RIVCO AUSTRALIA LTD — Proxy Solicitation & Information Statement 2017

Sep 14, 2017

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ACN�611�976�517�

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Notice�of�General�Meeting�

Date:��� 10am�(Adelaide�time)�on�18�October�2017� Place:� The�Stirling�Hotel�� 52�Mount�Barker�Road� Stirling,�South�Australia��

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8�September�2017�

Dear�Shareholder�

You�are�invited�to�attend�an�extraordinary�meeting�of�shareholders�(General�Meeting).�

The�key�General�Meeting�details�are��

• Time�and�date:� 10am�(Adelaide�time)�on�18�October�2017��

• � Location:� The�Stirling�Hotel,�52�Mount�Barker�Road,�Stirling�South�Australia

The�purpose�of�the�General�Meeting�is�to�approve�a�key�transaction�that�the�Company�is�proposing� involving�a�significant�Shareholder,�Duxton�Vineyards.�

The�Company�has�agreed�to�purchase�2,402�ML�of�Water�Entitlements�from�Duxton�Vineyards,�subject� to�Shareholder�approval.�The�water�entitlements�are�being�purchased�for�approximately�$6,810,050.�To� pay�for�those�water�entitlements,�the�Company�intends�to�issue�6,610,000�Shares�at�the�prevailing� market�price�on�the�day�of�issue,�which�is�currently�scheduled�for�17�November�2017.�The�Company� will�also�lease�the�water�entitlements�to�Duxton�Viticulture�on�a�long�term�basis.�Duxton�Viticulture�is� an�associated�entity�of�Duxton�Vineyards.�

Duxton�Vineyards�and�its�associated�entity,�Duxton�Vineyards�Water,�are�significant�Shareholders,�with� a�current�combined�shareholding�and�relevant�interest�of�40.74%.��

The�Company�has�obtained�an�Independent�Expert�Report�from�Pitcher�Partners�which�states�that�the� Duxton�Vineyards�Transaction�is� fair�and�reasonable �to�the�Shareholders�whose�votes�are�not�to�be� disregarded.�The�IER�includes�an�independent�valuation�of�the�water�entitlements�to�be�acquired�from� Duxton�Vineyards.�

A�copy�of�all�of�the�documents�for�the�General�Meeting,�including�the�Independent�Expert�Report,�can� be�found�at�www.duxtonwater.com.au.

If�you�are�unable�to�attend�the�General�Meeting�in�person,�I�encourage�you�to�complete�and�lodge�the� enclosed�Proxy�Form�as�soon�as�possible�and,�in�any�event,�by�no�later�than�10am�(Adelaide�time)�on� 16�October�2017.�Instructions�on�how�to�vote�by�proxy�are�set�out�on�the�Proxy�Form�and�this�Notice.�

I�encourage�all�Shareholders�to�consider�the�details�of�the�transaction�and�the�Independent�Expert� Report�in�particular.��

Yours�sincerely,�

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Dennis�Mutton� Director�

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Contents��

Contents
NoticeofGeneralMeeting(settingouttheResolutions)	3
ShareholderQuickReferenceGuide	5
VotingExclusions	7
VotingbyProxy	8
ExplanatoryStatement(explainingtheResolutions)	10
Glossary	32

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Notice�of�General�Meeting

A�General�Meeting�of�the�Company�will�be�held�at�The�Stirling�Hotel,�52�Mount�Barker�Road,�Stirling� South�Australia�on�10am�(Adelaide�time)�on�18�October�2017.�

The�Explanatory�Statement�that�accompanies�and�forms�part�of�this�Notice�of�General�Meeting�describe� the�matters�to�be�considered�at�the�EGM.�

Attendance�

If�you�are�attending�the�EGM,�please�bring�your�personalised�shareholding�form�to�allow�the�Share� Registry�to�promptly�register�your�attendance�at�the�meeting.�The�registration�desk�will�be�open�from� 9.30am.�

If�you�are�unable�to�attend�in�person,�you�may�wish�to�appoint�a�proxy�to�attend�and�vote�at�the�meeting� in�your�place.�Please�refer�to�the�Notice�and�Proxy�Form�regarding�the�appointment�of�a�proxy.��

Items�of�Business�

1. Approval�of�Acquisition�of�Water�Entitlements�from�Duxton�Vineyards�

To�consider�and,�if�thought�fit,�to�pass�the�following�resolution�as�an�ordinary�resolution:�

“Subject�to�the�passing�of�Resolutions�2,�3�and�4,�for�the�purpose�of�Listing�Rule�10.1�and�all� other�purposes,�the�acquisition�of�the�2,402�ML�of�Water�Entitlements�by�the�Company�from� Duxton�Vineyards�and�the�lease�of�those�Water�Entitlements�to�Duxton�Viticulture�on�the�terms� set�out�in�the�Explanatory�Statement,�is�approved.”�

This�Resolution�is�the�subject�of�an�Independent�Expert�Report�which�states�that�the�acquisition�of� Water�Entitlements�by�the�Company�from�Duxton�Vineyards�and�the�lease�of�those�Water� Entitlements�to�Duxton�Viticulture�is�fair�and�reasonable.

A�voting�exclusion�applies�to�this�Resolution,�details�of�which�are�contained�in�the�Notice�of�Meeting.�

2. Approval�of�Issue�of�Shares�to�Duxton�Vineyards�under�the�Corporations�Act��

To�consider�and,�if�thought�fit,�to�pass�the�following�resolution�as�an�ordinary�resolution:�

“Subject�to�the�passing�of�Resolution�1,�for�the�purpose�of�s.�611�item�7�of�the�Corporations�Act� and�all�other�purposes,�the�issue�by�the�Company�of�6,610,000�Shares�to,�and�the�acquisition�of� the�relevant�interest�in�those�Shares�by,�Duxton�Vineyards�and�its�Associates,�and�the�increase�in� the�voting�power�of�Duxton�Vineyards�and�its�Associates�to�46.29%�on�the�terms�set�out�in�the� Explanatory�Statement,�is�approved.”�

This�Resolution�is�the�subject�of�an�Independent�Expert�Report�which�states�that�the�issue�by�the� Company�of�6,610,000�Shares�to,�and�the�acquisition�of�the�relevant�interest�in�those�Shares�by,� Duxton�Vineyards�and�its�Associates is�fair�and�reasonable.��

A�voting�exclusion�applies�to�this�Resolution,�details�of�which�are�contained�in�the�Notice�of�Meeting.�

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1. Approval�of�Issue�of�Shares�to�Duxton�Vineyards�under�the�Listing�Rules��

To�consider,�and�if�thought�fit,�pass�the�following�resolution�as�an�ordinary�resolution:��

“ Subject�to�the�passing�of�Resolutions�1�and�2�and�for�the�purpose�of�Listing�Rule�10.11�and�all�other� purposes,�the�issue�by�the�Company�of� 6,610,000 �Shares�to�Duxton�Vineyards�on�the�terms�set�out�in� the�Explanatory�Statement,�is�approved”.��

This�Resolution�is�the�subject�of�an�Independent�Expert�Report�which�states�that�the�issue�by�the� Company�of�6,610,000�Shares�to�Duxton�Vineyards�is�fair�and�reasonable.��

A�voting�exclusion�applies�to�this�Resolution,�details�of�which�are�contained�in�the�Notice�of�Meeting.��

1. Giving�of�Financial�Benefits�by�the�Company��

To�consider,�and�if�thought�fit,�pass�the�following�resolution�as�an�ordinary�resolution:�

“Subject�to�the�passing�of�Resolutions�1,�2�and�3,�for�the�purpose�of�s.�208�of�the�Corporations� Act�and�all�other�purposes:�

• the�issue�of�6,610,000�Shares�by�the�Company�to�Duxton�Vineyards�at�the�prevailing� market�price�on�the�proposed�date�of�issue;��

• the�grant�of�leases�in�respect�of�the�Water�Entitlements�to�Duxton�Viticulture;�and��

• the�giving�of�other�financial�benefits�by�the�Company;�

on�the�terms�set�out�in�the�Explanatory�Statement,�is�approved.”�

This�Resolution�is�the�subject�of�an�Independent�Expert�Report�which�states�that�the�issue�by�the� Company�of�6,610,000�Shares�to�Duxton�Vineyards,�the�grant�of�the�leases�in�respect�of�the�Water� Entitlements�to�Duxton�Viticulture�and�the�giving�of�the�other�financial�benefits�by�the�Company is� fair�and�reasonable.��

A�voting�exclusion�applies�to�this�Resolution,�details�of�which�are�contained�in�the�Notice�of�Meeting.�

By�order�of�the�Board�

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Donald�Stephens� Company�Secretary�

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Shareholder�Quick�Reference�Guide�

Question	Answer
WhatistheDuxtonVineyards Transaction?	TheCompanyisproposingtoissue6,610,000SharestoDuxton Vineyardsattheprevailingmarketpriceontheproposeddate ofissueforthepurchaseof2,402MLofWaterEntitlements (comprisingbothHighSecurityandGeneralSecurity),which havebeenvaluedat$6,810,050.TheCompanyproposesto leasetheWaterEntitlementstoDuxtonViticulture.
WhoisDuxtonVineyards?	DuxtonVineyardsisamajorShareholderwhocurrentlyholds 3,365,561Shares(5.29%)andhasarelevantinterestin 26,056,680Shares(40.74%)intheCompany.
WhoareDuxtonVineyards’ Associates?	DuxtonVineyardsWaterandDuxtonViticultureareAssociates ofDuxtonVineyards
Whatarethefindingsofthe IndependentExpertReport?	Thattheproposedtransactionisfairandreasonableto Shareholderswhosevotesarenottobedisregarded.
WhateffectwilltheDuxton VineyardsTransactionhaveonthe controlintheCompany?	TheDirectorswhohavenotdeclaredamaterialpersonal interestdonotconsiderthatDuxtonVineyardscurrentlyhas controlovertheCompany.Whileitisnottheintentionofthe transaction,asaresultofthetransaction,DuxtonVineyards, alongwithitsassociates,mayexercisecontroloverthe CompanyatafuturedateduetoDuxtonVineyards’increasein itsrelevantinterest.
WhatrelevantinterestinSharesof theCompanywillDuxtonVineyards haveasaresultoftheDuxton VineyardsTransaction?	DuxtonVineyards’relevantinterestintheCompanywill increasefrom26,056,680Shares(40.74%)tomaximum 32,666,680Shares(46.29%).Thisisanincreaseinrelevant interestof5.54%.
Whatisthemaximumincreasein votingpowerofDuxtonVineyards anditsAssociatesasaresultofthe DuxtonVineyardsTransaction?	TheextentoftheincreaseinvotingpowerofDuxtonVineyards anditsAssociateswillbe5.54%,equatingtoavotingpowerof 46.29%(32,666,680Shares).
WhatdotheDirectorsrecommend?	TheDirectorswhohavenotdeclaredmaterialpersonalinterest recommendthattheeligibleShareholdersapprovethe transactionandvoteinfavourofallResolutions.
WhatResolutionsarebeingsought fromShareholders?	FortheissueofsharestoDuxtonVineyardsandincreasein votingpower,theCompanyisseekingapprovalforthepurpose ofListingRule10.11andsections208and611item7ofthe CorporationsAct. Forthepurchaseofthewaterentitlementsandforentryinto theleaseswithDuxtonViticulture,theCompanyisseeking approvalforthepurposesofListingRule10.1andsection208of theCorporationsAct.

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Whatarethefinancialbenefitsfor whichShareholderapprovalis sought?	Thefinancialbenefitsaretheissueof6,610,000sharesto DuxtonVineyardsattheprevailingmarketpriceonthe proposeddateofissueandconsequentincreaseinthevoting powerandrelevantinterestofitanditsAssociates,andthe leaseofthewaterentitlementstoDuxtonViticulture.

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Voting�Exclusions�

The�Corporations�Act�and�the�ASX�Listing�Rules�require�that�certain�persons�must�not�vote,�and�/or�the� Company�must�disregard�any�votes�cast�by�certain�persons�in�relation�to�the�Resolutions.�These�voting� exclusions�are�described�below.�

Resolution�1�–�Acquisition�of�Water�Entitlements�from�Duxton�Vineyards�

The�Company�will�disregard�any�votes�cast�on�Resolution�1�by�Duxton�Vineyards�and�Duxton�Viticulture� and�any�of�their�Associates.�However,�the�Company�will�not�disregard�a�vote�cast�on�Resolution�1�if:��

• it�is�cast�by�a�person�as�proxy�for�a�person�entitled�to�vote�on�Resolution�1,�in�accordance�with�the� directions�on�the�Proxy�Form,�and�is�not�cast�on�behalf�of�Duxton�Vineyards�or�Duxton�Viticulture� or�any�of�their�Associates;�or��

• it�is�cast�by�the�person�chairing�the�meeting�as�proxy�for�a�person�who�is�entitled�to�vote,�in� accordance�with�a�direction�on�the�Proxy�Form�to�vote�as�the�proxy�decides.��

Resolutions�2�–�Issue�of�6,610,000�Shares�to�Duxton�Vineyards�under�the�Corporations�Act��

In�accordance�with�Item�7�of�section�611�of�the�Corporations�Act,�no�votes�may�be�cast�in�favour�of� Resolution�2�by�Duxton�Vineyards�and�its�Associates.��

Resolution�3���Issue�of�6,610,000�Shares�to�Duxton�Vineyards�under�the�Listing�Rules��

The�Company�will�disregard�any�votes�cast�on�Resolution�3�by�Duxton�Vineyards�and�its�Associates.�� However,�the�Company�will�not�disregard�a�vote�cast�on�Resolution�3�if:��

• it�is�cast�by�a�person�as�proxy�for�a�person�entitled�to�vote�on�Resolution�3,�in�accordance�with�the� directions�on�the�Proxy�Form,�and�is�not�cast�on�behalf�of�Duxton�Vineyards�or�its�Associates;�or��

• it�is�cast�by�the�person�chairing�the�meeting�as�proxy�for�a�person�who�is�entitled�to�vote,�in� accordance�with�a�direction�on�the�Proxy�Form�to�vote�as�the�proxy�decides.��

Resolution�4�–�Financial�benefits�given�by�the�Company�

In�accordance�with�section�224�of�the�Corporations�Act,�no�votes�may�be�cast�on�Resolution�4�by�or�on� behalf�of�Duxton�Vineyards�and�any�of�its�Associates,�other�than�if�the�vote�is�cast�as�a�directed�proxy� for�a�non�related�party�or�Associate.��

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Voting�by�Proxy

1. A�Shareholder�entitled�to�attend�and�vote�at�the�General�Meeting�may�appoint�one�proxy�or,�if�the� Shareholder�is�entitled�to�cast�two�or�more�votes�at�the�Meeting,�two�proxies,�to�attend�and�vote� instead�of�the�Shareholder.�

2. Where�two�proxies�are�appointed�to�attend�and�vote�at�the�meeting,�each�proxy�may�be�appointed� to�represent�a�specified�proportion�or�number�of�the�Shareholder’s�voting�rights�at�the�Meeting.�

3. A�proxy�need�not�be�a�Shareholder�of�the�Company.�

4. A�proxy�may�be�an�individual�or�a�body�corporate.�If�a�body�corporate�is�appointed,�the�Proxy�Form� must�indicate�the�full�name�of�the�body�corporate�and�the�full�name�or�title�of�the�individual� representative�of�the�body�corporate�for�the�Meeting.�

To�record�a�valid�vote,�a�shareholder�will�need�to�take�the�following�steps:�

• cast�the�shareholder’s�vote�online�by�visiting� www.investorvote.com.au and�entering�the� shareholder’s�Control�Number,�SRN/HIN�and�postcode,�which�are�shown�on�the�first�page�of� the�enclosed�Proxy�Form;�or�

• complete�and�lodge�the�manual�Proxy�Form�at�the�share�registry�of�the�Company,� Computershare�Investor�Services�Pty�Limited:�

• by�post�at�the�following�address:�

Computershare�Investor�Services�Pty�Limited� GPO�Box�242� MELBOURNE�VIC�3001�

OR�

• by�facsimile�on�1800�783�447�(within�Australia)�or�+61�3�9473�2555�(outside�Australia);� or�

• for�Intermediary�Online�subscribers�only�(custodians),�cast�the�shareholder’s�vote�online�by� visiting www.intermediaryonline.com,

so�that�it�is�received�no�later�than�10am�(Adelaide�time)�on�16�October�2017.�

5. ‘Snap�Shot’�Time�

The�Company�may�specify�a�time,�not�more�than�48�hours�before�the�Meeting,�at�which�a�‘snap� shot’�of�shareholders�will�be�taken�for�the�purposes�of�determining�shareholder�entitlements�to� vote�at�the�Meeting.��The�Directors�have�determined�that�all�Shares�of�the�Company�that�are� quoted�on�ASX�as�at�7pm�(Sydney�time)�16[th] �October�2017�will,�for�the�purposes�of�determining� voting�entitlements�at�the�Meeting,�be�taken�to�be�held�by�the�persons�registered�as�holding�the� Shares�at�that�time.�

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Proxy�Voting�by�the�Chair�

The�Company’s�chairman�of�the�Board,�Ed�Peter,�has�declared�a�material�personal�interest�in�relation�to� all�of�the�Resolutions�and�accordingly�will�not�chair�the�General�Meeting.�Mr�Dennis�Mutton,�a�Director� who�has�not�declared�a�material�personal�interest�in�any�Resolution,�will�chair�the�General�Meeting.�

The�Chairman�intends�to�vote�all�available�undirected�proxies�in�favour�of�each�Resolution.��

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Explanatory�Statement�to�Notice�of�General�Meeting

This�Explanatory�Statement�is�for�the�General�Meeting�of�Shareholders�of�the�Company�to�be�held�on� 18�October�2017.�It�forms�part�of�the�Notice�of�Meeting.�

1. Overview�of�Duxton�Vineyards�Transaction�

The�Company�is�seeking�Shareholder�approval�of�four�Resolutions�in�connection�with�the� Duxton�Vineyards�Transaction.�There�are�no�other�items�of�business.�

Subject�to�Shareholder�approval,�the�Company�has�agreed�to�purchase�2,402�megalitres�of� Water�Entitlements�from�Duxton�Vineyards.�The�Water�Entitlements�are�to�be�purchased�for� approximately�$6,810,050.�The�Company�has�agreed�to�issue�6,610,000�Shares�at�the�prevailing� market�price�on�the�proposed�date�of�issue�to�pay�the�purchase�price.�

Upon�purchasing�those�Water�Entitlements,�the�Company�has�agreed�to�lease�those� entitlements�to�Duxton�Viticulture�for�an�initial�term�of�approximately�7�years�for�an�annual� rental�of�$476,703.50.�

As�at�the�date�of�the�Notice,�Duxton�Vineyards�and�its�associated�Shareholder,�Duxton� Vineyards�Water,�each�have�a�relevant�interest�in�40.74%�of�the�Shares�of�the�Company�on� issue.�If�approved,�the�number�of�new�Shares�to�be�issued�to�Duxton�Vineyards�would�be� 6,610,000.��

Based�on�the�number�of�Shares�being�issued�to�Duxton�Vineyards,�the�individual�shareholding� and�relevant�interest�of�Duxton�Vineyards�and�Duxton�Vineyards�Water�before�and�after�the� Duxton�Vineyards�Transaction�would�be�as�follows:*�

	DuxtonVineyards	DuxtonVineyards	DuxtonVineyardsWater	DuxtonVineyardsWater
	PreDuxtonVineyardsTransaction
No.ofShares	3,365,561	5.29%	22,691,118	35.47%
Relevantinterest	26,056,680	40.74%	26,056,680	40.74%
	PostDuxtonVineyardsTransaction
No.ofShares	10,175,611	14.8%	22,691,118	31.90%
RelevantInterest	32,666,680	46.29%	32,666,680	46.29%

*based�on�total�issued�Shares�of�63,965,406,�and�assumes�no�Options�exercised�

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Duxton�Vineyards�currently�holds�3,365,561�Options�in�the�Company,�with�an�issue�price�of� $1.10�and�an�expiry�date�of�31�May�2018.�Duxton�Vineyards�Water�currently�holds�4,142,919� Options�in�the�Company,�with�an�issue�price�of�$1.10�and�an�expiry�date�of�31�May�2018.�The� other�terms�of�the�Options�are�set�out�in�the�Company’s�Prospectus�dated�11�August�2016,� which�is�publically�available�on�the�ASX�website.�

If�after�the�Duxton�Vineyards�Transaction�but�prior�to�the�expiry�date,�Duxton�Vineyards�and� Duxton�Vineyards�Water�exercise�their�Options�in�the�Company,�their�maximum�relevant� interest�in�the�Company,�if�no�other�Optionholders�exercise�their�Options,�will�be�51.5%.[1] �If�all� Optionholders�in�the�Company,�including�Duxton�Vineyards�and�Duxton�Vineyards�Water,� exercise�their�Options�prior�to�the�expiry�date,�the�relevant�interest�of�Duxton�Vineyards�and� Duxton�Vineyards�Water�will�decrease�to�29.9%.��

The�approval�being�sought�from�Shareholders�is�for:�

• The�issue�of�Shares�to�Duxton�Vineyards�at�the�prevailing�market�price�for�the�purpose�of� Listing�Rule�10.11�and�Sections�208�and�611�item�7�of�the�Corporations�Act.��

• The�purchase�of�the�water�entitlements�from�Duxton�Vineyards�and�entry�into�the�leases�of� Water�Entitlements�to�Duxton�Viticulture�for�the�purpose�of�Listing�Rule�10.1�and�Section� 208�of�the�Corporations�Act.�

By�issuing�6,610,000�Shares�to�Duxton�Vineyards,�the�Company�is�giving�Duxton�Vineyards�a� financial�benefit.�6,610,000�Shares�is�the�number�agreed�to�be�issued�between�the�Company� and�Duxton�Vineyards.�The�reason�for�giving�the�financial�benefit�in�the�form�of�the�issue�of� Shares�to�Duxton�Vineyards�is�that�it�allows�the�Company�to�expeditiously�acquire�strategic� Water�Entitlements�that�do�not�often�come�up�for�sale.��This�is�set�out�in�more�detail�at�Section� 7.�The�Shares�will�be�issued�to�Duxton�Vineyards�at�the�prevailing�market�price�on�the�proposed� day�of�issue.��

The�Company�is�also�giving�a�financial�benefit�to�Duxton�Viticulture�by�entering�into�the�lease�of� the�Water�Entitlements�to�Duxton�Viticulture.�The�reason�for�giving�this�financial�benefit�to� Duxton�Viticulture�is�that�the�Company�increases�the�proportion�of�its�water�assets�which�are� leased�on�a�long�term�basis.�The�terms�upon�which�the�financial�benefits�are�being�provided�to� Duxton�Vineyards�set�out�in�Section�4�below.�

The�Directors�of�Duxton�Vineyards�are�Ed�Peter�and�Dirk�Wiedmann�(who�are�also�directors�of� the�Company)�and�Peter�Kight.�The�directors�of�Duxton�Vineyards�Water�and�Duxton�Viticulture� are�the�same�as�Duxton�Vineyards.��

1�Based�on�total�issued�Shares�of�70,575,406.��

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��12���

The�corporate�structure�of�the�Duxton�Vineyards�Group�is�detailed�in�the�below�diagram:��

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Unlike�Duxton�Vineyards,�the�Company�is�not�comprised�within�a�corporate�group.��

The�Directors�of�the�Company�who�have�declared�a�material�personal�interest�in�the�Duxton� Vineyards�Transaction�are�Ed�Peter,�Peter�Michell�and�Dirk�Wiedmann.�The�material�interests� of�these�Directors�are�set�out�in�the�below�table.�Stephen�Duerden�and�Dennis�Mutton�have� not�declared�any�material�personal�interest�in�the�Duxton�Vineyards�Transaction.��

CompanyDirector	Declared InterestinDV Group�Current	Declared InterestinDV Group� Expected	Interestinthe Company–pre Transaction*	Interestinthe Company–post Transaction*
EdPeter (Chairman)	17.24%	24.11%	0.46%	0.42%
DirkWiedmann	3.45%	3.84%	Nil	Nil
PeterMichell	1.72%	2.83%	0.015%	0.014%
StephenDuerden	Nil	0.14%	0.015%	0.014%
DennisMutton	Nil	Nil	Nil	Nil

The�Directors�who�have�not�declared�a�material�personal�interest�in�respect�of�the�Duxton� Vineyards�Transaction�do�not�consider�that�Duxton�Vineyards�presently�has�control�over�the� Company.�

The�Directors�who�have�not�declared�a�material�personal�interest�in�respect�of�the�Duxton� Vineyards�Transaction�recognise�that�by�entering�into�the�Duxton�Vineyards�Transaction,� Duxton�Vineyards�will�increase�its�relevant�interest�in�the�Company.�Accordingly,�although�it�is� not�the�intention�of�this�transaction,�Duxton�Vineyards,�along�with�Duxton�Vineyards�Water,� may�potentially�exercise�control�over�the�Company�at�a�future�date�as�a�result.�Those�Directors� therefore�consider�that�Shareholder�approval�should�be�obtained�on�the�basis�that�Duxton�

171058.4_2803310_3

��13���

Vineyards�and�its�associates�may�control�the�Company�as�a�result�of�the�Duxton�Vineyards� Transaction�and�thus�be�a�related�party�as�a�result.�

Details�of�water�purchase�and�lease�arrangements�are�set�out�in�Section�4�below.�Details�of�the� association�between�Duxton�Vineyards,�Duxton�Vineyards�Water�and�Duxton�Viticulture�are� provided�in�Section�5.�

2. Independent�Expert�Report�–Fair�and�Reasonable�

The�Company�has�obtained�an�Independent�Expert�Report�(IER)�from�Pitcher�Partners�in� relation�to�the�Duxton�Vineyards�Transaction.�The�IER�states�that�the�Duxton�Vineyards� Transaction�is�fair�and�reasonable�to�Shareholders�whose�votes�are�not�to�be�disregarded.�The� IER�is�attached�in�full�and�forms�part�of�the�Notice�of�Meeting.�A�summary�of�the�key�findings�of� the�IER�is�set�in�Section�6.�The�IER�is�available�from�the�following�website� http://www.duxtonwater.com.au/.�

The�IER�includes�an�independent�valuation�by�Aither�of�the�water�entitlements�to�be�acquired� by�the�Company,�and�the�Company’s�existing�portfolio�of�water�entitlements.�

3. Background�

The�Company�listed�on�ASX�in�September�2016.�Upon�listing�the�Company�completed�the� acquisition�of�Water�Entitlements�from�Duxton�Vineyard�Water�and�Duxton�Vineyards�worth� approximately�$28.66m,�details�of�which�are�set�out�in�the�Company’s�replacement�prospectus� dated�11�August�2016.�The�Company�issued�Shares�to�Duxton�Vineyards�and�Duxton�Vineyards� Water�in�payment�for�those�Water�Entitlements,�which�were�acquired�at�market�value� supported�by�a�valuation�undertaken�by�the�Valuer.�Upon�acquiring�those�Water�Entitlements,� the�Company�also�leased�those�entitlements�to�Duxton�Viticulture�on�a�long�term�basis.�

In�effect�the�Company�is�proposing�to�acquire�further�Water�Entitlements�from�Duxton� Vineyards�and�lease�those�entitlements�on�a�long�term�basis,�in�a�similar�manner�as�undertaken� as�part�of�listing�on�ASX.�The�Board�considers�that�those�water�entitlements�form�part�of�the� core�target�water�assets�for�the�Company�and�are�not�able�to�be�acquired�on�more�favourable� terms�in�any�other�manner.�

Upon�listing�on�ASX,�the�Company�also�raised�$41.7m�in�cash.�The�Company�has�now�fully� deployed�that�cash,�mostly�by�acquiring�Water�Entitlements�either�for�long�term�leasing,�or� short�term�leasing�or�trading.�The�proposed�transaction�to�acquire�additional�water� entitlements�and�lease�them�on�a�long�term�basis�forms�part�of�Company’s�strategy�to�grow�its� water�portfolio�assets�and�increase�the�proportion�of�its�water�assets�which�are�leased�on�a� long�term�basis.�

For�the�half�year�ended�30�June�2017�the�Company’s�net�profit�after�tax�for�the�period� amounted�to�$0.974�million�(Dec�2016:�loss�after�tax�of�$0.232�million)�and�the�net�asset�value� (NAV)�of�the�Company�at�30�June�2017�is�$69.726�million�or�$1.090�per�share�(Dec�2016:� 68.801�million�or�$1.076�per�share).�Prior�to�the�close�of�2017,�the�Board�intends�to�distribute�a� dividend�to�eligible�Shareholders�in�the�range�of�0.02�to�0.023�cents�per�Share.�The�extent�of� any�franking�will�be�determined�by�the�Board�at�the�time�the�dividend�is�declared.��

Permanent�water�rights�and�entitlements�are�held�at�historical�cost�of�$68.814�million�(Dec� 2016:�$51.125�million)�less�accumulated�impairment�losses�of�$0.560�million�(Dec�2016:�$0.771�

171058.4_2803310_3

��14���

million).�The�net�book�value�of�the�water�rights�as�at�30�June�2017�is�$68.254�million�(Dec�2016:� $50.354�million).��

4. Duxton�Vineyards�Transaction�

On�18�August�2017�the�Company�entered�into�two�Water�Purchase�Contracts�with�Duxton� Vineyards�for�the�sale�and�purchase�of�Water�Entitlements.�One�contract�is�for�the�purchase�of� 2,050�ML�of�WALs�and�the�other�is�for�the�purchase�of�352�ML�of�Water�Entitlements�as�shares� in�WMI.�Other�than�in�relation�to�the�amount�and�value�of�Water�Entitlements�being� purchased,�the�terms�of�both�Water�Purchase�Contracts�are�substantially�the�same.�

The�key�commercial�terms�and�conditions�of�the�Water�Purchase�Contracts�are�set�out�in�the� following�table:�

CommercialTerm Details	CommercialTerm Details
Region&Zone(s)	NSWMurrayRiver,Zone11
Security	1,891MLHighSecurity,511MLGeneralSecurity
EntitlementsPurchased(ML)	2,402MLintotal,being2,050MLasWALs,352MLasshares inWMI
PurchasePrice	$6,810,050(approx.)
PurchaseConsideration	Issueof6,610,000newSharesatsettlement
EntitlementstobeLeased(ML)	2,402ML(100%ofentitlementsbeingacquired)
EntitlementstobeLeased(value$)	$6,810,050
LeaseTerm	Settlementdateto30June2024(Approx.7years)
InitialRent($)	$476,703.50
Rate	7%
OptiontoExtend	Yes(onceonly)
OptionTerm	3years
FirstRightofRefusal	Yes

Water�Purchase�Contract�terms�

The�total�purchase�price�payable�by�the�Company�for�the�Water�Entitlements�is�$6,810,050� subject�to�immaterial�settlement�adjustments.�This�is�the�market�value�of�the�Water� Entitlements�as�determined�by�an�external�valuation�obtained�by�the�Company�as�at�5�May� 2017.�No�deposit�has�been�paid�by�the�Company�under�the�Water�Purchase�Contract.�

The�Company�will�acquire�ownership�of�the�Water�Entitlements�at�settlement.�Settlement�of� the�purchase�of�the�Water�Entitlements�is�subject�to�Shareholder�approval�being�obtained� (based�on�the�Notice�of�Meeting),�and�also�once�all�required�approvals�have�been�obtained� from�relevant�water�authority�for�the�transfer�of�the�Water�Entitlements�and�all�other� conditions�have�been�satisfied.�The�regulatory�approval�that�is�required�is�approval�from�WMI� for�the�transfer�of�352�ML�of�Water�Entitlements�as�shares�in�WMI.�The�Company�is�in�the� process�of�applying�for�approval�from�WMI�and�anticipates�that�approval�will�be�obtained�prior�

171058.4_2803310_3

��15���

to�the�proposed�date�of�issue.�Prior�consent�from�the�NSW�Office�of�Water�is�not�required�for� transfer�of�2,050�ML�of�WALs.��

The�Company�has�agreed�to�pay�the�purchase�price�at�settlement�by�way�of�the�issue�of�new� Shares.�Immediately�upon�settlement,�transfers�are�intended�to�be�lodged�with�the�relevant� water�authority�for�registration.�As�with�all�transfers�of�water�entitlements,�legal�transfer�of�the� Water�Entitlements�from�Duxton�Vineyards�to�the�Company�will�be�effected�upon�registration,� which�occurs�shortly�after�settlement�of�the�Water�Purchase�Contracts.�Settlement�of�both� Water�Purchase�Contracts�must�occur�at�the�same�time.�

For�settlement�to�occur,�the�Company�has�to�be�satisfied�that�all�required�approvals�from� relevant�water�authorities�have�been�obtained,�that�the�entitlements�are�unencumbered�and� that�there�has�been�no�material�adverse�change�to�any�of�the�approvals�or�regulations�applying� to�the�Water�Entitlements.�The�Company�has�agreed�to�pay�all�registration�and�transfer�fees,� stamp�duty�and�any�costs�associated�with�obtaining�the�approvals.�

Either�party�to�the�Water�Purchase�Contract�may�terminate�the�contract�if�the�other�party� becomes�insolvent�or�materially�breaches�the�contract�and�does�not�remedy�the�breach�within� a�minimum�period.�Duxton�Vineyards�has�given�the�Company�warranties�regarding�proper�title� to�and�ownership�of�the�applicable�Water�Entitlements.�

The�Company�is�intending�to�satisfy�all�of�those�other�conditions�required�for�the�transfer�of� the�Water�Entitlements�so�that�the�Water�Purchase�Contracts�may�settle�as�soon�as�practical� after�Shareholder�approval�and�by�17�November�2017,�as�set�out�in�the�timetable�in� Schedule�1.��

At�settlement�the�Company�will:�

• Issue�the�6,610,000�new�Shares�to�Duxton�Vineyards�to�pay�for�the�Water�Entitlements� being�acquired.��

• Enter�into�two�Water�Entitlements�leases�with�Duxton�Viticulture�(as�lessee),�pursuant�to� which�the�Company�will�lease�all�of�the�Water�Entitlements�acquired�from�Duxton� Vineyards�to�Duxton�Viticulture�(the�key�terms�of�which�are�set�out�in�the�above�table).�The� other�material�terms�of�the�water�leases�are�set�out�in�this�Section�4�below.�

Leaseback�arrangements�

At�settlement�of�the�Water�Purchase�Contract�with�Duxton�Vineyards,�the�Company�will�enter� into�two�leases�with�Duxton�Viticulture�for�an�initial�term�of�approximately�7�years�each.�One� lease�is�for�the�2,050�ML�of�WALs�and�the�other�lease�is�for�the�352�ML�of�Water�Entitlements� as�shares�in�WMI.�

The�terms�and�conditions�and�final�form�of�the�leases�have�been�agreed�and�cannot�be�changed� unless�the�Company�consents.�The�leases�must�be�entered�into�prior�to�or�at�settlement�of�the� respective�Water�Purchase�Contracts.�

Duxton�Viticulture�currently�pays�a�weighted�average�lease�yield�of�6.00%.�If�the�new�leases�are� entered�into�Duxton�Viticulture�will�be�paying�a�weighted�average�lease�yield�of�6.19%.�Duxton� Viticulture�currently�leases�41.65%�of�the�Company’s�portfolio�by�value�(being�8,554.56ML�or� 25.67%�of�the�Company’s�water�entitlement�portfolio�by�volume).�This�will�increase�to�46.91%�

171058.4_2803310_3

��16���

of�the�Company’s�portfolio�by�value�(being�10,956.56ML�or�30.67%�of�the�Company’s�water� entitlement�portfolio�by�volume)�after�the�transaction.�A�default�by�Duxton�Viticulture�could� adversely�affect�the�revenue�generated�by�the�Company.���

Other�Lease�Terms�

The�key�commercial�terms�of�the�leases�are�set�out�in�the�table�above.�An�outline�of�the�other� material�terms�of�the�each�lease�are�set�out�as�follows.�

OtherTerm	Details
Paymentof Rent	Therentispayablequarterlyinadvanceandisrequiredtobepaid regardlessofwhetherornotthelesseeactuallytakesorusesanywater availabletoitunderaWaterEntitlementorWaterAllocation,or whetherthereisanyactualWaterAllocationatall.
Outgoings	Inadditiontotherent,thelesseeisalsorequiredtopayalloutgoings andrelatedcostsassociatedwiththeownershipoftheWater EntitlementorWaterAllocationsortakingwaterundertheWater Allocationbythelessee.
Compliance	Thelesseemustcomplywithallapplicablelawsandtherequirements ofrelevantwaterauthoritiesduringthelease,andmustnotdo anythingthatcouldcauseorpermitaWaterEntitlementtobe adverselyaffected.
Assignmentof Lease	Thelesseeisnotentitledtoassignorotherwisedisposeofitsinterest intheleaseortheWaterEntitlementswithouttheCompany’sconsent, butthelesseemayassignorotherwisedisposeofitsannualWater Allocationtowhichitisentitled.Thelesseemustalsonotallowany changeinitscontrollingownershipwithouttheCompany’sconsent.
Encumbrances	Thelesseeisnotentitledtomortgageorotherwiseencumberits interestundertheleaseortheWaterEntitlementswithouttheconsent oftheCompany.TheCompanycannotunreasonablywithholdits consentwherethemortgageisrequiredaspartofaloantothelessee upontermsandconditionssatisfactorytotheCompany.
Lessor Indemnity	ThelesseeindemnifiestheCompanyforanyliabilityarisingfromany act,neglect,defaultoromissionofthelessee(oranyotherperson)in usingthewaterundertheWaterEntitlements.
Terminationof Lease	Ifthelesseedoesnotpayanyrentforaperiodofmorethan14daysor isotherwiseindefaultunderthelease,theCompanymayterminate thelease,takebacktheWaterEntitlementsandrecoveranylossfrom thelessee.Thelesseeisnotrequiredtoprovideabankguaranteeor otherformofsecurityforpaymentofrent.
Optionto Extend	Thelesseehasanoptiontoextendtheinitialtermforafurtherperiod of3years,withrentfortheextendedtermtobethespecified percentageofthecurrentmarketvalueassetoutintheabovetable determinedbytheValuer.Theoptiontoextendmustbeexercised within6monthsofexpiryoftheinitialterm.
FirstRightof	TheCompanymayselltheWaterEntitlementsatanytime,subjectto

171058.4_2803310_3

��17���

OtherTerm	Details
Refusal	theleaseholdinterestgrantedtothelessee.However,ifthelesseehas notexerciseditsoptiontoextendtheleaseoritsoptiontopurchase theWaterEntitlementsandtheCompanythenwishestoselltheWater Entitlements,itmustoffertheWaterEntitlementstothelesseeforsale asafirstrightofrefusalonthesameornolessfavorabletermsfora periodofatleast14days,orunlesstheCompanyproceedstoauction theWaterEntitlementswithpriornoticetothelessee.
CarryOver Water	WhereanyWaterAllocationsareentitledtobecarriedovertothenext WaterYearthelesseemustprovidetheCompanywithwrittennotice atleast20businessdaysbeforetheendoftheWaterYear.

