E xplanatory Memorandum xplanatory Explanatory Memorandum Pro A n d L p osed m i st in g o erger of the Austr n the Proposed Merger of

rfm RFM RiverBank

S alian R ARSN 112 951 578 iverBank | rfm iverBank e c RFM Chicken Income Fund

ur ARSN 105 754 461 i t i es E es Chicken Income F Income Chicken RFM Australian Wine Fund

x

c ARSN 099 573 485 h an of ge rfm | rfm und

R And Listing on the Australian Securities Exchange of fm R iverbank to form the R the to form iverbank

Australian Wine F RFM RiverBank to form the Rural Funds Group (RFF)

Issued by Rural Funds Management Ltd ACN 077 492 838 und

ural F ural Issue Date: 21 October 2013

For personal use only use personal For unds Group ( Group unds RFF ) www.ruralfunds.com.au IMPORTANT INFORMATION

A number of words and terms used in this Explanatory Neither RFM, their respective directors, officers or advisers, Memorandum have defined meanings that appear in the Glossary or any other person gives any representation, assurance nor of this Explanatory Memorandum. Words with defined meanings guarantee that the occurrence or events expressed or implied are capitalised. including any of the forecasts in this Explanatory Memorandum will actually occur. Accordingly, Unitholders are cautioned not to This document is issued by Rural Funds Management Ltd ACN place undue reliance on these forecasts. Investments are subject 077 492 838 (RFM), AFSL No. 226701 in relation to the merger to investment risks, including possible delays in repayment and of the Funds into the Rural Funds Group (RFF) and listing RFF loss of capital. None of RFM, or its directors, officers or advisers, on the Australian Securities Exchange (ASX). RFM acts as or their related entities guarantees any particular rate of return on responsible entity of the Funds. For an explanation of the function Units, the performance of RFF or RFMP nor do they guarantee of RFM refer to Section 7. This Explanatory Memorandum is the repayment of capital. dated 21 October 2013. It also intended that RFM Poultry (RFMP) be listed on the National Stock Exchange of Australia (NSX). NO INVESTMENT ADVICE Neither ASIC, ASX or NSX nor their respective officers take any responsibility for the contents of this Explanatory Memorandum. This Explanatory Memorandum contains important information but does not take into account your investment objectives, The fact that ASX may admit RFF to the Official List of the financial position or particular needs. Before making any ASX and grant quotation of the Units is not to be taken as an decision based on information contained within this Explanatory indication of the merits of RFF or any investment in the Units. Memorandum, you should consult a financial or other professional adviser. The fact that NSX may admit RFMP to the Official List of the NSX and grant quotation of the Units is not to be taken as an indication of the merits of RFMP or any investment in the Units OFFERING

This is an important document and requires your immediate No action has been taken to register this Explanatory attention. It forms part of, and should be read in conjunction with, Memorandum in any jurisdiction outside of Australia and the accompanying Notices of Meeting. If you are in any doubt as New Zealand. to what you should do, please consult your professional adviser. All financial amounts contained within this Explanatory It is important that you read and retain all documents you receive Memorandum are expressed in Australian currency. from RFM as they contain important information about the merger and listing of the Funds. UPDATING INFORMATION

YOUR VOTE IS IMPORTANT RFM will issue a supplementary Explanatory Memorandum if RFM becomes aware of any of the following between the issue It is important that you vote on the resolutions. If you are unable of this Explanatory Memorandum and the date the RFF or to attend the Meetings in person, you should complete and return RFMP’s Units are quoted: the proxy form accompanying the Notice of Meeting. –– a material statement in the Explanatory Memorandum is misleading or deceptive; FORECASTS –– there is a material omission from the Explanatory This Explanatory Memorandum includes forecasts and Memorandum; statements regarding the Funds, including a path for growth. –– there has been a significant change affecting a matter Theseonly use personal For forecasts have been based on RFM’s current expectations included in the Explanatory Memorandum; or of future performance. –– a significant new circumstance has arisen and it would These forecasts are not a guarantee of future performance and have been required to be included in the Explanatory involve known and unknown risks, uncertainties, assumptions Memorandum. and other important factors, many of which are beyond the control of RFM. Events may cause actual results, performance or achievements to differ materially from the future conduct, results, performance or achievements expressed or implied by the forecasts. For discussion of important risk factors, please refer to Section 11. Explanatory Memorandum

Proposed Merger of RFM RiverBank ARSN 112 951 578 RFM Chicken Income Fund ARSN 105 754 461 RFM Australian Wine Fund ARSN 099 573 485

And Listing on the Australian Securities Exchange of RFM RiverBank to form the Rural Funds Group (RFF)

Issued by Rural Funds Management Ltd ACN 077 492 838

Issue Date: 21 October 2013 For personal use only use personal For Chairman & Managing Director’s Letter

Dear Unitholder, This document contains a proposal to merge the three Funds and create a property trust listed on the Australian Securities Exchange (ASX). This fund will be called the Rural Funds Group and have the ASX code: RFF. You are a member of at least one of the three Funds.

For convenience, this proposal to merge the three Funds and list on the ASX has been titled: ‘Revaluation’.

Background to the RFM Funds

The three Funds were established between the years 2000 and 2005. They are illiquid Funds and there is currently no market for their Units.

While the majority of Unitholders do not currently wish to realise their investment, the absence of a market creates an illiquidity discount that is imposed on the value of your investment. Revaluation is being proposed to you, as a means of addressing this shortcoming.

Approximately 3.5% of Unitholders in the Funds are presently unable to realise their investment despite expressing their desire to do so. While you may not presently wish to sell your Units, a sale is inevitable at some point in time. The objective of Revaluation is to create a market for your investment.

The advantages of Revaluation include increased diversification of revenue, flexible borrowing facilities and better access to capital markets. An additional advantage is net cost reductions despite additional compliance costs associated with an ASX listing. The disadvantages of Revaluation include transaction costs, some dilution and the potential for RFF units to trade at a discount to their Net Asset Value. Refer to Section 5 and 11 of this document for further information.

An Independent Expert Report is included in this document and it should be read in full. The Independent Expert has concluded (on a control basis) the Merger is not fair but is reasonable.

The Rural Funds Group (RFF)

RFF will own a diversified portfolio of agricultural assets with a total value of $235 million and will generate all of its revenue from lease rentals, rather than farm operations. The average weighted lease term of RFF’s assets will be 14 years.

On Listing, current RiverBank Unitholders will own 37.1% of RFF, with CIF and AWF Unitholders representing 36.1% and 26.8% of RFF ownership respectively.

The RFM Directors intend to announce the record date of a Special Distribution of 2.05 cents per Unit immediately after Listing. Subsequently, whilst distributions are not guaranteed it is intended that RFF will pay quarterly distributions and for the 2014 financial year is forecast to pay a total of 8.2 cents per $1 Unit. The assumptions underlying the forecast distributions are detailed in Section 9.

This Explanatory Memorandum has been provided to allow you to consider and vote on resolutions that will enable Revaluation.

Yours faithfully, For personal use only use personal For

Guy Paynter David Bryant Chairman Managing Director S1

Contents

1. Executive Summary 2 2. What you need to do C9 3. About Revaluation 10

4. RG46 Disclosure 14

5. Advantages & disadvantages 18

6. Questions & answers 21

7. About Rural Funds Management Ltd 25

8. About the assets 28

9. Financial information 33

10. Fees and other Costs 60

11. Risks 65

12. RFM Poultry 68

13. Additional information 85

14. Mechanics of Revaluation 92

15. Taxation Report 93

For personal use only use personal For 16. Summary of Fund constitutional amendments 101

17. Glossary 103

18. Independent Experts Report 105

1 2 Explanatory MemorandumFor personal use only National StockExchange. RFMP. ItisintendedthatRFMPunitswillbelistedonthe value inCIF. OnlyCIFUnitholderswill receive unitsin CIF, whichrepresents approximately 13%ofthetotal RFMP willbeestablishedwith a transferof$6.8mfrom and infrastructure ownerandleaseallassetstoRFMP. responsible foralloperationalmatters.CIFwillbetheland the growing contractswiththechickenprocessor andbe that leasesandoperatesCIF’s assets.RFMP willhold RFM hasestablishedPoultry(RFMP)tobetheentity that landandinfrastructure. infrastructure andtheotherentityleasingoperating CIF intotwoentities,withoneentityowningthelandand that CIFhasexposure to.Thisisachievedbydemerging and AWF, itisnecessarytoisolateanyoperationalrisk In order toalignCIF’s riskprofile withthatofRiverBank with eitheroftheseentities. there isnodirect agriculturaloperationalriskassociated AWF leaseouttheassetsthattheyown.Thismeans operating riskinanyoftheFunds.BothRiverBankand necessary toensure thatthere isnodirect agricultural the riskprofiles ofeach oftheFundsare similar, itis As afirststepintheRevaluationprocess, andtoensure referred toas‘Revaluation’. Merger andListingintheExplanatoryMemorandumare Securities Exchange(Listing).Thesetwosteps,the Funds Group andapply forlistingontheAustralian Once merged,RiverBankwillberenamed astheRural (Riverbank) toformoneentity(Merger). Fund(AWF) withRFMRiverBank Australian Wine to mergeRFMChickenIncomeFund(CIF)and This ExplanatoryMemorandumcontainsaproposal 1.1 Rev Executive Summary alua tion S1 of yourinvestment. createdliquidity andinturn implicationsforthevaluation reduced. This haslimitedoptionsforproviding investor that thedemandforequityinvestmentinilliquidfundshas Since theglobalfinancialcrisis,itisRFM’s experience needs ofUnitholders. been identifiedasthebestsolutionformeetingvarying After consideringnumerous Revaluationhas alternatives, realised foranilliquidbut otherwiseidenticalsecurity. a market,isgenerallyhigherthanthevaluethatcanbe of buyersandsellers.Thevalueasecuritytradedon market, tradingvolumeswillbedictatedbythenumber to thecurrent volumeofoff-market trading.Aswithany volumes are likelytoincrease substantially, compared By mergingtheFundsandlistingonASX,trading provide amarketforthesaleandpurchase ofUnits. total ofthethree Funds. AnobjectiveofRevaluationisto arm’s lengthsalesofUnitsamountedtoonly0.27%the selling Units.Despitethis,duringthecalendaryear2012, by value intheFundshaveregistered theirinterest in their investment.Approximately 3.5%ofallUnitholders presently oratsome pointinthefuture, wishtorealise Revaluation willassistthoseUnitholderswhomay Liquidity 1.2 Reasonsforev alua tion Executive Summary 3 S1 F AW $44 million Net assets $29 million Total assets Total Diversification management of An important aspect of Revaluation is the owning and leasing from risk. RFF will derive its revenue agricultural assets, rather than owning and operating Funds, you will them. In addition, by merging the three diversified investment. have a more capitalAccess to years raising equity for RFM funds has only been In recent possible at significant discounts to net asset value. This the limited has been driven by investor concerns regarding their investment. By listing on the ability for them to realise the issue of investor ASX, RFF will simultaneously address liquidity and gain access to a much larger capital market. flexible facility negotiated for RFF is more The borrowing than that available for each of RiverBank, CIF and AWF. The loan to security ratio covenant (LSR) for RFF is 50% Under the RFF to 45% or less for CIF and AWF. compared compared is no initial amortisation requirement, facility there in CIF. to a $0.9 million per annum requirement peak LSR of RFF will be 41.1% and will be The forecast peak LSR of RiverBank (40.5%) higher than the forecast it will be lower than CIF however, (29.0%), and AWF (43.3%). and only if Revaluation proceeds. Please refer to Sections Please refer and only if Revaluation proceeds. Costs) and 6.15. 5.2 (Transaction 1.7% 5.0% 1.3% 3.5% RFF formerly $96 million RiverBank Net assets $47 million Total assets Total % by value 1 CIF

Net assets $45 million Total assets Total $101 million

Fund RiverBank CIF AWF Combined For personal use only use personal Cost savings in total cost reductions RFM expects Revaluation will result the $0.9 million per annum across of approximately in the RFM of the reduction Funds. This is a result three in fund management fee ($0.3 million) and a reduction overheads ($0.6 million). For further details on fees please to Section 10. refer For Beyond this, a larger fund, supported by increased access to capital markets, is expected to enable further a fixed costs across economies of scale, by spreading larger asset base. The costs to carry out and implement $3.2 million estimated to be approximately Revaluation are between all Funds on a Net Asset Value and will be shared costs will be payable basis. $1.8 million of the forecast and the by the Funds if Revaluation is not approved, after the meetings $1.4 million will be incurred remaining Figure 1.2: Unitholders 1.2: Figure registered as sellwishing to 1 CIF total and net assets exclude the $6.8 million of assets transferred to RFMP. to RFMP. of assets transferred 1 CIF total and net assets exclude the $6.8 million

Figure 1.1: RFF as at Implementation Date as Implementation at RFF 1.1: Figure S1 4 Explanatory MemorandumFor personal use only Key: Figure 1.3: Potential Advantages Disadvantages and statutory obligationtodoso. many Unitholders,suchassuperannuationfunds,havea component ofadisciplinedinvestmentprocess. Infact Recording thevalueofyourUnitsisanimportant also refer toSection12.4. discount maybeaslittle5%.CIFUnitholdersshould 15%–25%. If thisiscorrect, thereduction intheilliquidity trade ontheASXatadiscounttoNAV ofbetween The Independent ExperthasnotedRFFcouldpotentially during 2012atadiscountof20%–30%toNAV. Approximately 0.27%ofUnitswere traded off market this discount. Revaluation hasbeenproposed asameansofreducing of Units,thisvaluemaybesignificantlylowerthanNAV. into accountanilliquiditydiscount.Giventhethintrading to record Unitprices,basedontheir marketvaluetaking assets. RFMhasbeenadvisedthatitismore appropriate Net AssetValue (NAV) perUnitoftheunderlyingFund Unit valueshavetypicallybeenrecorded basedonthe discount Illiquidity On aminoritybasisRevaluationisfair(refer IERSection12.2(a)) Identified potentialadvantagesanddisadvantages Higher interest coverratioas aresult ofRevaluation(refer IERSection12.2(k)) Higher loantoassetvalueratioasaresult ofRevaluation(refer IERSection12.2(j)) Access tofunds(refer IERSection12.2(i)) Section 12.2(h)) Potential costsavingsthrough reduced managementfeesandeconomiesofscale(refer IER Section 12.2(g) Improved liquidityasUnitholdersare more likelytobeableselltheirUnits(refer IER Greater diversityofinvestmentportfolio(refer IERSection 12.2(f)) Improved financialandoperatingstabilityduetoincreased sizeunderRFF(refer IER Section12.2(e)) Lower Indirect CostRatio(managementfeesandcosts)underRFF(refer IERSection12.2(d)) Forecast improved totalreturn forUnitholdersunderRevaluationFY15(refer IERSection12.2(c)) Forecast improved totalreturn forUnitholdersunderRevaluationFY14(refer IERSection12.2(c)) Forecast increase distributionsforFY15underRevaluation (refer IERSection12.2(b)) Forecast increase distributionsforFY14underRevaluation (refer IERSection12.2(b)) Revaluation has taxation implications(refer IRE Section12.2(p)) Loss ofdeferred taxassets(refer IERSection12.2(o)) Transaction costs (refer IERSection12.2(n)) Section 12.2(m)) Under RevaluationUnitpriceswill bemore volatilebecause unitswillbelisted(refer IER Revaluation willresult inadilution ofUnitholderownership(refer IERSection12.2(l)) Lower interest coverratioas aresult ofRevaluation(refer IERSection12.2(k)) ü advantage û disadvantage RFF’s earnings. additional assetsthatgrow thequantumanddiversityof with thisstrategy, RFFwillconsidertheacquisitionof capital growth from owningagricultural assets.Consistent RFF’s investmentstrategyistogenerateleaserentals and trading volumes. entities withlargermarketcapitalisationhavehigher acquisitions canincrease returnsperUnit.Secondly, Growing thescaleofRFFhastwoadvantages.Firstly, Future growth for furtherinformation. Unitholders overtheforecast period.RefertoSection9 This willenableRFFtopayregular distributionsto typically associatedwithagriculturalbusinesses. earnings as aREIT. RFFwillnotexperiencethevolatilityof assets andforthisreason itisexpectedtobeclassified RFF willderiveallofitsrevenue from leasing agricultural flowConsistent cash RiverBank ü ü ü ü ü ü ü ü ü ü ü û û û û û û - - CIF ü ü ü ü ü ü ü ü ü û û û û û û û û - - AW ü ü ü ü ü ü ü ü ü ü ü û û û û û û û - F Executive Summary 5 S1 461 1,000 $461 $431 valued at valued at Converts to RFF Units F Units AW F Unitholders AW The exact number of RFF Units you will receive is set you will receive number of RFF Units The exact which accompanies out in separate correspondence CIF Unitholders will also this Explanatory Memorandum. 12 for to Section Please refer units in RFMP. receive RFMP. further information regarding for RiverBank will be diluted The value of Unitholdings will be diluted 5.5%. This 7.4%.and CIF Unitholders to RiverBank acquiring in value is attributable decrease the payment assets at higher than carrying value, the AWF to all Unitholders, the loss of of the Special Distribution to taxation losses, the relating tax benefits certain deferred other transaction costs. cost of stamp duty and returns a comparison of forecast 1.5–1.7 provide Figures and under for each of the Funds on a stand-alone basis returns Revaluation over various periods. The forecast for demonstrate that returns contained in the Figures during FY RiverBank and CIF Unitholders will be lower Revaluation. 14 due to the costs and minor dilution of demonstrate that Subsequent to this, the forecasts RFF will be higher in FY 15 than the from total returns is an important in returns stand-alone Funds. This trend calculated in accordance Returns are attribute of RFF. the assumption that 6, which requires with FSC Standard 9.25 and Refer also Figures reinvested. distributions are franking inclusive. are 9.26 and Section 9. All returns cash based on available forecast Assumed distributions are investing, andafter taking into account the funds operating, do not assumefinancing activities. The financing activities of any distributions. the actual reinvestment 1,000 $795 $842 valued at valued at CIF Units Converts to CIF Unitholders and 107 units 689 RFF Units in RFM Poultry

tion? alua ct to receivet can I expe 1,375 1,000

valued at $1,375 valued at $1,485 Converts to RFF Units

RiverBank Units RiverBank Unitholders For personal use only use 2013 as 1 October at forecast using Asset Net calculator Values conversion Unit 1.4: Figure personal For Once the Merger is approved, Unitholders in CIF and Once the Merger is approved, RiverBank, and will exchange their units for Units in AWF RFM the Rural Funds Group. RiverBank will be renamed of RFF on the ASX. will apply to list the units conversion of 1,000 1.4 demonstrates the Figure using forecast units to RFF Units RiverBank, CIF and AWF RiverBank units values as at 1 October 2013. The value of to be $1.49 as at the Implementation Date. is forecast to the value For simplicity RiverBank units will be reset Units in the current of $1.00 per unit. This will require RiverBank to be divided into additional units. between CIF The ‘exchange rate’ or merger ratio for Units and RFF has been determined based on the and AWF, 30 June 2013, financial statements of each Fund as at 9.25 including adjusted for the items set out in Figure the assets in the price at which RiverBank will acquire and Section 9. 9.26 Refer also Figure CIF and AWF. comments Section 2.3 of the Independent Expert Report on this aspect of Revaluation. in this The Independent Expert Report is included in full. The Independent document and it should be read basis) the Merger is Expert has concluded (on a control not fair but is reasonable. 1.3 Wha from Rev More details on each of the advantages and each of the advantages details on More in Section 5. contained disadvantages are 6 Explanatory MemorandumFor personal use only and stand-alone forecast returns for returns CIF forecast stand-alone and Figure 1.6: of RFF Comparison &RFMP (a) Unitholders, including: Unitholders. Revaluationbrings significantbenefitsto It isRFM’s viewthatRFFisinthebestinterests of 1.4 IsRFFinmybestterests? NAV appropriate. conversion rateforAWF Unitholdersata15%premium to buyers. Forthesereasons RFMconsidered the and thuswouldattractasmallernumberofprospective RiverBank andCIFwhichare significantlylargerinscale signs ofrecovery. Thiscontrastswiththeassetsownedby has beendepressed forsomeyearsandisnowshowing value. Inaddition,themarketforpremium vineyard assets AWF assetswouldbecomparabletotheircurrent book RFM’s viewthesalepricesthatcouldbeachievedfor premium vineyard assetslikethoseheldbytheAWF itis Based onthesizeandcurrent marketconditionsfor for returns RiverBank forecast stand-alone Figure 1.5: of RFF Comparison and Distributions % Returns CIF % Returns RiverBank T Growth Distributions Stand-alone T Growth Distributions RFF (andRFMP) Growth Growth RFF T Stand-alone T Distributions otal otal otal otal your choosing. with theabilityto sellyourinvestmentatatime of Liquidity: ListingRFFontheASXwillprovide you 2 1 1 4 4 4 4 2,3

30 June2014 30 June2014 9 months 9 months ending ending -2.19% -5.48% -7.62% 4.84% 7.03% 2.73% 8.21% 4.13% 7.81% 5.28% 1.16% 0.19%

30 June2015 30 June2015 12 months 12 months

11.37% 10.07% ending ending -4.49% 6.88% 0.55% 9.52% 5.48% 8.65% 7.56% 2.08% 9.11% 0.46%

These benefitsare furtherdiscussedinSection5.1. (e) (d) (c) (b) stand-alone forecast returns for returns AWF forecast stand-alone Figure 1.7: of RFF Comparison and 4. 3. 2. 1. Notes toFigures 1.5to1.7: AW % Returns Distributions Growth Growth RFF T Stand-alone T Distributions otal otal contained inSection9. met. Theunderlyingassumptionstotheseforecasts are that thecapitalrequirements ofRiverBankandCIFare reserves heldatcommencement.Theforecast assumes requirements. TheSpecialDistributionispaidfrom cash operating cashflowandafterconsiderationofcapital Distributions are basedonincomederivedfrom forecast dated thesamedateasthisdocument. Section 12andtheRFMPProduct Disclosure Statement RFF comparisontoCIFincludesreturns from RFMP. See above is from 1October2013to30June2014. 1 October 2013andthusthe9monthperiodrepresented The RFFreturnsassumethatRevaluationtakeseffect on Standards andassumereinvestment ofdistributions. % returnsare calculatedinaccordance withFSC lower fundingcosts. have increased accesstocapitalwhichcanresult in to accessequitymarkets.Listedanddiversifiedfunds financial crisis,manyilliquidfundshavebeenunable Access tocapitalmarkets:Sincetheglobal across alargerassetbase. enables economiesofscalebyspreading fixedcosts Lower costsandincreased scale:Alargerfund typically associatedwithagriculturalbusinesses. investors willnotexperiencethevolatilityofearnings its revenue from leasingagriculturalassetsandthus volatility:RFFwillderiveallof Reduced earnings geographically, byindustryandleasecounterpart. Diversification: Your investmentwillbediversified F 2 1 4 4 30 June2014 9 months 15.86% ending 5.18% 9.03% 5.97% 0.79% 6.82%

30 June2015 12 months

ending 4.80% 8.65% 9.11% 6.40% 1.60% 0.46%

Executive Summary 7 S1 8.3% 10.9% Annualised distributions yield (franking inclusive) 8.31 cents 8.20 cents Distributions per Unit (franking inclusive) 7.15 cents 8.20 cents Distributions per Unit (excluding franking) 9 months ending 30 June 2014 – 5.74 cents 12 months ending 30 June 2015 – 7.61 cents 9 months ending 30 June 2014 – 6.89 cents 12 months ending 30 June 2015 – 9.28 cents ending 30 June 2014 – 90% (excluding Special Distribution) Year ending 30 June 2015 – 90% Year 41.1% at Implementation Date 40.8% 30 June 2014 40.3% 30 June 2015 5 year term 50% maximum loan security ratio cover ratio 2.5 times Interest $97.5 million outright limit No amortisation Counterpart risk – an existing counterpart defaults on their contractual obligation entity as responsible risk – RFM is replaced Takeover Liquidity – the availability of buyers of RFF units prices fall Decline in asset values – property may take time to sell illiquidity – properties Property real value of your investment Inflation – the uncertainty over the future contained in Section 11 Details of these risks and others are • • • • • • 1.8 See Figure 98% 14 years $121 million • • • • • • • • The key risks associated with RFF are: • • • • • • • 12 months ending 30 June 2015 9 months ending 30 June 2014 RFF Trust (REIT) will be classified as a Real Estate Investment RFM expects that RFF returns rental and deriving income from Owning agricultural assets Key risks ASX Code Debt terms Classification flow per Unit) Net Asset Value Occupancy rate Earnings per Unit Revenue sources Principal business Forecast Distributions Forecast Forecast loan security ratio Forecast

Operational cash flow per Unit Average weighted lease expiry Average

per Unit divided by operation cash Distribution payout ratio ( Distributions roup (RFF) al Funds G Rur 1.5 About the only use personal For 8 Explanatory MemorandumFor personal use only for your Units. prevented bylawfrom maintainingasecondarymarket will be abletoselltheirUnitsinthe Funds.RFMis Illiquidity willmakeithighlyimprobable thatUnitholders Funds willcontinuetooperate. and typeofUnitsthatyoucurrently ownandeachofthe will notoccurandthere willbenochangetothenumber If theresolutions are notapproved, theMergerandListing proceed? if Rev 1.8 Wha Ordinary Resolutiontoapprove theMerger. RiverBank Unitholderswillbeaskedtoconsideran poultry farms. of RFMP, theentitythatwillleaseandoperate CIF Unitholderswillalsoconsidertheestablishment Special Resolutions to approve the Merger into RiverBank. CIF andAWF Unitholderswillbeaskedtoconsider the Mergertoproceed. resolutions. All resolutions mustbeapproved inorder for Revaluation requires Unitholderstovoteonanumberof for Rev 1.7 Wha Figure 1.8: RFF revenue sources financial yearending30June2014. Figure 1.8setsouttheRFFrevenue sources forthe 1.6 Revenuesources RFM AlmondFunds18% Select Harvests17% RFM Poultry47% alua es t aretheconsequences t aretherequiments alua ot tion doesot tion toproceed? Other 2% StockBank 2% Tr easury W ine Estates14% applicable toeachoftheFundsonastand-alonebasis. out inthissection.Thefollowingcapitalrequirements are of howRFMintendstomeettheserepayments are set CIF havedebtrepayment requirements andthedetails distributions orthrough assetsales.BothRiverBankand Funds’ current capitalstructure eitherbyareduction in requirements oftheFundswillneed tobemetwithinthe The inabilitytoraisecapitalmeansthatany will grow significantlyintheshorttomediumterm. capital willbedifficultandthusitisunlikelythattheFunds Due totheilliquidnature ofthethree Funds,raising new to Unitholders. an orderly mannerandthenetproceeds willbedistributed Funds. Inthatevent,theassetsofFundwillbesoldin or RFMasResponsibleEntitywillresolve towindupthe some pointitispossiblethatamajorityofUnitholders wish toretain theirinvestmentintheFunds.However, at RFM believesthatatpresent themajorityofUnitholders stand-alone basis stand-alone RiverBank capital requirements – make adistributionpaymentor redemption offer. $5 million whichmaybeusedtoreduce debtand/or production. Thishas unlockedworkingcapitalof Estatesandnolongercarriesoutgrape Wine AWF recently leaseditsvineyards toTreasury basis stand-alone AWF capital requirements – will needtocontribute$500,000thisconversion. welfare standards adoptedbyBaiada. ItisexpectedCIF also required toconvertitspoultryshedsmeethigher in FY2014,and9.14centsperUnitFY2015.CIFis CIF, andreducing distributionsto5.85centsperUnit requirement willbemetfrom theoperatingcashflowof of $0.9 milliondebtcommencingJuly2014.This The CIFbankingfacilityrequires anannualrepayment basis stand-alone CIF capital requirements – capped at30%ofRiverBank’s assets. thereafter. IneachoftheseyearsRFM’s commitmentis liquidity commencingin2015andeverysecondyear offers, RFMis committedtosellingassetsprovide RiverBank isunabletootherwisefundannualredemption In theeventthatRevaluationdoesnotproceed and surface watertoprovide additionalfinancialcapacity. 2013. RiverBankalsoplanstosell949MLofhighsecurity distributions of$0.02perunitcommencingDecember manage withintheseconstraintswhilstproviding quarterly distributions, RiverBankisexpectedtobeable recently sold2808ML ofgroundwater, and suspended LSR of50%andoutrightdebt$38million.Having The RiverBankbankingfacilityprovides foramaximum

What you need to do

2.1 Read the material (b) delivered to: Unit Registry – Boardroom Pty Limited You should read this material carefully as it is important to Level 7, 207 Kent Street your investment and explains Revaluation. S2 Sydney NSW 2000 2.2 Further queries? Australia (c) faxed to +61 2 9290 9655 After reading the material if you have any further queries in relation to Revaluation or your investment please contact (d) emailed to [email protected] your professional adviser, or call our Investor Services team on 1800 026 665 or email us at investorservices@ ruralfunds.com.au. 2.4 Timetable

DATE EVENT 2.3 Voting on Revaluation 48 hours prior to the Latest date for receipt of proxy It is important that you consider and vote on the commencement of the forms. resolutions being considered at your Meeting. meeting As contained in your Notice of Meeting, voting can be by either: 5.00pm on the Date for determining eligibility to Business Day before vote at the Meeting (a) attending your Meeting; or the Meeting (b) completing the proxy form so that it is received at least 48 hours prior to the commencement of your Meeting. 18 November 2013 Meetings to be held to vote on Revaluation If you wish to attend the Meeting please advise RFM of your attendance by telephone 1800 026 665 or email 19 November 2013 Date for advising Unitholders [email protected] the results of the Meetings 25 November 2013 Implementation Date of Merger The completed proxy form can be either: (a) mailed to: 10 December 2013 Units in RFF expected to be quoted on the ASX and Units in Unit Registry – Boardroom Pty Limited For personal use only use personal For RFMP expected to be quoted GPO Box 3993 on the NSX. Sydney NSW 2001 Australia This timetable is indicative only and may be subject to change.

9 10 Explanatory MemorandumFor personal use only Figure 3.1setsoutthecurrent assetsofeachtheFunds. Estates. Wine and equipmentloan.Thevineyards are leasedtoTreasury Australia, onevineyard andaplant locatedinVictoria, The assets includesixvineyards locatedinSouth approximately $37millionand1,411Unitholders. The smallestFundisAWF withassetsvaluedat processor. There are 1,865UnitholdersinCIF. has longtermgrowing contractswithBaiada,apoultry andaninvestmentinRFMStockBank.CIF in Victoria, poultry growing farmsinNewSouthWales andfourfarms approximately $105million.TheassetsofCIFinclude13 The largestoftheFundsisCIFwithassetsvaluedat Almond Funds.There are 1,030UnitholdersinRiverBank. orchards are leasedtoSelectHarvestsandthree RFM plant andequipmentlocatedinNewSouthWales. The and includealmondorchards, waterentitlementsand RiverBank assetsare valuedatapproximately $94million easily liquidatedbecauseoftheirsize. described brieflybelow, are largescale andnot readily or The assetsheldbyeachoftheFunds,whichare without offering itto all Unitholders. preventing theoffer ofaredemption toanyoneUnitholder prescribed bytheCorporations Actincludingarestriction This meansthatredemptions mustbecarriedoutas are classified under theCorporationsActasnonliquid. the three discreet, sectorspecificFunds.Allthree Funds At present there are atotalof4,308Unitholdingsbetween 3.1 Presentsitua About Revaluation tion S3 3.2 Rev and AWF Unitholdersvotinginfavouroftheresolutions. The MergerandListingisconditionaluponRiverBank,CIF 3.4 Conditosprecede RFMP PDS. 12 andhasbeenprovided toCIFUnitholdersinthe Further informationaboutRFMPappearsinSection and leasethepoultryfarmsownedbyRFF. from CIF. RFMPwill holdthechickengrowing contracts (RFMP). RFMPwillbecapitalisedwithfundstransferred CIF UnitholderswillbeissuedUnitsinRFMPoultry 3.3 RFMPoul the ASX. RiverBank (toberenamed RFF)andRFFwillbelistedon Merger. CIFandAWF UnitholderswillbeissuedUnitsin Figure 3.2illustrates thestructure ofRFFfollowingthe alua tion try About Revaluation 1111 S3 F F AW Plant & ASSETS AW Vineyards Vineyards $5 million $3 million $1 million Net assets $45 million $30 million $36 million Total assets Total Other assets $44 million Working capital Working equipment loan Net assets $29 million Total assets Total CIF RFF ASSETS $5 million $5 million $2 million Net assets $54 million formerly Total assets Total $112 million $100 million Other assets Poultry farms $96 million RiverBank Net assets $47 million Total assets Total Working capital Working StockBank units 1

CIF ASSETS $9 million $3 million $3 million Other land RiverBank

Net assets $97 million $48 million $82 million Total assets Total Net assets $45 million Total assets Total Other assets $101 million & surplus water Almond orchards Almond orchards Plant & Equipment For personal use only use personal For to RFMP. 1 CIF total and net assets exclude the $6.8 million of assets transferred Figure 3.2:Figure Date as Implementation at RFF

Figure 3.1: RiverBank, CIF and AWF Funds – asset valuations as 30 – asset at 2013 June valuations Funds and RiverBank, AWF CIF 3.1: Figure S3 12 Explanatory MemorandumFor personal use only 1.  Assets Industry Agricultural Australian Figure 3.3: to Australia’s ruralindustries.Insodoingitwillgenerate RFF’s investmentstrategyistodeliverleasingsolutions sources ofcapital,such asequityinvestmentorleasing. Australia’s ruralindustrieslackaccesstoalternatives or retained Compared earnings. tootherindustriesthen, this investmentwaslargelyfinancedbyeitherbankdebt capital structure present inAustralia’s agriculturalsector, totalled $16.2billion.Howeverduetotheprimarilyprivate During 2012investmentinAustralia’s ruralindustries but largelyprivatelyowned. evidence thatthecountry’s agriculturalsectorisverylarge household networthof$121billion.Thesestatisticsare families, managing410millionhectares withanaggregate to GDPinthatyearwere mainlyownedby93,000farming substantial scale.Theassetsthatcontributed$34billion and manufacturing(7.3%),thoughstillanindustryof making itasmallerindustrycompared tomining(9.6%) Australia’s gross domesticproduct (GDP)in2012, Australia’s ruralindustriesaccountedfor2.4%of solutions totheAustralianagriculturalsector. entities activelyseekingtoprovide property leasing Investment Trust (REIT),andoneofveryfewcommercial Australia’s onlydiversifiedagriculturalRealEstate RFF isaruralproperty investor, notafarmer. Itisalso opportunities 3.5 Futuregrowth eg processing eg processing or storage rates ofgrowth. Theyare neitherforecasts norprojections offuture returns.Pastperformance isnotaguidetofuture performance. be derivedfrom different assets.Theyare basedonRFM’s experienceandobservationsofagriculturalleasetransactions andhistorical The incomeandgrowth figures presented inFigure 3.3havebeenprovided todifferentiate theprofile ofincomeand growth thatcan structure structure Infra- High income12% Low growth -2%

Infrastructure predominant Steel Concrete CopperHighdensitypolyethylene (HDPE)Irrigatedinfrstructure FencingImproved pasture SoilWater

Poultry Poultry farms

orchards and other tree other tree Almonds Almonds nuts non-premium Vineyards

geographic geographic Vineyards indication premium premium

2.5% 7.5% the quantumanddiversityofRFF’s earnings. will pursuetheacquisitionofadditionalassetsthatgrow out agriculturalassets.Consistentwiththisstrategy, RFF lease rentals andcapitalgrowth from owningandleasing increase overtime. nominal valueofthecommoditiestheseassetsproduce but experiencerental growth asproductivity gainsandthe resources predominate, produce lowinitialincomeyields end oftheirusefullife.Bycontrast,assetswhere natural asset valuesdepreciate overtime,astheyapproach the for infrastructure assetsproduce highinitialyields,but characteristics oftheassetrange.Itnotesthatleaserates Figure 3.3alsoillustratestherelative economic and thewaterholdingcapacityofsoils. highly influencedbythe reliability andquantityofrainfall, natural resources predominate andwhere valuesare At the rightendofcontinuum,are assetswhere little presence, andtherefore relevance tocapitalvalue. are infrastructure assetswhere naturalresources have their capitalvalue.Attheleftendofthisassetcontinuum resources embeddedintheiroperations andtherefore along acontinuumbasedontherelative levelofnatural in theAustralianagriculturalindustryandsetsthemout Figure 3.3presents arangeofassets currently operating class of asset the Characteristics cropping Irrigated Irrigated 1

Dairy non-irrigated Cropping Cropping Natural resources predominant

Grazing Low income5% High growth 5% entitlements Water

About Revaluation 13 S3

Livestock leasing is an attractive alternativeleasing is an attractive Livestock investment capacity to generate income from because of its for RFF, both by diversification widespread leasing and provide Because lease terms are geography and counterparty. this investment allocation to nine months, typically three that can be liquid capital of relatively a source provides long term investments when for funding other realised opportunities arise. of stock agents and its own RFM utilises a network and analyse leasing opportunities. management to identify possible by radio frequency Livestock leasing is made the case of cattle, and the ability identification tags in ownership of all livestock with the national to register Securities Register. Personal Properties variation in Seasonal and market volatility generate price that RFF acquires livestock values and it is for this reason may lessees. This protection from additional protection additional include an equity contribution by the lessee, for the payment of interest security and full recourse and principle. For personal use only Leasing Livestock of all businesses A significant portion of the capital stock agricultural and industries is its working capital. In the use this includes plant and equipment, crops sector, managed and livestock. For several years RFM has initial asset portfolio investments in livestock and RFF’s includes a $5m investment in livestock leasing. personal For RFF’s current portfolio of assets is weighted towards the is weighted towards portfolio of assets current RFF’s 3.3. It is this weighting in Figure left side of the continuum yields high rental generate relatively that enables RFF to to Unitholders. and hence distributions the full range strategy is to invest across investment RFF’s whilst ensuring the asset mix of the asset continuum, consistent with current continues to fund distributions natural resources where assets levels. RFF will acquire assets can assist the growth because these predominate, of RFF earnings. In so doing, RFF will balance these with acquisitions of infrastructure lower yielding assets higher initial yields. assets that generate predominant type assets, they infrastructure RFF acquires Where in their will be leased out to counterparties experienced nor take operation. RFF will not operate infrastructure, risks. to infrastructure exposure direct 14 Explanatory MemorandumFor personal use only Benchmark Reporting & Disclosure &Disclosure Reporting Benchmark as theREmustreport againstsixdisclosure benchmarks property schemeas definedbyRG46.UnderRG46,RFM a direct orindirect investment.RiverBankisanunlisted unlisted property schemes inwhichretail investorshave The ASICRegulatoryGuide46appliestoregistered 4.1 Introductio RG46 Disclosure credit facilitylevel. thelevelofinterestpolicy thatgoverns coveratanindividual The responsible entitymaintainsandcomplieswithawritten Benchmark 2:Interest coverpolicy Gearing ratio= scheme calculatedusingthefollowingformula: Responsible entitiesshoulddiscloseagearingratioforthe Disclosure Principle1:Gearingratio facility level. thelevelofgearingatanindividualcreditpolicy thatgoverns The responsible entitymaintainsandcomplieswithawritten Benchmark 1:Gearingpolicy Benchmark /Disclosure Principle Total interest-bearing liabilities Total assets

S4 be obtainedbycontactingInvestor Services. interestfacilities. Acopyofthepolicygoverning covercan cover covenantundertheterms ofRFF’s credit limit In addition,RFFisrequired tocomplywithanyinterest should notbelessthan1.75times earnings. The policystipulatesthattheinterest coverratioofRFF interest thelevelofinterest coverpolicythatgoverns cover. Yes. RFMasREmaintainsandcomplieswithawritten conditions. gearing ratioisappropriate given thecurrent economic rates ordecreased property values.InRFM’s viewtheRFF the potentialriskthatRFFfacesfrom increased interest assets are fundedbyinterest bearingliabilities.Itindicates The gearingratiodemonstratestheextenttowhichRFF’s The gearingratioofRFFaftertheMergerwillbe41%. contacting InvestorServices. gearingcanbeobtainedby A copyofthepolicygoverning 50%, withatargetratioof35%. The policystipulatesthatgearingofRFFshouldnotexceed thelevelofgearing. policy thatgoverns Yes. RFMasREmaintainsandcomplieswithawritten Compliance /Disclosure approve themerger of thethree Funds. the membersofRiverBank,CIFandAWF havevotedto of aninvestmentinRiverBank.Thedisclosures assume retail investors toanalysetherelative risksandreturns RFM’s benchmarkreporting anddisclosure willassist (benchmark reporting) andeightdisclosure principles. RG46 Disclosure 1515 S4 – at all times >2.25 times – if distribution lock-up <2.5 times Covenant – 50% 41.1% on commencement – Forecast 30 June 2014 – 40.85% Forecast Covenant Forecast Interest Cover Ratio 30 June 2014 – 2.94 times Cover Ratio 30 June 2014 Interest Forecast Annual independent valuation Financial reporting Yes. All interest costs are currently expensed in the profit in the profit expensed currently costs are All interest Yes. incur any and loss statement. RFF does not currently capitalised. to be required costs that are interest Compliance / Disclosure Compliance is 2.94 times earnings. cover ratio of RFF The interest capacity to service cover demonstrates RFF’s Interest debts using its adjusted earnings. payable on RFF’s interest financial position of RFF’s cover is a critical indicator Interest debt level. In and risks of RFF’s and of the sustainability given the cover is appropriate the interest view, RFM’s economic conditions. current loan: $97.5m Term for term of requirements no amortisation Maturity profile: loan 1 October 2013 Facility termination date: 5 years from Loan to security ratio: • • • cover ratio: Interest • • Non-financial covenants: • • first mortgage by registered The loan facility will be secured registered land holdings and a security interest over RFF’s other assets. over RFF’s events. default and review standard Various rates will interest At the commencement of the facility, not be hedged. RFM intends to hedge up to 50% of the within 12 months of commencement. borrowings of any lending covenants under its RFF is not in breach loan facility. current Unitholders should note that money owing to RFF’s repaid in priority to money must be financiers and creditors owing to Unitholders. RFM will update Unitholders on any material changes to of loan covenants. or breaches borrowings Interest expense Interest + unrealised losses + unrealised EBITDA – unrealised gains EBITDA – unrealised

isclosure Principle 3: Scheme borrowing Disclosure balance funds (whether on or off If a scheme has borrowed entities should clearly and prominently sheet), responsible disclose details of the facilities. within facilities will mature and credit If borrowings should make appropriate entity 12 months, the responsible or possible of refinancing about the prospects disclosure alternative actions (e.g. sales of assets or further fundraising). for grounds reasonable entity has no If the responsible or possible refinancing of commenting on the prospect alternativeto actions, it should state this and explain why financial investors: see Regulatory Guide 170 Prospective information (RG 170) at RG 170.91–RG 170.94. associated with Responsible entities should explain any risks whether borrowings including maturity profile, their borrowing have been hedged and, if so, to what extent. information Responsible entities should also disclose any of loan covenants and breaches about scheme borrowing investors. Responsible by required that is reasonably entities should update investors about the status of of covenants through and any breaches scheme borrowings ongoing disclosure. Interest cover ratio = Interest capitalisation Benchmark 3: Interest expense of the scheme is not capitalised. The interest isclosure Principle / Disclosure Benchmark isclosure Principle 2: Interest cover ratio cover Principle 2: Interest Disclosure indication of an unlisted cover ratio gives an The interest payments from ability to meet the interest scheme’s property earnings. disclose the scheme’s Responsible entities should the following formula cover ratio calculated using interest financial statements: and based on the latest

For personal use only use personal For S4 16 Explanatory MemorandumFor personal use only operations (excludingborrowings) availablefordistribution. The schemewillonlypaydistributionsfrom itscashfrom Benchmark 6:Distributionpractices to theinvestmentdecision. parties shoulddescriberelated partyarrangementsrelevant Responsible entitiesthatenterintotransactionswithrelated Disclosure Principle5:Relatedpartytransactions and arrangementstomanageconflictsofinterest. assessment andapproval processes forsuchtransactions written policyonrelated partytransactions,includingthe The responsible entitymaintainsandcomplieswitha Benchmark 5:Relatedpartytransactions of theproperty scheme’s direct property investmentportfolio. A responsible entityshoulddisclosethecurrent composition Disclosure Principle4:Portfoliodiversification (e) (d) (c) (b) (a) valuation policythatrequires: The responsible entitymaintainsandcomplieswithawritten Benchmark 4:V Benchmark /Disclosure Principle (ii) (i) obtained: for eachproperty, anindependentvaluationtobe timetable; and valuations tobeobtainedinaccordance withaset rotation anddiversityofvaluers; of interest; procedures tobefollowedfordealingwithanyconflicts (ii) (i) a valuerto: change inthevalueofproperty. there isalikelihoodthatthere hasbeenamaterial within twomonthsafterthedirectors formaviewthat (B) (A) before theproperty ispurchased: be independent; professional bodyinthatjurisdiction;and exists), orotherwisebeamemberofanappropriate is located(where aregistration orlicensingregime territory oroverseasjurisdictioninwhichtheproperty be registered orlicensedintherelevant state, for allotherproperty, onan‘asis’basis;and if complete’basis;and for adevelopmentproperty, onan‘asis’and aluation policy operations. Yes. Forecast distributionswillbepaidfrom cashfrom can beobtainedbycontactingInvestorServices. A copyoftheRFMConflictInterest ManagementPolicy Party Transaction Register. RFM records allrelated partytransactionsintheRelated Compliance Committeeforreview. related partytransactionsbe submittedtotheRFMExternal that allrelated partiesbeclearlyidentifiedandthatall The RFMConflictofInterest ManagementPolicy requires 13.3. Details ofallrelated partytransactionsare setoutinSection can beobtainedbycontactingInvestorServices. A copyoftheRFMConflictInterest ManagementPolicy policy onrelated partytransactions. Yes. RFMasREmaintainsandcomplieswithawritten construction assets. RFF doesnotcurrently ownanydevelopmentor detailed inSection8. The compositionofRFF’s property investmentportfoliois development properties. All properties are valuedonan‘asis’basis.RFFhasno policy canbeobtainedbycontactingInvestorServices. RFF currently complieswiththispolicyandacopyof (g) (f) (e) (d) (c) (b) (a) Asset Valuation Policythatrequires: Yes, RFMasREmaintainsandcomplieswithawritten Compliance /Disclosure value oftheproperty. likelihood thatthere hasbeenamaterialchangeinthe months aftertheDirectors formaviewthatthere isa obtained before aproperty ispurchased andwithintwo for eachproperty anindependentvaluationtobe timetable; and valuations tobeobtainedinaccordance withaset which isassessedannually; diversity ofvaluersbaseduponapre-approved list, considers there are specialcircumstances; rotation ofvaluerseverythree yearsunlesstheBoard interest; procedures tobefollowedfordealingwithconflictsof the valuertobeindependent; the valuertoberegistered orlicensed; RG46 Disclosure 17 S4 Compliance / Disclosure Compliance RFM forecasts distributions to be paid quarterly as set out distributions to RFM forecasts in Section 6.24. cash flow operating paid from are Recurring distributions the forecast to be sustainable over considered and are assumptions and sensitivities set out period subject to the to is a Special Distribution expected in Section 9. There merging and this distribution will be be paid 45 days after earnings. opening retained funded through fund managed investment RFF is an illiquid registered to a in response only able to withdraw and investors are permits. or as the law otherwise withdrawal offer to trade their Once RFF is listed Unitholders will be able Units on the ASX. on a The net tangible assets per unit is $1.00 calculated forma basis as at Implementation Date. Unitholders pro information. to Section 9 for further should refer +/– any other adjustments Net assets – intangible assets Number of units in the scheme on issue

the source of the current distribution (e.g. from cash from from cash distribution (e.g. from of the current the source distribution, capital, unrealised operations available for gains); revaluation distribution; of any forecast the source distributions are or forecast whether the current 12 months; sustainable over the next distribution is not solely sourced or forecast if the current (excluding borrowings) operations cash from from the of funding and available for distribution, the sources these other from for making the distribution reasons sources; other distribution is sourced or forecast if the current borrowings) operations (excluding cash from than from over available for distribution, whether this is sustainable the next 12 months; and the the impact of, and any risks associated with, sources scheme from the payment of distributions from operations (excluding borrowings) other than cash from available for distribution. entity should disclose the methodology for The responsible and details of the adjustments per unit calculating the NTA for the used in the calculation, including the reasons adjustments. Responsible entities should also explain to investors what means in practical terms and per unit calculation the NTA per unit calculation to how investors can use the NTA level of risk. determine the scheme’s

NTA per unit = NTA isclosure Principle / Disclosure Benchmark isclosure Principle 6: Distribution practices Disclosure making distributions to or forecasts If a scheme is making entity should disclose: members, the responsible (a) (b) (c) (d) (e) (f) isclosure Principle 7: Withdrawal arrangements Disclosure a withdraw from given the right to If investors are should clearly disclose the entity scheme, the responsible those rights. surrounding circumstances isclosure Principle 8: Net tangible assets Disclosure clearly should scheme closed-end a of entity responsible The of the (NTA) disclose the value of the net tangible assets dollars. scheme on a per unit basis in pre-tax entities should calculate the consider that responsible We the following formula: of the scheme using NTA For personal use only use personal For 18 Explanatory MemorandumFor personal use only to sellassets.Hence aliquiditydeadlockexists between the bestinterests of90%theUnitholdersifitresolved investment. Forthisreason RFMwouldnotbeactingin 90% ofUnitholdersdonotcurrently wishtoexittheir to makearedemption offer. However, RFMestimates or alloftheassetsaFundand usethenetproceeds providing liquiditytoUnitholders.Thefirstissell some In theabsenceofRevaluation,there are twowaysof the numberofbuyersandsellers. As with anymarket,tradingvolumeswillbedictatedby of theseentitieswas19%forthecalendaryear2012. small capREITs indicatesthatthe averagetradingvolume and willbeconsidered a‘smallcap’stock.Analysisof Once listed,itisexpectedRFFwillbeclassifiedasaREIT, RFF willbebetweenthe500thand600thentitybysize. capitalisation issimilartoitsnetassetsof$121.4million, smallest entityislessthan$0.5million.AssumingRFF’s listed entityisapproximately $119billioninsizeandthe 2,100 companiescurrently listedontheASX.Thelargest can betradedontheASX.There are approximately A keyadvantageofRevaluationisthatyourinvestment point inthefuture. will ultimatelywishtorealise theirinvestmentatsome have noimmediaterequirement forliquidity, all Unitholders investment for10years. WhilstthemajorityofUnitholders Unitholders intheFundshaveonaverageheldtheir Liquidity 5.1 Adv details oneachofthoseadvantagesanddisadvantages. applicable toeachFund.Thissectionprovides more summary oftheadvantagesanddisadvantagesthatare when decidinghowtovote.Section1provides a of Revaluationthatshouldbeconsidered byUnitholders This sectiondetailstheadvantagesanddisadvantages disadvantages Advantages & ant ges ages S5 turnover thatmayoccurinRFF.turnover The informationinFigure 5.1 isnotaforecast ofthe ASX smallcapREITs. Funds issubstantiallylessthantheaverageliquidityof The datademonstratesthattheliquidityofUnitsin parties ineachoftheFundsforcalendaryear2012. out thevolumeandvalueoftradesbetweenarm’s length that UnitsintheFundsare veryilliquid.Figure 5.1sets that tradingisextremely thin, thereby confirmingthefact RFM dataonthevolumeoftradesthisnature indicates to selltheirUnitsthrough an off markettransfer. remaining liquidity mechanismavailabletoUnitholdersis the Fundsare nottraded onasecondarymarket,theonly In theabsence of aredemption offer, andbecauseUnitsin their investment. Unitholders seekingtoexitandthosewishingretain the numberofbuyersandsellers. As withanymarket,tradingvolumes willbedictatedby REITs cap small Figure 5.1: for 2012 Unit sales to compared RiverBank Fund CIF AWF Small capREITs

No. of sales 3 1 2 - Unitholders No. of 1,814 1,403 941 - T by value urnover urnover 19.00% 0.41% 0.06% 0.04% Advantages & disadvantages 1919 S5 9.3% 1.6% 0.4% 1.0% 2.3% 1.8% 17.2% 17.9% 37.1% 11.3% FY 2014 Revenue % Counterparts Select Harvests RFM Farming RFMP RFMP Wine Estates Treasury Wine Estates Treasury Wine Estates Treasury Wine Estates Treasury landholders Various landholders Various Consistent cashConsistent flow leasing agricultural from RFF will derive all of its revenue it is expected to be classified assets and for this reason RFF will not experience the volatility of earnings as a REIT. typically associated with agricultural businesses. This will distributions to Unitholders. enable RFF to pay regular Diversification the volatility of an reduce to Diversification serves sector specific Funds, three investment. By aggregating will have a diversity of agricultural your investment in RFF and counterparts as set out regions sectors, geographic 5.2. in Figure to capital, and anticipation of the probability that the next to capital, and anticipation of the probability buyer may apply similar discounts when valuing the asset. identical, the less liquid two assets are where Put simply, the asset, the lower its value. market traded off 0.27% of Units were Approximately The during 2012 at a discount of 20%–30% to NAV. Independent Expert has noted RFF could potentially trade of between 15%–25%. on the ASX at a discount to NAV in the illiquidity discount the reduction If this is correct, may be as little as 5%. CIF Unitholders should also refer to Section 12.4. Nevertheless an important aspect of Revaluation is its potential to unlock value for Unitholders, by increasing the marketability of their investment. Beyond this, a larger fund, supported by increased by increased a larger fund, supported Beyond this, is expected to enable further access to capital markets, a fixed costs across by spreading economies of scale, larger asset base.

