than offset

by any inflationary impact on outputs. It has been assumed

that the reporting currency is US$.

Prospective Financial Information

The assumptions underpinning the prospective financial information are predicated on the key structural and

business model assumptions set out in this section. The specific assumptions use those as the basis of the

Company’s prospective financial information as set out following the various statements.

The prospective pro‑forma statement of financial position as at 15 December 2006 set out below for the

Company is a prospective pro‑forma statement of financial position and is not the actual statement of

financial position of the Company.

Prospective Statement of Financial Position

Asat…

15 December 30 June 30 June

2006 2007 2008

US$’000 US$’000 US$’000

Current Assets

Cash and bank 19,085 338 5,268

Receivables 394 1,261 798

Unpaid share capital 31,000 31,000 –

50,479 32,599 6,066

Non Current Assets

Livestock 2,414 6,687 11,609

Property, plant and equipment 9,586 23,876 48,312

12,000 30,563 59,921

Current Liabilities

Payables 63 146 455

Tax payable – 198 1,028

63 344 1,483

Non Current Liabilities – – –

Net Assets 62,416 62,818 64,504

Shareholders Equity

Share Capital 62,416 62,416 62,416

Retained earnings – 402 2,088

62,416 62,818 64,504


Prospective Statements of Movements in Equity

Fortheperiodended…

Seven months Year

ended ended


2006 2007 2008

US$’000 US$’000 US$’000

Total recognised revenues and expenses for the period – 402 1,686

Share capital issued 64,000 64,000 –

Less Issue costs 1,584 1,584 –

Less Dividends paid – – –

Movements in equity for the period 62,416 62,818 1,686

Equity at beginning of the period – – 62,818

Equity at end of the period 62,416 62,818 64,504

Prospective Statements of Financial Performance


Seven months Year

ended ended


2006 2007 2008

US$’000 US$’000 US$’000

Revenue – 3,024 12,306

Cost of Sales – (1,235) (4,984)

Gross Profit – 1,789 7,322

Farm working expenses – (1,061) (3,400)

Management and administration expenses – (867) (1,300)

Fund Management fee – (329) (737)

Earnings before interest, tax and deprecation – (468) 1,885

Finance income / (expense) – 220 282

Interest income on deferred capital receipts – 1,000 1,000

Depreciation and amortisation – (152) (651)

Net profit before taxation – 600 2,516

Taxation – 198 830

Net profit after tax for the period – 402 1,686


Significant assumptions to the Prospective Financial Statements

Prospective Pro-forma Statement of Financial Position at 15 December 2006 and Prospective Cash Flows

It is assumed that the Offer is oversubscribed, and that together

with PGG Wrightson’s injection of properties, $100 million, or

the equivalent of US$66 million is raised:

• $82 million (US$54 million) is generated from the market,

50% of which is paid on 15 December 2006.

• Three farms are acquired in Uruguay from PGG Wrightson

Investments (through farm owning subsidiary companies)

for US$12 million, payable 50% in share subscription and

50% in cash.

• The prospective working capital within the farming

companies to be acquired from PGG Wrightson Investments

is in addition to the farming properties being acquired above.

This is assumed to be purchased for cash on settlement.

Prospective Statements of Cash Flows


Seven months Year

ended ended


2006 2007 2008

US$’000 US$’000 US$’000

Net cash flows from operating activities – (1,541) 1,659

Cash flows from investing activities:

Purchases of property, plant and equipment 4,793 18,029 25,088

Livestock purchases 1,207 5,508 4,641

Net working capital acquired on purchase of subsidiaries 331 – –

Net cash outflow to investing activities 6,331 23,537 29,729

Cash flows from financing activities:

Share capital raised 27,000 27,000 33,000

Less: Issue costs 1,584 1,584 –

Net cash inflow from financing activities 25,416 25,416 33,000

Net (decrease)/increase in cash held 19,085 338 4,930

Add cash at start of the year – – 338

Ending Cash/(Net Overdraft) carried forward 19,085 338 5,268

Prospective Statement of Financial Position at 30 June 2007, and Prospective Statement of Financial Performance and Prospective Cash Flows for the 7 months ending 30 June 2007

It is assumed that:

1. The equivalent of four additional conversion properties

will be acquired, for cash, based around the standard 1,000

hectare model unit. It is assumed that they will be purchased

and settle in December 2006. It is further assumed that

these properties will not generate any income or incur any

operating expenditure in this period. They will however, incur

development costs as set out under the model unit.

2. The three farm properties currently owned by PGG Wrightson

Investments, while partially developed are yet to be irrigated.

On the Tambo El Cabure property milking commenced in

January 2006. The Valle de Soba and Menafra properties

have been resown in early 2006 and are in the final stages of

pasture development. These are expected to commence dairy

production in the coming year.

The cash flows in the period reflect:

a. the receipt of US$27 million from investors;

b. the payments made to purchase and part develop the four

farms to be acquired in this period; and

c. ongoing operating costs and revenues associated with the

three farms currently owned by PGG Wrightson Investments.


Notes to the prospective financial statements

Significant Accounting Policies

Statement of Compliance with FRS 42: Prospective Financial Statements

The prospective financial information included in this

Offer Document comply with FRS 42: ProspectiveFinancial

Statements. Set out below is a statement of accounting policies

the Company intends adopting for its historical financial

statements. To the extent that they are applicable to the

prospective financial information, these accounting policies

have been applied in its preparation.

Reporting Entity

The consolidated financial statements for the Group are for

the economic entity comprising NZ Farming Systems Uruguay

Limited and its subsidiaries.

Statutory Base

NZ Farming Systems Uruguay Limited is a company registered

under the Companies Act 1993 and is an issuer for the purposes

of the Securities Act 1978. The financial statements and group

financial statements of NZ Farming Systems Uruguay Limited

will be prepared in accordance with the Financial Reporting Act

1993 and the Companies Act 1993.

Functional and Presentation Currency

Items included in the financial statements of the Group

are measured using the currency of the primary economic

environment in which the entity operates (the ‘functional

currency’). The consolidated financial statements are

presented in US dollars, which is the Group’s functional

and presentation currency.

Statement of Compliance with New Zealand Equivalent to International Financial Reporting

Financial reports will comply with New Zealand Accounting

Standards, which include New Zealand equivalents to NZ IFRS.

Compliance with NZ IFRS ensures that the financial report,

comprising the financial statements and the notes thereto,

complies with NZ IFRS. The Group is a profit-oriented entity.

Specific Accounting Policies

The financial statements are prepared in accordance with

New Zealand generally accepted accounting practices. The

accounting policies that materially affect the measurement of

financial performance, financial position and cash flows are set

out below:

Prospective Statement of Financial Position at 30 June 2008, and Prospective Statement of Financial Performance and Prospective Cash Flows for the 12 months ending 30 June 2008

It is assumed that:

1. The equivalent of six additional conversion properties will

be acquired in December 2007 following receipt of the final

subscription instalment, for cash, based around the standard

1,000 hectare model unit. These properties will not generate

any income or incur any operating expenditure in this

period. They will however, incur development costs as set

out under the model unit.

2. The farm properties currently owned by PGG Wrightson

Investments are now irrigated and are all in the early stages

of dairy production.

3. The four conversion properties acquired in the period to

30 June 2007 will, on average all be in the year one phase

of the model farming unit. They will continue to incur

development costs as set out under the model unit. These

farms will generate income from livestock sales, and incur

operating costs.

The cash flows in the period reflect:

a. the final receipt of US$33 million from investors;

b. the payments made to purchase and part develop the

six farms to be acquired in this period, and complete the

conversion on the four properties acquired the previous

year; and

c. ongoing operating costs and revenues associated with

the three farms currently owned by PGG Wrightson

Investments, and the four conversion properties acquired

the previous year.


a. Basis of Preparation

The consolidated financial statements of the Group have

been prepared in accordance with NZ IFRS. The consolidated

financial statements have been prepared under the historical

cost convention except that farming properties are carried at

fair value.

b. Consolidation

Subsidiaries are all entities over which the Group has the

power to govern the financial and operating policies generally

accompanying a shareholding of more than one half of the

voting rights. The existence and effect of potential voting rights

that are currently exercisable or convertible are considered

when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which

control is transferred to the Group. They are de-consolidated

from the date that control ceases.

The purchase method of accounting is used to account for

the acquisition of subsidiaries by the Group. The cost of an

acquisition is measured as the fair value of the assets given,

equity instruments issued and liabilities incurred or assumed

at the date of exchange, plus costs directly attributable to

the acquisition. Identifiable assets acquired and liabilities and

contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date,

irrespective of the extent of any minority interest. The excess of

the cost of acquisition over the fair value of the Group’s share

of the identifiable net assets acquired is goodwill. If the cost of

acquisition is less than the fair value of the net assets of the

subsidiary acquired, the difference is recognised directly in the

income statement.

Inter-company transactions, balances and unrealised gains

on transactions between group companies are eliminated.

Unrealised losses are also eliminated unless the transaction

provides evidence of an impairment of the asset transferred.

Accounting policies of subsidiaries have been changed where

necessary to ensure consistency with the policies adopted by

the Group.

c. Segment Reporting

A business segment is a group of assets and operations engaged

in providing products of services that are subject to risks

and returns that are different from those of other business

segments. A geographical segment is engaged in providing

products or services within a particular economic environment

that are subject to risks and returns that are different from

those of segments operating in other economic environments.

d. Revenue

Salesrevenue

Sales revenue principally comprises the sales value of milk and

livestock sold in the normal course of the farm’s business.

Investment income

Investment income is recognised when earned. Dividends are

recognised when received, or accrued when approved and

declared for distribution prior to balance date.

e. Income tax and deferred tax

The income tax expense recognised for the year is based on the

accounting surplus, adjusted for permanent differences between

accounting and tax rules.

Deferred income tax is provided in full, using the liability

method, on temporary differences arising between the tax

bases of assets and liabilities and their carrying amounts in

the financial statements as per NZ IAS 12: IncomeTaxes. The

deferred income tax is not accounted for if it arises from initial

recognition of an asset or liability in a transaction, other than

a business combination, that at the time of the transaction

affects neither accounting nor taxable profit or loss.

Deferred income tax is determined using tax rates (and laws)

that have been enacted or substantially enacted by the balance

sheet date and are expect to apply when the related deferred

income tax asset is realised or deferred income tax liability is

settled.

Deferred income tax assets are recognised to the extent that

it is probable that future taxable profit will be available against

which the temporary differences can be utilised. Deferred

income tax is provided on temporary differences arising on

investments in subsidiaries, joint ventures and associates,

except where the timing of the reversal of the temporary

difference is controlled by the Group and it is probable that the

temporary difference will not reverse in the foreseeable future.

f. Goods and Services Tax/Value Added Tax

The income statements and statements of cash flows have

been prepared so that all components are stated exclusive

of Goods and Services Tax/Value Added Tax (GST/VAT).

All items in the balance sheets are stated net of GST/VAT,

with the exception of receivables and payables, which include

GST/VAT invoiced.

g. Equity

Ordinary shares are classified as equity. Incremental costs

directly attributable to the issue of new shares are shown in

equity as a deduction, net of tax, from the proceeds.


h. Plant and Equipment

All plant and equipment is stated at historical cost less

depreciation. Historical cost includes expenditure that is directly

attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount

or recognised as a separate asset, as appropriate, only when

it is probable that future economic benefits associated with

the item will flow to the Group and the cost of the item can

be measured reliably. All other repairs and maintenance are

charged to the income statement during the financial period

in which they are incurred.

Depreciation, based on a component approach, is calculated

using the straight-line method to allocate the cost over the

assets’ estimated useful lives, at an average of 5% per annum.

The asset’s residual values and useful lives are reviewed, and

adjusted if appropriate, at least at each financial year-end.

An asset’s carrying amount is written down immediately to its

recoverable amount if its carrying amount is greater than its

estimated recoverable amount.

Gains and losses on disposals are determined by comparing

proceeds with carrying amount. These are included in the

income statement.

i. Impairment of Assets

Assets including goodwill that have an indefinite useful life

are not subject to amortisation and are tested annually

for impairment. Assets that are subject to amortisation or

depreciation are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount

may not be recoverable. An impairment loss is recognised for

the amount by which the asset’s carrying amount exceeds its

recoverable amount. The recoverable amount is the higher of

an asset’s fair value less costs to sell and value in use. For the

purposes of assessing impairment, assets are grouped at the

lowest levels for which there are separately identifiable cash

flows (cash-generating units).

j. Agriculture

Agricultural activity is defined as the management by

the Group of the biological transformation of biological

assets for sale into agricultural produce or into additional

biological assets.

k. Livestock and milk

Livestock are measured at their fair value less estimated point-

of-sale costs. The fair value of livestock is determined based

on market prices of livestock of similar age, breed and genetic

merit. Milk is initially measured at its fair value less estimated

point-of-sale costs at the time of milking. The fair value of milk

is determined based on market prices in the local area.

l. Trade Receivables

Trade receivables are recognised initially at fair value and

subsequently measured at amortised cost using the effective

interest method, less provision for impairment. A provision for

impairment of trade receivables is established when there is

objective evidence that the Group will not be able to collect

all amounts due according to the original terms of receivables.

The amount of the provision is the difference between the

asset’s carrying amount and the present value of estimated

future cash flows, discounted at the effective interest rate.

The provision is recognised in the income statement.

m. Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, deposits held

at call with banks, other short-term highly liquid investments

with original maturities of three months or less, and bank

overdrafts.

n. Borrowings

Borrowings are recognised initially at fair value, net of

transaction costs. Borrowings are subsequently stated at

amortised cost, any difference between the proceeds (net of

transaction costs) and the redemption value is recognised in the

income statement over the period of the borrowings using the

effective interest method.

Borrowings are classified as current liabilities unless the Group

has an unconditional right to defer settlement of the liability

for at least 12 months after the balance sheet date.

Costs incurred in the arrangement of borrowing are charged

in the period when incurred to the income statements for

investment assets and capitalised for development assets.

o. Provisions

Provisions for legal claims are recognised when the Group has

a present legal or constructive obligation as a result of past

events; it is more likely than not that an outflow of resources

will be required to settle the obligation and the amount has

been reliably estimated.

p. Dividend Distribution

Dividend distribution to the Company’s shareholders is

recognised as a liability in the Group’s financial statements in

the period in which the dividends are approved.

q. Financial Instruments

The Company’s activities expose it to a variety of financial risks:

market risk including currency risk, fair value interest rate risk

and price risk, credit risk, liquidity risk and cash flow interest

rate risk. The Company’s overall risk management programme

focuses on the unpredictability of financial markets and seeks

to minimise potential adverse effects on the Company’s

financial performance.