5. Details�of�Duxton�Vineyards�

Duxton�Vineyards�is�an�agri�producer�focused�on�grape�growing�and�production�in�South� Eastern�Australian.�

Duxton�Vineyards�Pty�Ltd�(as�trustee�for�Duxton�Vineyards�Unit�Trust)�owns�100%�of�Duxton� Viticulture�Pty�Ltd�(the�operating�entity)�and�owns�100%�of�the�units�in�Duxton�Vineyards� Water�Pty�Ltd�as�trustee�for�Duxton�Water�Trust.��

A�diagram�detailing�the�structure�of�these�entitles�is�included�below:��

Duxton�Vineyards�Group�Structure

==> picture [221 x 192] intentionally omitted <==

Directors�of�Duxton�Vineyards�

The�directors�of�Duxton�Vineyards�are�Ed�Peter�and�Dirk�Wiedmann�(who�are�also�directors�of� the�Company)�and�Peter�Kight.�The�directors�of�Duxton�Vineyards�Water�and�Duxton�Viticulture� are�the�same�as�Duxton�Vineyards.��

Relevant�Related�Parties�and�control�

171058.4_2803310_3

��18���

Prior�to�listing�on�ASX,�the�Company�was�100%�owned�and�therefore�controlled�by�Duxton� Vineyards�Water�and�Duxton�Vineyards�(although�it�was�incorporated�for�the�purpose�of�listing� on�ASX�and�had�not�traded�prior�to�the�transactions�entered�into�for�listing�on�ASX).�As�a�result� of�listing�on�ASX,�the�relevant�interest�of�each�of�Duxton�Vineyards�and�Duxton�Vineyards� Water�in�the�Company�was�reduced�to�40.74%�which�is�their�relevant�interest�in�the�Company� as�at�the�date�of�the�Notice.�

Their�individual�Shareholding�and�relevant�interest�before�and�after�the�Duxton�Vineyards� Transaction�would�be�as�follows*:��

	DuxtonVineyards	DuxtonVineyards	DuxtonVineyardsWater	DuxtonVineyardsWater
	PreDVTransaction
No.ofShares	3,365,561	5.29%	22,691,118	35.47%
Relevantinterest	26,056,680	40.74%	26,056,680	40.74%
	PostDVTransaction
No.ofShares	10,175,611	14.8%	22,691,118	31.90%
RelevantInterest	32,666,680	46.29%	32,666,680	46.29%

*based�on�total�issued�Shares�of�63,965,406,�and�no�Options�exercised��

The�Directors�who�have�not�declared�a�material�personal�interest�in�respect�of�the�Duxton� Vineyards�Transaction�do�not�consider�that�Duxton�Vineyards�presently�has�control�over�the� Company.�

However�the�Directors�who�have�not�declared�a�material�personal�interest�in�respect�of�the� Duxton�Vineyards�Transaction�recognise�that�by�entering�into�the�Duxton�Vineyards� Transaction,�Duxton�Vineyards�will�increase�its�relevant�interest�in�the�Company.�Accordingly,� although�it�is�not�the�intention�of�this�transaction,�Duxton�Vineyards,�along�with�Duxton� Vineyards�Water,�may�potentially�exercise�control�over�the�Company�at�a�future�date�as�a� result.�Those�Directors�therefore�consider�that�Shareholder�approval�should�be�obtained�on�the� basis�that�Duxton�Vineyards�and�its�associates�may�control�the�Company�as�a�result�of�the� Duxton�Vineyards�Transaction�and�thus�be�a�related�party�as�a�result.�

Ed�Peter�and�Dirk�Wiedmann�are�directors�of�both�Duxton�Water�and�Duxton�Vineyards�but�do� not�exercise�control�over�Duxton�Vineyards,�Duxton�Vineyards�Water�or�Duxton�Viticulture.��

The�Investment�Manager�does�not�in�any�way�act�in�concert�with�Duxton�Vineyards,�Duxton� Vineyards�Water�or�Duxton�Viticulture�in�relation�to�the�affairs�of�the�Company.���

Relevant�Associates�

Duxton�Viticulture�is�an�Associate�of�Duxton�Vineyards�and�Duxton�Vineyards�Water.�There�are� no�other�Associates�of�Duxton�Vineyards.��

Statement�of�Intention�by�Duxton�Vineyards

171058.4_2803310_3

��19���

Duxton�Vineyards�has�informed�the�Company�that�it�does�not�intend�to�change�the�business�of� the�Company,�has�no�intentions�in�respect�of�the�future�employment�of�present�employees�of� the�Company,�has�no�further�proposal�whereby�assets�will�be�transferred�with�the�Company�or� the�Associates�and�has�no�intention�to�otherwise�deploy�the�fixed�assets�of�the�Company.��

Duxton�Vineyards�has�also�informed�the�Company�that�it�has�no�intention�to�significantly� change�the�financial�or�dividend�distribution�policies�of�the�Company,�or�to�change�the� Directors�of�the�Company.��

Duxton�Vineyards�has�indicated�that�it�intends�to�distribute�its�Shares,�and�those�held�by� Duxton�Vineyard�Water,�to�their�own�investors�(as�in�in�specie�distribution),�as�soon�as� practicable�after�the�NAB�security�over�the�Shares�has�been�released,�which�is�estimated�to�be� within�24�months.�This�will�result�in�the�Shareholding�and�relevant�interest�of�Duxton�Vineyards� and�Duxton�Vineyards�Water�reducing�to�nil.�This�will�result�in�those�investors�individually� holding�Shares�in�the�Company,�none�of�which�will�have�a�relevant�interest�in�more�than�20%�of� the�Shares�on�issue�as�a�result.�Duxton�Vineyards�does�not�otherwise�intend�to�sell�or�dispose� of�its�Shares�or�those�of�Duxton�Vineyards�Water.�Duxton�Vineyards�does�not�consider�this� amounts�to�a�relevant�agreement�for�the�purpose�of�the�Corporations�Act.�

Duxton�Vineyards’�reasons�for�entering�into�transaction��

The�reasons�for�Duxton�Vineyards�entering�into�this�transaction�are:�

• Through�the�transaction,�Duxton�Vineyards�has�the�ability�to�secure�its�water�requirements� without�the�need�to�own�the�underlying�water�asset,�a�capital�light�option.�

• In�Duxton�Vineyards�holding�the�Shares�instead�of�the�underlying�water�assets,�Duxton� Vineyards’�financier�has�security�over�a�more�readily�available�current�value�than�if�direct� water�assets�are�held.�

• With�the�equity�held�in�Shares�there�is�much�greater�liquidity�for�Duxton�Vineyards�and�its� underlying�investors.�

• By�owning�Shares�in�the�Company�rather�than�retaining�the�underlying�water�assets,� Duxton�Vineyards�and�its�investors�have�a�balanced�exposure�to�a�portfolio�of�water�assets� rather�than�a�concentrated�holding.�

• Whilst�the�return�from�the�Shares�will�be�offset�by�the�lease�payments,�Duxton�Vineyards� has�the�potential�in�the�future�to�earn�returns�greater�than�the�internal�return�on�capital�it� would�receive�from�directly�holding�a�concentrated�water�entitlement�holding.��

6. Outline�of�IER�

The�Independent�Expert�has�determined�that�the�Duxton�Vineyards�Transaction�is�fair�and� reasonable�to�Shareholders�whose�votes�are�not�to�be�disregarded.�

The�IER�should�be�considered�in�full. The�following�is�an�outline�of�the�key�findings�and� assumptions�contained�in�the�IER.�

IER�

171058.4_2803310_3

��20���

In�arriving�at�the�opinion�that�the�Duxton�Vineyards�Transaction�is�fair�and�reasonable,�the� Independent�Expert�had�regard�to�insert�from�final�IER.�

In�determining�whether�the�Duxton�Vineyards�Transaction�is�fair,�the�Independent�Expert� considered:�

• the�value�of�the�water�entitlements�are�essentially�equal�to�the�value�of�the�proposed� consideration,�with�the�variance�reflecting�approximately�1%�which�it�considered�to�be� immaterial;�

• the�value�of�the�equity�in�the�Company�post�the�Duxton�Vineyard�Transaction�is�equal�to� the�value�range�of�a�Share�pre�the�proposed�transaction,�with�the�ordinary�shares�pre�and� post�the�proposed�transaction�valued�at�$1.12�(rounded);�and�

• the�terms�of�the�proposed�leases�are�on�commercial�terms.�

In�determining�whether�the�Duxton�Vineyards�Transaction�is�reasonable,�the�Independent� Expert�had�regard�to�the�following�advantages�and�disadvantages:�

• By�entering�into�a�seven�year�lease�with�Duxton�Viticulture,�the�Company�will�have�a�secure� source�of�income,�will�increase�its�weighted�average�lease�expiry,�will�increase�the� proportion�of�water�portfolio�that�is�leased�and�will�increase�its�weighted�average�yield� from�the�portfolio.�

• The�growth�in�the�Company’s�water�portfolio�and�capital�base�may�increase�the� attractiveness�of�the�Company�to�institutional�investors.�

• The�proposed�purchase�provides�the�Company�an�opportunity�to�secure�a�unique�parcel�of� water�which�is�rarely�available�on�the�open�market,�but�rather�is�generally�only�available�in� combination�with�a�land�and/or�productive�asset�purchase.�Currently�there�are� approximately�189,704�ML�of�NSW�Murray�High�Security�Shares�on�issue.��Of�this,� approximately�25,508�ML�are�owned�by�NSW�and�Commonwealth�governments,�leaving� only�164,196�ML�available�to�the�free�market.�Of�this�volume,�75%�would�be�held�by�no� more�than�20�groups,�the�majority�of�which�water�would�likely�be�committed�to�productive� assets�and�are�unlikely�to�be�sold�without�a�land�and�productive�asset�sale.�Further,�to� acquire�this�volume�on�market�could�well�have�an�undue�inflationary�impact.�

• The�Zone�11�Entitlement�has�some�of�the�greatest�flexibility�in�trading�capability.�This� maximises�the�customer�demand�pool�available�when�negotiating�or�renegotiating�a�lease� of�the�entitlement.�The�broader�the�tradeability�of�the�entitlement,�the�larger�the�number� of�industries�that�could�deploy�the�asset�which�reduces�specific�industry�risk.�

• The�proposed�transaction�will�result�in�Duxton�Vineyards�increasing�its�shareholding�from� 40.74%�to�46.29%.�This�could�further�impact�the�liquidity�of�the�Shares.�However,�Duxton� Vineyards�have�advised�the�Company�that�it�is�the�intention�to�distribute�the�Shares�that� Duxton�Vineyards�holds�in�the�Company�to�the�unit�holders�of�Duxton�Vineyards�as�soon�as� practicable�after�the�NAB�security�over�these�Shares�has�been�released,�which�is�estimated� to�be�within�24�months.�

• The�Duxton�Vineyard�Transaction�will�result�in�the�proportion�of�the�water�entitlements� leased�to�Duxton�Vineyards�increasing�from�approximately�41.65%�to�46.91%.�Whilst�

171058.4_2803310_3

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Duxton�Vineyards�is�considered�by�the�Company�to�be�strong�and�of�little�counterparty�risk,� it�is�placing�greater�reliance�on�one�party�for�its�income�generation.�Notwithstanding�the� foregoing,�ultimately�there�is�the�capacity�to�quickly�redeploy�the�asset�should�there�be�a� default�in�lease�terms,�thereby�reducing�the�risk.�

Aither�Valuation�

The�Independent�Expert�had�the�water�entitlements�to�be�acquired�from�Duxton�Vineyards� independently�valued�by�Aither,�whose�report�is�included�in�the�IER.�That�valuation�is�at�30� June�2017�and�was�conducted�on�a�fair�value�measurement�basis�under�the�Australian� Accounting�Standards�Board�(AASB)�13�definition.�

Aither�determined�the�value�of�the�Company’s�current�portfolio�of�water�entitlements�to�be� $69.6�million.�

The�value�of�the�water�entitlements�to�be�acquired�from�Duxton�Vineyards�as�determined�by� Aither�is�set�out�in�the�following�table,�which�also�shows�the�value�that�the�Company�has� agreed�to�pay�for�those�entitlements.�

WaterEntitlement	PurchaseValue	AitherValue
NSWZone11MurrayHighSecurity 1,539ML(WALs)	$5,001,750 ($3,250/ML)	$5,386,500 ($3,500/ML)
NSWZone11MurrayGeneral Security511ML(WALs)	$664,300 ($1,300/ML)	$689,850 ($1,350/ML)
NSWZone11WMIHighSecurity	$1,144,000 ($3,250/ML)	$1,232,000 ($3,500/ML)
Total	$6,810,050	$7,308,350

The�Company�has�65�individual�water�entitlements�comprising�its�current�portfolio.�The�Aither� report�includes�a�list�of�all�of�those�individual�water�entitlements.�The�listing�of�all�of�the� Company’s�water�entitlements�in�this�manner�is�not�publicly�available�and�is�not�considered�by� the�Board�to�be�materially�price�sensitive�or�material�to�Shareholders�for�the�Resolutions.�In� addition,�such�a�listing�of�the�Company’s�current�water�entitlements�is�considered�by�the�Board� to�be�disclosing�commercially�sensitive�information�which�may�be�detrimental�to�the�interests� of�the�Company.�Accordingly�those�lists�have�been�redacted�in�the�version�of�the�Aither�report� included�in�the�IER�and�on�the�Company’s�website.�The�Company�will�make�the�unredacted� version�of�the�Aither�report�available�for�inspection�to�a�Shareholder�upon�on�bona�fide�request� as�to�the�reason�for�the�inspection.�

7. Directors�Interests�and�Recommendations�

The�following�table�sets�out�the�equity�interests�of�the�Directors�declared�in�relation�to�the� Duxton�Vineyards’�Transaction,�being�their�proportionate�interest�in�the�shares�and�units�they� hold�or�control�in�Duxton�Vineyard,�Duxton�Vineyard�Water�and�Duxton�Viticulture�as�a� combined�group�(DV�Group).�Those�interests�may�change�in�the�period�up�to�the�General� Meeting�and�settlement�of�the�Duxton�Vineyards�Transaction,�and�accordingly�their�expected� new�interest�is�also�included.�

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CompanyDirector	Declared InterestinDV Group�Current	Declared InterestinDV Group� Expected	Interestinthe Company–pre Transaction*	Interestinthe Company–post Transaction*
EdPeter (Chairman)	17.24%	24.11%	0.46%	0.42%
DirkWiedmann	3.45%	3.84%	Nil	Nil
PeterMichell	1.72%	2.83%	0.015%	0.014%
StephenDuerden	Nil	0.14%	0.015%	0.014%
DennisMutton	Nil	Nil	Nil	Nil

*�Does�not�include�interests�in�the�Company’s�Options

Directors Recommendation

The�Directors�who�have�not�declared�any�material�personal�interest�in�the�Duxton�Vineyards� Transaction�are�Stephen�Duerden�and�Dennis�Mutton.�They�recommend�that�the�eligible� Shareholders�vote�in�favour�of�the�Duxton�Vineyards�Transaction�and�approve�all�Resolutions.� Refer�to�Section�5�for�the�reasons�for�the�Directors’�recommendation.��

The�Directors�who�have�declared�a�material�personal�interest�in�the�Duxton�Vineyards� Transaction�are�Ed�Peter,�Peter�Michell�and�Dirk�Wiedmann.�They�do�not�make�a� recommendation�in�relation�to�the�Duxton�Vineyards�Transaction�or�the�Resolutions�as�they�do� not�consider�it�appropriate�to�do�so�in�light�of�the�interests�they�have�declared.�

Alternatives�to�Duxton�Vineyard�Transaction

The�Board�has�considered�alternatives�to�the�Duxton�Vineyards�Transaction�which�might�be� available.��There�are�essentially�two�alternatives�–�not�proceed�to�acquire�the�water� entitlements�at�all,�or�seek�to�pay�cash�for�them.�In�considering�these�alternatives,�the� Directors�who�have�not�declared�any�material�personal�interest�in�the�Duxton�Vineyards� Transaction�have�concluded�that�the�transaction�as�proposed�is�the�preferred�and� recommended�approach.��

The�proposed�transaction�to�acquire�additional�water�entitlements�and�lease�them�on�a�long� term�basis�forms�part�of�Company’s�strategy�to�grow�its�water�portfolio�assets�and�increase�the� proportion�of�its�water�assets�which�are�leased�on�a�long�term�basis.�

The�ability�to�secure�this�volume�of�NSW�Murray�High�Security�Water�Entitlement�from�the� open�market�is�very�limited.�Parcels�of�this�nature�are�generally�only�available�when�a�land�and� production�asset�are�offered�for�sale.�The�General�Security�Entitlement�may�have�been�able�to� have�been�secured�through�the�open�market�as�it�is�more�readily�offered�and�available�in� volume,�however�the�General�Security�entitlement�was�offered�as�a�package�as�part�of�the� transaction.�Both�NSW�Murray�High�and�General�Security�Entitlement�form�part�of�the� Company’s�core�target�portfolio.���

As�the�Company�is�not�in�the�business�of�purchasing�land�and�production�assets,�its�ability�to� secure�parcels�like�this�at�present�relies�on�the�Company�engaging�or�negotiating�with�agri�

171058.4_2803310_3

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producers�who�are�interested�in�selling�their�water�entitlement�and�entering�into�long�term� lease�arrangements.�The�Company�continues�to�develop�various�relationships�which�over�time� are�likely�to�deliver�opportunities,�however�the�Company�does�not�currently�have�any� discussions�at�an�advanced�stage�that�they�would�offer�as�an�alternative�to�the�current� transaction.��

The�Board�considered�agreeing�to�pay�cash�to�Duxton�Vineyards�for�the�Water�Entitlements� instead�of�the�issue�of�Shares�to�Duxton�Vineyards.�If�the�water�entitlements�were�to�be� purchased�with�cash,�the�Company�would�be�required�to�raise�the�funds�by�issuing�more�Shares� (or�other�securities)�and�pay�brokerage�commissions�and�costs�of�marketing�campaigns� associated�with�a�separate�capital�raise.�Importantly,�this�would�also�not�provide�the�Company� with�certainty�regarding�raising�sufficient�funds�to�finance�the�transaction.��

Moreover,�there�is�no�timing�advantage�from�a�regulatory�perspective�for�the�Company�in� purchasing�the�Water�Entitlements�with�cash.�Cash�consideration�for�the�Water�Entitlements� would�still�require�the�Company�to�obtain�Shareholder�approval.�

Therefore�the�issue�of�Shares�will�allow�the�Company�to�expeditiously�acquire�strategic�Water� Entitlements�that�do�not�often�come�up�for�sale.��Given�the�Company�is�currently�fully�invested� with�no�excess�cash�reserves�and�the�Board�does�not�wish�to�leverage�the�business,�the�Board� concluded�that�the�issue�of�Shares�was�therefore�a�more�certain�and�efficient�way�for�the� Company�to�be�able�to�fund�the�acquisition�of�the�Water�Entitlements.�The�Company�is�also� agreeing�to�pay�a�purchase�price�which�is�less�than�the�value�independently�determined�by� Aither,�as�set�out�in�Section�6�and�the�IER.�

Director�Participation�

All�Directors�who�have�declared�their�material�personal�interest�have�participated�in�Board� deliberations�in�relation�to�the�Duxton�Vineyards�Transaction�pursuant�to�section�195(2)�of�the� Corporations�Act�(that�is,�with�approval�of�the�Directors�who�have�not�declared�a�material� personal�interest).�However�the�Directors�who�have�declared�a�material�personal�interest�did� not�vote�in�respect�of�the�Duxton�Vineyards�Transaction�at�relevant�Board�meetings.��

8. Material�Risks�in�Relation�to�the�Duxton�Vineyards�Transaction�

Risk���

This�section�provides�the�risks�which�the�Directors�believe�are�key�risks�in�relation�to�the� Duxton�Vineyards�Transaction.�Shareholders�should�be�aware�that�that�this�is�not�an�exhaustive� list�of�the�risks�and�they�should�be�considered�in�conjunction�with�the�other�information� disclosed�in�this�Explanatory�Statement.�Shareholders�should�also�note�that�the�occurrence�or� consequences�of�some�of�the�risks�described�in�this�section�are�partially�or�completely�outside� the�control�of�the�Company,�its�Board�and�the�Investment�Manager.��

Shareholders�should�consider�seeking�professional�advice�from�their�stockbroker,�solicitor,� accountant�or�other�independent�professional�adviser�before�deciding�whether�or�not�to� approve�the�transaction.��

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Risks�associated�with�the�Duxton�Vineyards�Transaction��

Control�Risk��

As�at�the�date�of�the�Notice,�the�relevant�interest�of�each�of�Duxton�Vineyards�and�Duxton� Vineyards�Water�in�the�Company�is�40.74%.�If�the�Duxton�Vineyards�Transaction�is�approved,� the�combined�Shareholding�and�relevant�interest�of�Duxton�Vineyards�and�Duxton�Vineyards� Water�in�the�Company�will�be�approx.�46.29%.�There�is�a�risk�that�Duxton�Vineyards�will�exert� or�attempt�to�exert�control�over�the�Company�and�its�affairs.��

Duxton�Vineyards�and�Duxton�Vineyards�Water�also�hold�Options�in�the�Company�totaling� 3,365,561�and�4,142,919,�respectively.�If�after�the�Duxton�Vineyards�Transaction�but�prior�to� the�expiry�date,�Duxton�Vineyards�and�Duxton�Vineyards�Water�exercise�their�respective� Options�in�the�Company,�their�maximum�relevant�interest�in�the�Company,�if�no�other� Optionholders�exercise�their�Options,�will�be�51.5%.[2]

See�Section�5�of�the�Explanatory�Statement�for�more�information.��

Key�Lessee�Risk��

At�current,�the�Company�has�approximately�76.39%�of�its�lease�revenue�payable�by�Duxton� Viticulture.�If�the�Duxton�Vineyards�Transaction�is�approved,�the�Company�will�have� approximately�80.51%�of�its�lease�revenue�paid�by�Duxton�Viticulture.�A�default�by�Duxton� Viticulture�could�adversely�affect�the�revenue�generated�by�the�Company.�Under�the�terms�of� the�water�leases�if�Duxton�Viticulture�defaults�the�Company�may�terminate�the�water�lease�and� take�back�the�Water�Entitlements.�The�Company�anticipates�that�it�will�be�readily�able�to�lease� those�Water�Entitlements�to�another�person�such�that�it�will�not�sustain�any�significant�losses� as�a�result�of�the�default�by�Duxton�Viticulture.��

2�Based�on�total�issued�Shares�of�70,575,406.��

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Issue�of�Shares�at�prevailing�market�price��

The�Share�price�for�the�issue�of�6,610,000�Shares�to�Duxton�Vineyards�is�based�on�the� prevailing�market�price�on�the�proposed�date�of�issue.�The�Company’s�Share�price�is�subject�to� fluctuation.�Over�the�previous�12�months,�the�Company’s�Share�price�has�ranged�from�as�low� as�$0.96�per�Share�to�its�highest�price�at�$1.10�per�Share.�Accordingly,�there�is�a�risk�that�the� prevailing�market�price�on�the�proposed�issue�date�may�be�higher�than�anticipated�by�the� Company�resulting�in�the�Company�providing�consideration�to�Duxton�Vineyards�at�a�value�that� is�higher�than�intended.��

Security�over�Duxton�Vineyards’�Shares��

The�Shares�issued�to�Duxton�Vineyards�are�likely�to�be�subject�to�a�security�interest�in�favour�of� the�NAB�as�part�of�the�financial�accommodation�provided�by�NAB�to�the�DV�Group.�If�the�NAB� enforces�its�rights�under�that�security,�some�of�all�of�Duxton�Vineyards’�Shares�may�be�sold.� Duxton�Vineyards’�Shares�represent�a�substantial�interest�in�the�Company.�Therefore�any� forced�sale�of�those�Shares�may�affect�control�of�the�Company�and�the�traded�Share�price.�

Risk�associated�with�investment�in�the�Company��

Contractual�Risk��

The�financial�performance�of�the�Company�is�subject�to�the�company�and�its�counterparties� continuing�to�perform�their�respective�obligations�under�various�contracts.�If�the�Company�or� one�of�its�counterparties�fails�to�adequately�perform�their�contractual�obligations,�this�may� result�in�a�loss�of�earnings,�termination�of�the�particular�contract,�disputes�and�or�litigation.�For� example,�the�Company�anticipates�many�of�its�Water�Entitlements�will�be�subject�to�long�term� lease�arrangements.�If�the�leaseholder�were�to�default�on�their�obligations,�this�could�result�in�a� loss�of�revenue�for�the�Company.�

Market�Size�and�Liquidity�risk�

The�turnover�of�Australian�Water�Entitlements�is�relatively�small�when�compared�to�the� aggregate�Australian�Water�Entitlement�market,�with�approximately�an�average�annual� turnover�of�311�GL�(approximately�4%�of�the�entire�Entitlements�market)�valued�close�to�$400� million�during�the�2014�15�season.�Average�annual�turnover�in�Water�Allocations�over�the� same�period�was�5,550�GL.�With�limited�market�activity,�the�small�market�size�poses�a�liquidity� risk�for�the�Company,�creating�pricing�and�capacity�considerations.�This�may�be�of�concern�as� the�Company,�and�the�aggregate�assets�managed�by�it�across�multiple�client�accounts,�grows�in� size,�if�the�market�as�a�whole�does�not�increase�at�the�same�pace.[3]

3�Based�on�2015�16�Water�Year.��

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Risk�of�Shares�trading�below�Net�Asset�Value�(NAV)�

The�Shares�of�the�Company�may�trade�on�the�ASX�at�a�discount�to�the�NAV�of�the�Water� Entitlements�portfolio�on�a�per�Share�basis�and�the�performance�of�the�Shares�may�not�be� correlated�with�the�performance�of�Water�Entitlements�portfolio.��

Market�Risk�

Macroeconomic�risks�such�as�movements�in�interest�rates,�commodities�prices�and�inflation� have�the�potential�to�adversely�impact�the�value�of�assets.�Significant�fluctuations�in� macroeconomic�factors�may�cause�volatility�in�the�value�of�Water�Entitlements�and�Water� Allocations�resulting�in�poor�returns.�

Diversification�Risk�

The�Company’s�key�strategy�in�active�investment�is�diversification�to�mitigate�risk.�However,� whilst�the�Company�will�target�portfolio�diversification�across�security�classes,�Water� Entitlement�types�and�geographical�regions,�due�to�the�timing�of�deployment�of�funds,�the� Company�may�be�concentrated�in�certain�Water�Entitlements.�Consequently,�a�lack�of� diversification�during�periods�when�capital�is�yet�to�be�invested�may�adversely�impact�the� performance�of�the�Company.�

Leverage�Risk�

The�Company�has�the�right�to�employ�the�use�of�leverage�in�order�to�manage�short�term�cash� flow.�This�has�the�ability�to�magnify�losses�to�the�Water�Entitlements�portfolio.�With�the�use�of� debt,�the�Company�is�exposed�to�changes�in�interest�rates.�An�increase�in�interest�rates�if�debt� were�utilised�could�have�an�adverse�effect�on�future�financial�performance.�

Legal,�Tax�and�Regulatory�Risks�

Regulatory�change�implemented�through�the�Murray�Darling�Basin�Plan�and�through�State�and� Federal�water�reforms�may�impact�the�liquidity,�transferability�and�value�of�Australian�Water� Entitlements.�Historically,�governments�have�allowed�transitional�periods�in�order�for�the� market�to�adapt�to�any�changes�in�regulations.��

The�regulatory�environment,�such�as�the�tax�and�legal�structure,�surrounding�Water� Entitlements�and�the�investment�vehicle�is�subject�to�change.�Such�change�has�the�potential�to� adversely�impact�the�Company’s�performance.�

Reliance�on�the�Investment�Manager�

The�investment�decisions�made�by�the�Investment�Manager�of�the�Company�are�key�to� achieving�the�investment�objectives.�Failure�to�develop�and�implement�adequate�strategies� may�adversely�impact�the�performance�of�the�Company.�

Key�Person�Risk�

The�success�of�the�Company�depends�on�the�ability�to�retain�the�members�of�the�Board�and�for� the�Investment�Manager�to�retain�as�well�as�attract�talented�personnel.�The�Company�has�

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executed�an�Investment�Management�Agreement�with�the�Investment�Manager�and�a�key� terms�of�reference�with�each�director,�but�this�does�not�guarantee�continued�involvement�of� Board�members�or�employment�of�key�personnel.�The�loss�of�key�employees�could�cause� material�disruption�to�the�business�and�operations�of�the�Company�and�have�a�material� adverse�effect�on�future�financial�performance.��

Capital�Depreciation�Risk�

Water�Entitlements�have�historically�generated�capital�growth.�However,�past�performance�of� Water�Entitlements�is�not�a�reliable�indicator�of�the�future�performance�of�Water�Entitlements.� As�such,�there�exists�the�risk�that�Water�Entitlements�may�depreciate�in�value�over�the� investment�period.�For�example,�severe�wet�conditions�were�experienced�throughout�2010�to� 2012.�Consequently,�the�amount�of�water�available�for�annual�water�allocations�was�greater� than�in�previous�dry�irrigation�seasons.�As�a�result,�the�greater�supply�of�water�reduced�its� scarcity�and�hence�reduced�the�price�of�water.�

9. ASX�Listing�Rule�Information�–�Resolutions�1�and�3��

For�the�purpose�of�Listing�Rules�10.10�and�10.13,�the�Company�provides�the�following� information.�

Information	Details
Persontobe issuedtheShares	DuxtonVineyards
Relationship betweenDuxton Vineyardsandthe Company	DuxtonVineyardsisasubstantialShareholderbutisnotpresentlya relatedpartytotheCompanywithinthemeaningofsection228of theCorporationsAct.However,DuxtonVineyardsmaycontrolthe CompanyasaresultoftheDuxtonVineyardtransaction.SeeSection 5.
Maximumnumber ofSharestobe issued	6,610,000newShares
Issuepriceand termsofissue	ThenewShareswillbeissuedatprevailingmarketpriceontheday ofissue,forthepurchasebytheCompanyof2,402megalitresof WaterEntitlementsfromDuxtonVineyards,whicharevaluedat approximately$6,810,050andwillhavethesamerightsasthe Company’sexistingissuedandquotedshares.
DateforShare issue	17November2017,beingwithin1monthfromthedateofapproval.
Intendeduseof fundsraised	Nocashfundsarebeingraised.Thefundsinthistransactionare WaterEntitlementsvaluedatapproximately$6,810,050.The CompanyintendstoleasetheWaterEntitlementstoDuxton Viticulturepursuanttotwoleases.SeeSection4.
Independent ExpertReport	ThenoticecontainsanIndependentExpertReportbyPitcher PartnerswhichstatesthattheDuxtonVineyardsTransactionisfair andreasonabletoShareholderswhosevotesarenottobe disregarded.