Agricultural region Riverina, NSW Riverina, NSW Riverina, NSW Western Districts, VIC SA Barossa, Adelaide Hills, SA Coonawarra, SA Grampians, VIC Various Riverina, NSW

Agricultural sector Almonds Poultry Winegrapes Livestock Olives, surplus water and land For personal use only use personal For Reducing the illiquidity discount An illiquidity discount is typically applied to assets that cannot easily be sold. Reasons for the discount include the cost of bearing risk during the period that the asset cannot be sold, the cost of not having immediate access Illiquid funds therefore have very limited access to capital. Illiquid funds therefore Limited access to capital imposes a cost on Unitholders, since debt terms may be less favourable and more expensive, and because the cost of equity is higher, the recent as demonstrated by the dilution arising from raisings. While the Funds capital RiverBank and AWF is little there additional equity, generally do not require this capacity for contingencies. Revaluation addresses access to capital markets. shortcoming by improving See Section 1.8 for further information about existing for capital. Fund requirements Ongoing access to capital accessOngoing to markets Since the global financial crisis, many illiquid funds have been unable to access equity markets whilst their level of debt. to reduce simultaneously being required

Figure 5.2:Figure sectors, RFF regions and counterparts

RFM expects Revaluation will result in total cost will result RFM expects Revaluation million per annum $0.9 of approximately reductions the reduction of a result Funds. This is the three across fee ($0.4 million) and a in the RFM management Fund ($0.5 million). The three in fund overheads reduction to charge a higher allow RFM constitutions currently RFM will reduce the Merger, management fee. Following intention to fee and it is RFM’s its overall management level. below their current keep management fees Lower costs S5 20 Explanatory MemorandumFor personal use only contained inSection13.1. Further informationaboutthecostsofRevaluationis subject tochange. if Revaluationproceeds. Thisisanestimateofcostsand $1.4 millionwillbeincurred afterthemeetingsandonly Funds ifRevaluationisnotapproved, andtheremaining $1.8 millionoftheforecast costswillbepayablebythe shared betweenallFundsonaNetAssetValue basis. estimated tobeapproximately $3.2millionandwillbe The coststocarryoutandimplementRevaluationare Transaction costs from different locationsanddifferent leasecounterparts. in thatthisprovides a diversified revenue stream, sourced The changeinprofile hasacounterbalancingadvantage counterpart ofyourcurrent investmentorFund. comprise RFFmaybedifferent totheasset,sectoror of oneormore ofthe assets,sectorsorcounterpartsthat viticulture and livestock. It is possible that the performance at leastfouragriculturalsectors,beingpoultry, almonds, Revaluation, RFFUnitholderswillownassetsexposedto Your current Fundissectorspecific.Following in profileChanges below NAV. and generaleconomicconditionsthattheUnitsmaytrade reasons including marketsentiment,supplyanddemand including marketsentiment.Itispossibleforarangeof as theirvaluewillbeinfluencedbyadditionalfactors likely thatUnitsinRFFwillexhibitahigherlevelofvolatility of Unitshasexhibitedverylittlevolatility. Oncelisted,itis agricultural assetshavenotbeenhighlyvolatilethevalue has beenrecorded atNAV. Becausetheunderlying Historically, thevalueofRiverBank,CIFandAWF Units Volatility 5.2 Disadv RFF’s earnings. additional assetsthatgrow thequantumanddiversityof with thisstrategy, RFFwillconsidertheacquisitionof capital growth from owningagricultural assets.Consistent RFF’s investmentstrategyistogenerateleaserentals and trading volumes. entities withlargermarketcapitalisationhavehigher acquisitions canincrease returnsperUnit.Secondly, Growing thescaleofRFFhastwoadvantages.Firstly, Future growth ant ages Group (RFF). rather RiverBankischangingitsnametoRuralFunds as RiverBankUnitholdersare notexchanginganyunits, rollover relief isnotrequired forRiverBankUnitholders to report thisCGTevent intheirtaxationreturns. CGT available toAWF Unitholdersandtherefore theywillneed as capitalandpartiallyincome.Rolloverrelief isnot applied toacquire RFMP unitswillbetaxedpartially respect toRFMP containedinSection12.Thedistribution Unitholders should alsorefer tothetaxation informationin return forRFFUnitswillqualifyrollover relief. CIF the ATO toconfirmthattheexchangeofCIFUnitsin for RFFUnits.RFMhasappliedaclassrulingwith disposed oftheirCIFand/orAWF Unitsinexchange CIF andAWF Unitholderswillbedeemedtohave Taxation for Unitholders implications liabilities arisingfrom therevaluation ofRiverBank’s assets. tax assetofRiverBankandappliedtooffset deferred tax AWF Unitholders.Theselossesare recorded asadeferred that willoccurwhenRiverBankissuesunitstoCIFand income taxlossesasaresult ofthechangeownership RFF willlosethebenefitof$1.9millionRiverBank’s assets tax deferred forward ofLoss carried tax assetsassetoutbelow. transaction costs,andthelossofcarriedforward deferred the costtoallthree fundsofstampdutyandother acquiring theAWF assetsathigherthancarryingvalue, value isattributabletothree majoritemsbeingRiverBank values atthecompletionofRevaluation.Thisdecrease in RiverBank andCIFUnitholderswillhaveslightlylower Dilution the impactonyourportfolio. the significantadvantagesthat arisefrom Revaluationand many Unitholders,thischangemustbeweighedagainst of listedsecuritiesiscontrarytotheoriginalintention Units forsecuritieslistedontheASX.Whileacquisition Revaluation entailstheexchangeofyourcurrently unlisted Units inRFF. an interest inaspecificagriculturalsectorexchangefor Some Unitholdersmayquestionthemeritsofrelinquishing allocation Potential to asset disruption compliance costs. of additionaldisclosure and animmaterialincrease in the ASXlistingrules.Thiswillresult inasmallamount Once listed,RFFwillhavetoensure complianceto ASX compliance costs Questions & Answers

6.1 What is the purpose of 6.3 Which Funds are eligible to this document? S6participate in Revaluation? The purpose of this document is to describe the Unitholders in the following funds are eligible to participate terms under which your managed investment will be in Revaluation: restructured. You should read it carefully and seek professional advice. Included in this package is a voting (a) RFM RiverBank (RiverBank) form. RFM Investor Services can assist you with any (b) RFM Chicken Income Fund (CIF) queries you may have or you may visit the RFM website at www.ruralfunds.com.au. (c) RFM Australian Wine Fund (AWF) 6.2 Why is RFM recommending If you have an investment in any or all of these Funds, it is recommended that you vote on Revaluation. All Funds Revaluation? need to approve Revaluation in order for it to proceed. RFM firmly believes the proposal is in the best interests of the Unitholders of the Funds. Revaluation brings the 6.4 What do I receive if my Fund following significant benefits to Unitholders, including: participates?

(a) Liquidity; Unitholders in CIF and AWF will receive Units in RFF. RiverBank Unitholders will receive additional units as their (b) Lower costs; units are reset to $1 in value. Following this RiverBank will (c) Diversification; change its name to RFF.

(d) Ongoing access to capital markets; CIF Unitholders will also receive Units in RFMP, a trust created to lease and operate the poultry farms owned by (e) Reducing the illiquidity discount; RFF. RFMP will be listed on the NSX. See Section 12 for further information about RFMP. (f) Consistent cash flow; and RFF will derive income from rental of land and (g) Future growth. infrastructure with an indicative value of $228 million,

For personal use only use personal For and from leasing livestock and plant and equipment. These are addressed in further detail in Section 5.1.

21 22 Explanatory MemorandumFor personal use only (c) (b) (a) impact uponthevalueachieved: considered, RFMbelievesthatthefollowingfactorswill the unlikelyeventthatafullsaleprocess doesneedtobe full saleprocess forthethree RFMFunds.However, in Directors currently havenotconsidered theoptionofa do notwishtoexittheirinvestment.Asaresult, RFM As notedabove,themajorityofUnitholderscurrently indivdual Funds? the al 6.7 HowdoesRFFcmpa re to currently wishtoexit theirinvestment. RFM believesthevastmajorityofUnitholdersdonot wish toselltheirUnits.Giventhisrelatively lownumber, Unitholders representing 3.5%oftotalequitythatthey continuing investors.RFMhasreceived advicefrom the sizeofFundresults inhigherongoingcostsfor costs associatedwithoperatingtheFund.Thusreducing in scaledoesnottriggeranequivalentreduction inthe The primaryreason for thisconflictisthatany reduction Unitholders wishingtocontinuewiththeirinvestment. Unitholders wishingtoredeem theirUnitsandthose This approach cancreate conflictbetweenthose redemption offer. assets andthenapplycashrealised from thesesalestoa sales. Inthisinstance,RFMcouldseektosellunderlying solution istofundaredemption offer through asset Unitholders intheFundswithliquidity. Analternative One ofthemainaimsRevaluationistoprovide indivdual Funds? of selling assetswithin compare totheal 6.6 HowdoesRev will notsignificantlyincrease thevolatilityofyourportfolio. investment withinyourportfolio,makeitprobable thatRFF These factors,combinedwiththerelative sizeofyourRFF equities markets. historical negativecorrelation withtheperformanceof agricultural commoditiespricesandlandvalueshavea gearing andconsistencyofcashflow. Furthermore, may assist thisincludethemaintenanceofmoderate be less volatilethanthegeneralmarket.Factorsthat It ispossiblethatRFF, likemanylistedsecuritieswill asset alloca 6.5 WillRev process; Additional costswillbeincurred aspartofasale ultimately narrow thenumberofbuyersinanymarket; enterprises ofsignificantscale. Thisscalemay The assetsownedbythethree RFMFundsare process maytakeoversixtotwelvemonths; the poultryfarmingindustryandasaresult asale There iscurrently ascarcity ofinstitutionalactivityin terna alua tive ofwinding-up ? tion? y tion dsrupmy alua terna tion ve tive

(d) vote onRev 6.10 Wha of gearing. be used forinvestmentacquisitions,orthereduction appropriate. Proceeds from anyequityraisingmay RFM mayundertakeanequityraisinginthefuture if It isnotintendedtoraiseequityaspartofRevaluation. raising apart ofRev 6.9 Willtherebeanequity Refer toSection3.5. of RFF? long-term investetstra 6.8 Wha person orbyproxy. 75% ofUnitholders’votescast atthemeetingeitherin resolution tobeapproved, itmustbeadoptedbyatleast the meetingeitherinpersonor byproxy. Foraspecial adopted byatleast50%ofUnitholders’ votescastat For theordinary resolution tobeapproved, itmustbe resolutions are approved, Revaluationwillproceed. Revaluation willnotproceed. Intheeventthatall In theeventthatanyofresolutions are notapproved, Unitholder approval ofthemergerwithCIFandAWF. RiverBank willconsideranordinary resolution seeking Unitholder approval tomergewithRiverBank. The AWF willconsideraspecialresolution seeking will leaseandoperatethepoultryfarmsownedbyCIF. approval toestablish RFMPoultry(RFMP),theentitythat with RiverBank.Thesecondpartofthisresolution seeks of thisresolution seeks Unitholderapproval tomerge The CIFwillconsideronespecialresolution. Thefirstpart Each ofthethree Funds mustconsidercertainresolutions. to approvetheresolutions? how manyvotesarerequired considered byUnitholdersand 6.11 Wha meeting, orbyproxy. you shouldvote“No”totheresolutions attheFund or byproxy. IfyoudonotwantRevaluationtoproceed should vote“Yes” totheresolutions attheFundmeeting, on Revaluation.IfyouwantRevaluationtoproceed you RFM isencouragingallUnitholderstosubmittheirvote upon marketconditionsprevalent atthattime; valuersmayhavedeviatedandwillbebased external period oftime,themarketvaluesasdeterminedby Given thatthesaleprocess mayrequire alengthy s the t isthe t to t shouldIdoifwant to e t resolutionswillbe alua

tion? alua ? tion? tegy tegy Questions & Answers 23 S6

able? y ntve to conse tion? be pa amp duty t will be the alua ained for RFF? obt able to sell your Once RFF is listed on the ASX you will be on the investment in full or in part on the ASX. Securities a traditional full ASX may be bought or sold using either or an online service. service stockbroker, ASX is available Further information about trading on the at www.asx.com.au 6.23 Wha d by RFF? distributions pai to pay an annualised distribution yield of RFF is forecast 10.9% for 9 months ending 30 June 2014 and 8.3% for the financial year ending 30 June 2015 franking inclusive. 6.24 When will RFF’s d? distributions be pai RFM intends to announce a Special Distribution within that 45 business days of merging. In addition it is forecast quarterly distributions as set out in RFF will pay regular 6.1. Figure based on the lease income that distributions are RFF’s its tenants and the majority of these are from it receives one declared Distributions will be on a calendar quarter. month prior and paid one month after each calendar expected to commence in January quarter and are 2014. Distribution dates over the 21 months from 6.1. detailed in Figure commencement are st 6.19 Will personally liable for stamp duty. Unitholders will not be of stamp duty will $700,000 However approximately final amount is subject to a The be payable by RFF. State jurisdiction where relevant determination in each held by the Funds. assets are IC ha 6.20 Does AS to Rev to issue a series of No. ASIC has been requested which are exemptions and modifications, details of explained in Section 13.26. een 6.21 Has bank funding b has RFM Following a competitive tender process, Yes. facility with a major Australian bank. arranged a borrowing See Section 9.6. ment6.22 How do I exit my invest in RFF?

tion tion? alua te? alua tion Da a tion is approved tion? ys for the costs x (CGT) on al Gains Ta ting Funds be liable

tion to proceed? t performance fee will alua alua

n to myt will happe alua For personal use only use fee from RFF as a consequence personal ing out Rev of carry For the Implement upon Unitholders Revaluation will impact differently depending upon their individual circumstances. Report in to the Taxation Unitholders should refer Section 15 for further information. 6.18 Will Unitholders of icipa rt pa for Capit No, RFM is not entitled to any fees as a result of No, RFM is not entitled to any fees as a result for costs Revaluation. RFM is entitled to be reimbursed in implementing Revaluation. incurred d by RFF to RFM? be pai 6.17 Will RFM be eligible for a 6.16 Wha is no performance fee paid by RFF to RFM. There The costs to carry out and implement Revaluation are are The costs to carry out and implement Revaluation Further based on NAV. between all Funds prorata shared contained are information about the costs of Revaluation in Section 13.1. 6.15 Who pa of Rev If you want Revaluation to proceed you should vote If you want Revaluation to proceed by proxy. at the Fund meeting, or to the resolutions “Yes” is contained in this pack. Simply complete it form A proxy it to RFM. and return t6.14 How do I vote if I wan Rev Voting is not compulsory, however RFM is encouraging all is not compulsory, Voting Unitholders to vote. 6.13 Is voting compulsory? If Revaluation is approved by each of the Funds, you will by If Revaluation is approved you voted. If you are of how regardless hold Units in RFF, Units in RFMP. will also receive a Unitholder in CIF you 6.12 If I vote against Rev 6.12 If I vote investment? If the requisite number of Unitholders of each Fund do of Unitholders number If the requisite your current you will retain not support the resolutions, Unitholding. and Rev wha 24 Explanatory MemorandumFor personal use only larger assetbase. economies ofscale,byspreading fixedcostsacross a access tocapitalmarkets,isexpectedenablefurther scale. Beyondthis,alargerfund,supportedbyincreased and areduction infund overheadcostduetoincreased is aresult ofthereduction intheRFMmanagementfee, reductions of approximately $0.9millionperannum.This RFM expectsRevaluationwillresult intotalcost resul 6.26 Wha assets atthattime. relative amounts ofnetincomeanddepreciation offund percentage will bedeterminedhavingregard tothe future distributionsas ataxdeferred distribution.This It isexpectedthatRFFwillpayapercentage ofits deferred distributons? 6.25 WillRFFpa 6.1:Figure dates Distribution June 2015 March 2015 December 2014 September 2014 June 2014 March 2014 December 2013 Calendar Month t fromRev t costsa y ant alua vings will ? tion? x ax May 2015 February 2015 November 2014 August 2014 May 2014 February 2014 November 2013 Declaration Month

deciding whethertovotefororagainstRevaluation. the IndependentExpert’s ReportatSection19before fair butisreasonable. Unitholdersshouldread infull concluded that(onacontrol basis)theMergerisnot The IndependentExperthasreviewed Revaluationand accordance with ASICguidelines. reasonableness ofRevaluation.Thisreport isprepared in provide and guidanceto Unitholdersonthefairness The purposeoftheIndependentExpertReportisto is fairandreasonable forUnitholdersofeachFund. opinion ofanIndependentExpertonwhetherRevaluation RFM, onbehalfoftheUnitholders,hasobtained Indepet Exert’s Report? 6.27 Wha ose of the t isthepuroseof July 2015 April 2015 January 2015 October 2014 July 2014 April 2014 January 2014 Payment Month About Rural Funds Management Ltd

7.1 Profile of RFM Guy Paynter LLB AICD Non-executive Chairman RFM is a boutique fund and asset manager specialisingS7 in the rural property sector. RFM was established in 1997 Guy Paynter is a former director of broking firm JB Were to provide retail investors with an opportunity to invest in and brings to RFM more than 30 years of experience Australian rural assets. in corporate finance. Guy is a former member of the Australian Securities Exchange (ASX) and a former The RFM management team includes specialist fund associate of the Securities Institute of Australia (now managers, finance professionals, horticulturists, livestock known as the Financial Services Institute of Australasia). managers, and agronomists. This team provides RFM Guy is also chairman of Aircruising Australia Limited. with the specialised skills and experience required to manage the agricultural assets. Guy’s agricultural interests include cattle breeding in the Upper Hunter region in New South Wales. RFM also utilises the best available consultants and supporting resources to achieve desired outcomes and Guy holds a Bachelor of Laws from The University of has a substantial network available to ensure that, where Melbourne. appropriate, tasks can be outsourced.

As Responsible Entity, RFM will have the primary David Bryant Dip FP MAgB responsibility for managing RFF on behalf of Unitholders. Managing Director RFM’s duties and responsibilities are governed by the Corporations Act and by the Constitutions of the Funds. David Bryant established RFM in February 1997. Since then, David has led the RFM team that has acquired over RFM is the Responsible Entity for ten agricultural $300 million in agricultural assets across eight Australian investment funds. As at 30 June 2013 RFM had agricultural regions. This has included negotiating the approximately $308 million of agricultural assets under acquisition of more than 25 properties and over 60,000 management in New South Wales, South Australia, megalitres of water entitlements. Victoria, Tasmania, and Western Australia. David is responsible for leading the RFM Executive and 7.2 RFM Board of Directors sourcing and analysing new investment opportunities. David holds a Diploma of Financial Planning from the The RFM Board of Directors comprises three members, For personal use only use personal For RMIT University and a Master of Agribusiness from two of whom are independent of RFM. The University of Melbourne.

25 26 Explanatory MemorandumFor personal use only RFM in thedesignofitsfinancialproducts. financial planning background isanassetinassisting largest financial planningfirms.Andrea’s strong RFM, Andrea wasapartneratoneofCanberra’s company’s commencement in1997.Before joining Andrea LemmonhasbeenwithRFMsincethe Executive ManagerFundsManagement Lemmon Andrea from The UniversityofNewcastle. Stuart holdsaBachelorofCommerce (Accounting) of$500million. an annual turnover Chief Financial Officerofapubliclylistedcompanywith and inthecommercial sector, includinghisrole asa management experienceintheaccountingprofession Australia, StuartbringstoRFMextensivefinancial As amemberoftheInstituteChartered Accountants Compliance; OfficeManagement;andInsurance. Safety, andEnvironment; InformationTechnology; Services teamincorporatingHumanResources; Health, In addition,Stuartisresponsible fortheCorporate vineyards ownedby AWF. responsible for thecommercial andassetmanagementof Managers ofPoultry, AlmondsandCropping, andis management activitiesundertakenbytheNational and investments.Heoverseestheassetfarm and analysingfuture developments, acquisitions, for optimisingtheperformanceofRFMfunds, Stuart Waight joinedRFMin2003.Stuartisresponsible Chief OperatingOfficer WaightStuart 7.3 RFMExecutiveanagement Company Directors. Boston, andisaFellowoftheAustralianInstitute Management Program atHarvard Business School, Business School.MichaelhascompletedtheAdvanced (MBA) from TheUniversityofMelbourne’s Melbourne Trobe UniversityandaMasterofBusinessAdministration Michael holdsaBachelorofAgriculturalSciencefrom La National AustraliaBank(NAB)Agribusinessdivision. of companies,includingestablishingandleadingthe Michael alsohasseniorexecutiveexperienceinarange of Victoria. Sunny QueenPtyLtd,andtheRuralFinanceCorporation Cheese andButterLimited,SelectHarvests the Boards ofQueenslandSugarLimited,Warrnambool businesses in a board and advisory capacity. Michael is on Michael Carroll servesarangeoffoodandagricultural Non-executive Director MBA BAgSc Carroll Michael Deakin University. Andrea holdsaDiplomaofFinancialPlanningfrom and advisers. provision ofservicesandcommunicationstoinvestors products, managementofresearch activities,andthe products, thecontinuousimprovement of existing Andrea isresponsible forthedevelopment ofnew of Pennsylvania. Wharton ExecutiveEducationProgram attheUniversity Harvard BusinessSchool ofExecutiveEducationandthe completed professional developmentprograms atthe of theTaxation InstituteofAustralia(Fellow).Melanie Melanie isaChartered Accountantandisamember from theAustralian NationalUniversity, Canberra. of Technology, SydneyandaBachelorofEconomics Melanie holdsanExecutiveMBAfrom theUniversity business andthefundsthatRFMmanages. and reports onthefinancial performanceofboththeRFM the RFMFinanceandAccountingteam,whichmanages As RFM’s ChiefFinancialOfficer, Melanieis responsible for equity company’s investments. Europe andNorthAmerica,theCFOforaprivate securities tradingbusinessoperatinginAustralia,Asia, roles astheCFOandCompanySecretary foraglobal publicly listedcompanies.Melanie’s experienceincludes industries includingfinancialservicesandforanumberof over 20yearsofexperienceworkinginadiverserange Melanie DoylejoinedRFMinDecember2011,bringing Chief FinancialOfficer Doyle Melanie (e) (d) The broad functionsoftheECCare to: toRFM. external members. ThemajorityoftheECCmembersmustbe The ECCmeetsquarterlyandmusthaveatleastthree (c) (b) (a) responsible for monitoringRFM’s compliancewith: RFM’s ComplianceCommittee(ECC)is External Committee 7.4 ExternalCompliance ECC becomesaware; Corporations Actinvolvingthe Funds ofwhichthe report toRFManybreach orpotentialbreach ofthe and toreport toRFMontheECC’s findings; monitor RFM’s compliancewiththe CompliancePlan the CompliancePlanofRFF. the ConstitutionofRFF;and the CorporationsAct; About Rural Funds Management Ltd 27 S7 Janice Ryan External Member Janice Ryan was appointed as an External of Member spans accounting, career the ECC in 2000. Janice’s planning, and compliance. superannuation, financial solid acquired Janice roles, her varied career Through financial planning industry and tax understanding of the with particular emphasis and management accounting of managed and requirements framework on regulatory and corporate and investment funds, superannuation multi-entity agriculture. industries and Janice has extensive experience in rural operates grain and livestock enterprises in currently New South Wales. Management Janice holds a Certificate of Superannuation and has completed a number of continual ASFA from development courses in accounting, professional by superannuation and financial planning conducted industry association.

report to RFM any breach or potential breach of the of the or potential breach any breach to RFM report Funds of which the ECC becomes Constitutions of the aware; actions taken by RFM in respect monitor and assess Act or of the of the Corporations of any breach Funds; Constitutions of the is of the view that RFM has to ASIC if the ECC report to take, appropriate propose not taken, or does not matter that the ECC has action to deal with a to RFM; reported previously with in accordance party transactions related review Management Policy; and the RFM Conflict of Interest assess whether the Compliance Plan is adequate, to RFM on that assessment, and recommend report should to RFM any changes that the ECC considers be made to the Compliance Plan. For personal use only use External Member 28 years of Gary Ling is a qualified lawyer with over and securities corporate law experience in banking law, practice. Gary has and company secretarial insurance law, been an external member of the ECC since 2003. Sydney a consultant with a prominent Gary is currently financial law firm specialising in superannuation law, He is a member of a and insurance law. services law, associations. number of well recognised Gary held corporate legal and compliance roles Previously, Limited at the Australia and New Zealand Banking Group Life, Mercantile Tower (ANZ) Funds Management, Tyndall, personal Group. Mutual, GIO, the ASX, and The Westpac Gary holds a Diploma of Law (Solicitors Admission and a Diploma of Corporate Management Board) the Institute of Corporate Managers, Secretaries from and Administrators. In 1982 Gary was admitted as a Gary is also Court of NSW. Solicitor of the Supreme mediator with the Lawyers Engaged in an accredited Alternative Dispute Resolution. For Gary Ling Stuart Waight Internal Member See biography in Section 7.3. 7.5 Members of the ECC (f) (g) (h) (i) (j) 28 Explanatory MemorandumFor personal use only Details oftheseassetsare setoutinthissection. (e) (d) (c) (b) (a) The RFFassetswillconsistof: 8.2 RFFassets Responsible EntityofRFF, CIFandAWF. a totalvalueofaround $236million.RFMwillremain the derive incomefrom leasing outtheseassetswhichhave (including theunderlyingassetsofthoseFunds).RFFwill RiverBank, and100%oftheissuedUnitsinCIFAWF RiverBank) willcontrol alltheassetscurrently ownedby Once theMergeriscomplete,RFF(currently knownas 8.1 Introductio About theAssets by RiverBank. $2.7 millionplantandequipmentcurrently owned and $5 millionofStockBankunitscurrently ownedbyCIF; vineyards currently ownedbyAWF; poultry farmscurrently owned byCIF; owned byRiverBank; almond orchards andwaterentitlementscurrently S8 contained inFigure 8.2. expires inMay2030.Furtherdetailsaboutthelease are arrangement. Theleasecommenced inMay2010and leased entirely toSelectHarvestsundera20year lease infrastructure andwaterentitlementsofYilgah are in 2007and2008.Thealmond plantings,associated Yilgah consistsof1,006ha almondorchards planted in size. Yilgah islocated20kmnorthofHillstonand6,400ha Yilgah (i) these assets. valued at$91.5million.Thefollowingisadescriptionof orchards, land andwaterassetswere independently set outinFigure 8.2.Asat30June2013theHillston who payaregular rental. Detailsofthoseleasesare New SouthWales. Theorchards are leasedtotenants Hillston islocated110kilometres northwestofGriffithin located at Hillstonandare currently ownedbyRiverBank. The almondorchards andwaterentitlementsare water and orchards Almond (a) entitlements About the Assets 29 S8

(b) Poultry Farms are owned by CIF, farms, currently The poultry growing Wales, and Lethbridge, located in Griffith, New South 17 farms in total, consisting of are Victoria. There sheds is 154 sheds. The weighted average age of the farms were 16.16 years. As at 30 June 2013 the poultry is a small independently valued at $100.2 million. There water entitlements owned by CIF which number of related in the Murrumbidgee Irrigation Area. held are the heating and cooling for shelter, All sheds provide fully automated with farm chickens. All sheds are managers able to monitor and modify temperature, An extensive food and water supplies quickly and easily. by the lessee RFMP is required maintenance program in good condition and are the sheds remain to ensure economically efficient to operate. located in Griffith, New The majority of the farms are which is one of the major chicken meat South Wales, in Australia. The Griffith farms are regions producing of the Baiada processing located within eight kilometres the primary contributor to that plant. plant and are plant supplies chicken meat to The Baiada processing the national market. The farms will be leased to RFMP who will operate the contracts with with chicken growing farms in accordance Bartter Enterprises Pty Ltd – a wholly owned subsidiary of Baiada Poultry Pty Ltd. Baiada is a national poultry which acquired established in the 1950’s, processor Bartter Enterprises and the Steggles brand in 2009. contained in Further details of the lease to RFMP are Section 12.8.

For personal use only use personal (iv) Other assets RiverBank owns 949 ML of High Security Lachlan River the annual allocation for water entitlement. Currently, this entitlement is sold on a temporary basis and the permanent licensed entitlement has been listed for sale. For (iii) Collaroy a separate and is considered Yilgah borders Collaroy is 1,998 ha in size and includes a This property property. 64 ha irrigated olive orchard. is often licensed to counterparts on an annual Collaroy purposes and in the long term will basis for cropping either be leased out or sold. Mooral is located 25 km south west of Hillston and is Mooral is located 25 km south west of Hillston 3,841 ha in size. planted in Mooral consists of 808 ha of almond orchards RFM leased to three 2006 and 2007. Of this, 551 ha are leased to Select Harvests and Almond Funds, 215 ha are licensed to RFM. 42 ha are contained in Further details about the leases are 8.2. Figure 3,033 ha of land at Mooral comprises The remaining 320 ha of grazing country, river frontage, lightly timbered and 121 ha of irrigated land for broadacre olive orchard, has been leased and the The olive orchard cropping. land is licensed to counterparts irrigated cropping depending on seasonal conditions. is supported by 12,120 ML of groundwater The property groundwater licensed entitlements, with a supplementary licensed entitlement of 3,223 ML. (ii) Mooral

The property is supported by 15,090 ML of groundwater ML of groundwater by 15,090 is supported The property that and irrigation infrastructure licensed entitlements of water. enables the delivery developed has been at Yilgah A further 959 ha of land irrigation development includes a for flood irrigation. The and an integrated channel system to central holding dam water. supply and recycle comprises lightly timbered land at Yilgah The remaining suited to grazing. Parts and open plains frontage creek for often licensed on a short term basis are of Yilgah upon seasonal conditions. purposes depending cropping S8 30 Explanatory MemorandumFor personal use only security interest overtheplantandequipment. 27 March 2018.Theloanissecured byaregistered The loan termsrequire fullamortisationonorbefore agreement, withaninterest rateof12%perannum. has beensoldtoMurdock Viticulture subjecttoaloan The plantandequipmentpreviously ownedbyAWF Estates. Wine supplies andtheseare includedintheleasetoTreasury AWF which provide thevineyards withsufficientwater There are anumberofwaterentitlementsownedby contained inFigure 8.2. 1 July2013.Furtherdetailsabouttheseleasesare Vineyard isleasedforanineyeartermcommencing on 1July2012andare foratenyearterm.TheHahn The leases forallvineyards exceptHahncommenced The vineyards are leasedtoTreasury Estates. Wine Figure 8.1: Vineyard assets $36.0 million. 30 June 2013thevineyards were independentlyvaluedat are managed to produce premium qualitygrapes.As at Allofthevineyardslocated intheGrampians,Victoria. Valley, Adelaide Hills,andCoonawarra,onevineyard with sixlocatedinSouthAustraliawithintheBarossa There are sevenvineyards currently ownedbyAWF, Vineyards (c) Mundy andMurphy Hahn Geier Rosebank Dohnt Kleinig V ineyard 665.8 55.2 49 243.3 82.3 29.7 206.3 Planted (ha) Adelaide Hills Barossa Barossa Grampians Coonawarra Barossa Location implements suchassprayers. including almondharvestingequipment,tractorsand Funds andconsistsofmostlylargefarmmachinery, The plantandequipmentisleasedtotheRFMAlmond equipment wasvaluedat$2.7million. will beretained. Asat 30June2013theplantand The plantandequipmentcurrently ownedbyRiverBank Plant Equipment and (e) geographic diversificationofitslivestock. a riskmanagementsystemwhichfocusesonensuring Act. Itdoesnotownanylandorinfrastructure andhas StockBank isaliquidfundasdefinedbytheCorporations price andtheaccruedleasepayments. to StockBankanyshortfallbetweenthelivestocksale Importantly, thelandowneriscontractuallyobligedtoremit are remitted toStockBankbythe selling agent. Upon saleofthelivestock,accruedleasepayments approximately 80%cattleand20%sheep. StockBank generallydividesitsinvestmentbetween responsible formanagingthelivestockuntiltheyare sold. livestock thatare leasedtolandownerswhoare StockBank isafundmanagedbyRFMwhichpurchases 30 June 2013theUnitswere valuedat$5million. The StockBankUnitsare currently owned byCIF. Asat StockBank Units (d) for RFF anditssubsidiaries. periods. Figure 8.2 setsoutthematerialleaseterms counterparts whohave entered intoleasesforvarious ASX. RFF receives incomefrom adiverserangeof it willbeclassifiedasaREIToncelistedonthe agricultural assetsandtherefore RFMexpectsthat itsincomefromRFF earns owningandleasingout counterpa rts 8.3 Property andlease unlistedpropertyinvest inotherexternal trusts. RFF hasnodevelopmentassets.RFMdoesnotintendto dependent onincreasing thesizeofRFF. operating risk.Anyincrease ininvestmentswillbe be agriculturalbutwithnoexposure todirect agricultural It isRFM’s investmentstrategyfortheproperty ofRFFto investment strategy Property About the Assets 31 S8 F reasury reasury AW T Wine Estates Pty Ltd All vineyards Lease 01-Jul-22 663 hectares $3.104 million Quarterly in advance Lessor’s Lessor’s expense, added to capital value and attracts additional rent. Capital value reassessed at fifth anniversary, based on independent valuation. Cannot be less than 2014 indexed rent for 5 years. 2.5% per annum CIF RFM Poultry All poultry farms Lease Weighted Weighted average lease expiry 15-Jan-23 303,216 sq metres $10.150 million Quarterly in advance Structural capital expenditure The lessee and the lessor have the right review of rent there where is significant change to the profitability of chicken growing activities. 2.25% per annum RFF formerly RiverBank AETL as custodian for RFM Almond Funds 2007 & 2008* Mooral Lease 31-Jul-28 321 hectares $1.606 million Quarterly in advance Capex to required meet orchard development requirements and replacement capital items on account of lessor, both subject to additional rental. Annual Indexation 2.5% per annum RFF formerly RiverBank RFM as responsible entity for RFM Almond Fund 2006 Mooral Lease 30-Jun-26 272 hectares $1.361 million Annually in October Capex to required meet orchard development requirements and replacement capital items on account of lessor, both subject to additional rental. Annual Indexation 2.5% per annum RFF formerly RiverBank Select Harvests Limited Mooral Lease 31-May-30 215 hectares $0.654 million Quarterly in advance Capex to required meet orchard development requirements and replacement capital items on account of lessor, both subject to additional rental. Market review Market review at 1 July 2016 2.5% per annum RFF formerly RiverBank Select Harvests Limited Yilgah Lease 31-May-30 1,006 hectares $3.061 million Quarterly in advance Capex to required meet orchard development requirements and replacement capital items on account of lessor, both subject to additional rental. Market review Market review at 1 July 2016, and 5 years thereafter 2.5% per annum

ype Lessor: Counterpart/ Lessee: Property Agreement Agreement T Expiry Area 2014 rent Other key terms Payment dates Capital commitments Payment or review rent Indexation Figure 8.2:Figure Material lease terms only use personal For 32 Explanatory MemorandumFor personal use only * RFMisresponsible entityfor theseprojects. Figure 8.2: Material lease terms (continued) lease Material Figure 8.2: events T events: Suspension Water licences Insurance Property rates Maintenance Repairs & Lessee: Counterpart/ Lessor: ermination policy. an insurance covered by where not destruction if orchard termination partial ortotal Possible insolvency. breach and Material N/A 15ML/ha insurance. Liability hold Public required to Lessor, Lessee On accountof Lessor On accountof Lessee On accountof Limited Harvests Select RiverBank RFF formerly policy. an insurance covered by where not destruction if orchard termination partial ortotal Possible insolvency. breach and Material N/A 15ML/ha insurance. Liability hold Public required to Lessor, Lessee On accountof Lessor On accountof Lessee On accountof Limited Harvests Select RiverBank RFF formerly insolvency. breach and Material N/A 15ML/ha insurance. Liability hold Public required to Lessor, Lessee On accountof Lessor On accountof Lessee On accountof Fund 2006 RFM Almond entity for responsible RFM as RiverBank RFF formerly policy an insurance covered by where not destruction if orchard termination partial ortotal Possible insolvency. breach and Material N/A 15ML/ha Lessee On accountof Lessor On accountof Lessee On accountof 2008* Funds 2007& RFM Almond custodian for AETL as RiverBank RFF formerly Change ofRE. contracts. the growing the termsof RFMP tofulfil A failure by insolvency. breach and Material Figure 12.9. detailed in contracts growing chicken Event of Suspension See Lessor provided by Water Lessee On accountof Lessee On accountof Lessee On accountof RFM Poultry CIF policy. an insurance covered by where not destruction if vineyard termination partial ortotal Possible insolvency. breach and Material N/A each vineyard attached to entitlements all water includes property Leased Lessor On accountof Lessee On accountof Lessee On accountof Pty Ltd Wine Estates T AW reasury F Financial Information

This section includes financial information on RFF and • Forecast Statements of Comprehensive Income and each of the Funds. Changes in Net Assets for the 12 months ending 30 June 2014 (9 months in the case of RFF), and S912 months ending 30 June 2015, and forecast 9.1 Basis of preparation Statements of Financial Position as at 30 June 2014 The financial information in this section has been prepared and 30 June 2015, collectively known as forecast on the basis required by Australian Accounting Standards financial statements. as issued by the Australian Accounting Standards Board The financial statements set out in this section should be unless otherwise stated. read in conjunction with the notes that follow each figure. Further, this financial information has been prepared on In addition, consideration should also be given to key risks a going concern basis. The Directors are of the opinion identified in Section 11. that there are reasonable grounds to believe that RFF and The forecast financial information is based on RFM’s each of the Funds will be able to pay their debts as and assessment of the present economic and operating when they become due and payable. conditions and a number of assumptions regarding future events and actions, which RFM expects to take place. 9.2 Historical and forecast These events or actions may or may not take place. financial information Whilst the Directors of RFM consider all key assumptions The financial information in this section has been to be reasonable at the time of preparation of this presented to show the following scenarios: Explanatory Memorandum, Unitholders should be aware that unforeseen events cannot be controlled and may lead • Each Fund on a stand-alone basis assuming the to a deviation from the forecast financial statements. Merger does not proceed; and The forecast financial information is by its very nature • The Merger where all three Funds are merged. subject to uncertainty and unexpected events, many of which are outside the control of RFM. Events and The financial information in this section includes the circumstances often do not occur as anticipated and following financial statements: therefore, actual results may differ from the forecast financial information and these differences may be • Audited Statements of Comprehensive Income and material. Accordingly, RFM cannot guarantee that the

For personal use only use personal For Changes in Net Assets for the 12 months ended forecast financial information can or will be achieved. 30 June 2013; Past performance is not indicative of future performance • Audited historical Statements of Financial Position as and returns are not guaranteed. Financial information is at 30 June 2013; and presented for financial years ended or ending on 30 June unless otherwise stated.

33 34 Explanatory MemorandumFor personal use only • • • • • • • • assumptions attheendofeachfinancialstatement: should beread inconjunctionwiththenotesandspecial relevant totheforecast provided inSection9and The followingbestestimategeneralassumptionsare 9.3 Generalassumptios relating tothe stand-aloneentitiesorRFF. No materialamendmenttoanykeyagreements assumptions fordetails;and accounting standards. Refertonotesandspecific accounted forinaccordance withtheapplicable The movementinthefairvalueofinvestmentis legislation; No materialchangestotheAustralianincometax the forecast period; reporting requirements, ortheCorporationsActduring Accounting Standards, othermandatoryprofessional No materialchangesinapplicableAustralian stand-alone entitiesorRFFoperate; regulatory environment inthejurisdictions thatthe No specificchangetothelegislative regime and notes andspecificassumptions; Expenses are indexedat2.5%unlessnotedinthe All leasesare classifiedasoperatingleases; Section 8; performed inaccordance withtheterms setoutin All leaseagreements are enforceable andare each oftherespective Funds’financialstatementsbelow. assumptions oftheforecast periodare alsoshownunder Sensitivity analysisonprofit anddistributionsforkey investing, andfinancingactivities. cash aftertakingintoaccounttheFunds’operating, Assumed distributionsare basedonavailableforecast distributions are reinvested. with FSCStandard 6,whichrequires theassumptionthat rolling annualisedreturns are calculatedinaccordance and theexistingFundsoverforecast period.The below. Thispresents comparativereturns betweenRFF under eachoftherespective Funds’financialstatements Detailed annualreturns fortheforecast periodare shown Unitholders, andStatementofFinancialPosition. Income andChangesinNetAssetsAttributableto historical andforecast StatementofComprehensive Detailed inthissectioniseachFund’s stand-alone financial st historical andforecast 9.4 Funds’st a e and-alone tements Financial Information 35 S9

– – – – – 6 $’000 8,148 1,946 5,110 3,646 3,646 1,022 (1,420) (1,347) (2,224) (1,464) (2,624) 10,100 orecast Forecast 12 mths to 30 June 2015

– – – – –

106 $’000 7,906 2,369 4,822 3,612 3,612 1,644 (1,839) (1,309) (2,411) (1,210) (1,968) 10,381 orecast Forecast 12 mths to 30 June 2014

76 15 272 588 503 (117) (793) $’000 7,071 8,640 8,539 8,248 (1,966) (1,239) (2,942) (2,990) (3,977) 13,748 21,755 12,618 12 mths to 30 June 2013 Audited Actual 1 2 3 4 5 6 7 8 9 Notes

Lease revenue relates to revenue from Select Harvests, RFM Almond Funds and Steak Plains Olive Farm Pty Ltd Select Harvests, RFM Almond Funds and Steak Plains Olive Farm from to revenue relates Lease revenue is set under the leases and indexed at 2.5% p.a., or CPI in some instances. Any ACN 161 539 153. Lease revenue allowances. of 10% – 11% p.a plus depreciation under the leases attracts additional lease rental capital expenditure up to 30 June 2013 net of costs. This portion harvest owned by RiverBank to almond grove relates Harvest revenue 2014 onwards. is leased from of the orchard otal revenue otal comprehensive income attributable to otal comprehensive Revenue Lease revenue Harvest revenue Unrealised gain on property assets gain on property Unrealised Unrealised gain on interest swaps gain on interest Unrealised Other income T Operating and other costs Management fees Depreciation Finance costs Net profit before income tax before Net profit Income tax expense Net profit after income tax Net profit ther comprehensive income Other comprehensive loss on fair value adjustments to property, Unrealised plant and equipment Income tax on other comprehensive income Income tax on other comprehensive T Unitholders Distributions paid to unitholders Issue of units Change in net assets attributable to Unitholders For personal use only use personal For 2. igure 9.1: Notes and specific assumptions to Figure 1. Changes Assets Net in Figure 9.1: RiverBank forecast Statement of Comprehensive Income and Income forecast Comprehensive RiverBank of Statement 9.1: Figure Detailed in this section are RiverBank’s stand-alone forecast Statement of Comprehensive Income and Changes in Income and Changes in of Comprehensive Statement stand-alone forecast RiverBank’s are Detailed in this section Statements of Financial Position. and forecast Net Assets, and historical N 112 951 578 ARSN 112 IVERBANK RFM R 36 Explanatory MemorandumFor personal use only 9. 8. 7. 6. 5. 4. 3. from forecast operatingcashflowandafterconsiderationofcapital requirements. declared: 8.02 centsperUnit(distributionpaidof8.02Unit).Distributionsare basedonincomederived distributions declared: 6.01 centsperUnit(distributionpaidof4.01Unit).FY2015forecast distributions FY 2013distributionsdeclared: 2.43centsperUnit(distributionpaidof4.53Unit);FY2014forecast RiverBank’s PPE. Unrealised lossonfairvalueadjustmentstoPPEisbasedupontheJune2013independentvaluationof and equipmentat9.00%p.a.,interest onaloantoRFMat10.0%p.a. assumption that50%ishedgedona5yeartenoratrateof6.0%p.a.Financecostsalsoincludeinterest onplant Average forecast costofdebtis5.5% p.a.basedonmarketratesasat20August2013of5.0%p.a,andthe Accounting Standard isadoptedandtherefore depreciation isnotforecast. calculated onastraight-linebasisovertheusefullivesofassets.In2014and2015InvestmentProperty Depreciation offixedassetsincludesdepreciation onbuildingsandcapitalisedleasedassets.Alldepreciation is In 2013theProperty PlantandEquipment(PPE)accountingstandard isadoptedrequiring PPEtobedepreciated. and $0.5millioninFY2014are alsoincludedinoperatingandothercosts. compliance costsandare baseduponhistoricalcostsofRiverBank.Revaluation$0.4millioninFY2013 Operating andothercostsincludedirect operatingcosts,insurance,property rates,fundadministrationand rates assumedfortheforecast period. Unrealised gainoninterest rateswapsand optionsare basedonactualsto30June2013withnochangeininterest recorded inthecomprehensive income–refer toFigure 9.1note8. 2.75% perannum.InFY2013theincrease inthevalueofproperty assetsispartlyoffset bytheunrealised loss assets increase from the30June2013independent valuationatanassumedgrowth rateintherangeof1.5%- Property assetscompriseofland,water, almondtrees, andirrigationinfrastructure. Forforecast years,property Financial Information 37 S9

200 800 918 $’000 1,560 6,255 2,329 96,774 99,334 39,603 49,105 50,229 orecast Forecast 12 mths to 30 June 2015

200 894 $’000 1,592 1,235 5,224 2,329 92,672 95,699 38,044 46,491 49,208 orecast Forecast 12 mths to 30 June 2014

182 $’000 3,002 2,724 1,574 4,433 4,146 90,789 96,697 38,980 49,133 47,564 12 mths to 30 June 2013 Audited Actual 1 2 3 4 5 6 Notes

AL ASSETS AL LIABILITIES Property assets include land, water, almond trees, and irrigation infrastructure. Changes in the forecast period are are period Changes in the forecast and irrigation infrastructure. almond trees, assets include land, water, Property 1.5%- in the range of rates are rates. Assumed growth disposals and assumed growth due to capital expenditure, 2.75% per annum. assets include plant and equipment that is leased to the RFM Almond Funds. Other non-current bearing. not interest generally on 30-90 day terms and are payables are Trade (2013: $35.3m, 2014: $36.1m, 2015: $37.7m); Plant and bearing liabilities include bank borrowings Interest RFM (2013: $1.8m, 2014: $0.0m, Equipment facility (2013: $1.9m, 2014: $1.9m, 2015: $1.9m); and loan from is 2014: $1.8m bearing debt that is due and payable in the next 12 months (current) 2015: $0.0m ). The total interest are operations. The bank borrowings and from opening cash reserves and 2015: $0.0m. This will be funded from LSR is 2014: 39.0% and The forecast security agreement. and subject to a general property against the real secured in October 2013. to be repaid loan is forecast to the facility covenant of 50%. RFM’s 2015: 38.9%. This compares cover to the interest This compares cover ratio is 2.17 and 2.60 for 2014 and 2015 respectively. interest The forecast ratio bank covenant of 1.75 and 2.05 for 2014 and 2015 respectively. 30 June and the for distributions declared liabilities include derivative financial liabilities, provisions Other non-current partly assumes that the derivative financial liabilities are $1.6 million Select Harvests security deposit. The forecast in FY 2014. repaid Other current assets include trade receivables. 30 June 2013 includes inventory of $0.987 million relating to almond 2013 includes inventory of $0.987 million relating 30 June assets include trade receivables. Other current harvest revenue. ASSETS Cash Other current assets Other current Property assets Property Other non-current assets Other non-current TOT LIABILITIES Payables and accruals Interest bearing liabilities Interest Deferred tax liabilities Deferred Other non-current liabilities Other non-current TOT NET ASSETS For personal use only use 3. 4. 5. personal 6. For 2. igure 9.2: igure Notes and specific assumptions to F 1. Figure 9.2: RiverBank Statement Financial of Position 38 Explanatory MemorandumFor personal use only and 9.6. RiverBank holdscashreserves thatmaybeusedtoabsorbthereduction indistributionspresented inFigures 9.5 • • 12 months ending30June2014and 2015,asaresult of: Set outinFigures 9.5and9.6isthesensitivityanalysisforchangestoforecast netprofit anddistributionsforthe 2. 1. Notes toFigure 9.4: returns of RiverBank forecast comparison Figure 9.4: and the2015financialyearassumingdistributionsare reinvested. Figure 9.4showsacomparisonofforecast financial forRFFandRiverBankthe9monthsto30June2014, returns 1. Note toFigure 9.3: keymetrics RiverBank financial 9.3: Figure LSR NAV Declared distributionsperunit Units onissue(‘000) T Growth Distributions Stand-alone T Growth Distributions RFF % Returns otal otal changes ininterest rates. changes invariableexpenses;and The financialforecast isbasedonanumberofbestestimateassumptionswhich are subjectto change. month periodending30June2014. The RFFreturn assumesthattheMergerofFundswilltakeeffect on1October2013andtherefore relates toa9 facility’s LSRcovenant. Bank LSRat30June2013ismeasured afterexcludinga$3millionfacilityfrom totalborrowings asspecifiedbythe 9 monthsending30June2014 Notes 1 30 June2013 -7.62% 5.28% 1.16% 4.13% 0.19% 7.81% Audited $1.4531 $0.0243 32,733 Actual 39.3%

12 monthsending30June2015 30 June2014 Forecast $1.5026 $0.0601 32,748 39.0%

30 June2015 Forecast $1.5337 $0.0802 32,748 38.9% 7.56% 2.08% 5.48% 9.11% 0.46% 8.65%

Financial Information 39 S9 2.7% 9.9% 4.7% 7.3% -5.4% -2.7% -9.9% -7.3% -9.3% -4.7% Change in Change in % per unit % per unit distributions distributions 0.0022 0.0058 0.0060 0.0028 (0.0043) (0.0022) (0.0058) (0.0060) (0.0056) (0.0028) $ per unit $ per unit Change in Change in distributions distributions 92 71 (92) (71) 195 191 (195) (184) (142) (191) $’000 $’000 in total in total Change Change distributions distributions 50 64 (50) (99) (64) 136 134 (134) (136) (129) $’000 $’000 after tax after tax net profit net profit net profit net profit Change in Change in 92 71 (92) (71) 195 191 (195) (184) (142) (191) $’000 $’000 Amount Amount 5% 5% 5% 5% $’000 $’000 1,420 1,420 1,420 1,839 1,839 1,839 Assumption Assumption

1 1

1 1

Parenthesis indicates a negative value. Parenthesis Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged impact the unhedged component. rate movements only any interest rate of 5.0% p.a. Therefore Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged rate movements only impact the unhedged component. any interest rate of 5.0% p.a. Therefore indicates a negative value. Parenthesis 5% reduction in variable 5% reduction expenses rates in interest 1% decrease 5% increase in variable 5% increase expenses in variable 10% increase expenses 1% increase in interest rates in interest 1% increase 1% decrease in interest rates in interest 1% decrease 10% increase in variable 10% increase expenses 5% reduction in variable 5% reduction expenses in variable 5% increase expenses 1% increase in interest rates in interest 1% increase For personal use only use personal 2. For igure 9.6: Notes to Figure 1. 2. 30 2015 ending June months 9.6:Figure sensitivity RiverBank 12 the analysis for igure 9.5: Notes to Figure 1. Figure 9.5: RiverBank sensitivity analysis for the 12 months ending 30 2014 ending June months 9.5:Figure sensitivity RiverBank 12 the analysis for 40 Explanatory MemorandumFor personal use only 3. 2. 1. Notes andspecificassumptionstoFigure 9.7: Figure 9.7: Statement of Comprehensive CIF forecast in Net Assets Income Changes and and historicalforecast StatementsofFinancialPosition. Detailed inthissectionare CIF’s stand-aloneforecast StatementofComprehensive IncomeandChangesinNetAssets RFM CHICKENINCOEFUDARS105754461 Change innetassetsattributabletoUnitholders Issue ofunits Distributions declared Unitholders T Income taxonothercomprehensive income plant andequipment Unrealised lossonfairvalueadjustmentstoproperty, Other comprehensive income Net profit afterincometax Income taxexpense Net profit before incometax Finance costs Repairs andmaintenance Depreciation Management fees Operating andothercosts T Other income Unrealised gainoninterest swaps Grower fees Revenue otal comprehensive incomeattributableto otal revenue $0.5 millioninFY2014are alsoincludedinoperating costs.Costsare indexedat2.5%p.a. costs, insurance,administration andcompliancecosts.Revaluationtransactioncostsof$0.4 millioninFY2013and Operating andothercostsare basedonhistoricaltrading results ofCIFandinclude direct operating costs,property rates assumedfortheforecast periods. Unrealised gainoninterest ratesswapsandoptionsisbasedonactuals to30June2013withnochangesininterest contracts. been forecast baseduponcurrent growing contractsandthestandard feereview mechanismspecifiedinthe Grower feesrelate toservicesprovided pursuanttogrowing contractswithBartterEnterprises.Grower feeshave Notes 8 7 6 5 4 3 2 1 Audited Actual 30 June2013 12 mthsto (12,500) 24,644 23,756 (1,587) (3,146) (5,838) (1,851) 4,977 6,379 5,984 $’000 (169) (745) 186 395 564 224 664 –

30 June2014 12 mthsto Forecast (12,657) (1,204) 24,517 23,968 (3,734) (1,156) (2,378) (2,252) (5,887) (1,855) 2,340 3,854 (358) (512) $’000 191 154 549

30 June2015 12 mthsto Forecast (12,427) (2,174) 25,524 24,983 (5,847) (2,181) (2,096) (5,294) (1,848) 3,481 3,294 1,175 1,678 $’000 (988) (503) 192 541

Financial Information 41 S9

Depreciation of fixed assets includes depreciation on buildings and capitalised leased assets. All depreciation is assets. All depreciation capitalised leased on buildings and depreciation assets includes of fixed Depreciation assets. basis over the useful lives of the calculated on a straight-line repairs and maintenance. to expenditure of capital FY 2015 is due to a reclassification in FY 2014 and The increase capitalised under accounting standards, may be classified as capital expenditure expenditure Some items of actual and depreciated. in the balance sheet 20 August 2013 of 5.0% p.a., and on the 5.5% p.a. based on market rates as at cost of debt is forecast Average 6.0% p.a. is hedged on a 5 year tenor at a rate of assumption that 50% to – refer reserve in the asset revaluation recorded plant and equipment are to property Fair value adjustments 9.8. note 2, Figure (distributions paid 5.0 cents). FY 2014 2.50 cents per Unit including franking credits: declared FY 2013 distributions cents per Unit). FY 2015 forecast cents per Unit (distributions paid of 3.15 5.85 distributions declared: forecast based on are 9.14 cents per Unit (distributions paid of 9.30 cents per Unit). Distributions distributions declared: requirements. after consideration of capital operating cash flow and forecast income derived from 4. 5. 6. 7. 8. only use personal For 42 Explanatory MemorandumFor personal use only 5. 4. 3. 2. 1. Notes andspecificassumptionstoFigure 9.8: CIF Statement of Financial PositionFigure 9.8: NET ASSETS TOT Other non-current liabilities Deferred taxliabilities Interest bearingliabilities Payables andaccruals LIABILITIES TOT Other non-current assets Property, plantandequipment Other current assets Cash ASSETS 2015 respectively. for 2014and2015respectively. Thiscompares totheinterest coverratiocovenantof3.0and3.35for2014 and 2015: 41.2%.Thiscompares tothefacilitycovenantof45%.Theforecast interest coverratiois3.26and4.20 secured againstthereal property andsubjecttoageneralsecurityagreement. Theforecast LSRis2014:41.3% and 2015:$0.9m.Thiswillbefundedfrom openingcashreserves andfrom operations.TheBankborrowings are $0.5m). Thetotalinterest bearingdebtthatisforecast toberepaid inthenext12months(current) is2014:$1.0m, (2013: $5.0m,2014:2015:$5.0m);andplantequipment facility(2013:$0.5m,2014:2015: Interest bearingliabilitiesincludebankborrowings (2013:$36.0m,2014:$34.9m,2015:$34.0);StockBank facility Trade payablesare generallyon30-90daytermsandare notinterest bearing. growth inthe StockBank unitpriceduetotheassumptionthatallincomeisdistributed. Other non-current assets include4.9millionunitsinStockBankvaluedat$1.03perunit.Forecast assumesno standard requirements. decrement isallocated toeithertheprofit andlossorasset revaluation reserve dependingontheaccounting commencing FY2014todepreciate theshedsovertheirassessedremaining usefullife.Theassumedasset Property, plantandequipmentisbasedonJune2013independentvaluationless$2.0millionp.a.decrement the processor. Other current assets includeaccruedrevenue relating toincomplete chickenbatchesandtradereceivables duefrom AL LIABILITIES AL ASSETS Notes 5 4 3 2 1

Audited Actual 30 June2013 12 mthsto 112,476 100,695 53,749 58,727 12,428 41,125 2,412 2,761 5,026 4,540 2,215 $’000

30 June2014 12 mthsto Forecast 108,334 52,546 55,788 13,276 39,998 98,411 2,030 5,277 4,292 $’000 485 354

30 June2015 12 mthsto Forecast 106,417 50,372 56,045 13,937 39,098 96,458 1,933 1,077 5,231 4,376 $’000 352

Financial Information 43 S9

9.52% 0.55% 41.2% 6.88% -4.49% 64,066 10.07% 11.37% $0.0914 $0.7862 orecast Forecast 30 June 2015

41.3% 63,831 $0.0585 $0.8232 orecast Forecast 30 June 2014 12 months ending 30 June 2015

41.5% Actual 63,638 $0.0250 $0.8446 Audited 8.21% 2.73% 7.03% 4.84% -5.48% -2.19% 30 June 2013 9 months ending 30 June 2014

The RFF return assumes that the Merger of the Funds will take effect on 1 October 2013 and therefore relates to a 9 relates on 1 October 2013 and therefore assumes that the Merger of the Funds will take effect The RFF return month period ending 30 June 2014. RFMP. from includes income which Unitholders will receive The RFF return subject to change. is based on a number of best estimate assumptions that are The financial forecast changes in variable expenses (gas and electricity, direct agribusiness expenses, and repairs and maintenance); agribusiness expenses, and repairs direct changes in variable expenses (gas and electricity, rates; and changes in interest fee for the 12 months ending 30 June 2015. changes in CPI on grower otal otal % Returns Units on issue (‘000) RFF & RFMP Distributions Declared distributions per unit Declared Growth NAV T LSR Stand-alone Distributions Growth T For personal use only use 2. 3. personal and distributions for the 12 net profit 9.11 and 9.12 is the sensitivity analysis for changes to forecast Set out in Figures of: months ending 30 June 2014 and 12 months ending 30 June 2015, as a result • • • 9.12. 9.11 and in Figures in distributions presented that may be used to absorb the reduction CIF holds cash reserves For igure 9.10: Notes to Figure 1. Figure 9.10: CIF comparison forecast CIF of returns 9.10: Figure Figure 9.10 shows a comparison of forecast financial returns for RFF and CIF for the 9 months to 30 June 2014 and the financial 9.10 shows a comparison of forecast Figure reinvested. are 2015 financial year assuming distributions Figure 9.9: financial metrics key CIF 44 Explanatory MemorandumFor personal use only Figure 9.12: for analysis the 12 CIF sensitivity months June ending 2015 30 2. 1. Notes toFigure 9.11: Figure 9.11: for analysis the 12 CIF sensitivity months June ending 2014 30 2. 1. Notes toFigure 9.12: 1% decrease ininterest rates expenses 10% increase invariable expenses 5% increase invariable 1% increase ininterest rates expenses 5% reduction invariable 1% increase ininterest rates expenses 5% reduction invariable expenses 5% increase invariable expenses 7.5% increase invariable 1% decrease ininterest rates Parenthesis indicates anegativevalue. rate of5.0%p.a.Therefore anyinterest ratemovements onlyimpacttheunhedgedcomponent. Assumes 50%ofdebtishedged.Hedgedassumedat6.0%p.a.andunhedgedbasedonamarket Parenthesis indicatesanegativevalue. rate of5.0%p.a.Therefore anyinterest ratemovementsonlyimpacttheunhedgedcomponent. Assumes 50%ofdebtishedged.Hedgedassumedat 6.0%p.a.andunhedgeddebtisbasedonamarket 1 1 1 1