MarketRisk

• Foreign Exchange Risk – The Group operates in Uruguay,

with its activities predominantly conducted in US Dollars.

Milk is nominally priced in pesos but the price is generally

adjusted to reflect changes in the USD/peso exchange

rate. Whilst New Zealand investors are subject to foreign

exchange risk on their investment, the Company and Group

as a consequence of US Dollars being its functional currency

is not exposed to any significant foreign exchange risk.

• Price Risk – The Group is exposed to price risks during

the normal course of operations. The Group is exposed to

commodity price risks.

CreditRisk

• The Group will be exposed to credit risk through its

dependence upon Conaprole, Uruguay’s producer co-

operative for milk. Apart from that it has no significant

concentrations of credit risk.

LiquidityRisk

• Prudent liquidity risk management implies maintaining

sufficient cash and marketable securities and the availability

of funding through an adequate amount of committed

credit facilities. The Group aims to maintain flexibility in

funding by keeping committed credit lines available.

CashFlowandFairValueInterestRateRisk

• During the initial phases of its business the group is likely

to have significant interest bearing deposits through which

it will be exposed to interest rate risk in the normal course

of business.

• The Group’s interest rate risk initially will arise through

its exposure to funds on deposit. In future periods it is

probable that interest rate risk will also arise though

borrowings as the Group gears its operations. Any such

borrowings raised at variable rates expose the Group to

cash flow interest rate risk.

• The Group takes on exposure to the effects of

fluctuations in the prevailing levels of market interest

rates on its financial position and cash flows. Interest

costs may increase as a result of such changes. They may

reduce or create losses in the event that unexpected

movements arise.

r. Recoverable Amount of Assets

At each reporting date, the Group assesses whether there is any

indication that an asset may be impaired. Where an indicator

of the impairment exists, the Group makes a formal estimate

of recoverable amount. Where the carrying amount of an asset

exceeds its recoverable amount the asset is considered impaired

and is written down to its recoverable amount.

s. Statement of Cash Flows

Definitions of the terms used in the statement of cash flows:

“Cash” includes coins and notes, demand deposits and other

highly liquid investments readily convertible into cash and

includes at call borrowings such as bank overdrafts used by

the company as part of its day-to-day cash management.

“Investing Activities” are those activities relating to the

acquisition and disposal of investment property and any

other non-current assets.

“Financing Activities” are those activities relating to changes

in the equity and debt capital structure of the Company and

those activities relating to the cost of servicing the Company’s

equity capital.

“Operating Activities” include all transactions and other events

that are not investing or financing activities.

t. Critical Accounting Estimates and Assumptions

Estimates and judgements are continually evaluated and are

based on historical experience and other factors, including

expectations of future events that are believed to be reasonable

under the circumstances.

The Group makes estimates and assumptions concerning the

future. The resulting accounting estimates will seldom equal

the related actual results. However, at balance date the Group

has no significant estimates and assumptions that have a

significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year.

u. Changes in Accounting Policies

The Company was incorporated on 26 September 2006 and

has adopted NZ IFRS for the purposes of its first reporting date.

There have been no material changes in accounting policies

during the period and the Company has not applied or adopted

early any other NZ international reporting standards.


The DirectorsNZ Farming Systems Uruguay Limited57 Waterloo RoadChristchurch

3 November 2006

Auditors’ report for inclusion in the Offer DocumentDear Directors

As auditors of NZ Farming Systems Uruguay Limited (“the Company”) we have prepared this report pursuant to clause 42 of the First Schedule of the Securities Regulations 1983 and consistent with the alternative form of report to that required by the Securities Regulations 1983 (“Securities Regulations”) required by the Securities Act (NZ Farming Systems Uruguay Limited) Exemption Notice 2006 (“the Exemption Notice”) for inclusion in an Offer Document to be dated on or about 3 November 2006.

Directors’ responsibilitiesThe Company’s Directors are responsible for the preparation and presentation of the prospective pro-forma statement of financial position of the Company and its subsidiaries (“the Group”) as at 15 December 2006 and the prospective financial information of the Group for the period ending 30 June 2007 and the year ending 30 June 2008, including the assumptions on which they are based.

Auditors’ responsibilitiesWe are responsible for reporting, in accordance with clause 42(2) of the First Schedule of the Securities Regulations and subject to the Exemption Notice, on the prospective pro-forma statement of financial position at 15 December 2006 and on the prospective financial information of the Group for the period ending 30 June 2007 and the year ending 30 June 2008 which have been prepared and presented by the Directors.

We have no relationship with or interests in the Group other than in our capacity as auditors.

Basis of opinion on the prospective pro-forma financial position and the prospective financial informationTo meet our reporting responsibilities we have examined the prospective pro-forma statement of financial position as at 15 December 2006 and the prospective financial information for the period ending 30 June 2007 and the year ending 30 June 2008 to confirm that, so far as the accounting policies and calculations are concerned, the prospective financial information has been properly compiled on the footing of the assumptions made or adopted by the Directors as set out on pages 36 to 40, and on pages 42 and 43 of this Offer Document and are presented on a basis consistent with the accounting policies expected to be adopted by the Group.

Unqualified opinion on the prospective pro-forma financial positionIn our opinion, the prospective pro-forma statement of financial position as at 15 December 2006 set out on page 40:

(i) subject to the requirements of the Exemption Notice, complies with FRS 42: ProspectiveFinancialStatements, and complies with the disclosures required by this Exemption Notice;

(ii) has been derived from the relevant valuations in respect of each of the properties to be acquired; and

(iii) so far as the accounting policies and calculations are concerned, has been properly compiled in accordance with the assumptions made or adopted by the Company set out at pages 36 to 40, and on page 42 of this Offer Document and is presented on a basis consistent with the accounting policies set out on pages 43 to 46 which were used in the preparation of the prospective pro-forma statement of financial position.

Unqualified opinion on the prospective financial informationIn our opinion, the prospective financial information for the period ending 30 June 2007 and the year ending 30 June 2008 set out on pages 40 to 42, so far as the accounting policies and calculations are concerned, has been properly compiled in accordance with the assumptions made or adopted by the Directors of the Company set out on pages 36 to 40, and on pages 42 and 43 of this Offer Document and is presented on a basis consistent with the accounting policies to be adopted by the Company, those accounting policies being materially the same as the accounting policies set out on pages 43 to 46 that were used in the preparation of the prospective pro-forma statement of financial position dated 15 December 2006.

Actual results are likely to be different from the prospective pro-forma statement of financial position as at 15 December 2006 and the prospective financial information since anticipated events frequently do not occur as expected and the variation could be material. Accordingly, we express no opinion as to whether the prospective pro-forma statement of financial position as at 15 December 2006 or the prospective financial information will be achieved.

Yours faithfully

PricewaterhouseCoopersChartered AccountantsChristchurch

PricewaterhouseCoopers119 Armagh StreetPO Box 13244Christchurch, New Zealandwww.pwc.com/nzTelephone +64 3 374 3000Facsimile +64 9 374 3001


Taxation

The following comments are intended to provide an

indication of the taxation implications relevant for this

investment as at the date of this Offer Document.

None of the Company, the promoters, the Lead Manager

nor any other party accepts responsibility for the taxation

consequences of an investment in the Company. Investors

are advised to consider their own tax position and where

appropriate seek professional advice.

Taxation In Uruguay

Under current legislation the farm owning subsidiary

companies will be taxed on their income in Uruguay at 30%.

However, there is currently a proposal before the Uruguayan

Parliament to reduce this tax to 25% with effect from 2007.

Uruguay taxes various capital gains but any sale in shares of

a farm owning subsidiary company by NZ Farming Systems

Uruguay is unlikely to be subject to tax in Uruguay.

Dividends paid by the farm owning subsidiary companies

to NZ Farming Systems Uruguay are currently subject to a

30% withholding tax in Uruguay. However there is currently

a proposal before the Uruguayan Parliament to lower that

rate to 7% with effect from 2007.

Taxation of NZ Farming Systems Uruguay

The farm owning subsidiary companies will be subject to

New Zealand’s controlled foreign company (CFC) regime.

NZ Farming Systems Uruguay will therefore be taxed in

New Zealand on the income derived by the farm owning

subsidiary companies, but with a credit for the tax payable

in Uruguay.

Dividends received by NZ Farming Systems Uruguay from the

farm owning subsidiary companies will be subject to foreign

dividend withholding payment but with a credit for tax paid

in Uruguay or tax paid by NZ Farming Systems Uruguay

under the CFC regime.

Imputation credits will only be generated and available

to attach to dividends paid to investors to the extent of

the New Zealand tax liability remaining after a credit for

Uruguayan tax paid.

Taxation of Dividends Paid to Investors

New Zealand resident investors will be taxed on dividends

(including imputation credits) received from NZ Farming

Systems Uruguay with a credit available against New Zealand

tax for the imputation credits attached. To the extent that

dividends paid to New Zealand residents by NZ Farming

Systems Uruguay are not fully imputed, resident withholding

tax will be deducted unless the investor holds a valid

certificate of exemption.

Dividends paid to non residents of New Zealand will be

subject to non resident withholding tax at either 30% or 15%

depending on whether the investor is resident in a country

which New Zealand has a double tax agreement with, or

whether the dividend is fully imputed.

Holding and Disposing of Shares by Investors

The tax treatment for New Zealand tax resident shareholders

of any gain they may make on the disposal or part-disposal

of their shareholding in NZ Farming Systems Uruguay follows

standard tax treatment of share disposals in New Zealand

and depends largely on the investor’s own intentions at the

time of purchase of the shares and their own tax profile.

Investors are recommended to take their own advice on such

matters.

Investors will not be subject to New Zealand’s Foreign

Investment Fund rules in respect of their investment in NZ

Farming Systems Uruguay; the Company will be a New

Zealand tax resident.

Repurchase of Shares held by Investors

Any repurchase of shares by NZ Farming Systems

Uruguay will be subject to the New Zealand dividend

rules. A repurchase of shares can be excluded from being a

dividend provided:

• Certain brightline tests are met;

• The payment is not made in lieu of dividend; and

• The payment is made out of available subscribed capital.

These terms have specific definitions for tax purposes.


The following is a report prepared by

Mr Romualdo Rodríguez of Firm Romualdo

Rodríguez Negocios Rurales of Montevideo,

Uruguay. Mr Rodríguez has been a registered

valuer since 1981. Some of the wording in the

report reflects the fact that the author’s first

language is Spanish.

Mr Rodríguez’ valuation was in response to a

letter signed jointly by AW Baylis, Chairman of

PGG Wrightson and KR Smith, Chairman of NZ

Farming Systems Uruguay. In it they requested

Mr Rodríguez to prepare a valuation of the

companies that own the three farms at Tambo El

Cabure, Valle de Soba and Menafra. The valuation

was required to be at a ‘price that is fair and

reasonable to both parties’. A copy of the letter

is available on request from NZ Farming Systems

Uruguay at the address on page 65.

Valuation


1. Valuer’s name and address

Romualdo Rodríguez

Cuareim 1978 • Montevideo, Uruguay

Tel. (00598) 2 924-0461/0475/8131

Fax (00598) 2 924-8130

eMail: [email protected]

The company Romualdo Rodríguez Limited started its activities

in 1954 as a stock and station company in charge of cattle

saleyards in the city of Florida. The company was founded by

my father and I started working with him when I was 18 years

old. Since July 1981, I became a registered valuator.

The company has large expertise in valuating machinery.

We regularly run machinery auctions therefore we have a clear

idea of current market prices.

The company grew during the years in Uruguay reaching

16 branches in the country. Today the company’s business

operations are rural real state operations, cattle auctions, farm

administrations, transactions with cattle into slaughter houses,

wool, and beef exports. The company is represented by Mr.

Romualdo Rodríguez, Director, together with both his son and

daughter, Juan Jose Rodríguez and Karma Rodríguez. I have

been involved in all rural transaction activities all my life and

managed to have a very high reputation all throughout the

country. Today the company is one of the leading businesses

in this area.

2. Statement by registered valuer

I declare that the present valuation is made by me, Romualdo

Rodríguez, as an independent registered valuer and no personal

interest or other’s influence has been made upon me or my

opinion in its completion.

3. Purpose of report

On the date of October 4th, 2006 I received a letter from Mr.

Bill Baylis, Chairman of PGG Wrightson and Mr. Keith Smith,

Chairman of New Zealand Farming Systems Uruguay. The

purpose of the letter was to ask for a formal valuation of the

land and assets of two companies combined, Gabefox S.A.

and Gimley S.A., whose owner is PGG Wrightson Investments

Limited, since these companies will be sold by PGG Wrightson

Investments Limited to NZ Farming Systems Uruguay.

Gabefox S.A. and Gimley S.A. own three farms: El Cabure

(1,161.5 hectares), Valle de Soba (624.67 hectares) and Menafra

(900.97 hectares). The assets considered in this valuation are

the fixed assets of the companies, which have been considered

in this report under the price of the land, plus their livestock

and machinery.

I am aware that the buyer and the seller are related parties and

that there are directors in common to both boards. I understand

that I have been commissioned as an independent party to

prepare a valuation on behalf of both buyer and seller which

establishes an overall price that is fair and reasonable to both

parties. I also acknowledge that NZ Farming Systems Uruguay

Limited is considering raising funds through a public offer in

New Zealand and that the assets valued in this valuation will

be the initial investments of the new company.

My company is providing this report for the purposes of

its inclusion in an Offer Document for use by prospective

subscribers for Shares.

4. Description of real property

In the whole area of Uruguay, 173,620km2 of land, near the

west centre of the country, there are two low hill branches that

surround and define, with the Uruguay river, an agricultural

and cattle breeding specific zone located in the Department of

Rio Negro, one of the most important areas related to these

kind of activities in the country, and well known for its history

– more than 150 years – of English family settlement and work

on agricultural and cattle tasks. In Uruguay, the best results in

cattle breeding, agricultural work, milk production and grassland

related activities are obtained from the “Departamento de

Rio Negro”, currently. Young city is the centre of the related

commercial activities. The three farm properties that will be

valued here are located at less than 20km from Young and

are linked to it by roads which are in very good condition and

maintenance. Zone approximate coordinates: 32°38’ South,

57°32’ West.