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Information	Details
Provisionofthe IERtoeach Shareholder	TheIERaccompaniesthisNoticeofMeeting.
AccesstoIER	TheIERisavailableontheCompany’swebsiteat http://www.duxtonwater.com.au/.HardcopiesoftheIERare availableonrequestofaShareholderatnocosttothatShareholder.
Votingexclusion statement	DuxtonVineyardsasacquirerofthenewShareswillbeexcluded fromvotingonResolutions1and3,alongwithitsAssociatesas identifiedinSection5.SeeNoticeofMeetingfordetailedvoting exclusionstatement.
Noapprovalunder ListingRule7.1	InaccordancewithListingRule7.2exception14,approvalunder ListingRule7.1isnotrequiredbecausetheissueofSharestoDuxton VineyardswillbemadewiththeapprovalofShareholdersunder ListingRule10.11.

Share�Price�Range�

The�minimum�and�maximum�price�of�the�Company’s�Shares�in�the�last�12�months�(being�since� listing�on�ASX)�has�been:�

Highest�Price:��$1.10��

Lowest�Price:��$0.96��

The�latest�available�traded�price�of�the�Company’s�Shares�at�the�date�of�the�Notice�is�$1.035.�

10. Corporations�Act�Information�

Section�611�Item�7�Corporations�Act�–�Resolution�2�

For�this�resolution�the�Company�is�required�to�give�Shareholders�all�information�known�to�the� Company�and�Duxton�Vineyards�(and�its�associates)�that�is�material�to�the�decision�to�vote�on� the�resolution.�The�following�is�a�guide�to�this�information�as�contained�elsewhere�in�the� Notice.��

Details	FurtherReference
Identifyofthepersonproposingtomake theacquisitionandtheirassociates.	DuxtonVineyardsandAssociates.See Section5.
Themaximumextentoftheincreasein DuxtonVineyards’votingpowerinthe Companythatwouldresultfromthe acquisition.	Themaximumextentoftheincreaseinthe votingpowerofDuxtonVineyards(and DuxtonVineyardWater)wouldbe5.54%.
ThevotingpowerthatDuxtonVineyards wouldhaveasaresultoftheacquisition.	46.29%(32,666,680Shares)
Themaximumextentoftheincreasein	Themaximumextentoftheincreaseinthe

171058.4_2803310_3

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thevotingpowerofeachofDuxton Vineyards’Associatesthatwouldresult fromtheacquisition.	votingpowerofDuxtonVineyards Associateswouldbe5.54%.
ThevotingpowerthateachofDuxton Vineyards’Associateswouldhavearesult oftheacquisition.	46.29%(32,666,680Shares)
Statementsastointention,controland directors	Nointentiontochange,seeSection5.

Section�208�of�the�Corporations�Act�–�Resolution�4�

The�Company�is�required�under�Section�219�of�the�Corporations�Act�to�provide�information�to� Shareholders�for�the�purpose�of�determining�how�to�vote�on�the�Resolution�4.�A�guide�to�this� information�contained�elsewhere�in�the�Notice�is�as�follows.�

Topic	KeyDetails
Identityoftherelated party	FortheissueofSharesbytheCompanyaspartoftheDuxton VineyardsTransaction,therelatedpartiesareDuxtonVineyardsas theallotteeoftheSharesanditsassociatedShareholderDuxton VineyardsWater,onthebasisthatthoseShareholdersmaycontrol theCompanyasaresultofthetransaction. FortheleaseoftheWaterEntitlementsformingpartoftheDuxton VineyardsTransaction,thefinancialbenefitisbeingprovidedto DuxtonViticulture(whichisanassociateofDuxtonVineyards).
Informationaboutthe circumstancesofthe relatedparty transaction	TheexistingarrangementsbetweenDuxtonVineyards,Duxton VineyardsWaterandDuxtonViticulturearesetoutinSection5. AstothearrangementsbetweentheCompanyandthoseentities (otherthaninrespectoftheDuxtonVineyardsTransaction),Duxton Viticultureisalreadythelesseeofapproximately8,554.56MLof WaterEntitlementsfromtheCompany.ThoseWaterEntitlements leaseswereenteredintoaspartofthelistingoftheCompanyon ASX,andthedetailsofthoseleasesaresetoutintheCompany’s replacementprospectusdated11August2016. TherearenootherrelevantarrangementsbetweentheCompany andanyoftheDVGroup.
Natureofthefinancial benefit	ThefinancialbenefitsbeinggivenbytheCompany(forwhich Shareholderapprovalissought)are: � Issueof6,610,000SharestoDuxtonVineyardsattheprevailing marketpriceontheproposeddateofissueandconsequent increaseinrelevantinterestofDuxtonVineyardsandDuxton VineyardWater. � LeasesoftheWaterEntitlementstoDuxtonViticulture. ThefinancialbenefitbeingprovidedtoDuxtonVineyardsis 6,610,000Shares. TheincreaseintherelevantinterestofDuxtonVineyardsand DuxtonVineyardsWaterwillbefrom40.74%to46.29%.The Companycannotquantifythevalueofthatfinancialbenefit.

171058.4_2803310_3

��30���

Topic	KeyDetails
	ThevalueoftheleasebeingprovidedbytheCompanytoDuxton Viticultureisnotpossibletoquantifyoverall.Theinitialrentpayable bythelesseetotheCompanyis$476,703.50assetoutinSection4. Thereasonsforthegivingofthefinancialbenefits,thebasisfor themandthesubstantiveeffectoftheDuxtonVineyards TransactionaresetoutinSections4and5.
Directors’ recommendations	TheDirectors’recommendations(whereapplicable)andreasons whysomeDirectorshavenotmadeanyrecommendationareset outinSection7.
Directors’interests	TheinterestsofDirectorsissetoutinSection7.
Valuationofthe financialbenefit	Avaluationofthefinancialbenefitshasbeenprovidedbywayofthe IndependentExpertReportandtheValuationReportbyAither(for theWaterEntitlements).
Relatedparty’sexisting interest	TheexistinginterestsoftherelatedpartiesissetoutinSection5. DuxtonVineyardsexistingrelevantinterestis40.74%.
Dilutioneffecton existingmembers’ interests	Thedilutioneffectonexistingshareholdersinterestsissetoutin Section5.Dilutionwillbeupto5.54%.
Disclosureofarelevant director’stotal remunerationpackage	Therearenoresolutionsrelatingtoremunerationorincentivesof Directorsorotherrelatedparties.

171058.4_2803310_3

��31���

Schedule�1�

Timetable�for�Duxton�Vineyards�Transaction�(if�approved)�

IndicativeDate*	Action
18October2017	GeneralMeetingofShareholderstoapproveallResolutions.
17November2017	� SettlementofWaterPurchaseContractsandentityintoWater Leases. � Issueof6,610,000SharestoDuxtonVineyards

*� Dates�are�indicative�only�and�may�change�subject�to�the�Corporations�Act�and�Listing�Rules

171058.4_2803310_3

Glossary

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TERM	DEFINITION
$orA$orAUD	Australiandollars
AFSL	AustralianFinancialServicesLicence
Aither	AitherPtyLtdACN155726426
ASIC	AustralianSecuritiesandInvestmentCommission
Associate	HasthesamemeaningasinChapter6CoftheCorporationsAct
ASX	ASXLimitedACN008624691orthemarketknownastheAustralian SecuritiesExchange,asapplicable
Board	TheboardofdirectorsoftheCompany
BusinessDay	MondaytoFridayinclusive,exceptNewYear’sDay,GoodFriday,Easter Monday,ChristmasDay,BoxingDayandanyotherdaythatASXdeclaresis notabusinessday
Chairman	ChairmanoftheGeneralMeeting
Company	DuxtonWaterLimitedACN611976517
Constitution	TheconstitutionoftheCompany
CorporationsAct	_CorporationsAct_2001(Cth)
Director	AcurrentdirectoroftheCompany
DuxtonVineyards	DuxtonVineyardsPtyLtdACN608763515astrusteefortheDuxton VineyardsUnitTrustABN47541387889
DuxtonVineyardsWater	DuxtonVineyardsWaterPtyLtdACN609424786asthetrusteeforthe DuxtonWaterUnitTrustABN25411487092
DuxtonViticulture	DuxtonViticulturePtyLtdABN83609424704
DVGroup	DuxtonVineyards,DuxtonVineyardsWaterandDuxtonViticulture
EquitySecurities	IncludesaShare,arighttoaShareorOption,anOptionaconvertiblesecurity andanysecuritythatASXdecidestoclassifyasanEquitySecurity
ExplanatoryStatement	TheexplanatorystatementaccompanyingtheNotice
GeneralMeeting(EGM)or Meeting	ThemeetingconvenedbytheNotice
GeneralSecurity	AformofWaterEntitlement,henceWaterAllocation,pertainingtoa regulatedstreamforwhichwaterordersareacceptedsubjecttostorage/ demandcircumstances
HighSecurity	AformofWaterEntitlement,henceWaterAllocation,pertainingtoa regulatedstreamforwhichthesupplyofwaterisguaranteedirrespectiveof circumstances
IER	IndependentExpertReportbyPitcherPartnersaccompanyingtheNotice
InvestmentManager	DuxtonCapital(Australia)PtyLtdACN164225647,AFSL450218
ListingRules	ThelistingrulesofASX

171058.4_2803310_3

��33��

TERM	DEFINITION
ML	Megalitre
NAB	NationalAustraliaBankLimitedACN004044937
NoticeorNoticeofMeeting	ThisnoticeofmeetingincludingtheExplanatoryStatementandtheProxy Form
Option	Aquotedoptiontoacquire1Share,exercisableat$1.10perOptiononor before31May2018
PitcherPartners	PitcherPartnersCorporatePtyLtdACN082323868,AFSL229841
ProxyForm	TheproxyformaccompanyingtheNotice
RelatedParty	HasthesamemeaningasintheCorporationsAct
Resolutions	TheresolutionssetoutintheNotice,oranyoneofthemasthecontext requires
Share	AfullypaidordinaryshareinthecapitaloftheCompany
Shareholder	AregisteredholderofaShare
ShareRegistry	ComputershareInvestorServicesPtyLimitedACN078279277
SRN	SecurityholderReferenceNumber
TradingDay	AdaydeterminedbyASXtobeatradingdayinaccordancewiththelisting Rules
TradingRegionorTrading ZoneorZone	Zonesestablishedtosimplifyadministrationofatradebysettingoutthe knownsupplysourceormanagementarrangementsandthephysicalrealities ofrelevantsupplysystemswithinthezone.
VWAP	Volumeweightedaveragemarketprice(asdefinedintheListingRules)
WAL	WaterAccessLicenceissuedundertheWaterManagementAct2000(NSW)
WaterAllocation	ThespecificvolumeofwaterallocatedtoaWaterEntitlementinagiven season.
WaterEntitlement	Theperpetualentitlementtoexclusiveaccesstoashareofwaterfroma specifiedconsumptivepool
WaterPurchaseContract	AcontracttoacquireWaterEntitlements
WaterYear	Anyperiodofoneyearendingon30June
WMI	WesternMurrayIrrigationLimited

171058.4_2803310_3

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Duxton�Water�Limited�

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8�September�2017�
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Independent�Expert�Report�

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Pitcher�Partners��|��Independent�Expert�Report����

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Ref:��PM�

8�September�2017�

PRIVATE�AND�CONFIDENTIAL�

The�Independent�Directors� Duxton�Water�Limited� Duxton�House� 8�Pomona�Road� STIRLING��SA��5152�

Dear�Sirs�

INDEPENDENT�EXPERT�REPORT��

INTRODUCTION�

Duxton�Water�Limited�(Duxton�Water)�proposes�to�acquire�2,402�megalitres�(ML)�of�water�entitlements� from�Duxton�Vineyards�Pty�Ltd�as�trustee�of�the�Duxton�Vineyards�Unit�Trust�(Duxton�Vineyards).���

The�purchase�price�payable�for�the�water�entitlements�is�$6,810,050.��It�is�proposed�that�Duxton�Water� issue�6,610,000�ordinary�shares�in�Duxton�Water�as�consideration�for�the�purchase�of�the�water� entitlements.�

Upon�purchasing�the�water�entitlements,�Duxton�Water�has�agreed�to�lease�those�entitlements�to�Duxton� Viticulture�Pty�Ltd�(Duxton�Viticulture)�for�an�initial�term�of�approximately�7�years,�for�an�annual�rental�of� $476,703.50�per�annum,�based�on�a�7%�yield.�

In�respect�of�the�above�proposed�transaction�(the�Proposed�Transaction)�we�understand�that:�

• Duxton�Vineyards�is�a�substantial�shareholder�of�Duxton�Water.��Duxton�Vineyards�owns�3,365,561� ordinary�shares�and�3,365,561�options�in�Duxton�Water.��Through�its�subsidiary,�Duxton�Vineyards� Water�Pty�Ltd��as�trustee�of�Duxton�Water�Trust�(Duxton�Vineyards�Water),�Duxton�Vineyards�owns�a� further�22,691,119�ordinary�shares�and�4,142,919�options�in�Duxton�Water.��The�holdings�comprise� 40.74%�of�Duxton�Water�on�an�undiluted�basis�and�26.24%�on�a�fully�diluted�basis.��The�Proposed� Transaction�will�result�in�Duxton�Vineyards�interest�in�Duxton�Water�increasing�to�46.29%�on�an� undiluted�basis�and�29.86%�on�a�fully�diluted�basis;�

Pitcher�Partners��|��Independent�Expert�Report�

• Mr�Edouard�Peter,�Chairman�of�the�Board�of�Duxton�Water,�indirectly�holds�297,000�shares�in�Duxton� Water�and�indirectly�holds�50,000�options�in�Duxton�Water.��Mr�Peter�is�also�a�director�of�Duxton� Vineyards�and�Duxton�Vineyards�Water�and�holds�an�indirect�non�controlling�interest�in�Duxton� Vineyards�and�Duxton�Vineyards�Water;�and�

• Mr�Dirk�Wiedman,�a�non�executive�director�of�Duxton�Water,�holds�880,000�options�in�Duxton�Water� and�is�also�a�director�of�Duxton�Vineyards�and�Duxton�Vineyards�Water.��

In�view�of�the�relationship�between�the�Duxton�Water�and�the�vendors�of�the�water�entitlements,�the� Proposed�Transaction�requires�an�independent�expert�report�pursuant�to�the�ASX�Limited�(ASX)�Listing�Rule� 10.1,�Section�611�item�7�of�the�Corporations�Act�2001�(Section�611)�and�Section�208�of�the�Corporations�Act� 2001�(Section�208).�

Pitcher�Partners�Corporate�Pty�Ltd�(Pitcher�Partners�Corporate)�has�been�engaged�by�the�Independent� Directors�of�Duxton�Water�to�provide�an�independent�expert�report�providing�our�opinion�as�to�whether�the� Proposed�Transaction�is�considered�fair�and�reasonable�to�the�non�associated�shareholders�of�Duxton� Water�(Shareholders).�

PURPOSE�OF�REPORT�

As�stated�above,�the�independent�expert�report�is�required�pursuant�to�ASX�Listing�Rule�10.1,�Section�611� and�Section�208�in�order�to�assist�the�non�associated�Shareholders�of�Duxton�Water�in�their�decision�as�to� whether�to�accept�or�reject�the�Proposed�Transaction.��

The�report�is�to�be�included�in�the�Notice�of�Meeting�to�be�sent�to�Shareholders�and�has�been�prepared�for� the�exclusive�purpose�of�assisting�the�non�associated�Shareholders�in�their�consideration�of�the�Proposed� Transaction.��The�report�should�not�be�quoted�or�referred�to�or�utilised�for�any�other�purpose�unless� written�consent�has�been�provided�by�Pitcher�Partners�Corporate.�

SOURCES�OF�INFORMATION�

Appendix�2�to�this�report�sets�out�details�of�information�referred�to�and�relied�upon�by�Pitcher�Partners� Corporate�during�the�course�of�preparing�this�report�and�forming�our�opinion.�

SUMMARY�OPINION�

In�determining�whether�the�Proposed�Transaction�is�fair�we:�

• compared�the�value�of�the�water�entitlements�being�acquired�to�the�value�of�the�consideration;�

• compared�the�value�of�a�Duxton�Water�share�pre�the�Proposed�Transaction�to�that�post�the�Proposed� Transaction;�and�

• considered�whether�the�entry�of�leases�with�Duxton�Viticulture�was�undertaken�on�commercial�terms.�

The�water�entitlements�proposed�to�be�acquired�by�Duxton�Water�have�been�independently�valued�by� Aither�in�their�report�dated�21�July�2017�(Aither�Report)�at�$7,308,350.��We�also�obtained�advice�from� Aither�that�the�proposed�terms�of�the�leases�with�Duxton�Viticulture�were,�in�their�opinion,�on�commercial� terms.�

The�value�of�the�shares�in�Duxton�Water�to�be�issued�as�consideration�has�been�estimated�by�Pitcher� Partners�Corporate�utilising�an�asset�based�methodology�on�a�going�concern�basis.��In�addition�we�had� regard�to�the�listing�price�and�the�trading�activity�since�listing,�however,�given�the�illiquidity�of�the�Duxton� Water�shares,�we�have�not�relied�upon�this�as�a�valuation�methodology.��Our�selection�of�methodology�and� valuation�are�set�out�in�Sections�4�and�5�respectively.�

Our�assessment�of�fairness,�adopting�each�of�the�above�methodologies,�is�summarised�in�the�tables�over� the�page.�

Pitcher�Partners��|��Independent�Expert�Report��|��C.3193657.2�

2

Assessment�of�Fairness�–�ASX�Listing�Rule�10.1�

AssessmentofFairness–ASXListingRule10.1	AssessmentofFairness–ASXListingRule10.1
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
ValueofWaterEntitlements ValueofProposedConsideration Difference	$7,308,350 $7,308,350 $7,308,350 $7,308,350 $7,237,950 $7,257,780 $7,257,780 $7,264,390
	$70,400 $50,570 $50,570 $43,960

Value�per�Duxton�Water�Share�Pre�and�Post�Proposed�Transaction�

	Undiluted	Undiluted	FullyDiluted	FullyDiluted
	BasisLow	BasisHigh	BasisLow	BasisHigh
EquityValueofDuxtonWaterPre	$70,046,000	$70,238,000	$140,408,000	$140,600,000
ProposedTransaction
NumberofShares	63,965,406	63,965,406	127,930,812	127,930,812
DuxtonWaterShareValuePre	$1.095	$1.098	$1.098	$1.099
ProposedTransaction
EquityValueofDuxtonWaterpost	$77,354,350	$77,546,350	$147,716,350	$147,908,350
ProposedTransaction
NumberofShares	70,575,406	70,575,406	134,540,812	134,540,812
DuxtonWaterShareValuepost	$1.096	$1.099	$1.098	$1.099
ProposedTransaction

We�also�obtained�advice�from�Aither�that�the�proposed�terms�of�the�leases�with�Duxton�Viticulture�were,�in� their�opinion,�on�commercial�terms.�

In�our�opinion,�having�regard�to�the�above�analysis,�the�Proposed�Transaction�is�fair�to�the�non�associated� Shareholders�of�Duxton�Water.��In�arriving�at�this�opinion�we�had�regard�to�the�following:�

• the�value�of�the�water�entitlements�are�greater�than�the�value�of�the�proposed�consideration;�

• the�value�of�the�equity�in�Duxton�Water�post�the�Proposed�Transaction�is�greater�than�the�value�range� of�a�Duxton�Water�share�pre�the�Proposed�Transaction;�and�

• the�terms�of�the�proposed�leases�are�on�commercial�terms.�

We�have�also�considered�whether�the�Proposed�Transaction�is�reasonable.��In�making�this�assessment�we� had�regard�to�the�following�advantages�and�disadvantages:�

• By�entering�into�a�seven�year�lease�with�Duxton�Viticulture,�Duxton�Water�will�have�a�secure�source�of� income,�will�increase�its�weighted�average�lease�expiry,�will�increase�the�proportion�of�water�portfolio� that�is�leased�and�will�increase�its�weighted�average�yield�from�the�portfolio.�

• The�growth�in�Duxton�Water’s�water�portfolio�and�capital�base�may�increase�the�attractiveness�of�the� company�to�institutional�investors.�

• The�proposed�purchase�provides�Duxton�Water�an�opportunity�to�secure�a�unique�parcel�of�water� which�is�rarely�available�on�the�open�market,�but�rather�is�generally�only�available�in�combination�with� a�land�and/or�productive�asset�purchase.��Currently�there�are�approximately�189,704�ML�of�NSW� Murray�High�Security�Shares�on�issue.��Of�this,�approximately�25,508�ML�are�owned�by�NSW�and� Commonwealth�governments,�leaving�only�164,196�ML�available�to�the�free�market.��Of�this�volume,� 75%�would�be�held�by�no�more�than�20�groups,�the�majority�of�which�water�would�likely�be�committed� to�productive�assets�and�are�unlikely�to�be�sold�without�a�land�and�productive�asset�sale.��Further,�to� acquire�this�volume�on�market�could�well�have�an�undue�inflationary�impact.�

Pitcher�Partners��|��Independent�Expert�Report��|��C.3193657.2�

3

• The�Zone�11�Entitlement�has�some�of�the�greatest�flexibility�in�trading�capability.�This�maximises�the� customer�demand�pool�available�when�negotiating�or�renegotiating�a�lease�of�the�entitlement.�The� broader�the�tradability�of�the�entitlement,�the�larger�the�number�of�industries�that�could�deploy�the� asset�which�reduces�specific�industry�risk.�

• The�Proposed�Transaction�will�result�in�Duxton�Vineyards�increasing�its�shareholding�from�40.74%�to� 46.29%.��This�could�further�impact�the�liquidity�of�the�shares.��However,�Duxton�Vineyards�have�advised� Duxton�Water�that�it�is��the�intention�to�distribute�the�shares�that�Duxton�Vineyards�holds�in�Duxton� Water�to�the�unit�holders�of�Duxton�Vineyards�as�soon�as�practicable�after�the�NAB�security�over�these� shares�has�been�released,�which�is�estimated�to�be�within�24�months.�

• The�Proposed�Transaction�will�result�in�the�proportion�of�the�water�entitlements�leased�to�Duxton� Vineyards�increasing�from�approximately�41.65%�to�46.91%.��Whilst�Duxton�Vineyards�is�considered�by� Duxton�Water�to�be�strong�and�of�little�counterparty�risk,�it�is�placing�greater�reliance�on�one�party�for� its�income�generation.�Notwithstanding�the�foregoing,�ultimately�there�is�the�capacity�to�quickly� redeploy�the�asset�should�there�be�a�default�in�lease�terms,�thereby�reducing�the�risk.�

In�our�opinion,�after�consideration�of�all�issues�including�those�set�out�above,�and�in�the�absence�of�any� other�information,�that�the�Proposed�Transaction�is�reasonable�to�the�non�associated�Shareholders�as�at� the�date�of�this�report.�

Pitcher�Partners�Corporate�has�been�engaged�to�prepare�an�independent�expert’s�report�setting�out� whether�in�its�opinion�the�Proposed�Transaction�is�fair�and�reasonable�to�the�non�associated�Shareholders.�� Pitcher�Partners�Corporate�has�not�been�engaged�to�provide�a�recommendation�to�the�non�associated� Shareholders�in�relation�to�the�Proposed�Transaction,�the�responsibility�for�which�lies�with�the�Independent� Directors.���Shareholders�should�read�the�Explanatory�Memorandum�issued�by�Duxton�Water�in�relation�to� the�Proposed�Transaction.�

This�report�is�general�financial�product�advice�only�and�has�been�prepared�without�taking�into�account�the� objectives,�financial�situation�or�needs�of�individual�Shareholders.���

The�decision�as�to�whether�to�vote�in�favour�or�against�the�resolutions�in�respect�of�the�Proposed� Transaction�is�a�matter�for�individual�Shareholders�based�on�their�views�as�to�value,�their�expectations� about�future�market�conditions�and�their�particular�circumstances�including�risk�profile,�liquidity� preference,�investment�strategy,�portfolio�structure�and�tax�position.�In�particular,�taxation�consequences� may�vary�from�shareholder�to�shareholder.���

Accordingly,�before�acting�in�relation�to�their�investment,�Shareholders�should�consider�the� appropriateness�of�the�advice�having�regard�to�their�own�objectives,�financial�situation�or�needs.�� Shareholders�who�are�in�doubt�as�to�the�action�they�should�take�should�consult�their�own�professional� adviser.�

Pitcher�Partners�Corporate�has�prepared�a�Financial�Services�Guide�as�required�by�the�Corporations�Act� 2001�(the�Act).��The�Financial�Services�Guide�is�included�at�the�beginning�of�the�full�report.�

This�letter�is�a�summary�of�Pitcher�Partners�Corporate’s�opinion.�The�full�report�from�which�this�summary� has�been�extracted�is�attached�and�should�be�read�in�conjunction�with�this�summary.��The�opinion�is�made� as�at�the�date�of�this�letter�and�reflects�circumstances�and�conditions�as�at�that�date.�

Yours�sincerely�

PITCHER�PARTNERS�CORPORATE�PTY�LTD�

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P�MURONE� Executive�Director�and�Representative�

Pitcher�Partners��|��Independent�Expert�Report��|��C.3193657.2�

4

Contents�

1.	DetailsoftheProposedTransaction	01
1.1	SummaryoftheProposedTransaction	01
1.2	ProposedCapitalStructure	01
1.3	KeyTermsandConditions	02
2.	ScopeofReport	03
2.1	PurposeoftheReport	03
2.2	BasisofEvaluation	04
2.3	LimitationsandRelianceonInformation	04
3.	ProfileofDuxtonWater	05
3.1	BriefBackground	05
3.3	CapitalStructure	07
3.4	LiquidityAnalysis	08
3.5	FinancialPerformance	10
3.6	FinancialPosition	11
4.	ValuationMethodology	12
4.1	ValuationApproach	12
4.2	SelectionofApproach&Methodology	13
5.	Valuation	14
5.1	ValueofWaterEntitlementsProposedtobeAcquired	14
5.2	ValueofDuxtonWater	14
6.	AssessmentofFairness	15
6.1	Approach	15
6.2	AssessmentofFairness–ProposedTransaction	15
7.	AssessmentofReasonableness	17
7.1	Approach	17
7.2	Approach	17
7.3	Advantages	17
7.4	Disadvantages	18
7.5	AssessmentoftheReasonableness	18
Appendices
Appendix1:GlossaryofTerms		19
Appendix2:SourcesofInformation		20
Appendix3:WaterEntitlementsValuation		21
Appendix4:Qualifications,DeclarationsandConsents		22

Pitcher�Partners��|��Independent�Expert�Report�

Pitcher Partners Corporate Pty Ltd ACN: 082 323 868 AFSL: 229841

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Level 19 15 William Street MELBOURNE VIC 3000 Tel: +61 3 8610 5000

Financial Services Guide

Version dated: 10 October 2014

What is a Financial Services Guide?

This Financial Services Guide (“FSG”) is an important document that is designed to assist you in deciding whether to use any of the general financial product advice provided by Pitcher Partners Corporate Pty Ltd. The use of “we”, “us” or “our” is a reference to Pitcher Partners Corporate Pty Ltd as the holder of Australian Financial Services Licence (“AFSL”) No. 229841. The contents of this FSG include:

• who we are and how we can be contacted

• what services we are authorised to provide under our AFSL

• how we (and any other relevant parties) are remunerated in relation to any general financial product advice we may provide.

• details of any potential conflicts of interest

• details of our internal and external dispute resolution procedures and how you can access them.

Information about us

Pitcher Partners Corporate Pty Ltd has been engaged by Duxton Water Limited to provide general financial product advice in the form of a report to be given to you in connection with a financial product to be issued by another party. You are not the party or parties who engaged us to prepare this report. We are not acting for any person other than the party or parties who engaged us. We are only responsible for the financial product advice provided in our report and for the contents of this FSG.

You may contact us by writing to GPO Box 5193, MELBOURNE VIC 3001, or by telephone on +613 8610 5000.

Pitcher Partners Corporate Pty Ltd is ultimately owned by the Victorian partnership of Pitcher Partners, a provider of audit and assurance, accounting, tax, corporate advisory, insolvency, superannuation, investment advisory and consulting services. Directors of Pitcher Partners Corporate Pty Ltd are partners of Pitcher Partners.

The Victorian partnership of Pitcher Partners is an independent partnership of Pitcher Partners. As such, neither it nor any of the other independent partnerships has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the name “Pitcher Partners”, or other related names.

The financial product advice in our report is provided by Pitcher Partners Corporate Pty Ltd and not by the Victorian partnership of Pitcher Partners or its related entities.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, we and the Victorian partnership of Pitcher Partners (and its related bodies corporate) may from time to time provide professional services to financial product issuers in the ordinary course of business.

We hold professional indemnity insurance as required by the Corporations Act 2001 (Cth).

What financial services are we licensed to provide?

Our AFSL authorises us to provide general financial product advice and deal in the following classes of financial products to both retail and wholesale clients:

• Deposit products (including basic deposit products and deposit products other than basic deposit products)

• Derivatives

• Government debentures, stocks or bonds

• Interests in managed investment schemes including investor directed portfolio services

• Securities

If our advice is being provided to you in connection with the acquisition or potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant Product Disclosure Statement (“PDS”) or offer document provided by the issuer of the financial product. The purpose of the PDS or offer document is to help you make an informed decision about the acquisition of a financial product. The contents of the PDS or offer document will include details such as the risks, benefits and costs of acquiring the particular financial product.

How are we and our employees remunerated?

The fees we charge for preparing reports are usually determined on an hourly basis; however they may be a fixed amount or derived using another basis. We may also seek reimbursement of any out-of pocket expenses incurred in providing the services.

Fee arrangements are agreed and confirmed in a letter of engagement with the party or parties who engage us.

Neither Pitcher Partners Corporate Pty Ltd nor its directors and officers, nor any related bodies corporate or associates and their directors and officers, receives any other fees, commissions or other benefits in connection with preparing and providing this report.

All of our employees receive a salary with partners also having an equity interest in the partnership. We do not receive any commissions or other benefits arising directly from services provided to you. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance.

We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

What should you do if you have a complaint?

If you have any concerns regarding our report, you may wish to advise us. We are committed to responding to any complaints promptly, fairly and effectively. We have developed an internal complaint resolution policy and complaint handling procedures that are designed to respond to your concerns promptly and equitably. Please address your complaint in writing to:

Partner in Charge – Corporate Finance Pitcher Partners GPO Box 5193

MELBOURNE VIC 3001

If we are not able to resolve your complaint to your satisfaction within 45 days of the first notification of your complaint to us, you may contact the Financial Ombudsman Service (“FOS”). FOS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry. Complaints may be submitted to FOS at:

Financial Ombudsman Service Limited GPO Box 3

MELBOURNE VIC 3001 Telephone: 1300 780 808 Fax: +61 3 9613 6399

Internet: http://www.fos.org.au

The Australian Securities and Investments Commission (“ASIC”) website contains information on lodging complaints about companies and individual persons and sets out the types of complaints handled by ASIC. You may contact ASIC as follows:

Info line: 1 300 300 630

Email: info@asic.gov.au

Internet: http://www.asic.gov.au/asic/asic.nsf

If your complaint relates to a breach of our Privacy Policy or the Australian Privacy Principles, the matter should be referred to The Privacy Officer, GPO Box 5193, Melbourne VIC 3001.

Information about the general financial product advice we provide

The financial product advice provided in our report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

C.3240889.14

Details�of�the�Proposed�Transaction�

1. Details�of�the�Proposed�Transaction�

1.1 Summary�of�the�Proposed�Transaction�

On�18�August�2017�Duxton�Water�entered�into�two�agreements�with�Duxton�Vineyards:�

• [an�agreement�to�acquire�water�shares�in�Western�Murray�Irrigation�Ltd�(WMI)�with�entitlements�to�352�] ML�water;�and�

• [an�agreement�to�acquire�the�following�water�access�licence�(WAL)�with�entitlements�to�2050�ML�water:�]

• WAL4944;�

• WAL5023;�

• WAL5434;�

• WAL16076;�

• WAL16271;�and�

• WAL16272.�

The�amount�to�be�paid�for�the�water�entitlements�is�$6,810,050�and�will�be�paid�via�the�issue�of�6,610,000� ordinary�shares�in�Duxton�Water.��The�shares�to�be�issued�to�Duxton�Vineyards�will�be�post�dividend.��The� Independent�Directors�have�provided�guidance�of�a�2�cents�to�2.3�cents�dividend�to�be�paid�to�current� shareholders�in�November�2017.�

Upon�purchasing�the�water�entitlements,�Duxton�Water�has�agreed�to�lease�those�entitlements�to�Duxton� Viticulture�for�a�period�of�approximately�seven�years�with�an�option�to�extend�a�further�three�years.��The� rent�payable�will�be�$476,703.50,�based�on�a�7%�yield.�

1.2 Proposed�Capital�Structure�

Should�the�Proposed�Transaction�proceed�the�capital�structure�of�Duxton�Water�would�be�as�follows:�

Proposed�Capital�Structure�

	Number
OrdinarysharesonissuepretheProposedTransaction	63,965,406
OrdinarysharestobeissuedpertheProposedTransaction	6,610,000
SharesonissueposttheProposedTransaction	70,575,406
OptionsonissuepreandposttheProposedTransaction	63,965,406

The�interest�in�Duxton�Water�held�by�Duxton�Vineyards,�directly�and�indirectly,�post�the�Proposed� Transaction�would�be�as�follows:�

Duxton�Vineyards�Interest�in�Duxton�Water�

DuxtonVineyardsInterestinDuxtonWater
	Number
OrdinarysharesheldpretheProposedTransaction	26,056,680
OrdinarysharestobeissuedpertheProposedTransaction	6,610,000
OrdinarysharesheldposttheProposedTransaction	32,666,680
%ofsharesonissueposttheProposedTransaction	46.29%
OptionsheldpreandposttheProposedTransaction	7,508,480
%ofoptionsheldposttheProposedTransaction	11.74%

Pitcher�Partners��|��Independent�Expert�Report��

1

Details�of�the�Proposed�Transaction�

1.3 Key�Terms�and�Conditions�

The�key�terms�and�conditions�of�the�Agreements�are�as�follows:�

KeyTerms&Conditions
Item	Details
ConditionPrecedent	DuxtonWatershareholderapproval.
	DuxtonWaterviewingDuxtonVineyardssharecertificatesforthewater
	entitlementsheldinWMI.
	Eachlenderfullydischargingeachencumbranceitholdsoverthewater
	entitlements.
	DuxtonWaterobtainingallshareholderapprovalsrequiredordesirable
	includingpermissionforDuxtonWatertoenterintoaleasewithDuxton
	Viticulturetoleasethewaterentitlements(WaterSupplyLease).
	DuxtonViticultureenteringintotheWaterSupplyLeasewithDuxtonWater.
	DuxtonVineyardspreparingandlodgingtheappropriateformswiththe
	Authoritiesandobtaininganyandallapprovalsrequiredforthetransferof
	thewarrightstoDuxtonWateronanunconditionalbasisoronconditions
	acceptabletoDuxtonWater.
Completion	Twobusinessdaysaftersatisfactionorwaiveroftheconditionsprecedent.
Termination	DuxtonVineyardsorDuxtonWatermayterminatetheagreementifany
	conditionisnotsatisfiedorwaivedonorbefore13January2018orsuch
	laterdateasthepartiesmutuallyagree.