Assumption Assumption 7,773 7,773 7,762 7,773 7,762 7,762 $’000 $’000 5% 5% 5% 5% Amount Amount $’000 $’000 (583) (389) (206) (200) (388) (582) 206 389 388 200 Change in Change in net profit net profit after tax after tax $’000 $’000 (408) (272) (144) (140) (272) (408) 272 144 140 272 distributions distributions Change Change in total in total $’000 $’000 (583) (389) (200) (206) (388) (582) 389 200 206 388 distributions distributions Change in Change in $ perunit $ perunit (0.0091) (0.0061) (0.0031) (0.0032) (0.0061) (0.0091) 0.0061 0.0031 0.0032 0.0061 distributions distributions % perunit % perunit Change in Change in -10.0% -10.4% -15.6% 10.4% -6.7% -3.4% -5.5% 6.7% 3.4% 5.5% Financial Information 45 S9

– – – – 92 492 (378) (569) (623) $’000 3,212 1,365 4,669 2,556 1,933 1,933 (1,166) (1,441) orecast Forecast 12 mths to 30 June 2015

– – – – 114 374 (383) (646) (561) $’000 3,104 1,844 5,062 2,487 1,926 1,926 (1,546) (1,552) orecast Forecast 12 mths to 30 June 2014

– – 29 565 (475) (100) $’000 2,783 2,637 3,195 9,180 2,733 2,028 4,761 4,661 4,690 (4,694) (1,278) 12 mths to 30 June 2013 Audited Actual

8 1 2 3 4 5 6 7 Notes

Assets Operating income in FY 2013 includes harvest revenue from the Hahn Vineyard. from Operating income in FY 2013 includes harvest revenue assets increase years, property For forecast vines and irrigation infrastructure. assets include land, water, Property rate in the range of 2.5%–4.0% p.a. the 30 June 2013 independent valuation at an assumed growth from Lease revenue relates to revenue from Treasury Wine 8.3. It is Estates as per the lease terms set out in Section Treasury from to revenue relates Lease revenue indexed at 2.5% p.a. FY 2013 excludes lease classified as operating leases. Leases are assumed that the leases are commenced on 1 July 2013. as the lease of that vineyard to Hahn Vineyard relating revenue otal revenue otal comprehensive income attributable to otal comprehensive Revenue Lease revenue Operating income Unrealised gain on property assets gain on property Unrealised Other income T Operating and other costs Management fees Finance costs Net profit before income tax before Net profit Income tax expense Net profit after income tax Net profit ther comprehensive income Other comprehensive loss on fair value adjustments to property, Unrealised plant and equipment Income tax on other comprehensive income Income tax on other comprehensive T Unitholders Distributions paid to Unitholders Issue of units Change in net assets attributable to Unitholders For personal use only use personal For 3. 2. igure 9.13: Notes and specific assumptions to Figure 1. Figure 9.13: AWF forecast Statement of Comprehensive Income and Changes Income in forecast Comprehensive of Statement AWF 9.13: Figure Net Detailed in this section are AWF’s stand-alone forecast Statement of Comprehensive Income and Changes in Net Assets, Income Statement of Comprehensive forecast stand-alone AWF’s are Detailed in this section of Financial Position. Statements and historical and forecast N 099 573 485 D ARSN 099 WINE FUN USTRALIAN RFM A 46 Explanatory MemorandumFor personal use only 8. 7. 6. 5. 4. based onincomederivedfrom forecast operating cashflowandafterconsiderationofcapital requirements. distributions declared forFY2015:2.04centsperUnit(distributionspaidof2.45Unit).Distributionsare Forecast distributionsdeclared forFY2014: 2.20centsperUnit(distributionspaidof1.16Unit).Forecast AWF assumedtoformataxconsolidatedgroup andbetaxedasacompany. assumption that50%ishedgedona5yeartenoratrateof6.0%p.a. Average forecast costofdebtis5.5% p.a.basedonmarketratesasat20August2013of5.0%p.a.,andthe 2013 and$0.25millionin2014are alsoincludedinoperatingcosts. include direct operatingcosts,administrationandcompliancecosts.Revaluationtransactioncostof$0.17millionin Operating costsare basedonhistoricaloperatingcostsforAWF adjustedtoreflect theleasingbusinessmodeland Viticulture onplant andequipmentvendorfinance. Other incomeincludescostreimbursements from Treasury Estatesandinterest paymentsfrom Wines Murdock Financial Information 47 S9

887 552 464 101 502 $’000 1,166 39,043 42,112 10,348 10,951 31,161 orecast Forecast 12 mths to 30 June 2015

728 755 101 793 $’000 1,139 1,510 37,780 41,911 10,348 11,242 30,669 orecast Forecast 12 mths to 30 June 2014

893 101 348 $’000 1,215 2,071 4,566 36,000 44,744 14,000 14,449 30,296 12 mths to 30 June 2013 Audited Actual 1 2 3 4 5 6 7 Notes

AL ASSETS AL LIABILITIES Other current assets include trade receivables which are generally issued on 30 day terms. 30 June 2013 includes generally issued on 30 day terms. 30 June 2013 which are assets include trade receivables Other current in which RFM expects to be resolved to legal proceedings a winery that is subject from a $0.4 million receivable favour of AWF. period is due The change in the forecast infrastructure. vines and irrigation assets include land, water, Property in the range of rates are Assumed growth rates. disposals and assumed growth to capital expenditure, 2.5–4.0% p.a. tax liabilities. tax assets arising due to tax losses net of deferred deferred tax assets represent Deferred to the sale of plant and equipment. relating Viticulture assets include a loan to Murdock Other non-current bearing. not interest generally on 30-90 day terms and are payables are Trade (2013: $14.0m, 2014: $10.4, and 2015: $10.4). The total interest bearing liabilities include bank borrowings Interest is 2014: $1.2m. This will be funded from in the next 12 months (current) to be repaid bearing debt that is forecast FY during assumed an additional $2.4m is repaid has operations. The forecast and from opening cash reserves property against the real secured are The Bank borrowings 2014 however this may be used to fund redemptions. bank loan to security ratio (LSR) is 2014: 27.5% and The forecast and subject to a general security agreement. cover ratio is 2.65 and 3.78 for interest to the facility covenant of 45%. The forecast 2015: 26.3%. This compares cover ratio bank covenant of 2.0 and 2.0 for 2014 and to the interest This compares 2014 and 2015 respectively. 2015 respectively. for distributions. and provision liabilities include derivative financial liabilities, employee provisions, Other non-current in FY 2014. repaid assumes that the derivative financial liabilities are Forecast ASSETS Cash Other current assets Other current Property, plant and equipment Property, Deferred tax assets Deferred Other non-current assets Other non-current TOT LIABILITIES Payables and accruals Interest bearing liabilities Interest Other non-current liabilities Other non-current TOT NET ASSETS For personal use only use 9.14: igure Notes and specific assumptions to F 1. 2. 3. 4. 5. 6. personal 7. For Figure 9.14: AWF Statement of Financial Position Financial of Statement AWF 9.14: Figure 48 Explanatory MemorandumFor personal use only AWF holdscashreserves thatmaybeusedtoabsorbthereduction indistributionspresented inFigures 9.17and9.18. • • • 12 months ending30June2014and 2015,asaresult of: Set outinFigures 9.17and9.18isthesensitivityanalysisforchangestoforecast netprofit anddistributionsforthe 2. 1. Notes toFigure 9.16: Figure 9.16: AWF returns of forecast comparison 2015 financialyearassumingdistributionsare reinvested. Figure 9.16showsacomparisonofforecast financial forRFFand AWF forthe9monthsto30June2014and returns 9.15:Figure AWF key metrics financial T Growth Distributions Stand-alone T LSR Growth NAV Distributions Declared distributionsperunit RFF Units onissue(‘000) % Returns otal otal changes ininterest rates. changes invariableexpenses;and changes inassumedrecovery ofvineyard receivable (refer tonote1Figure 9.14); subject tochange. The financialforecast isbasedonanumberofbestestimateassumptionsandtheseare 9 month periodending30June2014. The RFFreturn assumesthattheMergerofFundswilltakeeffect on1October2013andtherefore relates toa 9 monthsending30June2014 30 June2013 15.83% 5.97% 0.79% 5.18% 6.80% 9.03% Audited $0.4288 70,648 Actual 39.4%

Nil

12 monthsending30June2015 30 June2014 Forecast $0.4340 $0.0220 70,663 27.5%

30 June2015 Forecast $0.4410 $0.0204 70,663 6.40% 1.60% 4.80% 9.11% 26.3% 0.46% 8.65%

Financial Information 49 S9 4.0% 3.6% 4.5% 5.0% -8.1% -4.0% -3.6% -4.5% -9.9% -5.0% 23.2% -23.2% Change in Change in % per unit % per unit distributions distributions

0.0010 0.0011 0.0051 0.0008 0.0007 (0.0010) (0.0022) (0.0051) (0.0011) (0.0017) (0.0008) (0.0007) $ per unit $ per unit Change in Change in distributions distributions

70 77 58 52 (70) (77) (58) (52) 361 total (155) (361) (117) $’000 $’000 in total Change Change in distributions distributions 49 54 41 36 (49) (54) (82) (41) (36) 253 (108) (253) $’000 $’000 net profit net profit Change in Change in 70 77 58 52 (70) (77) (58) (52) 361 (155) (361) (117) $’000 $’000 Amount Amount 5% 5% 5% 5% 361 361 $’000 $’000 1,546 1,546 1,546 1,166 1,166 1,166 Assumption Assumption 2 1 1 2

1 1

Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged impact the unhedged component. rate movements only any interest rate of 5.0% p.a. Therefore indicates a negative value. Parenthesis The balance sheet contains a provision for 50% of the receivable (refer note 1, Figure 9.14). note 1, Figure (refer for 50% of the receivable The balance sheet contains a provision debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged rate movements only impact the unhedged component. any interest rate of 5.0% p.a. Therefore indicates a negative value. Parenthesis 1% decrease in interest rates in interest 1% decrease 10% increase in variable 10% increase expenses 5% increase in variable 5% increase expenses 5% reduction in variable 5% reduction expenses 1% increase in interest rates in interest 1% increase Full recovery of vineyard of vineyard Full recovery receivable 1% increase in interest rates in interest 1% increase 1% decrease in interest rates in interest 1% decrease 10% increase in variable 10% increase expenses 5% reduction in variable 5% reduction expenses in variable 5% increase expenses No recovery of vineyard of vineyard No recovery receivable For personal use only use personal For 2. igure 9.18: Notes to Figure 1. Figure 9.18: AWF sensitivity analysis for the 12 months ending 30 2015 ending June months sensitivity 12 the analysisfor AWF 9.18: Figure igure 9.17: Notes to Figure 1. 2. 3. Figure 9.17: AWF sensitivity analysis for the 12 months ending 30 2014 ending June months sensitivity 12 the analysis for AWF 9.17: Figure 50 Explanatory MemorandumFor personal use only RFF group issubject tocorporateincometax. accounting onthebasisthattaxableentitywithin financial informationpresented belowadoptstaxeffect and fullydistributedtotheUnitholderseachyear. The taxation; ratherthetrust’s taxableincomeiscalculated contrast, flowthrough trusts,are notliableforcorporate distributed toUnitholdersundertheimputationsystem.In and anytaxpaidgivesrisetofrankingcredits thatcanbe Generally, publictradingtrustsare taxedascompanies between financialyears. results onthe same taxbasisallowsforbettercomparison the flowthrough status isnotcertainandpresenting the public tradingtruststatusforthisyear. Thisisbecause through trustsin2015, howevertheforecasts assume RFM intendsthatRiverBankandCIFbecomeflow Figure 9.19: position tax Assumed 30 June2014andthe12monthperiodending Attributable toUnitholdersforthe9monthperiodending of Comprehensive IncomeandChangestoNetAssets in thissectionare theconsolidatedforecast Statement RiverBank) anditssubsidiariesCIFAWF. Detailed The RFFGroup comprisestheRFFparent (formerly scenario 9.5 RuralFundsGroupmerged AWF CIF RFF formerlyRiverBank Entity 100% 100% Parent entity % Ownership Tax consolidatedgroup Public tradingtrust Public tradingtrust Assumed taxationstatus2014 with accountingstandards. consolidated statutoryaccountsofRFFinaccordance at 30June2014willnolongerberecognised inthe from 1July2014, thentheforecast deferred taxliabilities If RFFandCIFare categorised asflowthrough trusts differences betweenaccountingandtaxationvalues. mainly relating toasset revaluations whichgiveriseto liabilities of$7.2millionand$12.9respectively, and CIFare expected tohavenetdeferred incometax As at30June2014,RiverBank(RFFinforecast period) by thetrust). during theyearatcorporatetaxrate,andwillbepaid (i.e. taxwillbecalculatedontheprofit derivedbythetrust profit willbeliable fortax,asifthetrustwere acompany significant subsidiary, CIF, themajorityofRFFGroup Based onpublictradingtruststatusforRFFparent andits of theassumedtaxpositionsforforecast periods. Figure 9.19setsouteachsubsidiary, includingasummary have itsowntaxationstatusandwillbetaxedaccordingly. consolidated group, thatis,eachentitywillcontinueto It isalsoassumedthatthegroup willnotformatax 1 October2013. It isassumedallthree Fundswillbemergedon Financial Position asat30June2014and2015. 2015. Figure 9.21 setsouttheforecast Statementof Tax consolidatedgroup Public tradingtrust Public tradingtrust Assumed taxationstatus2015 Financial Information 51 S9

– 910 550 (793) $’000 1,476 9,149 9,149 (2,312) (2,577) (5,492) (2,911) (8,599) 20,848 23,234 12,060 orecast Forecast 12 mths to 30 June 2015

$’000 1,298 1,097 8,964 6,965 6,965 (1,249) (1,616) (1,915) (3,898) (1,999) (7,417) (1,000) 15,247 17,642 (1,452) orecast Forecast 9 mths to 30 June 2014 1 2 3 4 5 6 7 8 Notes

RFMP Lease – 1.5% p.a. Select Harvest – 2.5% p.a. RFM Almond Fund 2006 – 2.5% p.a. RFM Almond Fund 2007 – 2.5% p.a. RFM Almond Fund 2008 – 2.5% p.a. Wine Estates – 2.5% p.a. Treasury the commencing FY 2014 to depreciate CIF: June 2013 independent valuation less $2.0 million p.a. decrement and is allocated to either the profit useful life. The assumed asset growth sheds over their assessed remaining requirements. depending on the accounting standard reserve loss or asset revaluation rate of 1.5% to 2.75% p.a. RiverBank: June 2013 independent valuation indexed at the assumed growth rate of 2.5% to 4.0% p.a. growth valuation indexed at assumed vineyard June 2013 independent AWF:

Lease revenue relates to lease agreements as set out in Section 8.3. It is assumed that the leases are classified as classified 8.3. It is assumed that the leases are as set out in Section to lease agreements relates Lease revenue assumed to index at the following rates: and are is fixed under lease agreements operating leases. Lease revenue a) b) c) d) e) f) years, For forecast vines, irrigation and poultry infrastructure. almond trees, assets include land, water, Property of: valuation at an assumed growth the 30 June 2013 independent from assets increase property a) b) c) otal revenue otal comprehensive income attributable to Unitholders income otal comprehensive Revenue Lease revenue assets gain on property Unrealised Other income T Property costs Property Fund overhead costs Management fees Finance costs income tax before Net profit Income tax expense after income tax Net profit T Distributions declared Issue of units Change in net assets attributable to Unitholders For personal use only use 9.20: Notes and specific assumptions to Figure 1. personal For 2. Figure 9.20:Figure and Income forecast Comprehensive of Statement consolidated RFF Changes Assets Net in 52 Explanatory MemorandumFor personal use only 8. 7. 6. 5. 4. 3. It isassumeda$1.0millionon-marketUnitbuybackwillbeoffered ata20%discounttoNAV. 8.26 centsperUnit).Distributionshavebeencalculatedbaseduponforecast netoperatingcashflow. per Unit).Forecast distributionsincludingfrankingdeclared inFY2015are 8.31centsperUnit(distributionspaid Forecast distributionsincludingfrankingdeclared inFY 2014are 8.20centsperUnit(distributionspaid6.15 and equipmentat9.00%p.a. assumption that50%ishedgedona5yeartenoratrateof6.0%p.a.Financecostsalsoincludeinterest onplant Average forecast costofdebtis5.5% p.a.basedonmarketratesasat20August2013of5.0%andthe compliance costs. Fund overheadcostsare basedonthehistoricalresults oftheFundsandincludefundadministration the Merger. property rates.The9monthperiodending30June2014includes$0.7millionofstampdutypayableasaresult of Property costsare basedonthehistorical results oftheFundsandincludeassetadministration,insurance and equipmentleasedtotheRFMAlmondFunds($0.9million)annualindexingof2.5%p.a. 2.5% p.a. FY2015otherincomeincludedistributionsfrom StockBank($0.5million),andleaseincomefrom plant leased totheRFMAlmondFunds($0.7million)for9monthperiod30June2014andannualindexingof Other incomerelates todistributionsfrom StockBank ($0.4million),andleaseincomefrom plantandequipment Financial Information 53 S9

455 $’000 5,603 5,026 2,873 2,899 4,079 98,638 20,284 232,480 246,437 125,900 120,537 orecast Forecast 30 June 2015

$’000 1,419 5,845 5,026 2,875 3,076 4,017 98,631 18,567 229,115 244,280 124,291 119,989 orecast Forecast 30 June 2014

$’000 1,305 5,162 5,026 2,707 1,025 4,043 98,631 16,827 227,766 241,966 121,440 120,526 Pro forma forma Pro 1 October 2013 3 4 6 7 8 1 2 5 Notes

CIF: June 2013 independent valuation less $2.0 million p.a. decrement commencing FY 2014 to depreciate the commencing FY 2014 to depreciate CIF: June 2013 independent valuation less $2.0 million p.a. decrement useful life. sheds over their assessed remaining rate of 1.5% to 2.75% p.a. RiverBank: June 2013 independent valuation indexed at the assumed growth rate of 2.5% to 4.0% p.a. growth valuation indexed at assumed vineyard June 2013 independent AWF:

AL ASSETS AL LIABILITIES Property assets comprise of land, water, almond trees, vines, irrigation and poultry infrastructure. Changes in vines, irrigation and poultry infrastructure. almond trees, assets comprise of land, water, Property rates rates. Assumed growth assumed growth disposals and due to capital expenditure, period are the forecast applicable to each sector are: a. b. c. in unit assumes no growth 4.897 million units in RFM StockBank based on the 30 June 2013 unit price. Forecast price due to the assumption that all income is distributed. assets include plant and equipment leased to RFM Almond Funds ($2.707 million), and loan to Other non-current ($0.847 million). Viticulture Murdock bearing. not interest generally on 30–90 day terms and are Payables and accruals include trade payables which are facility. Refer to Section 9.6 for details of bank borrowing tax assets. net of deferred tax liabilities are Deferred to the Select Harvest lease ($1.6 million) liabilities include: 30 June 2014 security deposit relating Other non-current to the Select Harvest lease for distributions ($2.5 million); 30 June 2015 security deposit relating and provision for distributions ($2.5 million). ($1.6 million) and provision Other current assets include trade receivables and inventory. As at 1 October 2013 the RiverBank trade receivables trade receivables As at 1 October 2013 the RiverBank and inventory. assets include trade receivables Other current a from account for $1.5 million (includes a $0.4 million receivable trade receivables account for $1.2 million, AWF in favour of RFF) and almond inventory which RFM expects to be resolved winery that is subject to legal proceedings valued at $0.7 million. ASSETS Cash Other current assets Other current Property assets Property RFM StockBank Other non-current assets Other non-current LIABILITIES Payables and accruals TOT Bank facilities Deferred tax liabilities Deferred Other non-current liabilities Other non-current NET ASSETS TOT For personal use only use personal 4. 5. 6. For 7. 8. 2. 3. igure 9.21: igure Notes and specific assumptions to F 1. Figure 9.21: RFF Consolidated Statement of Financial Position Financial of Statement Consolidated RFF 9.21: Figure 54 Explanatory MemorandumFor personal use only RFF holdscashreserves thatmaybeusedtoabsorb thereduction indistributions presented in Figures 9.23and9.24. • • • 9 months ending30June2014,and12 2015,asaresult of: Set outinFigures 9.23and9.24isthesensitivityanalysisforchangestoforecast netprofit anddistributionsforthe subject tochange. The financialforecast isbasedonanumberofbestestimateassumptionsandthese bestestimateassumptionsare 7. 6. 5. 4. 3. 2. 1. Notes andspecificassumptionstoFigure 9.22: RFF key metrics financial 9.22: Figure Weighted averageleaseexpiry(WALE) (Years) Indirect costratio(ICR) Interest cover Closing LSR Starting loansecurityratio(LSR) Closing NAV perUnit Starting NAV perUnit Payout ratio(FFO) Forecast distributionsperUnit(excludingfranking) Forecast distributionsperUnit(includingfranking) FFO perUnit Funds from operations(FFO)($’000) perUnit(EPU) Earnings Units onissue(‘000) changes ininterest rates. changes invariableexpenses;and changes inassumedrecovery ofvineyard receivable (refer tonote1,Figure 9.21); 2014 ICRisannualised. biological assetsandunrealised gain(loss)oninvestmentproperties dividedbycore interest payments. Interest before coverisearnings interest, taxes,depreciation andamortisation (EBITDA)lessincrease invalueof of aspecialdistribution. Distributions perunitincludingfrankingdividedbyFFO.The9monthsending30June2014excludesthepayment FFO dividedbyunitsonissue. Funds from operations isthetotalforecast operatingcashflowfortheperiod. Total comprehensive incomeattributabletoUnitholdersdividedbyUnitsonissue. Units onissueatthebeginningofforecast period. Notes 6 5 4 3 2 1 30 June2014 9 mthsto Forecast $0.0615 $0.0615 $0.0689 $0.0574 121,440 $8,365 2.25% 40.8% 41.1% $1.00 $1.00 89% 2.94 14 30 June2015 12 mthsto Forecast $0.0715 $0.0831 $0.0928 $0.0761 120,186 $9,766 2.25% 40.3% 40.8% $1.00 $1.00 90% 3.01 13 Financial Information 55 S9 1.6% 4.9% 3.6% 5.0% 5.0% 1.4% -3.1% -1.6% -4.9% -3.6% -1.4% -2.9% Change in Change in % per unit % per unit distributions distributions 0.0030 0.0041 0.0041 0.0012 0.0013 0.0041 (0.0030) (0.0012) (0.0024) (0.0026) (0.0013) (0.0041) $ per unit $ per unit Change in Change in distributions distributions 361 493 493 143 155 493 (361) (143) (287) (311) (155) (493) $’000 $’000 in total in total Change Change distributions distributions 109 345 253 345 345 100 (217) (109) (345) (253) (201) (100) $’000 $’000 net profit net profit Change in Change in 361 493 493 143 155 493 (361) (287) (143) $’000 (311) (155) (493) $’000 Amount Amount 5% 5% 5% 5% 361 361 $’000 $’000 3,105 3,105 3,105 2,865 2,865 2,865 Assumption Assumption 2 1 1 2

1 1

Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged debt is assumed at 6.0% p.a. and unhedged impact the unhedged component. rate movements only any interest rate of 5.0% p.a. Therefore indicates a negative value. Parenthesis The balance sheet contains a provision for 50% of the receivable (refer note 1, Figure 9.21). note 1, Figure (refer for 50% of the receivable The balance sheet contains a provision debt is assumed at 6.0% p.a. and unhedged debt is based on a market Assumes 50% of debt is hedged. Hedged rate movements only impact the unhedged component. any interest rate of 5.0% p.a. Therefore indicates a negative value. Parenthesis 1% decrease in interest rates in interest 1% decrease 10% increase in variable 10% increase expenses 5% reduction in variable 5% reduction expenses in variable 5% increase expenses 1% increase in interest rates in interest 1% increase Full recovery of vineyard of vineyard Full recovery receivable No recovery of vineyard of vineyard No recovery receivable 1% increase in interest rates in interest 1% increase 5% reduction in variable 5% reduction expenses in variable 10% increase expenses rates in interest 1% decrease 5% increase in variable 5% increase expenses For personal use only use personal For 2. 9.25. The calculation ownership for each of the existing Funds in RFF is shown in Figure igure 9.24: Notes to Figure 1. Figure 9.24: RFF sensitivity analysis for the 12 months ending 30 2015 ending June months 9.24:Figure sensitivity RFF 12 the analysis for 2. 3. igure 9.23: Notes to Figure 1. Figure 9.23:Figure 30 sensitivity 2014 ending June RFF 9 months the analysis for 56 Explanatory MemorandumFor personal use only 1. Notes toFigure 9.26 Calculation of RFF units issued Figure 9.26: issue price. Figure 9.26 showshowmanyunitswillbeoffered toexistingUnitholdersineachoftheFundsassuminga$1.00 of ownershipthetotalassetsRFFasbetweenthree Funds(CIF, AWF andRiverBank)asat 30June2013. The numbersofUnitsissuedinRFFisbasedontheforecast 30September2013NAV multipliedbytheallocation 4. 3. 2. 1. The ownershipcalculationisbasedonthe30June2013auditedaccounts,plusfollowingadjustments: Notes andspecificassumptionstoFigure 9.25: Calculation of ownership in RFFFigure 9.25: Total AWF CIF Entity RiverBank Entity RiverBank CIF AWF T otal tax losses. Adjustments relate toaprovision foraspecialdistributionof$2.5million andthelossof$1.9milliondeferred Unitholders ata15%premium toNAV appropriate. attract asmallernumberofprospective buyers.Forthesereasons RFMconsidered theconversionrateforAWF This contrastswiththeassetsownedbyRiverBankandCIFwhichare significantlylargerinscaleandthuswould the marketforpremium vineyard assetshasbeendepressed forsome yearsandisnowshowingsignsofrecovery. sale pricesthatcouldbeachievedfortheAWF assetswouldbecomparabletotheircurrent bookvalue.Inaddition the sizeandcurrent marketconditionsforpremium vineyard assets likethoseheldbytheAWF itisRFM’s viewthe $4.5 millionadjustmenttoAWF duetoRiverBankacquiringtheAWF assetsathigherthancarryingvalue.Basedon AWF adjustmentof$0.2millionforfuture capitalexpenditure inFY2014required underthetermsoflease. for future improvements onthechickenshedsrequired fortheadoptionofhigherwelfare standards. ($7.2 million)adjustmenttotheCIFNAV comprisingthede-mergerofRFMP ($6.8million)and($0.4provision reflect theindependent valuationofwater. Theseadjustmentsare netoftax. and hastherefore beenadjustedtoreflect this.Inadditionanaccountingimpairmentofwaterhasbeen reversed to held forsalebasedonaproposed transactionwhichsubsequentlycompletedonbetterthananticipatedterms $0.3 millionadjustmentforRiverBankrelates tothevaluationofparcels oflandandwaterwhichat30Junewere Forecast NA Sep 13$’000 Notes 3 &4 2 1 125,857 48,646 46,780 30,431 V NA 2013 $’000 V 30June Adjustments 131,610 30,296 53,749 47,564 (1,638) (1,594) (1,184) (4,416) 1 Adjustments NA Forecast V Sep13 121,440 (7,051) (7,150) 47,008 45,186 29,247 $’000 $’000 (210) 309 Premium $’000 issue ‘000 Forecast Units on 32,748 63,662 70,663 4,513 4,513

issued ‘000 RFF Units 121,440 45,043 43,844 32,554 consideration T otal RFF 129,072 34,599 46,599 47,874 $’000 Ownership 37.1% 36.1% 26.8% 100% RFF Ownership RFF Merger 1.3755 0.6890 0.4608 26.8% 36.1% 37.1% 100% ratio

Financial Information 57 S9 - 759 848 967 362 848 (374) (106) $'000 9,149 9,908 3,646 3,481 1,933 9,060 orecast Forecast 12 mths to 30 June 2015 750 837 635 321 289 291 837 (700) $'000 6,965 7,715 3,612 2,340 1,926 6,878 (1,000) orecast Forecast 9 mths to 30 June 2014

1 1 1 2 3 4 5 6 7 Notes

Adjustment excludes the 3 months of trading for the standalone entities from 1 July 2013 to 30 September 2013. from Adjustment excludes the 3 months of trading for the standalone entities of Revaluation. Reduction in fund overhead costs as a result of Revaluation. Reduction in management fee payable to RFM as a result additional drawings in FY 2015. by of Revaluation offset costs payable as a result Lower interest of Revaluation. Payment of $0.7 million of stamp duty as a result and depreciation. Includes other income, fair value adjustments to investment properties, Represents a 12 month period ending 30 June 2014 refer to Figures 9.1, 9.7 and 9.13. to Figures a 12 month period ending 30 June 2014 refer Represents ariance otal otal otal RFF T RFMP T RiverBank CIF AWF to Unitholders for 3 months income attributable Less comprehensive prior to Merger V Fund expenses Management fee Interest Stamp duty Other T For personal use only use personal 3. 4. 5. 6. 7. For 2. igure 9.27: Notes to Figure 1. Figure 9.27: Comparison of total comprehensive income attributableincome the Unitholders for comprehensive to Comparison total of 9.27: Figure 30 2015 ending June months and 12 30 2014 ending June 9 months Figures 9.27 and 9.28 show a comparison of the total comprehensive income attributable to Unitholders, and a to Unitholders, and income attributable of the total comprehensive 9.28 show a comparison 9.27 and Figures between RFF and the standalone entities. comparison of net assets 58 Explanatory MemorandumFor personal use only 4. 3. 2. 1. Notes toFigure 9.28: June 201530 at 1October as 2013, of net Comparison assets Figure 9.28: June 2014, 30 and Closing variance–netassets Issue ofUnits Variance indistribution Loss ofRiverBanktaxassets Total comprehensive incomeattributabletoUnitholders Opening variance–netasset V T AWF CIF RBK T RFMP RFF otal otal ariance Reduction inRFFassetsduetoa$1millionUnitbuybackoffset byreinvestment ofUnits. Reduction inRFFnetassetsduetoadditionaldistributionspaidasaresult ofRevaluation. $1.9 millionreduction inRFFnetassetsduetothelossofRiverBankdeferred taxassets. Refer toFigure 9.27 Notes 4 3 2 1

1 October2013 Forecast 132,657 128,240 121,440 (4,416) (4,416) 30,431 53,580 48,646 (2,490) (1,927) 6,800 $’000 - -

30 June2014 Forecast 132,418 126,864 119,989 (5,555) (5,554) 30,669 52,541 49,208 (1,138) (4,416) 6,875 $’000 (838) 837 -

30 June2015

Forecast 131,762 127,488 120,537 (4,275) (4,275) 31,161 50,372 50,229 (5,555) 6,951 $’000 (199) 630 848 -

Financial Information 5959 S9 Covenant: 50% on commencement: 41.1% Forecast 30 June 2014: 40.8% Forecast Covenant – at all times greater than 2.25 times, if less than 2.5 times distribution lock-up than 2.25 times, if less Covenant – at all times greater 2.94 times cover ratio 30 June 2014: interest Forecast Annual independent valuation Financial reporting mortgages; property real and a general security agreement; and its subsidiaries. guarantees between RFF cross events. default and review standard Various Facility is subject to annual review. Drawn to $96.7 million at Implementation Date Drawn to $96.7 million $97.5 million 2016 amortisation due commencing 30 September $2 million per annum 1 October 2013 5 years from • • • • • • • by: secured facilities are Borrowing • • • RFM intends to rates will not be hedged. interest At the commencement of the facility, of the Implementation Date. within 12 months hedge up to 50% of the borrowings • • ies acilit

Term Loan Term Limit Maturity profile Facility termination date Loan to Security Ratio (LSR) Interest cover ratio Interest Other key terms Non-financial covenants Security Hedging Figure 9.29: RFF bank facilities key terms 9.29:Figure key bank facilities RFF only use personal For Figure 9.29 sets out the key terms of the bank facility for RFF. terms of the bank facility for RFF. 9.29 sets out the key Figure bank f 9.6 RFF 60 Explanatory MemorandumFor personal use only other costsassociatedwithinvestinginRFF. section provides detailed informationaboutthefeesand section. FollowingtheConsumerAdvisoryWarning, this Consumer AdvisoryWarning atthebeginningofthis By law, RFMmustprovide youwiththe following constitution. are lowerthan themaximumallowedunderRiverBank’s 10.1 setsoutthefeesthatRFMintendstocharge,which fees andcostsidentifiedasoneofthoseareas. Figure Revaluation provides forcostsavingsinseveralareas with constitution. costs willbeleviedinaccordance withtheRiverBank Following thecompletionofRevaluation,feesandother 10.1 Introductio Fees andotherCosts S10 out different feeoptions. investment feecalculatortohelpyoucheck (www.moneysmart.gov.au) hasamanaged Investments Commission(ASIC)website circumstances, theAustralianSecuritiesand the impactoffeesbasedonyourown If youwouldliketofindoutmore, orsee TO MORE FIND OUT financial adviser. costs where applicable.AskRFMoryour lower contributionfeesandmanagement You maybeabletonegotiatepay higher feesandcosts. provision ofbettermember servicesjustify as superiorinvestmentperformanceorthe You shouldconsiderwhetherfeatures such $100,000 to$80,000). 30 yearperiod(forexample,reduce itfrom reduce yourfinal by upto20%overa return 2% ofyourfundbalanceratherthan1%could For example,totalannualfeesandcostsof substantial impactonyourlongtermreturns. performance andfeescostscanhavea Small differences inbothinvestment DID YOU KNOW? Warning Consumer Advisory Fees and other Costs 61 S10 How and when paid Not applicable Not applicable Not Applicable Fee calculated monthly based on the gross value Fee calculated monthly based on the gross of the RFF assets in the RFF Unit price Fee reflected RFF Fee paid monthly in advance from Costs paid from RFF as and when RFM incurs RFF as and when Costs paid from the costs Not applicable Payable on acquisition of an asset Not applicable RFF amount Nil Nil Nil Not applicable assets 0.60% p.a. of gross of RFF Estimated at 1.03% of the net value of RFF Nil 1% of the total purchase 1% of the total purchase price of the asset Nil Not applicable able

ype of fee or cost T Establishment fee investment The fee to open your Contribution fee The fee on each amount contributed to your investment. Withdrawal fee The fee on each amount you take out of your investment Termination fee Termination The fee to close your investment Management Costs Fund management fee Fund expenses Performance fee Acquisition fee Development fee Service Fees Investment switching fee The fee for changing investment options For personal use only use personal 10.4. set out in Figure The maximum amount of fees permitted by the RFF constitution are For

Figure 10.1: Fees and costs Fees 10.1: Figure The table below sets out the fees and costs expected to be paid by RFF to RFM. out the fees and costs expected to be The table below sets 10.2 Fee t S10 62 Explanatory MemorandumFor personal use only and legalfees. services, fundaudit,compliance, salesandmarketing, fees andcoststoadministerthe fund,provide investor assets. TheICRcalculationincludes fundmanagement RFF Unitholder’s account,dividedbytheRFFaveragenet management coststhatare notdeducteddirectly from the The Indirect CostRatio(ICR)istheratiooffund Ratio Cost Indirect the financialyearending30June2014. assumes thatRFFwillnotderiveacquisitionfeesduring annual feesandcostssetoutinFigure 10.3.Theexample management costsdisclosedintheworkedexampleof is made.Anyacquisitionfeesare includedinthe paid from RFF’s assetsatthetimeorafteracquisition total purchase price paid foranasset.Thisfeemaybe RFM maybepaidanacquisitionfeeequalto1%ofthe fees Acquisition be higherthantheamountdisclosedaboveinSection9. of RFFfrom RFF’s assets.Actualoperatingexpensesmay reasonable expenses incurred inrelation totheoperation considered aslimiting RFM’s rightstopayallproper and the financialyearending30June2014,andshouldnotbe likely tobeincurred in relation totheoperationofRFFfor on historicaltradingresults) oftheoperatingexpenses disclosed inSections9and10.2are anestimate(based or pursuinglegalproceedings. Theoperatingexpenses the costofUnitholdermeetings,changingconstitution Operating expensesmayincludeabnormalitemssuchas underlying assetsmaybepaidfrom theFund’s assets. For example,expensesrelating tomanagingtheFund’s paid byRFMandthenrecovered from RFF’s assets. may bepaiddirectly from RFF’s assetsoralternatively the operationofRFFfrom RFF’s assets.Theseexpenses reimbursed for allexpensesproperly incurred inrelation to Under RFF’s constitution,RFMisentitledtobe Fund expenses operating current level. RFM’s intentiontokeepmanagementfeesbelowtheir RFM willreduce itsoverallmanagementfeeanditis charge ahighermanagementfee.FollowingtheMerger, The three Fundconstitutionscurrently allowRFM to RFF’s assetsmonthlyinadvance. The management feewillbecalculatedandpaidfrom to 0.60%p.a.ofthegross valueofRFF’s assets. investors. RFMwillbepaidamanagementfeeequal overseeing RFF’s operationsandpromoting RFFto This isthefeewechargeformanagingRFF’s investments, Management fee fees andcosts 10.3 Additonalexplana of tion of Asset management fees an individualUnitholder’s account. Under thisoffer there are nodirect costsdeductedfrom 2014.Figure ICRs 10.2:for Forecast FY a stand-alonebasis. compares ittotheforecast ICRsforthe existing Fundson Figure 10.2setsouttheforecast ICRfor RFFand other managedinvestmentproducts. You shouldusethistabletocompare thisproduct with costs canaffect yourinvestmentoveraoneyearperiod. Figure 10.3givesanexampleofhowthefeesandother and costs forRFF 10.4 Exampleofannualfees currently operateassets norintendstodoso. charge upto5%ofoperatingexpenses.RFFdoesnot Where assetsare operated,ratherthanleased,RFMmay RFF constitution. the costrecovery that RFMisentitledtounderthe is chargedmonthlyinadvance, andseparatefrom expressed asapercentage ofgross assets.Thefee 5% oftheannualgross leaserevenue, or0.45%,if RFM intendsto chargeanassetmanagementfeeof • • • limited to: provided byRFM. Theseservicesinclude,butare not RFF ischargedafeeforassetmanagementservices AWF CIF RiverBank RFF Fund finance andaccountingservices. necessary capitalexpenditure; and property management includingoverseeingany contract managementandleasenegotiation; OR Forecast 3.62% 4.23% 3.88% 2.25% Fees and other Costs 63 S10 Notes The asset management fee is capped under the constitution at 1% p.a. asset of the gross value of the Fund Proposed RFF Proposed fee nil 0.60% p.a. of the asset value gross of the Fund nil 1% of the total price of purchase an asset - property Where is operated: 5% of the amount of annual operating expenses Where property property Where is leased: 5% p.a. of the annual rent Maximum fee under RiverBank Constitution up to 3% of the amount invested 1.5% p.a. of the asset value of gross the Fund 15% of the returns in excess of a return on equity of 15% p.a. on the amount invested 2% of the total price of an purchase asset - is property Where operated: 5% of the amount of annual operating expenses Where property is property Where leased: 5% p.a. of the annual rent Not applicable For every $50,000 you have in RFF you will be charged $1,250 each year have in RFF you will be charged $1,250 each For every $50,000 you and put in an of $50,000 at the beginning of the year If you had an investment you will be charged a fee of: $1,250 end of that year, additional $5,000 at the FEE Nil 2.25% iverBank current fee RiverBank current arrangement up to 3% of the amount invested 1.00% p.a. of the gross asset value of the Fund in 15% of the returns excess of a return on equity of 15% p.a. on the amount invested 2% of the total purchase price of an asset - is property Where operated: 5% of the amount of annual operating expenses Where property is leased: property Where 5% p.a. of the annual rent

Contribution fees EXAMPLE Plus management costs Equals cost of the fund Contribution fee Fund management fee Performance fee Acquisition fee Development fee Asset management fee For personal use only and proposed fees limits fee RFF constitution Comparison RiverBank of 10.4: Figure use personal For rison of fees 10.5 Compa aspects of fees: three 10.4 to 10.6 compare Figures paid by the stand-alone funds; the the fees currently and maximum fee payable under the RFF constitution; fee that will be paid by RFF. the proposed Figure 10.3: Forecast ICR for FY Forecast for ICR 10.3: Figure 2014 64 Explanatory MemorandumFor personal use only investors were investingasignificantsumintoRFF. RFM wouldonlyexercise thisdiscretion where wholesale with wholesaleinvestorsbasedontheamountinvested. investment. Anydiscountswillbeindividuallynegotiated the feespayablebythemtoRFMformanagingtheir RFM mayoffer wholesaleinvestorsadiscounton 10.6 Wholesaleinvestors Figure 10.6: RFF fees proposed of and AWF Comparison fee arrangements current RFF fees proposed and Figure 10.5: of fee arrangements CIF Comparison current Asset managementfee Development fee Acquisition fee Performance fee Fund managementfee Contribution fee

Asset managementfee Development fee Acquisition fee Performance fee Fund managementfee Contribution fee amount ofannualoperatingexpenses Where property isoperated:5%ofthe - - - the Fund 0.8% p.a.ofthegross assetvalueof up to3%oftheamountinvested AWF current feearrangement operating expenses 5% oftheamountannual Where property isoperated: - - - value oftheFund 1.25% p.a.ofthegross asset invested up to3%oftheamount arrangement CIF current fee 5% p.a.oftheannualrent Where property isleased: operating expenses amount ofannual operated: 5%ofthe Where property is - - - asset valueoftheFund 0.60% p.a.ofthegross Nil Proposed RFFfee 5% p.a.oftheannualrent Where property isleased: based upontheneteffect ofGST. as appropriate. FeesinthisSection10are disclosed taxessuchasstampdutyandGST willapply Government and GST 10.8 Governmentcharges any changestoRFF’s feestructure assetoutinthisEM. consent. Investorswillbegiven30dayspriornoticeof RFM mayincrease theamountoffeeswithoutinvestors’ Subject tothelimitationcontainedinRFF’s constitution, 10.7 Changestofee structure Where property isleased:5%p.a.oftheannualrent annual operatingexpenses Where property isoperated:5%oftheamount - - - 0.60% p.a.ofthegross assetvalueoftheFund nil Proposed RFFfee value oftheFund at 1%p.a.ofthegross asset capped undertheconstitution The assetmanagementfeeis Notes Risks

11.1 Risk factors Detailed below are risk factors however this is not an exhaustive list. Unitholders should make their own An investment in RFF, like any investment, involves risk. independent assessment of Revaluation. Many of S11these risks apply to the Funds under the current These risks can be broadly divided between specific risks, property market risks, and general risks relevant to RFF. ownership structure.

Whilst the assumptions used in generating the forecasts within this Explanatory Memorandum are considered 11.2 Specific risks reasonable, a number of these risk factors could affect the achievement of the forecasts. Most risk factors are The key terms of the RFF property leases are set out in outside the control of RFM. Section 8.3. These should be read in conjunction with the risks set out below.

Risk Summary

Counterpart All land and infrastructure assets owned by RFF are leased in order to ensure that Unitholders are not exposed to operational risk. There is a risk that a counterpart may default on its lease obligations to RFF. Any default would reduce RFF’s revenue and thus its ability to meet its obligations and the payment of distributions. RFF has several lessees with the largest lessee (by rental income), being RFMP representing 43% of RFF’s revenue stream during the 2014 financial year.

Takeover RFM, an experienced agricultural manager, is the Responsible Entity of RFF. Another entity may seek to take over RFF. Any change of responsible entity will require Unitholder approval of an ordinary resolution at a Unitholder meeting.

Future distributions or reduction in RFF must meet its operating expenses, capital commitments and debt servicing distributions obligations before distributions can be made to Unitholders. Consequently distributions may vary.

Unit price trades at below Following listing, there is a risk that RFF Units may trade at values less than their

For personal use only use personal For Net Asset Value NAV per security. Currently there are approximately 3.5% of Unitholders by value in the existing Funds who have registered their interest in selling their Units. It is possible that some Unitholders may accept a price below NAV for their RFF Units. The trading price of the Units will be dependent on the financial performance of RFF. RFM expects that RFF will be classified as a REIT and for this reason its financial performance will be considered using metrics commonly considered for this sector.

65 66 Explanatory MemorandumFor personal use only 11.3 Property MarketRisks Water availability Property illiquidity Destruction ordamageofproperty Decline inassetvalue Risk Welfare standards Suspension event Liquidity Risk the otherexistingleases. abatement orarighttoterminatethelease.There isnosuchrequirement inanyof entitlements from source. analternative Failure todosomayresult inarent water entitlements,RFFisrequired bythetermsof leases toreplace the for theRFMAlmondFunds2007and2008,where there isareduction in Pursuant tothetermsofTreasury Estatesleases,andthelease Wine longer torealise. of potentialbuyersislimited.Therefore thesaleofassetsatbookvaluemaytake The majorityofassetsownedbyRFFare largescale.Giventhisscale,thenumber it iseconomicallysensibletodoso. natural orotherevents.RFMwillmaintainappropriate levelsofinsurance,provided It ispossiblethattheassetsownedbyRFFcouldbedestroyed ordamagedby valuation methodologiesandchangesindiscountrates. conditions, localandglobalagriculturalchangesinindependent production. Thevalueoftheseassetsmayriseorfallbecausegeneraleconomic RFF ownsproperty includingland,waterandinfrastructure foragricultural Summary subsequent year, ornotatall. costs. Theincreased costsmaynotbeincludedinthegrower feeuntilthe The adoptionbyBaiadaofhigheranimalwelfare standards mayleadtoincreased contracts are setoutinSection12.9 the rent payabletoRFF. Detailsofsuspensioneventsunderthechickengrowing fee revenue relating toasuspensioneventwillresult inaproportional reduction in growing contracts.UnderthetermsofRFMPleaseanyreduction inthegrower There isariskthatsuspensioneventcouldoccurunderthetermsofchicken capitalisation ofRFFwillplaceitbetween500thand600thinsize. stocks. There are approximately 2,000stockslistedontheASXand thansmaller Larger stocksgenerallyhaveahigherlevelofliquidityorturnover The abilitytosellyourRFFinvestmentwilldependontheavailabilityofbuyers. Independent ExpertReport. whether theREITwaspayingaregular distribution.RefertoSection11.4ofthe The IndependentExpert’s calculatedtradingdiscounthasnottakenintoaccount discount of17.7%toNAV. RefertoSection11.4oftheIndependentExpertReport. and 70%.Theiranalysisfoundthatthisgroup ofREITs istradingatamedian market capitalisationoflessthan$600m,andreported gearingofbetween25% The IndependentExperthasprovided ananalysisofREITs thathaveacurrent distributions andtradingonaverageatadiscountof1.58%toNAV. RFM analysisidentifiedathird group ofREITs. Thisgroup were paying regular or withcapitalmanagementissues,tendtotradeatsignificantdiscountsNAV. group tradingatapremium totheirNAV. REIT’s notpayingregular distributions Analysis ofthe45REITs listedontheASXat31July2013,reveals asignificant Summary Risks 67 S11 national economic growth; industry change; rates; interest inflation; exchange rates; and changes to government policy economic legislative changes; changes; regulatory taxation changes; and the status of trade agreements). policy changes (including foreign Summary of RFF assets: conditions may impact the performance The following economic • • • • • • The following international (as well as others that are or domestic political conditions assets: RFF’s may adversely affect not listed here) • • • • rates. against changes in interest rate hedging to help protect RFF undertakes interest rate risk and interest create rate swaps, although used for hedging, can Interest to be valued required for accounting purposes, swaps are counterpart risk. Further, earnings volatility. at market value and this can create that sets limits for the next five years. Beyond a debt facility RFF has secured In these the gearing limit. bank could reduce is a risk that RFF’s this there any sufficiently to offset not increased asset values have where circumstances, or sell assets and reduce to in gearing limits, RFF may be required decrease debt. suspend distributions to retire a Unitholder, As taxation status of RFF. of the current an outline Section 15 provides law can change which may materially impact that taxation you should be aware in RFF. your taxation position or the value of your investment the day-to-day the decisions that affect over control RFF Unitholders have no direct employees of RFM’s on the skills of RFM and Instead they rely management of RFF. to manage RFF assets. An RFM employee may have a specialist skill set that is then RFM may not be used to manage those assets. If that RFM employee resigns, that specialist skill set quickly or easily. able to replace RFM is the Responsible Entity for RFF and for a number of other funds. It is relationship RFM’s possible that investment opportunities will arise for RFF through of time to time, RFM may face a conflict from with those other funds. Therefore, as the Responsible Entity for RFF and its role that arises because of its role interest as the Responsible Entity for other funds. Management subject to the RFM Conflict of Interest Related party transactions are The ECC comprises a majority of submitted to the ECC for review. Policy and are external to RFM. See Section 13.3 for further detail about related members who are party transactions. real value of your investment and Inflation risk is the uncertainty over the future at least in line with inflation. will increase revenue or profitability specifically whether Wine Estates leases allow for annual indexing of The Select Harvests and Treasury reviews to market. The RFMP lease is subject to standard 2.5% p.a. with five yearly subject to are Almond Projects indexation capped at 2% p.a. The leases to RFM’s indexation of 2.5% p.a. standard the market results achieved by than the is the risk that inflation will be more There and annual indexing. reviews

Risk Change in economic conditions Change in economic Change in political and regulatory environment rates Hedging of interest Gearing changes Taxation skills Reliance on RFM’s related party and Conflict of interest transactions Inflation neral risks 11.4 Ge only use personal For 68 Explanatory MemorandumFor personal use only approximately $6.8million. RFF asitisarelatively smallentitywithcapitalisationof market forUnits.Itislistedonadifferent exchangefrom on theNationalStockExchange(NSX)toprovide a RFMP willbetreated separatelytoRFFandwillbelisted funded withworkingcapitaltransferred from CIF. operate thepoultryfarmsownedbyRFF. RFMPwillbe entity knownasRFMPoultry(RFMP).RFMPwillleaseand current CIFUnitholders willbeissuedunitsinaseparate poultry growing operations from RFF. Forthisreason, agricultural enterprises,itisnecessarytoisolatethe In order tocreate amergedentitythatdoesnotoperate 12.1 Investmetsummary CIF Unitholders. This sectiononlyappliestoexisting RFM Poultry S12 12.2 AboutRFMP will notbevolatile. arrangement, therevenue received byRFMPfrom Baiada it incursingrowing thechickens.Giventhiscontractual amount thatcompensatesRFMPforthemajorityofcosts performance duringtheperiod.Thefeealsoincludesan CIF received anetbonusof$0.370millionbasedonits for growing efficiency. Duringthe2012financialyear, The bonusorpenaltycomponentisbasedonmetrics a performancefeeorpenaltyiscontainedinthecontract. throughput. Inthecase oftheNewSouthWales facilities, based onthesizeofchickengrowing facilitiesnoton The grower feethat RFMP receives underthecontractis marketable weight. collects thechickensforprocessing whentheyreach provides the necessaryfoodandotherinputs,then RFMP’s contractualcounterpart,deliversdayoldchicks, facilities and managementtoraisethechickens.Baiada, will provide, through theleasingarrangements, chicken meatpriceandfeedcosts.Rather, RFMP and therefore willnothaveadirect exposure tothe Importantly, likeCIF, RFMPwillnotownanychickens a commercial basis as outlinedinFigure 12.3. currentlyVictoria ownedbyCIFwillbeleasedtoRFMPon The chickengrowing facilitiesinNewSouthWales and will beheldbyRFMPaspartofRevaluation. The beneficialentitlementofthebroiler chickencontracts RFM Poultry 69 S12 ablish RFMP the sale of assets will reduce the scale of CIF and the sale of assets will reduce fund operating costs per increase therefore of issued Unit, due to the substantial fixed costs operating CIF; is unlikely to allow Unitholders any withdrawal offer leaving the same thereby who apply to fully exit CIF, number (and cost) of Unitholders in CIF with a smaller asset base; and income producing experience the limited market for based on RFM’s poultry farms is likely to lead to the farms being sold at a significant discount to their value whilst withdrawing members would be exiting at net asset value. 12.5 Distribution to est CIF will make a distribution to CIF Unitholders of 10.69 to fund the establishment of RFMP. cents per Unit in order Units in RFMP This distribution will be applied to acquire on behalf of each CIF Unitholder. of the CIF distribution is the subject of a The tax treatment which has been lodged with the ATO. class ruling request that the distribution will rule RFM believes that the ATO as a distribution partly made out of should be treated income and partly made out of capital for tax purposes. RFM considered the option of selling individual poultry RFM considered to provide farms to fund an equal access buyback, been liquidity to CIF Unitholders. This option has discounted because: (a) (b) (c) 9 months ending 30 June 2014 – 9.93 cents per unit franking inclusive (9.93 cents 2014 – 9.93 cents per unit franking inclusive 9 months ending 30 June excluding franking) inclusive June 2015 – 14.35 cents per Unit franking 12 months ending 30 franking) (10.04 cents excluding of $1.00 per Unit ending 30 June 2014 – 13.71% based on NAV Year franking inclusive of $1.01 per Unit ending 30 June 2015 – 15.01% based on NAV Year franking inclusive RFP contracts. growing chicken from farms and deriving income Operating chicken broiler • • • • Contracts Bartter Enterprises chicken Growing $6.8 million $1.00 No debt anticipated RFMP tion –

Principal business distributions per Unit Forecast Annualised distribution yield Revenue Sources Net equity (1 October 2013) (1 October 2013) Net Asset Value Loan security ratio NSX Code For personal use only use 0.1069 Units in RFMP Existing CIF Unitholders will receive these Units It is intended to list for every 1 Unit held in CIF. associated on the National Stock Exchange. The risks similar to those associated with an with an NSX listing are Section 11) and trading in RFMP units ASX listing (refer and sellers. will be dependent on the numbers of buyers The NSX is a stock exchange focusing on small to medium size entities. It is owned and operated by NSX Limited, which is listed on the ASX (listed 13 January 2005). The NSX enables trading in the securities of Settlement entities that meet its listing rule requirements. and on trade date plus three of securities is electronic business days. personal The NSX has 130 quoted securities and 25 market For the 2012 calendar year, participants (brokers). the market with executed through 3,370 trades were a value of $291 million. Further information about the NSX is available on their website: www.nsxa.com.au In the 2012 calendar year 0.4% by value of the Units of traded at a discount range to NTA in CIF were For 20% to 30%. The Independent Expert approximately considers that RFMP units could potentially trade at a 35% to 45%. of approximately discount range to NTA 12.4 Listing RFMP

Figure 12.1: RFMP Key Information Key RFMP 12.1: Figure informa 12.3 Key S12 70 Explanatory MemorandumFor personal use only employer, withover2,200employees. distribution. BaiadaisalsoasignificantAustralian Bartter Enterprisesthereby givingthecompanynational processors inAustralia. In2009,Baiadapurchased Australian companyandoneofthetwolargestpoultry Established inthe1950s,Baiadaisaprivatelyowned counterpart growing contracts 12.7 Thebroilerchicken growing activities. be capitalised to$6.8millionsupportitschicken are outlinedinfurtherdetailFigure 12.2.RFMP will currentlyVictoria owned byCIF. Thetermsofthelease RFMP willleasethefarmsinNewSouthWales and 12.6 RFMPopera form theUnitholder’s CGTcostbaseinRFMP. assessable income.Thefullamountofthedistributionwill the distribution),itshouldbeincludedinUnitholder’s (which RFMbelievesshouldbenomore than58%of in CIFUnits.To theextentthatdistributionisincome distribution, itwillreduce theinvestor’s CGTcostbase To theextentdistributionistaxedasacapital s tions

chicken products. day oldchickens,fresh chickenandfurtherprocessed including breeding stock,poultryfeed,fertileeggs, milling. Theirproducts includesalesoflivepoultry breeder farms,hatcheries,processing plants andfeed Baiada’s businessoperationsincludebroiler and poultry retailers. supply charcoal chickenshops,butchers,andspecialty Rooster, Subway, PizzaHut,andNandos.Theyalso service restaurants, includingMcDonalds,KFC,Red chicken brands,Baiadasuppliesanumberofquick range ofindependentretailers. Inadditiontotheirretail sold through Coles,Woolworths, Franklins, Aldi,anda and Baiada–are wellknownbyAustraliansandare Baiada’s retail chickenbrands–Steggles,Lilydale, CIF asoutlinedinFigure 12.2. RFMP willleasethechickengrowing assetsownedby 12.8 LeasefromCIF RFM Poultry 7171 S12 Griffith farms 53-66 – 110 sheds Griffith farms 53-66 – 24 sheds Griffith farms 67-68 Lethbridge farms – 20 sheds Griffith farms 53-66 – 11 years Griffith farms 67-68 – 16 years Lethbridge farms – 26 years Insolvency contract of growing Breach Change of Responsible Entity possession Take Cancel the lease Contracts to Lessor Assign Growing on account of Lessee. capital expenditure Ongoing or recurring on account of Lessor Structural capital expenditure erm RFM Chicken Income Fund RFM Chicken Income RFM Poultry 154 sheds: • • • $10.150 million 12.3) to Figure Contracts (refer Same as ROI component of Growing has been a material there where a review Lessee can request review. No standard margin. gross growing the chicken adverse event affecting contracts for each category of assets: growing The lease term is to match the term of the • • • approval. The lease can only be assigned with the Lessor’s • • • Lessor may: • • • All on account of Lessee unless otherwise specified On account of Lessee On account of Lessor On account of Lessee • • T

