1. Land Bank of the Philippines: ROLE IN THE DEVELOPMENT OF THE OIL PALM INDUSTRY 9 th National Palm Oil Congress KCC Convention Center General Santos City August 19 – 20, 2015

2. Topic Outline LBP’s Historical Credit Intervention on Palm Oil Industry Status of LBP’s Credit Intervention LBP Financing Program for Oil Palm Development of New Plantation Rehabilitation program Processing and Marketing Business and Financing Models

3. Expansion to Palawan 1996 Establishment of an Oil Mill Plant Trento, Agusan Sur 1998 Financed first coop for oil palm production Bunawan, Agusan Sur 2001 Financed coops in Davao Norte 2004 Expansion to Bohol 2007 Historical Background of LBP’s Credit Intervention

4. LBP Financing for Oil Palm Production As of June 30, 2015 BY SECTOR TYPE OF BORROWERS NO. OF BORROWERS TOTAL LOAN RELEASES OUTSTANDING BALANCE SMEs947,773,17941,395,468 COOPs30512,499,613478,227,303 CORP6803,328,558647,497,541 CFI312,211,280 Total481,371,812,6301,179,331,5912

5. Island GroupLoans Outstanding, Php Billion % to Total Luzon0.123810.49 Visayas0.647554.90 Mindanao0.408134.60 Total1.1793 LBP Financing for Oil Palm Production As of June 30, 2015 BY ISLAND GROUP

6. BASIC LENDING PARAMETER Eligible Borrowers Cooperatives Small and Medium Enterprises Non-Government Organizations Large Agribusiness Enterprises Local Government Units Eligible Projects Development and maintenance of oil palm plantation Trading/Marketing Acquisition of Fixed Assets FINANCING PROGRAM FOR OIL PALM

7. BASIC LENDING PARAMETER Loanable Amount Generally, maximum of 80% of Total Project Cost which shall be based on the following: a.Actual need and market condition of the borrower b.LBP agricultural commodity modules c.Data available with other government agencies d.Specific requirement stipulated in the PTMA Interest Rate Prevailing market benchmark rate + applicable spread Term of the Loan Production - up to 10 years, inclusive of a grace period of up to 5 years. Working Capital – 1 year Fixed Asset – depends on cash flow projections, but not more than the economic useful life of the asset FINANCING PROGRAM FOR OIL PALM

8. BASIC LENDING PARAMETER Amount of Financing Per Hectare P160,000.00 plus insurance premium for 5 years amounting to P17,679.00 For partially damaged plantation, new loans to be granted shall depend on the extent of damage. Term12 years, inclusive of up to 5 years grace period on principal and interest. Principal and interest for the 1 st 5 years shall be amortized over the remaining term of the loan LBP-AGRI REHAB PROGRAM FOR OIL PALM A. New Loan Structure

9. BASIC LENDING PARAMETER (NEW LOAN) Term (cont’d)For partially damaged plantation 12 years, inclusive of 3 years grace period on principal and interest or based on projects cash flow projections of the borrower, whichever is shorter. B. Existing Account Existing oil palm production loans will be restructured following the same terms and conditions of the of the loan under the rehab program, or based on cash flow projections. LBP-AGRI REHAB PROGRAM FOR OIL PALM

10.  Articles of Incorporation and certificate of Filing with SEC  DTI Registration and current year Business Permit  Certified List of Stockholders, Board of Directors and Key Officers together with subscribed and paid-up capital  Bio-data of Key Officers  Customer Information Sheet  BIR-stamped/filed Audited Financial Statement for the last three (3) years together with the Income Tax Return  Latest Interim Financial Statement  Regular documentary requirements pertaining to offered collaterals  Business Plan (if start-up) CORPORATIONS DOCUMENTARY REQUIREMENTS

11.  Photocopy of Registration with Articles of Cooperation/Incorporation and By-Laws  Bio-data of Officers and Board of Directors  Board Resolution authorizing the Coop/NGO to borrow and designating the authorized signatories  Audited Financial Statement for the last three ( 3) years  Feasibility Study COOPS/NGOs DOCUMENTARY REQUIREMENTS

12.  Sanggunian Resolution  Authorizing the Local Chief Executive (LCE) to borrow funds, negotiate, sign documents and enter into a loan with LANDBANK  Approving the projects to be financed in accordance with the Approved Local Development Plan and Public Investment Program or Approved Annual Procurement Program, as the case may be  COA-Audited Financial Statement for the past three (3) years  Approved Budget for the current year  List of Elected Officials and Key Officers  Schedule of LGU’s IRA for the past two (2) years  Feasibility Study  BLGF Certification on the Net Borrowing Capacity (NBC) for current year  Monetary Board Opinion issued by the Bangko Sentral ng Pilipinas (BSP) DOCUMENTARY REQUIREMENTS LGUs

13. Nucleus estate -oil palm plantation -oil mill Smallholders Farm Smallholders Co-op Plantation development - cost transferred to the coop thru bank loan - management transferred to coop at the time the palm begins to yield fruits) BANK Technical training & knowledge transfer Capacity building PMA NUCLEUS ESTATE AND SMALLHOLDERS SCHEME Indonesian Business Model Members Land Labor Loan Services Fees

14. Smallholders Farm Smallholders Oil Mill Company  Sales Contract (12-14 Years)  Loans;  Sales Proceeds, net of 30% loan amortization  FFBs (starting on the 4 th year)  Seedlings TA; CONTRACT FARMING (COSTA RICA MODEL) Farm management, under the supervision of the Mill

15. LBP OIL PALM PRODUCTION, PROCESSING AND MARKETING CHAIN FINANCING (Commodity and Funds Flow) Co-op Consolidator / Conduits Oil Palm Growers Oil Mill (Palm Oil Milling Co. Oil Refinery (Palm Oil Milling /Refining Co.) Market (local/international ) - Refined oil - Other processed products Fresh Fruit Bunches Crude palm oil Fresh Fruit Bunches Funds Flow (loans/repayment) LEGEND Commodity Flow Repayment Working Capital/ Production loan Fixed asset Loan/Working Capital Repayment Sales (Net of Loan Repayment) TA Repayment/ Sales Relending Fixed asset loan/ Working capital Sales Repayment FEATURES: Farm Management by Company Set up Debt Service Reserve Account Hierarchy of payment (from net sales proceeds): Maintenance of DSRA Loan amortization to LANDBANK Coop share (5-7% net of FFB sales proceeds) Loan amortization to Anchor Firm Payment of management fee of Anchor Firm

16. LAND BANK OF THE PHILIPPINES LANDBANK Plaza, 1598 M. H. del Pilar corner Dr. J. Quintos Streets, Malate, Manila 1004 Philippine

17. www.landbank.com