Source:��Water�Rights�Sale�Agreement�–�Water�Access�Licences�and�Water�Rights�Sale�Agreement�–�Water�Entitlement�in�Western� Murray�Irrigation�Limited�

Pitcher�Partners��|��Independent�Expert�Report��

2

Scope�of�Report�

2. Scope�of�Report�

2.1 Purpose�of�the�Report�

ASX�Listing�Rule�10.1�requires�a�listed�entity�to�obtain�approval�of�the�holders�of�its�ordinary�securities�if�it� proposes�to�acquire�or�dispose�of�a�substantial�asset�from�or�to�a�related�party,�subsidiary,�a�substantial� holder,�an�associate�of�any�of�the�aforementioned,�or�a�person�whose�relationship�with�the�listed�entity�or� any�of�the�aforementioned�is�such�that,�in�the�ASX’s�opinion,�the�transaction�should�be�approved�by�its� members.�

ASX�Listing�Rule�10.2�states�that�an�asset�is�substantial�if�its�value�is�5%�or�more�of�the�equity�interest�in�the� entity�as�set�out�in�the�latest�financial�statements�given�to�the�ASX.�

With�respect�to�the�Proposed�Transaction:�

• [The�value�of�the�water�entitlements�being�acquired�by�Duxton�Water�from�Duxton�Vineyards�is�greater�] than�5%�of�the�equity�of�Duxton�Water�as�at�30�June�2017�and�accordingly�the�acquisition�is�deemed�to� be�a�substantial�asset.���

• [Duxton�Vineyards�is�a�substantial�shareholder�of�Duxton�Water.��Duxton�Vineyards�owns�3,365,561�] ordinary�shares�in�Duxton�Water�and�3,365,561�options.��Through�its�subsidiary,�Duxton�Vineyards� Water,�Duxton�Vineyards�owns�a�further�22,691,119�ordinary�shares�in�Duxton�Water�and�4,142,919� options�in�Duxton�Water.��The�holdings�comprise�40.74%�of�Duxton�Water�on�an�undiluted�basis�and� 26.24%�on�a�fully�diluted�basis.��The�Proposed�Transaction�will�result�in�Duxton�Vineyards�interest�in� Duxton�Water�increasing�to�46.29%�on�an�undiluted�basis�and�29.86%�on�a�fully�diluted�basis.���

• [Mr�Peter,�Chairman�of�the�Board�of�Duxton�Water,�indirectly�holds�297,000�shares�in�Duxton�Water�and�] indirectly�holds�50,000�options�in�Duxton�Water.��Mr�Peter�is�also�a�director�of�Duxton�Vineyards�and� Duxton�Vineyards�Water�and�holds�an�indirect�non�controlling�interest�in�Duxton�Vineyards�and�Duxton� Vineyards�Water;�and�

• [Mr�Dirk�Wiedman,�a�non�executive�director�of�Duxton�Water,�holds�880,000�options�in�Duxton�Water�] and�is�also�a�director�of�Duxton�Vineyards�and�Duxton�Vineyards�Water.��

As�a�consequence�of�the�related�party�nature�of�the�transaction,�Duxton�Water�is�required�to�seek�approval� of�the�Proposed�Transaction�from�its�non�associated�Shareholders�pursuant�to�ASX�Listing�Rule�10.1�and� also�under�Section�208�of�the�Act.���

ASX�Listing�Rule�10.10.2�requires�that�the�Notice�of�General�Meeting�to�approve�the�Proposed�Transaction� pursuant�to�ASX�Listing�Rule�10.1�be�accompanied�by�a�report�from�an�independent�expert,�stating�whether� the�Proposed�Transaction�is�fair�and�reasonable�to�the�non�associated�Shareholders.���

Further,�Regulatory�Guide�76:�Related�Party�Transactions�requires�that�that�the�shareholders�have�sufficient� information�where�the�proposed�transaction�provides�a�financial�benefit�to�a�related�party�and�that�the� directors�may�wish�to�obtain�an�independent�expert�to�consider�the�value�of�the�financial�benefits�being� provided.�

Further,�Section�606�of�the�Act�expressly�prohibits�the�acquisition�of�shares�by�a�party�if�they�own�20%�or� more�of�the�issued�shares�of�a�public�company�and�the�acquisition�will�result�in�that�person�(or�someone� else)�increasing�its�interest�by�more�than�3%,�unless�one�of�the�exceptions�in�section�611�of�the�Act�applies.�

Following�the�Proposed�Transaction�Duxton�Vineyards�will�increase�its�voting�power�from�40.74%�in�Duxton� Water�to�46.29%�on�an�undiluted�basis�and�from�26.24%�to�29.86%�on�a�fully�diluted�basis.���

Section�611�permits�such�an�acquisition�if�the�shareholders�of�that�entity�have�agreed�to�the�issue�of�such� shares.�This�agreement�must�be�by�resolution�passed�at�a�general�meeting�at�which�no�votes�are�cast�in� favour�of�the�resolution�by�any�party�who�is�associated�with�the�party�acquiring�the�shares,�or�by�the�party� acquiring�the�shares.�Section�611�states�that�shareholders�of�the�company�must�be�given�all�information� that�is�material�to�the�decision�on�how�to�vote�at�the�meeting.�

Regulatory�Guide�74�issued�by�ASIC�deals�with�‘Acquisitions�Agreed�to�by�Shareholders’.�It�states�that�the� obligation�to�supply�shareholders�with�all�information�that�is�material�can�be�satisfied�by�the�Independent� Directors,�by�either:�

• [undertaking�a�detailed�examination�of�the�proposed�transaction�themselves,�if�they�consider�that�they�] have�sufficient�expertise;�or�

• [by�commissioning�an�independent�expert�report.�]

Pitcher�Partners��|��Independent�Expert�Report�

3

Scope�of�Report�

The�Independent�Directors�have�commissioned�this�independent�expert�report�to�satisfy�these�obligations.

2.2 Basis�of�Evaluation�

There�is�no�legal�definition�for�the�expression�‘fair�and�reasonable’.��ASIC�has�issued�Regulatory�Guide�111� which�establishes�guidelines�in�respect�of�independent�expert�reports.�ASIC�Regulatory�Guide�111� differentiates�between�the�analysis�required�for�control�transactions�and�other�transactions.�In�the�context� of�control�transactions,�whether�by�takeover�bid,�by�scheme�of�arrangement,�by�the�issue�of�securities�or�by� selective�capital�reduction�or�buyback,�the�expert�is�required�to�distinguish�between�‘fair’�and�‘reasonable’.�

Fairness�involves�a�comparison�of�the�offer�price�with�the�value�that�may�be�attributed�to�the�securities�that� are�the�subject�of�the�offer�based�on�the�value�of�the�underlying�businesses�and�assets.�For�this�comparison,� value�is�determined�assuming�100%�ownership�of�the�target�and�a�knowledgeable�and�willing�but�not� anxious�buyer,�and�a�knowledgeable�and�willing�but�not�anxious�seller,�acting�at�arm’s�length.��

An�offer�could�be�considered�‘reasonable’�if�there�were�valid�reasons�to�accept�the�offer�notwithstanding� that�it�was�not�‘fair’.�

Fairness�is�a�more�demanding�criteria.�A�‘fair’�offer�will�always�be�‘reasonable’�but�a�‘reasonable’�offer�will� not�necessarily�be�‘fair’.�A�fair�offer�is�one�that�reflects�the�full�market�value�of�a�company’s�businesses�and� assets.��

This�is�commonly�the�case�where�the�bidder�already�controls�the�target�company.�In�that�situation�the� minority�shareholders�have�little�prospect�of�receiving�full�value�from�a�third�party�offeror�unless�the� controlling�shareholder�is�prepared�to�sell�its�controlling�shareholding.�

Pitcher�Partners�Corporate�is�to�consider�whether�the�Proposed�Transaction�is�fair�by�comparing�the�value� of�the�water�entitlements�to�be�acquired�from�Duxton�Vineyards�with�the�value�of�the�shares�to�be�issued�as� consideration.��The�transaction�will�be�considered�fair�if�the�value�of�the�water�entitlements�to�be�acquired� is�equal�to�or�exceeds�the�value�of�the�consideration.��The�Proposed�Transaction�would�also�be�considered� fair�if�the�value�of�a�Duxton�Water�share�post�the�Proposed�Transaction�is�equal�to�or�greater�than�the�value� pre�the�Proposed�Transaction.��

In�addition�to�the�above�we�have�considered�whether�the�leases�entered�into�with�Duxton�Viticulture�are�on� commercial�terms.�

In�considering�whether�the�Proposed�Transaction�is�reasonable,�we�have�considered�the�advantages�and� disadvantages�of�Duxton�Water�proceeding�with�the�transaction.�

2.3 �Limitations�and�Reliance�on�Information�

The�opinion�of�Pitcher�Partners�Corporate�is�based�on�economic,�market�and�other�conditions�prevailing�at� the�date�of�this�report.��Such�conditions�can�change�significantly�over�short�periods�of�time.���

Our�procedures�and�enquiries�do�not�include�verification�work�nor�constitute�an�audit�or�a�review� engagement�in�accordance�with�standards�issued�by�the�Auditing�and�Assurance�Standards�Board.�

Pitcher�Partners��|��Independent�Expert�Report�

4

Profile�of�Duxton�Water�

3. Profile�of�Duxton�Water�

3.1 Brief�Background�

Duxton�Water�was�incorporated�on�20�April�2016�and�listed�on�the�ASX�on�16�September�2016,�raising� $41.7�million�in�proceeds�from�the�issue�of�shares.�It�is�the�sole�Australian�water�entitlement�investment� company�listed�on�the�ASX.�

Upon�listing,�Duxton�Water�completed�the�acquisition�of�water�entitlements�from�Duxton�Vineyard�Water� and�Duxton�Vineyards�worth�approximately�$29�million�and�leased�those�entitlements�to�Duxton�Viticulture� on�a�long�term�basis.��The�acquisition�was�undertaken�through�an�issue�of�shares.�

By�31�December�2016,�Duxton�Water�had�spent�approximately�$22�million�of�the�cash�in�acquiring�further� water�entitlements,�increasing�its�portfolio�to�approximately�$51�million.��By�June�2017�the�company�had� deployed�all�the�IPO�proceeds,�having�acquired�approximately�$69�million�of�water�entitlements�in�total.�

The�company�aims�to�benefit�from�the�increasing�demand�for�water�as�a�vital�input�to�the�agriculture� industry,�which�currently�utilise�approximately�60%�of�Australia’s�water�consumption.��Future�water� availability�is�likely�to�be�constrained�by�a�growing�global�population,�impacts�of�climate�change�and� government�buybacks�of�water�entitlements�for�environmental�purposes.�The�increasing�scarcity�of�water,� coupled�with�the�rising�demand�for�it�is�likely�to�be�a�key�economic�driver�underpinning�the�water�market.�

The�company’s�target�portfolio�comprises�a�mix�of�water�entitlements�in�Victoria,�New�South�Wales�and� South�Australia.�This�includes�the�Murray,�Goulburn,�Murrumbidgee,�Lachlan,�Mallee�and�Loddon�trading� zones.��

==> picture [275 x 168] intentionally omitted <==

----- Start of picture text -----

Entitlement�Portfolio�Value�by�Region
6% 1% [1% 1%] 0%
Murray
9%
Goulburn
Murrumbidgee
10% Lachlan
Mallee
Loddon
Macquarie
72%
Campaspe
----- End of picture text -----

As�at�30�June�2017�the�water�security�breakdown�within�the�portfolio�was�78%�high�security,�21%�low/� general�security�and�1%�ground�water.�

Water�Security�Breakdown

==> picture [189 x 136] intentionally omitted <==

----- Start of picture text -----

1%
21%
HS
GS
Bore
78%
----- End of picture text -----

Pitcher�Partners��|��Independent�Expert�Report��

5

Profile�of�Duxton�Water�

The�majority�of�Duxton�Water’s�returns�are�expected�to�be�generated�via�water�entitlement�leases�with� primary�producers.��These�leases�are�structured�in�a�similar�manner�to�commercial�leases�where�the�asset� title�is�held�by�the�lessor�and�fixed�annual�rent�is�paid�by�the�lessee.��

The�company’s�investment�strategy�is�to�predominantly�hold�entitlements�that�are�leased�out�for�between� 3�10�year�periods�and�for�the�minority�of�the�portfolio,�sell�allocations�on�the�spot�market.��The�company’s� aim�is�to�have�70%�to�80%�of�its�water�portfolio�held�in�long�term�leases�over�time.��As�at�30�June�2017�54%� of�the�portfolio�was�leased,�with�a�weighted�average�lease�term�expiry�of�5.9�years�at�an�annualised�yield�of� 6.04%.��The�unleased�income�is�generating�a�running�yield�of�3.13%.�

Water�Portfolio�Diversification

==> picture [202 x 118] intentionally omitted <==

----- Start of picture text -----

Leased
Unleased
46%
54%
----- End of picture text -----

3.2 Board�of�Directors�

Board�of�Directors�

BoardofDirectors
Directors	Experience
EdouardPeter,	MrPeteristheco�founderandChairmanofDuxtonAssetManagementPte
ExecutiveChairman	Ltd.HewasappointedtotheBoardofDuxtonWateron20April2016asa
	representativeoftheInvestmentManager.
	MrPeterhaspreviouslyheldanumberofroleswithinDeutscheBankincluding
	HeadofDeutscheAssetManagementAsiaPacific,MiddleEast&NorthAfrica,
	HeadofGlobalEquitiesforAsiaandAustralia,HeadofGlobalEquitiesforAsia
	andAustralia,andHeadofEquitiesandBranchManagerofDBSwitzerland.He
	wasalsoamemberoftheDeutscheBank’sGroupEquityOperatingCommittee
	andAssetManagementOperatingCommittee.
	MrPeterisalsoadirectorandshareholderofDuxtonVineyardsandDuxton
	VineyardsWater.
StephenDuerden,	MrDuerdeniscurrentlytheCEOofDuxtonAssetManagementPteLtd.Mr
Non�executiveDirector	Duerdenhasover25yearsofexperienceininvestmentmanagement.Hewas
	appointedtotheBoardofDuxtonWateron20April2016asarepresentative
	oftheInvestmentManager.
	Priortothis,MrDuerdenheldanumberofroleswithDeutscheBank.Hehas
	hadexposuretoabroadrangeoffinancialproductsandservicesduringhis
	career.Hehasbeeninvolvedindirectpropertydevelopmentand
	management,thelistingandadministrationofREITS,aswellastheoperation
	andinvestmentofmoretraditionalassetportfolios.MrDuerdenisaFellowof
	theFinancialServicesInstituteofAustralasiaandaCertifiedPracticing
	Accountant.
DirkWiedmannNon�	MrWiedmannwasappointedtotheBoardofDuxtonWateron20April2016.
executiveDirector	MrWiedmannhas25yearsofexperienceinthefinanceindustryhavingheld
	seniorglobalpositionswithBanks,includingUBSAG,BankJuliusBaer&CoLtd
	andRothschildBankAG.Throughouthistimeintheindustry,MrWiedmann
	gainedexperienceininternationalequitiesandderivatives,businesssector
	marketdevelopment,executiveeducationandstrategicmarketing.
	MrWiedmannisalsoadirectorofDuxtonVineyardsandDuxtonVineyards
	Water.

Pitcher�Partners��|��Independent�Expert�Report��

6

Profile�of�Duxton�Water�

Directors	Experience
PeterMichellNon�	MrMichellwasappointedtotheBoardofDuxtonWateron20April2016.
executiveDirector	MrMichellisaDirectoratMichellWoolPtyLtd,andpreviouslyheldtheroleof
	ManagingDirectorfrom2004to2014.MrMichellwasresponsiblefor
	commoditytrading,globalB2Bindustrialsalesandmarketing,production
	management,tradefinance,andwaterandwastewatermanagement.Mr
	MichellalsocurrentlysitsontheBoardofMutualTrustPtyLtdandthe
	UniversityofAdelaide’sAgribusinessAdvisoryBoard.
DennisMuttonNon�	MrMuttonwasappointedtotheBoardon20December2016.
executiveDirector
	MrMuttonisanindependentconsultantinthefieldsofnaturalresource
	management,primaryindustries,regionalgrowthinitiatives,leadership
	developmentandgovernment�businessrelationships.
	MrMuttonhaspreviouslyheldexecutivemanagementrolesinboththe
	privateandpublicsectorsasCEOofanumberofSouthAustralianState
	GovernmentagenciesincludingtheDepartmentofEnvironment,Waterand
	NaturalResourcesandtheDepartmentofPrimaryIndustriesandRegions.Mr
	MuttonalsoheldrolesasCommissionerandDeputyPresidentoftheMurray
	DarlingBasinCommissionandChairoftheSANaturalResourcesManagement
	Council.MrMuttonalsoholdsarangeofboarddirectorshipsingovernment,
	businessandnotforprofitorganisationsatStateandNationallevels.
DonaldStephen	MrStephenisaCharteredAccountantandcorporateadviserwithover20
Companysecretary	yearsofexperienceintheaccountingindustry,including14yearsasapartner
	ofCharteredAccountingfirmHLBMannJudd.MrStephenholdsanumberof
	positionsasapublicCompanyDirectorandCompanysecretary.MrStephen
	alsoprovidescorporateadvisoryservicestoawiderangeoforganisations.

3.3 Capital�Structure�

As�at�the�date�of�this�report�Duxton�Water�had�63,965,406�ordinary�shares�on�issue.��The�top�20� shareholders�of�Duxton�Water�as�at�31�July�2017�(as�well�as�any�options�held)�comprised�the�following:�

Top�20�Shareholders�

Top20Shareholders
Holder	OrdinaryShares % Options %
DuxtonVineyardsWaterPty Ltd DuxtonVineyardsPtyLtd FridayInvestmentsPtyLtd NationalNomineesLimited HSBCCustodyNominees GeatIncorporated MrStephenMauriceLintonLake MrDavidWayneRasheed MsWendyKathrenMichell SandhurstTrusteesLtd BNPParibasNomineesPtyLtd IronicaPtyLtd WKMHoldingsPtyLtd MrsJeanThyneHadges MrsLynetteJoyHerriot&MrsTraceyJoyMoulds KsOoiNomineesPtyLtd MrAlnisErnstVedig&MrsRasmaVedig BondStreetCustodiansLimited JPMorganNomineesAustralia R&DFielkePtyLtd Top20Shareholders	22,691,119 35.47% 4,142,919 6.48% 3,365,561 5.26% 3,365,561 5.26% 1,364,000 2.13% 1,364,000 2.13% 1,226,230 1.92% 1,226,230 1.92% 1,076,534 1.68% 3,440,000 5.37% 1,000,000 1.56% 1,000,000 1.56% 710,270 1.11% 1,000,000 1.56% 500,000 0.78% 500,000 0.78% 478,001 0.75% 0 0.00% 455,000 0.71% 455,000 0.71% 303,742 0.47% 145,454 0.23% 300,000 0.47% 300,000 0.47% 250,000 0.39% 250,000 0.39% 227,272 0.36% 227,272 0.36% 200,000 0.31% 200,000 0.31% 200,000 0.31% 200,000 0.31% 200,000 0.31% 150,000 0.23% 200,000 0.31% 0 0.00% 200,000 0.31% 0 0.00% 181,860 0.28% 181,860 0.28%
	35,129,589 54.89% 18,148,296 28.35%

Source:��Computershare�

Pitcher�Partners��|��Independent�Expert�Report��

7

Profile�of�Duxton�Water�

The�top�20�shareholders�hold�approximately�55%�of�the�total�shares�in�Duxton�Water,�with�approximately� 40.74%�held�by�Duxton�Vineyards�directly�and�indirectly�via�its�subsidiary�Duxton�Vineyards�Water,�with� 50%�of�the�holding�currently�in�escrow�until�15�September�2017.��This�tight�shareholding�explains�the�lack�of� liquidity�in�the�shares.����

In�addition�to�the�ordinary�shares,�Duxton�Water�has�63,965,406�options�on�issue.��Duxton�Vineyards� directly�and�indirectly�holds�11.74%�of�the�options�in�Duxton�Water.��All�options�have�an�exercise�price�of� $1.10�and�expire�on�31�May�2018.��

The�top�20�option�holders�of�Duxton�Water�as�at�31�July�2017�comprised�the�following:�

Top�20�Option�holders�

Top20Optionholders
Holder	Options %
PresaliAustraliaHoldingsPtyLtd SeppeltsfieldPtyLtd DuxtonVineyardsWater HSBCCustodyNominees DuxtonVineyards SherbrookLandPtyLtd FridayInvestmentsPtyLtd NationalNomineesLimited MrMichaelHartweg GeatIncorporated MrStephenMauriceLintonLake MrBenSmith BalthazarBarossaPtyLtd MrDirkErichWiedmann StirlingInvestments(Sa) TechwaCorporationPtyLtd MrDavidWayneRasheed MrMichaelDavidRow SandhurstTrusteesLtd MutualTrustPtyLtd Top20Shareholders	4,400,000 6.88% 4,400,000 6.88% 4,142,919 6.48% 3,440,000 5.38% 3,365,561 5.26% 1,672,000 2.61% 1,364,000 2.13% 1,226,230 1.92% 1,210,000 1.89% 1,000,000 1.56% 1,000,000 1.56% 895,100 1.40% 880,000 1.38% 880,000 1.38% 660,000 1.03% 572,000 0.89% 500,000 0.78% 455,644 0.71% 455,000 0.71% 450,000 0.70%
	32,968,454 51.53%

Source:��Computershare�

3.4 Liquidity�Analysis�

Ordinary�Shares�

The�chart�below�illustrates�the�share�price�and�volume�of�trade�in�the�ordinary�shares�from�September�2016� to�June�2017.�

==> picture [376 x 201] intentionally omitted <==

----- Start of picture text -----

Daily�Share�Price�&�Volume
�1.15 �0.50
�0.45
�1.10
�0.40
�0.35
�1.05
�0.30
�1.00 �0.25
�0.20
�0.95
�0.15
�0.10
�0.90
�0.05
�0.85 ��
Volume Share�Price
Share�Price�($) Volume�(m)
----- End of picture text -----

Pitcher�Partners��|��Independent�Expert�Report��

8

Profile�of�Duxton�Water�

Duxton�Water�shares�were�issued�at�$1.10�each.��The�price�declined�to�96�cents�on�17�November�2016�and� again�on�1�December�2016�however�has�generally�fluctuated�between�$1.01�and�$1.10�over�the�six�months� to�30�June�2017.���The�VWAP�increased�from�$1.03�in�the�quarter�to�31�December�2016�to�$1.05�in�the�six� months�to�30�June�2017.���Since�30�June�2017�to�16�August�2017�the�price�has�fluctuated�between�$1.01� and�$1.09�with�a�VWAP�of�$1.07�in�July�2017�however�this�reduced�to�$1.02�for�the�period�1�August�to�17� August�2017.�

The�shares�have�not�been�particularly�liquid�with�only�8.4%�of�total�shares�traded�over�the�9�months�to�30� June�2017�as�illustrated�in�the�following�table:�

Theshareshavenotbeenparticularlyliquidwithonly8.4%oftotalsharestradedoverthe9mo June2017asillustratedinthefollowingtable:	nthsto30
Volumeoftrades
Quarterended Low($) High($) VWAP($) LastSale Price($) Volume (millions)	%Traded
31�Dec�16 0.96 1.09000 1.03 1.00 1.39 2.2% 31�Mar�17 1.01 1.08000 1.05 1.07 1.34 2.1% 30�Jun�17 1.01 1.10000 1.05 1.09 2.66 4.2% 8.4%	2.2% 2.1% 4.2%

Source:��Capital�IQ�

Options�

The�chart�below�illustrates�the�price�and�volume�of�trade�in�options�from�September�2016�to�July�2017.�

==> picture [399 x 220] intentionally omitted <==

----- Start of picture text -----

Daily�Option�Price�&�Volume
0.06 �0.50
�0.45
0.05
�0.40
�0.35
0.04
�0.30
0.03 �0.25
�0.20
0.02
�0.15
�0.10
0.01
�0.05
0 ��
Volume�(m) Option�Price
Option�Price�($) Volume�(m)
----- End of picture text -----

The�price�of�the�Duxton�Water�options�peaked�on�21�October�2016�at�5.2�cents�but�declined�to� approximately�2.1�cents�on�28�November�2016.��The�price�of�the�options�steadily�increased�to� approximately�4.2�cents�by�25�January�2017�and�hovered�between�3.4�cents�and�4�cents�until�late�April� when�the�price�of�the�options�started�to�decline,�falling�to�around�1.8�cents�in�May�2017.��The�price�of�the� options�has�since�fluctuated�between�1.3�cents�and�2.5�cents�through�to�15�August�2017.�The�VWAP� increased�in�the�quarter�to�31�March�2017�from�3�cents�to�4�cents�and�declined�to�3�cents�in�the�quarter�to� 30�June�2017.��The�VWAP�declined�to�2�cents�in�July�2017.�

Pitcher�Partners��|��Independent�Expert�Report��

9

Profile�of�Duxton�Water�

The�options�however�have�not�been�particularly�liquid�with�only�8.9%�of�total�options�traded�over�the�9� months�to�30�June�2017�as�illustrated�in�the�following�table:�

Volume�of�trades�

Volumeoftrades
Quarterended Low($) High($) VWAP($) LastSale Price($) Volume	%Traded
31�Dec�16 0.02 0.05 0.03 0.03 1.73 2.7% 31�Mar�17 0.03 0.04 0.04 0.04 1.44 2.2% 30�Jun�17 0.02 0.04 0.03 0.02 2.01 3.1% 8.1%	2.7% 2.2% 3.1%

Source:��Capital�IQ�

In�addition�to�the�above,�we�understand�that�in�January�2017�Duxton�Vineyards�unitholders�were� distributed�options�held�by�Duxton�Vineyard�Water�in�Duxton�Water,�which�reduced�Duxton�Vineyard� Water’s�holding�from�22,691,119�options�to�4,142,919�options.��The�options�were�distributed�at�the�bid� price�on�the�day�of�4.1�cents.�

3.5 Financial�Performance�

Summarised�below�is�the�audited�historical�income�statement�for�the�eight�months�31�December�2016�and� the�income�statement�for�the�six�months�ended�30�June�2017:�

Income�Statement�

IncomeStatement
	31Dec16	30June17
	$’000	$’000
Leaseincomefrompermanentwaterentitlement	698	1,023
Saleoftemporarywaterallocation	145	762
Revenue	843	1,785
Costoftemporarywaterentitlementssold	�	(132)
Impairment/(reversal)ofwaterentitlements	(771)	211
Managementfees	(169)	(290)
Otherexpenses	(307)	(325)
Totalfixedexpenses	(1,247)	404
EarningsBeforeInterest&Tax(EBIT)	(404)	1,249
NetFinanceIncome	108	73
Listingcosts	(185)	�
Profit/(loss)beforetax	(481)	1,322
Incometaxbenefit/(expense)	249	(348)
Profit/(loss)aftertax	(232)	974

Source:��Annual�Report�and�Half�Year�Report�

Duxton�Water�primarily�generates�revenue�through�water�entitlement�leases�between�irrigators�(as�lessee)� and�the�company�(as�lessor).��As�at�30�June�2017�approximately�54%�of�the�water�entitlement�portfolio�is� allocated�to�long�term�leases.��Lease�income�was�approximately�$0.7�million�in�the�period�from�listing�to�� 31�December�2016�and�approximately�$1.0�million�for�the�6�month�period�to�30�June�2017.���

The�balance�of�the�income�was�generated�through�the�sale�of�temporary�water�allocations�on�the�spot� market.�The�increase�in�revenue�from�sale�of�temporary�water�allocations�in�the�six�months�to�30�June�2017� reflects�the�increased�water�needs�during�the�summer�season�and�cropping�requirements.�

At�31�December�2016,�the�water�entitlements�were�impaired�by�approximately�$0.8�million,�the�bulk�of� which�related�to�the�Murray�segment�of�the�portfolio�($0.37�million),�followed�by�the�Murrumbidgee� segment�($0.15�million).��At�30�June�2017,�$0.2�million�of�this�was�reversed.��

Pitcher�Partners��|��Independent�Expert�Report��

10

Profile�of�Duxton�Water�

The�management�fees�are�paid�to�the�Investment�Manager�on�arms�length�commercial�terms�approved�by� the�Non�Executive�Directors�of�the�company.�

The�company�incurred�a�loss�in�the�period�up�to�31�December�2016�reflecting�primarily�the�impairment� charge�and�listing�costs.��In�the�six�months�to�30�June�2017�the�company�has�generated�a�profit�of� approximately�$974,000.

3.6 Financial�Position�

Summarised�below�is�the�audited�balance�sheet�of�Duxton�Water�as�at�31�December�2016,�the�balance� sheet�as�at�30�June�2017�and�the�adjusted�balance�sheet�as�at�30�June�2017�which�incorporates�the�value�of� the�water�entitlements�as�assessed�independently�by�Aither.�

Balance�Sheet�

BalanceSheet
	31Dec16	30Jun17	Adjusted
	$’000	$’000	Jun17
			$’000
Cashandcashequivalents	13,996	1,147	1,147
Termdeposits	3,333	�	�
Tradeandotherreceivables	1,042	155	155
Waterallocations	�	57	1,280
Othercurrentassets	43	51	51
Totalcurrentassets	18,414	1,410	2,633
Waterentitlements	50,354	68,254	69,619
Deferredtaxasset/(liability)	711	584	(213)
Totalnon�currentassets	51,065	68,838	69,406
Totalassets	69,479	70,248	72,039
Tradeandotherpayables	165	118	118
Unearnedrevenue	471	130	130
Taxliability	42	274	274
Totalcurrentliabilities	678	522	522
Totalliabilities	678	522	522
Netassets	68,801	69,726	71,517

Source:��Annual�Report�and�Half�Year�Report�

Duxton�Water’s�main�asset�comprises�its�portfolio�of�water�entitlements.��The�portfolio�has�increased�since� 31�December�2016,�reflecting�primarily�the�acquisition�of�water�entitlements�during�the�six�months�to�30� June�2017.��Purchases�of�new�water�licences�were�funded�from�cash�and�term�deposits�being�the�balance�of� the�funds�raised�during�the�IPO.��

The�water�entitlements�have�been�independently�valued�in�the�Aither�Report�at�approximately�� $69.6�million�on�a�portfolio�basis.�We�note�however�that�the�valuation�assumes�the�entitlements�are�sold� ‘dry’.��Aither�have�estimated�the�value�of�the�water�allocations�at�approximately�$1.28�million.��

At�31�December�2016,�the�trade�and�other�receivables�balance�included�$0.5�million�of�deposits�for�water� entitlement�purchases.�The�purchase�transactions�were�completed�shortly�after�year�end,�with�the�$0.5� million�converted�to�water�entitlements�assets.��

At�31�December�2016,�Duxton�Water�recognised�a�deferred�tax�asset�(DTA)�on�share�issue�costs�of�$0.5� million,�and�impairment�of�water�entitlements�of�$0.2�million.�With�the�uplift�in�the�valuation�of�the�water� entitlements�per�the�Aither�Report,�we�have�adjusted�the�DTA,�which�results�in�a�deferred�tax�liability�(DTL)� of�approximately�$213,000.�

The�net�assets�of�the�company�increased�by�approximately�$0.9�million�in�the�six�months�to�30�June�2017�to� approximately�$69.7�million.��With�the�revaluation�of�the�water�entitlements,�adjusted�net�assets�increase� to�approximately�$71.5�million.�

Pitcher�Partners��|��Independent�Expert�Report��

11

Valuation�Methodology�

4. Valuation�Methodology�

4.1 Valuation�Approach�

Regulatory�Guide�111�states�that�it�is�generally�appropriate�for�an�expert�to�consider�using�the�following� methodologies:�

• [the�capitalisation�of�future�maintainable�earnings;�]

• [the�discounted�cash�flow�method�(DCF);�]

• [the�amount�that�would�be�available�for�distribution�to�security�holders�on�an�orderly�realisation�of�] assets;�

• [the�quoted�price�for�listed�securities,�when�there�is�a�liquid�and�active�market�and�allowing�for�the�fact�] that�the�quoted�price�may�not�reflect�their�value,�should�100%�of�the�securities�be�available�for�sale;�and�

• [any�recent�genuine�offers�received�by�the�company�for�any�business�units�or�assets�as�a�basis�for�] valuation�of�those�business�units�or�assets.�

Capitalisation�of�Future�Maintainable�Earnings�

The�capitalisation�of�future�maintainable�earnings�methodology�involves�capitalising�the�estimated�future� maintainable�earnings�at�a�multiple�which�reflects�the�risk�and�opportunities�of�the�business�and�the�stream� of�income�it�generates.��

In�utilising�this�methodology,�it�is�necessary�to�determine�the�appropriate�income�stream�to�value,�such�as:�

• Operating�Profit�After�Income�Tax�(PAT);�

• Operating�Profit�Before�Income�Tax�(EBT);��

• EBIT;�or�

• EBITDA.�

The�selection�of�multiple�is�undertaken�by�reviewing�either�listed�guideline�company�data�or�mergers�and� acquisition�data.���

In�using�the�mergers�and�acquisition�data,�a�review�is�undertaken�of�recent�transactions�of�comparable� businesses�from�which�the�implied�earnings�multiples�are�calculated.�Multiples�are�then�selected�and� applied�to�the�subject�entity�to�arrive�at�an�indication�of�value.��The�multiples�derived�are�based�on�an� analysis�of�recent�trades�of�entire�companies�and�therefore�reflect�value�for�100%�of�the�business.�� However�the�data�often�available�to�determine�the�implied�multiples�is�less�transparent�and�often�forecast� data�is�not�available.��Furthermore,�the�price�paid�for�an�acquisition�normally�reflects�the�fact�that�there� were�synergies�available�to�the�acquirer.��If�the�target’s�earnings�were�adjusted�for�these�synergies,�the� effective�multiple�would�be�lower�than�that�calculated�using�the�actual�earnings.�

In�using�guideline�company�data,�a�portfolio�of�public�companies�is�selected�based�on�comparability�of�the� subject�company�from�which�valuation�multiples�and�other�analytics�are�calculated.��Multiples�are�then� selected�and�applied�to�the�subject�entity�to�arrive�at�an�indication�of�value.��The�multiples�derived�for� guideline�companies�are�based�on�share�prices�reflective�of�the�trades�of�small�parcels�of�shares.�As�such,� they�generally�reflect�multiples�reflective�of�the�prices�at�which�portfolio�interests�change�hands.�That�is�to� say,�there�is�no�premium�for�control�incorporated�within�such�pricing.�The�multiples�may�also�be�impacted� by�the�level�of�liquidity�in�the�particular�stock.�

Discounted�Cash�Flow�

The�discounted�cash�flow�methodology�has�regard�to�the�expected�future�economic�benefits�discounted�to� present�value.��This�is�considered�appropriate�where�a�forecast�of�future�cash�flows�can�be�made�with�a� reasonable�degree�of�certainty.��This�approach�is�particularly�relevant�to�the�valuation�of�a�business�in�its� early�growth�stage�but�is�equally�applicable�to�any�business�with�expectations�of�significant�growth�or�with� volatility�in�cash�flows.�

In�undertaking�the�discounted�cash�flow�methodology�regard�is�generally�had�to:�

• the�projected�future�cash�flows;��

• an�appropriate�discount�rate;�and�

• the�perpetuity�or�terminal�value,�if�any.�

Pitcher�Partners��|��Independent�Expert�Report��

12

Valuation�Methodology�

Asset�Based�Approach�

The�asset�based�approach�determines�the�value�of�the�business�having�regard�to�the�market�value�of�the� underlying�assets�and�liabilities�thereof.��This�approach�includes�the�following�methodologies:�

• going�concern�method;�

• orderly�realisation�method;�and�

• liquidation�method.�

Under�a�going�concern�method,�the�value�is�derived�by�assessing�the�market�value�of�every�asset�and� liability�on�a�going�concern�basis.��This�may�include�a�premium�to�reflect�the�value�of�intangible�assets�not� recorded�on�the�balance�sheet,�if�appropriate,�to�reflect�market�position,�profitability�and�overall� attractiveness�of�business.��A�net�asset�or�cost�based�methodology�is�most�appropriate�for�businesses�where� the�value�lies�in�the�underlying�assets�and�not�the�ongoing�operations�of�the�business.��

The�orderly�realisation�method�has�regard�to�the�amount�that�would�be�distributed�to�shareholders�on�the� assumption�that�the�entity�would�be�liquidated�with�the�funds�realised�from�the�sale�of�its�assets,�after� payment�of�all�liabilities�including�realisation�costs�and�taxes,�being�distributed�to�shareholders.���

The�liquidation�method�is�based�on�the�same�principles�except�that�in�the�orderly�realisation�method,�the� assets�are�realised�in�an�orderly�manner,�whereas,�the�liquidation�method�assumes�that�the�assets�are�sold� within�a�shorter�time�frame.���

Quoted�Price�

This�approach�looks�at�the�value�of�the�company�having�regard�to�the�trades�in�the�subject�entity’s�own� equity.�There�is�no�premium�for�control�incorporated�within�such�pricing�and�the�pricing�may�also�be� impacted�by�the�level�of�liquidity�in�the�particular�stock.�

Recent�Genuine�Offers�

Any�recent�genuine�offers�received�by�the�company�for�any�business�units�or�assets�may�be�used�as�a�basis� for�valuation�of�those�business�units�or�assets�or�for�assessing�implied�multiples�which�may�be�utilised�when� undertaking�the�capitalisation�of�future�maintainable�earnings�approach.�

4.2 Selection�of�Approach�&�Methodology�

Pitcher�Partners�Corporate�does�not�have�the�necessary�experience�to�under�a�valuation�of�the�water� entitlements.��Accordingly�we�obtained�an�independent�valuation�of�the�water�entitlements�to�be�acquired� from�Duxton�Vineyards�from�Aither.���

In�valuing�Duxton�Water�we�have�adopted�an�asset�based�methodology�on�a�going�concern�basis�as�the� primary�approach.��In�utilising�this�approach,�we�had�regard�to�the�independent�valuation�of�the�water� entitlements�of�Duxton�Water,�also�prepared�by�Aither�in�their�report�dated�21�July�2017.���

There�was�insufficient�history�of�earnings�and�cash�flows�in�order�for�us�to�undertake�a�valuation�on�an� earnings�basis�or�on�a�discounted�cash�flow�basis.�

Further,�as�discussed�earlier,�the�shares�in�Duxton�Water�have�been�illiquid�and�inactively�traded.��As�such� we�do�not�consider�the�quoted�price�methodology�to�be�appropriate.���

Pitcher�Partners��|��Independent�Expert�Report��

13

Valuation�

5. Valuation�

5.1 Value�of�Water�Entitlements�Proposed�to�be�Acquired���

It�is�proposed�that�Duxton�Water�acquire�2,402�ML�of�water�entitlements�from�Duxton�Vineyards.��Pitcher� Partners�Corporate�retained�Aither�to�undertake�an�independent�valuation�of�the�water�entitlements�to�be� acquired.��A�copy�of�the�report�is�attached�at�Appendix�3.��Aither�have�valued�the�water�entitlements�at� approximately�$7.31�million�on�a�portfolio�basis.�

5.2 Value�of�Duxton�Water�

Section�3.6�contains�the�balance�sheet�as�at�30�June�2017,�adjusted�to�reflect�the�following:�

• [market�value�of�the�water�entitlements�based�on�the�independent�valuation�prepared�by�Aither;�and�]

• [an�adjustment�for�DTL�arising�from�the�above.�]

In�addition�to�the�above,�we�consider�it�appropriate�to�adjust�the�net�asset�value�by�the�proposed�dividend� to�shareholders�to�be�paid�to�shareholders�prior�to�the�issue�of�ordinary�shares�to�Duxton�Vineyards.��The� Independent�Directors�provided�guidance�of�a�2�cent�to�2.3�cent�dividend,�assuming�no�options�are� exercised.��Consequently�we�consider�it�appropriate�to�deduct�$1.279�million�to�$1.471�million�from�the�net� asset�value.���

We�are�not�aware�of�any�other�adjustments�that�are�required�in�order�to�derive�the�market�value�of�the� equity�in�Duxton�Water.�

Having�regard�to�the�above�we�have�derived�a�value�for�100%�of�the�equity�in�Duxton�Water�in�the�order�of�� $70.046�million�to�$70.238�million�post�dividend�but�pre�the�Proposed�Transaction.��As�the�equity�value�of� Duxton�Water�has�been�derived�using�an�asset�based�approach,�this�is�inclusive�of�a�control�premium�as�it� reflects�100%�ownership.��We�consider�this�appropriate�given�the�holding�which�Duxton�Vineyards�has�in� Duxton�Water.�

Duxton�Water�currently�has�63,965,406�shares�ordinary�shares�on�issue.��This�ascribes�a�value�per�Duxton� Water�ordinary�share�on�a�control�basis�as�follows:������

Value�of�Duxton�Water�Ordinary�Share�

ValueofDuxtonWaterOrdinaryShare	ValueofDuxtonWaterOrdinaryShare
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
ValueofEquity($) Numberofsharesonissue DuxtonWaterShareValue	70,046,000 70,238,000 1140,408,000 140,600,000 63,965,406 63,965,406 127,930,812 127,930,812
	$1.095 $1.098 $1.098 $1.099

In�comparison,�the�share�price�of�Duxton�Water�has�been�trading�more�recently�at�a�VWAP�of�$1.02,�albeit� we�do�not�consider�this�relevant�given�the�small�volume�of�trades�in�the�company’s�shares.��

We�have�also�undertaken�a�valuation�of�Duxton�Water�assuming�the�Proposed�Transaction�proceeds:

Value�of�Duxton�Water�Ordinary�Share�

ValueofDuxtonWaterOrdinaryShare	ValueofDuxtonWaterOrdinaryShare
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
ValueofEquityasispostdividend($) ValueofWaterRights($) ValueofEquityPostTransaction($) NumberofSharesPreTransaction Proposedshareissue NumberofSharesPostTransaction DuxtonWaterShareValuePost Transaction	70,046,000 70,238,000 140,408,000 140,600,000 7,308,350 7,308,350 7,308,350 7,308,350
	77,354,350 77,546,350 147,716,350 147,908,350
	63,965,406 63,965,406 127,930,812 127,930,812 6,610,000 6,610,000 6,610,000 6,610,000
	70,575,406 70,575,406 134,540,812 134,540,812
	$1.096 $1.099 $1.098 $1.099

1�Value�of�equity�increased�to�reflect�exercise�of�options�at�$1.10�per�option�

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14

Assessment�of�Fairness�

6. Assessment�of�Fairness�

6.1 Approach�

Under�RG111,�the�Proposed�Transaction�will�be�considered�fair�to�the�non�associated�Shareholders�if�the� value�of�the�consideration�is�equal�to�or�less�than�the�value�of�the�water�entitlements�to�be�acquired�from� Duxton�Vineyards�and�the�value�per�Duxton�Water�share�is�greater�post�the�Proposed�Transaction.�

To�assess�whether�the�Proposed�Transaction�is�fair�we�have�undertaken�the�following:�

• [determined�the�value�of�the�consideration;��]

• [compared�the�value�of�the�water�entitlements�to�be�acquired�to�the�proposed�consideration;��]

• [considered�the�value�per�Duxton�Water�share�before�and�after�the�Proposed�Transaction;�and�]

• [considered�whether�the�proposed�leases�to�Duxton�Viticulture�on�commercial�terms.�]

6.2 Assessment�of�Fairness�–�Proposed�Transaction�

The�purchase�price�for�the�water�entitlements�is�$6,810,050�with�the�consideration�being�6,610,000� ordinary�shares�in�Duxton�Water.��In�Section�5�we�valued�the�ordinary�shares�in�Duxton�Water�on�a�control� basis,�post�dividend,�to�be�$1.095�to�$1.098�on�an�undiluted�basis�and�$1.098�to�$1.099�on�a�fully�diluted� basis.��This�ascribes�a�value�to�the�consideration�as�follows:

Value�of�Consideration�

ValueofConsideration	ValueofConsideration
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
ValueofDuxtonWaterShares NumberofSharestobeIssued ValueofProposedConsideration	$1.095 $1.098 $1.098 $1.099 6,610,000 6,610,000 6,610,000 6,610,000
	$7,237,950 $7,257,780 $7,257,780 $7,264,390

The�value�ascribed�to�the�water�entitlements�by�Aither�as�compared�to�the�value�of�the�consideration�is� summarised�below:�

Assessment�of�Fairness�–�ASX�Listing�Rule�10.1�

AssessmentofFairness–ASXListingRule10.1	AssessmentofFairness–ASXListingRule10.1
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
ValueofWaterEntitlements ValueofProposedConsideration Difference	$7,308,350 $7,308,350 $7,308,350 $7,308,350 $7,237,950 $7,257,780 $7,257,780 $7,264,390
	$70,400 $50,570 $50,570 $43,960

We�have�also�considered�the�value�of�Duxton�Water�both�pre�and�post�the�Proposed�Transaction:�

Value�per�Duxton�Water�Share�

ValueperDuxtonWaterShare	ValueperDuxtonWaterShare
Undiluted BasisLow Undiluted BasisHigh FullyDiluted BasisLow FullyDiluted BasisHigh
EquityValueofDuxtonWaterPre ProposedTransaction NumberofShares DuxtonWaterShareValuePre ProposedTransaction EquityValueofDuxtonWaterpost ProposedTransaction NumberofShares DuxtonWaterShareValuepost ProposedTransaction	$70,046,000 $70,238,000 $140,408,000$140,600,000 63,965,406 63,965,406 127,930,812 127,930,812
	$1.095 $1.098 $1.098 $1.099
	$77,354,350 $77,546,350 $147,716,350$147,908,350 70,575,406 70,575,406 134,540,812 134,540,812
	$1.096 $1.099 $1.098 $1.099

We�also�obtained�advice�from�Aither�that�the�proposed�terms�of�the�leases�with�Duxton�Viticulture�were,�in� their�opinion,�on�commercial�terms.�

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15

Assessment�of�Fairness�

In�our�opinion,�having�regard�to�the�above�analysis,�on�balance�the�Proposed�Transaction�is�fair�to�the�non� associated�Shareholders�of�Duxton�Water.��In�arriving�at�this�opinion�we�had�regard�to�the�following:�

• [the�value�of�the�water�entitlements�exceeds�the�value�of�the�proposed�consideration;�]

• [the�value�of�the�equity�in�Duxton�Water�post�the�Proposed�Transaction�exceeds�the�value�range�of�a�] Duxton�Water�share�pre�the�Proposed�Transaction;�and�

• [the�terms�of�the�proposed�leases�are�on�commercial�terms.�]

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16

Assessment�of�Reasonableness�

7. Assessment�of�Reasonableness�

7.1 Approach�

7.2 Approach�

While�ASIC�Regulatory�Guide�111�Content�of�Expert�Reports�provides�that�an�offer�which�is�fair�will�also�be� considered�reasonable�we�have�also�considered�other�factors�which�should�be�brought�to�the�attention�of� non�associated�Shareholders.�

7.3 Advantages��

The�advantages�to�non�associated�Shareholders�of�the�Proposed�Transaction�are�as�follows:�

Advantage	Explanation
Fair	AstheProposedTransactionisfairitisalsoconsideredreasonable.
Sourceofsecureincome	ByenteringintoasevenyearleasewithDuxtonViticulture,Duxton
	Waterwillhaveasecuresourceofincome,regardlessofweather
	events,increasingtheprospectofdividendpayments.Duxton
	Water’sleasescurrentlyrangefromfouryearstosixyears,witha
	weightedaverageleaseexpiryof5.9years.Withthenewleases
	proposedtobeenteredinto,theweightedaverageleaseexpirywill
	increaseto6.1years.
Increaseinsize	GrowthinDuxtonWater’swaterportfolioandcapitalbasemay
	increasetheattractivenessofthecompanytoinstitutionalinvestors
	andpotentiallyleadtogreaterliquidityintheshares.
Increaseinweightedaverage	TheproposedleasearrangementwillprovideDuxtonWatera7%
yieldofleasedportfolio	annualleaseyieldontheentitlement.Thisishigherthanthecurrent
	weightedaverageyieldoftheleasedportfolioof6.04%andwilllift
	theWeightedAverageYieldoftheportfolio.
Increaseinleasedproportionof	Theproportionofwaterportfolioleasedwillincreasefrom54%to
waterportfolio	over58%.
Uniqueparcelofwater	TheproposedpurchaseprovidesDuxtonWaterwithanopportunity
	tosecureauniqueparcelofwaterwhichisrarelyavailableonthe
	openmarket,butratherisgenerallyonlyavailableincombination
	withalandand/orproductiveassetpurchase.
	Currentlythereareapproximately189,704MLofNSWMurrayHigh
	SecuritySharesonIssue.Ofthis,approximately25,508MLare
	ownedbyNSWandCommonwealthgovernments,leavingonly
	164,196MLavailabletothefreemarket.Ofthisvolume,75%would
	beheldbynomorethan20groups,themajorityofwhichwater
	wouldlikelybecommittedtoproductiveassetsandareunlikelyto
	besoldwithoutalandandproductiveassetsale.
	Further,toacquirethisvolumeonmarketcouldwellhaveanundue
	inflationaryimpact.
Flexibilityintradingcapability	Zone11Entitlementhassomeofthegreatestflexibilityintrading
	capability.Thismaximisesthecustomerdemandpoolavailable
	whennegotiatingorrenegotiatingaleaseoftheentitlement.The
	broaderthetradabilityoftheentitlement,thelargerthenumberof
	industriesthatcoulddeploytheassetwhichreducesspecific
	industryrisk.

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17

Assessment�of�Reasonableness�

7.4 Disadvantages��

The�disadvantages�to�non�associated�Shareholders�of�the�Proposed�Transaction�are�as�follows:�

Thedisadvantagestonon�associa	tedShareholdersoftheProposedTransactionareasfollows:
Disadvantage	Explanation
Numberofsharesheldby	TheProposedTransactionwillresultinDuxtonVineyardsincreasing
DuxtonVineyards	itsshareholdingfrom40.7%to46.29%.Thiscouldfurtherimpactthe
	liquidityoftheshares.However,DuxtonVineyardshaveadvised
	DuxtonWaterthatitistheintentiontodistributethesharesthat
	DuxtonVineyardsholdsinDuxtonWatertotheunitholdersofDuxton
	VineyardsassoonaspracticableaftertheNABsecurityoverthese
	shareshasbeenreleased,whichisestimatedtobewithin24months.
IncreasedrelianceonDuxton	TheProposedTransactionwillresultintheproportionofthewater
Vineyards	entitlementsleasedtoDuxtonVineyardsincreasingfrom
	approximately41.65%to46.91%.WhilstDuxtonVineyardsis
	consideredbyDuxtonWatertobestrongandoflittlecounterparty
	risk,itisplacinggreaterrelianceononepartyforitsincome
	generation.
	Notwithstandingtheabove,ultimatelythereisthecapacitytoquickly
	redeploytheassetshouldtherebeadefaultinleaseterms,thereby
	reducingtherisk.

7.5 Assessment�of�the�Reasonableness��

In�our�opinion,�after�consideration�of�all�issues�including�those�set�out�above,�it�is�our�view,�in�the�absence� of�any�other�information,�that�the�Proposed�Transaction�is�reasonable�to�the�non�associated�Shareholders� as�at�the�date�of�this�report.�

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18

Glossary�of�Terms�

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Glossary�of�Terms�

Term	Description
AitherReport	Aitherreportdated21July2017valuingthewaterentitlements
$	AustralianDollars
AFSL	AustralianFinancialServicesLimited
ASIC	AustralianSecuritiesandInvestmentsCommission
ASX	ASXLimited
CEO	ChiefExecutiveOfficer
CFO	ChiefFinancialOfficer
Act	CorporationsAct2001
DCF	DiscountedCashFlow
DTA	DeferredTaxAsset
DuxtonVineyards	DuxtonVineyardsPtyLtdastrusteeoftheDuxtonVineyardsUnit
	Trust
DuxtonVineyardsWater	DuxtonVineyardsWaterPtyLtdastrusteeofDuxtonWaterTrust
DuxtonViticulture	DuxtonViticulturePtyLtd
DuxtonWater	DuxtonWaterLimited
EBIT	EarningsBeforeInterestandTax
EBITDA	EarningsBeforeInterest,Tax,DepreciationandAmortisation
FOSL	FinancialOmbudsmanServiceLimited
FSG	FinancialServicesGuide
GST	GoodsandServicesTax
IndependentDirectors	IndependentdirectorsofDuxtonWater
ML	Megalitres
PAT	OperatingProfitAfterIncomeTax
PBT	OperatingProfitBeforeIncomeTax
PDS	ProductDisclosureStatement
PitcherPartnersCorporate	PitcherPartnersCorporatePtyLtd
RG	ASICRegulatoryGuide
Section208	Section208oftheCorporationsAct
Section611	Section611Item7oftheCorporationsAct
Shareholders	ShareholdersofDuxtonWater
VWAP	VolumeWeightedAveragePrice
WAL	WaterAuthorityLicence
WaterSupplyLease	ProposedleasebetweenDuxtonWaterandDuxtonViticultureto
	leasethewaterentitlementstobeacquiredfromDuxton
	Vineyards
WMI	WesternMurrayIrrigationLtd

Pitcher�Partners��|��Independent�Expert�Report��

19

Sources�of�Information�

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Sources�of�Information�

In�preparing�this�report�we�have�had�regard�to�the�following�information:�

• [Duxton�Water�website�]

• [Draft�Explanatory�Statement�and�Notice�of�Meeting�]

• [Final�executed�Water�Rights�Sale�Agreements��]

• [Duxton�Water�Supplementary�Prospectus�]

• [Duxton�Water�annual�report�as�at�31�December�2016�]

• [Duxton�Water�half�year�report�to�30�June�2017�]

• [Duxton�Water�monthly�updates��]

• [List�of�shareholders�as�at�31�July�2017�]

• [List�of�option�holders�as�at�31�July�2017�]

• [Share�trading�information�from�CapIQ�since�listing�to�17�August�2017�]

• [Option�trading�information�since�listing�to�15�August�2017�provided�by�Duxton�Water�]

• [Aither�Report�]

Pitcher�Partners��|��Independent�Expert�Report��

20

Water�Entitlements�Valuation�

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Water�Entitlements�Valuation�

Attached�is�the�independent�valuation�of�the�water�entitlements�undertaken�by�Aither.��Duxton�Water�has� 65�individual�water�entitlements�comprising�its�current�portfolio.�The�valuation�report�prepared�by�Aither� includes�a�list�of�all�of�those�individual�water�entitlements.�The�listing�of�Duxton�Water’s�water�entitlements� in�this�manner�is�not�publicly�available�and�is�not�considered�by�the�Board�to�be�materially�price�sensitive�or� material�to�shareholders.�In�addition,�such�a�listing�of�Duxton�Water’s�current�water�entitlements�is� considered�by�the�Board�to�be�disclosing�commercially�sensitive�information�which�may�be�detrimental�to� the�interests�of�Duxton�Water.�Accordingly�those�lists�have�been�redacted�in�the�valuation�included�in�this� Appendix�3.�

Pitcher�Partners��|��Independent�Expert�Report��

21

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Valuation of Australian water entitlements

Duxton Water Limited and potential acquisition

A confidential Final Report prepared for Pitcher Partners Corporate Pty Ltd

Valuation date: Friday 30 June 2017 Report provision date: Friday 21 July 2017

© Aither 2017

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Contents

Valuation summary .............................................................................................................. vi	Valuation summary .............................................................................................................. vi
1. Valuation method ........................................................................................................... 11
1.1.	Fair market value measurement ............................................................................... 11
1.2.	Assets subject to valuation measurement ................................................................ 11
1.3.	Highest and best use ................................................................................................ 16
1.4.	Principal market ........................................................................................................ 16
1.5.	Valuation approaches ............................................................................................... 17
1.6.	Assumptions ............................................................................................................. 18
2. Valuation assessment .................................................................................................... 23
2.1.	New South Wales 10 Murray General Security ........................................................ 23
2.2.	New South Wales 11 Murray High Security ............................................................. 25
2.3.	New South Wales 11 Murray General Security ........................................................ 26
2.4.	New South Wales 11 Murray Supplementary .......................................................... 28
2.5.	New South Wales 13 Murrumbidgee High Security ................................................. 30
2.6.	New South Wales Lachlan General Security ........................................................... 31
2.7.	New South Wales Macquarie General Security ....................................................... 33
2.8.	Victorian 1A Greater Goulburn HRWS ..................................................................... 34
2.9.	Victorian 3 Lower Goulburn HRWS .......................................................................... 36
2.10.	Victorian 4A Campaspe HRWS ................................................................................ 38
2.11.	Victorian 5A Loddon HRWS ..................................................................................... 39
2.12.	Victorian 6 Murray HRWS ........................................................................................ 41
2.13.	Victorian 7 Murray HRWS ........................................................................................ 42
2.14.	South Australian Murray High Security – Class 3 .................................................... 44
2.15.	South Australian Mallee Prescribed Wells Area – Red Parilla Zone ........................ 45
3. Portfolio valuation ......................................................................................................... 47
3.1.	Duxton Portfolio ........................................................................................................ 47
3.2.	Acquisition Portfolio .................................................................................................. 48
4. End notes ........................................................................................................................... 49
Attachment A – Encumbrance assessment ................................................................... 50
Attachment B – Material premiums or discounts assessment ............................... 59

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i

Attachment C – Title document review .......................................................................... 70

Attachment D – Aither proposal and instructions ..................................................... 73

Tables Table 1 Duxton Portfolio value – 30 June 2017....................................................................... vii Table 2 Acquisition Portfolio value – 30 June 2017 ............................................................... viii Table 3 Duxton Portfolio – entitlement holdings breakdown by state by volume ................... 11 Table 4 Duxton Portfolio holdings overview ........................................................................... 12 Table 5 Acquisition Portfolio holdings overview ..................................................................... 16 Table 6 Irrigation corporation transformation processing fees, 2015−16 ............................... 20 Table 7 New South Wales 10 Murray General Security – Valuation summary ...................... 23 Table 8 New South Wales Water Register June 2017 summary – New South Wales Murray General Security ........................................................................................................ 23 Table 9 Last five reported trades for 2017 – New South Wales Murray General Security .... 24 Table 10 Water market intermediary price summary June 2017 – New South Wales 10 Murray General Security ........................................................................................................ 24 Table 11 Water market intermediary sales data for 2017 – New South Wales 10 Murray General Security ........................................................................................................ 24 Table 12 New South Wales 11 Murray High Security – Valuation summary ........................... 25 Table 13 New South Wales Water Register June 2017 summary – New South Wales Murray High Security ............................................................................................................. 25 Table 14 Last five reported trades for 2017 – New South Wales Murray High Security .......... 25 Table 15 Water market intermediary price summary June 2017 – New South Wales 11 Murray High Security ............................................................................................................. 26 Table 16 Water market intermediary sales data for 2017 – New South Wales 11 Murray High Security ...................................................................................................................... 26 Table 17 New South Wales 11 Murray General Security – Valuation summary ...................... 26 Table 18 New South Wales Water Register June 2017 summary – New South Wales Murray General Security ........................................................................................................ 27 Table 19 Last five reported trades for 2017 – New South Wales Murray General Security .... 27 Table 20 Water market intermediary price summary June 2017 – New South Wales 11 Murray General Security ........................................................................................................ 27 Table 21 Water market intermediary sales data for 2017 – New South Wales 11 Murray General Security ........................................................................................................ 28 Table 22 New South Wales 11 Murray Supplementary – Valuation summary ........................ 28 Table 23 New South Wales Water Register June 2017 summary – New South Wales Murray Supplementary ........................................................................................................... 28 Table 24 Last five reported trades – New South Wales Murray Supplementary ..................... 29 Table 25 Water market intermediary price summary June 2017 – New South Wales 11 Murray Supplementary ........................................................................................................... 29

AITHER | Final Report Valuation of Australian water entitlements

ii

Table 26 Water market intermediary sales data for 2017 – New South Wales 11 Murray Supplementary ........................................................................................................... 29 Table 27 New South Wales 13 Murrumbidgee High Security – Valuation summary ............... 30 Table 28 New South Wales Water Register June 2017 summary – New South Wales 13 Murrumbidgee High Security ..................................................................................... 30 Table 29 Last five reported trades for 2017 – New South Wales 13 Murrumbidgee High Security ...................................................................................................................... 30 Table 30 Water market intermediary price summary June 2017 – New South Wales Murrumbidgee 13 High Security ................................................................................ 31 Table 31 Water market intermediary sales data for 2017 – New South Wales Murrumbidgee 13 High Security ........................................................................................................ 31 Table 32 New South Wales Lachlan General Security – Valuation summary ......................... 31 Table 33 New South Wales Water Register June 2017 summary – New South Wales Lachlan General Security ........................................................................................................ 32 Table 34 Last five reported trades for 2017 – New South Wales Lachlan General Security ... 32 Table 35 Water market intermediary price summary June 2017 – New South Wales Lachlan General Security ........................................................................................................ 32 Table 36 Water market intermediary sales data for 2017 – New South Wales Lachlan General Security ...................................................................................................................... 33 Table 37 New South Wales Macquarie General Security – Valuation summary ..................... 33 Table 38 New South Wales Water Register June 2017 summary – New South Wales Macquarie General Security ...................................................................................... 33 Table 39 Last five reported trades for 2017 – New South Wales Macquarie General Security 34 Table 40 Water market intermediary price summary June 2017 – New South Wales Macquarie General Security ...................................................................................... 34 Table 41 Water market intermediary sales data for 2017 – New South Wales Macquarie General Security ........................................................................................................ 34 Table 42 Victorian 1A Greater Goulburn HRWS – Valuation summary ................................... 34 Table 43 Victorian Water Register June 2017 summary – Victorian 1A Greater Goulburn HRWS ........................................................................................................................ 35 Table 44 Last five reported trades for 2017 – Victorian 1A Greater Goulburn HRWS ............. 35 Table 45 Water market intermediary price summary June 2017 – Victorian 1A Greater Goulburn HRWS ........................................................................................................ 35 Table 46 Water market intermediary sales data for 2017 – Victorian 1A Greater Goulburn HRWS ........................................................................................................................ 36 Table 47 Victorian 3 Lower Goulburn HRWS – Valuation summary ........................................ 36 Table 48 Victorian Water Register June 2017 summary – Victorian 3 Lower Goulburn HRWS 36 Table 49 Last five reported trades for 2017 – Victorian 3 Lower Goulburn HRWS .................. 37 Table 50 Water market intermediary price summary June 2017 – Victorian 3 Lower Goulburn Murray HRWS ............................................................................................................ 37 Table 51 Water market intermediary sales data for 2017 – Victorian 3 Lower Goulburn HRWS 37 Table 52 Victorian 4A Campaspe HRWS – Valuation summary .............................................. 38

AITHER | Final Report iii Valuation of Australian water entitlements

Table 53 Victorian Water Register June 2017 summary – Victorian 4A Campaspe HRWS .... 38 Table 54 Last five reported trades for 2017 – Victorian 4A Campaspe HRWS ....................... 38 Table 55 Water market intermediary price summary June 2017 – Victorian 4A Campaspe HRWS ........................................................................................................................ 39 Table 56 Water market intermediary sales data for 2017 – Victorian 4A Campaspe HRWS .. 39 Table 57 Victorian 5A Loddon HRWS – Valuation summary ................................................... 39 Table 58 Victorian Water Register June 2017 summary – Victorian 5A Loddon HRWS ......... 39 Table 59 Last five reported trades for 2017 – Victorian 5A Loddon HRWS ............................. 40 Table 60 Water market intermediary price summary June 2017 – Victorian 5A Loddon HRWS 40 Table 61 Water market intermediary sales data for 2017 – Victorian 5A Loddon HRWS ........ 40 Table 62 Victorian 6 Murray HRWS – Valuation summary ...................................................... 41 Table 63 Victorian Water Register June 2017 summary – Victorian 6 Murray HRWS ............ 41 Table 64 Last five reported trades for 2017 – Victorian 6 Murray HRWS ................................ 41 Table 65 Water market intermediary price summary June 2017 – Victorian 6 Murray HRWS 42 Table 66 Water market intermediary sales data for 2017 – Victorian 6 Murray HRWS ........... 42 Table 67 Victorian 7 Murray HRWS – Valuation summary ...................................................... 42 Table 68 Victorian Water Register June 2017 summary – Victorian 7 Murray HRWS ............ 42 Table 69 Last five reported trades for 2017 – Victorian 7 Murray HRWS ................................ 43 Table 70 Water market intermediary price summary June 2017 – Victorian 7 Murray HRWS 43 Table 71 Water market intermediary sales data for 2017 – Victorian 7 Murray HRWS ........... 43 Table 72 South Australian Murray High Security – Class 3 – Valuation summary .................. 44 Table 73 South Australian Water Register June 2017 summary – South Australian Murray High Security – Class 3 ............................................................................................. 44 Table 74 Last five reported trades for 2017 – South Australian Murray High Security – Class 3 44 Table 75 Water market intermediary price summary June 2017 – South Australian Murray High Security – Class 3 ............................................................................................. 45 Table 76 Water market intermediary sales data for 2017 – South Australian Murray High Security – Class 3 ...................................................................................................... 45 Table 77 South Australian Mallee Prescribed Wells Area – Red Parilla Zone – Valuation summary .................................................................................................................... 45 Table 78 South Australian Mallee Prescribed Wells Area – Red Parilla Zone – Income approach DCF analysis sensitivity table .................................................................... 46 Table 79 Duxton Portfolio value – 30 June 2017...................................................................... 47 Table 80 Acquisition Portfolio value – 30 June 2017 ............................................................... 48 Table 81 Summary of Duxton Portfolio entitlement encumbrances – Lease 1 to 5 ................. 52 Table 82 Summary of Duxton Portfolio entitlement encumbrances – Lease 6 to 9 ................. 53 Table 83 Available entitlement lease transaction evidence – Victoria and South Australia ..... 55 Table 84 Median entitlement trade parcel volumes – 2007-08 to 2016-17 .............................. 60 Table 85 Duxton Portfolio entitlement volume discount assessment ....................................... 61 Table 86 Acquisition portfolio entitlement size discount assessment....................................... 64

AITHER | Final Report Valuation of Australian water entitlements

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Table 87 Transaction costs as percentage of total parcel market value – Vic 7 Murray HRWS 64

Table 88 Potential market value discount by entitlement type based on volume of parcel – Duxton Portfolio ......................................................................................................... 65 Table 89 Estimated time to acquire Duxton Portfolio entitlements ........................................... 66 Table 90 Estimated time to acquire Acquisition Portfolio entitlements ..................................... 67 Table 91 Value of unused and unleased water allocations to Duxton Portfolio – 2017-18 water year as at 17 July 2017 ............................................................................................. 68 Table 92 Title document review – exceptions .......................................................................... 71 Figures Figure 1 Duxton Portfolio – security of entitlement holdings breakdown by volume ............... 12 Figure 2 Acquisition Portfolio – security of entitlement holdings breakdown by volume ......... 15 Figure 3 Duxton Portfolio – within irrigation corporation entitlement holding breakdown ........ 19 Figure 4 Acquisition Portfolio – within irrigation corporation entitlement holding breakdown .. 19 Figure 5 Aither Southern Murray-Darling Basin Entitlement Index .......................................... 22 Figure 6 Victorian 7 Murray HRWS entitlement trade price and volume comparison –2016-17 60

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AITHER | Final Report Valuation of Australian water entitlements

v

Valuation summary

Instructions

On 12 July 2017, Aither was instructed by Pitcher Partners Corporate Pty Ltd (Pitcher Partners) to provide an independent fair market valuation of Australian water entitlement types. The entitlements chosen for valuation relate to the current Duxton Water Limited (Duxton) water entitlement portfolio (Duxton Portfolio) and a potential acquisition water entitlement portfolio (Acquisition Portfolio).

The valuation date was agreed as at Friday 30 June 2017. It is Aither’s opinion that entitlement market values have not changed significantly between this date and the date that this report is provided (Friday 21 July 2017).

Pitcher Partners also instructed Aither to provide a portfolio valuation assessment of the Duxton Portfolio and the Acquisition Portfolio (Table 1 and Table 2). The specific water entitlement assets held by these two respective portfolios are documented at Table 4 and Table 5.

In addition to a valuation of relevant water entitlement types and a valuation of the Duxton Portfolio and Acquisition Portfolio, Pitcher Partners instructed Aither to provide the following related advice:

• An assessment of encumbrances (such as lease agreements) on specific entitlements in relation to the impact this may have on market value – see Attachment A.

• An assessment of any potential market value premiums or discounts based on the volume of specific water entitlements, or the total size of each portfolio – see Attachment B.

• A review of water entitlement title documents to assess ownership and material entitlement characteristics or conditions that may impact market value – see Attachment C.

Specific valuation instructions are detailed in Aither’s proposal attached at Attachment D.

Reliance

We understand that the results of Aither’s valuation assessment (this document) will be used by Pitcher Partners (Reliant Party) for the purpose of informing the potential acquisition by Duxton of the Acquisition Portfolio, as well as an assessment of the current market value of the Duxton Portfolio. This valuation has been prepared for the sole use of the Reliant Party for this described purpose.

Valuation method

Aither has undertaken this valuation based on an assessment of fair market value for the portfolios and associated water entitlements in question. Aither has adopted the Australian Accounting Standards Board (AASB)13 Fair Value Measurement definition of fair value; being:

“the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

For each entitlement type held by the Duxton Portfolio and Acquisition Portfolio, and based on the data available, Aither has employed either a market or an income valuation approach to inform our

AITHER | Final Report Valuation of Australian water entitlements

vi

fair market valuation (see AASB 13). Detailed discussion of the methods used, transaction evidence relied upon and resulting valuations are described in Section 1 and Section 2 of this report.

30 June 2017 valuation assessment

Based on the market valuations adopted for each relevant entitlement type, the 30 June 2017 portfolio value of the Duxton Portfolio is determined to be $69.6 million. Table 1 provides a summary portfolio value assessment of the Duxton Portfolio as at this date.