Lessee Leased assets Rent indexing Rent review Term Default events Insurance Rates Repairs & maintenance Capital expenditure Lessor Commencing rent Assignment Consequence of Lessee default Outgoings Item Figure 12.2:Figure Lease Terms only use personal For 72 Explanatory MemorandumFor personal use only Figure 12.3: Bartter Enterprises broiler chicken Enterprises growing contracts Figure 12.3: Bartter Figure 12.3. The detailsofthechickengrowing contractsare setoutin 12.9 Chickengrowingcotracts Property 2014 grower fee Area Expiry Agreement T Counterpart Suspension events Water licences Insurance Maintenance Repairs & component on investment(ROI) Fee review –return cost component Fee review –cash Payment dates Other keyterms ype 1 Farm 53–66 173,472 sqmetres 31-Mar-24 Contract Chicken Growing Bartter Enterprises $13.514 million • • • • limited to: Included, butnot rectified. suspended until and paymentare bird placement contract including obligations underthe If suspensionevent, Grower Water provided by On accountofGrower On accountofGrower 2.25% p.a. costs, allotherCPI & electricityactual based onaward, gas contract: wages Annually asper each batchbyfarm Payment atendof employees by Bartter Industrial disputes Fires Epidemics Acts ofGod Farm 67 35,088 sqmetres 23-Feb-26 Contract Chicken Growing Bartter Enterprises $2.994 million • • • • limited to: Included, butnot rectified. suspended until and paymentare bird placement contract including obligations underthe If suspensionevent, Grower Water provided by On accountofGrower On accountofGrower 2.25% p.a. costs, allotherCPI & electricityactual based onaward, gas contract: wages Annually asper each batchbyfarm Payment atendof employees by Bartter Industrial disputes Fires Epidemics Acts ofGod Farm 68 35,496 sqmetres 30-Sep-27 Contract Chicken Growing Bartter Enterprises $3.056 million • • • • limited to: Included, butnot rectified. suspended until and paymentare bird placement contract including obligations underthe If suspensionevent, Grower Water provided by On accountofGrower On accountofGrower 2.25% p.a. costs, allotherCPI & electricityactual based onaward, gas contract: wages Annually asper each batchbyfarm Payment atendof employees by Bartter Industrial disputes Fires Epidemics Acts ofGod Lethbridge 59,160 sqmetres 03-Jul-36 Contract Chicken Growing Bartter Enterprises $4.825 million • • • • limited to: Included, butnot rectified. suspended until and paymentare bird placement contract including obligations underthe If suspensionevent, Grower Water provided by On accountofGrower On accountofGrower 2.25% p.a. costs, allotherCPI & electricityactual based onaward, gas contract: wages Annually asper Monthly employees by Bartter Industrial disputes Fires Epidemics Acts ofGod RFM Poultry 73 S12 Livestock husbandry issues Disease, although contract payments suspended, RFM Poultry compensated when next batch placed. Chicken meat importation, although contract payments suspended, RFM Poultry compensated when next batch placed. Mutual agreement After 6 month suspension period Business ceasing Material breach Insolvency Lethbridge • • • Subject to written consent by Bartter • • • • • Livestock husbandry issues Disease caused by RFM Poultry Chicken meat importation Mutual agreement After 6 month suspension period Business ceasing Material breach Insolvency Farm 68 • • • Subject to written consent by Bartter • • • • • Livestock husbandry issues Disease caused by RFM Poultry Chicken meat importation Mutual agreement After 6 month suspension period Business ceasing Material breach Insolvency • • • Farm 67 • • • • • Subject to written consent by Bartter Livestock husbandry issues Disease caused by RFM Poultry Chicken meat importation Mutual agreement After 6 month suspension period Business ceasing Material breach Insolvency • • • Farm 53 – 66 • • • • • Subject to written consent by Bartter

ermination events: Suspension events (continued) Property T Change of control/ Change of control/ Assignment: For personal use only use Fee to be negotiated with processor only. 1. Forecast personal For 74 Explanatory MemorandumFor personal use only under RFMP’s financialstatements. assumptions fortheforecast periodare alsoshown Sensitivity analysisonprofit anddistributionsforkey not guaranteed. indicative offuture performanceandRFMPreturns are Unitholders are reminded thatpastperformanceisnot forecast financialinformationcanorwillbeachieved. material. Accordingly, RFMcannotguaranteethatthe financial informationandthesedifferences maybe therefore, actualresults maydiffer from theforecast circumstances oftendonotoccurasanticipatedand, of whichare outsidethecontrol ofRFM.Eventsand subject touncertaintyandunexpectedevents,many The forecast financial informationisbyitsverynature financial statements. controlled andmay lead toadeviationfrom theforecast should beaware that unforeseen eventscannotbe to bereasonable at the timeofpreparation, Unitholders Whilst theDirectors of RFMconsiderallkeyassumptions These eventsoractionsmaynottakeplace. events andactions,whichRFMexpectstotakeplace. conditions andanumberofassumptionsregarding future assessment ofthepresent economicandoperating The forecast financial informationisbasedonRFM’s identified inSection12.19. In addition,considerationshouldalsobegiventokeyrisks read inconjunction withthesummaryofkeyassumptions. The financialstatementssetoutinthissectionshouldbe statements. These are collectively knownasforecast financial • • The financialinformationinthissectionincludes: information financial forecast Historical and as issuedbytheAustralianAccountingStandards Board. on thebasisrequired byAustralianAccounting Standards The financialinformationinthissectionhasbeenprepared of preparation Basis This sectionincludesfinancialinformationonRFMP. 12.10 Financialinforma 30 Forecast Statements ofFinancialPositionasat and 30 June 2014,and12monthsending2015; and ChangesinNetAssetsforthe9monthsending Forecast StatementsofComprehensive Income

September 2013,30June2014and2015. tion • • • • • • • statement. and specialassumptionsattheendofeachfinancial 12.5 andshouldberead inconjunctionwiththenotes relevant totheforecast provided inFigures 12.4and The followingbestestimategeneralassumptionsare assumptions General Net Assets, andStatementofFinancialPositionforRFMP. Statement ofComprehensive IncomeandChangesin Detailed inFigures 12.4 and12.5are theforecast statements financial forecast RFM Poultry relating toRFMP. No materialamendmenttoanykeyagreements legislation; and No materialchangestotheAustralianincometax during theforecast period; reporting requirements, andtheCorporationsAct Accounting Standards, othermandatoryprofessional No materialchangesinapplicableAustralian RFMP operates; regulatory environment inthejurisdictions inwhich No specificchangetothelegislative regime and specific assumptions; CPI of2.5%p.a.unlessnotedinthenotesand All leasesare classifiedasoperatingleases; Figures 12.2and12.3; are performedinaccordance withtheterms setoutin All grower andleaseagreements are enforceable and RFM Poultry 75 S12

76 (46) 121 759 (634) (325) (683) $’000 1,084 (2,096) 24,983 25,104 (10,941) (10,302) orecast Forecast 12 mths to 30 June 2015

86 75 (36) 750 (394) (321) (675) $’000 1,071 (7,497) (7,592) (1,423) 17,927 18,013 orecast Forecast 9 mths to 30 June 2014 1 2 3 4 5 6 Notes

Operating costs include direct operating costs, administration and compliance costs assumed to index in the range Operating costs include direct of 1.75% to 2.5% p.a. and assumed to index at 1.5% p.a. Refer to lease set under the lease agreements Rental payments to RFMP are set out in Section 12.8. agreement and maintenance. Some items of actual on the facilities is assumed to be repairs incurred All expenditure capitalised in the balance sheet under accounting standards, may be classified as capital expenditure expenditure is assumed to be indexed at 2.5% p.a. Expenditure and depreciated. on plant and equipment, calculated on a straight-line basis over the useful life. Includes depreciation FY 2015 distributions franking inclusive of FY 2014 distributions franking inclusive of 9.93 cents per Unit declared; trading RFMP’s from revenue Distributions have been calculated based upon forecast 14.35 cents per Unit declared. expenses and amounts set aside for cash reserves. activities less forecast Grower fees relate to services provided pursuant to growing contracts with Bartter Enterprises. Grower fees have fees have with Bartter Enterprises. Grower contracts pursuant to growing to services provided fees relate Grower mechanism fee review and the standard in place contracts which are growing based upon current been forecast specified in the contracts. otal revenue Revenue income fee Grower Interest T Operating and other costs Rental payments Repairs and maintenance Management fees & asset revaluation Depreciation income tax before Net profit Income tax expense after income tax Net profit Distributions paid to Unitholders Change in net assets For personal use only use 3. 4. personal 5. 6. For 2. igure 12.4: Notes to Figure 1. Figure 12.4: RFM Poultry Statement of Comprehensive Income and Changes Income Assets Net in Poultry Comprehensive RFM of Statement 12.4: Figure 76 Explanatory MemorandumFor personal use only Figure 12.7: reinvested distributions are assuming returns Forecast Position of Financial Statement 12.5: RFM Poultry Figure Figure 12.6: RFM Poultry keymetrics 12.6:Figure RFM Poultry financial 3. 2. 1. Notes toFigure 12.5: T Franking Forecast NAV T Forecast declared Distributions(includingfranking)perUnit Growth Forecast declared Distributions(excludingfranking)perUnit Income Financial metrics NET ASSETS TOT Other non-current liabilities Bank facilities Payables andaccruals LIABILITIES TOT Other non-current assets Other current assets Cash ASSETS otal Return otal Other non-current liabilities includedeferred taxliabilities,andprovisions for distributions. Trade payablesare generallyon30-90daytermsandare notinterest bearing. from processor. Other current assets includeaccruedrevenue relating toincomplete chickenbatchesandtradereceivables due AL LIABILITIES AL ASSETS Notes 1 3 2 1 October2013 Pro forma 4,411 6,800 1,300 1,070 8,100 3,402 $’000 9 monthsending 184 287 46 30 June2014

$1.0110 $0.0993 $0.0993 FY 2014 11.38% 11.38% 10.28% 30 June2014 0.00% 1.10% Forecast

6,875 2,621 2,235 9,496 4,157 5,068 $’000 340 271 46

12 monthsending 30 June2015 30 June2015 Forecast $1.0222 $0.1435 $0.1004 FY 2015 16.11% 11.45% 10.34% 4.66% 1.10% 6,952 2,313 1,971 9,265 4,496 4,563 $’000 296 206 46

RFM Poultry 77 S12 36.1% 36.9% -54.2% -36.1% -36.9% -55.3% per Unit per Unit change in change in Percentage Percentage Percentage Percentage distributions distributions 0.0359 0.0551 (0.0538) (0.0359) (0.0551) (0.0827) $ per Unit $ per Unit Change in Change in distributions distributions 244 375 (366) (244) (375) (562) $’000 $’000 in total in total Change Change distributions distributions 171 262 (256) (171) (262) (394) $’000 $’000 net profit net profit RFMP holds cash reserves that may be used to absorb that may cash reserves RFMP holds 12.8 in Figures presented in distributions the reduction and 12.9. analysis below demonstrates Whilst the sensitivity only represents this investment RFMP, potential volatility of 12.8 and 12.9 Figures CIF holdings. 13% of the current with the RFF sensitivity in conjunction should be read 9.23 and 9.24. 9 Figure in Section analysis presented Change in Change in 244 375 (366) (244) $’000 (375) (562) $’000 Amount Amount $’000 $’000 4,876 4,876 4,876 7,497 7,497 7,497 Assumption Assumption

Parenthesis indicate a negative value. Parenthesis Parenthesis indicate a negative value. Parenthesis 7.5% increase in variable 7.5% increase expenses 5% increase in variable 5% increase expenses 5% reduction in variable 5% reduction expenses 5% reduction in variable 5% reduction expenses 5% increase in variable 5% increase expenses 7.5% increase in variable 7.5% increase expenses For personal use only use personal 12.9 Notes to Figure 1. For Figure 12.9: RFM Poultry sensitivity analysis for the 12 months ending 30 2015 ending June months Poultry RFM sensitivity 12.9: Figure 12 the analysis for igure 12.8 Notes to Figure 1. Figure 12.8: RFM Poultry RFM 30 12.8: sensitivity 2014 Figure ending June 9 months the analysis for The financial forecast is based on a number of best is based on a forecast The financial subject to change. which are estimate assumptions 12.9 is a summary of the key 12.8 and Set out in Figures and distributions profit net sensitivities of the forecast 30 June 2014, and 12 months for the 9 months ending being change in variable expenses ending 30 June 2015, expenses, and agribusiness direct (gas and electricity, and maintenance). repairs 78 Explanatory MemorandumFor personal use only Figure 12.10: RFMP Fees Costs and and othercostsassociatedwithinvestinginRFMP. This sectionprovides detailedinformationaboutthefees 12.11 FeesandCosts T investment The feetoopenyour Establishment fee investment. contributed toyour The feeoneachamount Contribution fee take outofyourinvestment The feeoneachamountyou fee Withdrawal investment The feetocloseyour Termination fee ype offeeorcost DID YOU KNOW? Warning Consumer Advisory be paidbyRFMP. Figure 12.10isacomparison ofthecurrent feesandcostspayablebyCIFthoseexpectedto fee calculatortohelpyoucheckoutdifferent feeoptions. Securities andInvestmentsCommission(ASIC)website(www.moneysmart.gov.au) hasamanagedinvestment If youwouldliketofindoutmore, orseetheimpactoffeesbasedonyourowncircumstances, theAustralian TO MORE FIND OUT or yourfinancialadviser. You maybeabletonegotiatepaylowercontributionfeesandmanagementcostswhere applicable.AskRFM member servicesjustifyhigherfeesandcosts. You shouldconsiderwhetherfeatures suchassuperiorinvestmentperformanceortheprovision ofbetter return byupto20%overa30yearperiod(forexample,reduce itfrom $100,000to$80,000). For example,totalannualfeesandcostsof2%yourfundbalanceratherthan1%couldreduce yourfinal term returns. Small differences inbothinvestment performanceandfeescostscanhaveasubstantialimpactonyourlong CIF ees Nil contributed Up to3%oftheamount a discounttoNAV spread andmayincorporate price incorporatesasell Nil, howevertheredemption Nil other costsassociatedwithinvestinginRFMP. section provides detailedinformationaboutthefeesand section. FollowingtheConsumerAdvisoryWarning, this Consumer AdvisoryWarning atthebeginningofthis By law, RFMmustprovide youwiththefollowing of costs fees and Explanation RFMP Amount Nil Nil Nil Nil How andwhenpaid Not applicable Not applicable Not applicable Not applicable RFM Poultry 79 S12 Not applicable Not applicable Not applicable Costs paid from RFMP as Costs paid from the and when RFM incurs costs Not applicable ow and when paid How and when Nil Nil Nil Estimated at 3.23% of Estimated at 3.23% of the the net asset value of RFMP Nil RFMP Amount Indirect Cost Ratio Cost Ratio (ICR) for RFMP is the ratio of the The Indirect not deducted directly fund management costs that are account, divided by the Unitholder’s the RFMP’s from includes RFMP average net assets. The ICR calculation the fund, fund management fees and costs to administer investor services, fund audit, compliance, sales provide and marketing, and legal fees. costs deducted from no direct are there Under this offer account. an individual Unitholder’s is estimated the RFMP ICR For the 2014 financial year, at 3.23%. 12.13 Example of annual fees and costs for RFMP 12.11 gives an example of how the fees and other Figure your investment over a one year period. costs can affect with this product should use this table to compare You other managed investment products. tion of Nil Nil 2.00% of the total purchase 2.00% of the total purchase price of the CIF asset 15% (excluding GST) of any 15% (excluding GST) that CIF distribution return exceeds 15% per annum Estimated at 4.23% of the net Estimated at 4.23% of asset value of the CIF 1.25% per annum of gross gross 1.25% per annum of assets CIF Fees

ype of fee or cost ype of fee Service Fees Investment switching fee The fee for changing investment options Development fee Acquisition fee Performance Fee Fund expenses Management Costs managing your investment The fees and costs for Fund management fee T For personal use only use operating expensesFund constitution, RFM must pay all expenses Under RFMP’s to the operation of RFMP from in relation incurred properly assets. These expenses may be paid directly RFMP’s assets or alternatively paid by RFM and then RFMP’s from assets. Operating expenses may RFMP’s from recovered include abnormal items such as the cost of Unitholder meetings, changing the constitution or pursuing legal The operating expenses disclosed in Sections proceedings. an estimate (based on historical trading 12.10 and 12.11 are personal in of the operating expenses likely to be incurred results) to the operation of RFMP for the financial year relation ending 30 June 2014. They should not be considered and reasonable rights to pay all proper as limiting RFM’s to the operation of RFMP from in relation expenses incurred assets. Actual operating expenses may be higher RFMP’s than the amount disclosed above in Section 12.10. For 12.12 Additional explana fees and costs 80 Explanatory MemorandumFor personal use only Figure 12.12: fees allowed Maximum under RFMP constitution provides RFMPwith theseservices,RFMwillcharge and accountingservices.Where RFMorarelated entity procurement services,contractmanagementandfinance work undertaken.Theservicesincludefarmmanagement, RFM willchargeRFMPanassetmanagementfeefor arm’s length fees 12.14 Commercial Figure 12.11: costs fees and of annual Example 5. 4. 3. 2. 1. Notes toFigure 12.11 Acquisition fee Farm managementfee Performance bonus Management fee Contribution fee Fee Contribution fees Example Equals costofthefund Plus managementcosts set outinSection12.16RFMPhasonlyoneclassofUnits.Noinvestmentoptionsapply. This disclosure isprescribed undertheCorporationsRegulations.Feeswillbeonlynegotiableincircumstances of calculatingmanagementcostsinthisexample. It isarequirement oftheCorporationsRegulationsthatadditional$5,000investedisexcludedforpurposes operating expenses.Additionalfeesandcostsmaybecharged. The managementcostsdisclosedaboveincorporateanestimateofInvestor’s contributiontowards the forecast investment balancewillvarydailyandfeeswechargeare baseduponthegross assetvaluewillalsofluctuatedaily. The managementcostsdisclosedaboveincludeanestimateforoperatingexpenses.Inpractice,youractual contribution fees. This exampleisrequired undertheCorporationsRegulations, notwithstanding thatRFMPdoesnotcharge It isarequirement oftheCorporationsRegulations thattheaboveexampleassumesabalanceof$50,000. 2% ofthetotalpurchase price ofanassetpurchased bytheFund. 5% ofannualoperatingexpenses equal to15%perannumofthetotalApplicationPriceUnitson issueduringthatFinancialYear onEquityinthatFinancialYear15% oftheamountbywhichReturn exceedsanamount 2.5% paofvaluethegross assetvalueofRFMP 3% oftheamountinvested(notapplicabletothisOffer) Amout Nil 3.23%

Not applicable Balance of$50,000withacontribution$5,000duringyear additional $5,000attheendofthatyear, youwillbechargedafeeof:$1,615 If youhadaninvestmentof$50,000atthebeginningyearandputin And, forevery$50,000youhaveinRFFwillbecharged$1,615eachyear you negotiatewithyourfundorfinancialadviser. What itcostsyouwilldependontheinvestmentoptionchooseandfees 2 recovery RFM isentitledtochargeundertheConstitution. of operatingexpenses.Thefeeisseparatefrom thecost RFMP anassetmanagementfeethatisequivalentto5% are setoutin Figure 12.12. The maximumfeesallowedundertheRFMPconstitution 12.15 Maximumfees 5 1 4 3 RFM Poultry 81 S12 actors sk f 12.19 Ri involves risk. like any investment, An investment in RFMP, between commercial divided These risks can be broadly risks. risks and agricultural used in generating the forecasts Whilst the assumptions considered Memorandum are within this Explanatory these risk factors could affect a number of reasonable, Some risk factors are forecasts. the achievement of the of RFM. outside the control the risk factors, however this some of Detailed below are list of all the risks. Unitholders should is not an exhaustive of RFMP. make their own independent assessment exposed to all currently Existing Unitholders in CIF are exception of of the risks outlined in this section, with the the first item. Summary net assets to the current million – compared $6.8 RFMP will have initial net assets of approximately business of the same scale. a poultry growing in CIF of $53.6 million and will continue to operate volatile than those RFMP can be expected to be more of the operating results For this reason, historically experienced by CIF. context of the totality of the Revaluation proposal. CIF Unitholders should evaluate this within the in full or may not be recoverable in facilities maintenance and operating costs expenditure Increases Contracts. mechanism under the Growing fee review in part under the standard are costs that may lead to increased standards The adoption by Baiada of higher animal welfare costs may not be included in the fee. The increased in the growing by an increase not recoverable or not at all. fee until the subsequent year, growing performance penalties or claims. may also expose RFMP to increased The adoption of the standards whether real value of your investment and specifically Inflation risk is the uncertainty over the future capital component of the RFMP at least in line with inflation. The will increase or profitability revenue The RFMP lease is indexation of 2.25% per annum. subject to standard contracts are growing indexation of 2.25% per annum. subject to standard reviews and the market results achieved by than the is the risk that inflation will be more There indexing. standard Baiada is is a risk that a counterpart may default on its contractual obligations to RFMP. There of making and has a sound track record to chicken growing in relation sole counterpart RFMP’s in place. payments within the contractual terms currently the legal owner. remains contracts whilst RFM RFMP will be the beneficiary of the chicken growing being no is a risk Baiada may attempt to take issue with the arrangement despite there There and put the change to the contracts. Any dispute with Baiada may be time consuming and costly contracts at risk. current

Commercial risks Commercial Reduced capitalisation and operational greater leverage costs Increased standards Welfare Inflation Counterpart risk Risk For personal use only use Poultry RFM in (RFMP) investing of Risks 12.13: Figure personal For Government taxes such as stamp duty and GST Fees in this Section 12 are will apply as appropriate. of GST. disclosed based upon the net effect 12.18 Government charges and GST Subject to the limitation contained in RFMP’s constitution, constitution, contained in RFMP’s Subject to the limitation of fees without investors’ the amount RFM may increase prior notice of consent. Investors will be given 30 days fee structure. any changes to RFMP’s cture 12.17 Changes to fee stru RFM may offer wholesale investors a discount on wholesale investors RFM may offer them to RFM for managing their the fees payable by will be individually negotiated investment. Any discounts based on the amount invested. with wholesale investors wholesale where discretion this RFM would only exercise sum into RFMP. investing a significant investors were vestors lesale in 12.16 Who 82 Explanatory MemorandumFor personal use only Farm performance Disease Diversification risk Risk contracts. The chickengrowth ratesdo notaffect thebasefeethatRFMPreceives underthechickengrowing Lethbridge farms performance adjustmentwasanetbonusof$0.370million. to 20%ofthegrower feeunder thecontract;howeverduring2012financialyearactual adjustment tothefeebasedonperformanceofGriffithfarms. Thisadjustmentislimited Under thechickengrowing contracts,RFMPwillreceive abasegrowing feefrom Baiada,withan Griffith farms and technologies. This risk is mitigated because farm management implements the appropriate management practices growing contracts. There isariskthatthepoultryfarmswillnotperformtostandards required underthechicken would beshared betweenBaiadaandRFMP. provisionsgovernment forcompensation.Thiscompensation,dependingonthecircumstances, In theeventofcompulsoryslaughterawholeflockduetoquarantine regulations, there are occurring atanyofRFMP’s farms. guidelines enforcedfurtherreduce bytheAustraliangovernment, chanceofadiseaseoutbreak The biosecuritymeasures thatRFMandBaiadahaveinplace,alongwiththestrictquarantine • • • • • • • and impactofadiseaseincluding: RFMP andpoultrygrowers andprocessors undertakeanumberofprecautions toreduce therisk experienced personnel. Disease riskismitigatedbystrictquarantinemeasures, environmental conditioncontrol, and A diseaseoutbreak couldimpactdemandforchickenmeatandleadtoanoversupply. restrictions. Seeotherrisk:“Importedchickenmeat”. diseasecouldalsoimpactAustralia’sVirulent abilitytomaintainbio-securitybasedimport inoperable untilthefarmisdeclared diseasefree. In addition,suchadiseasecouldcausesuspensioneventandresult inthatfarmorfarmsbeing brought againstRFMPiftheintroduction ofthediseasewasasaresult ofmanagementpractices. suffer adirect lossasthebirds are ownedbyBaiada,howeverthere couldbeasecondaryclaim Disease outbreaks couldresult intherequirement toslaughterbirds. InthiseventRFMPwouldnot increase operationalcosts,reducing profit margins. canaffectmortality whichinturn grower payments.Inaddition,thepresence ofdiseasecan Chicken healthcanbeaffected byarangeofdiseasesthatcanreduce feedconversionorincrease poultry industrymayimpactRFMPandduetoitssinglerevenue stream, thiswouldimpactreturns. RFMP’s incomewillbederivedexclusivelyfrom theoperationofpoultryfarms.Adisruptionwithin Summary employees mustobservethestrictbiosecurityarrangements. the shedsare washeddownandsanitisedbetweeneachbatchofchickens; each RFMPfarmisfencedtocontrol access; sheds accessingandinfectingthechickensinsidesheds; all poultryshedsare completelyclosedoff, removing thepossibilityofbirds from outsidethe chicken feedisheattreated; transmission; the waterusedfordrinkingandcoolinginshedsischlorinatedtoprevent disease national standards; both RFMandBaiadamaintainalevelofstrictbiosecuritycontrol whicheithermeetsorexceeds RFM Poultry 83 S12 at RFMP’s discretion if the farm performance is significantly below Performance Index Factor (PIF); if the farm performance is significantly below Performance discretion at RFMP’s and of law. of material contract terms or breach without notice for negligence, breach acts of God; acts of public enemies, sabotage, civil disturbances; riots; wars, blockades, insurrections, epidemics; conditions; weather wash-outs, extreme landslides, lightning, earthquakes, storms, cyclones, fires, explosions; industrial disputes by Bartter Enterprises employees; and obligations under the to the grower’s livestock husbandry issues (as such issues relate contract). growing Summary Canned the importation of chicken meat into Australia. restrict bio-security requirements Current meat diseases. Import nine prescribed from imported and this must be free chicken meat may be these diseases. domestic poultry flock from Australia’s to protect designed are restrictions in the event that prescribed could be removed bio-security restrictions is a risk that Australia’s There Australia. diseases entered cost of chicken meat in years has driven down the market over recent Competition in the domestic against cheaper imports. some protection which provides terms, real be imported chicken could unlikely that fresh chicken meat, it is life of fresh Due to the short shelf meat. Due to the chicken consumption is fresh chicken meat Over 90% of Australia’s by sea freight. by air freight. chicken meat can be imported it is unlikely that fresh low cost of chicken meat, of Australia’s would displace a proportion chicken meat Nevertheless the importation of frozen With the exception of capacity. chicken growing and lead to an oversupply of broiler production does not constitute a suspension event under the the Lethbridge farm, the importation of chicken contracts. growing on the majority of farms. Instead, to work employ staff RFM (on behalf of RFMP) does not directly The in each case to a contract farm manager. RFM contracts the farm management services corporate overheads. operational risk and contractor model aims to reduce on its contractual obligations to is a risk that a contract farm manager may default There and Officers Liability insurance contract managers to hold Directors RFMP requires RFMP. employees, Public Liability insurance and workers’ against negligence by the manager or their compensation insurance. RFMP with the following termination rights: would provide In addition, the contractor agreement • • entity of RFMP, contracts, if RFM ceases to be the responsible Under the Lethbridge growing contracts. the growing Bartter Enterprises has the right to terminate entity of RFMP then CIF if RFM ceases to be the responsible CIF to RFMP, Under the leases from contracts. may terminate the growing fulfilling obligations under the a party from is a risk that a suspension event will prevent There contracts. chicken growing fulfil an Under the contracts, an event is a suspension event if, because of the event, a party cannot the event by obligation under the contract when it has to and the party could not have prevented care. taking reasonable then the written notice is given to the other party, If a suspension event occurs, and the required until the party is able to the date the notice is given obligation under the contract is suspended from perform the obligation This period is called the suspension period. for the Griffith contracts defined as ‘suspension events’ under the chicken growing The following are farms and for the Lethbridge farms: • • • • • • • •

Imported chicken meat Contract farm managers Change of control Agricultural and operational risks Suspension events under the chicken contracts growing Risk For personal use only use personal For 84 Explanatory MemorandumFor personal use only operations to business Interruption Climatic conditions (continued) growing contracts under thechicken Suspension events Risk The insurancedoesnotcovercontractualdisputesorinsolvencyevents. • • following eventswhenthoseresult inalossofincometoRFMP: interruption sub-limitof$5milliononanyonelossandlocation.Theinsurancecoversthe The businessinterruptionsectionofthepolicyprovides upto$14.6millioncoverwithabusiness RFMP hasbusinessinterruptioninsurancewithinRFM’s IndustrialSpecialRisksinsurancepolicy. • • • Like allbusinesses,agriculturaloperationssuchasRFMPfacerisksrelating to: RFMP mitigatesthisriskbyhavingshedsthatare fullyenclosedandventilated. There isariskthatweatherconditionswilladverselyaffect returnsfrom agriculturaloperations. for more thansixmonths,theneitherRFMorBaiadamayterminatethecontract. Under thecontractsforGriffithfarmsandLethbridgefarms,ifasuspensionperiodlasts • • Lethbridge farms: The followingare additional‘suspensionevents’underthechickengrowing contractsforthe Summary damage toBartterEnterprisesproperty causedbyeventsincludingfire, storm,andflood. and damage toRFMPproperty causedbyeventsincludingfire, storm,andflood(limitedto$1million); labour shortages. lack ofaccessordamagetoinfrastructure (suchasutilitiesandtransport); equipment failure; disease. chicken; and importation ofchickenproduct whichhasasignificanteffect onthedomesticdemandfor Additional information

13.1 Costs of Revaluation Figure 13.1: Register of Directors’ interests The costs to S13carry out and implement Revaluation are estimated to be approximately $3.2 million and will RFM Directors & AWF CIF RiverBank be shared prorata between all Funds on a Net Asset Family Members Units Units Units Value basis. Bryant Family 1,174,156 203,265 854,512 $1.8 million of the forecast costs will be payable by the Services Pty Funds if Revaluation is not approved, and the remaining Ltd if Revaluation proceeds. These figures are estimates and are subject to change. Boskenna Pty Ltd 493,432 201,210 Nil (Guy Paynter) Revaluation transaction costs include: (a) Advisory fees; 13.3 Related party transactions (b) Costs for the preparation of the Notice of Meeting and RFM’s External Compliance Committee monitors this Explanatory Memorandum; compliance with all constituent documents and key (c) Professional fees and costs associated with the policies including the Conflict of Interest Management dispatch of documents; and Policy. The Policy requires that before any related party transaction is considered it must: (d) Stamp duty. • be on arm’s length; and The individual Fund allocation of these costs is detailed in the notes to the Fund forecasts in Section 9. • include at least one independent valuation of an external party which confirms the terms are no more favourable to the related party 13.2 RFM Directors’ and Related Parties interest If there is doubt the transaction may not be on arm’s length, then Unitholder approval must be sought. Detailed below is the nature and extent of any interest

For personal use only use personal For now, or in the past 2 years of every director of RFM in the In accordance with its compliance plan RFM maintains promotion of RFF, or in property acquired or proposed Related Party Transactions and Conflicts of Interest to be acquired by RFF. These units were acquired on the registers. Related party transactions are subject to review same terms as available to all Unitholders. by RFM’s External Compliance Committee and are only approved by the RFM Board if they consider them to be at arm’s length. The following related party transactions currently exist for the Funds:

85 86 Explanatory MemorandumFor personal use only (g) (f) (e) (d) (c) (b) (a) assumes nofundinggoingforward. associated interest costwas$3,767.TheRFFforecast RFM AlmondFund2007borrowed $115,757,andthe 30 June2015.Fortheyearending 30June2013 funding andinterest mustberepaid bynolaterthan amounts fundedatBBSWplus4%.Allof (capped at$1,675,000).Interest ispayableonany pending operatingcostsandexpensesofthefund funds tooperatethefund,meetimmediately the RFMAlmondFund2007hasinsufficientavailable up to30June2015,where theresponsible entityof and toprovide shortfallfundingasaloanatanytime agreed totakealicenceoverallcancelledalmondlots RFM AlmondFund2007pursuanttowhichithas RiverBank hasentered intoaFundingAgreement with RiverBank paidRFMinterest of$180,000. 1 January 2015.Fortheyearending30June2013 amount of$1.8millionwhichisrepayable by RiverBank currently has aloanfrom RFMinthe benefit RFF. the arrangements.Thisagreement doesnotdirectly practices, andTreasury Estates’s Wine agreement to commercial andarm’s lengthbasedonindustry margin. Thetermsoftheagreement are considered the costofmanagingvineyards plusafixed and Murdock Viticulture willbeentitled toreceive vineyard). Theagreement isforatermof5+years, vineyards (Treasury EstateswillmanageDohnt Wine Kleinig, Geier, Hahn,AdelaideHillsandRosebank a contractbasis.Murdock Viticulture willmanage Viticulture tomanagetheviticulturaloperationson Treasury EstateshasappointedMurdock Wine shares inMurdock Viticulture. set outinSection8.2.RFMholds28%oftheissued and equipment.Furtherdetailsaboutthisloanare Murdock Viticulture withrespect tothesaleofplant AWF hasentered intoaLoanAgreement with $232,000. and theassociatedleaserevenue toStockBankwas 2013 AgLinkleasedsheeptothevalueof$1,380,000, and shareholders ofRFM.Fortheyearending30June by DavidBryantandStuartWaight, bothofficeholders Pty LtdACN153808354,acompanypartlyowned has livestockplacedonproperties leasedbyAgLink StockBank, inwhichRFFwillbeinvested,currently subsidiary ofRFM. revenue inFY2014.RFMFarmingisawhollyowned agreement provides RFFwith$34,000 oflease for grazingandcropping to30June2014.The Farming withrespect totheCollaroy property RiverBank hasentered intoalicencewithRFM subsidiary ofRFM. revenue inFY2014.RFMFarmingisawhollyowned agreement provides RFFwith$40,000 oflease grazing and cropping to30June2014.The Farming withrespect totheYilgah property for RiverBank hasentered intoalicencewithRFM transactions are setoutinSection11.4. party transaction.Therisksassociated withrelated party Unitholder approval hasnotbeensoughtforanyrelated remain withinoriginallyapproved terms. party arrangementsare reviewed annuallytoensure they with itsConflictofInterest ManagementPolicy. Related approved bytheBoard ofRFM.RFMisincompliance considered ComplianceCommitteeand bytheExternal are onan‘arm’s lengthbasis’.Eachtransaction hasbeen The Board ofRFMissatisfiedall related partytransactions (k) (j) (i) (h) with third partyOperators. the OperatingContractsentered intobyStockBank standard termsandconditionswhichare identicalto leased $55,050ofcattle.Thecontractcontainedthe StockBank inJune2013underwhichRFMFarming RFM Farmingentered intoanOperatingContractwith of theleaseare summarised inSection12.8. on commercial arm’s lengthterms.Thematerialterms The Board ofRFMhas satisfieditselfthattheleaseis RMFP andCIFwillinitiallyhavethesameUnitholders. will amounttoarelated partytransaction,eventhough The leasearrangementRFMPwillenterintowithCIF notice andpayingtwoyearsrental. and RFMcanterminatetheleaseatanytimebygiving the leaseterminatesonchangeofResponsibleEntity the RFMAlmondSchemeswithexceptionthat are onthe same basis astheRiverBankleaseswith at 2.5%perannum.Theleaserental andotherterms 1 July2013andthestartingrent is$205,800indexed to RFM.Theleaseisfora15yearperiodcommencing RiverBank hasleased42hectares ofalmondorchards funding goingforward. cost was$11,720.TheRFFforecast assumesno 2008 borrowed $360,136, andtheassociatedinterest For theyearending30June2013RFMAlmondFund iii. ii. i. and toprovide shortfallfunding: agreed totakealicenceoverallcancelledalmondlots RFM AlmondFund2008pursuanttowhichithas RiverBank hasentered intoaFundingAgreement with 30 June2015. interest mustberepaid bynolaterthan BBSW plus4%.Allamountsoffundingand Interest ispayableonanyamountsfundedat at $2,657,600). operating costsandexpensesofthefund(capped operate thefund,tomeetimmediatelypending Fund 2008hasinsufficientavailablefundsto where theresponsible entityofthe RFMAlmond as aloanfrom 1July2012to30June2015, services (cappedat$2million);and Almond Fund2008inproviding themanagement incurred bytheresponsible entityofthe RFM management feescollectedandtheactualcosts up to30June2012,foranyshortfallinthe Additional information 87 S13 ) are managed rusts) are 13.8 Trust Constitution Each of RFF and RFMP (Listing T ASIC with investment schemes which have been registered with Chapter 5C of the Corporations Act. in accordance have each been established in the form The Listing Trusts trust constitution. of a unit trust pursuant to the relevant entity of each of the Listing Trusts RFM is the responsible and the holder of AFSL No 226701 which permits it to operate the Listing Trusts. rights and obligations of RFM and The respective determined are Unitholders in each of the Listing Trusts constitution, the Corporations Listing Trust by the relevant Act, the ASX Listing Rules (for RFF) and the NSX Listing Rules (for RFMP), together with any exemptions and declarations issued by ASIC, and the general law relating of these laws and rules, to trusts. Neither the provisions constitution, Listing Trust on the relevant nor their effect have been summarised below. by a constitution may be amended Each Listing Trust that RFM reasonably deed executed by RFM, provided considers that the amendment will not adversely affect of Unitholders. the rights of Unitholders, or by a resolution must lodge constitution is amended, RFM If a Listing Trust a copy of the change with ASIC. The change will not be until it is lodged with ASIC. effected Signed by each of the Directors Signed by Dated: 21 October 2013 David Bryant Guy Paynter Michael Carroll tement a

McCullough Robertson Lawyers; and Horwarth Crowe For personal use only use 13.7 Directors’ St months before RFF has not raised any capital for the three the date of issue of this Explanatory Memorandum and months after the will not need to raise any capital for three are date of this Explanatory Memorandum. The Directors of the opinion RFF will have sufficient working capital to personal carry out its stated objectives. confirm this Explanatory Memorandum The Directors under contains all the information that would be required Section 1013C of the Corporations Act if the Explanatory statement disclosure a product Memorandum were for subscription the same number of units in offering RFF for which quotation will be sought is contained in the Explanatory Memorandum. For McCullough Robertson Lawyers, Crowe Horwath and McCullough Robertson Lawyers, Crowe any interest their principals and employees do not have to be proposed of RFF or any property in the promotion by RFF. acquired fees McCullough Robertson Lawyers’ professional lawyers in connection with the for acting as RFM’s in Section 15 the taxation report Merger and preparing $160,000 (including GST). Crowe approximately were the Independent fees for preparing professional Horwath’s $140,000 (excluding approximately Report were Expert’s to be undertaken by GST). Any additional work required Horwath will be McCullough Robertson Lawyers or Crowe charge out rates. charged out at their standard 13.6 Interests of experts (b) The Directors have consented to and authorised the issue have consented The Directors of this Explanatory Memorandum. have given and not withdrawn their The following parties in this Explanatory Memorandum in consent to be named named including the form and context in which they are or extracts of their reports: their reports (a) ts 13.5 Consen It is RFM’s intention that PricewaterhouseCoopers be intention that PricewaterhouseCoopers be It is RFM’s the fund when the opportunity arises appointed auditor of financial year. after the end of the 2013 itor13.4 Aud 88 Explanatory MemorandumFor personal use only of Unitsheld.Therelevant ListingTrust constitution the relevant ListingTrust’s incomebasedonthenumber each financialyear, Unitholdersare entitledtoashare in income forthefinancialyear. Onand from thelastdayof distributable incomeforthatfinancial yearisthetaxable a determinationpriortotheend ofafinancialyearthenthe Listing Trust foreachfinancialyear. IfRFMdoesnotmake RFM willdeterminethedistributableincomeofeach 13.13 Income and otherfinancialinstruments. RFM hasthepowertoissueoptionsinrespect ofUnits instruments 13.12 Optionsandfinancial the relevant listingrules. extent itispermittedtodosobyanASICexemptionand relation tosome Units,aclassofUnitsoralltothe provides forRFMto determineadifferent issuepricein of theUnits.Therelevant ListingTrust constitutionalso officially quotedtheissuepricewillbemarket calculating theissuepriceofUnits.WhileUnitsare Each ListingTrust constitutioncontainsprovisions for 13.11 IssuepriceofUnits Listing Trust constitution. RFM canissueUnitsinaccordance withtherelevant 13.10 Crea (f) (e) (d) (c) (b) (a) Unit. TherightsofUnitholdersincludeto: Unit subjecttotherightsandobligationsattachingthat the managementofthatListingTrust. AUnitholderholdsa relevant ListingTrust, nordoesitconferanyrightsover not conferanyinterest inaparticularpartorassetofthe interest intherelevant ListingTrust property. AUnitdoes of therelevant ListingTrust. EachUnitconfersanequal confers a proportionate beneficial interest inthe net assets Each ListingTrust isdividedintoUnits,eachofwhich rights 13.9 Unitsandtholders’ participate inthewindingupofrelevant ListingTrust. Listing Trust; and receive theannual auditedaccountsoftherelevant attend andvoteatmeetingsofUnitholders; Unitholders; convene, orrequest thatRFMconvene,ameetingof any permittedrefusal byRFM); transfer Units(subjecttotherelevant listingrulesand Units held; receive incomeandotherdistributionsattributableto tion ofUnits

more Unitsintherelevant ListingTrust. to reinvest someorallofthedistributionbyacquiring provides that,ifRFMapproves, Unitholders maychoose 13.16 RFM’spowersand duties finally determinedbythecourts. ultimate liabilityofUnitholdersinunittrustshasnotbeen the relevant ListingTrust exceeditsassets.However, the or anycreditor ofRFMintheeventthatliabilities no UnitholderwillbepersonallyliabletoindemnifyRFM for theissueofUnits.Thisprovision seekstoensure that limited totheaggregate ofamountspaidbytheUnitholder Unitholder’s liabilitytoRFMortherelevant ListingTrust is The relevant ListingTrust constitutionstatesthateach 13.15 LiabilityofUnitholders Listing Trust islisted. A Unitholdercannotredeem Unitswhiletherelevant 13.14 Noredemption compliance committee. are RFMmayatitsdiscretion, external, establisha are considered Where external. amajorityofdirectors a compliancecommitteeiflessthanhalfofthedirectors with ASICandisauditedannually. RFMmustestablish constitution. Eachcomplianceplanhasbeenlodged with theCorporationsActandrelevant ListingTrust the keywaysinwhichRFMwillensure compliance be). RFMhasprepared acomplianceplansettingout to UnitholdersandtheASXorNSX(ascasemay Trust. Theseaccountsmustbeauditedyearlyandsent RFM mustkeeptrueaccountsoftherelevant Listing and anyadditionalobligationscontainedinthisdocument. NSX ListingRules(forRFMP),thegenerallawinAustralia Corporations Act,theASXListingRules(forRFF)and comply withtherelevant ListingTrust constitution,the discharging thisresponsibility, RFMisrequired to Listing Trust, includingallinvestmentdecisions.In administration andmanagementofeachtherelevant RFM isresponsible for theproper andefficient and functions. of itspowers,aswelladviserstoassistitwithduties (including custodians)toperformanyactorexercise any or fetteranypower. RFMmayappointdelegatesoragents swap arrangements,enterintojointventure arrangements relevant Listing Trust, enterintoderivativeandcurrency indemnity, provide anyguarantee,applyforlistingofthe money, encumberanyasset,incurliability, giveany dispose ofanyreal or personalproperty, borrow raise of itspowers,RFMmay, withoutlimitation,acquire or absolute andbeneficialownerofthem.Intheexercise trust, andmaymanagetheseassetsasifitwere the RFM holdstheassetsofrelevant ListingTrust on Additional information 89 S13 tion of the date specified by RFM in a notice given to the date specified by RFM in a notice given Unitholders; by Unitholders by special resolution; the date agreed or is Listing Trust the date on which the relevant of with another provision terminated in accordance constitution or by operation Listing Trust the relevant of law. administration fees; fees; keeping record audit, accounting and valuers, contractors and the engagement of agents, advisers; Unitholders; to of reports to the provision fees related and conducting Unitholder in convening fees incurred meetings; relevant costs associated with the operation of the ECC; Listing Trust’s insurance costs; and costs associated with the establishment and Listing Trust; of the relevant promotion Listing relevant the of operation of the out arising costs including transaction costs and government Trust, and costs charges, costs associated with borrowing requirements. to satisfy regulatory 13.22 Convening meetings of Unitholders RFM may convene a meeting of Unitholders at any time. A meeting of Unitholders must be convened by RFM on the lesser of Unitholders from of written requests receipt holding at least 5% of the votes or 100 of the Unitholders. 13.21 Dura each Listing Trust will terminate on the earliest to occur of Each Listing Trust the following: (a) (b) (c) proceeds the net On termination of each Listing Trust, Listing of the relevant of the property realisation from of the will be distributed among the Unitholders Trust to the number of Units in proportion Listing Trust relevant they hold. Any unpaid fees Listing Trust in the relevant payable (or to be payable) to RFM and any expenses of from the net proceeds termination will be deducted from distributed to Unitholders. they are before realisation reasonably and properly incurred in connection with the in connection with incurred properly and reasonably its obligations under or in performing Listing Trust relevant including: constitution, Listing Trust the relevant (a) (b) (c) (d) (e) (f) (g) (h) (i) tion of liability a

to the extent permitted by law, it relied in good faith it relied to the extent permitted by law, or on the services of, or information or advice from, any person appointed by RFM; purporting to be from, or by law. it acted as required deal with RFM (as responsible entity of the relevant entity of the relevant deal with RFM (as responsible or any Unitholder; Listing Trust) transaction or matter in any contract, be interested of the relevant entity with RFM (as responsible or any Unitholder; Listing Trust) entity of any other trust act as trustee or responsible or managed investment scheme; and an investment deal with any entity in which RFM holds case and in each Listing Trust on behalf of the relevant for its own benefit all RFM (or an associate) may retain from that activity. or benefits derived profits For personal use only use personal For 13.20 Fees and expenses RFM can charge management fees as summarised in Sections 10 and 12.11 of this document. In addition to these fees, and any other right of indemnity under RFM constitution or the law, Listing Trust the relevant reimbursed out of is indemnified and entitled to be for all expenses Listing Trust the assets of the relevant 13.19 RFM’s indemnity of trust, Except for its own fraud, negligence or breach relevant Listing RFM is indemnified out of the assets of the by it in against all liabilities and losses incurred Trust to the operation, administration and management relation or otherwise in connection Listing Trust of the relevant Listing Trust. with the relevant (b) This limitation of liability is subject to the Corporations Act. RFM is not liable for any loss or damage to any person RFM is not liable for any loss or damage of that matter, arising out of any matter unless, in respect with the it acted both otherwise than in accordance belief constitution and without a Listing Trust relevant with held in good faith that it was acting in accordance constitution. In any case, the Listing Trust the relevant is limited to each Listing Trust liability of RFM in relation which from Listing Trust to the assets of the relevant RFM is indemnified. RFM is not liable for any loss or damage to In particular, of in respect any person arising out of any matter where, that matter: (a) 13.18 RFM’s limit (b) (c) (d) RFM (in its personal capacity or in any capacity other than RFM (in its personal or any of Listing Trust) relevant entity of the as responsible its associates may: (a) terested dealings terested 13.17 In 90 Explanatory MemorandumFor personal use only iii. ii. i. as theywillapplytoRFF. relation tothe operationofthefollowingASXListingRules RFM hasappliedtoASXforthefollowingconfirmationsin Confirmations (b) as itbecomesknown. and theactualdistributionrateisadvisedtoASXassoon basis thatanestimateddistributionrateisadvisedtoASX when announcingadistributionandrecord dateonthe distribution neednotbeadvisedtoASXbyRFMorRFF to theextentnecessarythatrateandamountofa in respect ofcompliance withclause1ofAppendix6A as theywillapplytoRFF:awaiverfrom ListingRule6.24 to therequirements ofthefollowingASXListingRules application applytoASXforthefollowingwaiverinrelation RFM willalsoonbehalfofRFFaspartthelisting Waivers (a) confirma 13.25 ASXwaivers and obligations undertheCustodyAgreement. except where thecustodianhasfailedtoperformits connection withtheassetsofrelevant ListingTrust, any actiontakenandallclaimsliabilitiesarisingin given byRFM.ThecustodianisindemnifiedRFMfor proper instructions(assetoutintheCustodyAgreement) Custody Agreement. TheCustodianmayonlyacton the Custodian,subjecttocertainconditionsundera liable toUnitholdersandRFMisfortheactsof the ListingTrust (theCustodian).TheCustodianisnot relevant ListingTrust willbeheldbythecustodianof and thetermsofRFM’s AFSL,theassetsofeach In accordance withtheCorporationsAct,ASICpolicy 13.24 CustodyAgreement of allpayments. Joint Unitholdersare jointlyandseverallyliableinrespect 13.23 JointUnitholders statement. instead ofaprospectus orproduct disclosure requirements ofListingRule1.4andwillbesufficient that theExplanatoryMemorandumcomplieswith RFF hascompliedwithListingRule1.1condition3in Rules; and the constitutionofRFFisconsistentwithListing listed entity; RFF structure andoperationsare appropriate fora tions (e) (d) (c) (b) (a) relevant Listing Trust: potential tomateriallyimpacttheinvestmentreturns ofthe only totheextentthatRFMconsiderstheyhave RFM willtakethefollowingconsiderationsintoaccount When itmakesdecisionsabouttherelevant ListingTrust, considera ethical, andlabourst 13.27 Environment (e) (d) of theCorporationsActlistedbelow: RFM hasreceived from ASICmodifications tothesections 13.26 ASICdeclara (b) (a) complaint efficientlyandpromptly. RFMwill: In thecaseofacomplaint,RFMwillseektoresolve your (b) (a) suggestion by: You canregister acompliment,complaintor Unitholders. RFM iscommittedtoproviding excellentserviceto ices 13.28 RFMInvestorServ investment. invest furtherormaychoosetodisposeoftherelevant social orethicalfactors,RFMmaychoosenotto unacceptable labourstandards orenvironmental, the relevant ListingTrust isadverselyaffected by Therefore, where thesustainabilityorvalueof labour standards. ethical; and social; environmental; accompany theproduct disclosure statements. with section1016A(2)thatanapplicationform Paragraph 1020F(1)(a)–Exemptionfrom compliance on theregister. statements tobesenttheaddress ofUnitholders Explanatory Memorandumandproduct disclosure section 1015CandallowingtheNoticesofMeetings, Paragraph 1020F(1)(c)–Declarationmodifying address yourcomplaintwithin45days. complaint; and or inanyeventwithin14days of receiving your acknowledgement assoon reasonably practicable your complaint.RFMwillprovide thiswritten acknowledge inwritingthatwehavereceived ACT 2604. writing toRFMatLockedBag150,KINGSTON phoning RFMInvestorServiceson1800026665;or tions tions , al, social rds andards Additional information 9191 S13

the annual financial report for RFF most recently report for RFF most the annual financial lodged with ASIC; lodged with ASIC; and any half-yearly report notices given by RFF. any continuous disclosure phoning the Financial Ombudsman Service on phoning the Financial 1300 780 808; or Ombudsman Service at writing to the Financial VIC 3001. GPO Box 3, MELBOURNE RFF is a disclosing entity which is subject to regular which is subject to regular RFF is a disclosing entity only Investors have a requirements. and disclosure reporting right to obtain a copy of the following documents: • • • notices and financial statements for Continuous disclosure use posted on the RFM website. RFF are personal For g disclosure 13.29 Ongoin If you are dissatisfied with our response to your complaint, response to your with our dissatisfied If you are to the Financial Ombudsman your complaint you can refer Service by: (a) (b) 92 Explanatory MemorandumFor personal use only lease thosefarmstoRFMP. by CIF. CIFwillcontinuetoownthe17poultryfarmsand to conductthegrowing operationsformerlyconducted The subscriptionmoneyreceived byRFMPwillbeused for furtherinformationaboutRFMP). be usedtosubscribeforUnitsinRFMP(seeSection12 The CIFwillpayadistributiontoUnitholderswhich RFM Poul 14.2 St All existingRiverBankUnitholdingsreset to$1.00perUnit. (RFF) renamed RuralFundsGroup 14.1 St give effect toRevaluation. Funds, thefollowinglegalprocess willbecarriedoutto If Revaluationisapproved by Unitholdersinallthree Revaluation Mechanics of S14 age Two:IssueofUnitsin age One:RiverBank try try

Unitholders issuedtsinRFF 14.3 St responsible entity ofbothRFFandRFMP. in RFMPare listedon theNSX.RFMwillremain the The RFFUnitsare listed ontheASXandunits 14.5 St two funds. exchange fortheirUnitsinAWF, effectively mergingthe The UnitholdersofAWF willbeissuedUnitsinRFF Unitholders issuedtsinRFF 14.4 St two funds. exchange fortheirUnitsinCIF, effectively mergingthe The UnitholdersofCIFwillbeissuedUnitsinRFF age Three:CIF sted age Five:RFFisLsted age Four:AWF

S14 TaxationS15 Report For personal use only use personal For

93 94 Explanatory MemorandumFor personal use only form theRuralFundsGroup( 5 4 3 2 1 Scope ofopinion The following tax summary hasbeenpreparedforinclus -Merger Tax opinion Dear Directors DEAKIN ACT2600 2 KingStreet Level 2 FundsRural Management Limited The Directors 2 October 2013 merger ofRFM Riverbank ( announcement ofthetransaction and will notbecome op In accordance withusual practice, aclassrulin of theMerger. available to AWF Unitholders inrespect of theexchan taxation consequences oftheMerger and inparticul RFM has also requested thattheATOissueaclass scrip rollover relief fromcapitalgains tax ( distribution paid tothe Unitholders of CIFunderSt of thetax consequences of theMergerfor theUnithold consequences ofthe Merger forthe Unitholders of CIF RFM has applied tothe Australian TaxationOffice( other countries willalso need to obtain adviceonthe taxconsequences of that country. only considers theAustralian taxposition.Unitholder that are Australian taxresidents, whohold theiruni particular circumstances of everyUnitholder. Inpa However, itis notintended tobean authoritative orcomplete statement ofthe lawapplicable tothe date ofthisExplanatory Memorandum. participate in Revaluation ( The following isageneral summary of thepote RBK RFF ), RFM Chicken Income Fund ( ). Merger ). This summary isbased on thelawandpractice in effect on the CGT g will only beissuedsometime afterthepublic ) inrespect of Stage 3ofthe Merger. ntial taxconsequences fortheUnitholders who ion inthe explanatorymemorandum for theproposed age 2ofthe Merger, andthe availability of scrip for ATO ruling tothe Unitholders of AWF toconfirm the rticular, the summary isonlyrelevant to Unitholders ts on capital account for ar, whether scrip forscriprollover reliefwill be s who are residents of, or subject totaxation in, ge ofunitsin AWF forunitsinRFFunder Stage4 CIF . This ruling is expected to confirm the ATO view ers ofCIF–in particular, the taxtreatment of the ) for a classrulingregarding certain taxation erative until itispublishedintheGovernment ) andRFM Australian Wine Fund( investment purposesand AWF ), to Taxation Report 95 S15 and on the Rural and on the ioned equally across all of of all across equally ioned in this step, the comments this step, the comments in www.ato.gov.au plit’ of units in RBK. However, each RBK. However, of units in plit’ . e tax laws apply to them. The Directors are not to them. apply e tax laws rposes will be limited to the proportion of the total of the proportion limited to will be rposes a capital gain does arise does a capital gain ceived from CIF under Stage 2 of the Merger. Merger. 2 of the under Stage ceived from CIF ts in RBK should be apport be should RBK in ts (to be renamed RFF) will be split, so that the net so that split, RFF) will be (to be renamed this point RFM does not have sufficient certainty to sufficient certainty have does not RFM point this graphs 53 to 55 would apply in respect of any any of respect in apply would 55 to 53 graphs ted to unit capital, RFM believes that the ATO will the that RFM believes ted to unit capital, to the following steps in the transaction will be be will transaction in the the following steps to to 32 (CGT discount) apply equally to this gain. this to equally apply discount) (CGT 32 to CIF under Stage 2 of the Merger should be treated as should be treated 2 of the Merger CIF under Stage be taxed like a dividend and should be included in the the in included be should and dividend a like taxed be ts. Where the amount of the capital component of the of the capital component amount of the the ts. Where in their units, the cost base will reduce to nil and the the and nil to reduce will base cost the units, their in units in RFMP should be equal to the value of the to the value equal be should in RFMP units ssional advice about their particular circumstances circumstances their particular about advice ssional cannot provide tax advice to Unitholders. All Unitholders. to provide tax advice cannot . Where CIF has available franking credits, it may franking credits, available Where CIF has . n reserve) that is represented by unit capital. that is represented n reserve) l distribution, it will proportionately reduce each reduce each proportionately it will l distribution, tal for tax purposes. RFM expects that the ATO will expects that the ATO RFM tax purposes. tal for foreign tax consequences of the Merger). Merger). of the foreign tax consequences K immediately after the unit ‘split’. ‘split’. K immediately after the unit www.ruralfunds.com.au ) event should occur as a result of the ‘s occur as a result of the event should ) CGT capital - 42.26% of the distribution; and of the distribution; and capital - 42.26% of the distribution. income - 57.74%