Cuareim 1978 • Montevideo, Uruguay Tel. (00598) 2 9240461 • Fax (00598) 2 9248130



4.1. Tambo El Caburé

Located at 7km from Young, of 1161.5

hectares, divided into 26 paddocks,

that are currently being redistributed

with electrical fences.

Main house: living and dining

room, office, six bedrooms, kitchen,

pantry, four bathrooms. The house is

surrounded by a wooded park, has a

pool and tennis court. Near the main

house are: the playroom, barbecue

and five vehicle spaced garage.

Electric energy supply and phone line.

Foreman house: living and dining

room, kitchen, two dormitories

and bathroom.

Staff facilities: A house for the person

in charge of the dairy farm, with: three

bedrooms, living and dining room,

kitchen and two bathrooms. Kitchen

and common room for six, dormitories

and bathrooms. Small working shed.

Well with water pump and high tank.

Working facilities: Facilities for cattle

and sheep. Animal scale appears in well

conserved condition. Complete sheep

facilities, bath pool and paddocks

in good condition. Conventional

seven thread border wired fences in

good condition installed according

to the law. Internal fences in perfect

condition, most of them electric.

Natural water resources, brooks and

creeks. Watering troughs in every

plot, five watermills (with tanks

and watermills). Artificial sheltering

Eucalyptus forests.

Dairy Farm facilities: 200m2 shed

annexed to the dairy farm, 50,000

litre water tank, 4 water wells, and

12 reserve tanks. 1,100m2 concrete

silo. 200m long feed-lots, in double

rows. 2 metallic silos which hold up

to 20,000kg, that serve the stainless

steel automatic feeders for the milking

parlour. 3,500m2 paddocks which

border the milking parlour.



Mechanized and intelligent – sensor

controlled – paddock, which accesses

the milking parlour. Manoeuvring

platform made of concrete, with

a 1,200m2 surface. Dairy farm

poured waters control system, with

underground pipe system controlled by

inspection chambers. Paddock washing

system. Electric energy (380 volts)

supplied by the state network. Two

diesel generators of up to 100kW.

Milking shed and offices of 660m2

with metallic ceilings, aluminium doors

and windows. Milk deposit with five

primary freezing tanks (which hold up

to 4,400 litres each), a secondary tank

(which holds up to 6,200 litres) and a

cooler plaque exchanging system.

Complete air conditioned offices, with

six work stations, manager’s office,

computer room, conference room,

bathroom and kitchen. Veterinary

equipment and product deposit,

staff bathrooms.

“Westfalia” milking machine,

MK48 rotary system, SIDE-BY-

SIDE, allowing 48 animals per turn.

STIMOPULS-M pumps each, automatic

nipple removers, with kick-off fall

detection and acoustic signal, classic

milking sets with silicone nipple

appliances, individual milk and

connectivity (Metatrón) measurers,

automatic cleaning program

(SINETHERM). Three exit AUTOSELECT

door. Electronic identification system

for each cow in its milking post,

including DP5 software, allowing up to

5,000 animal registrations. 1,200 neck

rescounter identifiers.

Up to 90% of these lands are sown

with forage crops made of tall fescue,

white and red clover, rye grass, chicory.

We have inspected the plans and

specifications relating to construction

of a proposed water dam.

EL CABURÉN


4.2. Valle de Soba

Located at 7km from Young, Access

by Route N° 25, of 624,67 hectares,

divided into 45 paddocks.

Main house made of concrete material,

with three bedrooms, living and dining

room with fireplace and kitchen.

Foreman house with a living room,

kitchen, three bedrooms, toilet. Staff

house room with a living room,

kitchen, three bedrooms, toilet. Shed of

concrete warehouse, and zinc roof.

Water resources with water pump,

tank and higher tank. Electric energy

supply and telephone lines: UTE (State

Network)

Cattle and sheep facilities are in good

condition. Complete pens, scale, hard

wood. Farmyard, dip and veterinary

facilities. 26 Paddocks with many

farmyards. The border wire fences are

in very good condition, while internal

semi permanent are electric.

Natural water resources from “Canada

Grande” Creek and many brooks.

Artificial water supplies with three

watermills and tanks.

Artificial Forest: Eucalyptus, various.

Up to 65% of these lands are sown

with forage crops made of tall fescue,

white and red clover, rye grass, chicory.

4.3. Azahares de Menafra

Accessed by Route N° 25, 55km,

nearby Young, 25km, of 900.97

hectares, divided into 18 paddocks.

These are currently being redistributed

with electrical fences. An underground

pipe net has been installed to provide

water to the water troughs.

The main house has four bedrooms,

living and dining room with fireplace,

kitchen, larder and woodland. The staff

house has living room, kitchen, five

bedrooms, toilet, and near a concrete

shed with zinc roof.



Water resources: Water pump, tank and two

higher tanks. Electric energy and telephone

lines: UTE (State Network). Cattle and

sheep facilities are in good condition with

complete pens, scale, hard wood. Also

farmyard and veterinary facilities.

The border wire fences are in very

good condition, while internal semi

permanent are electric.

Artificial water resources with two

watermills, tanks and a high tank.

Artificial Forest with Eucalyptus.

Up to 20% of these lands are sown with

forage crops made of tall fescue, white

and red clover, rye grass, chicory.

In respect of a proposed irrigation project

we have inspected permits, maps and plans.

5. Covenants, etc, of real property

There are no covenants, conditions,

restrictions, easements or other interests

in respect of the property.

The use of the land on each of the

three properties is in accordance with

all national and regional regulations.

Current or past activities done in any of

the three properties are registered and

in compliance with the country laws and

according to the long or short term plans

of its political government.

6. Present use of real property

6.1. El Caburé

This property serves the purpose of milk

production. Every cattle breed, agricultural

task, builds, internal roads, or any other

tasks, are intended to be for the most and

best dairy milk product.

Workers facilities and Dairy operations

are carried in compliance with all the

safety regulations.

The land serves perfectly for the purpose

of carrying dairy activities. The Dairy

operation started 28 years ago and the

new rotary eight years ago.

VALLE DE SOBA Cda, Grande

N

N

AZAHARES DE MENAFRAROUTE 25


6.2. Valle de Soba

This farm in the past was used for cropping mainly for carrying

feed for the dairy El Caburé. It also carried the dry cows. Today

it has been transformed into raising heifers with an aim of

building the replacement for the dairies and creating an export

business with the rest.

The land has been developed with the usage of improved

pastures, fertilizer and water supply systems.

6.3. Azahares de Menafra

Los Azahares de Menafra was used for the same purposes

as Valle de Soba with part of the land being used for grain

production mainly maize and sorghum. This production was

carried later to El Cabure where the silage was made and

stored. The rest of the farm was used mainly on native pastures

for raising cattle, mainly the heifers and a few steers. Today

the property has been transformed into a Steer fattening

using New Zealand intensive grassing systems with improved

pastures, fertilizer and water supply systems.

According to the Management Team the project that will be

carried forward in this farm in the future is transforming it into

two dairies under irrigation with central pivots. These future

plans as already mentioned have not been considered when

forming the valuation.

7. Compliance with regional or district plan

Other than as set out in relation to permits for dams, there are

no regional or district plan rules, existing use rights, resource

consents or other statutory requirements which govern or

restrict use of the property by the Company. The Company’s

use of the property is therefore unaffected by such rules, rights,

consents or requirements.

The use of the land on each of the three properties is carried

according to all national and regional regulations. Current

or past activities done in any of the three properties are in

compliance with the country’s laws.

The intended use of the properties is similar to the model that

has been running in the three farms for more than twenty

years. Tambo El Caburé is considered to be a first class dairy

farm for the standards of the country. All buildings and working

facilities comply with the regional or district plans.

This was fully checked with the attorney when the farm was

bought by Gabefox S.A. from the previous owner.

In the few months that the farm has been run by Gabefox S.A.

the improvements and maintenance, internal roads, fencing,

water supply, and improved pastures, have needed no special

authorizations or any other statutory requirements.

However, the planning of the future dam needs specific

permits that have been already obtained by the company

at all Governmental levels (Ministerio de Transporte y

Obras Públicas).

In Valle de Soba the business carried on is the same that it was

before, raising heifers, with improved pastures, electric fences

and a water system supply to each paddock. These activities do

not need additional permits.

Azahares de Menafra, a steer fattening unit, uses a management

system which is similar to Valle de Soba’s. As seen above a

dam’s permit was required and already obtained.

8. Registered valuer’s opinion as to capital value of real property

8.1. Lands

Farm “El Cabure”, with a total area of 1161 hectares

5129 meters with a Productivity Index of 192.

Value per hectare US$3,800.

Farm “Valle de Soba”, with a total area of 624 hectares

6710 meters with a Productivity Index of 148.


Farm “Los Azahares de Menafra”, with a total area of 900

hectares 9771 meters with a Productivity Index of 159.


Total amounts of the valuation are detailed as follows:

Valuation of the Farms US$9,303,028.82 (American dollars

nine million three hundred and three thousands twenty eight

with eighty-two cents).

8.2. Livestock

Class Qty. Value Total

El Caburé

Milking Cows 1,242 530 658,260

Milking Cows – Spring 72 580 41,760

Old Cows 39 360 14,040

Calves 558 190 106,020

Steers 1 250 250

Part. El Caburé 1,912 1,910 820,330




Valle de Soba

Pregnant Cows – Fall 126 480 60,480

Heifers – Fall 354 500 177,000

Heifers 1-2 years 1139 320 364,480

Heifer Calves 361 250 90,250

Steer Calves 187 170 31,790

Old Cows 16 360 5,760

Steers 1 200 200

Bulls 3 700 2,100

Part.Valle de Soba 2,187 2,980 732,060

Azahares de Menafra

Milking Cows 4 530 2,120

Heifers 527 400 210,800

Steers 440 370 162,800

Steers 681 340 231,540

Steers 475 250 118,750

Steer Calves 491 220 108,020

Old Cows 33 360 11,880

Bulls 2 700 1,400

Part. Azahares de Menafra 2,653 3,170 847,310

Horses 49 300 14,700

TOTAL 6,801 8,360 2,414,400

Valuation of the livestock in the three farms

US$2,414,400.00 (American dollars two million four hundred

and fourteen thousands four hundred).

8.3. Machinery

Tractors

Valmet 68. 45 hp. 5,000

Valmet 68, Cabin. 45 hp. 6,000

Massey Ferguson 290. Cab. 66 hp. 8,000

Valmet 785. Cab. 4x4 72 hp 15,000

Valmet 980. Cab. 4x4 100 hp. 20,000

Valmet 985. Cab. 4x4 100 hp. 18,000

Valmet 1280. Cab. 4x4 126 hp. 22,000

Others

Mower John Deere 3,000

Mower Murria 2,000

Grain elevator screw. 800



Mixer/Scale GEHL 9m3 5.,000

Forage wagon 9 rn3 3,000

Gasoil tank 1000 ltrs 700

Gasoil tank 3000 ltrs 1,500

Trailer 8000 kg 2,000

2 Trailers 4000 kg 3,000

3 Small Trailers 3,000

Roller 500

Land plain 800

Rotative cutter 2,500

Baler handler 200

Round baler CLAAS 8,000

Off-set Disc BALDAN 26 discs 2,500

Scraper 2 m3, SUPER TATU 2,000

Loader 0.6 m3 800

Loader 600

Offset Disc BALDAN 18 discs 1,800

Rotative cutter BALDAN 1,200

2 Cultivators 18 points 600

Cultivator 300

Rotative cutter double helix HARTWICH 1,500

Wheel Rake MAINERO 1,800

Air compressor 1,000

Sprayer 1,500

Driller SEMEATO 21,000

Driller BALDAN 3,000

Chopper KVERNELAND 1.5 m. wide 1,000

Other minor tools 3,000

Pick-Up Toyota Hilux 13,000

Lorry Truck Hyundai 13,000

2 Gator John Deere, trailer, Land plain. 6 wheels 8,000

Moto Yazuki enduro 125 cc3 1,200

Valuation of the machinery in the three farms US$208,800

(American dollars two hundreds and eight thousands eight

hundred).

TOTAL AMOUNT OF THIS VALUATION: US$11,926,228.82

(American Dollars eleven million nine hundred and

twenty six thousands two hundred and twenty eight with

eighty‑two cents).




9. Government Valuation

See paragraph 11 below.

10. Basis of valuation

This valuation was prepared on a current market value

basis, given a willing buyer and a willing seller. For the

valuation of these properties we considered the project

as it is today, this specifically means that in the dairy El

Cabure we considered the existing functioning model

without including any of the future developments that

are planned to be done in the farm. There is a big project

on irrigation which includes the construction of a water

dam and the instalment of future pivots. Although those

plans were disclosed to us and the water permits, plans of

the constructions of the dams, all the survey of the whole

property are things that will add value if the future projects

are carried on. The same happened with the Azahares de

Menafra farm for which there is an irrigation project with

all the permits, maps and plans, with all the authorizations

of the regulatory authorities. These projects will add value

in the near future to these farms operations, but as they are

not being done yet we considered the valuation of the land

without adding any value from these prospects.

There are no official registers of transactions made in the

region, but some farms have been sold recently close to the

location of the properties under valuation. Such sales values

are in accordance with the prices that we have given to the

three farms in our valuation. There are more farms for sale

in the neighbourhood with similar or higher prices than the

ones we have valued.

Another consideration made was the location of the

properties which being so near to the bridge that

communicates the country with Argentina has always had

an added value due to the easy access from buyers from

that country. Argentinians are buying farms in the region

since similar lands in Argentina have a value three times

higher than here.

In Valle de Soba all kind of agricultural developments can

be made and it is a farm adapted for many type of land

usage. We consider that any of the three farms are easier to

sell than the average of the country. Given our experience,

the current market values obtained in recent sales and the

availability of other farms to sell that we have compared

we believe that the price given on the valuation of each

farm represents a fair and reasonable price.