Table 1 Duxton Portfolio value – 30 June 2017

	Water Source / Entitlement type	Volume held (ML)	Estimate of market value – 30 June 2017 ($/ML)	Estimated value of portfolio – 30 June 2017 ($)
	New South Wales 10 Murray Regulated River
	General Security	3,062	$1,275	$3,904,050
	New South Wales 10 Murray Regulated River– Murray Irrigation Limited
	General Security	3,624	$1,275	$4,620,600
	New South Wales 11 Murray Regulated River
	High Security	3,166.15	$3,500	$11,081,525
	General Security	1,155.41	$1,350	$1,559,803.50
	Supplementary	83	$260	$21,580
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	High Security	2,304	$3,500	$8,064,000
	New South Wales 13 Murrumbidgee Regulated River
	High Security	1,776	$3,500	$6,216,000
	New South Wales Lachlan Regulated River
	General Security	4,138	$600	$2,482,800
	New South Wales Lachlan Regulated River– Jemalong Irrigation Limited
	General Security	2,660	$600	$1,596,000
	New South Wales Macquarie Regulated River
	General Security	226	$1,300	$293,800
	Victorian 1A Greater Goulburn
	High Reliability Water Share	2,522.90	$2,600	$6,559,540
	Victorian 3 Lower Goulburn
	High Reliability Water Share	120	$2,600	$312,000
	Victorian 4A Campaspe
	High Reliability Water Share	60	$2,350	$141,000
	Victorian 5A Loddon
	High Reliability Water Share	239	$2,100	$501,900
	Victorian 6 Murray
	High Reliability Water Share	3,772.60	$2,650	$9,997,390

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	Water Source / Entitlement type	Volume held (ML)	Volume held (ML)	Estimate of market value – 30 June 2017 ($/ML)	Estimated value of portfolio – 30 June 2017 ($)
	Victorian 7 Murray
	High Reliability Water Share	3,409.50		$2,915	$9,938,692.50
	South Australia Murray Regulated River
	High Security - Class 3	509		$3,100	$1,577,900
	South Australia Mallee Prescribed Wells Area
	Parilla Red Zone		500	$1,500	$750,000
	Total		33,327.56		$69,618,581

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

Based on the market valuations adopted for each relevant entitlement type, the 30 June 2017 portfolio value of the Acquisition Portfolio is $7.3 million. Table 2 provides a summary of the portfolio value assessment of the Acquisition Portfolio as at this date.

Table 2 Acquisition Portfolio value – 30 June 2017

	Water Source / Entitlement type	Volume held (ML)	Estimate of market value – 30 June 2017 ($/ML)	Estimated value of portfolio – 30 June 2017 ($)
	New South Wales 11 Murray Regulated River
	High Security	1,539	$3,500	$5,386,500
	General Security	511	$1,350	$689,850
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	High Security	352	$3,500	$1,232,000
	Total	2,402		$7,308,350

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

Inclusion of 2017-18 allocations in portfolio value assessment

While Aither believes relevant entitlement market values have not changed significantly between Friday 30 June 2017 and the date that this report is provided (Friday 21 July 2017), water allocations for the 2017-18 water year have been allocated to entitlements held by each of the portfolios over this period. If the portfolios or individual entitlements were sold at the report provision date, it is likely that unused or unleased 2017-18 water allocations accrued to entitlements would be packaged in the sale (i.e. water entitlements would be sold ‘wet’).

Accounting for the value of 2017-18 water allocations is potentially material given that much of the holdings of the Duxton Portfolio and Acquisition Portfolio are higher reliability and therefore receive allocations early in water years. On this basis, the value of these water allocations may add a material premium to the portfolio values determined in Table 1 and Table 2.

The volume of allocations received by the Duxton Portfolio as at 17 July 2012 is equal to 10,721.84 ML. Based on an assessment of 21 July 2017 water allocation spot prices, this volume of water allocations is valued at approximately $1.28 million (excluding transaction costs).

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Limitations of advice

The valuation assessment provided in this report is provided subject to the following limitations and conditions:

• Assessment of asset title documentation – Aither has reviewed and assessed water entitlement title documentation provided by Duxton with the purpose of reviewing ownership and any material conditions on the water entitlements that may impact value. Aither has relied on ownership as stated in title documents supplied. Aither has not undertaken any independent title searches or attempted to validate any information included in tittle documents supplied. Please see Attachment C to this report.

• Independent validation of portfolio holdings – Aither has been supplied details of both the Duxton Portfolio and Acquisition Portfolio by Duxton. Aither has cross checked information supplied about the nature of water entitlement asset holdings of each portfolio as well as confirmed volumes of holdings against titles. Aither has not undertaken any independent validation of the accuracy of the information supplied by Duxton. Consequently, any advice given by Aither on the holdings of each portfolio is subject to the accuracy and limitations of data provided by Duxton.

• Assessment of asset specific characteristics and impact on value – Aither’s scope of work for the main valuation (Table 1 and Table 2) does not include an assessment the nature of specific entitlements and property right characteristics (such as specific entitlement parcel volumes or encumbrances) that may be material to informing entitlement specific market values or investment decisions. Please see Attachment A and B to this report which respectively provide an assessment of encumbrances and asset specific premiums or discounts that may be applied to the findings of the main valuation (Table 1 and Table 2).

• Suitable qualifications to undertake valuation – Aither offers Australia’s leading independent analysis and advice on water markets and water sector investments. The skills and professional experience of Aither’s team in Australian water markets make Aither suitably qualified to undertake this valuation assessment. However, as noted in Aither’s proposal and declared to Pitcher Partners, Aither is not a registered or certified property valuer and does not provide conveyancing or legal services.

• Reliance – Aither has undertaken this valuation assessment for use by the Reliant Party and for the sole Purpose described above.

• Reliance period – This valuation has been prepared as at Friday 30 June 2017 and should be relied upon in this context.

• Consent – Aither consents to the inclusion of a generalised summary of the valuation of each portfolio in Pitcher Partners’ independent expert report on the basis that it is accompanied by the following disclaimer and is subject to the conditions and limitations stated by Aither in this document:

“This table represents a generalised summary of the valuation of the Duxton Water Limited water entitlement portfolio and a potential acquisition water entitlement portfolio undertaken by Aither for 30 June 2017. It should not be interpreted or relied upon for any purpose outside of the context of the full valuation report [INSERT LINK].”

Aither also consents to the publication of a redacted version of the full valuation report by Duxton, subject to the following disclaimer:

“This report is a redacted version of the valuation of the Duxton Water Limited water entitlement portfolio and a potential acquisition water entitlement portfolio undertaken by Aither for 30 June

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2017. It should not be interpreted or relied upon for any purpose outside of the context of the full unredacted valuation report.”

• Confidentiality and reproduction – The information contained in this document is confidential and must not be reproduced, distributed, referred to or used, in whole or in part, for any purpose without the express written permission of Aither.

• Intellectual property – The contents of this document remain the intellectual property of Aither.

• Liability – Aither does not accept responsibility or liability for any loss, damage, cost or expense incurred or arising by reason of any party using or relying on information provided in this document. This document does not purport to represent commercial, financial or legal advice, and should not be relied upon as such.

• Reliance on third-party data – Aither relies on data obtained from multiple third-party sources that are documented in the report. Consequently, any advice given by Aither on the value of water entitlements is subject to the accuracy and limitations of data obtained. In this context, Aither makes no warranties, expressed or implied, in relation to any third-party information contained in this document.

• Pecuniary interests – Aither does not have any pecuniary interest in Duxton Water Limited or any related entities that would prevent the independent undertaking of this valuation assessment. Aither provides independent advice to several market participants, investors and governments but has no financial stake in any water market outcome or participant.

• Conflicts of interest – Aither does not have any known professional conflicts of interest (perceived, potential or real) that would impact on the provision of the described independent valuation services.

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1. Valuation method

1.1. Fair market value measurement

Aither has undertaken this valuation based on an assessment of fair market value for the water entitlement types and portfolios in question. Aither has adopted the Australian Accounting Standards Board (AASB)13 Fair Value Measurement definition of fair value; being:

“the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

Consistent with AASB 13, a fair value measurement requires the entity undertaking the valuation (Aither) to determine the following:

• the particular asset(s) that is the subject of the valuation measurement

• for a non-financial asset, which water entitlements are, the valuation premise that is appropriate for the measurement (consistently with its highest and best use)

• the principal (or most advantageous) market for the asset

• the valuation technique(s) appropriate for the valuation measurement, considering the availability of data.

The sections below document Aither’s determination of the above points for the context of this valuation.

1.2. Assets subject to valuation measurement

Aither has identified the assets subject to valuation measurement based on the portfolio holdings of both the Duxton Portfolio and Acquisition Portfolio (portfolio details supplied by Duxton). The identification was performed on the basis of water entitlement and account reference numbers (WAL, WEE and certificates), and the associated volumes and other characteristics of these entitlements.

• 1.2.1. Duxton Portfolio

The current portfolio of entitlements held by Duxton contains 16 different entitlement types from water systems predominantly in New South Wales and Victoria (Table 3). A small volume of surface and groundwater South Australian water entitlements are also held.

Table 3 Duxton Portfolio – entitlement holdings breakdown by state by volume

State	Percentage of holdings (%)
New South Wales	67%
Victoria	30%
South Australia	3%

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

Notes: Holdings rounded to the nearest percent.

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By volume, the entitlements held by the Duxton Portfolio are mostly High Security; although there is a significant volume of General Security entitlements, with relatively smaller volumes of Supplementary and Groundwater entitlements also held (Figure 1).

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017. Notes: Holdings rounded to one decimal place. Figure 1 Duxton Portfolio – security of entitlement holdings breakdown by volume

The Duxton Portfolio holds water entitlements with a total volume of 33,327.56 ML. The specific entitlements and volumes are outlined in detail below in Table 4.

Table 4 Duxton Portfolio holdings overview

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

1.2.2. Acquisition Portfolio

The Acquisition Portfolio contains three separate entitlement types all of which are located within the New South Wales 11 Murray water source. By volume these entitlements are mostly High Security, although there is one General Security entitlement within the portfolio (Figure 2). In addition, there is a mixture of Regulated River and Western Murray Irrigation Limited (irrigation corporation) licences.

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017. Notes: Holdings rounded to the nearest percent. Figure 2 Acquisition Portfolio – security of entitlement holdings breakdown by volume

The Acquisition Portfolio holds water entitlements with a total volume of 2,402 ML. The specific entitlements and volumes are outlined in detail below in Table 5.

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Table 5 Acquisition Portfolio holdings overview

	Water Source / Reference Number	Entitlement Type	Volume (ML)
	New South Wales 11 Murray Regulated River
	WAL 4944	High Security	557
	WAL 5023	High Security	289
	WAL 16076	High Security	284
	WAL 16271	High Security	209
	WAL 16272	High Security	200
	WAL 5434	General Security	511
	Sub total		2,050
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	WMI450	High Security	352
	Sub total		352
	Total		2,402

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017

1.3. Highest and best use

As defined by AASB 13, the valuation of a non-financial asset, which water entitlements are, consistent with its highest and best use relates to:

“the use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (e.g. a business) within which the asset would be used.”

The highest and best use of a non-financial asset considers the use of the asset that is physically possible, legally permissible and financially feasible. Highest and best use is determined from the perspective of market participants, even if the entity intends a different use. An entity’s current use of an asset is presumed to be its highest and best use unless market or other factors suggest that a different use by market participants would maximise the value of the asset.

Aither considers the current use of the Duxton Portfolio and the intended future use of the Acquisition Portfolio to be consistent with the highest and best use of these assets at the date of valuation (30 June 2017).

1.4. Principal market

As defined by AASB 13, the principal (or most advantageous) market for an asset is the:

“market with the greatest volume and level of activity for the asset or liability.”

In the context of the water entitlement assets held by the Duxton Portfolio and Acquisition Portfolio, we have identified the principal market to be the Murray-Darling Basin water entitlement market. This market is generally liquid with satisfactory price discovery and market rule transparency. These findings extend to the major water entitlement types which make up the majority by both volume and value of both the Duxton and Acquisition Portfolios.

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Major participants in the Murray-Darling Basin water entitlement market include irrigators, investors (both domestic and foreign), major agribusiness, local government and environmental water holders. In the context of this valuation, we expect a potential purchaser of the Duxton or Acquisition Portfolios to be a large investor or agribusiness with similar portfolio management intentions to Duxton.

1.5. Valuation approaches

For each of the entitlement types assessed, we have determined an appropriate valuation approach based on data available to use as inputs to the valuation assessment. These inputs represent similar assumptions to that which other market participants would use when pricing similar water entitlement assets. Detailed discussion of the two valuation approaches used for this valuation is provided below.

1.5.1. Market approach

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets to value the assets subject to valuation measurement (AASB 13). Given available data, this is Aither’s preferred valuation method for water entitlements.

Aither’s market approach valuation method draws on publicly available water trade data from the Victorian, New South Wales and South Australian Water Registers as well as analysis of trade data obtained from several water market intermediaries. Specifically, we use the following method:

• For the month prior to the valuation, we collect available water trade data for each of the relevant entitlement types from the Victorian, New South Wales and South Australian water registers.

• We then ‘clean’ the raw data for outlier prices to calculate a dollar per ML volume weighted average price (VWAP) for each of the relevant entitlement types.

• Following this we analyse recent sales data (buy and sell offers, and transactions) from market intermediaries (for this valuation we have used Ruralco Water, H2OX, Wilks Water and Landmark WATER).

• Finally, we compare and corroborate the analysis of register data with market intermediary data to establish a more accurate valuation due to the known time lag of information that can occur for prices reported on the state registers.

Since state register data and water market intermediary data does not always align for a given time period, Aither uses a degree of professional judgement to arrive at dollar per ML valuations for each entitlement type. Aither’s professional judgement is grounded in its knowledge of market trends and drivers; contemporary market intelligence gained through networks; and Aither’s current engagement to value approximately 90 different entitlement types across Australia on a monthly and quarterly basis for a large Australian agricultural enterprise, a global NGO, a major Australian superfund and a major Australian bank.

1.5.2. Income approach

The income approach converts future cash flows or income that are expected to accrue to an asset over time to a current value. When the income approach is used, the fair value measurement reflects current market expectations about the future income stream (AASB 13). Where there is a lack of market data to support a market approach valuation method, the income approach can be used as an alternative.

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Known current lease fees can be used to approximate future cash flows to relevant entitlement types. For this valuation, we have only used this income approach to inform the valuation of a single entitlement type, South Australia Mallee Prescribed Wells Area Parilla Red Zone (please see Section 2.15).

1.6. Assumptions

1.6.1. Impact of encumbrances on market value

We have undertaken a valuation based on an assumption of unencumbered entitlements (Table 1 and Table 2). Encumbrances on entitlements (such as leases) may have positive or negative impacts on the market value of specific entitlement parcels. Please see Attachment A which provides an assessment of the potential impact of known encumbrances on the market value of the Duxton Portfolio and Acquisition Portfolio.

1.6.2. Impact of entitlement parcel size or other material characteristics on market value

The valuation at Table 1 and Table 2 does not include an assessment the nature of specific entitlements and property right characteristics (such as parcel volume) that may be material to informing entitlement specific market values or investment decisions or. Please see Attachment B which provides an assessment of these potential impacts.

1.6.3. Irrigation corporation licence assumptions

The Duxton Portfolio and Acquisition Portfolio include water licences that are held within three New South Wales irrigation corporations: Murray Irrigation Limited; Western Murray Irrigation Limited; and Jemalong Irrigation Limited. By volume, approximately 26 per cent of entitlements held by the Duxton Portfolio (Figure 3) and 15 per cent of the Acquisition Portfolio (Figure 4) are within irrigation corporations. These volumes are material in to this valuation as water licences held within irrigation corporations can be priced differently to equivalent entitlements held outside (e.g. Regulated River).

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017. Notes: Holdings rounded to the nearest percent. Figure 3 Duxton Portfolio – within irrigation corporation entitlement holding breakdown

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017. Notes: Holdings rounded to the nearest percent.

Figure 4 Acquisition Portfolio – within irrigation corporation entitlement holding breakdown

Within irrigation corporation trade data

Water licence trades between customers located within these irrigation corporations are not reported on the relevant state water registers and details of trades are generally not made publicly available. To inform a valuation of the licences held within these irrigation corporations by both the Duxton and

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Acquisition Portfolios, we have relied upon water trade data for equivalent water entitlements held outside of irrigation corporations.

Irrigation corporation licence transformation costs

Licences within irrigation corporations are subject to different conditions to entitlements held outside of irrigation corporations (in New South Wales referred to as Water Access Licences (WALs)). Specifically, water licences held within irrigation corporations may not have as high a value per ML compared to equivalent WALs in the same water source due to less trade flexibility and different fee structures. For example, water licences within irrigation corporations can only be traded customer to customer, whereas WALs can generally be traded to a larger pool of potential buyers across the entire water source.

Irrigation corporation licences are ‘transformable’, meaning a licence can be converted to an equivalent WAL. If an individual irrigation corporation licence holder decides to transform their licence, there is a cost involved in transformation. The irrigation corporation generally charges a fee to cover the administration cost of this process.

The fee charged differs from irrigation corporation to irrigation corporation. Table 6 documents the relevant fees for each irrigation corporations as documented by the Australian Competition and Consumer Commission (ACCC) for 2015-16 (more recent fee schedules are not made publicly available and only available upon request from specific irrigation corporations).

Table 6 Irrigation corporation transformation processing fees, 2015−16

Irrigation corporation	Transformation processing fees ($)
Murray Irrigation Limited	$385
Western Murray Irrigation Limited	$333
Jemalong Irrigation Limited	$400
ource: Aither 2017. Based on ACCC 2017.

Source: Aither 2017. Based on ACCC 2017.

In New South Wales, transformation is commonly given effect via a trade of ‘share component’ from the irrigation corporation’s WAL to a WAL nominated by the customer. This incurs additional New South Wales Government processing and administration fees. These fees are generally fixed and are not dependent upon the volume of water being transformed. When large volumes are transferred, the cost per ML of this transformation process is generally small (generally less than $10 per ML).

Given the relatively large volumes held in irrigation corporation licences by both the Duxton and Acquisition Portfolios, transformation and associated fees are likely to be very small on a dollar per ML basis. On this basis, the fact that these licences are held in irrigation corporations is unlikely to have a material impact on the valuation of the licences compared to equivalent entitlements held outside of irrigation corporations. Therefore, in this valuation Aither has assumed there to be no discount on the value of licences held by the Duxton or Acquisition Portfolios within irrigation corporations compared to equivalent entitlements held outside of irrigation corporations in the same water source.

Please note, in cases where irrigation corporations do not hold a separate entitlement for conveyance losses, a share of each irrigator’s irrigation licence is used. When transformation occurs, this volume of water is retained by the irrigation corporation to meet any conveyance loss requirements to deliver water to customers that remain within the network. These calculations are made on a case by case basis and Aither has not considered these potential adjustments in this valuation.

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Termination of delivery rights

Aither has been instructed by Duxton that it does not own delivery rights connected to licences held within irrigation corporations. Therefore, any costs regarding termination of delivery rights would not accrue to Duxton. On this basis, Aither has not considered these potential costs to be material to this valuation.

Irrigation corporation fees

There are fees associated with holding licences within an irrigation corporation that differ from holding an entitlement outside of an irrigation corporation. Most of the material fee differences relate to delivery, conveyance and landholding access. As Aither has been instructed by Duxton that it only holds irrigation licences and not delivery rights, these fees would not accrue directly to Duxton. On this basis, Aither has not considered these potential costs to be material to this valuation.

1.6.4. Third-party information

Aither relies on data obtained from multiple third-party sources – including water market intermediaries and state water registers which are known to have up to three-month lag times between sale agreements and registration of trade. Consequently, any advice given by Aither on the value of water allocations or entitlements is subject to the accuracy and limitations of data obtained from third-party sources. In this context, Aither makes no warranties, expressed or implied, in relation to any third-party information contained in this document.

Furthermore, Aither has relied on the information provided by Duxton about the holdings of the Duxton and Acquisition Portfolios. Aither was provided with title documentation by Duxton, and while Aither has cross checked information supplied about the nature and asset holdings of each portfolio, Aither has not undertaken any independent validation of the accuracy of the information supplied.

1.6.5. Market value change

The value of water entitlements can and does change considerably over time, with monthly entitlement value change of over 5 per cent not infrequent. Over the past three years (2014-15 to 2016-17), there has been a sustained and substantial increase in southern Murray-Darling Basin entitlement values, and a large portion of this increase has been driven by New South Wales entitlement types. The Aither Southern Murray-Darling Basin Entitlement Index provides evidence of this trend (Figure 5).[1]

Market value variability is important in the context of undertaking a time specific water entitlement portfolio valuation of both the Duxton Portfolio and Acquisition Portfolio because it demonstrates that portfolio valuations will change over time (potentially by significant amounts even at monthly timesteps).

1 The Index tracks the relative monthly market value of a group of major water entitlement types across the southern Murray-Darling Basin. Indexed back to 100 at July 2008, a current index value higher than 100 indicates relatively higher market values of the group compared to July 2008 – and vice versa.

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Source: Aither 2017.

Figure 5 Aither Southern Murray-Darling Basin Entitlement Index

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2. Valuation assessment

This section documents the evidence that Aither has used to determine the valuation of each entitlement type of relevance to this assessment. For those entitlement types for which Aither has adopted a market valuation approach, recent transaction data is documented along with any material assumptions made by Aither. For those entitlement for which Aither has also used an income valuation approach, the workings of this analysis along with any material assumptions made by Aither are presented.

2.1. New South Wales 10 Murray General Security

Table 7 New South Wales 10 Murray General Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$1,275 per ML
Material assumptions or limitations	• New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated • Aither has valued New South Wales 10 Murray General Security entitlements and New South Wales 10 Murray General Security – Murray Irrigation Limited equally (see Section 1.6.3)

Source: Aither 2017.

Prices for New South Wales 10 Murray General Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there has been a slight weakening of New South Wales Murray General Security entitlement prices in June 2017 (Table 8).

Table 8 New South Wales Water Register June 2017 summary – New South Wales Murray General Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Murray General Security6	$1,266	$1,262	$1,155	$1,400	6

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

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The last five water entitlement trades recorded for New South Wales Murray General Security entitlements in 2017 range from $1,150 per ML to $1,400 per ML (Table 9).

Table 9 Last five reported trades for 2017 – New South Wales Murray General Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Murray General Security	27/06/2017	300	$1,150
New South Wales Murray General Security	21/06/2017	45	$1,325
New South Wales Murray General Security	23/06/2017	100	$1,300
New South Wales Murray General Security	13/06/2017	564	$1,250
New South Wales Murray General Security	05/06/2017	75	$1,400

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

Table 10 presents the results of the analysis of water market intermediary trade data and quoted prices for for June 2017.

Table 10 Water market intermediary price summary June 2017 – New South Wales 10 Murray General Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales 10 Murray General Security	$1,300	$1,250	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

Only one sale of New South Wales 10 Murray General Security was reported by water market intermediaries for June 2017 (Table 11).

Table 11 Water market intermediary sales data for 2017 – New South Wales 10 Murray General Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
New South Wales 10 Murray General Security	07/06/2017	20	$1,300
New South Wales 10 Murray General Security	12/05/2017	56	$1,280
New South Wales 10 Murray General Security – Murray Irrigation Limited	21/04/2017	100	$1,250
New South Wales 10 Murray General Security – Murray Irrigation Limited	16/03/2017	100	$1,270
New South Wales 10 Murray General Security – Murray Irrigation Limited	10/01/2017	606	$1,350
New South Wales 10 Murray General Security – Murray Irrigation Limited	2/12/2016	400	$1,275

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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Valuation of Australian water entitlements

2.2. New South Wales 11 Murray High Security

Table 12 New South Wales 11 Murray High Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$3,500 per ML
Material assumptions or limitations	• New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated • Aither has valued New South Wales 11 Murray High Security entitlements and New South Wales 11 Murray High Security – Western Murray Irrigation Limited equally (see Section 1.6.3)

Source: Aither 2017.

Prices for New South Wales 11 Murray High Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there has been a strengthening of New South Wales Murray High Security entitlement prices in June 2017 (Table 13).

Table 13 New South Wales Water Register June 2017 summary – New South Wales Murray High Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Murray High Security6	$3,420	$3,451	$3,480	$3,600	4

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for New South Wales Murray High Security entitlements in 2017 range from $3,200 per ML to $3,600 per ML (Table 14).

Table 14 Last five reported trades for 2017 – New South Wales Murray High Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Murray High Security	23/06/2017	42	$3,480
New South Wales Murray High Security	06/06/2017	20	$3,600
New South Wales Murray High Security	06/06/2017	17	$3,200

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Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Murray High Security	05/06/2017	8	$3,300
New South Wales Murray High Security	19/05/2017	10	$3,420

Source: Aither 2017. Based on New South Wales Water Register 2017.

Notes: See end notes.

Table 15 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 15 Water market intermediary price summary June 2017 – New South Wales 11 Murray High Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales 11 Murray High Security	$3,500 - $3,540	$3,450	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

Transactions reported by water market intermediaries range between $3,500 per ML and $3,540 per ML for June 2017 (Table 16).

Table 16 Water market intermediary sales data for 2017 – New South Wales 11 Murray High Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
New South Wales 11 Murray High Security	26/06/2017	37	$3,540
New South Wales 11 Murray High Security	01/06/2017	10	$3,500

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.3. New South Wales 11 Murray General Security

Table 17 New South Wales 11 Murray General Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$1,350 per ML
Material assumptions or limitations	• New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated.

Source: Aither 2017.

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Prices for New South Wales 11 Murray General Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there has been a slight weakening of New South Wales Murray General Security entitlement prices in June 2017 (Table 18).

Table 18 New South Wales Water Register June 2017 summary – New South Wales Murray General Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Murray General Security6	$1,266	$1,262	$1,155	$1,400	6

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for New South Wales Murray General Security entitlements in 2017 range from $1,150 per ML to $1,400 per ML (Table 19).

Table 19 Last five reported trades for 2017 – New South Wales Murray General Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Murray General Security	27/06/2017	300	$1,150
New South Wales Murray General Security	21/06/2017	45	$1,325
New South Wales Murray General Security	23/06/2017	100	$1,300
New South Wales Murray General Security	13/06/2017	564	$1,250
New South Wales Murray General Security	05/06/2017	75	$1,400

Source: Aither 2017 Notes: See end notes.

Table 20 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 20 Water market intermediary price summary June 2017 – New South Wales 11 Murray General Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales 11 Murray General Security	$1,260 – $1,425	$1,350	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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Sales prices reported for New South Wales 11 Murray General Security by water market intermediaries range between $1,260 per ML and $1,425 per ML for June 2017 (Table 21).

Table 21 Water market intermediary sales data for 2017 – New South Wales 11 Murray General Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
New South Wales 11 Murray General Security	30/06/2017	250	$1,425
New South Wales 11 Murray General Security	26/06/2017	23	$1,325
New South Wales 11 Murray General Security	16/06/2017	10	$1,260

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

==> picture [62 x 61] intentionally omitted <==

2.4. New South Wales 11 Murray Supplementary

Table 22 New South Wales 11 Murray Supplementary – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$260 per ML
Material assumptions or limitations	• New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated
Source: Aither 2017.

Prices for New South Wales 11 Murray Supplementary entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there was no trade of New South Wales Murray Supplementary entitlement prices in May or June 2017 (Table 23).

Table 23 New South Wales Water Register June 2017 summary – New South Wales Murray Supplementary

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Murray Supplementary6	No reported trade	No reported trade	No reported trade	No reported trade	No reported trade

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

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The last five water entitlement trades recorded for New South Wales Murray Supplementary entitlements range from $120 per ML to $320 per ML (Table 24).

Table 24 Last five reported trades – New South Wales Murray Supplementary

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Murray Supplementary	2/02/2017	37	$120
New South Wales Murray Supplementary	23/01/2017	60	$320
New South Wales Murray Supplementary	7/12/2016	10	$220
New South Wales Murray Supplementary	5/12/2016	60	$320
New South Wales Murray Supplementary	17/08/2016	39	$230
Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

Table 25 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 25 Water market intermediary price summary June 2017 – New South Wales 11 Murray Supplementary

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales 11 Murray Supplementary	No recent trade	No recent trade	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

No trades have been recently reported by water market intermediaries for New South Wales 11 Murray Supplementary (Table 26).

Table 26 Water market intermediary sales data for 2017 – New South Wales 11 Murray Supplementary

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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2.5. New South Wales 13 Murrumbidgee High Security

Table 27 New South Wales 13 Murrumbidgee High Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$3,500 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for New South Wales 13 Murrumbidgee High Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there was no trade of New South Wales 13 Murrumbidgee High Security entitlements in June 2017 (Table 28).

Table 28 New South Wales Water Register June 2017 summary – New South Wales 13 Murrumbidgee High Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Murrumbidgee High Security	$3,500	No trade	No trade	No trade	No trade

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for New South Wales 13 Murrumbidgee High Security entitlements in 2017 range from $3,500 per ML to $3,600 per ML (Table 29).

Table 29 Last five reported trades for 2017 – New South Wales 13 Murrumbidgee High Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales 13 Murrumbidgee High Security	29/05/2017	45	$3,500
New South Wales 13 Murrumbidgee High Security	23/02/2017	130	$3,500
New South Wales 13 Murrumbidgee High Security	17/02/2017	444	$3,600
New South Wales 13 Murrumbidgee High Security	23/01/2017	30	$3,550
New South Wales 13 Murrumbidgee High Security	18/01/2017	100	$3,550

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

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Table 30 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 30 Water market intermediary price summary June 2017 – New South Wales Murrumbidgee 13 High Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
NSW Murrumbidgee 13 High Security	No recent trade	$3,500	$3,500 – $3,600	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

A single transaction valued at $3,480 per ML has been reported recently by water market intermediaries for New South Wales Murrumbidgee 13 High Security for 2017.

Table 31 Water market intermediary sales data for 2017 – New South Wales Murrumbidgee 13 High Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
NSW Murrumbidgee 13 High Security	11/04/2017	120	$3,480

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.6. New South Wales Lachlan General Security

Table 32 New South Wales Lachlan General Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$600 per ML
Material assumptions or limitations	• Aither has valued New South Wales Lachlan General Security entitlements and New South Wales Lachlan General Security – Jemalong Irrigation Limited entitlements equally (see Section 1.6.3)

Source: Aither 2017.

Prices for New South Wales Lachlan General Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there has been a strengthening of New South Wales Lachlan General Security entitlement prices in June 2017 (Table 33).

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Table 33 New South Wales Water Register June 2017 summary – New South Wales Lachlan General Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Lachlan General Security	$550	$650	No trade	$650	2

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for New South Wales Lachlan General Security entitlements in 2017 range from $550 per ML to $650 per ML (Table 34).

Table 34 Last five reported trades for 2017 – New South Wales Lachlan General Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Lachlan General Security	15/06/2017	30	$650
New South Wales Lachlan General Security	17/05/2017	100	$550
New South Wales Lachlan General Security	20/04/2017	197	$650
New South Wales Lachlan General Security	20/03/2017	100	$600
New South Wales Lachlan General Security	17/03/2017	570	$620

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

Table 35 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 35 Water market intermediary price summary June 2017 – New South Wales Lachlan General Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales Lachlan General Security	No recent trade	$550 – $600	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

A single transaction valued at $550 per ML has been reported recently by water market intermediaries for New South Wales Lachlan General Security – Jemalong Irrigation Limited for 2017 (Table 36).

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Table 36 Water market intermediary sales data for 2017 – New South Wales Lachlan General Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
New South Wales Lachlan General Security – Jemalong Irrigation Limited	28/01/2017	100	$550

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.7. New South Wales Macquarie General Security

Table 37 New South Wales Macquarie General Security – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$1,300 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for New South Wales Macquarie General Security entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the New South Wales Water Register, there has been a weakening of New South Wales Macquarie General Security entitlement prices in June 2017 (Table 38).

Table 38 New South Wales Water Register June 2017 summary – New South Wales Macquarie General Security

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
New South Wales Macquarie General Security	$1,319	$1,250	$1,250	$1,250	1

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for New South Wales Macquarie General Security entitlements in 2017 range from $1,250 per ML to $1,350 per ML (Table 39).

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Table 39 Last five reported trades for 2017 – New South Wales Macquarie General Security

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
New South Wales Macquarie General Security	26/06/2017	20	$1,250
New South Wales Macquarie General Security	09/05/2017	124	$1,300
New South Wales Macquarie General Security	02/05/2017	74	$1,350
New South Wales Macquarie General Security	19/04/2017	150	$1,300
New South Wales Macquarie General Security	12/04/2017	70	$1,300

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

Table 40 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 40 Water market intermediary price summary June 2017 – New South Wales Macquarie General Security

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
New South Wales Macquarie General Security	No recent trade	No recent trade	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

There were no sales reported by water market intermediaries for June 2017 (Table 41).

Table 41 Water market intermediary sales data for 2017 – New South Wales Macquarie General Security

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.8. Victorian 1A Greater Goulburn HRWS

Table 42 Victorian 1A Greater Goulburn HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,600 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

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Prices for Victorian 1A Greater Goulburn HRWS entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the Victorian Water Register, there has been a strengthening of Victorian 1A Greater Goulburn HRWS entitlement prices in June 2017 (Table 43).

Table 43 Victorian Water Register June 2017 summary – Victorian 1A Greater Goulburn HRWS

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
Victorian 1A Greater Goulburn HRWS	$2,531	$2,600	$2,566	$2800	64
Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for Victorian 1A Greater Goulburn HRWS entitlements in 2017 range from $2,550 per ML to $2,600 per ML (Table 44).

Table 44 Last five reported trades for 2017 – Victorian 1A Greater Goulburn HRWS

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
Victorian 1A Greater Goulburn HRWS	30/06/2017	100	$2,600
Victorian 1A Greater Goulburn HRWS	30/06/2017	213.5	$2,600
Victorian 1A Greater Goulburn HRWS	27/06/2017	288.5	$2,550
Victorian 1A Greater Goulburn HRWS	21/06/2017	111.1	$2,550
Victorian 1A Greater Goulburn HRWS	19/06/2017	101.5	$2,550

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

Table 45 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 45 Water market intermediary price summary June 2017 – Victorian 1A Greater Goulburn HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 1A Greater Goulburn HRWS	$2,550	$2,600	No recent trade	$2,700

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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Water market intermediaries have reported trades of between $2,500 to $2,600 per ML during 2017.

Table 46 Water market intermediary sales data for 2017 – Victorian 1A Greater Goulburn HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
Victorian 1A Greater Goulburn HRWS	06/06/2017	5	$2,500
Victorian 1A Greater Goulburn HRWS	03/05/2017	233	$2,600
Victorian 1A Greater Goulburn HRWS	03/05/2017	16	$2,560
Victorian 1A Greater Goulburn HRWS	03/05/2017	100	$2,600

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

==> picture [62 x 61] intentionally omitted <==

2.9. Victorian 3 Lower Goulburn HRWS

Table 47 Victorian 3 Lower Goulburn HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,600 per ML
Material assumptions or limitations	Vic 3 Lower Goulburn HRWS share similar characteristics with Vic 1A Greater Goulburn, Aither has valued this entitlement type at the same market value as Vic 1A Greater Goulburn HRWS and LRWS – noting that there are restrictions on trading water from Vic 3 Lower Goulburn back into Vic 1A Greater Goulburn which is not expected to impact the market value materially

Source: Aither 2017.