Each Unitholders’ circumstances will determine how th circumstances will determine how Unitholders’ Each licensed under the tax agent services regime and regime services tax agent the licensed under profe seek independent are advised to Unitholders (including non-resident Unitholders on the Unitholders (including non-resident $1.00. tax ( No capital gains hold in RB will Unitholder each the units While the full amount of the distribution will be debi distribution of the amount While the full asset value of each unit on issue immediately prior immediately issue on each unit of asset value of Unitholders to the the distribution consider that of capi partly of income and partly a distribution Under Stage 1 of the Merger, all of the units in RBK units in RBK the all of 1 of the Merger, Under Stage consider that the amount treated as capital for tax pu as capital treated the amount consider that revaluatio assets the (including equity accounting CIF uni of their respect in base cost CGT investor’s To the extent the distribution is taxed as a capita is taxed distribution the extent To the RFM considers that the potential split will be approximately: be approximately: will potential split that the RFM considers (a) (b) cost base an investor’s greater than distribution is excess will give rise to a taxable capital gain. Where will give rise to a taxable capital excess To the extent that the distribution is income it will is income distribution extent that the To the year for the relevant investor’sassessable income At of the distribution. frank the income component the however If or in part. in whole may be franked, component any income of not whether as to advise in para the comments franked is income component component. franked base in respect of their Unitholder’s cost Each CIF in paragraphs 18 (capital gains and losses) and 27 and 27 and losses) 18 (capital gains in paragraphs re components) capital and income (both distribution Gazette. Once issued, copies of the class ruling will be available on on of the class ruling will be available copies issued, Gazette. Once Funds Management Limited website, Funds Management Unitholders’ existing cost base in respect of their uni base in respect existing cost Unitholders’

6 8 9 This stage is relevantTax treatment of distribution for Unitholders in CIF Stage 2 – Issue of units in RFMP Stage 2 – Issue of units 7 Stage 1 – Standardisation of units in RFF (currently RBK) of units in RFF (currently Stage 1 – Standardisation This stage is relevant for Unitholders in RBK 11 10 13 12 of units in RFMP Cost base For personal use only use personal For 96 Explanatory MemorandumFor personal use only 18 17 base Cost 16 Capital proceedsreceivedundertheScheme 15 CIF in 14 Unitholders for CGT eventondisposalofCIFUnits relevant is stage This Stage 3 – Exchange of units in CIF for units in RFF 22 21 20 ofCGTrolloverrelief Availability 19 as the netcapital gain),should beincludedinthe occurs, reducedbyanycapitallossincurredduringth The sum ofall capitalgains incurredbyaCIFUnitholder intheyear inwhichthe Implementation Date base of theCIF unitsthey own. CIF Unitholderinrespect of their acquisition or ownership of CIFunits may also be includedinthecost component of thedistribution madeunder Stage2 of reduced byanycapitaldistributionsreceivedfromCIF Generally, the taxcost baseofanyCIF units should market value of the RFF units that each CIF Unitholder will receive. The capital proceeds received for the disposal of units in CIF should be calculated by reference to the cost base units. oftheirCIF that the market value of the totalconsideration receiv Conversely, CIF Unitholders should incur acapitallosson value of the total consideration received (capital proc CIF Unitholderswillderive a capitalgain onthedispos event should occur onthe Implementation Date. The disposal of CIFunits will consti any election to apply CGT rollover relief, as described below). CIF Unitholderandtherefore Unitholders shou The benefit ofchoosingscrip forscriprollover relie of theirCIFunits are replacementunits in RFF. the disposal will bedisregarded, asthe onlyconsider If aCIFUnitholder CGTrollover toapply elects relief, a capitalgainthattheywouldotherwise makeon Merger.the co be relief to expected is rollover to make achoice whether or nottoapply CGTrollove If a CIF Unitholder would make a capital gain on the disposal of their CIF units, they should be eligible trust). company or year (subject to the satisfaction ofcertain lossrecoupment testswhichapplyiftheCIFUnitholder isa made inthe same income year orbe carried forward units inRFF) they receive as a result of the Merger. amount bywhichthereduced costbaseoftheirCIFunitsis more than thecapital proceeds (i.e. value of Alternatively, a CIFUnitholder willmakeacapitallosson nfirmed intheClassRulingissued totheCIF Unitholders inrespect of tute a CGT event for Australian resident CIF Unitholders. This CGT ld discuss this with theirtax advisers. assessable income oftheCIF f will dependontheindividualcircumstancesofeach A capitalloss may beusedtooffset a capital gain be equal to the amount paid to acquire the units, ation that the CIF Unitholders will receive in respect receive respect Unitholders in will CIF the that ation eeds) exceeds thetax cost base of their CIFunits. to offset a capitalgainmadeinfutureincome at year, orcarried forward from prioryears(known r relieftodefer that gain. The availability ofCGT ed (capitalproceeds) isless than the reduced tax inrespect of theirUnits(including thecapital the Merger). Other incidental costsincurred bya al of unitstheir themarket inCIFtotheextent thetransfer oftheirunits toRFF, equal tothe the disposal of their units in CIF to the extent Unitholder (subjectto Taxation Report 97 S15 to apply will be the date er relief to apply, the cost base or reduced base costapply,er relief the to cost te. The CGT discount will only be available once only be available discount will te. The CGT ount applies on any subsequent disposal of RFF of disposal subsequent any on applies ount choose rollover relief, they may be entitled to a entitled be relief, they may choose rollover rip for rollover scrip relief after any available capital losses are first offset first offset losses are available capital after any ementation Date, any gain or loss will be subject to Date, ementation the RFF units received by the CIF Unitholders should should Unitholders CIF RFF units received by the the determining the availability of the CGT discount, the the CGT discount, of determining the availability prevent CIF Unitholders obtaining scrip for scrip scrip for scrip obtaining Unitholders CIF prevent e CIF Unitholders in writing of this prior to the in writing of Unitholders e CIF to prevent CIF Unitholders obtaining scrip for scrip obtaining scrip for CIF Unitholders to prevent of. This tax cost base will be allocated on a will be allocated base This tax cost of. or reduced cost base for the CIF Units that were CIF Units or reduced cost base for the which the CIF Unitholders will be deemed to have the CIF Unitholders which of making the choice to obtain rollover relief. rollover relief. to obtain the choice making of taxable income of that individual or trust. trust. or individual that of income taxable itholder will be an asset for CGT purposes. will be an asset for CGT purposes. itholder nths before the Implementation Date. the Implementation nths before

A CIF Unitholder that is a complying superannuation entity may discount the capital gain by 33 1/3% by gain capital the may discount entity superannuation complying a that is A CIF Unitholder superannuation of that complying gain in the taxable income net capital the 2/3% of and include 66 entity. company. a is that Unitholder to a CIF is available No CGT discount If a CIF their Unitholder sells RFF Units after the Impl their original CIF acquired. Units were value market to the will be equal of the RFF Units the cost base is not made, scrip election If a scrip for Da at the Implementation Units RFF of the replacement CGT, as the RFF Units received by the CIF Un RFF Units received CGT, as the base reflect the cost will RFF Units their base for sc elected for who date for CIF Unitholders acquisition at least 12 months. Units for their RFF has held the CIF Unitholder For CIF Unitholders who elected for scrip for scrip rollov scrip for elected who For CIF Unitholders of 2 Stage under received distribution the of amount the by (reduced Unitholder CIF the by exchanged of the purposes For as noted above). the Merger, The CGT discount is applied to reduce the capital gain the capital reduce applied to is The CGT discount gain. capital that against 50% and capital gain by the discount a trust may of individual or the trustee an that is A CIF Unitholder in the of the net capital gain include only 50% Where rollover relief is chosen, the tax cost base of base the tax cost relief is chosen, Where rollover disposed of the CIF units cost base equal the tax units. CIF original their acquired they day the be will units RFF the acquired rollover scrip scrip for on the basis that return tax their income prepare CIF Unitholders Generally, where evidence will be sufficient this has been applied, proportionate basis across the RFF units received. received. the RFF units across basis proportionate the CGT disc whether determining For the purposes of on the date chosen, relief is rollover units where choose CIF units, can the the acquirer of as RFF, so, must notify th to do but, in order rollover relief a choice to make will not shares. RFF exchange of they choose. should of the Merger in respect rollover relief and do not a capital gain Unitholders have Where CIF ‘CGT discount’. a complying or of a trust trustee the an individual, who is Unitholder resident CIF Any Australian gain if their any capital calculating in discount claim the CGT be entitled to entity may superannuation least 12 mo acquired at were CIF Units

33 31 32 RFF Units disposal of Subsequent 35 34 29 30 23 25 27 24 26 CGT discount 28 For personal use only use personal For 98 Explanatory MemorandumFor personal use only 38 Capital proceedsreceivedundertheScheme 37 AWF in 36 Unitholders for CGT eventondisposalofCIFUnits relevant is stage This Stage 4 – Exchange of units in AWF for units in RFF 42 ofCGTrolloverrelief Availability 41 40 39 base Cost 45 44 CGT discount 43 The capital proceeds received forthedisposalofunits cost base their tax units. of AWF reduced extent that the market value of the total consider Conversely, AWF Unitholders should incur acapitallo value of the total consideration received (capital proc AWF Unitholders willderiveacapitalgain onthedispos event should occur onthe Implementation Date. The disposal of AWFunits will consti might otherwise make in respect exch make the respect otherwise of in might The AWF Unitholders willnot beeligible to applyscri Unitholder is a companyor trust). future income year(subject tothe satisfaction ofcertain lossrecoupment testswhichapplyiftheAWF capital gain made inthe same income year orbe carried forward to offset a capitalgainmadein value ofunitsinRFF)they receive asaresult of the amount by whichthereduced costbase of their Alternatively, an AWF Unitholder maymakeacapitallo as the netcapital gain),should beincludedin occurs, reducedbyanycapitallossincurredduringth The sum ofall capitalgains incurredbyanAWFUnitho cost base theyown. oftheAWFunits AWF Unitholder inrespect of theiracquisition or ow less any capital distributions receivedfrom AWFinpr Generally, the taxcost baseofanyAWF unitsshould market value of theRFFunits that each AWF Unitholder willreceiveundertheMerger. AWF Units were acquiredatleast 12mont superannuation entity may beentitledto claim theCGT discount in calculating any capital gainiftheir Any Australian residentAWF Unitholder whois an entitled to a‘CGT discount’. AWF Unitholders that derive acapitalgainon theexch Merger. RFM expects that this will be confirmed in theClass tute aCGTevent for Australian resi hs before disposalundertheMerger. ange of units inAWFforunits RFF. the assessable income of each AWF Unitholder. the Merger. Acapital lossmay be usedto offset a ation received(capitalproceeds) islessthan the individual, thetrustee of atrust or a complying nership of AWF units may also be included in the Ruling issuedtoAWF Unitholders inrespectofthe AWF unitsis more thanthe capital proceeds (i.e. p for scrip rollover to defer any capital gain they ior years. Other incidental costs incurred by an eeds) exceeds thetax cost base of their units. AWF ss onthe disposal oftheirunits inAWFtothe at year, orcarried forward from prioryears(known be equal to the amount paid to acquire the units, in AWF should be calculated by reference to the the to should reference by AWF in calculated be ange oftheir unitsinAWFfor RFF maybe lder intheyearwhich ImplementationDate ss on thetransfer oftheir units to RFF, equal to al oftheirunits inAWF totheextent themarket dent AWF Unitholders. ThisCGT Taxation Report 99 S15 entity may discount the capital gain by 33 1/3% gain by the capital entity may discount tion Date. The CGT discount will only be available be available will only The CGT discount tion Date. plementation Date, any gain or loss will be subject be or loss will Date, any gain plementation e a refund of excess franking credits, they may be they credits, excess franking e a refund of have held their units ‘at risk’ for 45 days in order to have held their units ‘at risk’ itholders’ units in RFF will be equal to the market market the to equal be will RFF in units itholders’ in which remains after any available capital losses available capital any which remains after in e form of dividends (which may be franked). franked). be may (which dividends of form e to be treated as a public trading trust for tax trading trust for as a public be treated to Unitholders should obtain their own advice on the on advice own their obtain should Unitholders be used to offset income earned in future years offset income earned be used to r the incomer year, the those excess credits franking may should give rise to any stamp duty liability for for liability duty stamp any to rise give should itholder will be an asset for CGT purposes. for asset will be an itholder F, AWF and RBK who will each become Unitholders F Unitholder that is a company. a company. is that Unitholder F will pay tax on any profit derived during the year at the corporate tax rate of 30%; and and tax rate of 30%; corporate at the during the year will pay tax on any profit derived th in may distribute the profit to Unitholders

Any dividends and franking credits received from RFF should be included in the assessable income of the the of income in the assessable should be included from RFF received credits Any dividends and franking and the fund, superannuation or complying individual a resident is Where the Unitholder Unitholder. credits available fo franking has excess Unitholder Unitholder. the to refunded be to receiv eligible are not Unitholders Whilst corporate loss that may a into convert any excess entitled to rules). loss utilisation of the satisfaction to (subject required to are generally Unitholders It is noted that above. outlined benefits be eligible for the franking once the AWF Unitholder has held their RFF Units for at least 12 months. at least 12 months. for RFF Units has held their Unitholder once the AWF Immediately after continue RFF should the Merger, RFF: that means This purposes. (a) (b) circumstances. to their these rules of application Merger stages required to effect the None of the Merger. thewith connection in stamp duty any to pay RFF has agreed In any event, Unitholders. and include 66 2/3% of the net capital gain in the taxable income of that complying superannuation superannuation of that complying in the taxable income gain net capital 2/3% of the and include 66 entity. to an AW No CGT discount is available orThe reduced base ofUn cost each base cost AWF Implementa the RFF Units at replacement value of the The CGT discount is applied to reduce the capital ga capital the reduce to applied is The CGT discount are offset. by 50% capital gain the may discount of a trust that is an individual or the trustee Unitholder An AWF trust. or individual that of income taxable the in gain capital net the of 50% only include and superannuation complying a is that Unitholder AWF An Units after the Im their RFF sells Unitholder If an AWF received by the CIF Un RFF Units to CGT as the

in RFF as a result off the Merger. 53 54 55 52 56 Dividends from RFF RFF Dividends from Stamp Duty This comment is relevant for Unitholders in CI General tax advice for all Unitholders General tax 49 51 50 46 47 48 RFF Units disposal of Subsequent For personal use only use personal For 100 Explanatory MemorandumFor personal use only Partner Hayden Bentley 60 Future statusofRFF 59 58 57 Goods and Services Tax (GST) 62 61 Yours faithfully 63 has deferred consideration ofsome other Boardre July 2014. Legislation has not yet been enacted to August 2009. On 30 July 2012, the Government announc regime formanaged investmenttrusts ( As part of the 2010-11 Budget, the Government announced its intention to introduce a new taxation relation in the to arise Merger. Where Unitholders arenot registered, or requiredto if theacquisition constitutes areduced creditacquisition. legislation. However, areduced inputtaxcrediteq individual Unitholder exceedsthefinancial acquisit or units ac existing of relate to sale that the Where Unitholders areregistered or required tobe GST will be payable on the acquisition of RFF Units. The transfer ofUnitsbyexistingUn cease tobe taxed as a tradingtrustinfuture year changes future any of theIrrespective R to if law, likely bereleasedwhen the Governme should bepermitted, having regardtothe newMI The Boardhasalso more recently considered whet public trading trust rules. profile ofthe investor. This may allow theinvestor character when distributed toinvestors. Theincome When a trust becomes aflowthrough trust, the income itholders to RFF as contemplatedw nt releases its response tothis Board of Taxation Report. MIT quisition of new units may not be recoverable if the ), in response to the Board of s andinsteadbetaxed as a flow through trust. FF’s business activities change overtime, RFF may T taxframework. Theoutcome ofthisreviewwill ions threshold as setoutin the relevantGST commendations thatmaynarrow the scope ofthe her abroaderrange ofta registeredforGST, any GSTincurred onexpenses tooffset any taxlosses ual to 75% of the GST incurred may still be available give effecttothesechanges andtheGovernment be registered forGST,no GST implications should will thenbesubjecttotax based on the income tax derived bythetrust each year should retain its ed the start date of thenewlaws would be1 ill notattractGST.Similarly, no Taxation Report released in from other activities. activities. other from x flow-through vehicles Summary of Fund constitutional amendments

16.1 Changes to CIF Constitution (f) Each Member irrevocably appoints the Manager for valuable consideration as the agent and attorney of each Member to execute all documents and do New clauseS16 4.13 Demerger of CIF all things which the Manager reasonably considers necessary or desirable to be executed or done on The Manager may: behalf of each Member to effect: (c) transfer cash from the Trust to RFM Poultry ARSN 164 i. the De-merger; and 851 218 (RFM Poultry); and ii. the Merger.

(d) distribute funds from the Trust to Members and then in the manner set out in the Explanatory Memorandum as agent and attorney of each Member apply the without needing further authority or approval from any distributed funds to acquire units in RFM Poultry, Member. in the manner set out in the Explanatory Memorandum provided the proportional interest of each Member in New Clause 4.16 Communications RFM Poultry is the same as each Member’s proportional interest in the Trust (De-merger). For the purposes of receiving communications from the Manager (including product disclosure statements, notices of meeting and other statutory communications) New Clause 4.14 Merger each Member confirms the address for receipt of that communication is their address as recorded on the The Manager may as agent and attorney of each Member Register and that the posting of any communication to transfer each Member’s units in the Trust to Rural Funds the Member at that address will be effective receipt of Management Limited as responsible entity of RFM that communication by the Member. RiverBank ARSN 112 951 578 (RFM RiverBank) in exchange for RFM as responsible entity of RFM RiverBank issuing units in RFM RiverBank to each Member at Additional definition the conversion rate as set out in the Explanatory Memorandum (Merger). Clause 25.1 is amended by inserting the following additional definition:

New Clause 4.15 Limited Power of Attorney Explanatory Memorandum means the explanatory

For personal use only use personal For memorandum which accompanied the notice of meeting (e) Each Member irrevocably appoints the Manager for of the Trust which considered and adopted the changes valuable consideration as the agent and attorney of to clauses 4.13 to 4.16 of the Trust deed. each Member to apply for membership of both RFM Poultry and RFM RiverBank in the manner disclosed in the Explanatory Memorandum.

101 102 Explanatory MemorandumFor personal use only (h) (g) New Clause 4.14 Limited Power of Attorney Memorandum (Merger). the conversionrateassetoutinExplanatory issuing unitsinRFMRiverBanktoeachMemberat exchange forRFMasresponsible entityofRFMRiverBank RiverBank ARSN112951578(RFMRiverBank)in Management Limitedasresponsible entityofRFM transfer eachMember’s unitsintheTrust toRuralFunds ofeachMember The Managermayasagentandattorney New Clause 4.13 Merger AWF Constituto 16.2 Changesto any Member. without needingfurtherauthorityorapproval from manner setoutintheExplanatoryMemorandum behalf ofeachMembertoeffect theMergerin necessary ordesirabletobeexecuteddoneon all thingswhichtheManagerreasonably considers of eachMembertoexecutealldocumentsanddo valuable considerationastheagentandattorney Each Memberirrevocably appointstheManagerfor Memorandum. RiverBank inthemannerdisclosedExplanatory of eachMembertoapplyformembershipRFM valuable considerationastheagentandattorney Each Memberirrevocably appointstheManagerfor to clauses4.134.15oftheTrust deed. of theTrust whichconsidered andadoptedthechanges memorandum whichaccompaniedthenoticeofmeeting Explanatory Memorandummeanstheexplanatory additional definition: Clause 25.1isamendedbyinsertingthefollowing Additional definition communication bytheMember. the Memberatthataddress willbeeffective receipt ofthat Register andthatthepostingofanycommunicationto communication istheiraddress asrecorded onthe each Memberconfirmstheaddress for receipt ofthat notices ofmeetingandotherstatutorycommunications) the Manager(includingproduct disclosure statements, For thepurposesofreceiving communicationsfrom New Clause 4.15 Communications Glossary

Term Definition ABN S17Australian Business Number AFSL Australian Financial Services Licence

ARSN Australian Registered Scheme Number

ASIC Australian Securities and Investments Commission

ATO Australian Taxation Office

AWF RFM Australian Wine Fund ARSN 099 573 485

ASX ASX Limited ACN 008 624 691

Baiada or Bartter Enterprises Includes both Bartter Enterprises Pty Limited ABN 22 000 451 374 and Baiada Poultry Pty Limited ABN 96 002 925 948

Business Day A day that is not a Saturday, Sunday or a public holiday in Canberra, Australian Capital Territory

CIF RFM Chicken Income Fund ARSN 105 754 461

Compliance Plan The Compliance Plan of RFF and RFMP

Corporations Act Corporations Act 2001 (Cth)

Directors The directors of RFM

ECC External Compliance Committee

Foreign Unitholders A Unitholder who has an address on the Fund register outside Australia, New Zealand, Vietnam or Hong Kong.

For personal use only use personal For Funds RFM RiverBank ARSN 112 951 578 RFM Chicken Income Fund ARSN 105 754 461 RFM Australian Wine Fund ARSN 099 573 485

FSC Financial Services Council

FY Financial Year

103 104 Explanatory MemorandumFor personal use only Unitholder orInvestor Unit Treasury Estates Wine TFN StockBank Select Harvests RFM AlmondFunds RiverBank RFMP RFM Farming RFM RFF Revaluation Responsible EntityorRFMwe REIT NSX Net AssetValue orNAV Murdock Viticulture Merger Meetings LSR Listing Trust Listing Independent Expert Implementation Date ICR Growing Contracts T erm Definition The holderofthelegaltitleUnitsinoneormore oftheFunds A UnitinoneoftheFunds,RFForRFMPascasemaybe Treasury LimitedACN004094599 EstatesVintners Wine Tax FileNumber RFM StockBankARSN153436803 Select HarvestsLimitedACN000721380 124 998527,andRFMAlmondFund2008ARSN127947960 RFM AlmondFund2006ARSN117859391, Fund 2007ARSN RFM RiverBankARSN112951578 RFM PoultryARSN112951578 RFM FarmingPtyLtdACN105842671 Rural FundsManagementLtdACN077492838 Rural FundsGroup (formerly RFMRiverBank)ARSN112951578 the Listing. AWF UnitholderstovoteontheMergerandRiverBank The proposal byRFM containedinthisExplanatoryMemorandumforCIFand Rural FundsManagementLimitedABN65077492838 Real EstateInvestmentTrust National StockExchangeofAustraliaLimitedACN000902063 Units on issue. may be. TheNAV isthenetvalueofassetsdividedbynumber A measure ofthevalue ofaUnitintheFunds,RFForRFMPascase Murdock Viticulture &AdvisoryPtyLtd ACN161344252 (AWF) withRFMRiverBank(RiverBank): Fund The mergerofRFMChickenIncomeFund(CIF)andAustralianWine The meetingsofUnitholderstoconsiderandvoteonRevaluation Loan securityratio RFF and/orRFMP Exchange The listingofRFF(currently knownasRiverBank)ontheAustralianSecurities Crowe HorwathCorporateFinanceLimitedABN95001508363 The dateofimplementationtheMerger, expected25November2013 Indirect CostRatio are setoutinFigure 12.3 The ChickenGrowing ContractswithBartterEnterprises,thedetailsofwhich Independent Experts

ReportS18 For personal use only use personal For

105 106 Explanatory MemorandumFor personal use only Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent www.crowehorwath.com.au 3567 3233 7 +61 Fax: 3555 7 3233 +61 Tel: Australia 4001 QLD Brisbane 736 Box GPO Street Edward 120 16, Level 239170 No. AFSL 363 508 001 95 ABN Ltd (Aust) Finance Corporate Horwath Crowe [email protected] 3501 3233 7 +61 Tel: Mitchell Harley contact:information please For further 2013October 10 Fund. Wine Australian RiverBank RFM of merger proposed the to In relation REPORT EXPERT’S INDEPENDENT Limited Management Funds Rural

iie t Limited , RFM Chicken Income Fund and RFM RFM and Fund Income Chicken , RFM

1 Independent Experts Report 107 S18 2 te he he he he can ber. for r on of its has a as an d send ional or , please financial financial financial financial rectly or fits to any any to fits financial e Finance may also al services fee fee has not Ltd Ltd paid to Ltd Ltd paid Ltd to paid to t. your rights. rights. your the ordinary cluding cluding GST ociated ociated with with ociated ociated with with Ltd get paid Ltd Ltd get get paid paid or: or: o provide the th the Report FOS FOS)FOS of which the person or or person the t of the Report related entities, entities, related of the Report. (Aust) (Aust) (Aust) (Aust)Ltd paid to

(Aust) (Aust) (Aust) (Aust) Ltd get paid

contact contact the Service Ombudsman Financial (FOS a mem is Ltd (Aust) Finance Corporate Horwath Crowe FOS can be contacted on 1300 780 808 or you can wri to them at GPO Box 3, Melbourne, Victoria 3001. 3001. Victoria Melbourne, 3, Box GPO at them to If you still do not get a satisfactory outcome you you outcome satisfactory a get not do still you If The Complaints Officer Officer Complaints The Ltd (Aust) Finance Corporate Horwath Crowe Street Bourke 473 9, Level 3000 VIC Melbourne (03) (03) 9522 0888, or put your complaint in writing an [email protected] at us to it Contact us and tell us about your complaint. complaint. your about us tell and us Contact If your complaint is not resolved satisfactorily thinwi three business days, please contact the Complaints Office uce an Independent Expert’s Report? uce an uceIndependent anExpert’s Independent Report?Expert’s Report?

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What What provideprovide me?to me?to What type ofWhat advice is type ofbeing adviceprovided is being to me? provided to me? What kinds of financial services are you authorised Who is responsibleWho foris responsible the forfinancial the services financial services provided me?to provided me?to What kinds of financial services are you authorised What is thepurpose of thisFinancial Services Guid What is thepurpose of thisFinancial Services Guid We are providing Independent financial Expert’s Report product in advice product connection of with by another a person issuin or fi description entity. Our of Report the inc identifies circumstances the person or of entity who has our engaged us. not engagement engaged us directly but you will be provided wi the Report due to your connection to the matters in which we have been engaged to report. WhatWhat   What kinds of provideprovide me?to me? to financial services are you authorised We are authorised to provide advice on, and deal in following following classes of financial products to wholesal clients:  in in the form of an Independent Expert’s Report (the Crowe Crowe Horwath Corporate Finance (Aust) Ltd ABN 95 0 363 has been engaged to issue general financial pro to financial 363 general issue has engaged been inclusion inclusion in a Notice of Meeting and Explanatory Me shareholders. to sent be to What type ofWhat advice is type ofbeing adviceprovided is being to me?provided to me? In the Report we provide general financial product personal financial product advice, because the advi prepared without taking into account your personal financial situation or needs. You should, before ac advice, consider the and situation appropriateness financial objectives, your to of regard the advice, What kinds of financial services are you authorised  Who is responsibleWho foris responsible the forfinancial the services financial services provided me?to provided me? to Crowe Horwath Corporate Finance (Aust) Ltd holds Au respon is and 239170 No. Licence Services Financial financial services p provided and advisory by business it the of part as and operates its and Authorise Representatives, Representatives, including authorising the distribu Financial Services Guide. Crowe Horwath Corporate (Aust) F Ltd is wholly owned by Crowe Horwath (Austra accounting practice operating as Crowe Horwath.  What is thepurpose of thisFinancial Services Guid This This Financial Services Guide is designed to help r make make a decision as to their use of the relevant gen product advice; to ensure that wecomply with our o you and w to provide licensee; services a financial on:  What is thepurpose of thisFinancial Services Guid Independent Expert’s | Report Rural Funds Managemen Dated 10 October 2013 2013 October 10 Dated Financial Services Guide For personal use only use personal For 108 Explanatory MemorandumFor personal use only ( determining in consideration fo convened unitholders of their meeting a at Transaction for F Each rs unitholde Transaction. Proposed Fund’s the approve each to whether to forwarded be to Memorandum inc for Report the commissioned voluntarily has RFM unitholde the to reasonable and fair is Transaction Horwath (THE “REPORT”) REPORT EXPERT’S RE: INDEPENDENT Directors The 2604 ACT KINGSTON 150 Bag Locked Ltd Management Funds Rural Directors of Board The Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent C Horwath Crowe appointed have RFM of Directors The ( Ltd Management Funds Rural 2013, January In Purpose of the Report 1.1. Introduction 1. o ua Fns ru. h Pooe Tascin s c is Transaction Proposed (col The AWF and CIF RBK, of unitholders from approvals Group. Funds Rural to in merged be will AWF and CIF Transaction, Proposed funds managed its ( Fund Income of three merge to plans announced CorporationsAct ) to prepare an independent expert’s report (the (the report expert’s independent an prepare to ) CIF ) and RFM Australian Wine Fund ( Fund Wine Australian RFM and ) ). ).

iie t Limited s, s, Fund the for entity responsible As Funds. the of rs r the purposes of the Corporations Act 2001 (Cth) (Cth) 2001 Act Corporations the of purposes the r lectively, the Funds the lectively, AWF RFM lusion in a Notice of Meeting and Explanatory Explanatory and Meeting of Notice a in lusion to RBK and the merged entity will be renamed renamed be will entity merged the and RBK to und’s unitholders may vote on the Proposed Proposed the on vote may unitholders und’s RM ieBn ( RiverBank RFM – ) (the (the ) ), in its capacity as responsible entity, entity, responsible as capacity its in ), onditional upon RFM obtaining relevant relevant obtaining RFM upon onditional Report roae iac (ut Ld ( Ltd (Aust) Finance orporate Proposed Transaction Proposed ) to opine whether the Proposed Proposed the whether opine to ) www.crowehorwath.com.au Fax+617 3233 3567 +61Tel 7 32333555 BrisbaneQLD 4000 Australia 16Level 120Edward Street MemberCrowe Horwath International 95ABN 001 508 363 AFSLNo.239170 CroweHorwath Corporate Finance (Aust) Ltd ). ). RBK ), RFM Chicken Chicken RFM ),

). Under the the Under ). Crowe Crowe 3 Independent Experts Report 109 S18 4

230

AWF $29m) subsidiary (net assets assets (net wholly owned wholly owned NSX).

unitholders) (formerly AWF

on issue in both CIF and AWF. In return, to unitholders

unitholders) (formerly RBK to list on the Australian Securities Exchange Group in forexchange their unitsAWF.in ed ed Transaction will be implemented. RBK will former unitholders of CIF and AWF. Post- Group forexchange in their unitsin CIF. (netassets $47m) (formerly RBK) issued be held by the current unitholders of RBK (37%), Rural Funds Group units units Group Rural Funds Rural Funds Group Group Funds Rural Group Funds Rural Rural Funds Group Group Funds Rural Group Funds Rural l l Stock Exchange of Australia ( portfolio of agricultural assets of approximately $ of agricultural assets and deriving income from rental t Limited t Limited unitholders) (formerly CIF

CIF RFMP unitholders subscribe for units in in units for unitholders CIF pays capital distribution to CIF CIF to distribution subsidiary wholly owned wholly owned

Overview Overview RBK will renamed be Rural Group Funds and the value of all existing unitsstandardised at $1.00 it. per un Issue of units inPoultry toRFM existing CIF unith olders. CIF unitholders issuedwill be units Rural in Funds AWF unitholders will be issued units in Funds Rural Listing of Rural Funds Group the ASX and on RFM Pou theltry on NSX.

CIF $7m) ($45m) ). Rural Funds Group will acquire 100% of the units CIF leases

(net assets assets (net (net assets assets (net RFM Poultry RFM PoultryRFM Poultry RFM PoultryRFM Poultry poultry farms to to farms poultry Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage ASX Figure 1: Overview of the Proposed Transaction Transaction Proposed the of Overview 1: Figure Independent Expert’s | Report Rural Funds Managemen Rural Funds Group will initially own a diversified Source:management RFM Note:Pro-forma net assets as Octoberat 1 2013. overviewAn of the Proposed Transaction implementation process is provided below. Transaction Proposed the of Overview 1: Table million. Its principal business will be the owning returns. Further information the on Proposed Transaction can foundbe in Section 2 of Report. the change its name to Rural Funds Group and will apply ( Rural Funds Group will issue units in itself to the Upon approval by the Funds’ unitholders, the Propos 1.2. Transaction Proposed of the Overview implementation, the units in Rural Funds Group will CIF (36%) and AWF (27%). In addition, former CIF RFM Poultry which will apply to unitholderslist on the Nationa will hold units in the newly created Source:management. RFM An overviewAn of the Proposed Transaction is provided below. For personal use only use personal For 110 Explanatory MemorandumFor personal use only ae dpe te prah e ot n euaoy Gui Regulatory in out set approach ( the adopted have T Proposed the whether to as opinion our forming In Approach to Our Assessment 1.3. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent Table 2: Assessment of Fairness under the Proposed T conside the as follo as AWF, and CIF, RBK of fair assessments valuation not is Transaction Proposed The Fairness of Assessment 1.4.1. detail. in findings and scope our out sets which Report the of remainder the with conjunction in read be should opinion This AWF. fair not is Transaction Proposed the opinion our In Summary of Our Opinion 1.4. Source: Crowe Horwath analysis. Croweanalysis. Horwath Source: asonable, we considered the potential potential the considered and summari are we Transaction Proposed tothe Fund in relation each of asonable, re disadv unitholders the outweigh the is advantages the to whether ction assessed Transa Transaction Proposed the of Proposed disadvantages and the advantages whether assessing In b expert the fair, being alternative. asuperior of in the absence offer the accept to shareholders not despite if, reasonable is reasonable offer an 111, Guide Regulatory Under comparing: involved approach ise b te utain euiis netet C Investments Securities Australian the by issued ) 111 Guide Regulatory Implied consideration received by CIF by unitholders received Implied consideration invalue) CIFunit a of Fair(control market value Fund Income RFM Chicken Implied consideration received by RBK by unitholders received Implied consideration value) inRBKunit a (control of Fairmarket value Bank r Rive RFM Implied consideration received by AWF unitholders AWF by received Implied consideration value) (control in AWF unit a of Fairmarket value Fund Wine RFM Australian   eeat a nt n F Puty post- Poultry RFM in unit a relevant, where and, Group Funds a mi on Transaction, Proposed the of Rural implementation in unit a of value the and basis; controlling a on Transaction, Proposed the of ntation pre-impleme AWF and RBK CIF, in unit a of value the

iie t Limited but reasonable to the unitholders of CIF, RBK and and RBK CIF, of unitholders the to reasonable but sed in Section 12.2 of the Report. Report. the of 12.2 Section in sed ransaction ws: ws: ransaction is fair to the Funds’ unitholders, we we unitholders, Funds’ the to fair is ransaction elieves that there are sufficient reasons for for reasons sufficient are there that elieves ration offered is less than the range of the the of range the than less is offered ration antages. The advantages and disadvantages disadvantages and advantages The antages. f t s ar hwvr a ofr ih as be also might offer an however, fair, is it if Value $0 $0.80 $1 $1.41 $0 $0.41 Low nority basis. basis. nority .58 .03 .35 de 111 ‘Content of Expert’s Reports’ Reports’ Expert’s of ‘Content 111 de Value $0.62 $0.84 $1.10 $1.49 $0.37 $0.43 Mid miso ( ommission Value $0.65 $0.88 $1.17 $1.56 $0.39 $0.45 High ASIC

). This This ). 5 Independent Experts Report 111 S18 6

$0.50 $0.45 $0.40 $0.35

recast distributions, forecast total return, olling basis – this involved comparing the on a minority basis to the value of a unit of and the resulting impact to the indirect cost luding access to funding; , in our opinion, reasonable as the advantages $0.30 Fair Market Value (AWF) (AWF) Value Market Fair Fair Market Value (RBK) Fair Market Value (CIF) (CIF) Value Market Fair IF, RBK and AWF. f the Report. t Limited t Limited $0.25 $0.20 $0.85 $0.95 $1.05 $1.15 $1.25 $1.35 $1.45 $1.55 $0.50 $0.55 $0.60 $0.65 $0.70 $0.75 $0.80 $0.85 $0.90

Rural Funds Group (including a unit of RFM Poultry, where relevant) on minoritya basis; financial metrics for CIF, RBK compared with financial metrics for and Rural Funds Group (and RFM Poultry, AWF where relevant) post- pre-implemen tation of implementation the of the Proposed Proposed Transaction Transaction, (e.g. fo analysis of the Proposed Transaction on a non-contr pre transaction value of a unit in CIF, RBK and AWF forecast to loan value ratios forecast and interest cover ratios); cost savings arising from the Proposed Transaction ratio; financial flexibility of the Rural Funds Group, inc potential improvements to the underlying liquidity for unitholders; the likely impact the on control of the Funds and any dilution effects; and

Fair market value of a unit in CIF (control value) (control CIF in unit a of value market Fair Fair market value of a unit in RBK (control value) (control RBK in unit a of value market Fair Fair market value of a unit in AWF (control value) (control AWF in unit a of value market Fair       Implied consideration received by RBK unitholders RBK by received consideration Implied Implied consideration received by AWF unitholders AWF by received consideration Implied Implied consideration received by CIF unitholders CIF by received consideration Implied Source: Crowe Source:Horwath analysis.Crowe Source:Horwath analysis.Crowe Figure 4: Comparison of Consideration Received and Received Consideration of Comparison 4: Figure Independent Expert’s | Report Rural Funds Managemen 1.4.2. Assessmentof Reasonableness Despite being not fair, the Proposed Transaction is outweigh the disadvantages for unitholders the of C To assess the reasonableness of significant factors: the Proposed Transaction, we have considered the following Our detailed valuation can foundbe in Section 11 o Source: Crowe Source:Horwath analysis.Crowe Figure 3: Comparison of Consideration Received and Received Consideration of Comparison 3: Figure and Received Consideration of Comparison 2: Figure For personal use only use personal For 112 Explanatory MemorandumFor personal use only are provided below. below. provided are Funds the of each for Transaction Proposed the of disadvantages and advantages the of summary A Table Table 3: SummaryAdvantages of and Disadvantages of Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent Report. the of 12.2 Section in found be can sonableness rea of assessment our of discussion detailed more A Key: Croweanalysis. Horwath Source: Taxation implications implications Taxation taxassets Deferred costs Transaction Pricingvolatility ownership incremental / Dilutionary FY15 cover Interest FY14 cover Interest ratio value to Loan funds to Access savings Cost Liquidity Diversification stability operating and Financial ratio cost Indirect returnFY15 Total returnFY14 Total FY15 Distributions FY14 Distributions ir is fa Transaction Proposed basis, the a minority On Advantages Disadvantages and Potential   advantage, × disadvantage × advantage, nitholders in accepting or rejecting the the rejecting or accepting in unitholders Transaction. Proposed Funds’ the for disadvantages and advantages other

iie t Limited Section 12.2 (f)12.2 Section (e)12.2 Section (d)12.2 Section (c)12.2 Section (c)12.2 Section (b)12.2 Section (b)12.2 Section (a)12.2 Section Cross-reference Report Section 12.2 (p)12.2 Section (o)12.2 Section (n)12.2 Section (m)12.2 Section (l)12.2 Section (k)12.2 Section (k)12.2 Section (j)12.2 Section (i)12.2 Section (h)12.2 Section (g)12.2 Section the Proposed Transaction for each Fund CIF CIF           × × × × × × × × ×

RBK             × × × × × × ×

AWF AWF              × × × × × ×

7 Independent Experts Report 113 S18 8

Each member of Crowe Horwath is a read the Proposed Transaction documentation estimates, calculations of value and fractions in ccordingly, the actual calculation of these figures n and should not be substituted for the reading of the Report are defined in the Glossary. s unless otherwise indicated.

t Limited t Limited ber of Crowe Horwath International, a Swiss verein.

Independent Expert’s | Report Rural Funds Managemen ABN 001 95 508 363 AFSL 239170 Crowe Horwath Corporate Finance (Aust) Ltd is a mem separate and independent legal entity. This letter is a summary of our analysis and opinio 1.5. Other the entire Report. Unitholders of the Funds issued by should RFM, together with this Report in full, prior to Transaction. deciding whether to approve the Proposed Capitalised terms certain and abbreviations used in For the avoidance of doubt, references to “we”, “our” or similar terms refer to Crowe Horwath contextthe requires otherwise. unless A number of figures, amounts, percentages, prices, the Report are subject to the effect of rounding. A Yours faithfully Crowe Horwath Corporate Finance (Aust) Ltd may differ from figures the set out in the Report. All references currency to are to Australian dollar For personal use only use personal For 114 Explanatory MemorandumFor personal use only 1. Guide ...... Services Financial 2 Contents of Table Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent 7. 6. 5. 4. 3. 2.

7.1. RiverBank RFM of ...... Profile 33 6.3. 6.2. 6.1. of Profile 5.4. 5.3. 5.2. 5.1. Ltd Management Funds Rural of Profile ...... 24 4.5. 4.4. 4.3. 4.2. 4.1. Overview Industry ...... 17 3.4. 3.3. 3.2. 3.1. theReport of Scope ...... 15 2.4. 2.3. 2.2. 2.1...... Transaction Proposed The 11 1.5. 1.4. 1.3. 1.2. 1.1. Introduction ...... 3

...... Summary...... Industry 23 Industry Meat ...... 22 ...... Australia in Horticulture 20 Estate Real ...... 17 Introduction ...... 17 Information on ...... Reliance and Limitations 16 Criteria ...... Evaluation 15 Requirements Regulatory ...... 15 ...... theReport of Purpose 15 Timetable Transaction Proposed ...... 14 Ratios Merger ...... 13 Transaction ...... Proposed the of Overview 11 Transaction Proposed the for Rationale ...... 11 Other ...... 8 Opinion Our of Summary ...... 5 Assessment Our to Approach ...... 5 Transaction ...... Proposed the of Overview 4 ...... theReport of Purpose 3 RBK Fund Overview Overview Fund RBK ...... 33 Performance CIF ...... 29 Assets CIF ...... 27 Overview Fund CIF ...... 26 Committee theCompliance of Members ...... Compliance...... Fund 25 Management and Board RFM ...... 24 RFM About ...... 24

RFM Chicken Income Fund Fund Income Chicken RFM ...... 26 iie t Limited 25

9 Independent Experts Report 115 10 10 S18

56 61 Poultry ...... 55 ...... Poultry t Limited t Limited ...... 71 ...... Disclaimers 71 ...... Declarations 71 ...... Consents Implied Minority Value of Rural Funds...... Group 57 Implied...... Minority Value of RFM Poultry 59 ...... Proposed Transaction Consideration 60 ...... The Proposed Transaction is Not Fair The Proposed Transaction...... is Reasonable 70 ...... Conclusion 71 ...... Qualifications . 47 ...... Rural Funds Group Pro-forma Financials 51 ...... RFM Poultry Overview 51 ...... RFM Poultry Assets 52 RFM...... Poultry Pro-Forma Financials 54 ...... Valuation Methodology 54 ...... Implied Control Value of CIF, RBK and AWF Implied Control Value of Rural Funds Group and RFM ...... 34 ...... RBK Assets 35 ...... RBK Performance 40 AWF FundOverview ...... 41 ...... AWF Assets 42 ...... AWF Performance 46 ...... Rural Funds Group Overview

13.2. 13.3. 13.4. 11.4. 11.5. 11.6. 60 ...... Evaluation of the Proposed Transaction 12.1. 12.2. 12.3. 71 ...... Qualifications, Declarations and Consents 13.1. 9.2. 51 ...... Profile of RFM Poultry 10.1. 10.2. 10.3. 54 ...... Valuation Analysis 11.1. 11.2. 11.3. 7.2. 7.3. 40 Profile of RFM Australian ...... Wine Fund 8.1. 8.2. 8.3. 46 ...... Profile of Rural Funds Group 9.1.

Independent Expert’s | Report Rural Funds Managemen ...... 77 Appendix D –...... Glossary ...... 72 ...... Appendix A RFM– Management Fees 73 Appendix B ...... – Valuation Methodologies 75 Appendix C –...... Sources of Information 13. 12. 11. 9. 10. 8.

For personal use only use personal For 116 Explanatory MemorandumFor personal use only the Proposed Transaction will proceed. proceed. will Transaction Proposed the approved, are the resolutions all that event In the of Constitutions Fund. the each to changes necessary the undertake to empowered be not will RFM as are proceed resolutions above the of any that event the In person or by proxy.by or person RFM cites the following benefits for the Proposed T the Proposed for benefits following the cites RFM future. in the or now maywho wish those to realiseincluding theirunitholders investment Funds’ the of inneeds the Funds their realise to unable presently Th so. do are to desire a Funds expressing despite investment the in unitholders the of value) (by that advised 3.5% have RFM approximately units. their for market active no currently is there and funds illiquid are They esta funds investments managed are AWF and RBK CIF, Rationale for the Proposed Transaction 2.1. Transaction Proposed The 2. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent 3 2 1 responsibl as capacity its in RFM, 2013, January In Overview the of Proposed Transaction 2.2. The Proposed Transaction is subject to the approval to the subject is Transaction Proposed The Precedent Conditions 2.2.1. toR renamed be will entity merged the and RBK into merged be will AWF and CIF Transaction, d Propose the Under AWF. and CIF RBK, – funds managed in person or by proxy.by or person in For an ordinary resolution to be approved, it must approved,it be to resolution ordinary an For 1. note See votes cas unitholders’ of75%least at by beadopted must approved,it be to resolution a special For         capital which may result in lower funding costs. costs. funding lower in result may which capital illiquid many diversi and Listed crisis, markets. equity financial access to unable global the Since : markets capital to Access base. asset a larger across costs fixed scale increased and costs Lower typically earnings of volatility the rience expe not businesses. with agricultural associated may investors thus and assets agricultural Diversification choosing. their of time at a investment their Liquidity eue erig volatility earnings Reduced counterpart. lease by and industry I wl b akd o osdr seil resolution special a consider to asked be will CIF ry resolution ry ordina an consider to asked be will unitholders RBK with RBK. merge AWF unitholders will be asked to consider a special a consider to asked be will unitholders AWF Poultry. RFM establish and RBK the merger with CIF and AWF. AWF. and CIF with the merger

unitholders with the ability to sell sell to ability the with unitholders provide will ASX the on Group Funds Rural Listing :

te netet n ua Fns ru wl b diver be will Group Funds Rural in investment the :

: Rural Funds Group will derive all of its revenue revenue its of all derive will Group Funds Rural : be adopted by at least 50% of unitholders’ votes c unitholders’ of50% least atbyadopted be ding sprea by scale of economies enables fund larger A : iie t Limited ransaction: ransaction: e Proposed Transaction aims to meet the varying varying the meet to aims Transaction Proposed e of the unitholders of CIF, RBK and AWF. AWF. and RBK CIF, of unitholders the of not approved, the Proposed Transaction will not not will Transaction Proposed the approved, not ural Funds Group. Group. Funds ural e entity, announced plans to merge three of its its of three merge to plans announced entity, e 1 fied funds tend to have increased access to access increased have to tend funds fied seeking unitholder approval to merge with with merge to approval unitholder seeking resolution blished by RFM between 2000 and 2005. 2005. and 2000 between RFM by blished 2 3 seeking unitholder approval to to approval unitholder seeking seeking unitholder approval of of approval unitholder seeking sified geographically, by by geographically, sified t at the meeting either in ast at the meeting either theat meeting ast funds have been been have funds from leasing leasing from

11 Independent Experts Report 117 S18 12 12

A- ing on issue in NSX). RFM will

ch will be used to subscribe for units in in units for subscribe to used be will ch purpose of operating the poultry farm Exchange of Australia ( stralian Real Estate Investment Trust ( lders will be issued additional units as per In addition, former CIF unitholders will hold Funds Group and will apply to list on the

issue units in itself to the former unitholders of pply to list on the National Stock Exchange of action will be implemented by way of a five stage ion. ion. Rural Funds Group will initially have approximately will will be the owning of agricultural assets and deriv ar of trading, Rural Funds Group intends to conduct t Limited t Limited StockBank) held through its subsidiary, CIF (refer Sections ). Rural Funds Group will acquire 100% of the units ASX

RBK will be renamed Rural Funds Group and the valu e of all existing units Rural Funds Group will list on the Australian Securities Exchange (proposed ASX ). AWF unitholders will be issued units in Rural Fund s Group in exchange for their units CIF unitholders will be issued units in Rural Funds Group in exchange for their units in CIF will pay a distribution to CIF unitholders whi ). RFM Poultry will be listed on the National Stock NSX

Stage 1: standardised at $1.00 per unit. Existing RBK unitho mergerthe ratios set out in Section 2.3. Stage 2: RFM Poultry using the merger ratios set out in Section 2.3. RFM Poultry will be a newly created managed investment fund established by RFM for assets the owned by Rural Funds Group. CIF will continue to own thethose farms RFM to Poultry (refer17 Section for 10 more information on RFM poultryPoultry). farms and lease Stage 3: CIF using the merger ratios set out in Section 2.3. Stage 4: Stage 5: ticker: RFF) and is expected to be classed as An Au in in AWF using the merger ratios set out in Section 2.3. REIT remain responsible the entity of RFM Poultry and Rural Funds Group.