Agricultural and cattle breed production levels

VERY HIGHHIGHGOODFAIRPOOR

Ministerio de Ganaderia Agricultura y Pesca – 2003

Other than as set out in this valuation, we do not consider that there

are any special features or characteristics of the land valued, including

but not limited to, potential erosion, subsidence or the likely presence

of hazardous contaminants, or other matters held or disclosed by a

statutory authority, which are relevant to this valuation.

10.1. Lands

For its geographic location, distance from the country’s capital city,

agriculture development centres, ports, establishment nearby services

which are related to its activities.

• Easy access through asphalt routes.

• Soils’ quality, undoubtedly higher than the national average soil.

• Vast farming surface in the area, of such a high productive

potential.

• Wide range of productive options in varied agricultural, livestock

and agro-industrial aspects.

• Improvements made in various aspects: The firm 10km internal

pathway that beholds smaller inner tracks.

• Excellent soil maintenance and rational management.

• High proportion of sown pastures and their conditions.

• Good wire fence conditions, maintenance, rational division criteria

and cattle management facilities.

• Electric energy supply services.

• Communication, telephone and internet services.

• Quantity, quality and utility of the real estate buildings.

• The unique characteristics of the milk exploitation infrastructure.




10.2. Cattle

• Homogeneity and high quality which the livestock shows.

• Productivity achieved by cattle in its different purposes.

• Livestock’s aging structure.

10.3. Machinery

• Type of the existent machinery.

• Good conditions and maintenance.

• High quality of the machinery’s brands.

• Relation between the machinery types and the productive

purposes of the establishments.

11. Official valuation of the property

In Uruguay all real estate properties are subject to an annual

district tax on property that is paid to the local district

government. This rate is based on the government valuation of

the land which is revaluated on an annual basis. As of December

2005, the rateable value of the land was US$1,165,000 and for

the whole year 2006 the rate paid was US$8,800.

12. Amount of income that can be expected

The property (all three farms) has already been partially

developed, with pastures improvement, water supply and small

paddocks. This allows it to achieve higher productivity. Based

on these prevailing conditions of the property and the current

running business, we can reasonably expect this property

to have annual operating income net of operating expenses

(income) of US$1, 000,000.

The business is currently running three different business units:

a Dairy Unit, a Heifers Unit, and a Steers Unit.

The Dairy Unit has 1,450 dairy cows which can allow for

monthly sales of milk of US$100,000, and therefore annual milk

sales of US$1,200,000.

The Heifer Unit is currently raising heifers to be assigned to

the dairy unit or sold in the open market. Heifers are received

as heifer calves from the dairy unit and raised to sell pregnant.

This allows for the business to earn US$250 per year per heifer.

The Unit currently has 2,000 heifers, which on an annual basis

could allow for an income of US$500,000.

The Steers Unit is holding 1,600 steers which are gaining

800 grams per day, with an annual gain of US$ 460,000.

In addition, the business has heifers and steer calves.

Therefore the total probable income of the property would be

US$2,200,000.

We would expect this business to have annual expenses

of US$650,000 and an annual investment in pastures of

US$350,000.

Therefore, the annual income of the property can reasonably

be US$1,000,000. This amount does not include the strategic

development plans that management told us will be

implemented such as irrigation and new dairy units.

13. Confirmation that there are no other facts related to the valuation

I would like to confirm that the valuation was done following

the criteria mentioned above and in agreement with traditional

business modality and standards usually applied by registered

valuers in Uruguay. There are no other matters that we would

consider to be material.

14. Consent to the report’s distribution

I have consented, at the date of this report (and have not as

at that date withdrawn that consent), to this report being

distributed to prospective subscribers for Shares offered in NZ

Farming Systems Uruguay Limited, and there is no copyright or

registered material that I could claim now or in the future.

Mr. Romualdo Rodríguez

Montevideo, 30 October 2006


Investment Statement InformationThis Offer Document contains in this section an investment statement for the purposes of the Securities Regulations 1983.

The purpose of the investment statement is to provide certain key information that is likely to assist a prudent but non-expert

person to decide whether or not to acquire Shares in the Company under this Offer.


What sort of Investment is this?

The Offer is for 75 million ordinary Shares in NZ Farming

Systems Uruguay.

Each Share, when it is fully paid, gives the holder the right to:

• attend and vote at a meeting of the Company including the

right to cast one vote per Share on a poll or any resolution

including but not limited to a resolution to;

appoint or remove a director or auditor;

adopt or alter the Company’s constitution;

approve a major transaction;

approve the amalgamation of the Company under section

221 of the Companies Act 1993; and

put the Company in liquidation.

• an equal share with other ordinary Shares in dividends

authorised by the Board in respect of the ordinary Shares;

• an equal share with other ordinary Shares in the distribution

of surplus assets in any liquidation of the Company;

• be sent certain Company information (including financial

information); and

• enjoy the other rights as a Shareholder conferred by the

Companies Act 1993 and the Company’s constitution.

Until the Shares are fully paid up (when the second instalment

of 50 cents per Share is paid on 14 December 2007), each

Share gives the holder the right to:

• attend and vote at a meeting of the Company including the

right to cast one vote per Share on a poll or any resolution;

• a share in dividends authorised by the Board in respect of

each partly paid ordinary Share;

• a share in the distribution of surplus assets in any liquidation

of the Company;

• be sent certain Company information (including financial

information); and

• subject to the above limitations, enjoy the other rights as a

shareholder conferred by the Companies Act 1993 and the

Company’s constitution.

Following the issue of Shares under the Offer, the Company will

have a minimum of 50 million (and a maximum of 150 million)

partly paid shares on issue under the Offer, and 17,934,177

partly paid shares on issue to PGG Wrightson Investments

Limited for the part purchase of the Farms.

Listing

The Directors will use their best endeavours to list the Shares

on the NZSX as soon as possible after 14 December 2007,

however no representation is made that such a listing will

occur. The Board has adopted an NZSX Listing Rules compliant

constitution and corporate governance policies. NZX accepts no

responsibility for any statement in this Offer Document.

Answers to Important Questions


Other terms of the Offer

The above is a simplified and general description of some of

the rights and obligations of NZ Farming Systems Uruguay’s

shareholders. All terms of the Offer and Shares, except those

rights and obligations implied by law, are set out in other parts

of this Offer Document and the Company’s constitution, which

is available for public inspection at the Company’s registered

office at 57 Waterloo Road, Hornby, Christchurch and on the

Companies Office website at www.companies.govt.nz.

Who is involved in providing it for me?

The Issuer

NZ Farming Systems Uruguay is the issuer of the Shares.

The Company’s registered address is 57 Waterloo Road,

Hornby, Christchurch.

The Company was incorporated under the Companies

Act 1993 on 26 September 2006. Its registered number is

1866126. Copies of incorporation documents, the Constitution

and the material contracts can be viewed, (if available) on

the Companies Office website at www.companies.govt.nz.

Where documentation is not available on the Companies

Office website a request for the documents can be made

by contacting the Companies Office contact centre on

0508 266 726. A prescribed fee may be charged for requested

documents. These documents may also be viewed at the

registered office of the Company during normal business hours.

The Directors of NZ Farming Systems Uruguay

The Directors of NZ Farming Systems Uruguay are; Keith

Raymond Smith, Michael Craig Norgate, Samuel Richard

Maling, Murray James Flett, John Suffield Parker and Bevan

David Cushing.

The Promoters

PGG Wrightson and its directors, except Keith Raymond Smith,

Michael Craig Norgate, Samuel Richard Maling and Murray

James Flett, who are also Directors of NZ Farming Systems


The Directors of PGG Wrightson are;

Arthur William Baylis, Sir Selwyn John Cushing, Richard Frank

Elworthy, Murray James Flett, Brian James Jolliffe, Samuel

Richard Maling, John Baird McConnon, Michael Craig Norgate,

Keith Raymond Smith and William David Thomas.

The address of the Promoters is set out in the Directory.

NZ Farming Systems Uruguay has not yet commenced

business. The intended activities of the Company (to acquire

and develop farms and farmland in Uruguay) are described

in detail in the section of this Offer Document entitled ‘The

Investment Opportunity’ on pages 33 to 34.

How much do I pay?

The issue price is $1.00 per Share. The Minimum Subscription is

20,000 Shares, with additional amounts in multiples of 1,000

Shares. Half of the issue price must be paid on application and

the other half on 14 December 2007. There are consequences

of not paying the second instalment of the subscription which

are described in detail on page 12. Applications cannot be

withdrawn or revoked by the applicant.

The minimum amount which must, in the opinion of the

Directors be raised by the Offer, is $50 million.

The Company reserves the right to refuse to accept any

Application for Shares at its discretion. It also reserves the

right to terminate the Offer at any time prior to the Company

allotting Shares under the Offer.

Applications to subscribe for Shares must be made on the

Application Form following page 76 of this Offer Document,

in accordance with the application instructions contained on

page 76. Applications may be lodged with the Lead Manager,

any NZX Firm or with the Registrar in time to enable them to

be mailed or delivered to reach the Company’s share registrar,

Computershare Investor Services no later than 5pm on Tuesday

12 December 2006. Cheques must be made payable to ‘NZ

Farming Systems Uruguay Share Offer’ and be available for

immediate banking.

Funds received in respect of applications which are declined

in whole or in part will be refunded without interest as soon

as practicable, and in any case no later than ten business days

after the Closing Date. The Company reserves the right to

withdraw the Offer at any time, in which case all application

funds will be refunded without interest. Interest earned on

application funds will be retained by the Company.

What are the charges?

In return for the performance of its duties, PGG Wrightson

Funds Management, as Manager, is entitled to a Management

Fee and a Performance Fee. PGG Wrightson Uruguay, as

farm manager, is also entitled to be paid for certain on-farm

services to the Company. Further details of the management

agreements are set out on page 16.

An investor is only required to pay the issue price of $1.00

for each Share, 50 cents payable on application and 50 cents

payable on 14 December 2007.

Investors are not required to pay any charges to the Offeror,

Promoters, or any other party, in relation to the Offer.


All costs and expenses associated with the Offer, including the

Lead Manager’s fee, legal fees, establishment fees, the costs

of farm management, registry fees and printing and postage

costs will be met by the Company from the proceeds of the

Offer. The costs and expenses of the Offer are estimated to be

approximately $2.4 million.

For Shares allotted pursuant to firm and priority allocations, the

rate of brokerage is 3% of the gross value of initial subscription

proceeds (ie the number of shares allotted times 50 cents

per Share). For Shares allotted pursuant to oversubscriptions,

the rate of brokerage is 2% of the gross value of initial

subscription proceeds.

For any subsequent sale, an investor will be liable to pay normal

brokerage fees (if any).

What returns will I get?

The principal factors that will determine returns to investors in

the Company are:

• the financial condition of the Company;

• the Company’s ability to pay dividends; and

• the price that investors may realise on the sale of Shares.

Shareholders will receive returns through any dividends paid by

the Company and any increase in the value of its Shares when

they sell them.

Subject to available profits and normal prudential requirements,

dividend policy will reflect a desire to pay shareholders a

minimum dividend that equates to an after tax yield to

investors of 6% on the initial investment. Whether, and to

what extent, dividends are paid or the price of Shares increases

or falls will depend on a number of factors, including those

discussed under the heading ‘What are my risks?’. The factors

described in that section could reduce or eliminate the

dividends or other returns or benefits intended to be derived

from holding the Shares.

The Company is legally liable to pay any dividends it

declares. The dates and frequency of dividend payments by

the Company are unknown. No amount quantifiable as at the

date of this Offer Document and enforceable by investors has

been promised.

Dividends will be subject to the Uruguayan and New Zealand

tax regimes. A summary of the current effect of taxation on

returns is detailed on page 48. Investors should consult their

own taxation or other financial advisers concerning the taxation

implications of investing in Shares and whether, depending on

their own circumstances, any increase in value on their sale of

Shares may be taxable.

Performance of the Company or the current or future value of

the Shares is not guaranteed by the Company or any person

and no amount of return has been promised. The Shares could

go down in value as a result of matters that may or may not be

within the Company’s control.

What are my risks?

All forms of investment involve an element of risk. The principal

risk for investors in the Company is that they may be unable to

recoup all or part of their original investment. This could occur

for a number of reasons including:

• a deterioration in the Company’s financial condition through

circumstances that may or may not be within its control,

or the Company becomes insolvent and is placed into

receivership or liquidation;

• broader conditions in the New Zealand and world

sharemarkets that can result in Shareholders being unable to

sell their Shares for fair value at a time of their choosing;

• a thinly traded or no market for the Shares, or the market

becomes illiquid.

The factors and risks which could affect the operational and

financial performance of the Company, and the return on the

Shares, are:

Political and economic

Country risk

Uruguay is a small country that is vulnerable to the

economies of its larger neighbours, Argentina and Brazil.

The country was unstable politically through the first half

of the 20th century culminating in a military coup in 1973.

Democracy was restored through the period 1983–1990 and,

since 2004, Uruguay has been governed democratically by a

coalition of left-wing parties.

The Uruguayan economy, and those of its larger neighbours,

could be characterised currently as ‘free market democracies’,

with a trend towards further trade liberalisation through

MERCOSUR, the Southern Cone Common Market, which

includes Argentina, Brazil, Venezuela and Paraguay. While

democracy and market-oriented policies have been in

place for some years in Uruguay, there is a risk that either

could be eroded in a way that adversely impacts the

Company’s investments.


It is worth noting that Uruguay ranks well in indices such as

Corruption Perception (published by Transparency International

at www.transparency.org ). At 32nd out of 158 countries

surveyed, Uruguay is level with Taiwan and ahead of countries

such as Malaysia, South Korea and Italy. The country also

scores well in the 2006 Index of Economic Freedom published

by www.heritage.org. Uruguay does not have a history of

expropriation of private property rights and the risk of such

expropriation is considered low.

Economic risks

Until recent years Uruguay was highly dependent on exporting

to its larger neighbours, Brazil and Argentina, and for tourist

receipts from them. Over recent years the US has grown in

importance as a trading partner and the country’s economic

risks have become more diversified. As with all small countries,

however, Uruguay is vulnerable to the global economic climate

and the performance of the economies with which it enjoys

close relations.