Prices for Victorian 3 Lower Goulburn HRWS entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the Victorian Water Register, there has been an increase in trade activity of Victorian 3 Lower Goulburn HRWS in June 2017 (Table 48).

Table 48 Victorian Water Register June 2017 summary – Victorian 3 Lower Goulburn HRWS

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
Victorian 3 Lower Goulburn HRWS	No trade	$2,561	No trade	$2,600	3

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

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The last five water entitlement trades recorded for Victorian 3 Lower Goulburn HRWS entitlements in 2017 range from $2,100 per ML to $2,650 per ML (Table 49).

Table 49 Last five reported trades for 2017 – Victorian 3 Lower Goulburn HRWS

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
Victorian 3 Lower Goulburn HRWS	22/06/2017	261	$2,100
Victorian 3 Lower Goulburn HRWS	19/06/2017	75	$2,560
Victorian 3 Lower Goulburn HRWS	27/03/2017	70	$2,650
Victorian 3 Lower Goulburn HRWS	23/01/2017	12	$2,100
Victorian 3 Lower Goulburn HRWS	22/01/2017	32	$2,387

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

Table 50 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 50 Water market intermediary price summary June 2017 – Victorian 3 Lower Goulburn Murray HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 3 Lower Goulburn HRWS	No recent trade	No recent trade	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

No recent transactions of Victorian 3 Lower Goulburn HRWS have been reported by water market intermediaries for 2017.

Table 51 Water market intermediary sales data for 2017 – Victorian 3 Lower Goulburn HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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2.10. Victorian 4A Campaspe HRWS

Table 52 Victorian 4A Campaspe HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,350 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for Victorian 4A Campaspe HRWS entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the Victorian Water Register, there has been an increase in trade activity of Victorian 4A Campaspe HRWS in June 2017 (Table 53).

Table 53 Victorian Water Register June 2017 summary – Victorian 4A Campaspe HRWS

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
Victorian 4A Campaspe HRWS	No trade	$2,346	No trade	$2,355	2

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for Victorian 4A Campaspe HRWS entitlements in 2017 range from $2,300 per ML to $2,400 per ML (Table 54).

Table 54 Last five reported trades for 2017 – Victorian 4A Campaspe HRWS

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
Victorian 4A Campaspe HRWS	23/06/2017	15	$2,300
Victorian 4A Campaspe HRWS	22/06/2017	77	$2,355
Victorian 4A Campaspe HRWS	07/04/2017	2	$2,300
Victorian 4A Campaspe HRWS	10/02/2017	77	$2,355
Victorian 4A Campaspe HRWS	31/01/2017	40	$2,400

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

Table 55 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

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Table 55 Water market intermediary price summary June 2017 – Victorian 4A Campaspe HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 4A Campaspe HRWS	No recent trade	No recent trade	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

No recent transactions of Victorian 4A Campaspe HRWS have been reported by water market intermediaries for 2017 (Table 56).

Table 56 Water market intermediary sales data for 2017 – Victorian 4A Campaspe HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.11. Victorian 5A Loddon HRWS

Table 57 Victorian 5A Loddon HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,100 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for Victorian 5A Loddon HRWS entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the Victorian Water Register, there has been an increase in trade activity of Victorian 5A Loddon HRWS in June 2017 (Table 58).

Table 58 Victorian Water Register June 2017 summary – Victorian 5A Loddon HRWS

May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
No trade	$2,031	$1,700	$2,200	4

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

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The last five water entitlement trades recorded for Victorian 5A Loddon HRWS entitlements in 2017 range from $1,700 per ML to $2,200 per ML (Table 59).

Table 59 Last five reported trades for 2017 – Victorian 5A Loddon HRWS

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
Victorian 5A Loddon HRWS	23/06/2017	74	$1,700
Victorian 5A Loddon HRWS	22/06/2017	11	$2,200
Victorian 5A Loddon HRWS	07/06/2017	60	$2,000
Victorian 5A Loddon HRWS	07/02/2017	35	$2,000
Victorian 5A Loddon HRWS	06/02/2017	65	$2,000
Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

Table 60 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 60 Water market intermediary price summary June 2017 – Victorian 5A Loddon HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 5A Loddon HRWS	No recent trade	No recent trade	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

No recent transactions of Victorian 5A Loddon HRWS have been reported by water market intermediaries for 2017.

Table 61 Water market intermediary sales data for 2017 – Victorian 5A Loddon HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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2.12. Victorian 6 Murray HRWS

Table 62 Victorian 6 Murray HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,650 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for Victorian 6 Murray HRWS entitlements have been sourced from state water registries and water market intermediaries. These reported transactions form the basis of our valuation.

Based on analysis of trades registered on the Victorian Water Register, there has been a weakening of Victorian 6 Murray HRWS entitlement prices in June 2017 (Table 63).

Table 63 Victorian Water Register June 2017 summary – Victorian 6 Murray HRWS

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
Victorian 6 Murray HRWS	$2,659	$2,630	$2,627	$2,800	18

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for Victorian 6 Murray HRWS entitlements in 2017 range from $2,560 per ML to $2,650 per ML (Table 64).

Table 64 Last five reported trades for 2017 – Victorian 6 Murray HRWS

Table 64 Last five reported trades for 2017 – Vic	torian 6 Murra	y HRWS
Sale description	Date registered	Volume (ML)	Sale Price ($/ML)
Victorian 6 Murray HRWS	30/06/2017	40	$2,650
Victorian 6 Murray HRWS	30/06/2017	60	$2,650
Victorian 6 Murray HRWS	27/06/2017	108	$2,560
Victorian 6 Murray HRWS	26/06/2017	192.5	$2,650
Victorian 6 Murray HRWS	22/06/2017	1,680	$2,615

Source: Aither 2017. Based on New South Wales Water Register 2017. Notes: See end notes.

Table 65 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

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Table 65 Water market intermediary price summary June 2017 – Victorian 6 Murray HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 6 Murray HRWS	$2,650	$2,600	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

No recent transactions of Victorian 6 Murray HRWS have been reported by water market intermediaries for 2017.

Table 66 Water market intermediary sales data for 2017 – Victorian 6 Murray HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.13. Victorian 7 Murray HRWS

Table 67 Victorian 7 Murray HRWS – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$2,915 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for Victorian 7 Murray HRWS entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the Victorian Water Register, there has been a weakening of Victorian 7 Murray HRWS entitlement prices in June 2017 (Table 68).

Table 68 Victorian Water Register June 2017 summary – Victorian 7 Murray HRWS

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
Victorian 7 Murray HRWS	$2,854	$2,824	$2,898	$3,200	66

Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

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The last five water entitlement trades recorded for Victorian 7 Murray HRWS entitlements in 2017 range from $2,850 per ML to $2,950 per ML (Table 69)

Table 69 Last five reported trades for 2017 – Victorian 7 Murray HRWS

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
Victorian 7 Murray HRWS	30/06/2017	50	$2,950
Victorian 7 Murray HRWS	23/06/2017	140	$2,950
Victorian 7 Murray HRWS	21/06/2017	59.4	$2,900
Victorian 7 Murray HRWS	19/06/2017	44.2	$2,850
Victorian 7 Murray HRWS	16/06/2017	100	$2,925
Source: Aither 2017. Based on Victorian Water Register 2017. Notes: See end notes.

Table 70 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 70 Water market intermediary price summary June 2017 – Victorian 7 Murray HRWS

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
Victorian 7 Murray HRWS	$2,800 – $2,985	$2,900	No recent trade	Asking $3,000

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

Water market intermediaries reported prices of between $2,785 and $2,985 per ML during June 2017 (Table 71).

Table 71 Water market intermediary sales data for 2017 – Victorian 7 Murray HRWS

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
Victorian 7 Murray HRWS	14/06/2017	138	$2,985
Victorian 7 Murray HRWS	22/02/2017	162.1	$2,800
Victorian 7 Murray HRWS	21/11/2016	86.9	$2,785

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

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2.14. South Australian Murray High Security – Class 3

Table 72 South Australian Murray High Security – Class 3 – Valuation summary

Item	Comment
Valuation approach	Market approach
Aither 30 June 2017 valuation	$3,100 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Prices for South Australian Murray High Security – Class 3 entitlements have been sourced from state water registers and water market intermediaries. These reported transactions form the basis of our valuation using a market valuation approach.

Based on analysis of trades registered on the South Australian Water Register, there has been a strengthening of South Australian Murray High Security – Class 3 entitlement prices in June 2017 (Table 73).

Table 73 South Australian Water Register June 2017 summary – South Australian Murray High Security – Class 3

Entitlement type	May 2017 VWAP ($/ML) 1, 3	June 2017 VWAP ($/ML) 1, 3	Last week of June 2017 VWAP ($/ML)1, 4	Max June 2017 price ($/ML)3	Number of trades (June **2017)5 **
South Australian Murray High Security – Class 3	$3,003	$3,100	$3,100	$3,100	10

Source: Aither 2017. Based on South Australian Water Register 2017. Notes: See end notes.

The last five water entitlement trades recorded for South Australian Murray High Security – Class 3 entitlements in June 2017 range from $3,007 per ML to $3,100 per ML (Table 74).

Table 74 Last five reported trades for 2017 – South Australian Murray High Security – Class 3

Entitlement type	Date registered	Volume (ML)	Reported price ($/ML)
South Australian Murray High Security – Class 3	21/06/2017	50	$3,100
South Australian Murray High Security – Class 3	21/06/2017	20	$3,100
South Australian Murray High Security – Class 3	09/06/2017	20	$3,100
South Australian Murray High Security – Class 3	06/06/2017	320	$3,007
South Australian Murray High Security – Class 3	01/06/2017	20	$3,007

Source: Aither 2017. Based on South Australian Water Register 2017. Notes: See end notes.

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Table 75 presents the results of the analysis of water market intermediary trade data and quoted prices for June 2017.

Table 75 Water market intermediary price summary June 2017 – South Australian Murray High Security – Class 3

Entitlement type	Ruralco Water ($/ML)	H2OX ($/ML)	Wilks Water ($/ML)	Landmark WATER ($/ML)
South Australian Murray High Security – Class 3	$3,100	$3,150	No recent trade	No recent trade

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

Water markets intermediary transactions reported were both at $3,100 per ML during June 2017 (Table 76).

Table 76 Water market intermediary sales data for 2017 – South Australian Murray High Security – Class 3

Entitlement type	Date reported	Volume (ML)	Reported price ($/ML)
South Australian Murray High Security – Class 3	26/06/2017	20	$3,100
South Australian Murray High Security – Class 3	19/06/2017	30	$3,100

Source: Aither 2017. Based on Ruralco Water, H2OX, Wilks Water and Landmark WATER 2017. Notes: See end notes.

2.15. South Australian Mallee Prescribed Wells Area – Red Parilla Zone

Table 77 South Australian Mallee Prescribed Wells Area – Red Parilla Zone – Valuation summary

Item	Comment
Valuation approach	Market approach and income approach
Aither 30 June 2017 valuation	$1,500 per ML
Material assumptions or limitations	None noted

Source: Aither 2017.

Based on information provided on the South Australian Water Register, there has never been a trade of South Australian Murray High Security Mallee Prescribed Wells Area – Red Parilla Zone with a commercial price. This makes valuing this entitlement type using the market approach challenging.

Duxton confirmed with Aither that in 2016-17 it purchased a 500 ML parcel of this entitlement type for $1,500 per ML. Based on knowledge of the market and area in question, this price appears reasonable, but there is no publicly available market data available to Aither to compare this purchase price with.

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To validate the purchase price of $1,500 per ML, Aither has also employed an income valuation approach based on the known lease agreement between Duxton and the lessee for this entitlement parcel (i.e. using a discounted cash flow (DCF) analysis). Aither understands that the current lease agreement is for $135 per ML per annum. For the purposes of DCF analysis, Aither has assumed that this lease can be achieved into perpetuity (appraisal period of 120 years). Aither has not considered transaction and lease management costs in this analysis.

To arrive at a valuation of $1,500 per ML, an approximate 9 per cent real discount rate is required as an assumption in the DCF analysis. Based on Aither knowledge of the market in question, its relatively small size and therefore comparatively smaller potential lease market and higher counterparty risk, a 9 per cent real discount rate is a reasonable assumption to make. Table 78 below provides a discount rate sensitivity analysis for the DCF analysis and estimate of market value for this entitlement type.

Table 78 South Australian Mallee Prescribed Wells Area – Red Parilla Zone – Income approach DCF analysis sensitivity table

Real discount rate applied (%)	Estimated market value ($/ML)
5%	$2,692.26
7%	$1,928.00
9%	$1,499.95
11%	$1,227.27

Source: Aither 2017. Notes: See end notes.

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3. Portfolio valuation

3.1. Duxton Portfolio

Based on the market valuations adopted for each relevant entitlement type, the 30 June 2017 portfolio value of the Duxton Portfolio is determined to be $69.6 million. Table 79 provides a summary portfolio value assessment of the Duxton Portfolio as at this date.

Table 79 Duxton Portfolio value – 30 June 2017

	Water Source / Entitlement type	Volume held (ML)	Estimate of market value – 30 June 2017 ($/ML)	Estimated value of portfolio – 30 June 2017 ($)
	New South Wales 10 Murray Regulated River
	General Security	3,062	$1,275	$3,904,050
	New South Wales 10 Murray Regulated River– Murray Irrigation Limited
	General Security	3,624	$1,275	$4,620,600
	New South Wales 11 Murray Regulated River
	High Security	3,166.15	$3,500	$11,081,525
	General Security	1,155.41	$1,350	$1,559,803.50
	Supplementary	83	$260	$21,580
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	High Security	2,304	$3,500	$8,064,000
	New South Wales 13 Murrumbidgee Regulated River
	High Security	1,776	$3,500	$6,216,000
	New South Wales Lachlan Regulated River
	General Security	4,138	$600	$2,482,800
	New South Wales Lachlan Regulated River– Jemalong Irrigation Limited
	General Security	2,660	$600	$1,596,000
	New South Wales Macquarie Regulated River
	General Security	226	$1,300	$293,800
	Victorian 1A Greater Goulburn
	High Reliability Water Share	2,522.90	$2,600	$6,559,540
	Victorian 3 Lower Goulburn
	High Reliability Water Share	120	$2,600	$312,000
	Victorian 4A Campaspe
	High Reliability Water Share	60	$2,350	$141,000
	Victorian 5A Loddon
	High Reliability Water Share	239	$2,100	$501,900
	Victorian 6 Murray
	High Reliability Water Share	3,772.60	$2,650	$9,997,390

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	Water Source / Entitlement type	Volume held (ML)	Volume held (ML)	Estimate of market value – 30 June 2017 ($/ML)	Estimated value of portfolio – 30 June 2017 ($)
	Victorian 7 Murray
	High Reliability Water Share	3,409.50		$2,915	$9,938,692.50
	South Australia Murray Regulated River
	High Security - Class 3	509		$3,100	$1,577,900
	South Australia Mallee Prescribed Wells Area
	Parilla Red Zone		500	$1,500	$750,000
	Total		33,327.56		$69,618,581

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

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3.2. Acquisition Portfolio

Based on the market valuations adopted for each relevant entitlement type, the 30 June 2017 portfolio value of the Acquisition Portfolio is $7.3 million. Table 80 provides a summary of the portfolio value assessment of the Acquisition Portfolio as at this date.

Table 80 Acquisition Portfolio value – 30 June 2017

	Water Source / Entitlement type	Volume held (ML)	Estimate of market value 30 June 2017 ($/ML)	Estimated value of portfolio 30 June 2017 ($)
	New South Wales 11 Murray Regulated River
	High Security	1,539	$3,500	$5,386,500
	General Security	511	$1,350	$689,850
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	High Security	352	$3,500	$1,232,000
	Total	2,402		$7,308,350

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

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4. End notes

State Water Register June 2017 summary tables

1) All $0 trades were excluded from price calculations. Other outliers are excluded if they are judged to bias the VWAP calculation. 2) Only trades reported in May 2017 are included in this calculation. 3) Only trades reported in June 2017 are included in this calculation. 4) Trades reported from 23 June to 30 June 2017 are included in this calculation. 5) Number of trades excludes $0 and trades with outlier prices. 6) The New South Wales Water Register does not report entitlement trades in a way that allows New South Wales 10 Murray High Security and New South Wales 11 Murray High Security trades to be disaggregated.

Last five reported trades for 2017 tables

Aither has cleaned trade data sourced from state water registers for outlier trades. Date registered is not indicative of sale agreement date. For New South Wales, Aither has only considered 71Q entitlement trades. The New South Wales Water Register does not report entitlement trades in a way that allows New South Wales 10 Murray High Security and New South Wales 11 Murray High Security trades to be disaggregated.

Water market intermediary sales data for 2017 tables

Date reported is not necessarily indicative of sale agreement date.

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Attachment A – Encumbrance assessment

Instructions

On 12 July 2017, Aither was instructed by Pitcher Partners Corporate Pty Ltd (Pitcher Partners) to provide an independent fair market valuation of Australian water entitlement types. The entitlements chosen for valuation relate to the current Duxton Water Limited (Duxton) water entitlement portfolio (Duxton Portfolio) and a potential acquisition water entitlement portfolio (Acquisition Portfolio).

A component of this engagement involved Aither being instructed to assess the positive or negative impact that encumbrances, such as a lease agreement, could have on the value of specific entitlements held by each portfolio and the portfolios in aggregate.

This attachment to the main valuation report explores the potential market value impacts of current water entitlement encumbrance.

Types and potential market value impacts of encumbrances

Types of encumbrances

An encumbrance is a claim against an asset by a party that is not the registered owner – examples of financial encumbrances include mortgages or leases. In specific relation to water entitlements, the most common type of encumbrance is a water entitlement lease (technically referred to as ‘term transfers’ by some Australian state governments).

Water entitlement leases involve the transfer of the use of the water entitlement from the owner of the asset to another party for a fixed-term (generally water entitlements are leased to an agricultural enterprise that will use the water allocated to the entitlement). For the period of the lease, the costs associated with holding the entitlement are generally paid by the lessee and the allocation risk is also borne by the lessee (which is different to other property leases where the lessor directly pays asset holding costs and passes these on through the lease fee). For use of a water entitlement, a lease fee (rent) is paid to the owner of the entitlement.

While there are market conventions, there is no industry standard water entitlement lease agreement and in many cases the conditions and terms attached to lease agreements can be relatively bespoke. Water entitlement lease fees can be paid annually, quarterly or monthly, can be a fixed rate or a percentage of the entitlement market value, can be adjusted for CPI. Term extensions options are not uncommon.

Given the value of water entitlements, mortgages are another type of common entitlement encumbrance (i.e. where a bank or financial institution registers a financial claim against a specific water entitlement).

Potential market value impacts of encumbrances

An encumbrance, if material, can impact the ability to transfer the asset in a market or limit the use of this asset by the new owner. In comparison to an unencumbered asset, which may have more trade flexibility or less restrictions on use, an encumbered asset may be valued by some buyers at a

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discount to market value to reflect the materiality of limitations. Alternatively, an encumbered water entitlement asset with an above market and agreed future lease income could be valued by some buyers at a premium to market if the terms of this lease were materially advantageous.

Two key aspects will generally determine the potential market value impacts of specific encumbrances over water entitlements:

• Lease terms compared to market averages – if lease terms for a specific encumbered entitlement are materially better or worse than market averages, an associated premium or discount may be applied to the market value.

• Type of buyer – if a potential buyer was an investor with similar intentions and investment horizons as Duxton, no or some premium may be paid to acquire leased entitlements on the basis that there are secured and known returns from these assets. If a potential buyer was an agricultural enterprise that wanted to use the water allocated to the entitlements or have use of the entitlement accounts, it is likely that a discount would be applied to the market value of specific encumbered entitlements.

Furthermore, guidelines surrounding Commonwealth Government water entitlement purchases (buybacks) and irrigation efficiency upgrades do not allow encumbered water entitlements to be sold or transferred to the Commonwealth Government – this includes if there is a current mortgage over the entitlement. This has the effect of limiting the potential market for currently encumbered water entitlements and this could have a material impact on the value of these entitlements. However, on the basis that further Commonwealth Government water entitlement purchases are unlikely, Aither does not consider this to be a material concern in the context of this valuation.

Identification of relevant encumbrances

Between 7 July 2017 and 21 July 2017, Duxton provided Aither with encumbrance details and supporting documentation relevant to entitlements held by the Duxton Portfolio and Acquisition Portfolio. As instructed, Aither has relied on this information to make an assessment and has not undertaken its own independent searching for registered interests over entitlements held.

Duxton Portfolio

Based on documents provided, Aither has identified 9 encumbrances in relation to water entitlements held in the Duxton Portfolio. The details of these encumbrances are documented below in Table 81 and Table 82. While the terms of every lease differ slightly, at a portfolio level Aither finds the following:

• By volume, 56 per cent of the Duxton Portfolio is currently leased.

• The weighted average annual current yield of the Duxton Portfolio is 5.91 per cent (Aither was not provided with water entitlement purchase prices so this is not a calculation of yield on cost).

• Current leases over water entitlements held by the Duxton Portfolio have a volume weighted average term to expiry of 5.9 years.

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Acquisition Portfolio

Based on documents provided by Duxton to Aither, there are no ‘current’ encumbrances in relation to water entitlement types held by the Acquisition Portfolio. There are however proposed encumbrances that may apply at the point of acquisition of this portfolio by Duxton (i.e. a purchase and lease back approach). Aither has been provided with the details of these proposed encumbrances.

While Aither understands that it is Duxton intention to lease back the entitlements that will be potentially acquired through the Acquisition Portfolio, at the date of reporting these lease agreements are yet to be finalised and have not been executed. In this context, we have not provided a detailed summary of the proposed lease terms below.

Aither is aware that there are two proposed leases. The first is for New South Wales 11 Murray High Security (1,539 ML) and New South Wales 11 Murray General Security (511 ML) entitlement types for a proposed weighted annual yield of 6.5 per cent. The second lease is for New South Wales 11 Murray High Security – Western Murray Irrigation Limited (352 ML) for a proposed annual yield of 6.5 per cent.

Comparative analysis

Market data on water entitlement leases

The southern Murray-Darling Basin states (New South Wales, Victoria and South Australia) have publicly-accessible and reliable water registers that among other things provide the ability to undertake title searches. It is a requirement that the nature (but not specific terms) of any encumbrances on specific rights or approvals are recorded on this documentation.

However, unlike for allocation and entitlement trade, there is limited public data on entitlement lease prices and terms. For Victoria and South Australia there is no contemporary public register of entitlement lease prices or terms but are made public through ABARES a year following registration. The New South Wales Government does not publicly release lease details. In general, the details of most lease deals are kept commercial in confidence by the parties or intermediary involved. In comparison to other asset classes, such as commercial real estate or government and corporate bonds, assessing market average water entitlement yields is very difficult due to the lack of publicly available transaction evidence.

Available transaction data

At the time of valuation, public data on lease prices and terms was available for Victorian and South Australian entitlement types up to the conclusion of the 2015-16 water year. Evidence of relevant transactions is provided in Table 83.

Current market yields typically range from 4 per cent to 6 per cent across the various entitlement types being leased on the open market. In comparison, the yields being achieved by Duxton (Table 81 and Table 82) range between 5 per cent to 9 per cent are therefore the Duxton Portfolio leases are at the upper end of the market.

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|||||||||||||||||||||||AITHER|Final Report
55|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Current annual
yield (%)|1%|2%|4%|4%|7%|4%|4%|4%|5%|5%|6%|4%|5%|3%|3%|4%|1%|2%|3%|4%|||
||||||||||||||||||||||||
||||||||||||||||||||||||
|Annualised lease
price ($/ML)|$22.23|$47.67|$92.27|$92.27|$177.46|$113.68|$103.94|$103.24|$130.89|$138.43|$149.95|$93.42|$128.15|$88.17|$88.55|$101.17|$42.80|$45.00|$92.27|$102.52|||
||||||||||||||||||||||||
|Volume (ML)|||||||||||||||||||||||
||300|300|200|400|100|495.7|797.3|340|1,650|176.1|8.1|103.2|823.5|200|250|1,006|500|500|1,000|500|||
||||||||||||||||||||||||
|Lease term (years)|||||||||||||||||||||||
||3|3|3|3|2.3|4.5|4.9|5|4.2|4.2|8|3|3|5|5|4.6|2.7|3|3|3|||
||||||||||||||||||||||||
||||||||||||||||||||||||
|Financial Year
commencement|2014-15|2015-16|2014-15|2014-15|2014-15|2014-15|2014-15|2014-15|2014-15|2014-15|2013-14|2015-16|2015-16|2014-15|2014-15|2014-15|2014-15|2014-15|2013-14|2014-15|||
||||||||||||||||||||||||
|Entitlement type|||||||||||||||||||||||
||Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 1A Greater Goulburn HRWS|Victorian 6 Murray HRWS|Victorian 6 Murray HRWS|Victorian 6 Murray HRWS|Victorian 6 Murray HRWS|Victorian 6 Murray HRWS|Victorian 7 Murray HRWS|Victorian 7 Murray HRWS|Victorian 7 Murray HRWS|Victorian 7 Murray HRWS|||
||||||||||||||||||||||||

																			Source: Aither 2017. Based on ABARES 2017.
Current annual yield (%)	4%	4%	3%	6%	5%	5%	4%	4%	4%	5%	5%	2%	3%	3%	3%	4%	3%	4%
Annualised lease price ($/ML)	$118.00	$118.33	$93.43	$160.33	$139.10	$150.00	$120.83	$120.83	$125.93	$140.92	$143.92	$65.00	$104.58	$107.37	$107.59	$137.31	$98.48	$109.09
Volume (ML)
	300	2,000	3,000	400	400	900	200	1,000	500	1,200	500	100	306	95	290	1,005	24	10
Lease term (years)
	3	3	4	2.5	3	3	5	5	5	5	5	3	3	5	5	5	11	11
Financial Year commencement	2014-15	2015-16	2013-14	2014-15	2015-16	2015-16	2014-15	2015-16	2014-15	2014-15	2015-16	2013-14	2014-15	2014-15	2014-15	2015-16	2014-15	2013-14
Entitlement type
	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	Victorian 7 Murray HRWS	South Australian 3A Murray High Security	South Australian 3A Murray High Security	South Australian 3A Murray High Security	South Australian 3A Murray High Security	South Australian 3A Murray High Security	South Australian 3A Murray High Security	South Australian 3A Murray High Security

In the absence of public lease data for New South Wales, Aither has reviewed commercial in confidence lease agreements for similar water entitlement types to those held by the Duxton Portfolio and the Acquisition Portfolio. Current yields for these New South Wales lease agreements are within a range of 5 per cent to 7 per cent. These yields are similar to yields currently agreed for encumbered New South Wales entitlements held by the Duxton Portfolio and proposed for the not yet executed lease agreements related to the Acquisition Portfolio.

Other material lease terms

While there are market conventions, there is no industry standard water entitlement lease agreement and in many cases the conditions and terms attached to lease agreements can be relatively bespoke. Beyond the agreed lease fee, other conditions and terms can have a material impact on the market value of encumbered water entitlements. In this context, Aither has reviewed the current lease agreements relating to the Duxton Portfolio and made the following findings:

• Long average term to expiry – current leases over water entitlements held by the Duxton Portfolio have a volume weighted average term to expiry of 5.9 years. Market average lease terms are approximately 3 to 4 years, so the average term to expiry of the Duxton Portfolio leases are above the historical market average. For the correct buyer, such as an institutional investor with similar investment intentions to Duxton, the above average term to expiry for leases could be advantageous for the marketing of the Duxton Portfolio for sale.

• Protection against inflation – by volume, only 6 per cent of Duxton Portfolio leases are adjusted for CPI in future years (for these leases CPI adjustment only starts from 2020-21 onwards). Given the above average term to expiry of the Duxton Portfolio leases, inflation over the forward 5 to 6 year period will dilute the current yields generated by Duxton Portfolio leases. This may be detrimental to the marketing of the Duxton Portfolio for sale.

• Lease fee reset at option – the majority of Duxton Portfolio leases have options over them that allow the lessee to re-lease the water entitlement(s) upon initial lease expiry. In most cases, the lease fee for the option period has been agreed as a set percentage of water entitlement market value at the point in time that the option is taken (effectively a current yield). Knowing the future yield of the investment if the option is taken is advantageous as it insulates the owner of the entitlement against the impact that capital value appreciation over this period will have on current yield calculations. In all cases the agreed yields on these options are within market averages and Aither would not be expect these characteristics to be detrimental to the marketing of the Duxton Portfolio for sale.

• Current leases negotiated between related parties – the current Duxton Portfolio leases were negotiated between related parties and this has implications for a purchaser of the Duxton Portfolio. For example, if the purchaser’s investment horizon assumed the need to renegotiate leases at the point options can be taken or following an option period expiry and the purchaser believed that it would not be able to negotiate as advantageous terms as Duxton has and could in the future, this may be detrimental to the marketing of the Duxton Portfolio for sale.

Conclusion

Based on the analysis and discussion presented in this section, Aither concludes that if an investor with similar intentions to Duxton was the potential purchaser of the Duxton Portfolio or Acquisition Portfolio, the high lease weight of the portfolios, at or above market yields and above market average terms to expiry are likely to increase the attractiveness of the portfolios and therefore buyer willingness to pay.

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Our market intelligence suggests that there are several large domestic and foreign investment vehicles (including superannuation funds and banks) seeking to deploy capital to acquire large parcels of water entitlements in the Murray-Darling Basin and Australian more broadly. Some of these investors would look favourably on the current lease arrangements in place for the Duxton Portfolio. While based on current leases the Duxton Portfolio may be more attractive compared to alternative portfolios, and this may command some premium to market for the right buyer, most buyers may not be willing to pay a large premium to market value (Table 1 and Table 2).

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Attachment B – Material premiums or discounts assessment

Instructions

On 12 July 2017, Aither was instructed by Pitcher Partners Corporate Pty Ltd (Pitcher Partners) to provide an independent fair market valuation of Australian water entitlement types. The entitlements chosen for valuation relate to the current Duxton Water Limited (Duxton) water entitlement portfolio (Duxton Portfolio) and a potential acquisition water entitlement portfolio (Acquisition Portfolio).

A component of this engagement involved Aither being instructed to provide advice about any material premiums or discounts that could be applied based on the nature or characteristics of specific entitlements or the strategic nature of each portfolio in aggregate.

Specifically, this attachment to the main valuation report assesses the size and strategic nature of specific entitlements listed at Table 4 and Table 5 of the main valuation report, and whether as a result it would be appropriate to attach a significant premium or discount to the market values established. While the valuation date was agreed as Friday 30 June 2017 the assessment of potential premiums and discounts has been conducted as at the date of this report (21 July 2017). In this context, this attachment also explores the value of 2017-18 water allocations allocated to each of the portfolios over this period.

Market value discounts for small volume entitlement parcels

While in aggregate the Duxton Portfolio and Acquisition Portfolio are both sizeable assets, the size of some of the entitlements within the portfolios are relatively small in the context of entitlements on issue in the water systems in which they are located.

Anecdotal market evidence suggests that when very small volume entitlement parcels are sold, a discount to the average market value for equivalent but larger water entitlement parcels is attached. The reason for this discounting is the fact that water entitlement transactions incur both variable brokerage fees but fixed state government processing fees. The logic being that the sale of very small entitlement parcels incurs proportionally higher dollar per ML transaction costs because of the fixed fees.

Discounting of small parcels can be observed within the entitlement market when price and volume trends are assessed. Figure 6 demonstrates this trend in relation to Victorian 7 Murray HRWS entitlements over the course of water year 2016-17. Discounting appears to be occurring for those parcels below 20 ML, with this being particularly the case in relation to parcels below 10 ML – note, Aither has not undertaken formal statistical relationship analysis.

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Figure 6 Victorian 7 Murray HRWS entitlement trade price and volume comparison –2016-17

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Source: Aither 2017. Based on the Victorian Water Register 2017. Note: Outliers have been removed for illustration purposes. Aither has not undertaken statistical relationship analysis.

Median entitlement trade parcel volumes

To assess whether the entitlements within the Duxton Portfolio and Acquisition Portfolio could attract a discount due to their small volume, we have calculated the median volume of relevant entitlement trade parcels over water years 2007-08 to 2016-17 (Table 84). Those entitlements held by the Duxton Portfolio and Acquisition Portfolio that are significantly lower in volume that the relevant median have been assessed as having the potential to attract a discount due to their small volume.

Table 84 Median entitlement trade parcel volumes – 2007-08 to 2016-17

Water source and entitlement type	**Median traded parcel size (ML)1 **
New South Wales Murray General Security2	165
New South Wales Murray High Security2	61
New South Wales Murray Supplementary Water2	63
New South Wales Murrumbidgee High Security	150
New South Wales Lachlan General Security	350
New South Wales Macquarie General Security	201.5
Victorian 1A Greater Goulburn HRWS	27
Victorian 3 Lower Goulburn LRWS	14.7
Victorian 4A Campaspe HRWS	26.2
Victorian 5A Loddon HRWS	17.5
Victorian 6 Murray HRWS	53.3
Victorian 7 Murray HRWS	20
South Australian Murray High Security – Class 3	50

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Water source and entitlement type	Median traded parcel size (ML)1
South Australian Mallee Prescribed Wells Area3	167

Source: Aither 2017.

Notes: 1) Median parcel size includes entitlement trades with $0 reported prices. 2) The New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated. 3) Mallee Prescribed Wells Area data is not broken down by management zone and therefore differences may exist between the data presented here and the actual time taken to acquire the specific entitlement type held by Duxton Water.

Assessment of Duxton Portfolio for small parcel volumes

Table 85 presents an assessment of individual parcel volumes for the Duxton Portfolio based on the assessment of median entitlement trade parcel volumes for the equivalent entitlement type. Four individual entitlement parcels have been identified as having the potential to attract a market value discount if sold at market individually.

Table 85 Duxton Portfolio entitlement volume discount assessment

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Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

Assessment of Acquisition Portfolio for small parcel volumes

Table 86 presents an assessment of individual parcel volumes for the Acquisition Portfolio based on the assessment of median entitlement trade parcel volumes for the equivalent entitlement type. No individual entitlement parcels have been identified as having the potential to attract a market value discount if sold at market individually.

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Table 86 Acquisition portfolio entitlement size discount assessment

	Water Source / Reference Number	Entitlement Type	Volume (ML)	Potential for discount due to parcel volume?
	New South Wales 11 Murray Regulated River
	WAL 4944	High Security	557	No
	WAL 5023	High Security	289	No
	WAL 16076	High Security	284	No
	WAL 16271	High Security	209	No
	WAL 16272	High Security	200	No
	WAL 5434	General Security	511	No
	Sub total		2,050
	New South Wales 11 Murray Regulated River– Western Murray Irrigation Limited
	WMI450	High Security	352	No
	Sub total		352
	Total		2,402

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017

Assessment of potential parcel volume market value discount

In general, Aither has identified individual parcels of less than 10 ML as having the potential to attract a market value discount if sold individually. This volume has been assumed based on:

• historical median trade parcel volumes (Table 84)

• the fact that at volumes of 10 ML or greater, the fixed administration fee component of engaging in trade is distributed sufficiently across the parcel being traded to be less than 1 per cent of total transaction price (Table 87).