     The five primary stages of Proposed the Transaction are as follows: Independent Expert’s | Report Rural Funds Managemen

2.2.2. Implementation Process If the resolutions are approved, the Proposed Trans process in which RBK will change its name to Rural Australian Securities Exchange ( both both CIF and AWF. In return, Rural Funds Group will CIF and AWF. Post-implementation, the unitholders units of RBK in (37%), RuraCIF l (36%) Fundsand AWF Group (27%). units will in the be newly held created by RFM Poultry the which Australia ( current will a income from rental returns. As part of its assets, Rural Funds Group (formerly RBK) will approximately initially $230 million. Its principal business own a diversified portfolio of agricultural assets of $5 $5 million investment in RFM StockBank ( 6.2.3 and 6.3.2). We also note that in the first ye on-marketan buy-back unit of approximately $1 mill An overviewAn of the Proposed Transaction processis provided below. For personal use only use personal For 118 Explanatory MemorandumFor personal use only Memorandum: Memorandum: RF by adjusted then was Fund each for NAV The 2013. Figure 5: Overview of the Proposed Transaction Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent following the v the to relates RBK for adjustment $0.3 million plus accounts, 1. audited 2013 June 30 the on based adjustments: is calculation ownership The RFM management. Source: Table 4: Ownership of Rural GroupFunds for RBK, CI audited the using ratios merger the derived has RFM Merger Ratios 2.3. Report. the 9 of Section to refer Group Funds Rural on information more For 2013. October 1 atassetsnet Pro-forma Note: RFM management. Source: g the de-merger of RFM Poultry ($6.8 million) million) ($6.8 Poultry RFM of de-merger g the comprisin NAV CIF tothe adjustment $7.2 million 2. niyNotes RBK Entity CIF W 3 &4 Total AWF poultry farms to RFM Poultry Poultry RFM Poultry RFM RFM Poultry RFM Poultry RFM RFM Poultry Poultry RFM to reflect the independent valuation of water. Thes water. of valuation independent the to reflect reversed been has water of impairment unting acco an Inaddition, terms. anticipated than better transac proposed a on based sale for held were June welfare standards ($0.4 million). million). ($0.4 standards welfare higher of adoption the for required n sheds chicke on the improvements future for provision and (net assets (net assets CIF leases CIF ($45m) ($45m) $7m) $7m) CIF CIF

1 2 wholly ownedwholly subsidiary subsidiary distribution to CIF CIF pays capitalpays CIF unitholders unitholders for units in subscribe subscribe unitholders unitholders RFMP RFMP CIF CIF 0Jn21 dutet PeimAjse A Ownership NAV Adjusted Premium Adjustments 30 Jun 2013 $00) $00) $00)($'000s) ($'000s) ($'000s) ($'000s) 131,610 NAV at NAV 47,564 53,749 30,296

(formerly CIF (formerly unitholders) unitholders) iie t Limited (7,150) (7,051) (210) 309 aluation of parcels of land and water which at 30 at 30 which water and land of parcels of aluation Rural Funds Group Rural Funds Group Rural Funds Group Rural Funds Group Rural FundsRural Groupunits F and AWF issued net asset values ( values asset net (formerly RBK) RBK) (formerly (net assets $47m) assets (net e adjustments are net of tax. tax. of net are e adjustments (formerly RBK RBK (formerly unitholders) unitholders) M, as detailed below and in the Explanatory Explanatory the in and below detailed as M, tion, which subsequently completed on completed subsequently which tion,

to unitholders to 4,513 ,1 129,072 4,513 - -

(formerly AWF (formerly unitholders) unitholders)

NAV ) of each fund at 30 June June 30 at fund each of ) Rural Funds Group 47,874 34,599 46,599 wholly ownedwholly (net assets subsidiary subsidiary $29m) AWF AWF

100% 37% 27% 36% 13 Independent Experts Report 119 S18 14 14 s of of s 1.375 0.689 0.461 Gr oup

45,043 43,844 32,554 ('000s) 18 18 November 2013 19 November 2013 1 October 2013 12 December 2013 Anticipated Date units IssueIssued Units Ratio Merger 32,748 63,662 70,663 ('000s) 1,000 AWF units AWF unitholders AWF unitholders AWF AWF unitholders AWF unitholders AWF 461 Rural FundsGroup tholders under Stages 1 to 4 of the Proposed nits, the amount of units for each Fund is as ing the AWF assets higher at than carrying based on the forecast 30 September 2013 NAV 47,008 45,186 29,247 table below shows how many units will be offered l expenditurel in FY14 required under terms the of ision for distributions of $2.5 million and the los ng a $1.00ng issue price. and RFM Poultry (NSX). (NSX). Poultry RFM and t Limited t Limited AdjustedForecast ForecastFunds Rural Poultry ect toectchange. (1,638) (1,594) (1,184) (4,416) 121,440 167,072 121,440 1,000 CIF units CIF unitholders CIF unitholders CIF CIF unitholders CIF unitholders CIF 689 Rural FundsGroup units and 107 units in RFM RFM in units 107 and units 48,646 46,780 30,431 125,857 ($'000s)($'000s) 2013 ($'000s) 30 Sep30 2013 Adjustments NAV at Sep30 Unitson Forecast NAV at NAV Forecast units

1,000 RBK units RBK unitholders RBK unitholders RBK RBK unitholders RBK unitholders RBK

value. the the lease. 1,375 Rural FundsGroup Expected admission date for Funds Rural Group (ASX) Event Unitholdermeetings heldFund for each Date for advising unitholdersthe theresultsme of etings Expected effective implementation date RBK CIF AWF Total Entity Source:management. RFM Note: timetableThis is indicative and only is subj Independent Expert’s | Report Rural Funds Managemen Table 6: Proposed Transaction Timetable Timetable Transaction Proposed 6: Table Source:management. RFM 2.4. Timetable Transaction Proposed The numbers of units issued in Rural Funds Group is Ratios Merger Transaction Proposed 6: Figure Source:management. RFM The adjustments in the above table relate to a prov 4. million $4.5 adjustment to AWF to RBK due acquir multiplied by the ownership calculation above. The existingto unitholders in each of Funds the assumi Ratios Merger 5: Table $1.9 million of deferred tax assets. The merger ratios shown number above of will issued be used units in in determining Rural the Funds Group for Transaction uni (refer Section 2.2.2). Based on 1,000 u 3. AWF adjustment of $0.2 million for future capita follows (refer also Table 52 of Report): the For personal use only use personal For 120 Explanatory MemorandumFor personal use only r te ujc o te fe sol b md assumin made be should offer the of subject the are of comparison the that states 111 Guide Regulatory m is excluded, that is, where the Proposed Proposed the where is, that excluded, is m premiu control a where basis. a minority on analysed is Transaction case the in result different th that acknowledge We Transaction. Proposed the of included therefore have we and 111 Guide Regulatory transactio control a be to Transaction Proposed the associates its or offeror the of holding percentage i offered consideration the whether of irrespective decisions. decisions. Direc Transac RFM Proposed the on opine the to expert independent However, Transaction. Proposed the to Transaction. Proposed the approve to whether to as conclusions different ch rea may Propos unitholders individual the Accordingly, Report. of cir aspects various particular on to emphasis Due different Funds. the of unitholder each accoun into taken not has circumstances. and generally particular Transaction her or his by to influenced relation the in decision for unitholder’s convened individual members An of Fund’s meeting Each a at Transaction. Transaction Proposed Proposed Act. Corporations the of the purposes the ve appro on vote to may whether unitholders determining in for unitholders Funds’ consideration the to their forwarded be to Memorandum Explanatory and Meeting of Notice a in has RFM Funds, the and for entity responsible fair As Funds. is Transaction to Proposed report the expert’s independent whether an opine prepare to Horwath Crowe appointed have RFM of directors The Purpose of the Report 3.1. Report the of Scope 3. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent cons have we Transaction Proposed the evaluating In Evaluation Criteria 3.3. commi to RFM for requirement regulatory no is There Regulatory Requirements 3.2. provides the following guidance on interpretation: interpretation: on guidance following the provides th in defined not are reasonable and fair terms The Regulatory particular, in and ASIC by issued Guides consid Due unitholders. upon impact will it how and    significant factors, unitholders should accept the accept should unitholders factors, significant other considering after believes expert the ir, fa being not despite if, reasonable be may offer an and fair; is it if reasonable is an offer consideration the of offer; the of subject the securities value the if fair is offer an

iie t Limited h Pooe Tascin ouetto my be may documentation Transaction Proposed the in the target company. While we do not consider consider not do we While company. target the in e Corporations Act however Regulatory Guide 111 Guide Regulatory however Act Corporations e srp r ah n wtot osdrto o the of consideration without and cash or scrip s eration has been given to the relevant Regulatory Regulatory relevant the to given been has eration Guide 111. 111. Guide r unde requirement a still is it 11) Section (refer n voluntarily commissioned a Report for inclusion inclusion for Report a commissioned voluntarily that securities the of value the to price offer the Crowe Horwath has considered the Proposed Proposed the considered has Horwath Crowe ssion an independent expert’s report in relation relation in report expert’s independent an ssion place may unitholders individual cumstances, t the objectives, financial situation or needs of of needs or situation financial objectives, the t offer in the absence of any higher bid. bid. higher any of absence in the offer g 100% ownership of the target company and and company target the of ownership 100% g e outcome of the fairness analysis may yield a yield may analysis fairness the of outcome e tion will assist the Funds’ unitholders with their their with unitholders Funds’ the assist will tion idered the nature of the Proposed Transaction Transaction Proposed the of nature the idered a control premium in determining the fairness fairness the determining in premium control a ed Transaction from the one adopted in our our in adopted one the from Transaction ed esnbe o h uihles f ah f the of each of unitholders the to reasonable s qa t o getr hn h vle f the of value the than greater or to equal is os osdr ht h apitet f an of appointment the that consider tors 15 Independent Experts Report 121 S18 16 16 an e: ues recast distributions, forecast total return, olling basis – this involved comparing the compliance with laws and regulations and nority nority basis. on a minority basis to the value of a unit of and the resulting impact to the indirect cost iness and trading conditions prevailing at the ansaction is fair and reasonable to the Funds’ gnificantly over relatively short periods. Should luding access to funding; gh analysis, inquiry and review for the purposes information provided by RFM and their advisers ould vary significantly. Should we become aware tion we have compared: tigation might disclose. to to assets, properties, or business interests or iss t Limited t Limited

Rural Funds Group (including a unit of RFM Poultry, where relevant) on a minority basis; financial metrics for CIF, RBK compared with financial metrics for and Rural Funds Group (and RFM Poultry, AWF where relevant) post- pre-implemen tation of implementation the of the Proposed Proposed Transaction Transaction, (e.g. fo pre transaction value of a unit in CIF, RBK and AWF forecast to loan value ratios forecast and interest cover ratios); cost savings arising from the Proposed Transaction ratio; financial flexibility of the Rural Funds Group, inc the the value of a unit in CIF, RBK and AWF pre-implementation of the Proposed Transaction, on a controlling basis; and the value of a unit in implementation Rural of the Proposed Transaction, on a mi Funds Group and, where relevant, a unit in RFM Poultry post- analysis of the Proposed Transaction on a non-contr potential improvements to the underlying liquidity for unitholders; the likely impact the on control of the Funds and any dilution effects; and other advantages and disadvantages for the Funds’ Proposed Transaction. unitholders in accepting or rejecting the assume responsibility no and offer no legal opinion or interpretation on any issue; and have generally assumed that matters such as title, contracts in place are proceedings, other than as publicly disclosed. in good standing and will remain so and that there are no legal

           To assess the reasonableness of significant factors: the Proposed Transaction, we have considered the following of factors any that alter our assumptions as given, reservewe the right to alter our Report. This Report is based on financial and non-financial which we have used and relied on for the purposes of our analysis.We have considered and relied on this information and have no reason information provided to to us has been believe evaluated throu that any material facts have been withheld. The Independent Expert’s | Report Rural Funds Managemen they they change materially, our valuation and opinion c of forming an opinion as to whether the Proposed Tr date date of this Report. These conditions can change si unitholders. We do not warrant that its inquiries have identified or verified all of the matters that Our opinion is based on economic, share market, bus 3.4. 3.4. Information on Reliance and Limitations audit, extensive examination or due diligence inves To the extent that there are legal issues relating relating to compliance with applicable laws, continuous disclosure rules, regulations, and policies, w In determining the fairness of the Proposed Transac

For personal use only use personal For 122 Explanatory MemorandumFor personal use only RFM’s operations. operations. with RFM’s associated outlook industry and the demand of comprehensive a be to observ intended not is following The level high our below provide whole. a we as economy Accordingly, the and industry spective re their in movements by affected are sectors These assets. Funds that are currently managed by RFM pre RFM by managed currently are that Funds assets. underlying those of performance the to exposed are investors Therefore, investments. other or estate inves allow funds Managed Australia. within located po a with industry fund managed the in operates RFM Introduction 4.1. Overview Industry 4. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent is A-REIT an fund, managed a to Similar water. and re infrastructu land, as such assets property Australian in investments direct of comprise largely assets Australi an to comparable be will Group Funds Rural Trusts Investment Estate Real Australian 4.2.1. Real Estate 4.2. erty held, such as: as: such held, erty prop of type the by categorised usually are A-REITs u or listed be may A-REITs that noted It is assets. inc rental or lease from generated are A-REITs from es real single a in interest an purchase to holders            sheep and beef farming. farming. beef and sheep and farming; meat chicken operations: meat growing; almond growing; grape operations: horticultural property; agricultural and rural commercial – office buildings and office parks. parks. office and buildings –office commercial various of warehouses and centres –shopping retail cinemas pubs, nightclubs, hotels, – leisure / hotel factories; and facilities manufacturing warehouses, – industrial

iie t Limited nlisted. nlisted. s Return assets. managed of portfolio a or asset tate analysis, but rather provide a high level overview level high a provide rather but analysis, tors to purchase an interest in a portfolio of real of portfolio a in interest an purchase to tors an Real Estate Investment Trust ( Trust Investment Estate Real an dominately have interests in: in: interests have dominately rtfolio of agricultural investments and properties properties and investments agricultural of rtfolio ome and capital growth of the underlying fund fund underlying the of growth capital and ome ations regarding RFM’s associated industries. industries. associated RFM’s regarding ations an investment vehicle which enables security- enables which vehicle investment an and theme parks; parks; and theme sizes; and and sizes; A-REIT ), as its as ),

17 Independent Experts Report 123 S18 18 18

S&P/ASX ). The GFC S&P/ASX All d , an index that GFC Index Value Index - S&P/ASX All Ordinaries ) investors in the value of US the the A-REIT sector has shown A-REIT Index X 200 and S&P/ASX All Ordinaries Index (^XAO) (^XAO) Index Ordinaries All S&P/ASX United States ( S&P/ASX 200 a reversal of performance, with the e last three years. gearing levels, stronger balance sheets, and . pressure on debt covenants and resulted in

A-REITs traded at a significant discount to their d by the global financial crisis ( 5 ecover, the US Federal Bank injected capital into nding criteria and debt becoming more difficult to debt. Credit shortages meant higher funding costs, ly. Index Value Index t Limited t Limited -

y that y physicalhave forma suchmachinery, as inventory, plant and Index Value Index -

REIT (Sector) Index (^XPJ) (^XPJ) Index (Sector) REIT -

A-REIT Index underperformed both the S&P/ASX 200 an A-REITs: A Case for Cautious Optimism Cautious for Case A A-REITs: in the first half of the identified period, having been influenced by general S&P/ASX 200 Index (^XJO)A 200 S&P/ASX value post the GFC. In more recent times however, 4 . S&P/ASX 200 A-REIT Index significantly outperforming the S&P/AS

The Ordinaries Index market conditions as described above. The second half of the identified period indicates 200 200 Index 0.00%

40.00% 30.00% 20.00% 10.00% -10.00% -20.00% -30.00%   NTAs calculated are the total as assets of an entit

Jones Lang LaSalle, 2012, resilience, having emerged from the GFC with greater reliance rentalon cash lower flows than previous Independent Expert’s | Report Rural Funds Managemen 4 5 Source: S&P Capital IQ. We the note following respectwith to the above fig ure: commenced in late 2007 when a loss of confidence by Figure 7: S&P/ASX 200 A-REIT Index Index 200 A-REIT S&P/ASX Figure 7: 4.2.2. Current Performance and Outlook As with other sectors, A-REITs were greatly affecte equipment less all relatedliabilities. The figure below represents the performance of the sub-prime mortgages caused a liquidity crisis. To r the country’s financial markets. This in turn greatly affected global markets, causing mass volatility and and decline in asset values. The fall in prices put refinance at a viable price. As a consequence, many aggressive asset sales or equity raisings to repay with financiers becoming more stringent in their le net tangible asset contains any listed vehicle that S&P/ASX200 and S&P/ASX All Ordinaries Index over is th classified as a real estate investment trust, compared to the For personal use only use personal For 124 Explanatory MemorandumFor personal use only capital to purchase will be a key industry driver i driver industry key a be will purchase to capital nt sufficie with internationally) and domestically oth (b Investors assets. distressed of were sales those of many however 2012-13, and 2011-12 indiversify increased land to farm rural of seek Sales portfolios. investors property their as years recent in interest greater received has sector property rural The n qiy a rie i 21-2 o ivsmn i A in investment for 2011-12 in raised was equity in positioned to service that demand. that service to positioned well is Australia and rising is demand food Global values. higher attract well and perform to tend conditions climate favourable more enjoy that properti rural Therefore conditions. climatic and r weathe by affected greatly are production livestock 2012, China became the world’s largest importer of of importer largest world’s the became China 2012, in assist to industries) of series a cattle since China in after sought highly and are dairy the as s product dairy (such Foreign-sourced population. growing its for supplies agriculture food quality higher future in ensuring invest to looking are China as incr been has agribusiness Australian in investment Below are examples of large offshore investments wh investments offshore large of examples are Below years. coming the in to strengthen ( Forestry l altern for demand such, As 2050. and by 70% by total increase Fisheries country’s Agriculture, the of of Department 52% approximately 2009-10; as China, India and Japan, meaning lower lower meaning Japan, and India China, as such Austr markets Additionally, export. export to costs major transportation to proximity close its on rise to expected are produce Australian of Exports foreign now Malaysia. and Singapore Indonesia, from emerge are to agriculture assets milling IBISWor prior). years sugar three just ralian Aust 15% from of (up owned 75% around that claim Australia Canegrowers The rural property sector can be categorised as fol as categorised be can sector property rural The property sector. property rural Australian traditional the to alternative investment agricul Australian in interests holds predominately pr traditional in invest generally A-REITs Although S Property Agricultural and Rural Australian 4.2.3. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent 9 8 7 6 Above note 2. note Above in dairy targets ‘China 2012, Massola &J, A Grigg 2013, International, Colliers Re port, National Research 2012, International, Colliers        forestry. forestry. The Teachers Insurance and Annuity Association Coll Association Annuity and Insurance Teachers The Chinese a specialist to sold was winery Estate Ross ( South Wales New incr company, food based Qatar a Group, Food Hassad billion to invest in farmland in the US, Australia Australia US, investors. the institutional international in farmland in invest to billion pastoral / grazing – sheep, beef cattle, veal and p and veal cattle, beef – sheep, /grazing pastoral growing; vegetable and – fruit land horticultural vineyards; – sector wine

Property Outlook (Australia) 2013. (Australia) Outlook Property NSW ), Queensland, Western Australia ( Australia Western Queensland, ),

dustry’, dustry’, iie t Limited 2012Agribusiness Rural and Australian Financial Review Financial Australian n the sector long term. Similarly, more than $2 bil $2 than more Similarly, term. long sector the n contaminations in locally produced dairy products. products. dairy produced locally in contaminations alia had 398 million hectares of agricultural land land agricultural of hectares million 398 had alia lows: lows:

in coming years. Australia will be able to capitali to able be will Australia years. coming in tural property. This sector is considered a viable viable a considered is sector This property. tural operty sectors (refer Section 4.2.1), RFM’s funds funds RFM’s 4.2.1), Section (refer sectors operty easing, particularly since the GFC. Countries such such Countries GFC. the since particularly easing, etr. eo i a ih ee oeve o the of overview level high a is Below sectors. food, as imports grew by 34 per cent. per 34 by grew imports as food, ich took place during 2012. during place took ich ld also predicts further investment in Australian Australian in investment further predicts also ld ative investments (such as rural property) is set set is property) rural as (such investments ative oultry farming; and and farming; oultry ABARES srla farmland. ustralian ector ector and Brazil. The company comprises seven seven comprises company The Brazil. and and area dedicated to agribusiness. The The agribusiness. to dedicated area and wine company. wine company. ege Retirement Equities Fund raised $2 $2 raised Fund Equities Retirement ege eased its pastoral land investments in investments land pastoral its eased etmts ol fo dmn to demand food world estimates ) WA . ) and Victoria. Victoria. and ) , 24September. , 6 eun fo co and crop from Returns 9

7 As such, foreign foreign such, As 8 Moreover, Moreover, lion lion es es se se In in in

19 Independent Experts Report 125 S18 20 20

l is der .

.

10 2-13 tially to maintain sales levels at the expense of ssing and marketing. , , InternationalWine Industry Review ch conditions have caused widespread crop tal tal production in 2009-10. The level of annual ar, will account for the majority of the grapes and and joint management arrangements. There is y y be able to expand profitability by investing in ape ape prices have fallen an average 67%. In 2009, ve however, as demand for grapes are set to t suitable for almond growing. These include four 60% of total Australian wine grape production in , followed by cabernet sauvignon. Together, these vering retail sector. Grape prices are beginning to mpacting the viability of vineyard productions and Territory. South Australia however is the dominant e years, although they will be larger in size. This ease in surviving vines. lity. The five years to 2011-2012 saw heavy rainfal ion water will rise, and growers will need to consi t Limited t Limited ) predicts levels of wine production will remain stagnant

12 ABS .

Australian WineAustralian Grape Production Projectionsto 201

11 Grape Grape inGrowing Australia

favourable weather conditions; suitable land and soil; relatively few pests and diseases; highly developed infrastructure; and, a leader in world’s best practice production, proce

     IBISWorld, 2012, Commonwealth Australia,Bank of 2011,Research Global Markets ABARES, 2011, Research Report, more water-efficient operation models. achieving economies of scale through consolidation likely to be a smaller number of vineyards in futur strengthen in line with exports to China and a reco recover, particularly for premium fruit. Growers ma grown. Chardonnay is to be the next largest variety three varieties are expected to account for nearly 2012-13. In spite of stagnant production winemaking grapes. Prices have levelsbeen lowered substan the industry is still experiencinggross profit margins. an oversupply of The outlook for the industry is increasingly positi during 2012-13. Red wine grapes, Shiraz in particul tempered by the prediction that the cost of irrigat The Australian Bureau of Statistics ( 4.3.2. Almond Growing In Australia, there are several areas which are mos areas along the Murray Basin: the Adelaide and Riverland region regions of of NSW South and Australia, the the Riverina Sunraysia region Australia enjoys a number of of advantages as an almond producer including: Victoria. According to the Almond Board of Australia, local local wine industry bodies estimated that Australia is producing 20 to 40 than it is selling. million more cases of wine The grape and wine industry in Australia has operated in challenging market conditions over the past decade. Overplanting since the 1990’s, a significan tincreased international decline competition in and exports, weak domestic the sales high has resulted Australian grapes in and dollar, an wine. oversupplyThe onset of of both the GFC further exacerbated these market downward trends. saturated, With grape the priceswine fell dramatically, i values. Over the past 10 years, warm-climate red gr Independent Expert’s | Report Rural Funds Managemen 10 11 12 wine wine grape growing region, accounting for 48% of rainfall to greatly dictates production levels and qua 4.3.1. Grape Growing The Australian grape industry consists of production businesses and which for grow eating; grapes to for sell winemaking, directly grown in all sultana parts to of Australia except wine makers the Northern and wholesalers or retailers. Grapes are 4.3. Australia in Horticulture and flooding across eastern states damage and splitting, rotting and the spread of dis of Australia. Su For personal use only use personal For 126 Explanatory MemorandumFor personal use only

d increasing. Almond production in Australia Australia in production Almond increasing. d an e is figure high, that and 2011 in time tonnes 37,626 all totalled an at is consumption almond World Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent 14 13 improved on fruit, spending domestic rising demand, be to expected are growers nut and fruit Australian 2013. Presentation Limited Harvest Select Source: 8:Figure Seasonal Price for Almonds result in an annual boost to revenue by 3.0% into 2 into 3.0% by revenue to boost annual an in result to expected are young plantings of maturing the with in line factors These development. market niche supply was higher than demand, indicating a possibl a indicating demand, than higher was supply peak at their were prices almond when that be noted the and price almond world the by governed largely is producers Australian by earned price The mand. de world rising strongly to due increasing steadily been has 2007, until prices, almond in trend The demand. and supply principally factors, of a number by determined is almonds of price The atives. altern to choose consumers the encourage and demand price to sensitive highly is though nuts for Demand relati the to due growth largely is This demand. in growth of rate the expansion, such wor Despite with decade. globally, increased has almonds for demand IBISWorld, 2012, IBISWorld, 2009, of Australia, Board Almond Citrus, Banana and Other Fruit Growing in Australia Growing in Fruit Other and Banana Citrus, All About Australian Almonds Australian About All

iie t Limited vely long time period from planting to full product full to planting from period time long vely changes. A large increase in price can hamper hamper can price in increase A large changes. xpected to more than double by 2016. by double than more to xpected nefit over the next 5 years from growing export export growing from years 5 next the over nefit 017-18. exchange rate for the Australian dollar. It should Itshould dollar. Australian the for rate exchange . . e similar trend in forthcoming years. years. in forthcoming trend similar e water availability, increased crop yields and and yields crop increased availability, water in 2006 (refer diagram below), the level of global of level the below), diagram (refer 2006 in n upy s o crety etn te ae of rate the meeting currently not is supply in ld almond consumption doubling in the last last the in doubling consumption almond ld . 14

13 Consumer Consumer ion. ion.

21 Independent Experts Report 127 S18 22 22

Success in the industry is 16 and suppliers and enjoys suitable weather convenience foods which incorporate chicken and and raising of chickens for meat production. rchase more of those meats and less poultry. lities in order to run more efficiently and keep that consumer concerns regarding the use of en en meat, while the Northern Territory does not on household consumption patterns. There has upstream poultry processors, as approximately cale contracts with buyers, economies of scale Industry participants often operate as part of an ng ng sector. Poultry growers are facing increasing ically integrated businesses. These businesses meat and wool, and the operation of sheep and ng and cooling of sheds. There has also been 15 is popularity in recent times. Demand for chicken % of NSW’s land mass is dedicated to agricultural is produced by a small number of private company

the spread of disease in Australian poultry farms. . uch as pork, beef and lamb. When meats such as chickens could threaten industry expansion. Overall orward. t Limited t Limited

Poultry Meat in Farming Australia. Sheep and Cattle Beef Farming Australia.in

IBISWorld, 2012, IBISWorld, 2012, integrated operation. Levels of live poultry imports and exports are extremely low as a result of border quarantine regulations in place to protect against these are lower in price, consumers subsequently pu cattle feedlots. Most of the country’s sheep and efbe farming operations are NSW,located South Australiain and Queensland,Victoria. In fact, over 70 NSW and Victoria are the largest producers of chick have any chicken farming or processing businesses. Currently, the industry is dominated by manage larger their vert own breeder approximately 95% of all chicken meat in Australia farms, hatcheries, and processing plants. According to IBISWorld, contracts with upstream processors. economies of scale to operate As profitability going f with grape growing, industry players Future demand will for chicken meat needwill depend greatly to gain meat is also affected by the price of substitutes s Growth in consumption also follows a trend towards more so than other substitutes. It should be noted though, industry revenue is predicted by IBISWorld grow to by 1.9% each toyear 2017-18. 4.4.2. Sheep and Beef Farming The industry is engaged in farming sheep for their operations due to the state’s river systems and le amp water supply. processors, such as Inghams, Baiada number of and larger players, Turi much like the Foods. grape growi The industry input is costs moving such towards as electricity a costspressure fewer on for growers to the upgrade their heati sheds and faci been an increasing move towards more health conscious eating choices. Chicken is seen as a lower fat alternative to other meats, and thus has risen antibiotics in production and the welfare of caged Independent Expert’s | Report Rural Funds Managemen 15 16

4.4.1. Chicken Meat Farming Businesses in this industry engage in the hatching 4.4. Meat Industry Demand for chicken meat is significantly driven 95% by of all meat is sold to processors for slaughter and and a farming location that conditions. is close to key markets largely dependant on establishing long term large-s For personal use only use personal For 128 Explanatory MemorandumFor personal use only Agriculture years, thus dampening the consumption of red meat. red of consumption the dampening thus years, competit increased seen has industry the that noted also should It during drop. prices higher is example, supply as re therefo for increased, are rates as slaughter time drought performance, industry ct’s effe in rainfall annual increase time, been same has the there At supply. while lamb worldwide d deman increased to due years recent in considerably The prices. operati their making animal, per farmers wool to returns increased support India and produ China sheep greater encourages wool of price the in ri a as production affect prices Wool exports. for demand the impact strongly dollar Australian the of a movements price such As by meat. and cattle live of amount significant largely driven is industry The Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent 17 provi are overview industry our from points key The Industry Summary 4.5. the Australian dollar predicted to stay strong. strong. stay to predicted with dollar Australian the exports cheaper for Zealand New and US with compete will Australia However, revenue. in and f are conditions weather while lower be will b inputs to expected are prices to incomes, disposable according and conditions larger economic 2017-18 improving with Coupled to market. the in supply years of shortage a five cause will This supply. next stock their replenish to the need now will rs farme over high, been have grow rates slaughter As IBISWorld. revenue see should conditions weather pric predicted contraction, industry recent Despite cos and cutting scale of economies ongaining focus number in fewer becoming are farms years five last farmers their conditions changed such rates, to slaughter their adapt increased To have feed). severe as ch (su and inputs of cost conditions the did drought as rose, for cuts both economical demand of Concurrently, ation combin years. a recent seen in has flooding Australia costs. input rising and disas natural and exper conditions weather currently to due is largely industry meat red Australian The ts Research, ts Marke Global 2012, of Bank Australia, Commonwealth     to service that demand. demand. that to service agricul Australian and rising is demand food Global the major business drivers for the above industries above the for drivers business the major are prices commodity and conditions weather dollar, Australian the activity, economic of Levels of economies slimmer. become seeking are players red industry Surviving and poultry growing, grape sectors. these te domina businesses larger but fewer as consolidation growing, almond The .

iie t Limited increased have lamb for Prices profitable. more ons , movements in the exchange rate and the strength strength the and rate exchange the in movements , fitpro in rise a bring to predicted is This avourable. ded below: below: ded e rises, increased demand and more favourable favourable more and demand increased rises, e business model or exited their operations. In the the In operations. their exited or model business ts. ts. ters, diminished demand as a result of the GFC GFC the of result a as demand diminished ters, 17 ion from healthier protein alternatives in recent recent in alternatives protein healthier from ion but larger in size, as industry players turn their their turn players industry as size, in larger but expensive cuts of beef fell, demand for more more for demand fell, beef of cuts expensive e driven upwards. The cost of feed and other other and feed of cost The upwards. driven e ecn cnrcin n cnoiain Ti is This consolidation. and contraction iencing ction. Demand in developing nations such as as such nations developing in Demand ction. Commodities: Agri Updates - Outlook for Australian Australian forOutlook - Updates Agri Commodities: . domestic price of sheep and beef elevates elevates beef and sheep of price domestic nd weather conditions. Australia exports a a exports Australia conditions. weather nd tural land and businesses are well positioned positioned well are businesses and land tural scale to remain profitable as margins margins as profitable remain to scale

meat industries are undergoing undergoing are industries meat be se se 23 Independent Experts Report 129 S18 24 24

JB for – Ms Lemmon has been with r of Commerce (Accounting) from the please refer to the RFM website at nistration from the Melbourne Business ect Harvests Limited, Sunny Queen Pty MBA from the University of Technology, e in corporate finance. He is chairman of lysing future developments, acquisitions, ian ian National University, Canberra. a Diploma of Financial Planning from the oducts, management of research activities counting function of both the RFM business y. Melbourne. ustralian Institute of Company Directors. His and for several publicly listed companies. At ation to more than 25 properties and over ver $300 million in agricultural assets across toria, Tasmania Western and Australia. of Company Directors. ten agricultural managed funds, among these CIF, holder of Australian Financial Services License No . – Mr Carroll is on the boards of Queensland Sugar – Mr Paynter is a former director of broking firm – Mr Bryant established RFM in February 1997 and – Ms Doyle joined RFM in 2011 and has over 20 years – Mr Waight joined RFM in 2003. He is responsible t Limited t Limited

.

RMIT University and a Master of Agribusiness from the University of Melbourne. Guy Paynter, Non-executive Chairman Were and brings to RFM more than 30 years experienc 60,000 mega litres of water entitlements. He holds Aircruising Australia Limited and a member of the A agricultural interests include cattle breeding in the Upper Guy holds Hunter a Bachelor of Laws from University the of region in New South Wales. Ltd, and the Rural Finance Corporation of Victoria. He holds a Bachelor of Agricultural Science from La Trobe University, a Master of Business School, and is Fellow a of Australian the Institute Admi David Bryant, RFM Managing Director has since then led the team in its acquisition of o Australia including acquisition negotiations in rel Michael Carroll, Non-executive Director Limited, Warrnambool Cheese and Butter Limited, Sel Stuart Waight, Chief Operating Officer experience working in a diverse range of industries RFM, Ms Doyle is responsible for the finance and ac and its managed funds. Ms Doyle holds an Executive Sydney and a Bachelor of Economics from Austral the and and investments. He oversees the asset and National farmManagers of management Poultry, Almonds activities and undertakenCotton and by is responsible the for asset the managementcommercial and of vineyards owned by AWF.Chartered Mr Accountants Waig ht Australia is and a holds member of a the Bachelo Institute of optimising the performance of the RFM funds and ana University of Newcastle. Andrea Lemmon, Executive Manager Funds Management RFM since the firm’s commencement in 1997. Ms Lemmon new is products, responsiblecontinuous improvement for of existing development pr of and the provision of services Diploma of Financial Planning from and Deakin Universit communications to investors and advisers. She holds a Melanie Doyle, Chief Financial Officer

      www.ruralfunds.com.au Independent Expert’s | Report Rural Funds Managemen

The RFM Board of Directors comprises three members, two of whom are independent: 5.2. 5.2. Management and Board RFM 5.1. 5.1. RFM About Founded in 1997, Rural Funds Management Ltd is a fu nd manager and asset manager specialising in the Australian agricultural sector. RFM is also the 5. Profile of Rural Funds Management Ltd 226701 and is currently the responsible entity for RBK and AWF. As at 30 June 2013 RFM had approximate ly $308 million in agricultural assets under management New in Wales,South South Australia, Vic For more information on RFM and its managed funds, The RFM executive management team comprises: For personal use only use personal For 130 Explanatory MemorandumFor personal use only Figure 9: RFM Compliance Structure basis. annual on an audited externally also is Plan Compliance nd’s fu each with compliance RFM’s regulations. and laws ext the monitoring for responsible is who Committee Compliance a has RFM Plans. Act, Compliance spective re Corporations their and the funds various by the of governed constitutions the are entity le responsib as RFM of responsibilities and duties The Fund Compliance 5.3. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent comprises: Committee Compliance RFM’s Members of the Compliance Committee 5.4. RFM management. Source:   

Rural Funds Management Ltd Ltd Ltd Management Funds Management Funds Rural Rural Rural Funds Management Ltd Ltd Management Funds Management Funds Rural Rural ay Ling Gary Operating Officer of RFM (refer Section 5.2). Section (refer RFM of Officer Operating Waight Stuart in courses development professional continual of planning. number financial and superannuation accounting, a completed has cu and ASFA and from industries Cer a holds Ryan Ms rural Wales. South New in in enterprises experience extensive has superannuatio accounting, spans career Her 2000. in Ryan Janice diitaos H i as a aceie mdao w mediator Resolution. Dispute accredited an also is He Administrators. and Institute the from legal Management Corporate of Diploma corporate L of Diploma previous a holds He Group. held Westpac the and He ASX, practice. Tyndall, Management, secretarial Funds ANZ at roles compliance company and law, insurance la corporate of years 28 over with lawyer qualified Managed Funds Funds Funds Managed Managed Managed Funds Funds Managed Managed Responsible Entity Entity Responsible Unitholders Unitholders AssetManager FundManager A etra mme o te opine omte s Committee Compliance the of member external An – he Compliance Committee Committee Compliance the of member external an as appointed was Ryan Ms – – Mr Waight is an internal member of the Complianc the of member internal an is Waight Mr –

with Compliance Plans, Plans, Compliance with iie t Limited Corporations Act and and Act Corporations other applicable laws laws applicable other Monitors compliance compliance Monitors and regulations regulations and Constitutions, Constitutions,

ent to which RFM is compliant with applicable applicable with compliant is RFM which to ent w experience in banking law, securities and and securities law, banking in experience w

n, financial planning, and compliance. She She compliance. and planning, financial n, of Corporate Managers, Secretaries and and Secretaries Managers, Corporate of ith the Lawyers Engaged in Alternative Alternative in Engaged Lawyers the ith Tower Life, Mercantile Mutual, GIO, the the GIO, Mutual, Mercantile Life, Tower tificate of Superannuation Management Management Superannuation of tificate aw (Solicitors Admission Board) and a and Board) Admission (Solicitors aw rrently operates grain and livestock livestock and grain operates rrently e Committee and the Chief Chief the and Committee e ne 03 M Ln i a is Ling Mr 2003, ince

Compliance Compliance Compliance Compliance Committee Committee Committee Committee Committee

25 Independent Experts Report 131 S18 26 26 6.0% 2.9% 2.4% 1.9% 0.9% 0.8% 0.7% 0.7% 0.6% 0.5% 17.4% 82.6% 100.0% 597,370 484,710 458,421 427,409 373,005 346,470 1,861,677 1,504,934 No. Units No. 3,806,369 Unitholding (%) 1,227,243 11,087,608 52,558,312 63,645,920 id id units on issue. Details of the top 10 ff nt> trategy Fund> ncome Fund ARSN Fund 105 ncome 754 ARSN 461 t Limited t Limited ment Plan> ment I al Managers Limited Managersal Limited

5 years plus Unlisted unit trust Rural Funds Ltd077 Management ACN 492 AFSL 838 701 226 AustralianExecutor Trustees ACN Limited 007 794 869 August 2003 Rural property meat and farming NAV of approximately $53.7million at June 30 2013 Open-end fund Low Quarterly RFM RFM Chicken Provide investors with risk-adjusted returns ted genera by contractchicken growing activities RFM Chicken Income Fund

Unitholder RE Multi Strategy Income Sub Fund Class for Class Multi-S Fund Sub Strategy Income Multi RE Superannuation Fund> Subtotal (Top 10 unitholders) Balance of unitholders unitholders Total 2 Group Financial BT 3 Avanteos Investments Limited 4 Netw ealth Ltd Pty Holdings

Lethbridge, VIC Lethbridge, Griffith, NSW Griffith, Griffith, NSW Griffith, Griffith, NSW Griffith, Griffith, NSW Griffith, Location iie t Limited 5 303,216 154 No. of sheds Total farm size Total size farm No. of sheds , Ltd Pty Enterprises Bartter with contracts growing ow: 30 Jun 2012 30 Jun 2013 30 Jun 2012 30Jun ). Baiada is a privately owned Australian Australian owned privately a is Baiada ). Baiada 4 60,000 40 These farms comprise a total of 154 poultry poultry 154 of total a comprise farms These atutr cnitn o 1 sprt frs in farms separate 17 of consisting rastructure n FY12. FY12. n 20 37,512 20 0 29,580 0 $00)($'000s) ($'000s) Indicated Value s 29,580 70,584 97,150 100,225 100,225 97,150 23,300 25,600 16,600 16,600 21,650 21,650 10,000 10,000 mium quality poultry products throughout throughout products poultry quality mium (sqm) 23,300 23,300 25,550 17,725 17,725 23,050 23,050 10,600 10,600

23 Feb23 30 Sep 2027 2026; Contrac s Lethbridge Lethbridge s 31 Mar 2024 31 Mar 2024 31 Mar2024 03 Jul 2036 03 Jul2036 t Expiry t 27 Independent Experts Report 133 S18 28 28

V During FY13, 14,619 head of cattle were etable etable weight or breeding quality. Under this the end of the year. StockBank also acquired is paid the accrued lease payments and the 17,444 remained on hand as at 30 June 2013. ank is a managed fund which operates a sheep did not participate in the capital raising. The NA illion as at 15 August 2013. eased to landowners for fattening and finishing and lion units (approximately 45% of total units issued). t Limited t Limited Income distributions made a are bi-annual on basis RFM RFM StockBank ARSN 153 803 436 Provide investors with a reliable by yield financinthe g acquisition of livestock that are placed on portfolioa of diversifiedproperties. 3 years plus Unlisted unit trust Rural Funds LimitedManagement ACN 077 492 AFSL 838 226701 AustralianExecutor Trustees ACN Limited 007 794 869 2011May Rural Property and Meat Growing NAV of approximately $11.2million at June 30 2013 Open-ended Medium

Investment size Investment structure Liquidity Distributions Investment period Structure / manager fund entity Responsible Custodian date Inception Investment sector Fund Overview name Fund Investmentobjective Source:management. RFM of StockBank after the capital raising $11.56was m Independent Expert’s | Report Rural Funds Managemen acquired, 8,422 sold and 10,567 remained on hand at StockBank divides its investment between approximately 80% cattle being held for periods and of between 70 and 280 days. 20% sheep with livestock StockBank recently raised $6 purchases of sheep and cattle millionto grow the fund. CIF at $1.05 per unit from external investors to fund further StockBank does not own any land or infrastructure. 32,154 head of sheep, of which 24,217 were sold and Table 11: StockBank Fund Overview Overview Fund StockBank 11: Table 6.2.3. CIF Investment in StockBank CIF holds a direct interest in StockBank of 4.9 mil RFM is the responsible entity for StockBank. StockB and cattle leasing business whereby livestock are l are then sold when the livestock has reached leasing model, StockBank a finances the acquisition of marklivestock and places them on suitable farms with landowners. On the sale of the livestock, landowner receives the StockBank balance of the proceeds. For personal use only use personal For 134 Explanatory MemorandumFor personal use only CIF’s key financial metrics are presented below. below. presented are metrics financial key CIF’s This section contains a summary of CIF’s performanc CIF’s of asummary contains section This CIF Performance 6.3. Independent Expert’s Report | Rural Funds Managemen Funds Rural Report| Expert’s Independent a full assumes aboveshown returns distribution The franking. and include declared ns baseddistributio are on returns Distribution Note: RFM management. Source: Table 12: CIF Key Financial Metrics months to 30 June 2014 is 7.03%. is 2014 30 toJune months With respect to CIF’s key financial metrics table a table metrics financial key toCIF’s respect With FY15 FY14 Period FY13 FY12        − well were as which d to forecast is NAV equipment. and plant property, provisions distributions, in unit decrease a for to provided due previously predominantly FY13, in improves unit per NAV earnings. peri increased and charges interest the over improve to forecast is cover Interest Trans Proposed with the associated costs of absence in increase 0.25% a Indirect 2012. to August 20 effective due fees management predominantly , FY13 in substantially increased ratio cost Indirect value. equipment and plant property, in increase forecast financials for FY14 and FY15. and FY15. FY14 for financials forecast and and FY13; FY12 for financials audited − ( ratio value to Loan red distributions FY14, $0.9 mil of amortisation debt Transaction, and Proposed FY13 In reinvested. are roll a on calculated been have returns Distribution

capital items; and and items; capital of depreciation associated the and operations farming chicken of nature intensive capital the preciation exceeding accounting accounting exceeding depreciation tax by generated liabilities depreciation. tax income deferred itiuinDsrbto La oVleIndirec Loan to Value Distribution Distribution (per unit) (per $0.091 $0.059 $0.025 $0.100 LVR

) marginally reduces in FY13 to FY15 due to debt am debt to due FY15 to FY13 in reduces marginally )

11.37% Return 11.75% 7.07% 3.61% year of trading. For comparative purposes, distrib purposes, comparative For ofyear trading. iie t Limited bove, we note the following: the following: note we bove, 41.23% 41.30% 41.51% 42.85% e with reference to CIF’s: CIF’s: to with reference e Ratio

ecline in FY14 and FY15 due to: to: due FY15 and in FY14 ecline ing returns basis, i.e. assuming distributions distributions assuming i.e. basis, returns ing s n xetd nrae n h vle of value the in increase expected an as od, predominantly due to lower debt, lower lower debt, lower to due predominantly od, lion per year and capital expenditure. expenditure. capital and year per lion action that were in FY13 and FY14. and in FY13 were that action cost ratio drops in FY15 mainly due to the the to due mainly FY15 in drops ratio cost uce due to costs associated with the the with associated costs to due uce ot neet Net Interest Asset Value t Cost 3.29% 4.23% 3.99% 3.09% Ratio ution return for 9 return for ution Cover (per unit) (per Cover 4.20x 3.26x 3.04x 1.36x ortisation and an an and ortisation

$0.786 $0.823 $0.845 $0.768 29 Independent Experts Report 135 S18 30 30

- - - - 8 39 503 98 503 679 - - - 46 , that the the , that 598 503 664 ures have luded inluded RFM’s - 1,156 - - - - 395 (358) 1,175 382 564169 (512) (154) 1,678 888 - - 8--- 5 959 556 6,379 2,340 3,480 1 809 3,710 1,866 3,859 278 FY12 FY13 FY14 FY15 (670) 6,1575,348 9,547 5,838 7,753 5,887 9,153 5,294 1,7033,702 1,851 3,575 1,8553,160 5,074 1,848 3,146 4,988 2,378 2,181 1,859 7,0001,307 8,009 8,573 8,856 3,215 1,279 ecast for FY14 and FY15. 17,085 15,096 16,764 16,371 23,709 23,756 23,968 24,983 23,242 24,644 24,517 25,524 (1,681) (3,196) (5,984) (3,854) (3,294) (2,351) (2,604) trolling interest in StockBank. responsible entity based on the fee ($'000s) ($'000s) ($'000s) ($'000s) Audited Audited Forecast Forecast 13 13 is to due 0.25% increase in fundsthe ee costsee declined due to the use of contractors in FY13. Direct grower costs for StockBank FY14in and in FY15. 2 and from FY13 are 50% hedged. Cost of debt is turing costs, internal overheads and other fees increase in value of sheep and cattle held by t Limited t Limited line items an Weon aggregated basis. note however 6 7 8 9 1 2 3 4 5 5 5 10 Notes above may above differ from the financial information inc years shown.years

ceased from due FY13 to CIF no longer holding con a which continued to deliver operational efficiencies structure set out in Appendix The A. increase in FY management fee effective August20 2012. which will be incurred relationin to the Proposed Transaction regardless of whether proceeds. it StockBank. There no was change in FY13 and none for assumed to be 5.5% with no change for FY13 to FY15. reflected in the year on increases.year NPAT Unrealised Unrealised loss / (gain) on fair value adjustments to property, plant and equipment tax onIncome other comprehensive income Total comprehensive income attributable unitholdersto 11 Depreciation EBIT Finance costs EBIT DA Management fee Management Transaction costs Other expenses expenses Total NPBT Income tax expenseIncome / (benefit) Loss on interest rate sw aps Grow er fees Increase assets biological in Other income Profit - Stockbank Direct grow er costs - CIF Total revenue Direct grow er costs - StockBank Employee costs Employee Impairment 6. Management fees representremuneration to RFM as 7. Transaction costs relate to advisory fees, struc Source:management. RFM Note: theFY12Only audited accounts ared prep have on been a consolidated basis, figi.e.FY13 to FY15 accounted forStockBank investmentas an tharather n on consolidateda basis. Figuresfor the individual line items the in table Explanatory Memorandum, occasionally which presents overall result consistentis for all the financial Independent Expert’s | Report Rural Funds Managemen

3. The increase in biological assets relates to the 4. StockBank is forecast to make 10% a distribution 5. Direct grower costs for CIF combined employwith With respect to CIF’s summary income statementsle tab above, we note the following: 1. Grower fees are solely derived from growing contracts with Baiada, with contract inflation 2. Existing interest rate swaps are paid out in FY1 Table 13: CIF Income Statements Statements Income CIF 13: Table 6.3.1. CIF Income Statements For personal use only use personal For 136 Explanatory MemorandumFor personal use only 8. A breakdown of other expenses is presented below presented is expenses other of A breakdown 8. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent dif inabovethetable may theaccounts for Figures basis.a on consolidated n rather antha as investment for StockBank accounted have ures to FY15 i.e. FY13 fig basis, consolidated a beenhaveon prepared accounts audited Onlythe FY12 Note: RFM management. Source: Table 15: CIF Balance Sheets purp taxation for trust trading public a is CIF 10. interest- in reduction a forecast to due toFY15 FY12 from to decrease forecast are costs Finance 9. Table 14: CIF Other Expenses Detail is consistent for all the financial years years allshown. financial for the consistent is on accounts presents occasionally which Memorandum, Sheets Balance CIF 6.3.2. to pr adjustments value on fair gain Unrealised 11. Source: RFM management. RFM management. Source: Total Number of units issued units Numberof unitholders to attributable assets Net liabilities bearing Interest Provisions payables other and Trade assets Total Repairs and maintenanceand Repairs Fundoverheads Non-controlling interest Non-controlling Net assets liabilities Total Other liabilities Other liabilities financial Derivative liabilities tax Deferred assets Other Intangibleassets Insurance expenses Insurance Property expenses Property Property, plant and equipmentand plant Property, assets Biological receivables other and Trade Cash and cash equivalents cash and Cash following: following: bearing liabilities and lower interest rates. rates. interest lower and liabilities bearing valuers. independent the by attributed value in increase the to was due in FY13 gain large The value. tofair equipment and plant property, of 30%. of − − −

2 due to a reduction in premiums, premiums, in FY14. for reduction premiums insurance in an increase a assumed has the forecast to due FY12 from FY13 in decreased expense insurance Actual of contract labour (i.e. reduced training expenses) training reduced (i.e. labour contract of c to due FY14 to FY13 from decreases overheads Fund expenditure to repairs and maintenance. maintenance. and torepairs expenditure in substantially increased maintenance and Repairs fer from the financial information included in RFM’ included in information financial from the fer Notes 3 &4 3 10 7 6 5 9 8 3 2 1 an aggregated basis. We note however, that notehowever,thenet that aggregated basis. an We iie t Limited rate rate tax the corporate to subject therefore is and oses operty, plant and equipment relates to revaluation torevaluation relates equipment and plant operty, 30 June 2012 30 June 2013 30 June 2014 30 June 2015 June 30 2014 June 30 2013 June 30 2012 June 30 336816,3,6 63,830, 63,638,267 63,396,831 . With respect to the table below, we note the the note we below, table tothe respect . With uie uie oeatForecast Forecast Audited Audited $00)(’0s $00)($’000s) ($’000s) ($’000s) ($’000s) $00)(’0s $00)($’000s) ($’000s) ($’000s) ($’000s) 0,4 1,7 0,3 106,417 108,334 112,476 108,946 8685,4 5 53,749 39, 48,648 39,998 41,125 41,228 9745,4 25650,371 56,045 52,546 55,788 53,749 58,727 49,794 59,152 95,613 3 97,61 99,646 96,511 . ,0 ,7 ,7 4,988 5,074 3,575 3,702 ,5 2,575 1,708 3,458 ,3 ,5 ,8 1,827 1,783 2,056 1,837 ,9 2481,7 13,937 13,276 1,146 2,402 1,049 12,428 3,066 1,049 9,692 1,049 1,049 ,2 ,2 ,2 5,026 3,932 5,026 3,848 5,026 4,096 2,215 4,520 4,465 2,015 Y2F1 Y4FY15 FY14 FY13 FY12 893 386 799 173 FY14 due to a reclassification of capital capital of reclassification a to due FY14 - ost savings associated with the use use the with associated savings ost 4 ,5 2,096 2,252 745 8 ,1 1,813 1,910 184 444 696 12 78 - s Explanatorys ,4 50,371 2,546 418 444 769 9 64,066,150 992 120 270 354 position position 67 - 363 444 788 714 120 098 276 352 -

31 Independent Experts Report 137 S18 32

(470) 1,049 99,646 100,225 100,225 (410) 1,049 96,511 97,150 97,150 ($’000s) ($’000s) 30 Jun 2012 30 Jun 2013 angements which require the debt to be assets (i.e. water licences) have been valued tributions that were on hold given the ayment of management fees and cost ist of land, poultry infrastructure, and plant and general security agreement. The forecast LVR FY14 FY15,and respectively. This compares to ve nature of chicken farming operations. The k held by StockBank fair at value less estimated teon Valuations Valuations teon declared and to beyet paid. nancial years relate to distribution reinvestment. is due to payoutthe of existing interest rate hedges. ion t Limited t Limited

recoveries incurred in FY12 FY13. and million$1.0 repayment in FY14 and $0.9 million rep ayment FY15. in Bank borrowings are secured against the real property and subject to a the interest cover ratio covenant of 3.00x and 3.35x for FY14 FY15,and respectively. is 41% as at 30 June 2014 and June30 2015. This compares the facility to covenant of 45%. The forecast interest cover ratio is 3.26x and 4.2x for by by independent property valuers asat 30 June 2013 (refer Section 6.2.2). The reconciliation to Opteonthe valuations is provided below. equipment. These assets, along with the intangible which is relatively high due theto capital intensi depreciation is calculated based on the remaining useful life of depreciable assets, assuming 45 a year lifespan for poultry sheds. CIF property value s are based on FY13 independent property valuations less a $2.0 million depreciation decreme fornt FY14 and a $4.0 million depreciation decrement for FY15. Proposed Transaction and previousthe financing arr reduced. sales costs. The biological assets FY13 in FY15to represent the investment held in StockBank. Less: Other excluded equipment from external valuat Reconciliation to Opteon valuations Property, plant and equipment assets Intangible Total 6. Provisions predominately relate to distributions 7. Interest bearing liabilities decrease from FY13 due to new financing arrangements require that a 8. The increase in deferred tax liabilities in FY13 is due to the asset revaluation of chicken sheds. 9. The decrease in derivative financial liabilities 10. The increase in the unitholdings between the fi 11. Other movements account in balances relate to ongoing operations. Source: Horwath Crowe analysis. Independent Expert’s | Rural Report Funds Managemen 4. Property, plant and equipment decreased from3 FY1 to FY15 due to the effect ofdepreciation, 5. Trade otherand payables reduce FY14in due to p Table 16: Reconciliation of CIF Balance Sheets to Op to Sheets Balance CIF of Reconciliation 16: Table With respect to CIF’s balance sheet table above, we note thefollowing: 1. Cash decreases FY14 in due to the payment of dis 2. Biological assets in FY12 represent the livestoc 3. Property, plant and equipment predominately cons For personal use only use personal For 138 Explanatory MemorandumFor personal use only Table Table 17: RBK Fund Overview below: provided is RBK of An overview RBK Fund Overview 7.1. RiverBank RFM of Profile 7. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent Fund. each for information financialpro-forma the not match and 2013 asmay areAugust at 2 figures Unitholding Note: RFM management. Source: Table 18: RBK Top 10 Unitholders pa fully of 32,737,860 had RBK below. provided are RBK in unitholdings 2013, August 2 at As Source: RFM management and RFMand website. RFM management Source: Distributions Liquidity structure Investment size Investment sector Investment Inceptiondate Custodian Responsibleentity fund / manager Structure period Investment objective Investment Fundname Overview Fund 10 Lacey Consulting Group Pty Ltd Pty Ltd Group Consulting Lacey 10 3 Asset CustodianNominees Pty Asset Ltd (Aust) 3 R& J FamilyPty Super Fund Ltd 4 6 Netw ealth Investments Limited Class for tegy Total unitholders unitholders of Balance unitholders) 10 (Top Subtotal

Quarterly Quarterly Low Open-ended 2013 30 June at $47.6 million ofapproximately NAV Horticulture and Property Rural 2005 February 869007 794 Limited ACN Trustees Executor Australian 226701 838 492 AFSL 077 Limited ACN Management Funds Rural trust unit Unlisted plus years 5 waterentitl and orchards ofalmond lease long-term and theacquisition generated through returns risk-adjusted consistent, Provide 951112 578 ARSN RiverBank RFM al Managers Limited alManagers RE iie t Limited /C> > nt> id units on issue. Details of the top 10 10 top the of Details issue. on units id 32,737,860 25,624,992 1,009,493 (%) Unitholding No. Units 1,371,336 7,112,868 936,172 778,030 855,175 527,857 512,421 414,876 359,116 348,392 ements ements 100.0% 21.7% 78.3% 3.1% 4.2% 2.9% 2.4% 2.6% 1.6% 1.6% 1.3% 1.1% 1.1% 33 Independent Experts Report 139 S18 34

2 (ML) 2012 - Excess Water Excess 2,494 3,223 1,200 6,917

(ML) ime ime and high a small area 15,090 12,120 - 30,359 5-6 6-7 7-8 - 3,149 Colliers) performed valuations as at 2012 2012 of the Steak Plains and Collaroy (ha) (years) s e Mooral and Yilgah assets. y y Ltd ( d Collaroy assets. d below. d as follows: s own accord; rather it leases assets to third leased to Select Harvests Limited, an ASX listed ) performed comprehensive valuations as at 30 usts which are also managed RFM:by 1 and infrastructure. RBK’s main assets are almond 100 100 kilometres north of Griffith, NSW. These assets 74 2,134 ucture and associated water extraction rights based (ha) Land Land Developed OrchardWater Allocated Estimated - - 6,400 1,006 1,054 808 t Limited t Limited ests ests and LimitedSteak Plains Farm Olive Pty Ltd. 320 320 Riverina location on Yilgah location on and Mooral that t decreases over water and water landthe primarily usedfor grazing and hile Steak Plains torelates olives. ) performed comprehensive valuations as at 30 June (ha) Total Land Leased Orchard MaturityVolume Barnden

12,239 7,7 Hillston, NSW Hillston, NSW Hillston, Carrathool, NSW6,400 Carrathool, NSW 3,334 507 1,998

3 4 30 June30 2013 of Mooral, the Yilgah, Steak Plains an Barnden Property Pty Ltd ( June 2012 and desktop valuations as at 20 December assets. Colliers International Consultancy and Valuation Pt and and desktop valuations as 20at December 2012 of th Riverina Property Services Pty Ltd ( RFM Almond Fund 2006; RFM Almond Fund 2007, and RFM Almond Fund 2008. 3 3

      Property Location Yilgah Mooral Steak Plains Collaroy Total Orchards Yilgahfor Mooral relateand almondsto w Collaroy is mainunencumbered the with asset being Land leasedthreeto RFM Funds,Almond Select Harv Estimated excess supplementary includes water a al (64ha) (64ha) of olive trees. A summaryA of the independent property valuations at June 2012 and June 2013 are presented below: Independent Expert’s | Rural Report Funds Managemen RBK’s property assets have been independently value 3 4 7.2.2. Independent Valuations of RBK Property Asset Source: Barnden valuations, Riverina valuations and Colliers valuations. 1 2 Table 19: RBK’s Property Assets Assets Property RBK’s 19: Table 7.2.1. RBK Property Assets RBK primarily invests in horticultural land, water orchards situated on two properties near Hillston, Australian agribusiness company, for a leased to the following three managed period investment tr of 20 years. The remaining almond orchards are 7.2. Assets RBK include the land, almond trees, irrigation infrastr theon Lower Lachlan Aquifer. RBK does not undertake farming activities parties. The majority out of RBK’s almond of orchards are it security thatriver water is not allocated a to perty. pro A summaryA of RBK’s main property assets are provide For personal use only use personal For 140 Explanatory MemorandumFor personal use only Colliers valuations. Colliers and valuations Riverina valuations, Barnden Source: A reconciliation of the above valuations to RBK’s b RBK’s to valuations the above of A reconciliation reduction in NAV over the first three months of FY1 isand FY14 return for distribution yearfull higher n is tha the 4.13%. is This 2014 to30 June months below. presented are metrics financial key RBK’s Metrics Financial Key RBK 7.3.1. Table 20: Barnden’s, Riverina’s and Colliers’ Valuat Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent in the metrics financial key toRBK’s respect With a full assumes aboveshown returns distribution The franking.and declared nsinclude baseddistributio are returnson Distribution Note: RFM management. Source: Table 21: RBK Key Financial Metrics performanc RBK’s of asummary contains section This RBK Performance 7.3. foll the note we table, above tothe reference With FY15 FY14 Period FY13 FY12 Collaroy Carrathool, NSW Carrathool, Total Collaroy Location Property Steak Plains Carrathool, NSW Carrathool, SteakPlains Mooral Yilgah         h dces i vle o Clao i atiue to attributed changes. is Collaroy for value in decrease The Steak Plains Olive Farm Pty Ltd. PtyLtd. Farm Olive Plains Steak with lease term a long of market finalisation to the due substantially increased Plains Steak of value The improved to mainly attributed be can Mooral and conditions. Yilgah for values in increase The $70 at sale for contracted was to Collaroy relation Yilgah was contracted for sale at $1,164/ML (total (total $1,164/ML at sale for contracted was Yilgah to relation in water river security high of 0ML 25 2013, June at valuations Colliers’ to Subsequent debt amortisation requirements. amortisation as debt and Transaction Proposed the with associated costs FY13, in lower are Distributions reinvested. are roll a on calculated been have returns Distribution mil $1.8 excludes 2012 valuati property June independent the across consistency at Mooral for value The forecast financials for FY14 and FY15. and FY15. FY14 for financials forecast and and FY13; FY12 for financials audited

Hillston,NSW Hillston,NSW itiuinDsrbto La oVleIndirec Loan to Value Distribution Distribution (per unit) (per $0.080 $0.060 $0.024 $0.084 30 June 2012 30 June 2013 June 30 2012 June 30 Return 5.48% 4.08% 1.84% 7.78%

$00)($'000s) ($'000s) Indicated Value Indicated 84,204 34,514 42,650 4. 4. 6,350 year of trading. For comparative purposes, distrib purposes, comparative of year For trading. 690 iie t Limited ions of RBK PropertyAssets owing: owing: above table, we note the following: following: the note we table, above alance sheets is provided at Table 24. Table at provided is sheets alance 38.94% 39.00% 39.33% 46.80% Ratio e with reference to RBK’s: RBK’s: to reference e with 0/ML (total of $2.0 million). million). $2.0 of (total 0/ML 91,458 41,718 43,952 of $291,000) and 2,808ML of ground water in in water ground of 2,808ML and $291,000) of ing returns basis, i.e. assuming distributions distributions assuming i.e. basis, returns ing 3,726 2,061 ons. ons. moderation in water values and seasonal seasonal and values water in moderation distributions have been withheld to meet meet to withheld been have distributions

lion for water entitlements to ensure ensure to entitlements water for lion ot neetNet Interest Asset Value t Cost 3.23% 3.88% 3.85% 3.93% Ratio due to the ution return for 9 return for ution Cover (per unit) (per Cover 2.60x 2.17x 1.71x 0.48x

$1.535 $1.504 $1.453 $1.452 35 Independent Experts Report 141 S18 36 - - - - 8 6 2,767 8,595 7,333 5,110 3,646 - - - , that the the , that 106 523 on included RFM’s on in - (1,575) (459) - 117 936 358 (15)

- - 412 497 3,977 8,640 1,210 3,612 1,464 909 12,618 4,822 927 FY12 FY13 FY14 FY15 (437) (173) 4,305 15,608 7,233 5,596 1,291 18,549 3,396 2,942 7,288 2,990 1,6312,910 2,411 1,721 2,224 6,816 4,004 7,071 13,748 7,906 2,425 8,148 3,20 1,175 1,239 1,309 1,347 2,949 5,051 1,609 3,205 1,316 3,148 1,420 2 through to FY15 is predominantly due to 10,647 21,755 10,437 11,362 (1,977) 8,539 3,612 3,646 ($'000s) ($'000s) ($'000s) ($'000s) Audited Audited Forecast Forecast er operational costs. uation. uation. sets. This in turn positively impacts earnings n grower proceeds and movements interest in ments from RFM’s Almond Funds, Select t Limited t Limited line Weitemsan line aggregatedon basis. note however 9 1 3 2 4 5 6 7 10 Notes table above may table above from financialthediffer informati years shown.years increases in the value of biological assets. increases in the value of property, plant and equipment; and repayment of debt;

and theand interest cover calculation. In addition the debt is forecast to reduce. The assumed increase in biological asset values ryea on year is also a contributing factor to the improvement NAV in per unit from FY12 to FY15. the the forecast increase in the value of biological as − The forecast improvement in the indirect cost ratio maturing profile of the business and associated low in FY12 compared to FY15 is due to the The forecast improvement in interest cover from FY1 − The forecast decrease in LVR from to FY12 FY15 can attributed be to: −