Exchange rate

The Company’s operations will be conducted largely in United

States dollars (US Dollars). Milk is nominally priced in pesos

but the price is generally adjusted to reflect changes in the

US Dollar/peso exchange rate. Appreciation in the value of the

New Zealand dollar against the US Dollar would reduce the

value of the Company’s Uruguayan farm assets and US Dollar

cashflows in NZ Dollar terms and could affect the share price

adversely. The Company does not intend to hedge this exposure.

Business and Farming

Farming is an activity which is subject to a wide range of risks

relating to nature and the climate, many of which apply in

Uruguay in a similar way to farming in New Zealand. Whilst

subject to the normal farming risks such as climate, disease and

pest, international commodity prices, the success or otherwise

of this venture is particularly predicated on the following key

assumptions:

• the success of the Offer;

• the robustness of the Company’s business model;

• the ability to achieve targeted productivity increases;

• the ability to source suitable property; and

• the ability to secure appropriately qualified and experienced

farm managers in Uruguay.

Success of the Offer

The rate at which properties are capable of being acquired

depends upon the success of this Offer. Should the Offer

only raise the minimum subscription level, significantly fewer

properties will be capable of being acquired, and consequently,

given the relatively fixed nature of certain costs, will result in

a lower return to investors. Conversely, should more funds be

raised than is assumed in the prospective financial information,

subject to the availability of further experienced and qualified

property managers and suitable properties, the returns

projected may be exceeded.

Robustness of the Company’s Business Model

The overall performance of the business is dependent upon two

key drivers:

• the robustness of the Company’s business model, and

• the number of farm units acquired.

The business model makes certain assumptions around the

acquisition and development costs of properties and livestock in

Uruguay. Whilst these are based upon current market conditions

and prices in Uruguay, should these change from that currently

experienced, this is likely to reduce the overall profitability

of the venture and in turn, returns to investors. Assumptions

around stocking levels, milk production and returns are based

upon a combination of New Zealand experience in such

situations, and expectations in Uruguay following limited trials

and extensive discussion with advisers. While the Board believes

such assumptions to be conservative, should any of these key

assumptions prove to be unfounded, once again additional costs

and/or revenue reductions are likely to be experienced which

would adversely impact on investor returns.

Identification of suitable property and ability to attract suitably qualified farm managers

The Group’s plans involve purchasing and developing farms,

which is not a risk-free activity. Managers will be recruited who

the Company believes to be experienced in implementing large

scale dairy conversions based on New Zealand intensive pasture

management systems. This experience will be combined with

local farming knowledge and expertise to achieve development

that is on time, to budget and of the desired quality. There

are, nevertheless, risks such as the possibility of rising land

values and difficulties in acquiring suitable land, together with

difficulties in attracting suitably qualified and experienced

managers for the properties. Should such difficulties be

encountered this would delay progress by the Group against

its plans.


International trade

In common with other farming operations in many countries,

the outputs from the Company’s activities will be sold into

markets in which the Group is a price-taker. Volumes sold and

the prices received are subject to non-market influences from

government policies and various bilateral, multilateral and

international agreements. Changes in these can have both

negative and positive effects on the Company’s operations and

profitability.

Foot and mouth disease (FMD) and bovine spongiform encephalopathy (BSE)

Historically, FMD has been endemic in South America. Uruguay

was declared free of FMD in 1995 however experienced

an outbreak in April 2001 near the border with Argentina.

Since August 2001 the country has enjoyed ‘FMD-free with

vaccination’ status and all cattle are vaccinated against FMD.

Uruguay prohibits the import of live animals and genetic

material from countries affected by FMD.

If there were an outbreak of FMD in future, returns to investors

could be affected.

Uruguay has never experienced a case of BSE and is classified as

low risk for BSE by the World Organisation for Animal Health.

Scale of operations

The scale of the Company’s operations is likely to increase

Conaprole’s output by around 10% over a two year timeframe

and more in the medium term. It is also likely to have a

material effect on the volume of Uruguay’s dairy exports.

These factors may affect the price of the Company’s outputs

and its profitability. The Company intends to work closely with

Conaprole to mitigate any potentially negative impacts from its

operations.

The Company’s scale and growth may also have an effect on

land and other input prices.

Financial

The prospective financial information is based on the Directors’

best judgment and experience in Uruguay, however economic

conditions can change, output prices fall, input prices rise and

circumstances change in a manner and to an extent which

we have not foreseen to materially undermine prospective

financial information.

Other risks

Taxation

Changes to the rate of company tax and other changes to

taxation in New Zealand and in Uruguay could affect returns

to investors. The taxation assumptions used in this Offer

Document are based on existing New Zealand tax legislation

and the currently proposed changes to the Uruguay tax

legislation.

Liquidity risk


on the NZSX as soon as possible after 14 December 2007,

however no representation is made that such a listing will

occur. The Board has adopted an NZSX Listing Rules compliant

constitution and corporate governance policies. NZX accepts

no responsibility for any statement in this Offer Document.

Until the Shares are listed there will be no established market

for investors to sell their Shares and liquidate their investment.

If, and when the Shares are listed, their price will fluctuate

with the supply and demand for them and with a number of

factors relating to the New Zealand and world economies and

sharemarkets. Many of these factors are outside the Company’s

control and may be unrelated to its performance. If such listing

does not occur for any reason, there will continue to be no

established market for the trading of Shares and investors will

only be able to trade shares privately, limiting their ability to

sell Shares.

Transfer of Shares prior to full payment

If an investor sells or transfers a Share, prior to paying the

second instalment on 14 December 2007, the investor will

remain liable for that second instalment of 50 cents per

Share if the actual holder of the Share does not pay it, and

the Company may seek payment from the investor for the

outstanding amount until the Shares are fully paid.

Forfeiture of Shares

If the investor does not pay the second instalment, the

Company may forfeit and sell the forfeited Shares. The

proceeds of the sale may be insufficient to meet the second

instalment plus default interest and the investor will remain

liable for the shortfall.

No trading history

The Company has not traded and there is no meaningful

historical financial information upon which investors can base

their decision to invest.


Forward Looking Statements

Certain statements in this Offer Document constitute

forward-looking statements. Such forward-looking statements

involve assumptions about known and unknown risks,

uncertainties and other factors which may cause the actual

results, performance or achievements of the Company, or

industry results, to be materially different from any future

results, performance or achievements expressed or implied by

such forward-looking statements.

Given these uncertainties, investors are cautioned not to place

undue reliance on such forward-looking statements in this

Offer Document. In addition, under no circumstances does

the inclusion of such forward-looking statements in this Offer

Document constitute a representation or warranty by the

Company or any other person with respect to the achievement

of the results or matters set out in such statements or that the

underlying assumption used will in fact be the case.

Consequences of insolvency

Investors in Shares will not be liable to pay any money to

any person as a result of the insolvency of the Company or

otherwise, other than their obligation to pay both instalments

of the issue price and any interest payable if an investor

defaults on payment of the second instalment.

If the Company is placed into receivership or liquidation prior to

the second instalment being paid, the investor will remain liable

for the second instalment, and the receiver or liquidator may

seek payment of the outstanding amount.

All creditors of the Company will rank ahead of holders of

Shares if the Company is liquidated. After all such creditors

have been paid, the remaining assets, if any, will be available

for distribution amongst investors and the other holders of

Ordinary Shares who will rank equally among themselves.

Prospective investors should consider these risks and other

details of the Offer prior to applying for Shares. Investors are

encouraged to read the entire Offer Document and to obtain

advice from their financial adviser if they have any questions.

Can the investment be altered?

The full terms of the Offer and the terms and conditions

on which investors may apply for Shares are set out in this

Offer Document. The Company may withdraw the Offer

without notice but may only alter the terms after amending

the Prospectus and filing details of the amendment with the

Registrar of Companies for New Zealand. Offer terms cannot be

altered without investors’ consent once applications have been

accepted by the Company.

The rights conferred on the holders of Shares are set out

on page 58 of this Offer Document. The rights of holders of

Shares are subject to the provisions of the Companies Act

1993, the Company’s Constitution, the Takeovers Code and, if

the Shares are listed on the NZX, the NZSX Listing Rules. The

Constitution may only be altered by a special resolution of its

Shareholders, subject to the rights of interest groups under

the Companies Act, or in certain circumstances by court order.

The Company may not take any action that affects the rights

attaching to Shares, unless that action has been approved by

special resolution of all shareholders who would be affected by

that action. Under certain circumstances, a shareholder whose

rights would be affected by a special resolution may require the

Company to purchase its Shares.

Takeovers Code

The Company will be subject to the Takeovers Code 2000 and

Takeovers Act 1993.

Takeover provisions

The Takeovers Code, amongst other matters, prohibits any

person (together with their Associates as defined in the Code)

from becoming the holder or controller of more than 20% of

the voting rights in the Company other than in compliance

with the requirements of the Code. There are exemptions, and

investors should note the information regarding the initial

shareholding of PGG Wrightson Investments, and Rural Portfolio

Investments Limited, set out on page 67.

Investors are advised to seek legal advice in relation to any act,

omission or circumstance which may result in them breaching

the Takeovers Code.


Compulsory acquisition

Shares can be compulsorily acquired by another party in certain

circumstances.

If a person or two or more persons acting jointly or in concert

become a dominant owner of the Company (that is, become

the holders or controllers of 90% or more of the voting rights in

the Company by any method and at any time) that dominant

owner must immediately send a written notice of that fact to

the Company, the Takeovers Panel and NZX.

The dominant owner will then have the right to acquire all the

outstanding securities in the Company and similarly each other

security holder in the Company will have the right to sell their

outstanding securities in the Company to the dominant owner,

in each case in accordance with Part 7 of the Takeovers Code.

A notice to this effect (an acquisition notice), must be sent by

the dominant owner not later than 30 days after becoming the

dominant owner.

The consideration for any such acquisition or sale will be:

(a) where a person becomes the dominant owner by reason

of acceptances under an offer where acceptances were

received for more than 50% of the securities that were the

subject of the offer, the same as the consideration payable

under that offer; or

(b) in all other cases, a cash sum certified as fair and reasonable

by an independent advisor, provided however that if within

14 days after the dominant owner sends the acquisition

notice, the dominant owner receives written objections to

the specified consideration from security holders who hold

the lesser of:

• 2% or more of a class of equity securities; or

• 10% or more of the outstanding securities of a class,

the consideration payable will be a cash sum certified as fair

and reasonable by an independent person appointed by the

Takeovers Panel.

The fair and reasonable value of an equity security must be

calculated by first assessing the value of all equity securities in

the class of equity securities of which the equity security forms

part and then allocating that value pro-rata among all the

securities of that class.

Early termination

The Company may, if an investor does not pay the second

instalment by 31 December 2007, resolve that investors will

forfeit the Shares which remain unpaid. The Company may

then sell those forfeited Shares and apply the proceeds against

the payment of the second instalment plus any interest from

14 December 2007 until the date of sale. Any balance of

proceeds will be returned to the investor. If the proceeds are

insufficient to meet the second instalment plus interest, the

investor remains fully liable to the Company. Until the second

instalment is received by the Company, the investor is not

entitled to receive any distributions attaching to the Shares.

How do I cash in my investment?

Shareholders are free to sell their Shares subject to compliance

with the Company’s constitution. Until the Company lists

Shares on the NZX the Shares will only be able to be sold

privately and in the Company’s opinion there will be no

established market for the sale of Shares. If such listing

does not occur for any reason there will continue to be no

established market for the Shares and the Shares will only

be able to be traded privately and this will limit an investor’s

ability to sell their Shares. Until Shares are fully paid any Shares

must be sold on the basis that the transferee acknowledges its

obligation to pay the second instalment of the Share price due

on 14 December 2007.

On the basis that the Shares are listed on the NZSX, they

will be tradeable subject to compliance with the Company’s

constitution, the Takeovers Code, applicable securities laws

and regulations, the Overseas Investment Regulations and the

continuation of an active trading market. In the Company’s

opinion there will then be an established market for the Shares.

No charges are payable to the Company in respect of any sale

of Shares although brokerage may be payable to your broker.

Subject to the above, and the ability of the Company to cancel

Shares if the second instalment is not paid on 14 December

2007, there is no right of the Company, a holder of Shares, or

any other person to terminate, cancel or surrender the Shares.


Who do I contact with enquiries about my investment?

Enquiries about the shares should be directed to:


c/– PGG Wrightson Funds Management Limited

57 Waterloo Road

Hornby

Christchurch.

Attention: Peter Baynes

Phone: (03) 372 0800

Fax: (03) 349 6176

Is there anyone to whom I can complain if I have problems with the investment?

Complaints about the Shares can be made to:

NZ Farming Systems Limited

c/– PGG Wrightson Funds Management Limited

57 Waterloo Road

Hornby

Christchurch.

Attention: Peter Baynes

Phone: (03) 372 0800

Fax: (03) 349 6176

There is no ombudsman to whom complaints about the Shares

can be made.

What other information can I obtain about this investment?

This document is a combined Investment Statement and

Prospectus. Other information about the Shares is contained

in this Offer Document under the sections entitled ‘Statutory

Information’, and in NZ Farming Systems Uruguay’s prospective

financial information on pages 66 and 35. Material contracts

relating to this Offer, including those between the Company

and PGG Wrightson Funds Management, and the Company and

PGG Wrightson Limited can be inspected at the offices of the

Company at 57 Waterloo Road, Hornby, Christchurch. They are

also on a public register with the Companies Office which can

be accessed at www.companies.govt.nz. Where documentation

is not available on the Companies Office website, a request

for the documents can be made by contacting the Companies

Office Contact Centre on 0508 266 726. A prescribed fee may

be charged for requested documents.

Shareholders will be sent an annual report which will include

audited financial statements, and a copy of unaudited financial

statements at each half year.

If the Shares are listed on the NZX, the Company will become

subject to the requirements of the NZSX Listing Rules and its

communications with shareholders will be governed by them.

On request information

Investors are also entitled to copies, (free of charge), of NZ

Farming Systems Uruguay’s most recent financial statements,

Investment Statement, registered Prospectus, material contracts

and documents registered for the purpose of extending the

period during which allotment may be made under a registered

prospectus.

Copies are available by telephoning, writing to or calling at the

Company’s registered office, during normal business hours.

Investors may also request (on payment of a reasonable fee)

copies of the Constitution and any other information that may

be requested under the Securities Regulations 1983.


Statutory Information

This Offer Document contains in this section the statutory

information required in a registered prospectus for equity

securities for the purposes of the First Schedule of the

Securities Regulations 1983.