Harvests Limited and Steak Plains Olive Farm d.Lt Pty change in allocation of the orchard value fromr to wate biological assets in addition to orchard value growth in accordance with the independent val rate swaps.     NPAT EBIT Unrealised Unrealised loss / (gain) on investment properties 8 NPBT Depreciation Finance costs tax expenseIncome Unrealised loss / (gain) on fair value adjustments to property, plant and equipment 11 EBIT DA tax onIncome other comprehensive income Rental revenueRental Other income Increase assets biological in Total comprehensive income attributable unitholdersto Total revenue Impairment Management fees Management Transaction costs Other expenses Total expenses Total 7.3.2. RBK Income Statements 2. For FY13, the significant increase the in value of biological assets is predominately due to a 3. Other income for FY13 comprisedmainly revenue o 4. Impairment expense FY12in related orchardto maintenance costs written off. Explanatory Explanatory Memorandum,occasionally which presents overall resultconsistent is for financialthe all Independent Expert’s | Rural Report Funds Managemen With respect to RBK’s summary income statements le tab above, we note the following: 1. Rental revenue comprises predominantly lease pay Source:management. RFM Note: for Figures items individualthe thein line Table 22: RBK Income Statements Statements Income RBK 22: Table

For personal use only use personal For 142 Explanatory MemorandumFor personal use only t assets between FY12 and FY13. betweenFY12 netassets in thenotwill 22 movement match Table in shown 7.3.3. RBK Balance Sheets Sheets Balance RBK 7.3.3. downwar trended consistently have expenses Other 7. struc fees, advisory to relate costs Transaction 6. policies. As a result, the total comprehensive inco a the total result,comprehensive As policies. to pr adjustments value on fair gain Unrealised 11. purp taxation for trust trading public a is RBK 10. as toRFM remuneration represent fees Management 5. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent ar above in assetsthe table intangible for figures note FY15. FY13 been has to for We tadopted impairmen a or model cost Specifically, (waterlicences). inaccounting change adopted a RFM management Note: RFM management. Source: Table 23: RBK Balance Sheets 8. Unrealised gain on investment properties relates properties investment on gain Unrealised 8. equipment at 9.00% pa for the reported periods, periods, reported the pafor at9.00% equipment and plant on interest include also costs Finance 9. Trade and other receivables other and Trade Cash and cash equivalents cash and Cash Interest-bearing liabilities Interest-bearing Other liabilities Other payables other and Trade Number of units issued units Numberof Net assets liabilities Total liabilities financial Derivative liabilities tax Deferred assets Total assets Other assets Biological Intangibleassets equipmentand plant Property   ies. ies. propert investment on gain unrealised to classified Thi value. tofair equipment and plant property, of proceeds. it whether of regardless Transaction, Proposed the to in relation incurred be will which A. Appendix in out set structure rate of 30%. 30%. of rate direct operating expenses associated with the recen with the associated expenses operating direct pr i.e. orchard, maturing with the line in projects the improved rates under the new loan facility and and facility loan new the under rates improved the FY13 for pa at10.00% RFM to loan a on interest and The movement between FY14 and FY15 is due to: to: due is FY15 and FY14 between movement The du standards accounting applicable under properties investment as classified be to able were s asset these of none as FY14 to prior exist not does orchard maturity. maturity. orchard of result a as standards, accounting under s asset biological to assets some of reclassification and expenditure; capital

e recognised at fair value and do not reflect the c not atfairdo and recognised value e me attributable to unit holders (less any distributany (less holders to unit attributable me Notes 5 &6 5 &6 4 &6 3 10 2 1 8 9 7 2 7 iie t Limited ngible assets assets ofitsvaluation inta ngible tothe respectwith policies oses and is therefore subject to the corporate tax tax corporate the to subject therefore is and oses turing costs, internal overheads and other fees fees other and overheads internal costs, turing operty, plant and equipment relates to revaluation torevaluation relates equipment and plant operty, oject management costs, and the reduction in reduction and the costs, management oject to revaluation of the asset to fair value. This This value. fair to asset the of revaluation to 30 June 2012 30 June 2013 30 June 2014 30 June 2015 June 30 2014 June 30 2013 June 30 2012 June 30 s does not exist in FY14 and FY15 as it was re- it as FY15 and in FY14 not exist does s debt reduction in FY13. in FY13. reduction debt 233163,3,2 2742532,724,225 32,724,225 32,733,121 32,303,126 ds due to reduced capital expenditure expenditure capital reduced due to ds t sale of the unleased orchard area. area. orchard unleased the of sale t e to the derivation of operational revenue. revenue. operational of derivation to the e uie uie oeatForecast Forecast Audited Audited only. The decrease in finance costs reflects reflects costs finance in decrease The only. $00)(’0s $00)($’000s) ($’000s) ($’000s) ($’000s) responsible entity based on the fee the fee on based entity responsible 21,904 35,394 37,818 37,818 25,354 29,5 35,394 27,497 27,898 21,904 35,193 27,107 41,359 38,980 39,044 39,044 38,980 41,359 44,573 47,564 49,208 49,208 47,491 47,564 49,133 100,334 44,573 49,977 96,699 96,697 94,550 2,045 3,002 1,592 1,592 3,002 2,045 5,041 5,041 1,553 1,553 2,209 2,209 1,553 1,553 1,419 4,433 5,224 5,224 2,593 4,433 2,235 1,574 3,180 1,419 2,724 2,466 3,260 182 ions paid) in FY13 as FY13 ions in paid) hange to accounting accounting to hange that the the FY12 that 200 120 894 00 50,229 50,229 50,105 40,603 41,026 25,726 30,022 2,209 2,209 6,255 1,800 1,560 200 200 12 918 0 37 Independent Experts Report 143 S18 38

76 291 (658) (378) e assets on that the d in an - - - - 84,20427,10735,193 90,78921,904 27,898 84,204 27,497 35,394 90,789 84,204 91,458 ($'000s) ($'000s) 30 June 2012 30 June 2013 tions plus capital expenditure. The ecently by Colliers at 30 June 2013. The ge ofge 1.5% and 2.75%, in addition to capital ability/rainfall) and the reclassification of water the following: vided below. below. vided perty subject and to a general security ucture, land, and plant and equipment. These and biological assets were independently valued cies with respectto valuationthe intangibl its of t Limited t Limited ment the in asset intangible balance FY12 between and FY13 is ions to ions account to capitalfor improvements Stetheto akPlains Olive s of are reflective not changethe in accounting policies (which has by the by valuersthe the and sale potential million). value (i.e. $0.66 as as opposed profit the to and loss statement. asset at asset million.$2.75at such, As RBK thehas in recognised account 2 4 3 1

liabilities. agreement. The forecast is LVR 39% as 30 at June 2014 and as at 30 June 2015. This compares theto facility covenant of 50%. Included in interest bearing liabilities is a $1.8 million loan from RFM which is forecast to be repaid Octoberin 2013. The forecast interest cover ratio is 2.17x and 2.60x for FY14 and FY15, respectively. This compare the to s interest cover ratio bank covenant of 1.75x and 2.05x for FY14 and FY15, respectively. the operationalthe costs of the unleased area. presenting neta figure for unearned income rather than totals for receivables and payables. values are based on the June 2013 independent valua assumed growth rate for FY14 and FY15 is in ranthe expenditure assumptions. river water. The value of these assets decreased su bstantially in FY13 due to moderation a in water values (increased temporary river water avail reconciliation to the independent valuations is pro values to biological asset values. assets FY13 in is predominantly due reclassificato tion of biological assets to include water values. by Barnden and Riverina at 30 June 2012, and more r Collaroy Land and Water adjustment adjustment Accounting Policy adjustment Expenditure Capital Surface Water adjustment Total - Valuations and Adjustments and Valuations - Total equipment and plant Property assets Intangible Biological assets Total- Sheet Balance Barnden, Riverina Colliers & valuations An millionamount $0.08 of added to was valuat the At Junethe valuation, 2013 valuersthe excluded million$0.291 from valuationstheir the on assumpti At Junethe valuation, land 2013 Collaroy and a portion of million was water valued $3.4 at the luers.by va RBK management RFM adopted change in a accounting poli (water licences).(water Specifically, cost model or a impairmenadoptedt for has been ThisFY13. has resulte adjustmentmillion theto$0.4 of valuatio ns.property orchard that was not valuationthe reflected in ure. fig however however received a potential sell to contract this balance,the difference ascribedthe between value been adoptedWe from FY13). move also note that the Source:management RFM Horwath analysis.and Crowe Note:June 30 The 2012 balance intangiblefor asset accounted forthe within asset account revaluation Independent Expert’s | Rural Report Funds Managemen 4 7. From FY13, other assets include tax assets which were previously netted off deferred in tax 8. Bank borrowings are secured against the real pro 1 2 3 rnden, Riverina and Colliers Valuations Valuations Colliers and Riverina rnden, Ba to Sheets Balance RBK of Reconciliation 24: Table 2. Both receivables balance and payables balance decreased from to FY13 FY14 as result of 3. Property, plant and equipment comprises infrastr 4. Intangible assets relate to water licences held for Lower Lachlan ground water and high security With respect to RBK’s balance sheets above, we note 1. Cash decreased FY13in predominantly due to the repayment of million $3 vendor finance and 5. Biological assets comprise predominantly almond orchards. The substantial increase in biological 6. Property, plant and equipment, intangible assets surface had water been sold. as However, June the30 at surface asset 2013, water had toyet sold and be hence was added back theto management. accounts by RFM For personal use only use personal For 144 Explanatory MemorandumFor personal use only 10. Other liabilities are forecast to increase in F in toincrease forecast are liabilities Other 10. liabilities financial derivative in decrease The 9. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent

iie t Limited Y14 due to provisions for distributions. distributions. for provisions to due Y14 is due to the payout of interest rate hedges in FY hedges rate interest of the payout to due is 14. 39 Independent Experts Report 145 S18 40 ) ) AIT

). The fund name was high grapesquality high wine UPVF

AIT AIT AITAIT ard Fund ( th the Agricultural Income Trust Fund 1 ( tholders relinquished their AIT units and were held. The AIT continues to exist as an entity, t Limited t Limited RFM RFM RFM RFM 100% 100% Responsible entity Open-ended Low Quarterly (from December 31 2013) RFM WineAustralian FundARSN 099 573 485 Provide an investment capitalwith potential in throughgrowth rural theassets ownership of production the tosuitedvineyards of 5 years plus Unlisted unit trust Rural Funds Management ACNLimited 077 AFSL492 838 226701 AustralianExecutor Trustees ACN Limited 794 007 869 February 2002 Rural Property and Viticulture NAV approximately of million$30.3 atJune 30 2013

AWF AWF AWFAWF (formerly(formerly UPVF) UPVF) (formerly(formerly UPVF) UPVF)

Inception date date Inception Investment sector Investment size Investment structure Liquidity Distributions Investmentobjective Investment period Structure manager / fund entity Responsible Custodian Fund Overview name Fund Independent Expert’s | Rural Report Funds Managemen As at 2 August 2013, unitholdings in AWF are provided below. AWF has 70,653,212 of fully paid units on issue. Details of the top 10 Source:management. RFM Overview Fund AWF 25: Table Figure 10: AWF Structure Structure AWF 10: Figure 8.1. 8.1. Overview Fund AWF AWF was formerly called the RFM Ultra Premium Viney 8. Profile of RFM Australian Wine Fund Source:management. RFM issued with 1 UPVF unit for every 1.0235 however all AIT units are wholly owned by AITAWF. RFM is responsible the entity for AIT. units changed on March 2011 following a merger of UPVF wi on 28 February 2011. As part of the merger, AIT uni For personal use only use personal For 146 Explanatory MemorandumFor personal use only Table Table 26: AWF Top 10 Unitholders Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent valuationsand website. RFM Gaetjens Source: Table 27: AWF PropertyAssets Sou in located six with vineyards seven has AWF The Assets Property AWF 8.2.1. Assets AWF 8.2. Fund. each for information financialpro-forma the not match and 2013 asmay areAugust at 2 figures Unitholding Note: RFM management. Source: A summary of AWF’s main property assets are provide are assets property main AWF’s of A summary i via Estates Wine toTreasury back charged be will capital in invest will but costs production incurs commencement lease at value capital the of 9% upon fr however Estates, Wine Treasury to leased be also will Vineyard Hahn remaining The value. capital 2012 June 30 the of 9% upon based rental initial with to leased were vineyards six 2013, February 15 From is property one remaining The Coonawarra. and Hills Location & Property lii iead206 Kleinig Vineyard Rosebank Vineyard Koonunga, SA ee iead243 Geier Vineyard on iead30 DohntVineyard Moyston, VIC Moyston, Greenock, SAGreenock, Coonaw arra, SA arra, Coonaw ud upy55 Vineyards Mundy &Murphy Forreston, SA Forreston, Light Pass, SA Hahn Vineyard 10 SCA FT Pty Ltd Ltd Row 10 Total 9 Netw ealth Investments Limited 8 Family Bryant Pty LtdServices t> 7 us Tr Mitchell Nominees Karen Mitchell expenditure capital Any required. where expenditure ncreases in rental payments. payments. rental in ncreases located in the Grampians, Victoria. Victoria. the Grampians, in located Treasury Wine Estates for a period of 10 years years 10 of period a for Estates Wine Treasury om 1 July 2013, for a period of 9 years based based years 9 of period a for 2013, July 1 om th Australia within the Barossa Valley, Adelaide Adelaide Valley, Barossa the within Australia th d below: d below: date. Under these agreements, AWF no longer longer no AWF agreements, these Under date. 2000/2000-09/2001-08 1994-95/2002/2008 1986-87/2000-07 1997/2006;2001 1970/2001/2005 lnigYa Yi Planting Year 2000-01; 2000 2000-01; 2000;2001/07 2002/2003 2002/2003 1976/2001 1996/2001 1999/2001 2000/2005

70,653,212 53,649,157 17,004,055 2000-02 2000-01 1,174,156 1,185,526 1,309,044 1,482,362 1,725,384 3,171,680 (%) Unitholding 4,199,811 No. Units 817,019 960,329 978,744 2002 2001 2001 2001 2000 2000 2013 Expected Expected Expected 2013Expected (tonnes/ha) 9 –10 9 elds Tonnes Tonnes elds 6 – 9 6 – 6 – 7 6 – 8.5 12 12 11 12 11 12 11 12 12 6 6 6 4 6 8 6 7

100.0% 75.9% 24.1% 1.2% 1.4% 1.4% 1.7% 1.7% 1.9% 2.1% 2.4% 4.5% 5.9% 1,094 1,209 4,997 363 101 466 109 109 126 109 350 286 106 74 32 87 69 69 46 50 57 85 41 Independent Experts Report 147 S18 42

$0.357 $0.429 $0.434 $0.441 y y assets as 2.21x 1.26x 2.65x 3.78x Cover (perunit) ution for return 9

950 2,400 3,650 2,300 14,000 36,000 12,700 Ratio 2.89% 3.46% 3.62% 2.79% t Cost Cost t Value Asset Interest Net ng ng FY12 and FY13 due to reduced 950 s 2,400 3,650 2,300 ne ne Estates for a term of 10 years has been 13,000 33,300 11,000 value due to the strong demand for Barossa Indicated Value Indicated ($'000s) ($'000s) ing returns basis, i.e. assuming distributions e with reference to AWF’s: 30 Jun 2012 30 Jun 2013 Ratio ons. 0 June 2013. 39.00% 39.44% 27.47% 26.32% t Limited t Limited year of trading.For year of comparative purposes, distrib 0.00% 0.00% 5.23% 4.80% Return Location Light Pass, SA Coonaw arra, SA Forreston, SA VIC Moyston, Greenock, SA Koonunga, SA Gaetjens) performed independent valuations of AWF’s propert $0.000 $0.000 $0.022 $0.020 (perunit) Distribution Distribution Value to Loan Indirec

Distribution returns have been calculated on a roll profitability asresult a of severe weather conditi audited financials for FY12 FY13;and and forecast financials for FY14 FY15. and are reinvested. No distributions were declared duri The proposed lease of the properties to Treasury Wi taken into account. Kleinig and Geier Vineyards have both increased in located vineyards. This is largely driven by Treasury Wine the Barossa locality.Estates’ acquisitions of property in The 30 June 2013 values entitlements for Kleinig the vineyard totalat a cost of$418,500 reflectper annum. the purchase of 270 ML permanent River Murray water

      Property VineyardHahn VineyardDohnt & Mundy Murphy Vineyards Vineyard Rosebank Total Geier Geier Vineyard Kleinig VineyardKleinig FY12 FY13 Period FY14 FY15 at 30 June 2012 and updated desktop valuations 3 at Independent Expert’s | Rural Report Funds Managemen With respect to AWF’skey financial metrics table above, we note the following: Source:management. RFM Note: Distribution on returns are distributiobased includens declared and franking. The distribution returns shown above assumesfull a Table 29: AWF Key Financial Metrics Metrics Financial Key AWF 29: Table This section contains a summary of AWF’s performanc With respect to Gaetjen’s valuations of AWF’s property assets table above, we note the following: ts Asse Property AWF’s of Valuations Gaetjens 28: Table monthsJune 30 to 2014 is 5.18%. 8.2.2. Independent Valuationsof PropertyAWF Asset Gaetjens Pickett Valuers ( Source: Gaetjens valuations 8.3. 8.3. Performance AWF 8.3.1. AWF Key Financial Metrics AWF’skey financial metrics are presented below. A reconciliationA of above the Gaetjens valuations to AWF’s balance sheets is provided at Table 32. For personal use only use personal For 148 Explanatory MemorandumFor personal use only 8.3.2. AWF Income Statements Statements Income AWF 8.3.2. e of grape vines and grapes on the vines. This This vines. on the grapes and vines grape of e valu to the relate assets biological in Increase 3. risk financial the Given Estates. asury Wine Tre from payments lease comprises revenue Rental 2. allthefinancial for is consistent result overall presents which occasionally Memorandum, Explanatory Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent i of the sale for payments received AWF InFY12, 1. following: the note we above, table statements income summary AWF’s to respect With line in the theindividual items Figures for Note: RFM management. Source: Table 30: AWF Income Statements nelsdls gi)o netetpoete 8 properties investment on (gain) / loss Unrealised Transaction costs Transaction to to unitholders attributable income comprehensive Total Total revenue Total Sale of grapes Saleof EBIT Total expenses NPAT NPBT Depreciation DA EBIT expenses Other Managementfees Impairment Employeecosts expense operating Direct income Other in biological assets Increase Rentalrevenue dutet opoet,patadeupet10 income comprehensive other Incomeon tax equipment and plant property, to adjustments value fair on (gain) / loss Unrealised Incomeexpense tax costs Finance    asset value increased substantially in FY13 due pre due FY13 in substantially increased value asset years. 10 of aperiod for Estates Wine Treasury to vineyards its all leases FY13 from AWF unitholders, for returns of e consistency provid to and activity with agricultural associated Hahn Vineyard is leased to Treasury Wine Estates fr Estates Wine Treasury to leased is Vineyard Hahn The Vineyard. Hahn the to attributed hand on crops to remaining relates therefore statement T 2012). 1July to (backdated Estates Wine Treasury six 2013, 15 February from that given in FY13 lower rvn y n nrae n h vle f ilgcl as above. biological mentioned of value the i in increase increase an an by to driven due FY15 to FY12 from improves NAV due FY14 and fees. management in increase an and Transaction FY13 in increases ratio cost Indirect i FY14. for cover interest improved the in reflected debt of repayment and values, equipment and plant LVR is forecast to decrease from FY12 to FY15 due t due FY15 to FY12 from decrease to forecast is LVR years shown. yearsshown. table above may differ from the financial informati differthe financial from abovetable may Notes 7 1 9 6 5 4 3 2 line items on an aggregated basis. We note however note basis. onaggregated line an items We iie t Limited ts grapes to third parties. The sale of grapes is is grapes of sale The parties. tothird grapes ts dominantly to improved assed values for the the for values assed improved to dominantly out of seven vineyards were leased to to leased were vineyards seven of out om 1 July 2013. 1July2013. om he amount recognised in the income income the in recognised he amount uie uie oeatForecast Forecast Audited Audited $00)('0s $00)($'000s) ($'000s) ($'000s) ($'000s) sets and property, plant and equipment as as equipment and plant property, and sets o increased biological assets and property, property, and assets biological increased o ,9 ,6 ,2 1,933 1,926 4,660 2,890 9,569 9,180 3,829 3,829 9,180 9,569 7,499 7,499 4,098 4,011 3,132 3,132 4,011 4,098 5,012 4,888 1,526 1,526 4,888 5,012 3,152 4,760 1,926 1,926 2,487 4,760 2,732 3,152 2,303 3,143 4,292 1,697 4,557 1,589 1,004 3,195 1,992 2,070 Y2F1 Y4FY15 FY14 FY13 FY12 459 459 1,522 128 824 259 1,278 955 479 n FY14. The repayment of debt also is is also debt of repayment The FY14. n to costs associated with the Proposed Proposed the with associated costs to 9 (2,028) (9) 2 - - - - 2,783 3,193 3,193 2,637 2,783 - -

n total assets. This is predominately predominately is This assets. total n 191 281 10 475 565 0-- (,3)(960) (1,233) - - - - on included inon RFM’s included 251 404 383 892 646 611 561 , that the 25 ------3,290 3,290 1,933 1,933 2,556 3,125 2,567 1,143 3,709 401 401 378 378 764 764 569 569 405 623 623 14 14 ------43 Independent Experts Report 149 S18 44 - - - 81 60 887 533 464 442 101 1,636 1,688 20,536 16,286 42,112 10,348 10,951 31,161 - - - - thatthe 81 60 520 755 733 101 n RFM’s - - - - 81 500 101 348

- 2,071 1,510 - 82 16 16 76 76 402 268 125 1,688 1,688 1,688 2,667 2,948 4,566 2,026 1,785 13,025 15,270 15,881 14,869 25,607 14,449 30,296 11,242 30,669 19,664 18,542 19,691 40,476 44,744 14,384 41,911 14,000 10,348 t FY13 as the vineyards are leased by responsible entity of AWF on based the fee ($’000s) ($’000s) ($’000s) ($’000s) Audited Audited Forecast Forecast e to the derivation of operational revenue. and equipment and planted crop cost ed FY13 in is due to the crystallisations of tax 70,572,756 70,647,901 70,663,323 70,663,323 erating cost recovery fromTreasuryWine e note the following: mately $8.0 million and deferred tax liability of 30 June 2012 30 June 2013 30 June 2014 30 June 2015 to revaluation of the asset to fair value. This t result of rental the income derived from op expenditureop and direct agribusiness expenses. turing costs, internal overheads and other fees ses and is therefore subject tothe corporate tax t Limited t Limited accounts on Wean accounts aggregatedon basis. note however, 2 2 2 2 3 4 5 1 Notes ay differ from ay financialthe information included i

rate of 30%. The large negative tax losses recognis does not exist prior to FY14 as none of these assets were able to be classified as investment properties under applicable accounting standards du losses. Specifically, deferred tax asset of approxi approximately $5.7 million were recognised in FY13 due to the existence of consistent cash flow stemming from lease the contract Treasurywith Wine Estates. TreasuryWine Estates. structure set out in Appendix A. This expense, along with employee costs, ceases pos which will be incurred relationin to the Proposed Transaction regardless of whether proceeds. it Estates for seven months to January 31 2013. Kleinig and Geier Vineyards as per the independent property valuations. For forecast years, property assets increase from June the 30 2013 independent valuation at an assumed growth rate in the range of 2.5% - 4.0% per annum. TreasuryWine Estates and associated sale of plant recovery. The cash account will decrease FY14in to fund a debt payment of $4.0 million offset by a payout of interest rate swaps. Other assets Biological assets Number ofNumber units issued Trade and other payables Interest-bearing liabilities Derivative financial liabilities Total liabilities assets Net Property plant and equipment assetsIntangible Investments Deferred tax asset Total assets Cash Cash and cash equivalents Trade and other receivables Other liabilities Short provisions term Provision for distributions 9. AWF is a public trading trust for taxation purpo 8.3.3. AWF Balance Sheets 6. Management fees represent remuneration to RFM as 7. Transaction costs relate to advisory fees, struc 8. Unrealised gain on investment properties relates 5. Direct operating expenses relates to deferred cr 4. Other income FY13 in predominantly relates toop 1. The increase in cash account for FY13 is a direc Independent Expert’s | Rural Report Funds Managemen With respect to AWF’s balance sheets table above, w Source:management. RFM Note: for Figures accountsthe in tablethe m above Table 31: AWF Balance Sheets Sheets Balance AWF 31: Table Explanatory Memorandum,occasionally which presents net position is forconsistent financialthe all ars shown. ye

For personal use only use personal For 150 Explanatory MemorandumFor personal use only Source: RFM management. RFM management. Source: Table 32: Reconciliation of AWF Balance Sheet to Gaetjens A 8.2.2). Section (refer valuers perty pro independent by valued been have assets AWF’s 2. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent 6. Other movements in account balances relate to on to relate balances in account movements Other 6. 5. Derivative financial liabilities relate to movem relate liabilities financial Derivative 5. 4. LVR is forecast to improve after FY14 due to inc to due FY14 after toimprove forecast is LVR 4. 3. Deferred tax asset and deferred tax liability we liability tax deferred and asset tax Deferred 3. Investments Biologicalassets Reconciliation to Gaetjens valuations Gaetjens to Reconciliation Total Intangibleassets Property plant and equipment and plant Property Less: Biological assets excluded from external valu external from excluded Biological assets Less: Less: Other equipment excluded from external valuat external from equipment excluded Other Less: the Gaetjens valuations is provided below: below: provided is valuations Gaetjens tothe equipment and plant property, of reconciliation anges in interest rates. rates. interest in anges ch from resulting exposures to manage used are that FY14 and FY15. and FY15. FY14 for 2.0x of covenant bank ratio cover interest the to compares This respectively. FY15, and FY14 r fo 3.78x and 2.65x is ratio cover interest forecast co This 2015. at 30 June as 26% and 2014 June at 30 security to ageneral subject and property the real repayment and values asset biological in increases ct with Treasury Wine Estates. Estates. Wine with Treasury ct contra thelease from stemming flow cash consistent late to unlisted shares in Barossa Barossa in shares unlisted to annum. per 4% late re a indexed 2013 Investments June at valuation independent the vines. on the th of on value the in increase The Ltd. grapes Infrastructure and vines grape wa to relate assets Intangible equipment. and plant compris predominately equipment and plant Property, iie t Limited ation ion ents in the value of interest rate swap derivatives swap rate interest of value in the ents re recognised in FY13 due to the existence of of existence the to due FY13 in recognised re reases in property, plant and equipment values, values, equipment and plant in property, reases agreement. The forecast bank LVR is 27% as as 27% is LVR bank forecast The agreement. e biological assets from FY12 to FY13 is based based is FY13 to FY12 from assets biological e going operations. operations. going of debt. Bank borrowings are secured against against secured are borrowings Bank debt. of e lcne ad ilgcl ses oss of consist assets biological and licences ter

Valuations mpares to the facility covenant of 45%. The The 45%. of covenant tothe facility mpares t assumed vineyard growth rate of 2.5% to to 2.5% of rate growth vineyard assumed t es land, buildings and improvements, and and improvements, and buildings land, es 30 June 2012 30 June 2013 June 30 2012 June 30 $00)($’000s) ($’000s) 33,300 13,025 33,300 19,664 1,688 (405) (754) 82 36,000 15,270 36,000 18,542 1,688 500 - -

45 Independent Experts Report 151 S18 46

654 1,360 1,606 3,061 3,104 19,935 10,150

30 272 321 215 663 (ha) ($’000s) AreaRent FY14 2,507 1,006

1 2026 2028 2030 2030 2022 2023 Expiry (year)

ricultural assets. In addition, the Rural Funds process which will result in the formation of the es d that Rural Funds Group will not operate assets, ies as summarised the in table below: t Limited t Limited Mooral Mooral Yilgah All farms All vineyards Property counterparties counterparties counterparties assetsassetstoto various various Leases agricultural agricultural agricultural Leases Leases RFM Almond Projects 20082007 & Almond RFM Mooral RFM Almond Project 2006 Project Almond RFM Select Harvests Limited Select Harvests Limited Lessee RFM Poultry RFM Treasury Estates Wine Counterpart/ RuralRural RuralRuralFundsFunds GroupGroup FundsFunds GroupGroup RuralRural RuralRuralFundsFunds GroupGroup FundsFunds GroupGroup

RBK Total RBK RBK RBK CIF AWF Lessor Weighted average lease expiry. Independent Expert’s | Rural Report Funds Managemen but but instead lease its assets to various counterpart Source:management. RFM 1 broad acre cropping properties leasedorchards, vineyards or to grazing land. It farming is envisage sinesses bu and further investment in almond Leas Material FundsGroup Rural of Summary 33: Table Source:management. RFM Rural Funds Group’s initial and long term investment strategy will capital be growth to generate through lease therentals and owning and leasing of ag Rural Funds Group. Rural Funds Group will have combined total assets of approximately $242 million comprised of CIF, RBK and AWF assets. Structure Leasing FundsGroup Rural 11: Figure Group will consider acquisition of additional assets to grow and diversify its income streams, such as 9.1. 9.1. Overview Group Funds Rural The Proposed Transaction comprises of a five stage 9. Profile of Rural Funds Group For personal use only use personal For 152 Explanatory MemorandumFor personal use only .. Rural Funds Group Pro-forma Financials 9.2. Table 34 of post-implementation regions and Transaction: Proposed the sectors s, tenant Group’s Funds Rural out sets below table The Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent incl Distributions declared. distributions on based aon roll are returns calculated Distribution Note: RFM management. Source: Table 35: Rural Funds Group Key MetricsFinancial FY15. and FY14 for financials T pro-forma Proposed the of date implementation effective The p’s Grou Funds Rural of summary a contains section This RFM management. Source: be declared upon unitholder approval for thePropos for approvalunitholder upon declared be dist this special thatproposed RFM unithold ers. management toall unitper of2.05cents distribution nted prese are below. metrics financial key Group’s Funds Rural trics Me Financial Key Pro-forma Group Funds Rural 9.2.1. 12 mths to 30 Jun2015 30 mthsto 12 9 mths to 30 Jun 2014 30 mthsto 9 Period ietc Various Total Grampians,Other VIC SA arra, Coonaw Livestock Wine grapes SA Barossa, Wine grapes Wine grapes Riverina,NSW Almonds Sector iegae AdelaideHills, SA Wine grapes NSW Riverina, Poultry Poultry Almonds giutrlAgricultural Agricultural : Rural Funds Group Tenants, Sectors and Regions and Sectors Tenants, Group Funds Rural : Riverina,NSW Region Western Western VICDistricts, Riverina,NSW

itiuinDsrbto La oVleIndirec Value to Loan Distribution Distribution (per unit) (per $0.083 $0.082

ing returns basis (assuming distributions are reinv are distributions (assuming basis returns ing includes a special a includes unitspecial per figure 2014 distribution The franking. ude ed Transaction andnon-recurring.ed is Transaction Return 8.65% 8.44% iie t Limited Various landholdersVarious landholders Various Wine Treasury Estates Wine Treasury Estates Wine Treasury Estates Wine Treasury Estates RFM Poultry RFMPoultry RFMFarming Limited Select Harvests Counterpart ransaction is assumed to be 1 October 2013. 2013. 1 October to be assumed is ransaction

40.27% 40.85% Ratio t Cost Interest Interest t Cost 2.25% 1.69% Ratio ested)are and ribution will onlywill ribution % of Revenue Cover (per unit) (per Cover 3.01x 2.94x 11.3% 37.1% 17.9% 17.2% 100% Net Asset Value Asset Net 1.8% 2.3% 1.0% 0.4% 1.6% 9.3% FY14 .003 $1 $0. 998 47 Independent Experts Report 153 S18 48 , that the the , that

on included RFM’s on in 584 793 2,911 9,149 3,613 2,577 2,312 5,683 7,370 5,492 415 1,249 5,937 3,898 1,915 1,616 2,749 8,964 1,999 6,965 12,060 6,965 9,149 4,780 4,486) (4,667) 19,093 25,938 14,313 20,255 12,862 17,552 15,929 21,740 ( ($’000s) ($’000s) Group. 9 mths 9 to mths to 12 responsible entity of Rural Funds Group es (FY14: $0.7 million, FY15: $0.9 million), ndix A. ion) repairs and and maintenance (FY14: 30 June 2014 30 June 2015 arts who have entered into lease arrangements ncome Statements Statements ncome to revaluation of the asset to fair value. rom StockBank. sis over theiruseful lives. 4 7 9 3 5 6 1 2 t Limited t Limited line Weitemsan line aggregatedon basis. note however Notes Pro-forma Pro-forma table above may table above from financialthediffer informati years shown.years

Transaction. for various terms.key assumption A is that there are no major changes to lease profile, occupancy rates and rental income under Rural Funds based on the proposed fee structure set out in Appe $0.02 million, FY15: $0.2 million). These represent payments to RFM and external suppliers on wages payable and compliance related expenditure. fund overheads (FY14: $0.9 million, FY15: $1.2 mill 2013. It is assumed 50% that is hedged on a 5 year basis a rate at of 6.0% pa. Finance costs also include interest on plant and equipment at 9.00% pa. EBIT taxIncome expense Total comprehensive Total incomeattributable unitholders to Property expenses Depreciation Unrealised loss / (gain) on investment propertiesFinance costs 8 NPBT NPAT Other income Totalrevenue feesManagement expenses Other expenses Total EBIT DA Asset revaluation Rental income Rental Source:management. RFM Note: for Figures items individualthe thein line Explanatory Memorandum,occasionally which presents overall resultconsistent is for financialthe all Independent Expert’s | Rural Report Funds Managemen

2. Asset revaluation relates to the movement in biological asset values. 3. Other income comprises primarily distributions f With respect to Rural Fund Group’s pro-forma incomestatements table above, we note the following: 1. Revenue will be derived from range a of counterp 4. Property expenses FY14in include stamp duty of $0.7 million relationin to the Proposed 5. Management fees represent remuneration to RFM as Table 36: Rural Funds Group Pro-forma Consolidated I Consolidated Pro-forma Group Funds Rural 36: Table 6. Other expenses relate to assetmanagement expens 7. All assets are depreciated a straight-lineon ba 9.2.2. Rural Funds Group Pro-forma Consolidated Income Statements 8. Unrealised gain on investment properties relates 9. Average forecast cost of debt is 5.50% pa based market on rates of 5.0% pa as at 20 August For personal use only use personal For 154 Explanatory MemorandumFor personal use only expected to converge over time.over toconverge expected resultin lower values Thedepreciation may sheds. Table Table 37: Rural Funds Group Pro-forma Consolidated B Sheets ance Bal Consolidated Pro-forma Group Funds Rural 9.2.3. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent 18 RFM management. Source: follows: as overall, increase will values ructure infrast and water land, that is assumption A key 1. following: the note we above, table sheets balance pro-forma Group’s Funds toRural respect With Table Table 38: Rural Funds Group Pro-forma Changes in Ass net position is consistent for all the financial yeshown.ars allthefinancial consistent for is position net presents which occasionally Memorandum, Explanatory above m thetable in theaccounts Figures for Note: RFM management. Source: Total Total AWF Provision for distributions for Provision liabilities incometax Deferred RBK Cash Cash Prepayment Inventory Receivables nrsrcuePofraMvmn r-om oeetPro 3 2014-15 Movement Pro-forma 2014 30 June 2013-14 Movement Pro-forma 1 Oct2013 CIF assets infrastructure & water Land, issued units Numberof Net assets liabilities Total liabilities Other Current liability tax Bankdebt Creditors assets Total Derivative financialasset StockBank in Investment Plantequipment& assets Biological Water properties Investment l life of depreciable assets, assuming a 45li a year assuming assets, ofldepreciable usefu life on theremaining based approach systematic A − − −

assumed growth rate of 1.5% to 2.75% per annum, in in annum, per 2.75% expenditure. to 1.5% of rate growth assumed AWF r bsd n h Jn 21 idpnet rpry val property independent 2013 June the decrement. depreciation on based are assumed vineyard growth rate of 2.5% to 4.0% per an per 4.0% to 2.5% of rate growth vineyard assumed less a $2.0 million depreciation decrement. depreciation million $2.0 a less RBK CIF 13 independent property valuations valuations property independent 2013 June the are values property CIF 2014, June At : endent valuation indexed at the the at indexed valuation endent indep 2013 June the on based are values asset RBK : endent valuation indexed at the the at indexed valuation endent indep 2013 June the on based are values asset AWF : 227,766 $00)('0s $00)('0s ($'000s) ($'000s) ($'000s) ($'000s) ($'000s) 36,445 91,446 99,876

(1,213) ay differ from the financial information included i included information thefinancial ayfrom differ two approaches are twohoweverapproaches the valuations, independent to the compared ,4 229,115 1,348 1,335 1,227 oe r-om r-om Pro-forma Pro-forma Pro-forma Notes accounts on an aggregated basis. We note however, note basis. onaggregated accounts an We iie t Limited 3 2,4,5 2,8,7 120,18 120,185,675 121,440,255 4 2 164,875 1 1 1 1 Oct 2013 30 June 2014 30 June 2015 June 30 2014 June 30 2013 Oct 1 alance Sheets 18 et Valueet

($’000s) Similarly, at June 2015, CIF property values values property CIF 2015, June at Similarly, 37,780 92,673 98,662 121,440 121,440 120,526 241,966 16,827 16,827 98,631 98,631 35,394 27,497 1,305 1,305 1,553 1,553 1,025 5,026 2,707 4,086 2,490 2,490 301 301 774 1 - - num. addition to any assumed capital capital assumed any to addition

uations less a $4.0 million million $4.0 a less uations (2,000) $00)($’000s) ($’000s) ,6 232,480 3,365 1,263 4,102 119,988 119,988 124,291 244,279 165,943 165,943 18,567 20,284 20,284 18,567 98,631 98,638 98,638 98,631 41,026 25,726 37,818 25,354 1,419 1,419 1,553 1,553 2,916 5,026 2,655 5,510 2,464 2,464 5 (35) 159 301 301 220 220 34 34 n RFM’s RFM’s n 0 June 2015 June 0 fespan for poultry for fespan 246,437 246,437 165,728 120,538 120,538 125,899 39,043 96,774 96,662 -forma 2,933 2,933 5,026 2,653 5,268 1,553 1,553 2,525 5,675 that the that 220 220 301 455 34 34

49 Independent Experts Report 155 S18 50

ed Transaction and is non-recurring. 5 are $0.082 and $0.083, respectively, inclusive Term $97.5 million facility)50% (total 2.25x 5 years Nil Nil t Limited t Limited debt facility termsfor Rural the Funds Group. d

of franking any credits. The 2014 distribution per unit figure includes a special distribution of 2.05 cents per unit allto unitholders. RFM management proposes that this special distribution will only declaredbe upon unitholder approval for the Propos 20% discount NAV. to Debt limit securityloan ratio Maximum interest cover Minimum term Loan Amortisation requirement Covenants concerning trading price of units Description Independent Expert’s | Rural Report Funds Managemen

3. Forecast distributions declared for FY14 and FY1 Table 39: Rural Funds Group Proposed Debt Facility Facility Debt Proposed Group Funds Rural 39: Table 2. Set out below are the propose 4. key A assumption is that Rural Funds Group will conduct $1 a million on-marketunit buy-back at Source:management. RFM For personal use only use personal For 156 Explanatory MemorandumFor personal use only ih okn cptl rnfre fo CF CIF CIF. from 2.3). Section (refer ratios merger the transferred per capital working with in capitalised Poultry RFM in units issued be be will unitholders initially will and Group Funds Rural growing RFM fund, chicken managed created newly a into transferred the Transaction, Proposed the Under RFM Poultry Overview 10.1. Poultry RFM of Profile 10. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent RFM management. Source: Table 40: Summary of Chicken Growing Contracts Poultr RFM 33). Table (refer CIF by owned currently will but farms poultry any own not will Poultry RFM RFM Poultry Assets 10.2. RFM management. Source: Figure 12: RFM Poultry Group Structure provided in the table below: below: table the in provided c growing chicken existing the of summary A CIF. by Total Bartter Enterprises Pty Ltd Counterpart RFM Poultry Grower wholly owned subsidiary owned wholly

Rural Funds Funds Funds Rural Rural Rural Funds Funds Funds Rural Rural Group Group Group Group Group CIFCIF CIF CIF

Lethbridge 68 m Far 67 m Far Farm 66 53 - Property iie t Limited

proportion to their unitholding percentages in CIF CIF in percentages unitholding their to proportion lease the farms in New South Wales and Victoria Victoria and Wales South New in farms the lease y will lease the chicken growing contracts owned owned contracts growing chicken the lease will y Poultry. RFM Poultry is to remain separate from from separate remain to is Poultry RFM Poultry. ontracts which RFM Poultry will be assigned is is assigned be will Poultry RFM which ontracts andchicken growing CIFleases assets contracts to RFM to contracts operations of CIF will be separated and and separated be will CIF of operations Poultry Poultry Expiry (year) 2036 2027 2026 2 2 173,472 024 303,216 59,160 35,496 35,088 External chicken processors chicken External sm Fee ($’000s) (sqm) RFM Poultry Poultry RFM Poultry RFM raFY14 Grower Area RFM Poultry RFM Poultry RFM

24,788 13,670 4,984 3,161 2,973 as as 51

Independent Experts Report 157 S18 52

Net Asset Value Asset Net - - $1.011 $1.022 , that the the , that Cover (perunit)

- ested) and are ested) on included RFM’s on in 46 121 665 679 634 325 759 759 3,456 4,736 2,096 1,406 1,130 1,084 1,084 Ratio 3.23% 3.25% t Cost Cost t Interest - 36 86 394 484 497 321 750 750 7,592 1,423 10,302 1,071 1,041 2,507 2,970 1,107 1,071 18,013 25,104 16,906 23,974 17,927 24,983 - - ($’000s) ($’000s) 9 mths 9 to mths to 12

responsible entity of RFM Poultry based on o-forma financials for FY14 and FY15. The Ratio 30 June 2014 30 June 2015

action is assumed be to 1 October 2013. 2 3 1 t Limited t Limited line Weitemsan line aggregatedon basis. note however Notes Pro-forma Pro-forma Return ude franking. ing returns basis (assuming distributions are reinv table above may table above from financialthediffer informati years shown. years $0.0993$0.1435 10.28% 15.01% (perunit) Distribution Distribution Valueto Loan Indirec

the proposedthe fee structure set out in Appendix A. (referTable 40, note the Grower fee income the in above table to 30 June 2014 represents 9 months of trading). Repairs and maintenance NPBT Finance costs taxIncome expense NPAT comprehensive Total incomeattributable unitholders to Management feeManagement Property rental expenses Other expenses Total Depreciation Totalrevenue feesContractor Direct agribusiness expense costs Employee electricity & Gas EBIT DA EBIT Other income Grow er fee income 9 mths to 30 Jun 2014 Jun 30 to mths 9 2015 Jun 30 to mths 12 Period Source:management. RFM Note: for Figures items individualthe thein line Explanatory Memorandum,occasionally which presents overall resultconsistent is for financialthe all Independent Expert’s | Rural Report Funds Managemen With respect to RFM Poultry’s pro-forma income statement table above, we note following:the 1. Grower fee income is attributable to the chicken growing contracts with Bartter Enterprises Pty Ltd 2. Management fees represent remuneration RFM to as effective implementation date of the Proposed Trans 10.3.2. RFM Poultry Pro-forma Income Statements Income Statements Poultry RFM 42: Table Table 41: RFM Poultry Pro-forma Key Financial Metrics Financial Key Pro-forma RFM Poultry 41: Table Source:management. RFM Note: Distribution calculated returns are rollon a This section contains a summary of RFM Poultry‘s pr 10.3.1. RFM Poultry Pro-forma Key Financial Metrics RFM Poultry’s key financial metrics are presented below. based on distributions declared. Distributions incl 10.3. Financials Pro-Forma Poultry RFM For personal use only use personal For 158 Explanatory MemorandumFor personal use only d grower payments in accordance with payment payment with accordance in payments d grower expecte to due high historically are Receivables 2. rental of timing to due predominantly is 2015 June and 2014 atJune balance high cash The 1. Table 43: RFM Poultry Pro-forma Balance Sheets Sheets Balance Pro-forma Poultry RFM 10.3.3. Sout in New farms the to relates rental Property 3. Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent w following note the We Explanatory Memorandum, which occasionally presents which occasionally Memorandum, Explanatory net position is consistent for all the financial yeshown.ars allthefinancial consistent for is position net above m thetable in theaccounts Figures for Note: RFM management. Source: Cash Provisions for distribution for Provisions Number of units issued units Numberof Net assets liabilities Total liability tax Deferred Current liability tax Employeeprovisions Creditors assets Total Plantequipment& Inventories Receivables Prepayments terms, with approximately 95% coming from Baiada. Baiada. from coming 95% with approximately terms, 90%. of ratio payout the given purposes distribution for required also is cash of amount An 2015. July and 2014 in July payable is million $2.6 e.g. expenses, 33). Table (refer i th reference to the above table: table: above tothe reference th

ay differ from the financial information included i included information thefinancial ayfrom differ oe r-om r-om Pro-forma Pro-forma Pro-forma Notes accounts on an aggregated basis. We note however, note basis. onaggregated accounts an We iie t Limited 1 2

h Wales and Victoria currently owned by CIF CIF by owned currently Victoria and h Wales 1 Oct 2013 30 June 2014 30 June 2015 June 30 2014 June 30 2013 Oct 1 6,800,000 ($’000s) 6,800 6,800 1,300 1,116 8,100 3,402 3,402 3,967 3,967 184 184 287 370 370 74 74 - - - -

6,800,000 $00)($’000s) ($’000s) 6,875 6,875 2,601 1,940 9,476 5,068 5,068 3,713 3,713 (20) 156 156 342 184 184 251 370 370 74 74 n RFM’s RFM’s n

6,800,000 1,881 1,881 9,263 4,051 4,563 6,951 6,951 2,312 that the that 113 113 136 184 205 370 (1) 74 74

53 Independent Experts Report 159 S18 54 0 June 2013 audited accounts and 30 oup oup and RFM Poultry may own water nder the going concern basis, an asset ransaction is assumed to be 1 October ons as at 30 June 2013. These property approach on a going concern basis. In are adopted in this Report as the NTAs in total NAV for CIF, RBK and AWF combined, 13 given13 the timeframe. onsider these to be intrinsic to their revenue ber 2013 pro-forma accounts as the valuation CIF, RBK, AWF, Rural Funds Group and RFM making any necessary adjustments required to gies we considered is provided in Appendix B. rent methodologies is however, dependent upon and availability of information. sets in our valuation approach. Therefore the NAV t Limited t Limited

2013. There have been no material movements between the 3 the auditedthe financials for FY12 and FY13; forecastthe / pro-forma accounts for the period to 30 September 2013; and any adjustments required to assets and liabilities as a result of the Proposed Transaction. The effective implementation date of the Proposed T September 2013 pro-forma accounts. Agricultural assets represent approximately 90% of which are supported by independent property valuati valuations are still relevant as 30 at September 20 ) valuation methodology on a going concern basis. U

      NTA Independent Expert’s | Rural Report Funds Managemen In arriving at the fair market value Poultry, consideredwe the following: of the NTA of basis is as follows: reflect the fair market value of net the assets of the business. moreA detailed overview of valuation the methodolo 11.2. AWF and RBK of CIF, Value Control Implied We have assessed the value of deriving the the Funds NTA of using CIF, a RBK and NTA AWF, we sheets examined prepared by the RFM 30 management September on 2013 the basis pro-forma that balance the Funds concern. continue As individually such, as a the going rationale for using 30 Septem individual circumstances, nature the of the company In valuing CIF, RBK, AWF, Rural Funds Group and RFM Poultry, we adopted the net tangible assets ( based valuation will estimate the value of net assets of an entity at account its fair for market realisationvalue and costs. will not This method involves 11.1. 11.1. Methodology Valuation Regulatory Guide 111 outlines the appropriate when valuing methodologies assets or a securities. valuation The use expert of diffe should consider 11. Valuation Analysis We note that although CIF, RBK, AWF, Rural Funds Gr of CIF, RBK, AWF, Rural Funds Group and RFM Poultry our valuation analysis. entitlements and other such intangible assets, earning ability and as such, have we included these as c For personal use only use personal For 160 Explanatory MemorandumFor personal use only Source: Crowe Horwath analysis. Crowe Horwath Source: ese assets and liabilities are based on the the on the based of b are part 44. Table provided liabilities as 2013 and AWF September and 30 assets at RBK these financials CIF, with forecast from associated them values to The transferred Transaction. be Proposed to are that liabilities and assets F Rural of NTA the deriving In basis. concern going Table 44: NAV for AWF CIF,and RBK September 30 at 2 Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent Group Funds Rural the of value the assessed have We Implied Control Value of Rural Funds Group Poultry RFM and 11.3. Table 45: Implied Control Value of CIF, RBK AWF and and variations onacontrol yield AWF and RBK CIF, of values implied The potential risk, elling mod We from assets. value. control ne alo astand biological derives approach this that note of further impact value the to the decreases and increases potential reflects the surrounding uncertainty range This value. high and low a derive to value), mid (the agement man RFM by provided values the to 5% ± a applied We RFM management. Source: Trade and receivables other CIF net assets ($‘000s) CIFassets net NAV per CIF unit (control value) CIF(control unit NAV per CIF Numberof (‘000s) units Cash and cash Cashequivalentsand cash Trade and payablesother assets Total assets Other Infrastructure RBK net assets ($‘000s) RBKassets net NAV per RBK unit (control RBKvalue) NAV per (control unit NumberRBK of units (‘000s) Net assets Derivative financialliabilities liabilities Interest-bearing termprovisions Short Total liabilities Total liabilities Other AWF net assets ($‘000s) assets net AWF NAV per AWF unit (control value) AWF (control unit NAV per NumberAWF (‘000s) units of

I oeatRKFrcs AWFForecast RBKForecast CIFForecast 109,629 105,188 $00)(’0s $00)($’000s) ($’000s) ($’000s) ($’000s) 53,580 12,335 42,448 56,049 3,967 1,070 444 184 30 12 iie t Limited unds Group and RFM Poultry, we examined the the examined we Poultry, RFM and Group unds 013 basis are presented in the table below. below. table in the presented are basis y RFM management, as shown previously in in previously shown as management, RFM y and RFM Poultry using a NTA approach on a on approach NTA a using Poultry RFM and 96,999 91,446 48,646 48,354 41,425 50,901 63,662 46,214 32,724 28,909 70,663 Value 2,815 4,462 2,538 1,553 30 Sep 2013 Sep 30 $0.80 $1.41 $0.41 Low 200 913 - 089247,507 233,079 40,879 36,445 040132,656 114,851 30,430 10,449 10,348 53,580 63,662 48,646 32,724 30,430 70,663 Value 2,265 2,147 $0.84 $1.49 $0.43 101 Mid 22 - - - 94,22 16,797 56,259 63,662 51,078 32,724 31,952 70,663 Value 9,047 2,084 5,130 1,565 Total $0.88 $1.56 $0.45 High 251 184 1

55 Independent Experts Report 161 S18 56

e he he - - RFM 6,800 $1.00 6,800 6,800,000

Rural $1.00 45,186 47,008 29,246 121,439,745 interests in Australian agricultural

lion; lion; igures to arrive at the 1 October 2013 NAV ng ng of their properties, A-REITS that typically a special distribution of 2.05 cents to Rural (1,594) (1,638) (4,416) 121,440 (1,184) eholding and are comparable to the Proposed

wer of control. The reasoning underlying the n 11.3 is reflective of a controlling interest. To t 1 October 2013 2013 October 1 t below. er, depend upon marketability, nature of the RBK RBK tax assets under the Proposed Transaction ed the pricing of ASX-listed A-REITS (compared of the funds based on their post-implementation umber of willing buyers is restricted and that the reasoning: s typically applied to reduce the pro rata value of t Limited t Limited 53,580 48,646 30,430 132,656 30 Sep 2013 Forecast NAV Forecast AdjustmentGroup Funds Poultry

fund investment strategy and sector. last reported gearing between 25% and 70%; and it is it proposed that Rural Funds Group be ASX. listed on the current market capitalisation of less than $600 mil unitholders will continue to hold minority interests in Rural Funds Group; and

− − − Given that the CIF, property RBK and generate regular cash flows from and leasi AWF predominately invest in property sectors hold are deemed to be compara ble. The following table includes a list of A- REITs that have similar characteristics to Rural Funds Group. These funds have been selected based on a combination of the following criterion: − ASX-listed prices are reflective of a minority shar Transaction given that: − an an adjustment of $1.9 million for the write-off of an an adjustment of $2.5 million for the provision Funds of Group unitholders; and (refer Section 12.2).