1. Main terms of the Offer

Issuer

The issuer of the Shares is NZ Farming Systems Uruguay

Limited which has its registered office at 57 Waterloo Road,

Hornby, Christchurch.

Description of securities offered

The securities being offered are 75 million (partly paid)

ordinary Shares in NZ Farming Systems Uruguay Limited at a

price of $1.00 per Share with provision for oversubscriptions of

up to 75 million additional Shares. A fuller description of the

Shares being offered is set out in the Description of the Offer.

NZX Listing


on the NZSX as soon as possible after 14 December 2007.

No representation is made that such a listing will occur and if

such listing does not occur for any reason there will continue

to be no established market for the trading of Shares and

investors will only be able to trade Shares privately, limiting

their ability to sell Shares. The Board has adopted an NZSX

Listing Rules compliant constitution and corporate governance

policies. NZX accepts no responsibility for any statement in this

Offer Document.

Maximum number

The maximum number of Shares being offered is 150 million.

Minimum offer amount

The minimum offer amount that, in the opinion of the

Directors, must be raised by the issue of Shares under this

Offer is $50 million.

Price or other consideration

The Shares are being offered at an issue price of $1.00

per Share which is payable in two instalments. The first

instalment of 50 cents is payable on application and the

second instalment of 50 cents is payable on 14 December

2007.

2. Name and address of offeror

The Shares have not previously been allotted. NZ Farming

Systems Uruguay Limited is the offeror and the disclosure

requirements of clause 2 of the First Schedule to the

Regulations do not apply.

3. Details of incorporation of company

Dateandnumber

NZ Farming Systems Uruguay was incorporated in New

Zealand under the Companies Act on 26 September 2006

and its registered number is 1866126.

Placefilekept

The public file relating to the Company can be accessed on

the Companies Office website at www.companies.govt.nz.

Where relevant documents are not available on the website

they can be requested from the Companies Office on

0508 266 726 (charges are payable). These documents may

also be viewed at the Company’s registered office during

normal business hours.


4. Principal subsidiaries

NZ Farming Systems Uruguay does not have any subsidiaries

at the date of this Offer Document. Further information about

the two Uruguayan companies the Company has agreed to

purchase can be found on page 33.

5. Directorate and advisors

Details

The names, technical or professional qualifications and

addresses of each director of NZ Farming Systems Uruguay are

set out on page 14. The address at which each director can be

contacted is 57 Waterloo Road, Hornby, Christchurch.

Nobankruptcy

No director of NZ Farming Systems Uruguay has been

adjudged bankrupt during the five years preceding the date

of this Offer Document.

Advisors

The names of NZ Farming Systems Uruguay’s auditor, registrar,

solicitors and Lead Manager who have been involved in

preparing this Offer Document are set out in the Directory.

Experts

The farms purchased by NZ Farming Systems Uruguay from

PGG Wrightson Investments were valued by Sr Romualdo

Rodríguez of Firm Romualdo Rodríguez Negocios Rurales (an

agribusiness firm) of Cuareim 1978, Montevideo, Uruguay. The

information relating to farming has been provided by agri-

business and food consultants Nimmo-Bell & Company Limited

of 12 Johnston Street, Wellington. Other financial information

has been provided by Agricultural Business Associates whose

address is PO Box 14-107, Hamilton. All three have given their

consent to be named in this Offer Document, and consents are

attached to this Offer Document.

5A Restrictions on directors’ powers

There are no specific modifications, exceptions or limitations

on the powers of the Company’s Board imposed under the

Companies Act 1993 or the Constitution other than as set

out below.

The Companies Act contains a number of provisions which

could have the effect, in certain circumstances, of imposing

modifications, exceptions or limitations on the powers of

the Company’s Board (including the requirement that ‘major

transactions’, as defined in that legislation, be approved by a

special resolution of shareholders). These provisions apply to

any company registered under the Companies Act.

The NZSX Listing Rules contain a number of provisions

which could have the effect, in certain circumstances, of

imposing modifications, exceptions or limitations on the

powers of the Board. These provisions apply to any issuer listed

on NZX and will apply to the Company if and when it lists the

Shares on NZX.

6. Substantial equity security holders of the issuer

Namesandsharesheld

This is a new offer and at the date of the offer there are

no holders of shares other than the incorporation shares.

The Company plans to issue 17,934,177 partly paid

ordinary shares to PGG Wrightson Investments Limited on

15 December 2006 as 50% of the consideration for the

purchase of nominee companies which own the three farms

discussed on pages 33 to 34.

The shares issued to PGG Wrightson Investments will amount

to 10.7% of the total Shares on issue if the Offer proceeds

amount to $150 million, 26.4% if the Offer proceeds amount

to the minimum subscription amount of $50 million.

Rural Portfolio Investments Limited also intends to apply for

10 million Shares. That interest will be associated with the

shareholding of PGG Wrightson Investments under the New

Zealand Takeovers Code. The maximum combined interest

(if the Offer proceeds amount to the minimum subscription

amount of $50 million) is 41.1%.

As at the date of the Offer PGG Wrightson holds 100 ordinary

shares in the Company (incorporation shares).

Noshareholderliability

None of the shareholders named above, NZ Farming Systems

Uruguay, ABN AMRO Craigs, PGG Wrightson, Rural Portfolio

Investments, the promoters or any of their respective

subsidiaries undertakes any liability in respect of the

performance of the Shares issued under this Offer Document,

nor are the Shares guaranteed by them or any other party.


7. Description of activities of the issuing group

NZ Farming Systems Uruguay has not yet commenced

business. Its intended activities are set out on pages 33 and

34 of this Offer Document.

8. Summary of financial statements

Financial statements in summary form in respect of

the Company are not required as the Company has not

yet commenced business. Apart from costs incurred in

incorporation and those relating to this Offer Document,

NZ Farming Systems Uruguay has not acquired any assets or

incurred any debts. Therefore no historical financial statements

have been prepared.

9. Prospects and forecasts

The trading prospects of NZ Farming Systems Uruguay,

together with material information relevant to those

prospects, are discussed in pages 33 to 34. Any special trade

factors or risks are discussed under ‘What are my risks?’ on

pages 60 to 63.

10. Provisions relating to initial flotations

Directors’plans

The Directors’ plans are set out on pages 11 to 13.

The Company intends to acquire and develop farms and

farmland in Uruguay.

Useofproceeds

The proceeds of the Offer, after deduction of expenses, will

be applied to the purchase and improvement of farmland in

Uruguay, and development of dairying and beef farming on

that land applying New Zealand style farming systems.

As its foundation investment, the Company will acquire the

three part-developed farms discussed on pages 33 to 34

through the acquisition of nominee companies, Gabefox S.A.

and Gimley S.A. from PGG Wrightson Investments. The purchase

price of US$11,926,228, which was determined at an agreed

valuation, will be paid for in equal parts by an issue of partly

paid ordinary shares and cash. The partly paid shares will be

issued on the same terms as those to all other shareholders.

PGG Wrightson Investments intends to use the cash it receives

in part payment for the sale of the farms to NZ Farming

Systems Uruguay, to retire debt it incurred when it purchased

farms in 2005. PGG Wrightson Investments will also invest

further in the Company when it makes the instalment payment

due on its partly paid shares in December 2007.

PGG Wrightson Investments will undertake not to sell these shares

for at least three years from the date of this Offer Document and

intends to hold its shares as a long-term investment.

The proceeds of the second instalment payable in December

2007 are intended to be utilised to source, acquire and develop

further farm assets.

Notwithstanding the Board’s plans referred to above, the

proceeds of the Offer may be applied towards any undertaking

in which the Company may lawfully engage.

The Exemption Notice exempts the Company from compliance

with clause 10(1)(c) of the Regulations.

Minimumamountrequiredtoberaised

For the purposes of section 37(2) of the Securities Act, the

minimum amount that, in the opinion of the Directors, must

be raised by the issue of shares under this Offer Document to

provide for the matters specified in clause 10(4) of the First

Schedule to the Regulations is $50 million.

11. Acquisition of business or subsidiary

NZ Farming Systems Uruguay is a newly incorporated

company which has no subsidiaries. It has agreed to acquire

two Uruguayan nominee companies – Gabefox S.A. and

Gimley S.A. from PGG Wrightson Investments under a farm

purchase contract dated 3 November 2006. The Uruguayan

nominee companies own the farms and farm assets described

on page 33. It also intends to acquire or incorporate farm

owning subsidiary companies in Uruguay as detailed on page

34 through which it will hold its farm investments in Uruguay.

Under the Exemption Notice, the Company is exempted from

including in this Offer Document certain historical financial

information about the initial farms and farm assets to be

acquired, through farm owning subsidiary companies, from

PGG Wrightson Investments. For more information about the

Exemption Notice, see page 71.

12. Securities paid up otherwise than in cash

The existing 100 shares held by PGG Wrightson in

NZ Farming Systems Uruguay were issued for no consideration

upon incorporation. NZ Farming Systems Uruguay has not

allotted any other securities. It will allot 17,934,177 shares

to PGG Wrightson Investments as consideration for shares

in Gabefox S.A. and Gimley S.A., the farm owning subsidiary

companies which own the three farms and farm assets

described on page 13.

13. Options to subscribe for securities of issuing group

No options have been granted and it is not proposed to

grant any options to subscribe for any shares in NZ Farming

Systems Uruguay.


14. Appointment and retirement of Directors

Existing

The Company’s initial Directors have been appointed in

accordance with section 153 of the Companies Act.

RetirementAge

The Company’s constitution does not contain any provisions

concerning the retirement age of the Company’s Directors.

RighttoappointadditionalDirectors

No person has any right to appoint any Director other than

the holders of ordinary shares of the Company by ordinary

resolution or the Directors acting as a board of the Company to

fill a vacancy on the Board.

15. Directors’ interests

None of the Directors of NZ Farming Systems Uruguay is

entitled to any remuneration from the Company other than by

way of Director’s fees (which, in aggregate, will amount to a

maximum of $400,000 per annum for non-executive directors)

and reasonable travel, accommodation and other expenses

incurred in the course of performing duties or exercising

powers as directors. In addition, Directors may from time to

time, subject to appropriate disclosures in accordance with the

procedures of the Companies Act, provide consulting services to

NZ Farming Systems Uruguay on normal arm’s-length terms.

Directors’andrelatedparties’intendedshareholdings

An allocation of 5 million shares has been reserved for the

Directors of NZ Farming Systems Uruguay and PGG Wrightson

who have indicated that they intend to participate in the Offer.

Rural Portfolio Investments Limited in which Murray Flett

and Craig Norgate have the interests set out on page 69

also intends to apply for 10 million Shares. That interest

will be associated with the shareholding of PGG Wrightson

Investments under the Takeovers Code. The maximum combined

interest (if the Offer proceeds amount to the minimum

subscription amount of $50 million) is 41.1%.

The shares issued to PGG Wrightson Investments will amount

to 10.7% of the total shares on issue if the Offer proceeds

amount to $150 million, 26.4% if the Offer proceeds amount

to the minimum subscription amount of $50 million.

No person (including any Director, agent or employee of

NZ Farming Systems Uruguay), or any member of the PGG

Wrightson Group guarantees the return of capital invested, or

the performance of the Shares.

Materialtransactionswithdirectors

No transactions have occurred between NZ Farming Systems

Uruguay and its directors or any other person described in

clause 15(4) of the First Schedule of the Regulations.

16. Promoters’ interests

PGG Wrightson and its directors, except Keith Raymond Smith,

Michael Craig Norgate, Samuel Richard Maling and Murray

James Flett, who are also Directors of NZ Farming Systems


The Directors of PGG Wrightson are:

Arthur William Baylis, Sir Selwyn John Cushing, Richard Frank

Elworthy, Murray James Flett, Brian James Jolliffe, Samuel

Richard Maling, John Baird McConnon, Michael Craig Norgate,

Keith Raymond Smith and William David Thomas.

The Company has not entered into any material transactions

with its promoters (and its subsidiaries) other than in respect

of the contract to acquire the farms owned by PGG Wrightson

Investments, set out on page 33 and the Management

Agreement with PGG Wrightson Funds Management Limited,

and the Farm Management Agreement with PGG Wrightson

Uruguay Limited, set out on page 16. The original cost to PGG

Wrightson Investments of the three farms was US$7.6 million.

The Company has agreed to pay US$11,926,288 for them.

These figures are not directly comparable – see page 33.

The following information is given concerning PGG Wrightson

Limited. PGG Wrightson’s wholly owned subsidiary PGG

Wrightson Investments is the vendor of the farm owning

subsidiary companies which own the three farms and farm

assets, which the Company intends to buy under the farm

purchase contract referred to on page 33.

The Company and PGG Wrightson have common directors,

whose interests are noted below.

a) Sam Maling is an associated person of PGG Wrightson

substantial security holder Pyne Gould Corporation Limited

which holds 62,444,007 shares in PGG Wrightson. By

virtue of a shareholder agreement between Rural Portfolio

Investments Limited and Pyne Gould Corporation, he is also

an associated person of Rural Portfolio Investments Limited.

b) Murray Flett and Craig Norgate are associated persons of

PGG Wrightson substantial security holder Rural Portfolio

Investments Limited which holds 84,410,595 shares in

PGG Wrightson. By virtue of a shareholder agreement

between Rural Portfolio Investments Limited and Pyne

Gould Corporation, they are also associated persons of Pyne

Gould Corporation. Craig Norgate has a beneficial interest in

shares held by Rural Portfolio Investments Limited.


c) Craig Norgate is a non beneficial trustee for the PGG

Wrightson employee share purchase scheme holding

655,758 shares in PGG Wrightson.

d) Keith Smith, Murray Flett and Sam Maling have also

beneficial share holdings in PGG Wrightson.

17. Material contracts

The Company has entered into the following material contracts:

1. Farm purchase contract

On 3 November 2006 the Company agreed to purchase the

Uruguayan nominee companies, Gabefox S.A. and Gimley

S.A., described on page 33 from PGG Wrightson Investments

Limited for US$11,926,228, in exchange for the issue of

17,934,177 partly paid shares in the Company, and cash.

The purchase contract is conditional upon the minimum

subscription amount of $50 million being raised under

the Offer.

PGG Wrightson Investments has agreed to indemnify

the Company for all contingent obligations and liabilities

(including taxation obligations and liabilities) of the

nominee companies up to the date of settlement (15

December 2006).

2. Management Contract with PGG Wrightson Funds

Management Limited dated 3 November 2006. Details

of the management agreement are set out on page 16.

In addition, PGG Wrightson Funds Management Limited

will enter into a Farm Management Contract with

PGG Wrightson Uruguay Limited. Details of the farm

management agreement are set out on page 16.

18. Pending proceedings

There are no legal proceedings or arbitrations that are pending

or current at the date of registration of this Offer Document

that could have an adverse effect on the Company.

19. Preliminary and issue expenses

Preliminary and issue expenses of the Offer (including

brokerage and firm fees) to be met by NZ Farming Systems

Uruguay are estimated by the Directors to be $2.4 million,

assuming the Offer is 10% oversubscribed.

NZ Farming Systems Uruguay will pay brokerage to the Lead

Manager on the allotment of Shares pursuant to this Offer.

For Shares allotted pursuant to firm and priority allocations,

the rate of brokerage is 3% of the gross value of initial

subscription proceeds (ie the number of Shares allotted

times 50 cents per Share). For Shares allotted pursuant to

oversubscriptions, the rate of brokerage is 2% of the gross

value of initial subscription proceeds.

From this brokerage the Lead Manager will pay brokerage to

PGG Wrightson, NZX Firms and financial intermediaries at

the same rate in respect of Shares allocated to them and duly

allotted pursuant to applications bearing their stamp.

20. Restrictions on issuing group

There are no restrictions which limit the Company’s ability to

distribute profits or borrow.

21. Other terms of offer and securities

All terms of the Offer, and of the Shares being offered, are set

out in this Offer Document except those implied by law, or set

out in a document registered with the Registrar of Companies,

which is available for public inspection and is referred to in this

Offer Document.

22 – 38. Financial statements

There are no historical financial statements for NZ Farming

Systems Uruguay as the company has not yet commenced

business. For more information on the Exemption Notice,

which exempts the Company from including certain historical

financial information about the initial farms and farm assets to

be acquired through farm owning subsidiary companies from

PGG Wrightson Investments, see page 35.

39. Places of inspection of documents

The Company’s constitution and material contracts may be

viewed on the Companies Office website at www.companies.

govt.nz or during business hours at the registered office of NZ

Farming Systems Uruguay set out in the Directory.


40. Other material matters

Exemption Notice

Under the Securities Act (NZ Farming Systems Uruguay

Limited) Exemption Notice 2006 (Exemption Notice)

the Company and every person acting on its behalf has

been exempted from compliance with certain provisions

of the Securities Act 1978 and regulations under that Act

(Regulations). In particular, the Company, and every person

acting on behalf of the Company is exempted from compliance

with clauses 10(1)(c), 11(3)(f) and 11(3)(g) of the First

Schedule to the Regulations:

• Clause 10(1)(c) of the First Schedule to the Regulations

would otherwise require that this Offer Document contains

a prospective statement of cash flows of the Company and

its subsidiaries which the Directors expect to occur in the

year commencing on the date of this Offer Document.

• Clause 11(3)(f) of the First Schedule to the Regulations

would otherwise require this Offer Document to contain

financial information in respect of the five accounting

periods proceeding the date of this Offer Document on

the initial farms and farm assets to be acquired through

farm owning subsidiary companies from PGG Wrightson

Investments, as detailed on page 38.

• Clause 11(3)(g) of the First Schedule to the Regulations

would otherwise require that this Offer Document contains

the net tangible asset backing per share of the shares

offered on the basis that those assets have been acquired

and all shares allotted.

The exemptions referred to above have been granted on the

basis of conditions to the effect that this Offer Document

contains:

(a) The price or other consideration that was paid or provided

by PGG Wrightson Investments for the three farms.

(b) The price or other consideration to be paid or provided by

the Company for each of the three farms.

(c) The valuation report in respect of each of the three farms

containing information specified in the Exemption Notice is

contained on pages 49 to 56 of this Offer Document.

(d) The prospective financial information contained at pages 40

to 46 of this Offer Document.

(e) A copy of an auditor’s report in respect of prospective

financial information.

(f) The statements of the Directors of the Company, and of

PGG Wrightson respectively, set out on pages 35 and 36.

The Exemption Notice also exempts the Company and every

person acting on its behalf from compliance with Regulation

23 of the Regulations (relating to statements to listing on

the NZSX) subject to the condition that NZX has approved

statements referring to the intended listing of Shares on the

NZSX, and that this Offer Document states that if such listing

does not occur for any reason there will continue to be no

established market for the Shares and that the Shares will

only be able to be traded privately, and that this will limit an

investor’s ability to sell their Shares.

Other than the matters set our elsewhere in this Offer

Document and subject to the following there are no other

material matters relating to the Offer of Shares.

Expert consents

The following persons have consented to information

contained in this Offer Document which is attributed to them

and have not at the date of this Offer Document withdrawn

their consent:

• Sr Romualdo Rodríguez of Firm Romualdo Rodríguez

Negocias Rurales in respect of the valuations of the farms.

• Nimmo-Bell & Company Limited in respect of the

information relating to farming contained in the Offer

Document, and certain statistical information.

• Agricultural Business Associates in respect of financial

information.

None of the above persons is intended to be a director, officer

or employee of the Company. Each may from time to time in

the future provide professional services to the Company.

41. Directors’ statement

NZ Farming Systems Uruguay has not commenced business

or produced any financial statements so the requirements

of clause 41 of the First Schedule to the Regulations are

inapplicable.

42. Auditor’s report

There are no historical financial statements for NZ Farming

Systems Uruguay as the Company has not commenced

business. The auditor’s report on the prospective financial

information is contained on page 47.


This Offer Document is dated 3 November 2006.

A copy of this Offer Document has been signed by or on behalf of each of the Directors of NZ Farming Systems Uruguay, the

Promoters and each director of the Promoters (other than those directors who are also directors of NZ Farming Systems Uruguay).

Signed by the Company (by its directors or by their duly authorised agent):

Keith Raymond Smith Michael Craig Norgate

Samuel Richard Maling Murray James Flett

John Suffield Parker Bevan David Cushing

Signed by the Promoters (by its directors or by their duly authorised agent):

PGG Wrightson Limited

Arthur William Baylis Sir Selwyn John Cushing

Richard Frank Elworthy Brian James Jolliffe

John Baird McConnon William David Thomas


Statutory Index

Page

1. Main terms of offer 7, 11, 57–65, 66

2. Name and address of offeror 66

3. Details of incorporation of issuer 66

4. Principal subsidiaries of issuer 67

5. Directorate and advisers 67, back cover

5A. Restrictions on directors’ powers 67

6. Substantial equity security holders of issuer 67

7. Description of activities of issuing group 33, 68

8. Summary of financial statements 68

9. Prospects and forecasts 33–34, 68

10. Provisions relating to initial flotations 68

11. Acquisition of business or subsidiary 68

12. Securities paid up otherwise than in cash 68

13. Options to subscribe for securities of issuing group 68

14. Appointment and retirement of directors 69

15. Directors’ interests 69

16. Promoters’ interests 69, 70

17. Material contracts 70

18. Pending proceedings 70

19. Preliminary and issue expenses 70

20. Restrictions on issuing group 70

21. Other terms of offer and securities 70

22–38 Requirements in respect of Financial Statements 70

39. Places of inspection of documents 70

40. Other material matters 71

41. Directors’ statement 71

42. Auditor’s report 47, 71


Glossary

Application Form means the application form issued with this

Offer Document for the offer of ordinary shares in NZ Farming

Systems Uruguay Limited.

Board means the board of Directors of the Company.

BSE means bovine spongiform encephalopathy

Business Day means the period of 9 am to 5 pm on any day

of the week when banks in Wellington are generally open for

business.

Closing Date means 12 December 2006 or such other date as

the Board determines.

Code means the Takeovers Code under the Takeovers Code

Approval Order 2000.

Companies Act means Companies Act 1993.

Company means NZ Farming Systems Uruguay Limited.

Conaprole means the Uruguayan milk processing company

Co-operativa Nacional de Productores de Leche.

Constitution means the constitution of the Company.

DINAMA means the Environmental Management agency

of Uruguay.

Directors means the directors of the Company.

DM/ha means dry matter per hectare.

Exemption Notice means the Securities Act (NZ Farming

Systems Uruguay Limited) Exemption Notice 2006.

Farm Manager means PGG Wrightson Uruguay Limited.

Farms means the farms at Valle de Soba, Tambo El Cabure

and Menafra described on page 34.

Firm Allocation means a binding commitment pursuant to

which the entity accepting a Firm Allocation of Shares in the

Offer is bound to submit valid Applications which in aggregate

equals the amount of the Firm Allocation. The entity is required

to submit a valid Application for any shortfall as principal.

FMD means foot and mouth disease.

FOSS means the international company in the business of

quality control for agricultural, food, pharmaceutical and

chemical products.

HACCP means the Hazard Analysis and Critical Control Point

system of identifying, evaluating and controlling food safety

standards.

INAC means the National Meat Institute of Uruguay.

Lead Manager means ABN AMRO Craigs Limited.

Manager means PGG Wrightson Funds Management Limited.

Market Participant means a participant in the markets

provided by NZX who has been accredited and approved by

NZX as a NZX Firm.

MERCOSUR means the Southern Common Market. Members

are Brazil, Argentina, Uruguay, Venezuela and Paraguay.

Associate Membership is held by Bolivia, Chile, Colombia,

Ecuador and Peru.

MGAP means the Uruguayan Ministry of Agriculture and

Fisheries.

Minimum Subscription means 20,000 Shares.

NAFTA means the North American Free Trade Agreement.

NZSX means the main board equity security market operated

by NZX.

NZSX Listing Rules means the listing rules of the NZSX.

NZX means New Zealand Exchange Limited.


NZX Firm means a market participant, accredited and

approved by NZX for the purpose of providing client advice and

facilitating trades in the markets provided by NZX.

Offer means the offer of Shares under this Offer Document.

Offer Document means this combined Investment Statement

and Prospectus dated 3 November 2006.

PGG Wrightson means PGG Wrightson Limited.

PGG Wrightson Group means PGG Wrightson and any of its

subsidiaries.

PGG Wrightson Investments means PGG Wrightson

Investments Limited.

PGG Wrightson Uruguay means PGG Wrightson Uruguay

Limited.

Priority Allocation means a best endeavours allocation in

which there is no binding obligation to subscribe for any

shortfall Shares.

Registrar means Computershare Investor Services Limited.

Shares means the ordinary shares in the Company offered

under this Offer Document.

Securities Act means the Securities Act 1978.

Securities Regulations means the Securities Regulations 1983.

thd means thousands.

In this document, a reference to $, unless otherwise stated

means to New Zealand dollars.


to construe, amend or complete it, shall

be final. The decision on the number of

Shares to be allocated or transferred

to you shall also be final. You will not,

however be treated as having offered to

purchase a greater value of Shares, than

that for which payment has been made.

Investors applying under the Offer whose

applications are not accepted, or are

accepted in respect of a lesser value

of Shares than the amount for which

they applied will receive a refund of

all, or part, of their application monies

without interest.

Closing dates

Application Forms under the Offer

must be received by the Registrar,

Computershare Investor Services, no

later than 5pm on Tuesday 12 December

2006. The Company may amend this

date at its discretion.

Delivery

Applications cannot be revoked or

withdrawn.

Application Forms may be mailed or

delivered, with payment, to one of the

following:

NZ Farming Systems Uruguay Limited; or

The office of the Lead Manager; or

The office of an NZX Firm.

Application Forms which are not lodged

directly with the Share Registry must be

lodged with the relevant person in time

to enable them to be forwarded to the

Share Registry before the Closing Date.

Applications which are received by the

Share Registry after the Closing Date,

may or may not be accepted, at the

discretion of the Company.

When to Apply by

If you have received an allocation

of Shares from the Lead Manager or

any other NZX Firm, you must return

your completed Application Form

(together with payment in full for the

number of Shares allocated to you) to

that NZX Firm or the Lead Manager

so that they may be delivered to the

Registry, Computershare Investor Services

by no later than 5pm on Tuesday

12 December 2006.

If you do not have an allocation you

can apply for Shares by completing an

Application Form and returning it directly

to the Share Registry, Computershare

Investor Services.

How to Apply

Applications may only be made on

the Application Form attached to this

Offer Document. If you wish to apply

for Shares under the Offer you must

complete the Application Form in


the Form.

Insert Details

Insert full name(s), address and

telephone numbers. Applications must

be in the name(s) of natural persons,

companies or other legal entities. At

least one full given name and surname

is required for each natural person.

Applications in the name of a minor,

fund, estate, trust, business, firm or

partnership, club or other unincorporated

body cannot be accepted. In those

cases, applications must be made in the

individual name(s) of the person(s) who

is (are) the legal guardian(s) trustee(s),

proprietor(s), partner(s) or office

bearer(s) (as applicable).

Insert IRD number in the space provided

on the form.

Insert the dollar value of Shares applied

for. Note that applications must be for

a minimum of 20,000 Shares (an initial

payment of $10,000) and thereafter in

multiples of 1,000 Shares ($500).

Signing and Dating

Read the Offer Document and

Application Form carefully and sign

and date the Application Form. It

must be signed by the applicant(s)

personally, or under company seal, if

it has one, or by two directors of the

company, or one director if there is

only one director, or in either case by

an attorney. If your application form

is signed by an attorney, the power of

attorney document is not required to be

lodged but the attorney must complete

the certificate on the reverse of the

application form. Joint applicants must

all sign the Application Form.

Payment

Payment of the first instalment of the

Shares (being 50 cents per Share), must

accompany the Application Form.

Payment must be in New Zealand dollars

for immediate value. Post dated cheques

will not be accepted. Cheques must be

drawn on a registered New Zealand Bank.

Cheques must be made out in favour

of ‘NZ Farming Systems Uruguay Share

Offer’ and crossed ‘Not Transferable’.

Treatment of Application

The submission of an Application Form

with your cheque for the application

money will constitute your irrevocable

offer to purchase or subscribe for

Shares. If your Application Form is

not completed correctly, or if the

accompanying payment is the wrong

amount, it may still be treated as valid.