    Funds ($‘000s) CIF RBK ($‘000s)RBK Number ofNumber units NAV perNAV unit(control value) AWF ($‘000s) Total NAV ($‘000s) Independent Expert’s | Rural Report Funds Managemen value a minority shareholding a minority discount i 11.4. 11.4. Group Funds Rural of Value Minority Implied The value of Rural Funds Group calculated in Sectio the the entire company to reflect the discount absence is of that the the value po of the whole is parts. In addition to a minority worth discount, a market ability discount mowill reoften apply to illiquid unitholdings. than the sum of the value This marketability of discount the acknowledges component that the n search costs of finding a buyer are high. A marketability discount applied to the valuation of illiquid significant. unitholdings in The alternative assets extent can b of business and the existing unitholders. We have consider discount will, howev use of ASX-listed A-REITS is based on followingthe Source:management. RFM The adjustments set out above are allocated to each for Rural Funds Group and RFM Poultry as presented a Poultry RFM and FundsGroup Rural for NAV 46: Table ownership percentages, being RBK (37%), CIF (36%)adjustment relates to the following: and AWF (27%). As such, the $4.4 million to its NTA) to infer an implied value of Rural Funds Group on a non-controlling (or minority) basis. T RFM management has adjusted the 30 September 2013 f For personal use only use personal For 162 Explanatory MemorandumFor personal use only 15 Implied Minority Value of RFM Poultry 11.5. Table 47: Comparable A-REITs Discount to NTA Analysi Independent Expert’s Report | Rural Funds Managemen Funds Report Rural | Expert’s Independent 1 Section in calculated as Poultry RFM of value The analysis. Crowe Horwath Source: Table 48: Implied Minority of Rural Value Funds Gro Rur for comparables direct of absence the With iden ASX. to unable were we analysis, our undertaking In 2 1 Capital IQ. and S&P analysis Crowe Horwath Source: Rural Funds Group based on this discounted range is range discounted on this based Group Funds Rural to discount a at trade potentially will Group Funds F Rural of risks and characteristics investment the of consideration as well as yields, implied and A-REITs comparable of analyses above the on Based performance financial its reason sector. this a this for considered as classified for be will Group and Funds Rural that REIT expects RFM that note further We adopt. to market This above. out set as parameters certain on based ority discounts given the following: the following: given discounts ority min and marketability of application the considered Calculated on the last reported distributions per distributions lastreported on the Calculated 2013 at15 August As Median Limited(ASX:HGL) HudsonInvestment Group Trinity Group (ASX:TCQ)Group Trinity (ASX:MIX) Industrial Trust Mirvac Lantern Hotel Lantern (ASX:LTN)Group ud(S: ZF) (ASX:A Fund SocialInfrastructure Australian SX:CDP) (A CarindaleTrust Property Group (ASX:CDI) Group Property ChallengerDiversified Entity Aspen Group (ASX:APZ) Property Portfolio Property Development Property CICLimited Australia (ASX:CNB) (ASX:APZ) Group Aspen NAV per Rural Funds Group unit (minority value) (minority unit Group Rural Funds NAV per Discounts applied Discounts Rural per NAV Funds Group unit   Transaction. unitholders CIF be will Poultry RFM Transaction Proposed the under

will hold minority interests in RFM Poultry post-im Poultry RFM in interests minority hold will

Agricultural Products Agricultural CommercialProperty (All property sectors) property (All ManagementFunds Investment IndustrialProperty EntertainmentProperty Hospitalityand Property Investment Property ShoppingCentre a of nership Ow Office Focus Investment unit divided by the trading price as at 15 August 2013. at15 as August thetradingprice by divided unit iie t Limited Capitalisation NTA of between 15% to 25%. The minority value of of value minority The 25%. to 15% between of NTA up up unds Group, we consider that upon listing Rural Rural listing upon that consider we Group, unds 1.3 is reflective of a controlling interest. We hav We interest. controlling a of reflective is 1.3 ($ million) million) ($ represented in the table below. below. table the in represented s s al Funds Group we analysed the A-REIT sector sector A-REIT the analysed we Group Funds al tify comparable agricultural funds listed on the the on listed funds agricultural comparable tify is consistent with the approach we expect the the expect we approach the with consistent is Market 9. 1.% 31.0% (13.8%) 399.0 3. 1.% 29.6% (11.7%) 537.4 9. (31.2%) 190.7 was considered using metrics commonly commonly metrics using considered was 69(77)34.8% (17.7%) 66.9 09(37)40.4% (33.7%) 30.9 71(47)43.8% (34.7%) 37.1 52(77)63.0% (17.7%) 65.2 62(99)52.2% (19.9%) 66.2 69(.% 34.0% (9.8%) 66.9 56(16)34.8% (11.6%) 75.6 listed on the NSX; and and NSX; the on listed (25%) Value $0.7 $1.00 Low 1 5 (Discount) to Premium / Premium NTA plementation of the proposed proposed the of plementation 1 (20%) Value $1.00 $0.80 Mid ea ing ar Ge 06 11.3% 30.6% 1 (15%) Value Distribution $1.00 $0.85 High Yield FY13 0.0% 0.0% 0.0% 0.0% 4.9% 6.8% 6.7% 7.1% 4.9% e 2

57 Independent Experts Report 163 S18 58 58 1%) 57% 69%) (39%) (30%) (36%) ( (38%) (7 (39%) to NTA on on to Premium/ (discount) $1.06 $0.17 Price (17%) (14%) (10%) (21%) (28%) $34.12 Raised (per unit) Offerprice price Closing 7.5 6.0

iums required to obtain control of 65.9 207.2 thin the last two years indicate that raised premium(discount) / premium(discount) / Raised Amount to 30%. We note that the sizes of these their trading price (refer Table 49 below). ($ million) ($ price closing to reported last to NTA 195.2 the 2012 calendar year for CIF, RBK and

FM Poultry. 30.4 control, control, of between 15% and 30%. ; and sis sis e have focused primarily on the following in

on issue. lst lst this range is relatively wide, our opinion is that d on the NSX, in our opinion we do not consider ings Analysis Analysis ings ity as A-REITS listed on the ASX. We have based discounts applicable to RFM Poultry: Date ($ million) Date Offer Offer Amount dity. As a result, whilst we have given considerati 21 Jun 2012 21 Jun 19 Oct2012 101.4 10 Mar 2010 10 Mar 20 Apr2011 15 Dec 2010 Dec 15 11 May 2012 May 11 t Limited t Limited X:RCU) 4 Apr 2012 20.0

transactions are less than 0.27% of the total units The off-market transfers that have occurred during AWF indicate a discount range of approximately 20% the the illiquidity of NSX-listed securities; sizethe of RFM Poultry with NAV of approximately $6.8 million; historicalthe transaction evidence for RFM’s funds the the investment strategy and risks associated R with We note that this is in addition to the discount for listed A-REITS when comparing their price pre-announcementtrading and their last reported NTA. Secondary raisings for comparable placements have listed a discount of approximately A-REITS 20% to wi Secondary raisings for unlisted unit funds in the agricultural sector ranging fromindicate 30% 69% to (refer Table 50 below). a discount to NTA We note that anecdotal companies range between 20% and 40% of holding values. As such, a minority interest discount evidence indicates that can be inferred, being the inverse of premium a for prem

        RFM Riverbank RFM En t it y Limited Arena Management Investment RFM Ultra Premium Vineyard Fund Premium Ultra RFM En t it y Charter Hall (ASX:CHC) Group CharterHall AustralianTrust (ASX:AEU) Education Partners Property USA Trust(ASCapital Estate Real Aspen (ASX:APZ)Group Median Independent Expert’sRural | Funds ManagemenReport it is reasonableit taking into account: Source: Crowe Horwath Source:analysis Crowe S&PIQ. and Capital Based upon the above analysis, we consider that the relevant marketability and minority discount for RFM Poultry will be in the range of 35% to 45%.Whi Source: Crowe Horwath Source:analysis Crowe S&PIQ. and Capital Rais Secondary Funds Agricultural Unlisted 50: Table Whilst we understand that RFM Poultry will be liste that RFM Poultry will have the same level of liquid this opinion on research we have conducted on listed managed investment funds on the indicate NSXrelatively low which levels of trading and liqui the the pricing discounts to NTA examined previously, w determining appropriate marketability minorityand Table 49: Comparable A-REITs Secondary Raisings Analy Raisings Secondary A-REITs Comparable 49: Table For personal use only use personal For 164 Explanatory MemorandumFor personal use only 16 Proposed Transaction Consideration 11.6. Table Table 51: Implied Minority of RFM Poultry Value below: table in the minorit the with Poultry, RFM of value minority The Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent Crowe analysis. Source: Horwath Table 55: Implied Consideration per AWF Unit rounding.Figures to subject Note: Crowe analysis. Source: Horwath Table 53: Implied Consideration per CIF Unit CI below. tables the in presented are ratios of unitholders the by received value implied The Table 52: Proposed Transaction Merger Ratios f on the Poultry in RFM units and Group Funds Rural unitholder existing Transaction, Proposed the Under Source: RFM management Source: Source: Crowe analysis. Source: Horwath Source: Crowe Horwath analysis. Crowe analysis. Source: Horwath Table Table 54: Implied Consideration per RBK Unit Discounts applied Discounts RFM per NAV unit Poultry Rural Funds Group per unit (minority value) (minority unit per Group RuralFunds value) (minority unit RFM Poultry NAV per CIFunit) (1 Rural Funds Group merger ratio merger Group RuralFunds Rural Funds Group per unit (minority value) (minority unit per Group RuralFunds value) (minority unit per Group RuralFunds RBKunit) (1 Rural Funds Group implied consideration Rrual Funds Group merger ratio merger Group RrualFunds ratio merger Group RrualFunds AWF (1 unit) (1 AWF RFMPoultry merger ratio RFMvalue) (minority unit per Poultry Implied consideration per AWF unit per consideration Implied RBK per unit consideration Implied RFM Poultry implied consideration implied RFMPoultry Total implied consideration per CIF unit per consideration implied Total ua ud ru RFM Poultry Rural Funds Group 1ui)(1 unit) (1 unit) 0.689 1.375 0.461

0.107 n/a n/a iie t Limited

presented is applied, discounts marketability and y ollowing basis: basis: ollowing s in CIF, RBK and AWF will be issued units in in units issued be will AWF and RBK CIF, in s F, RBK and AWF based on the above merger merger above the on based AWF and RBK F, (45%) Value Value Value Value $1.00 $0.75 $0.55 0.689 $0.75 $0.75 $0.52 0.461 1.375 0.107 $0.55 $0.35 $1.03 $0.06 $0.58 Low Low Low Low

(40%) Value Value Value Value $1.00 $0. $0.60 0.689 $0. $0. $0.55 0.461 1.375 0.107 $0.60 $0.37 $1.10 $0.06 $0.62 Mid Mid Mid Mid 80 80 80 (35%) Value Value Value Value $1.00 $0.85 $0.65 0.689 $0.85 $0.85 $0 0.461 1.375 0.107 $0.6 $0.39 $1.17 $0.07 $ High High High High 0.65 .59 5

59 Independent Experts Report 165 S18 60 60

High $0.39 $1.17 $0.45 $0.65 $1.56 $0.88 Value Mid $0.37 $1.10 $0.43 $0.62 $1.49 $0.84 Value .35 .03 .58 Low $0 $1 $0.41 $0 $1.41 $0.80 Value g scrip constituting minority interests in the the implied consideration received is set out in offering non-cash consideration in a control ade ade between the value of the securities being value of the target entity’s securities, assuming t of the offer. Our assessment of the fair market that consideration compared with the valuation of ansaction ansaction comparison reflects fact the that: t Limited t Limited

the acquirerthe is obtaining or increasing control of target; the and the security holders in the target will be receivin combined entity.

  Implied consideration Implied received by AWF unitholders Implied consideration Implied received unitholdersby RBK AustralianRFM Wine Fund value market Fair of a unit AWF in (control value) Implied consideration Implied received unitholders by CIF RFM Rive r Bank value market Fair of (control a unit RBK in value) RFM ChickenRFM Income Fund value market (controlFair of a unit CIF value)in Independent Expert’sRural | Funds ManagemenReport

Source: Crowe Horwath Source:analysis. Crowe Given the above, the Proposed Transaction is not fair as the consideration offered AWF unitholders are lower to than the fair market value ofCIF, their respective units on a control RBK basis. and Table 56: Analysis of Fairness under the Proposed Tr Proposed the under Fairness of Analysis 56: Table 12.1. 12.1. Fair Not is Transaction Proposed The Regulatory Guide 111 provides that if an offeror is 12. Evaluation of the Proposed Transaction transaction, the expert should examine the value of the the target’s securities. The comparison should be m offered (allowing for a minority discount) 100% of the securities and are available for sale. This the Regulatory Guide 111 further defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities the subjec value of CIF, RBK and AWF, compared to the value of tablethe below: For personal use only use personal For 166 Explanatory MemorandumFor personal use only fair isfair Transaction Proposed the basis aminority On (a) Table 57: Summary of Advantages and Disadvantages of Transaction: the Proposed of reasonableness the assessing in considered n bee have disadvantages and advantages following The The Proposed Transaction is Reasonable 12.2. Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent full a of the follo given application inappropriate tobe premium control the consider we fair, is Transaction Proposed the whether analysing when AWF and RBK CIF, of ownership 100% assume h to Horwat Crowe 111 requires Guide Regulatory Although AWF. and RBK CIF, for an advantage considerati other account into took we In addition, Key: Crowe analysis. Source: Horwath    Taxation implications Taxationimplications tax Deferred assets costsTransaction Pricingvolatility ownership / incremental Dilutionary FY15 Interest cover FY14 Interest cover ratiovalue to Loan to funds Access savings Cost Liquidity Diversification operating and stability Financial ratio Indirect cost return FY15 Total return FY14 Total FY15 Distributions FY14 Distributions is ir basis, afa Transaction the On minority Proposed Advantages Disadvantages Potential and     Advantage  advantage, × disadvantageadvantage, × holding greater than a 3.4% interest in Rural Funds Rural in interest a3.4% than greater holding unitholder no with shareholdings, unitholder the dilute effectively will Transaction Proposed The Poultry. contr a in result not does Transaction Proposed The e Funds. Funds. the of to unitholders available options the possible and characteristics; investment in change : On a minority basis, the Proposed Transaction is is Transaction Proposed the basis, minority a On :

iie t Limited ons (refer Section 12.2(q)), namely: namely: 12.2(q)), Section (refer ons wing: Section 12.2(g) Section 12.2(f) Section 12.2(e) Section 12.2(d) Section 12.2(c) Section 12.2(c) Section 12.2(b) Section 12.2(b) Section 12.2(a) Section Cross-reference Report Section 12.2(p) Section 12.2(o) Section 12.2(n) Section 12.2(m) Section 12.2(l) Section 12.2(k) Section 12.2(k) Section 12.2(j) Section 12.2(i) Section 12.2(h) Section the Proposed Transaction Group and 6.0% in RFM Poultry. Poultry. in RFM 6.0% and Group olling interest in Rural Funds Group or RFM RFM or Group Funds Rural in interest olling considered ‘fair’ and this represents represents this and ‘fair’ considered CIF CIF           × × × × × × × × ×

RBK             × × × × × × ×

AWF AWF              × × × × × ×

61 Independent Experts Report 167 S18 62 62

High $0.88 $0.62 $0.65 $1.56 $1.09 $1.17 $0.45 $0.32 $0.39 Value (30%) (30%) (30%) Mid $0.84 $0.57 $0.62 $1.49 $1.00 $1.10 $0.43 $0.29 $0.37 Value (33%) (33%) (33%) .58 .03 .35 m is not appropriate for the Proposed Low $0.80 $0.52 $0 $1.41 $0.92 $1 $0.41 $0.27 $0 ur. Value tion tion 11.2), this would have resulted in the (35%) (35%) (35%) Unitholders as demonstrated below: es not result in any material transfer of control. s ket Value of a RBK Unit Unit a RBK Value of ket ket Value of a CIF Unit Unit a CIF Value of ket t Limited t Limited $0.50 $0.55 $0.60 $0.65 $0.70 $0.75 $0.80 $0.85 $0.90

$0.85 $0.95 $1.05 $1.15 $1.25 $1.35 $1.45 $1.55

The Proposed Transaction does not premium future the in should such transaction a occ preclude existing unitholders from receiving a control

Fair market value of a unit in CIF (control value) (control CIF in unit a of value market Fair Fair market value of a unit in RBK (control value) (control RBK in unit a of value market Fair Fair market value of a unit in CIF (minority value) (minority CIF in unit a of value market Fair Fair market value of a unit in RBK (minorityRBK value)unit ina value marketof Fair  Implied consideration received by CIF unitholders CIF by received consideration Implied Implied consideration received by RBK unitholders RBK by received consideration Implied RFM ChickenRFM Income Fund value market (controlFair of a unit CIF value)in Discounts applied value market (minorityFair of value) a unit CIF in consideration Implied received unitholders by CIF RFM Rive r Bank value market Fair of (control a unit RBK in value) Discounts applied value market Fair of (minority value)a unit RBK in consideration Implied received unitholdersby RBK AustralianRFM Wine Fund value market Fair of a unit AWF in (control value) Discounts applied value) (minority AWF in ofvalue unit a market Fair consideration Implied received by AWF unitholders Figure 14: Comparison of Consideration and Fair Mar Fair and Consideration of Comparison 14: Figure Independent Expert’sRural | Funds ManagemenReport

Source: Crowe Horwath Source:analysis. Crowe Mar Fair and Consideration of Comparison 13: Figure Table 58: Proposed Transaction Minority Value Analysi Value Minority Transaction Proposed 58: Table

Source: Crowe Horwath Source:analysis. Crowe Horwath Source:analysis. Crowe For these reasons we consider that a control premiu Transaction, given that the Proposed Transaction do Had the control premium not been applied (refer Sec Proposed Transaction being fair to CIF, RBK and AWF For personal use only use personal For 168 Explanatory MemorandumFor personal use only b Distributions (b) believe this to be reasonable due to the the to due reasonable be to this believe we 45%), to 35% reasons: following (i.e. Poultry RFM for adopted range discount the to different is AWF and RBK CIF, to applied range discount the that recognise we Whilst n management assumptions and are not not are and assumptions management on based are distributions guaranteed. that distributi note FY15 and We FY14 Transaction. with compared basis, alone Figure 15: Comparison of Consideration and Fair Mar Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent distri FY15 and FY14 the summarises table below The in FY15. CIF for lower are : Distributions × Disadvantage for higher in and FY14 AWF and RBK CIF, for higher AW and RBK CIF, for value minority a calculating In Crowe analysis. Source: Horwath same analysis conducted in Section 11.5 and include and 11.5 Section in conducted analysis same particu This 35%. to 30% of range discount minority    Implied consideration received by AWF unitholders        Advantage Fair market value of a unit in AWF (minority value) Fair market value of a unit in AWF (control value) in net assets which is significantly smaller in siz smaller significantly is which assets in net fund P RFM the Notably, AWF. and compared RBK CIF, of characteristics and Index Poultry RFM of ics Property characterist fund individual All the considered also NSX We on nsidered co we data years. few last the in on activity no trading based is or activity trading of levels low relatively vealed re This data The history. trading their and constituents fund. the for liquidity limited provide will this that view the of are we NSX, the on listed be to is Poultry RFM Although strategy and risk. risk. and strategy AWF and RBK CIF, of characteristics fund Individual 30%. to 20% approximately of range discount a indicate AWF during occurred have that transfers off-market The range betw of control, companies for apremium of inverse the being of control m a obtain such, As values. to holding of 40% and required 20% between premiums that indicates evidence Anecdotal NTA to discount a 50). Table (refer to 69% 30% from indicate ranging sector agricultural the in funds unit unlisted for raisings Secondary tradi totheir 20% approximately of discount a have placements that indicate years two last the in A-REITS listed comparable for raisings Secondary sed Transaction, distributions are are distributions Transaction, sed Propo the post and pre distributions comparing In : $0.20

$0.25 iie t Limited ket of Value AWF an Unit F, Crowe Horwath has applied a marketability and and marketability a applied has Horwath Crowe F, $0.30 lar discount range was determined based on the the on based determined was range discount lar e to CIF, RBK and AWF. and RBK to CIF, e d examining the following: following: the d examining RBK and AWF in FY15. in FY15. AWF and RBK een 15% and 30%. 30%. and 15% een ng price (refer Table 49). 49). Table (refer price ng

uin fr I, B ad W o a stand- a on AWF and RBK CIF, for butions ons post-implementation of the Proposed Proposed the of post-implementation ons , including their respective size, investment investment size, respective their including , the 2012 calendar year for CIF, RBK and and RBK CIF, for year calendar 2012 the oultry will have approximately $6.8 million million $6.8 approximately have will oultry inority interest discount can be inferred, inferred, be can discount interest inority $0.35 $0.40

$0.45 $0.50

63 Independent Experts Report 169 S18 64 64 tion FY15 fund 9.11% 6.40% 9.11% 7.56% 6.88% 2.71% 1.55% 3.19% 10.06% al Re tur n NAV at at NAV FY15 0.46% 1.60% 0.46% 2.08% 0.55% 5.04% FY15 8.65% 4.80% 8.65% 5.48% 9.52% 3.85% (1.15%) 3.17% (1.62%) 11.37% (4.49%) (1.85%) ed ed Transaction, total return is higher

a 45% LVR covenant for AWF and CIF on repayment requirement for CIF. note note that it is RFM’s intention to announce p will not be required to undertake principal y y to borrow as a collective group and thereby ). FY14 ss capital. This is supported by the following 5.97% 0.19% 5.28% 4.84% 2.73% ing: 9.86% n 45 business days of the successful completion 15.83% (5.10%) (2.11%) FY15 based on the pro-forma financials prepared provide improved distributions for CIF, RBK and t Limited t Limited CIF and RBK had previously withheld a number of

- Consolidation of debt under the Proposed Transac FY14 6.80% 0.79% 1.16% 6.01% – Both – RFM management expects total management fees and

FY14 9.03% 5.18% 7.81% (7.62%) 4.13% 7.03%8.21% (2.19%) (5.48%) 3.85% 3.68% (8.78%) 1.18% (3.29%) Distribution GrowthReturn Total Distribution Growth Tot : In comparing total return pre and post the Propos

The lower total return for CIF and RBK in FY14 is due to the dilution of existing ownership (refer Section 12.2(l)), loss of deferred tax benefits (refer Section costs12.2(o)) (i.e. stamp duty of approximately $700,000).and once-off transactions Improved Improved financing arrangements will allow Rural Funds Group to increase its abilit attain a higher LVR covenant of 50% (compared with a stand alone basis). Furthermore, Rural Funds Grou repayments, compared a $0.9with million per annum overheads to decrease by approximately $0.9 million due to economies scalingthe up of operations (refer Section 12.2(h) of scale derived from Unlocking cash reserves a special distribution of 2.05 cents per unit withi distributions in FY13 for debt reduction and capita l accessible under the expenditureRural Funds Group. We purposes. further These will now be of Proposed the Transaction this– distribution is in addition to the regular quarterly distribution. Potential cost savings

Advantage     Difference Post transaction Post Difference Fund Wine Australian RFM transactionPre Post transaction Post Difference RFM RiverBank transactionPre RFM Chicken IncomeChicken Fund RFM transactionPre transaction Post    Independent Expert’sRural | Funds ManagemenReport by RFMby management. Specifically, we note the follow × Disadvantage× : Total return is lower for CIF and RBK FY14. in With reference to Table 59 above, the Proposed Transaction AWF will unitholders in provideFY14 and for improvedall three Funds total in returns for for AWF FY14, in and higher for CIF, RBK and AWF FY15. in AWF unitholders in FY14 and FY15 (except for CIF in FY15 which is lower) as a result of an improved cash flow position and an increased assumptions: ability to acce It is envisaged that the Proposed Transaction will Source:management. RFM Note:common transaction for returnsFunds FY14 Fun post Group’sThe the ds adopt that is basis Rural a Implementationmergthe multiplied Date relevant by er ratio. The monthsFY14 Juneare on based returns 9 30 to 2014. Analysis Returns 59: Table (c) Total return For personal use only use personal For 170 Explanatory MemorandumFor personal use only Note: The post RatioIndirect for transaction Cost Note: RFM management. Source:

Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent the provide will size benefits: in following increase This million. $242 approximately of assets property total combined agricultural with an fund become will Group s Fund Rural proceed, Transaction Proposed the Should an RBK CIF, for advantage an represents Transaction Table 60: Indirect Cost Ratio Analysis fi transaction post The fees. management applicable lower to due Transaction Proposed the of tion pre-implementa to compared Transaction Proposed the of post-implementation lower be will ratio cost ct indire the AWF, and RBK CIF, in unitholders the For AWF. and RBK CIF, for lower is ratio cost (e) Financial and operating stability stability operating and Financial (e)     (d) Indirect cost ratio ratio cost Indirect (d) RFM have retained the ability raise the retained in haveto RFM fees the    Difference Posttransaction Pretransaction Fund Wine RFM Australian Difference Posttransaction Pretransaction Bank r Rive RFM Difference Posttransaction Pretransaction Fund Income RFM Chicken      Advantage Advantage Funds to continue to persist in future financial ye financial in future the persist to tocontinue Funds for differences return total the expects it that advised has however management RFM basis. for return total combined the RBK, for that note We (i.e. more favourable LVR covenants). covenants). LVR favourable more (i.e. lar to due terms bank improved negotiate to ability greater certainty around assumed future distributio future assumed around certainty greater ability to raise further debt and equity finance im finance equity and debt further raise to ability lower administrative and operating costs by combini by costs operating and administrative lower − and transaction) post and pre between respectively FY15 in AWF and RBK for lower be to appears Growth −

decrease in depreciable asset exposure. exposure. asset in depreciable decrease this from benefit will unitholders CIF hand, other the On items. capital depreciable these by impacted negatively be will growth ital cap the Group, Fund Rural the under assets these of significant hold ownership common the in share will to rs unitholde AWF and RBK As items. CIF capital depreciable requires rations ope farming chicken of nature intensive capital The Higher levels of distribution will result in lower lower in result un the of price unit the decrease will distribution will distribution of levels Higher the Proposed Transaction, indirect indirect Transaction, Proposed the post and pre ratio cost indirect the comparing In : stability under the Proposed Proposed the under stability operating and financial greater for potential The : Indirect Cost Ratio Cost Indirect future, however RFM are forecasting for lowerforecasting arehoweverfuture, fees RFM FY14 is shown on an annualised basis comparativshownon is annualised for FY14 an (1.37%) (1.63%) (1.87%) 2.25% 3.62% 2.25% 3.88% 2.36% 4.23% FY14 iie t Limited gures for CIF below include RFM Poultry. Poultry. RFM include below CIF for gures ars and thus provide ongoing financial benefit. benefit. financial ongoing provide thus and ars provements; provements; d AWF. d AWF. FY14 and FY15 is lower on a post transaction transaction post a on lower is FY15 and FY14 ns; and and ns; derlying fund. fund. derlying ng three funds into one merged group; group; merged one into funds three ng is due to the following: following: the due to is ger fund scale and diversification of assets assets of diversification and scale fund ger ees f aia got, ie ta the that given growth, capital of levels Indirect Cost Ratio Cost Indirect (i.e. a difference of 1.62% and 1.15% 1.15% and 1.62% of difference a (i.e. (0.54%) (0.98%) (0.99%) 2.25% 2.79% 2.25% 3.23% 2.30% 3.29% FY15

FY14 and FY15. and FY14 e purposes. purposes. e

65 Independent Experts Report 171 S18 66 66

or of

roposed Transaction represent an advantage for CIF, RBK and AWF period until a successful sale is highly WF unitholders will have a stake in the ings that may arise from the Proposed lders (by value) across the Funds do not cess to liquidity. Furthermore, the sale down cale as shown in the table below. If realised, ntially impacting remaining unitholder’s returns ill provide RBK, CIF and AWF unitholders with ble to provide limited redemption offers to its – The sale of rural property assets is highly eed with an asset sale. A liquidity deadlock thus ow to fund redemptions, RFM management has currently, each of the Funds is unable to achieve e wishing retainto their investment. avings are due to reductions to RFM management reduces the risk specific to a particular property ing suspended due to a single vacancy or default of erlying profitability of Rural the Funds Group. eason RFM would not be acting in the best interests t Limited t Limited – Anecdotal evidence suggests that off-market sferstran occur at

: Increased diversification represents a potential : Potential ongoing cost savings arising from the P : Improved liquidity under the Proposed Transaction represents a potential advantage

due todue the fixed costs necessary to fund the operations. variable in nature thus unable to provide timely ac of assets will also reduce the size of a fund, pote Off-market Off-market transfer of units a deep discount compensate to for a funds’ illiquidity. Redemption offer funded by dependent asset upon sales current market conditions. The time ld ld the Proposed Transaction proceed, CIF, RBK and A

u Advantage Advantage Advantage            Independent Expert’sRural | Funds ManagemenReport Transaction of approximately $0.9 additional million costs such as on listing costs. The an costs s ongoing basis. These cost savings arethese cost savings will assist in improving the und net of advantage for CIF, AWF RBK. and RFM management have identified a number of cost sav a single tenant. (g) Liquidity unitholders. For example, since inception only 1.1 million units CIFin were redeemed compared to the 6.3 million units in CIF requested for redemption. We further note that in the absence of capital infl fees and fund overheads arising from economies of s the the level of liquidity required and has only been a considered other liquidity alternatives. These alternatives unitholders as summarised below: however, have negative connotations to for CIF, RBK and AWF. The proposal to list Rural Funds Group on the ASX w location. This may offer CIF, RBK and AWF unitholders greater certainty of income tenant base and throughreduce the risk a of distributions be larger the advantage of increased liquidity. We note that unitholders. Sho (f) Diversified portfolio merged group’s participating entities and varying therefore properties across an different interest locations in and agricultural a broader portfolio sectors and larger greater (refer diversity property Table of tenants 34). portfolio Generally, with a the the majority of unitholders if RFM resolved to proc (h) Cost savings derived from the merger currently wish to exit their investment. For this r exists between unitholders wishing to exit and thos RFM have estimated that approximately 96% of unitho For personal use only use personal For 172 Explanatory MemorandumFor personal use only (i) Access to Funds Funds to Access (i) assumed. amount the be will they that or eventuate best estimates of future events. As such, there is is there such, As events. future of estimates best Tr Proposed the from savings cost net potential The Table 61: Cost Savings Breakdown Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent pre- Proposed a the on of AWF post-implementation and and n pre-implementatio RBK funds below. for table in the shown are Transaction individual higher for be LVR will The CIF. formation upon Group du basis Transaction Proposed the Funds of implementation Rural of LVR The AWF. and RBK for higher is : LVR × Disadvantage ratio value to Loan (j) interest liabilities bearing the d Note: represents RFM management. Source: discussions from Specifically, access funds. additional to increased have will Group Funds Rural , Transaction Proposed the under that envisaged is It and RBK. AWF CIF, debt for property, for equipment. plant and debt table: following in the shown disposal, its at borrowings excess have will Given Group RBK). for ceiling debt app a of LVR and a have will basis, FY14 at as alone Group Funds stand Rural a on CIF and AWF for 45% with (compared potential will Group Funds Rural that understood is FY15. abilityretainedhave raiseRFM fees the i to Note: RFM management. Source:     Table Table 62: Funding Analysis Post-implementation of th e Proposed Transaction   Additional debt available funding (’000s) LVR liabilities (’000s) Interest-bearing Fundoverheads Total Managementfees Advantage Advantage

ction, LVR is lower for CIF. CIF. for lower is LVR ction, Transa Proposed the post and pre LVR comparing : In : Improved access to funds under the Proposed Trans Proposed the under funds to access Improved : Pre Transaction Post Transaction Cost savings Cost Post Transaction Transaction Pre

2,434 5,107 2,673 doespropertyassetsincludeand only ebtrelation funding to in not n thehoweverfuture,and n FY14 lowerforecasting arefor s RFM fee iie t Limited 2,7 $23 $96,721 $21,676 $96,721 between RFM management and potential lenders, it it lenders, potential and management RFM between no guarantee that the potential net cost savings wi savings cost net potential the that guarantee no 08 40.3% 40.8%

thereby minimising the need for capital raisings as raisings capital for need the minimising thereby Y4FY15 FY14 ly be able to borrow up to 50% of its total assets assets total its of 50% to up borrow to able be ly ansaction are based upon RFM management’s management’s RFM upon based are ansaction e to an increased exposure to the debt levels of of levels debt the to exposure increased an to e 1,862 4,205 2,342 roximately 40.8%, this entails that Rural Funds Funds Rural that entails this 40.8%, roximately ,358 action represent an advantage for for advantage an represent action

571 902 331

ll ll

67 Independent Experts Report 173 S18 68 68

FY15 FY15 4.20x 3.01x 2.60x 3.01x 3.78x 3.01x 0.42x 1.33% (1.18x) (0.76x) 41.23% 38.94% 26.32% 40.27% 40.27% 40.27% 13.95% (0.95%) Interest Cover Interest Loan to Value Ratio Value to Loan or FY15. This is predominately due to CIF’s hen compared to CIF on a stand-alone basis for t Limited t Limited FY14 FY14 3.26x 2.94x 2.17x 2.94x 2.65x 2.94x 0.77x 0.29x 1.85% 41.30% (0.33x) 39.00% 27.47% 40.85% 40.85% 40.85% 13.37% (0.46%) Interest Cover Interest

Loan to Value Ratio Value to Loan

: The Proposed Transaction will bring about an imme diate dilution of unitholders’ : AWF is not diluted and receives an increment of 6.98%, due primarily to RBK : In comparing interest cover pre and post the Proposed Transaction, interest cover is

Advantage Advantage RFM ChickenRFM Income Fund transactionPre RFM ChickenRFM Income Fund transactionPre transactionPost Difference AustralianRFM Wine Fund transactionPre Difference Difference RFM Rive r Bank transactionPre Post transactionPost transactionPost Difference AustralianRFM Wine Fund transactionPre Difference Difference RFM Rive r Bank transactionPre Post transactionPost Post transactionPost transactionPost   Source:management. RFM Source:management. RFM     Independent Expert’sRural | Funds ManagemenReport acquiring the AWF assets higher at than the NAV. × × Disadvantage ownership of 5.48% for CIF unitholders and 7.47% units from the participating for Funds. RBK unitholders, due to the re-allotment of The interest cover for Rural Funds Group is lower w Analysis Cover Interest 64: Table (k) Interest Cover higher for RBK and AWF FY14, in and higher for RBK in FY15. Disadvantage× : Interest cover is lower for CIF in FY14, and lower for CIF and AWF FY15. in FY14, and both CIF and AWF on a stand-alone basis f and AWF’s increasing profitability (on a stand-alone basis) and a partial decrease in interest bearing liabilities. Transaction Post Analysis LVR 63: Table (l) Dilution / increment of existing ownership For personal use only use personal For 174 Explanatory MemorandumFor personal use only Transaction. NAV Transaction. reduce effectively will costs transaction These These include: include: These Table 65: Dilution Analysis under the Proposed Trans below. table the in presented is This Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent total in million $3.2 at estimated costs are There incurred. be will million transacti one-off Transaction, proposed the Under : Disadvantage × costs Transaction (n) term long includes volatility. this of some reducing i assist portfolio potentially may Group which sectors, Funds agricultural multiple ral previously Ru across diversified been the streams has that income rental that however, note methodology We pricing Funds. unit the unlisted by the utilised than higher be to likely is security lis the of nature the to Due variables. market and also performance absolute Group’s the upon based fluctuate be will which of price the Group, Funds t consideration the Transaction, Proposed the Under ma pricing security Transaction, proposed the Under × Disadvantage: volatility (m) pricing Security Note: Post on are figures transactionthe Post Note: mer based RFM management. Source: Increment / (dilution) / Increment Posttransaction Pretransaction Fund Wine RFM Australian Pretransaction Bank r Rive RFM Pretransaction Fund Income RFM Chicken Increment / (dilution) / Increment Posttransaction (dilution) / Increment Posttransaction     stamp duty. duty. stamp dis with the associated and costs fees professional Memorandum; Explanatory the and Meeting of the Notice of the preparation for costs fees; advisory ua ud ru RFM Poultry Rural Funds Group

NAV (per unit) NAV (per unit) NAV (per unit) NAV (per ($0.11) ($0.15) ger ratios.ger $0.03 $0.46 $0.43 $1.38 $1.49 $0.69 $0.84 iie t Limited Transaction. Proposed the executing with associated ted security market, volatility in the price of a l a of price the in volatility market, security ted action l Rura the in securities listed be will received be o per unit post-implementation of the Proposed Proposed the of post-implementation unit per patch of documents; and and documents; of patch $0.11 $0.11 ------on costs of approximately $3.2 $3.2 approximately of costs on y be more volatile. volatile. y be more (7.47%) (5.48%) ($0.11) ($0.05) 6.98% $0.03 $0.46 $0.43 Total $0.80 $1.38 $1.49 $0.84 NAV - -

isted isted n 69 Independent Experts Report 175 S18 70 70

l al pose

ssed as a potential alternative. Furthermore, will be the entity that issues units to CIF and ith ith no guarantee that it could be sourced on y y are not seeking to exit their investment and, may have been specifically chosen based on e dependent upon their individual taxation tion of distributions under the current structure antages under the Proposed Transaction. e Proposed Transaction. As a result of the downturn in both the global mination in each relevant State jurisdiction where

ownership in RBK (otherwise known as the Rural r but reasonable to the unitholders of CIF, RBK and gains tax. Unitholders should evaluate the potentia e accessible following the Proposed Transaction. t Limited t Limited

Change in investment characteristics: Participating in the Proposed Transaction will ex unitholders to a diversified real property asset portfolio. Unitholders currently have exposure to certain agricultural sector specific assets, which the property and asset characteristic of that Fund. In may this have instance, the the Proposed unintended Transaction consequence of changing specific assets. a unitholders current exposure to those Possible options available to unitholders: and asset sales, these options are yet to be progre equity and credit markets, RFM management believe that increasingly raising difficult debt in or the equity current environment has w become favourable terms. Whilst RFM relation management to other alternatives, have including the reduc considered the Proposed Transaction in RFM notes that the majority of unitholders currentl as a result, RFM management have not considered the option of a full sale process for the three RFM funds.

Disadvantage: The Proposed Transaction may result in adverse personal taxation consequences Disadvantage: Under the proposed Transaction, deferred tax assets of million $1.9 will be lost.   Independent Expert’sRural | Funds ManagemenReport 12.3. 12.3. Conclusion In our opinion, the Proposed Transaction is not fai At At the fund level, we note that $700,000 of stamp utyd (refer section 12.2 (n)) will be payable by Rur Funds Group. The final amount is subject to a deter assets are held by the Funds. (q) Other considerations × for some unitholders. Whilst, the taxation implications to unitholders ar × The Proposed Transaction will result in a change of circumstances, there is the possibility of capital tax consequences in assessing whether to approve th AWF as the potential advantages outweigh the disadv (o) Deferred tax assets Funds Group under the Proposed Transaction), as RBK AWF unitholders in exchange for totalling $1.9 million held by RBK will no longer their b underlying units. Due to this, existing income tax (p) losses Taxation implications For personal use only use personal For 176 Explanatory MemorandumFor personal use only thereto may be included in any other document document other itany appears. which in and context form the in to as Horwath Crowe of consent included written prior the without be may thereto reference any nor Report this of part any nor whole resu a as conclusions t or valuation alteration the methodology, no was There Report. draft the of tion circula the of result a as Report this to made were prov were Report this of drafts Advance costs. such wilful or negligence involving conduct of guilty or Horwath Crowe where except person any by initiated wilful or expenses and costs negligence legal reasonable and spent involving time Crowe conduct indemnify any to of agreed also ct respe has in RFM apply misconduct. not will indemnity This Report. this in or suffered liability any of respect in officers law by permitted extent the the to that, agreed has RFM been has role only Horwath’s Crowe 112. Guide Regulatory of . Transaction Proposed the other Cr Report. Expert’s Independent this of of or preparation in formulation the shareholding its in any affecting part of had capable has as regarded nor be relation in Report, nably reaso opinion unbiased an could provide to ability this that RFM of or date Funds the the with E at relationship & have not Professional does Accounting Horwath the by issued Services" with accordance in Representative a Act. is he 239170 and No. Mitc Licence matters Services Harley Financial advisory Mr Australian corporate is relevant Horwath in Crowe experience of behalf this on preparing for Report responsible Principal The ions. reconstruct capital and takeovers acquisitions, and mergers concerning reports expert i and advice t independen of services provision the and finance valuations business corporate provides Horwath Crowe Qualifications 13.1. Consents and Declarations Qualifications, 13. Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent documentation Transaction Proposed Repor the in included this of issuing the to consents Horwath Crowe Consents 13.4. pr with accordance in prepared been has Report This Declarations 13.3. disclai expressly Horwath Crowe Propos unitholders. Funds’ the whether to as opinion Horwath's Crowe of reli or used be Report this that intended not is It Disclaimers 13.2. liability arising from an opinion expressed reckles expressed an opinion provided from arising liability Report, this of preparation the in officers arising its of any or Horwath Crowe by accepted is i responsibility no However, misleading. not and ct corre given are opinions and statements such that grounds opinions and statements diligence, and care with Horwath Crowe by prepared been has Report is Th other. any for Report the on rely to purports or

iie t Limited tion of tion prepara the of out arising or of result a as curred ed upon for any purpose other than as an expression an as than other purpose any for upon ed misconduct in which case Crowe Horwath shall bear bear shall Horwath Crowe case which in misconduct to the Proposed Transaction. Crowe Horwath had no no had Horwath Crowe Transaction. Proposed the to sly or in bad faith. bad faith. in sly or owe Horwath considers itself independent in terms terms in independent itself considers Horwath owe that this shall not absolve Crowe Horwath from from Horwath Crowe absolve not shall this that lt of issuing the drafts. drafts. the issuing of lt , it will indemnify Crowe Horwath employees and and employees Horwath Crowe indemnify will it , ms any liability to any person or party who relies relies who party or person any to liability any ms or employees for errors or omissions however however omissions or errors for employees or or its employees and officers are found liable for for liable found are officers and employees its or ided to RFM and its advisers. Certain changes changes Certain advisers. its and RFM to ided to be sent to the Funds’ unitholders. Neither the the Neither unitholders. Funds’ the to sent be to incurred in relation to any inquiry or proceeding proceeding or inquiry any to relation in incurred n good faith and in the belief on reasonable reasonable on belief the in and faith good n ld by Crowe Horwath under the Corporations Corporations the under Horwath Crowe by ld t in the form and context in which it is to be be to is it which in context and form the in t ed Transaction is fair and reasonable to the the to reasonable and fair is Transaction ed Horwath and its employees and officers for for officers and employees its and Horwath ncluding the preparation of company and and company of preparation the ncluding ofessional standard APES 225 "Valuation "Valuation 225 APES standard ofessional hcl tnad Bad ( Board Standards thical hell B.Com, CA. Harley has significant significant has Harley CA. B.Com, hell APESB ). Crowe Crowe ). o

71 Independent Experts Report 177 S18 72 72 nil nil nil RFM Poultry (proposed fee arrangement) nil 1.25% annum per of value of the assets. gross n/a nil nil total the 1% of purchase of price an asset. Rural Funds Funds Rural Group (proposed fee arrangement) nil 0.60% annum per of value of the assets. gross Where is property operated, 5% of the amount of annual operating expenses. Where is property leased, p.a. of 5% the annual rent.

n/a n/a AWF (current fee arrangement) the of 3% to up amount invested. 0.80% annum per of value of the assets. gross Where is property operated, 5% of the amount of annual operating expenses. t Limited t Limited n the future, however RFM are forecasting lower fee RFM s forare forecasting lower FY14 n and future, however the

an an asset. Where is property operated, 5% of the amount of annual operating expenses. Where is property leased, p.a. of 5% the annual rent. 15% the of returns excess in of on a return equity of 15% p.a. on the amount invested. total the 2% of purchase of price RBK (current fee arrangement) the of 3% to up amount invested. 1.00% annum per of value of the assets. gross Where is property operated, 5% of the amount of annual operating expenses. Where is property leased, p.a. of 5% the annual rent. n/a n/a CIF (current fee arrangement) the of 3% to up amount invested. 1.25% per p annum theof value of gross assets.

Acquisition Fee Acquisition Performance Fee Fund Fund Management Fee Asset Management Fee Contribution Fee Independent Expert’sRural | Funds ManagemenReport Source:management. RFM Note: toi thefees RFM raise have retained ability FY15. Appendix A – RFM Management Fees For personal use only use personal For 178 Explanatory MemorandumFor personal use only Cash Flow Discounted Method Methodologies Valuation – B Appendix Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent Yield Based of Dividends Capitalisation of Earnings Capitalisation business being considered and/or businesses are comparable to that of the observed multiples of entities whose determined with reference to the The appropriate capitalisation multiple is the business. money and future growth prospects of multiple will reflect the risk, time value of gains or losses. The capitalisation business and must not include one-off FME be must maintainable by the Earnings (FME) of the business. The an estimate of the Future Maintainable application of a capitalisation multiple to valuation method. It involves the method is the most commonly used The Capitalisation of Earnings (CE)    The DCF method requires: associatedrisks with the cash flows. reflect the time value of money and the capital). The discount rate used will appropriate discount rate (cost of discounted back to a present value at an future cash flows of the business on a controlling basis based on the method derives the value of a business The Discounted Cash Flow (DCF) Description comparable entities. rate is determined based on analysis of future maintainable yield. The yield or forecast distributions by an estimated property assets and involves capitalising This method is primarily used for return. reflects the investor’s required rate of entity. The appropriate capitalisation rate earnings and the dividend policy of the expected level of future maintainable dividends is estimated by assessing the dividends. The maintainable level of forecastof future maintainable This method involves the capitalisation comparable transactions.

method). using the capitalisation of earnings end of the period (typically derived of the business into perpetuity) at the Pricing Model (CAPM)), and and aids such theas Capital Asset rate (typically derived using judgement years and usually 10 years) sufficiently long period (at least 5 estimation of the terminal value (value assessing an appropriate discount forecasting cash flows over a iie t Limited     methodWhen used       

mining projects. life, for example, have a finite or infinite or turn around phase. from year to year. expected to fluctuate 5 (minimum. years). forecast cash flows commercial. industrial and including retail, investment properties minority interest. not available. indefinite life. expected to continue. trend and that trend is reasonably consistent history profits of with a Specific projects that Business is in start-up Earnings or cash flows Reasonably accurate Commercial or High payout ratios. Stable business. Valuation is for a Cash flow forecasts are The business has an The business has a  Rationale   

not available. least 5 years were flowscash at of not used as forecast approach. check to our primary reviewed a as cross method. was our primary based approach however the asset assessment reasonableness compared in our considered and approach was used. an asset based group. Accordingly assetsnet theof and included in the specialist valuers by property have been valued These properties from the properties. business derived the earnings of the are properties with underlying assets Funds Group’s not used Ruralas This method was Implied yields were Distributions were This method was

73 Independent Experts Report 179 74 74 S18 Rural Funds Group Group Funds Rural as used was This properties have have properties by valued been specialist property and valuers net the in included group. the of assets an Accordingly based asset used. was approach and RFM Poultry Poultry RFM and listed not are this therefore not was method selected. primary the valuation as methodology AWF, RBK, CIF, Group Funds Rural Poultry RFM and funds managed are related property with These assets.

Rationale Rationale  

Company’s equity is is equity Company’s the in Securities been has business The assets specific The listed on public market/ market/ public on listed ASX. i.e. exchange actively are company market/ the on traded exchange. a for losses incurring consecutive of number years. financial are considered being business the to surplus the of operations business.

When method used used Whenmethod     t Limited t Limited orderly realisation realisation orderly liquidation going concern

components that can be readily sold, readily be can that components or units business individual as such and equipment, and plant of items component each to value a ascribing be could that amount the on based sold. if obtained on determined be can value asset The of: basis the    Description Description based company a values method This a on equity its of prices traded the on approach The market/exchange. public the of rate spot prevailing the adopt can or date valuation at securities company’s Price Average Weighted Volume the the i.e. period trading set a over (VWAP) to days trading 90 or 60 30, preceding date. valuation the involve valuations based Asset into business the separating

Independent Expert’sRural | Funds ManagemenReport Source: Crowe Horwath Source:analysis. Crowe Asset Based Based Asset Market Market Based Method For personal use only use personal For 180 Explanatory MemorandumFor personal use only Appendix C – Sources of Information Information of Sources – C Appendix Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent                         NSW. 2012). June (30 Ltd. Pty Services Property Riverina Griffith. 2013). June (27 Ltd. Pty (Victoria) Opteon Griffith. and Lethbridge Opteon (Victoria) Pty Ltd. (30 June 2012). 2012). June (30 Ltd. Pty (Victoria) Opteon Retri (2013). Australia. of Exchange Stock National Optimism. Cautious for A Case A-REITs: (2012). LaSalle. Lang Jones Australia. in Farming Cattle Beef and Sheep (2012). IBISWorld. Australia. in MeatFarming Poultry (2012). IBISWorld. oles nentoa Cnutny n Vlain Pt Valuation and Consultancy International Colliers utain euiis n Ivsmns omsin ( Commission. Investments and Securities Australian . Australia in Growing Fruit Other and Banana Citrus, (2012). IBISWorld. Review tar China 2012). September (24 J. Massola & A Grigg 2012). August Properties. (8 Valuers. Pickett Gaetjens 2013). June Properties. (18 Valuers. Pickett Gaetjens Pt Valuation and Consultancy International Colliers Plains. Steak and Mooral Y Plains, Steak Mooral, - 2013 June at 30 as values Pt Valuation and Consultancy International Colliers 2012). NSW. Hillston, Road, Roto Almonds, June (30 Ltd. Pty Property Barnden NSW. Hillston Road, Merungle 2012). June (30 Ltd. Pty Property Barnden f Retrieved (2013). Exchange. Securities Australian ( Commission. 112). Guide (Regulatory Experts' of 'Independence Investments and Securities Australian 111 ). Guide (Regulatory Reports' Expert's of 'Content Almond Board of Australia. (2009). (2009). Australia. of Board Almond Review. (2011). Australia. of Bank Commonwealth Agriculture. Australian for Outlook Australia. of Bank Commonwealth 2013. (Australia) Outlook Property (2013). International. Colliers ss. Agribusine and Rural 2012 Report, Research National (2012). International. Colliers Collaroy. and Yilgah

.

Almonds. Australian About All Global Markets Research, Commodities: Agri Updates Updates Agri Commodities: Research, Markets Global iie t Limited Rural Property Valuation Reports for the Properties the for Reports Valuation Property Rural Global Markets Research, International Wine Industr Wine International Research, Markets Global nd and Lethbridge at Properties the for Letter Valuation Report and Valuation of property situate Mooral, Mooral, situate property of Valuation and Report Report and Valuation of property situate Yilgah Yilgah situate property of Valuation and Report Valuation Letter - RFM Australian Wine Fund Fund Wine Australian RFM - Letter Valuation Valuation Letter - RFM Australian Wine Fund Fund Wine Australian RFM - Letter Valuation eved from NSX website: www.nxsa.com.au www.nxsa.com.au website: NSX from eved rom ASX website: www.asx.com.au www.asx.com.au website: ASX rom y Ltd. (23 August 2013). 2013). August (23 Ltd. y Collaroy. and ilgah y Ltd. (31 May 2013). 2013). May (31 Ltd. y y Ltd. (31 May 2013). 2013). May (31 Ltd. y

Valuation and Report, "Collaroy" Hillston, Hillston, "Collaroy" Report, and Valuation gets dairy industry. industry. dairy gets March 2011). 2011). March March 2011). 2011). March

Regulatory Guide 111 111 Guide Regulatory Regulatory Guide 112 112 Guide Regulatory Australian Financial Financial Australian Valuation Report - - Report Valuation Valuation Report - - Report Valuation Addendum Letter - - Letter Addendum

at y - 75 Independent Experts Report 181 S18 76 76 year year year year years ing ing 30 e years

ng 30 June s ending 30 RFM RiverBank Product Disclosure 15). Valuation and Report, "Steak Plains" Rural Funds Management Ltd website 15). RFM RiverBank Supplementary Product RFM RiverBank Supplementary Product RFM RiverBank Supplementary Product ews management.with t Limited t Limited RFM Australian Wine Fund Audited Financials for the RFM Australian Wine Fund Audited Financials for the RFM Chicken Income Fund Audited Financials for the RFM Chicken Income Fund Audited Financials for the RFM RiverBank Forecast Financials for the years end RFM Australian Wine Fund Forecast Financials for th RFM Chicken Income Fund Forecast Financials for the RFM RiverBank Audited Financials for the year ended 30 June RFM RiverBank Audited Financials for the year ended 30 June RFM StockBank Audited Financials for the year ended 30 June RFM StockBank Audited Financials for the year ended 30 June RFM Poultry Pro-forma Financials for the years endi Rural Funds Group Pro-forma Financials for the year

Hillston, NSW. Rural Funds Management Ltd. (2013). Retrieved from Riverina Property Services Pty Ltd. (30 June 2012). (RFM website): www.ruralfunds.com.au Rural Funds Management Ltd. ended 30 June 2012 (AWFAudited Financials FY12). Rural Funds Management Ltd. ended 30 June 2013 (AWFAudited Financials FY13). Rural Funds Management Ltd. ending 30 June 2014 & 2015 (AWF Forecasts FY14 & FY Rural Funds Management Ltd. ended 30 June 2012 (CIF Audited Financials FY12). Rural Funds Management Ltd. ended 30 June 2013 (CIF Audited Financials FY13). Rural Funds Management Ltd. ending 30 June 2014 & 2015 (CIF Forecasts FY14 FY& Rural Funds Management Ltd. 2014 & 2015 (RFM Poultry Forecasts). Rural Funds Management Ltd. 2012 (RBK Audited Financials FY12). Rural Funds Management Ltd. 2013 (RBK Audited Financials FY13). Rural Funds Management Ltd. June 2014 and 2015 (RBK Forecasts FY14 FY15).& Rural Funds Management Ltd. Statement (RBK PDS). (27 September 2011). Rural Funds Management Ltd. Disclosure Statement. (21 June 2012). Rural Funds Management Ltd. (25 May 2012). Disclosure Statement. Rural Funds Management Ltd. 2012 (StockBank Audited Financials FY12). Rural Funds Management Ltd. 2013 (StockBank Audited Financials FY13). Rural Funds Management Ltd. June2014 & 2015 (Rural Funds Group Forecasts). Rural Funds Management (2013).Ltd. Various intervi Disclosure Statement. Rural Funds Management Ltd. (27 January 2012). S&P Capital IQ. (2013). Retrieved from Capital S&P IQ website: www.capitaliq.com Select Harvest Limited. (2012). Half Year Presentation.

                      Independent Expert’sRural | Funds ManagemenReport

For personal use only use personal For 182 Explanatory MemorandumFor personal use only ABS ABS ABARES ‘000s Term Glossary – D Appendix Independent Expert’s ReportManagemen Funds |RuralExpert’s Independent NSW NPBT NPAT NAV n/a ML LVR Cover Interest Ratio Cost Indirect ha GFC Gaetjens FY Funds Report Expert’s EBITDA EBIT Horwath Crowe CorporationsAct Colliers CIF Bartter Barnden Baiada AWF ASX ASIC A-REIT ARSN APESB AIT AFSL ACN New South Wales NewWales South profitbefore taxationNet profitafter Net taxation valueasset Net applicable Not Megalitre ratio,value follows:asto calculated Loan as follows:Interest cover, calculated ratio, Indirect follows:ascalculatedcost Hectare 2007 in global late commenced whichfinancial The crisis 106 90 Pickett710 ABN 791 Gaetjens Valuers 30 yearJuneending/ended Financial and RBK AWF CIF, Report before interest,amortisation and Earnings taxation, depreciation before interesttaxation and Earnings 95Ltd ABN 0 (Aust) Finance Corporate Horwath Crowe (Cth)2001Act Corporations Pt Valuation Consultancy and International Colliers 461754 105 IncomeFund ARSN Chicken RFM wholly a Ltd,Pty ownedEnterprises Bartter subsidi 465 273Ltd PtyACN127 Property Barnden 002 925PoultryLtdPtyACN 948 Baiada 485 573 099 Fund ARSN Australian RFM Wine Exchange Australian Securities Investmentand Commission Australian Securities Real Investment Estate Trust Australian Number Registered Scheme Australian Professional & EthicalBoard Accounting Standards 804093 276 1 IncomeTrust ARSN Fund Agricultural Licence Financial Services Australian Number Company Australian of Statistics Australian Bureau ofand ForestryFisheries Agriculture, Department Thousands Meaning EBITDA – unrealised gains + unrealised losses unrealised+gains– unrealised EBITDA total interest bearing interest liabilitiestotal average NAV attributableyear for the averageNAV total assets total management fees management interest expense interest iie t Limited y Ltd ABN 88 07611288 848Ltd yABN aryofBaiada 01 508 363 AFSL No. 239170 No. 363 508 AFSL 01 77 Independent Experts Report 183 S18 78 78 ments unds Group unds Group anaged fund to which chickenCIF’s anaged to fund tion to the proposed merger the RBK to tion CIF, proposed of issued by ASIC March March 2011 by ASIC issued : t Limited t Limited Number of units on issue Number on issue units of Net assets – intangible assets +/- any any other adjust Net – +/- assets assets intangible Western Australia WesternAustralia Regulatory Regulatory Guide ASIC 112 issu ‘Independence 2011 Experts’ ed of by March Regulatory Expert’sGuide Reports’ 112 ‘Content of Crowe Horwath’s Expert’sIndependent in rela Report and AWF Rural Funds 077 ACN AFSL Ltd 492 Management 838 701 226 createdm Under the newly the Proposed Transaction, growing operationstransferred be will PropertyRiverina ACN Pty Services 819 103 Ltd 749 Formerly RBK theRefers to section in Report a RFM StockBank ARSN 803 153 436 RFM Ultra Premium Vineyard AWF former Fund, the United States Meaning National Exchange Australia ofStock Net assets tangible calculated as follows Net unit, assetstangible per Opteon ACNPty Ltd 547 600 (Victoria) 140 Per annum Proposedmerger AWF RBK form Rural to CIF, F and of RFM RiverBankARSN 578 112 951

Independent Expert’sRural | Funds ManagemenReport StockBank UPVF US WA RFM RFM Poultry Riverina Group Funds Rural Section pa Transaction Proposed RBK GuideRegulatory 111 GuideRegulatory 112 Report NSX NTA unit per NTA Opteon Term For personal use only use personal For 184 Explanatory MemorandumFor personal use only or any other member of Crowe Horwath and specifical and Crowe Horwath of member other any or Horwath Crowe of omissions or acts any for liable or nsible respo not are affiliates its and Ltd (Aust) Finance Corporate Horwath Crowe entity. legal pendent inde and a separate is Horwath Crowe of member Each . verein a Swiss International, Crowe Horwath of mber ame is Ltd (Aust) Finance Corporate Horwath Crowe each in licensees) services financial of omissions Profes under approved a scheme by limited Liability Disclaimer 01 508 363 AFSL No. 239170 239170 No. AFSL 363 508 001 95 ABN Ltd (Aust) Finance Corporate Horwath Crowe member. rwath Ho Crowe other any or Horwath Crowe of omissions or Contact Us Contact www.crowehorwath.com.au 3567 7 3233 +61 Fax 3555 7 3233 +61 Tel Australia 4000 QLD Brisbane Street Edward 120 16, Level 239170 No. AFSL 363 508 001 95 ABN Ltd (Aust) Finance Corporate Horwath Crowe State or Territory other than Tasmania. Tasmania. than other Territory or State sional Standards Legislation (other than for the ac the for than (other Legislation Standards sional ly disclaim any and all responsibility or liability or responsibility all any and disclaim ly for acts acts for ts or or ts E xplanatory Memorandum xplanatory Explanatory Memorandum Pro A n d L p osed m i st in g o erger of the Austr n the Proposed Merger of

rfm RFM RiverBank

S alian R ARSN 112 951 578 iverBank | rfm iverBank e c RFM Chicken Income Fund

ur ARSN 105 754 461 i t i es E es Chicken Income F Income Chicken RFM Australian Wine Fund

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c ARSN 099 573 485 h an of ge rfm | rfm und

R And Listing on the Australian Securities Exchange of fm R iverbank to form the R the to form iverbank

Australian Wine F RFM RiverBank to form the Rural Funds Group (RFF)

Issued by Rural Funds Management Ltd ACN 077 492 838 und

ural F ural Issue Date: 21 October 2013

For personal use only use personal For unds Group ( Group unds RFF ) www.ruralfunds.com.au