The decision of the Company and the

Lead Manager as to whether to treat

your Application Form as valid, and how

Instructions and Terms and Conditions of Application Form


This Application Form is issued with the combined Prospectus and Investment Statement dated 3 November 2006 (“Offer Document”) for the offer of ordinary shares in NZ Farming Systems Uruguay Limited (“Shares”) and constitutes an offer to acquire Shares at $1.00 per Share partly paid to 50 cents per Share. Your completed Application Form, together with payment of the application money payable in respect of the total number of Shares applied for, should be mailed or delivered to the Lead Manager or any Market Participant, so as to be received by Computershare Investor Services before 5.00 pm (NZ time) on Tuesday 12 December 2006. Primary Participants should stamp Application Form with “Firm Allocation” where appropriate.

This Application Form must not be circulated or distributed unless accompanied by the Offer Document. Please refer to the reverse of this Application Form for additional instructions regarding its completion and lodgement.

Application FormTo: The Directors of NZ Farming Systems Uruguay LimitedC/o Computershare Investor Services LimitedLevel 2, 159 Hurstmere RoadTakapunaPrivate Bag 92119, Auckland

Advisor’s Code

Market Participant’s Stamp

Investor Details (BlockLettersPlease)

Please enter name(s) in full, including all first names:

Title: First Name(s): Surname: IRD No:



Corporate Name: IRD No:

Postal Address: Suburb:

City: Post code:

Telephone Number Home: Business Phone:

Email Address:

Number of Shares Applied for and Amount Payable

Bank Branch Account Number Suffix

Number of Shares applied for at the Issue Price of NZ$1.00 per Share:

Amount payable, being the number of Shares applied for multiplied by the first instalment of NZ$0.50 per Share:

Common Shareholder Number (CSN)If you have a CSN please enter it here:

Agreement of TermsI/We hereby apply for the number of ordinary Shares shown above at the purchase price of $1.00 per Share, partly paid to 50 cents per Share, and agree to accept such Shares (or such lesser number as may be allotted) on and subject to the terms and conditions set out in this Offer Document dated 3 November 2006 and this Application Form. I have read and understand the terms of the Offer Document including the consequences of my failure to pay the second instalment of 50 cents per Share due on 14 December 2007. I/We declare that all the details and statements made by me/us in this Application Form are complete and accurate.

Signature: Date:

Signature: Date:

Signature: Date:

If this Application is signed under Power of Attorney, the Attorney must complete the certificate on the reverse of the Application Form. This Application Form must not be issued, circulated or distributed unless accompanied by the Offer Document.

$ .00

Account Name:(s)

Applications must be for a minimum of 20,000 Shares and thereafter in multiples of 1,000.

Cheques for the amount payable must be attached to this Application Form and made payable to ‘NZ Farming Systems Uruguay Limited Share Offer’. Cheques must be crossed ‘Not Transferable’ and for immediate payment. Payment must be made in New Zealand dollars with a cheque drawn on a registered New Zealand bank.

Dividend PaymentsBank account details MUST be completed as dividend cheques will not be issued. Please complete only one option.

Direct credit to my bank account as held by Computershare; OR

Direct credit to my bank account below; OR

Account Number

Direct credit to my cash management account

Name of NZX Firm where Cash Management Account held

Cash Management Client Account Number

Certificate of Non-Revocation of Power of Attorney

I, of

(NameofAttorney) (AddressandOccupationofAttorney)

HEREBY CERTIFY THAT:

1. By a Power of Attorney dated the day of

of

(NameandOccupationofpersonforwhomAttorneyissigning) (AddressofpersonforwhomAttorneyissigning)

(“the Donor”) appointed me his/her/its Attorney on the terms and conditions set out in the Power of Attorney;

2. I have executed the application for Shares printed on the face of this form as Attorney pursuant to the powers conferred on me by that Power of Attorney.

3. At the date of this certificate I have not received any notice or information of the revocation of that Power of Attorney, whether by the death or dissolution of the Donor or otherwise.

Signed at this day of 2006

Signature of Attorney

Certificate of Non-Revocation of AgencyComplete this section if you are acting as agent for someone.

I, (Name of Agent)

Of (Address and Occupation of Agent)

HEREBY CERTIFY:

1. THAT, by an Agreement dated the day of (‘Donor’) appointed me his/her/its Agent on the terms and conditions set out in the Agreement.

2. THAT I have executed the Application for Shares printed on this Application Form under the Appointment and pursuant to the powers thereby conferred on me.

3. THAT at the date of this certificate I have not received any notice or information of the revocation of that Appointment by the death (or winding up) of the Donor or otherwise.


Signature of Agent

Additional Application TermsThis application constitutes an irrevocable offer by the applicant to acquire the Shares specified in the Application Form, or such lesser number of Shares as NZ Farming Systems Uruguay Limited and the Lead Manager may determine, on the terms and conditions set out in the Offer Document and this Application Form.

If the aggregate number of Shares applied for exceeds the number offered then applicants may be allotted fewer Shares than the number for which they applied. The number of Shares allotted to an applicant will be determined by NZ Farming Systems Uruguay Limited in conjunction with the Lead Manager. No reasons will be given regarding the level of allotments.

NZ Farming Systems Uruguay Limited reserves the right to decline any application in whole or in part, without giving any reason. Money received in respect of applications which are declined in whole or in part will be refunded in whole or in part (as the case may be) within five business days after Closing Date. Interest will not be paid on any application money refunded to applicants. Statements will be dispatched as soon as is practicable after allotment, but in any event not later than five Business Days after allotment.

If this Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be treated as valid. NZ Farming Systems Uruguay Limited’s decision as to whether to treat an application as valid, and how to construe, amend or complete it, shall be final. NZ Farming Systems Uruguay Limited’s decision on the number of Shares to be allotted to an applicant shall also be final. Applicants will not, however, be treated as having offered to purchase a greater number of Shares than the number for which payment is made. Application money will be banked upon receipt into an account. Interest earned on that account will be paid to NZ Farming Systems Uruguay Limited. If application money is paid by a cheque which does not clear, that application may be rejected or an allotment made to the applicant may be cancelled.

Expressions defined in the Offer Document have the same meanings in this Application Form. This Application Form is governed by New Zealand law. Personal information provided by you will be held by NZ Farming Systems Uruguay or the Registrar, at the addresses shown in the Directory of the Offer Document or at such other place as is notified upon request. This information will be used for the purpose of managing your investment. Under the Privacy Act 1993, you have the right to access and correct any personal information held about you.

By signing (or authorising your attorney to sign) this Application Form you acknowledge that this Application Form was distributed to you with a copy of the Offer Document.

This Application Form is issued with the combined Prospectus and Investment Statement dated 3 November 2006 (“Offer Document”) for the offer of ordinary shares in NZ Farming Systems Uruguay Limited (“Shares”) and constitutes an offer to acquire Shares at $1.00 per Share partly paid to 50 cents per Share. Your completed Application Form, together with payment of the application money payable in respect of the total number of Shares applied for, should be mailed or delivered to the Lead Manager or any Market Participant, so as to be received by Computershare Investor Services before 5.00 pm (NZ time) on Tuesday 12 December 2006. Primary Participants should stamp Application Form with “Firm Allocation” where appropriate.

This Application Form must not be circulated or distributed unless accompanied by the Offer Document. Please refer to the reverse of this Application Form for additional instructions regarding its completion and lodgement.

Application FormTo: The Directors of NZ Farming Systems Uruguay LimitedC/o Computershare Investor Services LimitedLevel 2, 159 Hurstmere RoadTakapunaPrivate Bag 92119, Auckland

Advisor’s Code

Market Participant’s Stamp

Investor Details (BlockLettersPlease)

Please enter name(s) in full, including all first names:




Corporate Name: IRD No:

Postal Address: Suburb:

City: Post code:

Telephone Number Home: Business Phone:

Email Address:

Number of Shares Applied for and Amount Payable

Bank Branch Account Number Suffix

Number of Shares applied for at the Issue Price of NZ$1.00 per Share:

Amount payable, being the number of Shares applied for multiplied by the first instalment of NZ$0.50 per Share:

Common Shareholder Number (CSN)If you have a CSN please enter it here:

Agreement of TermsI/We hereby apply for the number of ordinary Shares shown above at the purchase price of $1.00 per Share, partly paid to 50 cents per Share, and agree to accept such Shares (or such lesser number as may be allotted) on and subject to the terms and conditions set out in this Offer Document dated 3 November 2006 and this Application Form. I have read and understand the terms of the Offer Document including the consequences of my failure to pay the second instalment of 50 cents per Share due on 14 December 2007. I/We declare that all the details and statements made by me/us in this Application Form are complete and accurate.

Signature: Date:

Signature: Date:

Signature: Date:

If this Application is signed under Power of Attorney, the Attorney must complete the certificate on the reverse of the Application Form. This Application Form must not be issued, circulated or distributed unless accompanied by the Offer Document.

$ .00

Account Name:(s)

Applications must be for a minimum of 20,000 Shares and thereafter in multiples of 1,000.

Cheques for the amount payable must be attached to this Application Form and made payable to ‘NZ Farming Systems Uruguay Limited Share Offer’. Cheques must be crossed ‘Not Transferable’ and for immediate payment. Payment must be made in New Zealand dollars with a cheque drawn on a registered New Zealand bank.

Dividend PaymentsBank account details MUST be completed as dividend cheques will not be issued. Please complete only one option.

Direct credit to my bank account as held by Computershare; OR

Direct credit to my bank account below; OR

Account Number

Direct credit to my cash management account

Name of NZX Firm where Cash Management Account held

Cash Management Client Account Number

Certificate of Non-Revocation of Power of Attorney

I, of

(NameofAttorney) (AddressandOccupationofAttorney)

HEREBY CERTIFY THAT:

1. By a Power of Attorney dated the day of

of

(NameandOccupationofpersonforwhomAttorneyissigning) (AddressofpersonforwhomAttorneyissigning)

(“the Donor”) appointed me his/her/its Attorney on the terms and conditions set out in the Power of Attorney;

2. I have executed the application for Shares printed on the face of this form as Attorney pursuant to the powers conferred on me by that Power of Attorney.

3. At the date of this certificate I have not received any notice or information of the revocation of that Power of Attorney, whether by the death or dissolution of the Donor or otherwise.


Signature of Attorney

Certificate of Non-Revocation of AgencyComplete this section if you are acting as agent for someone.

I, (Name of Agent)

Of (Address and Occupation of Agent)

HEREBY CERTIFY:

1. THAT, by an Agreement dated the day of (‘Donor’) appointed me his/her/its Agent on the terms and conditions set out in the Agreement.

2. THAT I have executed the Application for Shares printed on this Application Form under the Appointment and pursuant to the powers thereby conferred on me.

3. THAT at the date of this certificate I have not received any notice or information of the revocation of that Appointment by the death (or winding up) of the Donor or otherwise.


Signature of Agent

Additional Application TermsThis application constitutes an irrevocable offer by the applicant to acquire the Shares specified in the Application Form, or such lesser number of Shares as NZ Farming Systems Uruguay Limited and the Lead Manager may determine, on the terms and conditions set out in the Offer Document and this Application Form.

If the aggregate number of Shares applied for exceeds the number offered then applicants may be allotted fewer Shares than the number for which they applied. The number of Shares allotted to an applicant will be determined by NZ Farming Systems Uruguay Limited in conjunction with the Lead Manager. No reasons will be given regarding the level of allotments.

NZ Farming Systems Uruguay Limited reserves the right to decline any application in whole or in part, without giving any reason. Money received in respect of applications which are declined in whole or in part will be refunded in whole or in part (as the case may be) within five business days after Closing Date. Interest will not be paid on any application money refunded to applicants. Statements will be dispatched as soon as is practicable after allotment, but in any event not later than five Business Days after allotment.

If this Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be treated as valid. NZ Farming Systems Uruguay Limited’s decision as to whether to treat an application as valid, and how to construe, amend or complete it, shall be final. NZ Farming Systems Uruguay Limited’s decision on the number of Shares to be allotted to an applicant shall also be final. Applicants will not, however, be treated as having offered to purchase a greater number of Shares than the number for which payment is made. Application money will be banked upon receipt into an account. Interest earned on that account will be paid to NZ Farming Systems Uruguay Limited. If application money is paid by a cheque which does not clear, that application may be rejected or an allotment made to the applicant may be cancelled.

Expressions defined in the Offer Document have the same meanings in this Application Form. This Application Form is governed by New Zealand law. Personal information provided by you will be held by NZ Farming Systems Uruguay or the Registrar, at the addresses shown in the Directory of the Offer Document or at such other place as is notified upon request. This information will be used for the purpose of managing your investment. Under the Privacy Act 1993, you have the right to access and correct any personal information held about you.

By signing (or authorising your attorney to sign) this Application Form you acknowledge that this Application Form was distributed to you with a copy of the Offer Document.

DirectoryThe Company

NZ Farming Systems Uruguay Limited57 Waterloo RoadHornbyChristchurch

Phone: (03) 372 0800Fax: (03) 344 5195

The Board of DirectorsKeith Raymond SmithAuckland

Michael Craig NorgateAuckland

Murray James FlettInvercargill

Samuel Richard MalingChristchurch

John Suffield ParkerOtaki

Bevan David CushingChristchurch

The Directors can be contacted at the Company’s registered address.

The PromotersPGG Wrightson Limited57 Waterloo RoadHornbyChristchurch

Phone: (03) 372 0800Fax: (03) 344 5195

Lead ManagerABN AMRO Craigs LimitedABN AMRO Craigs House158 Cameron RoadP.O. Box 13155Tauranga

Phone: (07) 577 6049Fax: (07) 571 8625

RegistrarComputershare Investor Services LimitedLevel 2159 Hurstmere RoadTakapunaPrivate Bag 92119Auckland

Phone: (09) 488 8777Fax: (09) 488 8787

AuditorsPricewaterhouseCoopers12th FloorPricewaterhouseCoopers Centre119 Armagh StreetP.O. Box 13244Christchurch

Phone: (03) 374 3000Fax: (03) 374 3001

SolicitorsPhillips FoxTower Building50-64 Customhouse QuayWellington

Phone: (04) 472 6289Fax: (04) 472 7429

www.nzfsu.co.nz

Prospectus and Investment Statement

Documents

Transcript of Prospectus and Investment Statement