It should be noted however that whether a specific parcel attracts a discount or not will depend on the median parcel size for entitlements and other case by case factors.

Table 87 Transaction costs as percentage of total parcel market value – Vic 7 Murray HRWS

Water entitlement parcel volume (ML)	Transaction costs as percentage total parcel market value (%)
1	13.66%
10	4.07%
20	3.53%
50	3.21%
100	3.11%
500	3.02%
1,000	3.01%

Source: Aither 2017.

Note: Assumes market value as at 30 June 2017, 3 per cent brokerage commission and relevant Victorian Government fees.

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Valuation of Australian water entitlements

Based on the assumption of 3 per cent brokerage fees, buyers of water entitlement parcels at or above median parcel volumes generally incur total transaction costs (brokerage and state administration fees) of no more than 3 per cent to 4 per cent of total trade value (Table 87). We have used this benchmark to back solve a potential market value discount that might be applied to water entitlements with small parcel volumes that are held by the Duxton Portfolio. This method effectively discounts the per ML market value of the entitlement by the proportionally higher costs that fixed administration fees represent per ML of the entitlement traded. These calculations are documented in Table 88 below.

Table 88 Potential market value discount by entitlement type based on volume of parcel – Duxton Portfolio

	Water Source / Reference number	Entitlement type	Volume (ML)	30 June 2017 market value ($/ML)	Brokerage fees (3%) ($)	State transfer fees ($)	Potential market value discount ($/ML)
	New South Wales 11 Murray Regulated River
	WAL 9316	General Security	1	$1,350	$40.50	$456.07	$440 – $460
	New South Wales 13 Murrumbidgee Regulated River
	WAL 3834	High Security	3	$3,500	$315	$456.07	$350 – $370
	Victorian 7 Murray
	WEE 037190	HRWS	5	$2,915	$437.25	$310.60	$170 – $190
	Victorian 6 Murray
	WEE 044162	HRWS	5.30	$2,650	$421.35	$310.60	$170 – $190

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017 and state fees sourced from relevant state governments 2017.

Having assessed the impact of potential discounts applicable to the four specific entitlements identified in the Duxton Portfolio, we have estimated a potential total aggregate dollar value discount if these entitlements were sold individually of between approximately $3,240 and $3,530. In the context of a total estimated 30 June 2017 value of the Duxton Portfolio of $69,618,581, this represents an approximate 0.005% potential discount on the portfolio in aggregate. Considering this and assuming that if the Duxton Portfolio were to be sold it would be sold in aggregate, Aither believes that the estimated potential discount amount for the four identified entitlements is immaterial to the overall valuation of the portfolio.

Strategic value of the portfolio

There are some important strategic benefits associated with acquiring a large portfolio, such as the Duxton Portfolio or the Acquisition Portfolio, in a single transaction when compared to purchasing individual entitlements on the open market. These considerations, and potential to impact on the market value of each portfolio are explored below.

Brokerage fees

Brokers and exchanges typically charge between 2 and 4 per cent of the purchase price, depending on the broker and specific details of a given trade. Some brokers charge both the buyer and seller,

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although some market makers have negotiated lower fees with specific brokers. Buying an off the shelf portfolio can avoid brokerage charges and provide a significant financial savings.

In the case of the Duxton portfolio, the avoided cost of not using a water broker could be as much as approximately $2.8 million. In relation to the Acquisition portfolio this could be as much as $300,000.

Time taken to acquire similar portfolio from market

For any buyer seeking to acquire a portfolio the size of the Duxton Portfolio or the Acquisition Portfolio it would take time to acquire such a portfolio by buying individual parcels from the market without materially impacting on market prices. Managing these negotiations would also come at some material cost to the investor.

Based on historical liquidity in relevant entitlement markets, we estimate that it could take an investor up to approximately 4 years to acquire a portfolio of a similar size to the Duxton Portfolio – assuming an investor purchased 25 per cent of annual traded volume each year (Table 89). This time estimate is almost entirely driven by the time it would take to acquire New South Wales 11 High Security entitlements and New South Wales Lachlan General Security entitlements. In this context, there may be strategic merit to the Duxton Portfolio given the large holdings these entitlement types.

Table 89 Estimated time to acquire Duxton Portfolio entitlements

Entitlement class	Annual average for 2015-16 and 2016-17	Annual average for 2015-16 and 2016-17	Duxton Holdings (ML)	Years taken to acquire	Years taken to acquire
	Volume **traded (ML)1 **	Number of **trades1 **		@25% of turnover	@15% of turnover
New South Wales Murray High Security2	5,635.815	58.5	5,470.15	3.88	6.47
New South Wales Murray General Security2	16,436.415	67.5	7,841.41	1.91	3.18
New South Wales Murray Supplementary	432.5	4	83	0.77	1.28
NSW 13 Murrumbidgee HS	6,088.75	22.5	1,776	1.17	1.94
NSW Lachlan General Security	7037	19	6,798	3.86	6.44
NSW Macquarie General Security	3464.5	15	226	0.26	0.43
Vic 1A Greater Goulburn HRWS	48,637.1	796.5	2,522.90	0.21	0.35
Vic 3 Lower Goulburn HRWS	1655.4	22	120	0.29	0.48
Vic 4A Campaspe HRWS	850.95	29	60	0.28	0.47
Vic 5A Loddon HRWS	873.1	24	239	1.09	1.82
Vic 6 Murray HRWS	20,334.85	228.5	3,772.60	0.74	1.24

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Entitlement class	Annual average for 2015-16 and 2016-17	Annual average for 2015-16 and 2016-17	Duxton Holdings (ML)	Years taken to acquire	Years taken to acquire
	Volume **traded (ML)1 **	Number of **trades1 **		@25% of turnover	@15% of turnover
Vic 7 Murray (Barmah to SA) HRWS	60,428.15	849.5	3,409.50	0.23	0.38
SA Murray High Security – Class 3	37,101.791	220	509	0.05	0.09
SA Mallee Prescribed Wells Area3	1086.93	5.5	500	1.84	3.07

Source: Aither 2017. Based on New South Wales, Victorian and South Australian Water Register 2017. Notes: 1) Volumes and numbers of entitlement trades include transfers with $0 reported prices. 2) The New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated. 3) Mallee Prescribed Wells Area data is not broken down by management zone and therefore differences may exist between the data presented here and the actual time taken to acquire the specific entitlement type held by Duxton Water.

Based on historical liquidity in relevant entitlement markets, we estimate that it could take an investor up to approximately 1 to 2 years to acquire a portfolio of a similar size to the Acquisition Portfolio – assuming an investor purchased 25 per cent of annual traded volume each year (Table 90Table 89). This time estimate is almost entirely driven by the time it would take to acquire New South Wales High Security entitlements. In this context, there may be similar additional strategic merit to the Acquisition Portfolio given the large holdings of these entitlement types.

Table 90 Estimated time to acquire Acquisition Portfolio entitlements

Entitlement class	Annual average for 2015-16 and 2016-17	Annual average for 2015-16 and 2016-17	Acquisition Portfolio holdings (ML)	Years taken to acquire	Years taken to acquire
	Volume **traded1 **	Number of **trades1 **		@25% of turnover	@15% of turnover
New South Wales Murray High Security2	5,635.815	58.5	1891	1.34	2.24
New South Wales Murray General Security2	16,436.415	67.5	511	0.12	0.21

Source: Aither 2017, based on New South Wales, Victorian and South Australian water register data

Notes: 1) Volumes and numbers of entitlement trades include transfers with $0 reported prices. 2) The New South Wales Water Register does not report trades in a way that allows New South Wales 10 Murray and New South Wales 11 Murray entitlement trade to be disaggregated.

Current market interest

Our market intelligence suggests that there are several large agribusinesses and investment vehicles (including superannuation funds and banks) seeking to deploy capital to acquire large parcels of water entitlements in the Murray-Darling Basin and Australian more broadly. This interest has been sustained over several years.

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The current market environment and interest from multiple parties may provide opportunities over the short and long-term where market liquidity is advantageous for the sale of portfolios as large as both the Duxton Portfolio or the Acquisition Portfolio.

Inclusion of 2017-18 allocations in portfolio value assessment

Entitlement valuations determined by Aither in the main valuation report are as at Friday 30 June 2017 (Table 1 and Table 2). These ‘end of season’ market values most likely reflect the fact that all water allocations during 2016-17 have been used and these entitlements are being sold ‘dry’ (not discounting the fact that expectations about allocations to entitlements in future years, including 201718, will be priced into the market value of these entitlements).

While Aither believes relevant entitlement market values have not changed significantly between Friday 30 June 2017 and the date that this report is provided (Friday 21 July 2017), water allocations for the 2017-18 water year have been allocated to entitlements held by each of the portfolios over this period. If the portfolios or individual entitlements were sold at the report provision date, it is likely that unused or unleased 2017-18 water allocations accrued to entitlements would be packaged in the sale (i.e. water entitlements would be sold ‘wet’).

Accounting for the value of 2017-18 water allocations is a material issue given that much of the holdings of the Duxton Portfolio and Acquisition Portfolio are higher reliability and therefore receive allocations early in water years. On this basis, the value of these water allocations may add a material premium to the portfolio values determined in the main valuation report.

On Monday 17 July 2017, Duxton provided Aither with details of unused and unleased allocations that have accrued to the entitlements of the Duxton Portfolio for the 2017-18 water year – these figures are inclusive of the allocation determinations made by state governments on Monday 17 July 2017.

Aither was not provided with 2017-18 allocations accruing to the Acquisition Portfolio. Aither has assumed that all allocations to entitlements of this portfolio can be considered ‘used’ given that in the event of acquisition, Duxton has pending lease-back agreements in place so 2017-18 allocations to these entitlements will accrue to the lessee not Duxton.

As is shown in Table 91, the current volume of allocations received by the Duxton Portfolio in 2017-18 is equal to 10,721.84 ML. Based on an assessment of 21 July 2017 water allocation spot prices, this volume of water allocations is valued at approximately $1.28 million (excluding transaction costs). Based on the value of these allocations and a 30 June 2017 valuation of the Duxton Portfolio of approximately $69.67 million, Aither considers the inclusion of the value of 2016-17 allocations to be material to informing a portfolio value assessment of the Duxton Portfolio at the date that this report is provided (Friday 21 July 2017).

Table 91 Value of unused and unleased water allocations to Duxton Portfolio – 2017-18 water year as at 17 July 2017

Water entitlement type	Allocation volume (ML)	21 July 2017 allocation spot price ($/ML)	Estimated value of current 2017- 18 allocations ($)
New South Wales 10 Murray General Security	248.64	$110	$27,350
New South Wales 11 Murray General Security	18.5	$120	$2,220

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Water entitlement type	Allocation volume (ML)	21 July 2017 allocation spot price ($/ML)	Estimated value of current 2017- 18 allocations ($)
New South Wales 11 Murray High Security	3,884	$120	$466,080
New South Wales 13 Murrumbidgee High Security	2.9	$120	$348
New South Wales Macquarie General Security	81.4	$120	$9,768
Victorian 1A Greater Goulburn HRWS	285.34	$105	$29,961
Victorian 6 Murray HRWS	165.08	$110	$18,159
Victorian 7 Murray HRWS	5,526.98	$120	$663,238
South Australian Murray High Security – Class 3	509	$120	$61,080
Total	10,721.84		$1,278,204

Source: Aither 2017. Based on entitlement holdings supplied by Duxton 2017.

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Attachment C – Title document review

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Piera Murone Executive Director Pitcher Partners Corporate Pty Ltd By email

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Dear Piera

Valuation of Australian water entitlements

On 12 July 2017, Aither was instructed by Pitcher Partners Corporate Pty Ltd (Pitcher Partners) to provide an independent fair market valuation of Australian water entitlements relating to the current Duxton Water Limited (Duxton) water entitlement portfolio (Duxton Portfolio) and a potential acquisition water entitlement portfolio (Acquisition Portfolio).

A component of this engagement involved Aither viewing and assessing water entitlement title documentation with the purpose of reviewing ownership and any material conditions on the water entitlements that may impact value. Aither was not instructed to provide legal advice or conveyancing services, nor is Aither suitably qualified to provide legal advice or conveyancing services.

Between 7 July 2017 and 13 July 2017, Duxton provided Aither with title and supporting documentation relevant to entitlements held by the Duxton Portfolio and Acquisition Portfolio.

I confirm that Aither has reviewed the documents supplied, cross checked information about the nature of water entitlement holdings of each portfolio, and confirmed the volumes of entitlements held. With two exceptions, we are comfortable that title documents supplied and subsequent clarifications provided by Duxton support the following findings:

• For the Duxton Portfolio, title and supporting documents supplied support the current ownership by or the current transfer of ownership to Duxton.

• Entitlement characteristics and volumes stated on title and supporting documents align with Aither’s understanding of the volumes and nature of holdings of each portfolio.

• There are no conditions that have been identified that would materially impact on the value of any entitlement held by either portfolio (subject to clarifications by Duxton that encumbrances noted on title documents are not current – see Table 1).

Table 1 documents exceptions to the above-mentioned findings.

Table 92 Title document review – exceptions

Exception	Comment
Original advice received by Aither suggested Duxton owned 3,409.50 ML of Vic 7 Murray – HRWS. Vic 7 Murray – HRWS title documents supplied total 3,396.50 ML.	Duxton confirmed the recent purchase of 13 ML of Vic 7 Murray – HRWS. Aither understands this to be with the Victorian Water Register for approval. Aither has not reviewed the sale agreement or other related documents.
Titles for the following entitlements suggest there was a current encumbrance at the point the title document was produced: WAL39825, WAL37452, WAL3834 and WAL3365. Lease documents supplied by Duxton did not list current encumbrances over these entitlements.	Duxton confirmed with Aither that at the date of valuation (30 June 2017) these entitlements are not leased nor are there any current encumbrances over these entitlements.

As instructed, Aither has not undertaken any independent validation of the accuracy of the information supplied by Duxton nor undertaken any independent title searches. Consequently, any advice given

by Aither on the holdings of each portfolio is subject to the accuracy and limitations of documents provided by Duxton.

Kind regards

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Chris Olszak Director

Friday 21 July 2017

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Attachment D – Aither proposal and instructions

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Piera Murone Executive Director Pitcher Partners Corporate Pty Ltd By email

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Dear Piera

Valuation of Australian water entitlements

Building on discussions to date, I have prepared this letter of proposal which outlines how Aither could assist Pitcher Partners with the provision of water entitlement valuation services. This letter outlines Aither’s understanding of the scope of work required by Pitcher Partners, our approach to meeting your needs and proposed commercial arrangements. We would be happy to modify the scope or proposed approach as to best meet your needs.

Scope

Aither understands that Pitcher Partners is seeking an assessment of the current fair market value of several water entitlement types, a valuation of Duxton Water Limited’s (Duxton) water entitlement holdings, and related valuation analysis and advice. We understand that the results of Aither’s assessment will be used by Pitcher Partners to inform a potential acquisition by Duxton, as well as an assessment of the current market value of the Duxton portfolio. In this regard, we consent to the inclusion of Aither’s assessment and associated reporting in Pitcher Partners’ independent expert report.

Specifically, Aither has been asked by Pitcher Partners to quote for the following services:

• A current fair market valuation of the water entitlement types listed at Table 1 in Attachment A – this will be used to inform the potential acquisition.

• A current fair market valuation of the water entitlement types listed at Table 2 in Attachment B – this will be used to inform a valuation of Duxton’s water entitlement holdings.

• A portfolio valuation assessment of Duxton’s water entitlement holdings (Attachment B).

• An assessment of encumbrances (such as lease agreements) on specific entitlements in relation to the impact this may have on market value.

• An assessment of any potential market value premiums or discounts based on the volume of specific water entitlements, or the total size of each portfolio (Attachment A and Attachment B).

• A water entitlement title search to assess ownership and material entitlement characteristics or conditions that may impact market value.

Method and approach

To meet your requirements, Aither will provide a valuation report which can cover all aspects of the scope described. To provide Pitcher Partners with a range of options, we have structured our approach to reflect five different service levels. These options have been developed to aid your decisions around budget and depth of services required.

Option 1 – Current fair market valuation assessment

Option 1 involves an assessment of the current fair market value (that is the dollar per megalitre price) of the water entitlement types listed at Attachment A and Attachment B. At the request of Pitcher Partners, these assessments and the results will be undertaken and presented independently.

To provide robust fair market valuations for water entitlements, Aither uses a tested method which we currently use on a monthly basis to value over $200 million worth of entitlements and inform the lending of a major Australian bank. The method draws on publicly available water trade data from the Victorian, New South Wales and South Australian Water Registers as well as analysis of trade data obtained from several market intermediaries. Specifically, Aither uses the following method:

• For the month prior to the valuation, collect available water trade data for each of the entitlement types listed above from the Victorian, New South Wales and South Australian water registers.

• ‘Clean’ data for outlier prices to calculate a dollar per ML volume weighted average price (VWAP) for each of the entitlement types listed above and other analysis.

• Analyse recent sales data (buy and sell offers and transactions) from market intermediaries (Ruralco Water, Waterfind Australia, H2OX, Tom Wilks Water and Landmark WATER). Confidentially consulting directly with brokers helps Aither to corroborate the analysis of register data and establish a more accurate valuation due to the known time lag of information that can occur for prices reported on the public registers.

• Present analysis (including any assumptions made) to Pitcher Partners in a valuation report.

Please note that Option 1 does not include an assessment the nature of specific entitlements and property right characteristics (such as parcel volume or encumbrances) that may be material to informing investment decisions or entitlement specific market values (see Options 3 and 4).

Option 2 – Portfolio valuation assessment

Option 2 involves a portfolio valuation assessment of Duxton’s water entitlement holdings. To provide this, Aither will multiply the entitlement holdings of Duxton (Attachment B) by the estimated fair market values of entitlement types established in the analysis undertaken under Option 1.

Similarly, Option 2 does not include an assessment the nature of specific entitlements, property right characteristics (such as parcel volume or encumbrances) or the potential strategic value of the portfolio to a potential buyer that may be material to informing a more detailed assessment of Duxton’s water portfolio as a whole (see Options 3 and 4).

Option 3 – Assessment of encumbrance

Option 3 involves an assessment of the positive or negative impact that an encumbrance, such as a lease agreement, can have on a specific entitlement’s market value. This option would require Duxton or Pitcher Partners to supply Aither with the details of current lease agreements related to all entitlements listed at Attachment A and Attachment B – Aither will not undertake its own independent searching for registered interests over entitlements. Aither would rely on this information to make an assessment as to whether the identified encumbrance may have a positive or negative impact on the market value of the individual entitlements listed.

Option 4 – Assessment of market value premiums or discounts

Option 4 involves an assessment of the size and strategic nature of specific entitlements listed at Attachment A and Attachment B, and whether as a result it would be appropriate to attach a

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Valuation of Australian water entitlements

significant premium or discount to the market values established under Option 1. For example, a water entitlement of less than 10 ML in volume, may if sold individually, attract a price discount based on the relatively high transaction costs of acquiring such a small and potentially non-strategic parcel.

Under Option 4, Aither will also assess the premium or discount that entitlements listed under Attachment A and Attachment B may attract if sold as portfolios in their entirety. For example, a buyer may be willing to pay a premium to acquire the Duxton portfolio (Attachment B) in its entirety.

Option 5a – Water entitlement title assessment

Option 5a involves Aither viewing and assessing water entitlement title documentation with the purpose of reviewing ownership and any material conditions on the water entitlements that may impact value. This option would require Duxton to supply Aither with the relevant title documents – Duxton has already provided some title documents to Aither, and we understand that Duxton will be able to provide those outstanding. Under this option, Aither would rely on ownership as stated in title documents supplied. For the purposes of a valuation and not a formal sales agreement, this level of assessment be sufficient and avoid the costs of Aither independently undertaking title searches.

Option 5b – Water entitlement title search and assessment

Option 5b involves Aither undertaking an independent title search for each of the water entitlements listed at Attachment A and Attachment B. This would involve Aither approaching each relevant state jurisdiction or authorised title information broker and requesting formal title documents for each water entitlement. The purpose of this task is to review ownership and any material conditions on the water entitlements that may impact value.

We note that this option will require expenses to be incurred by Aither (title search fees) and delivery will be contingent on the timeliness of receiving requested title documents from third-parties.

Team and experience

Aither offers Australia’s leading independent analysis, insight, and advice on water markets and water sector investments. Aither team members have extensive experience working with the private sector and government in the design, implementation and modelling of Australia’s water markets. We are independent and objective and have no direct stake in the market.

Chris Olszak (Director) will lead the project and quality assure outputs, and Daniel Baker (Senior Consultant) will be responsible for undertaking the analysis. Both proposed team members have an expert understanding of and valued networks across the Australian rural water sector. CVs are attached to the back of this letter.

Chris Olszak, Director – Chris is one of Australia’s leading water economists. Chris has an unparalleled understanding of the economics of water markets and the regulatory, policy and institutional settings that govern the water sector. Chris has worked extensively on water markets for the Commonwealth and basin states, as well many large private sector market participants.

Daniel Baker, Senior Consultant – Trained in environmental economics and public policy, Daniel currently manages Aither’s provision of water markets transaction due diligence advice and valuation services to Aither’s rural water clients – including major agribusinesses, Australian banks, domestic and international investors, and local governments.

Aither’s relevant project experience includes work across the following areas:

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• Water portfolio valuations: Aither is engaged by a large Australian agricultural enterprise, a global NGO, a major Australian superfund and a major Australian bank to provide ongoing water entitlement and portfolio valuation assessments. Aither currently values approximately 90 different entitlement types across Australia on a monthly and quarterly basis.

• Irrigated agriculture transaction advice: Aither is regularly engaged by domestic and international investors to provide transaction due diligence advice in relation to the purchase of Australian irrigated agricultural assets. Aither has recently provided asset specific transaction advice to a major North American institutional investor.

• Water portfolio transaction advice: Aither was engaged by an Australian private sector investor to provide independent due diligence advice which was used to inform the purchase of a large water entitlement portfolio in the southern Murray-Darling Basin.

• Australian water markets and resource management advice: Aither provides market analysis and research advice to a network of domestic and international investors in relation to water resource management and water markets in Australia. Aither has recently provided advice of this nature to two major North American investors and as well as several Australian investors.

• Advisory retainers: Aither is engaged by several Australian investment groups to provide ongoing water market and related commercial advisory services under retainer arrangements. Aither provides these clients with strategic advice to inform investment portfolio, market participation and strategy decision making.

Timing

Aither can commence this project immediately following engagement. Aither expects that Option 1 and Option 2 could be completed within a one-week period, with the provision of a final report to Pitcher Partners before close of business Friday 14 July 2017. The inclusion of Option 3, 4 and 5 would require a two-week period for final delivery. However, if all five options were chosen, we are still able deliver an interim report including Options 1 and 2 within a one-week period.

Budget and commercial arrangements

Redacted – commercial in confidence

Conflict of interest and confidentiality

I confirm that Aither does not have any known conflicts of interest (perceived, potential or real) in the provision of the described independent advisory services. We provide independent advice to several market participants, investors and governments but have no financial stake in any water market outcome or participant. If any perceived, potential or real conflicts of interest arise during an engagement with Pitcher Partners, we will bring it Pitcher Partners’ attention for immediate resolution.

We have already entered into a Non-Disclosure Agreement with Duxton. We are happy to complete a Confidentiality Agreement with Pitcher Partners as part of any engagement.

Limitations

The provision of the above described services by Aither is subject to the following:

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• Aither is not a registered or certified property valuer and does not provide a full property valuation service, or conveyancing or legal services.

• Aither relies on data obtained from multiple third-party sources. Consequently, any advice given by Aither on the value of water allocations or entitlements shall be subject to the accuracy and limitations of data obtained from third-party sources.

Next steps

I trust the above is in accordance with your requirements. Please do not hesitate to contact me on 0425 707 170 or at chris.olszak@aither.com.au to discuss any aspects of this proposal.

Kind regards Chris Olszak Director Friday 7 July 2017

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Attachment A – Potential acquisition water entitlement types

Table 1 Potential acquisition water entitlement types

Water entitlement no.	Water Source	Category	Volume (ML)
WAL4944	New South Wales 11 Murray Regulated River	High Security	557
WAL5023	New South Wales 11 Murray Regulated River	High Security	289
WAL5434	New South Wales 11 Murray Regulated River	General Security	511
WAL16076	New South Wales 11 Murray Regulated River	High Security	284
WAL16271	New South Wales 11 Murray Regulated River	High Security	209
WAL16272	New South Wales 11 Murray Regulated River	High Security	200
Share in water held by Western Murray Irrigation Ltd	New South Wales 11 Murray Regulated River	High Security	352

Source: Provided to Aither by Pitcher Partners 2017.

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Attachment B – Duxton Water Limited water entitlement portfolio

Table 2 Duxton Water Limited water entitlement portfolio

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Source: Provided to Aither by Duxton Water Limited 2017.

Note: 1) Aither understands that these entitlements are currently being consolidated by Duxton. Duxton has agreed to provide post-consolidation WEE numbers to Aither during the week beginning Monday 10 July 2017.

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Chris Olszak | Director

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Qualifications

Bachelor of Commerce (Economics)

The University of Melbourne 1995 – 2000

Bachelor of Engineering (Honours

– Environmental) The University of Melbourne 1995 – 1999

Employment history

February 2012 – current

Director

Aither

2007 – 2012

Economist

Frontier Economics

2002 – 2007

Senior Economist

Economics and Policy Group, URS

Chris Olszak is an economist who specialises in water markets and infrastructure. He co-founded Aither in 2012 after previously working with Frontier Economics and URS. Chris’ primary skills are in public policy, economic evaluation, pricing and regulation, and water market design and analysis. He combines these skills with in-depth technical, policy and regulatory knowledge of water management and markets in Australia. Chris’ strengths as a consultant lie in his exceptional analytical skills and knowledge and his ability to led complex and sensitive engagements.

Chris is a recognised expert in Australian water markets, having spent more than a decade leading and undertaking engagements for governments, regulators, market participants, banks and investors.

He leads Aither’s water markets practice – including the development of Aither’s bespoke water market models and independent Water Markets Report. Chris is regularly sought after to speak publicly on water market policy, trends and drivers.

Chris has recently directed water markets and policy engagements with the NSW Government, Victorian Government, Melbourne Water, Dairy Australia, Southern Rural Water, as well as a range of financial institutions and market participants.

Previously, Chris has provided due diligence advice to inform the successful purchase of a large water entitlement portfolio in the southern Murray-Darling Basin.

Throughout the late 2000’s, Chris was the lead author of the National Water Commission’s assessments of the Impacts of water trading in the southern MDB which provided him with a unique insight into irrigation industries and communities, and their publication Water markets in Australia: a short history which traced the emergence and development of water markets over many decades

2001 – 2002

Consultant

Environmental Services Group, Andersen

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Project summary

Supply-side drivers of water allocation prices in southern Murray-Darling Basin: Aither was engaged by the Commonwealth Department of the Environment to draft a report that identifies supplyside drivers of water allocation prices in the southern Murray-Darling Basin – including Commonwealth water purchases through the Restoring the Balance Program. Using Aither’s proprietary water allocation price model, the report examines the water allocation price impacts of changing consumptive water availability under a range of seasonal conditions, and the drivers for the changes in water availability. Commonwealth Department of the Environment, 2015.

Contemporary irrigation trends and drivers in the southern Murray-Darling Basin: Aither was engaged by the Rural Industries Research and Development Corporation (RIRDC) to explore contemporary irrigation trends and drivers in the southern Murray-Darling Basin (sMDB). The project involved extensive stakeholder consultation in the sMDB. Aither’s report provides RIRDC with insight into what impact contemporary irrigation trends and drivers are having now, and what impacts are likely to be felt into the future for the sustainability and competitiveness of different rural industries. Rural Industries Research and Development Corporation, 2015.

Independent advice on the development and implementation of water investment strategies, and ongoing water markets advice: Aither was engaged to provide a large Australian agricultural enterprise located in the southern Murray-Darling Basin with ongoing water markets advice services. Aither’s analysis examined the nature and distribution of entitlements, indicators of market size and liquidity, and provided an assessment of likely future government purchases. Aither has also been engaged to provide monthly market value assessments for a number of Victorian water entitlement types in the southern Murray-Darling Basin. Confidential private sector client, 2012 – current.

Independent review of water entitlement management: Aither was engaged to undertake an independent review of water entitlement management arrangements for an irrigation water supplier located in South Australia. The findings of the review were used to inform future decision-making by the irrigation water supplier on how to cost-effectively secure future water supply for network users and manage other associated risks. Confidential private sector client, 2016.

Due diligence of multi-million dollar water portfolio for a large institutional investor: Aither was engaged by a confidential private sector investor to provide independent due diligence advice which was used to inform the successful purchase of a large water entitlement portfolio in the southern Murray-Darling Basin (circa $100 million). Aither provided the client with contextual information, descriptions of specific entitlement characteristics, historical trade analysis, price forecasts and strategic advice about other considerations. Aither was engaged because of its position as the leading independent provider of water markets analysis in Australia. Confidential private sector client, 2015.

Water licence advisor, Dubbo City Council: In 2013, Aither was engaged to act as water licence advisor to the Dubbo City Council. The first phase of the project was an assessment of needs which involved a stocktake of current portfolio and management practices; strategic modelling of supply and demand to identify needs over time and analysis of the reliability, price and other regulatory features of relevant Water Access Licence types. After developing an agreed strategy for the Council, Aither is now providing ongoing entitlement management and trading advice. Dubbo City Council, ongoing.

Water trading strategy, Goulburn-Murray Water: In 2012, Aither developed a water allocation trading strategy for water entitlements held by the G-MW Connections Project (formerly NVIRP). The trading strategy was focused on within-season timing of trading decisions to manage risk. Our advice also encompassed governance and procurement issues in the context of G-MW’s multiple roles within the water market in northern Victoria. The strategy was approved by the board and is now being implemented. Goulburn-Murray Water, 2012.

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Comparative assessment of the value of entitlements in the Murray-Darling Basin: Aither was engaged to estimate the annual financial returns on water access entitlements across the entire MDB. The assessment was based on the returns that could be obtained by selling water allocations and drew upon our detailed database of individual trades over the last 6 years. The comparative assessment of historical returns helped our client identify priorities for investment. Private-sector client, 2013.

Water markets information: In October 2014, Aither published its inaugural Water Markets Report 2013–14 Review and 2014–15 Outlook. A large Australian agricultural enterprise located in the Murray-Darling Basin engaged Aither to provide an update of this report for the 2014-15 water year. Aither provided analysis of allocation and entitlement market outcomes – including prices, volume of trade, market size, value of turnover, liquidity and yield. Private sector client, 2015.

Trading rule compliance and mechanisms: Chris led Aither’s engagement with VEWH to provide advice to help demonstrate compliance with the Murray Darling Basin Plan’s water trading rules and advice on the most appropriate mix of allocation trading mechanisms (e.g. brokers, tenders, exchanges). The Basin Plan water trading rules particularly address the need for announcements to the market to be made publicly available and for organisations privy to insider information to avoid trading under certain circumstances. Aither’s advice outlined how these rules could impact VEWH’s operations and outlined how the rules could be met while providing VEWH with necessary operational flexibility. Victorian Environmental Water Holder, 2014.

Advice on developing and assessing cost benefit analysis for dams: Further to earlier work advising IA on their water sector CBA template, IA asked Aither for further detailed guidance on developing CBA for the development of dams (both rural and urban). The purpose was to assist Infrastructure Priority List proponents in further understanding IA’s expectations when developing a CBA. As part of the engagement, IA also requested analysis of potential challenges for Infrastructure Priority List assessment in this area (such as lack of data, difficulty in quantifying benefits). Infrastructure Australia, 2014.

Sales of groundwater and unregulated surface water: Aither was engaged by Southern Rural Water to provide economic and regulatory advice regarding the sale of unallocated groundwater and unregulated surface water in Victoria through the use of market mechanisms. Our advice addressed key issues of mechanism design as well as the establishment of a reserve price. Southern Rural Water, 2014.

Licence valuation project: Aither was engaged by a government client to undertake a valuation of four separate irrigation Water Access Licences in a New South Wales water system. Aither applied two methods to the valuation: 1) a direct market valuation based on past sales data; and 2) a comparative valuation based on products within the same system and products in other systems with similar characteristics. Aither provided a recommended licence valuation and total asset valuation. This valuation will be used in reporting changes to the State’s asset base. NSW Office of Environment and Heritage, 2014.

Water trading review: Aither reviewed the financial performance of a number of Victorian water corporations and entitlement holders in relation to water allocation trading in 2012-13. The reviews were undertaken for Coliban Water, Goulburn-Murray Water, the Bulk Entitlements Management Committee, the Victorian Environmental Water Holder, and North East Water. Each review considered the financial performance of the entity compared to a series of market price benchmarks. The reviews also considered the performance of market intermediaries in relation to market outcomes and their fees and charges. South East Water, 2013.

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Modelling the value of water entitlements and allocations: Chris led the project to develop an economic model to estimate future water allocation and entitlement prices in the southern MurrayDarling Basin water market under a range of government buyback and climate change scenarios. The project also involved an assessment of the regulatory risks associated with owning a portfolio of water entitlements and an assessment of strategies to maximise returns over time. Private sector client, 2012.

Water markets in Australia: a short history: Chris authored this National Water Commission flagship report on the history of water market development in Australia. The report documents the development of water markets in Australia, including the factors contributing to their success.

The impacts of water trading in the southern Murray-Darling Basin: an economic, social and environmental assessment: Chris led the report writing for the National Water Commission’s comprehensive assessment and report on the impacts of water trading released in 2010. He then led the updated assessment of the impacts of trade published in early 2012 where he managed hydrological and environmental input, social analysis, fieldwork, a survey of over 500 irrigators and economic (CGE) modelling. Chris also led a project for the NWC undertaking irrigator and industry level case studies on the role of water trading. National Water Commission, 2009-2012.

Strengthening Australia’s water markets: Peer review of a draft report to the National Water Commission that examined the factors affecting the development of water markets in Australia and identified strategic recommendations for the future. National Water Commission, 2011.

Structural adjustment in the irrigation sector in the Murray-Darling Basin: Chris authored a published report to the Murray-Darling Basin Authority (MDBA) on the relative importance of various factors affecting adjustment in the irrigation sector in the Murray-Darling Basin. The report provided an early input into the MDBA's Guide to the Draft Basin Plan prior to more detailed socio-economic assessment. MDBA, 2010.

Australian water reform 2009: Chris played an integral role in preparing the Commission’s 2009 biennial assessment of progress by jurisdictions in meeting commitments under the National Water Initiative. Through this experience, he has gathered deep expertise in all relevant aspects of water resource management in Australia including in water allocation planning, environmental water, addressing over allocation and overuse, water markets, and water pricing. National Water Commission, 2009.

Analysis of water management options to manage climate risk: Economic analysis of water allocation management options and reserve policy options as an input into the preparation of the Draft Northern Region Sustainable Water Strategy. Victorian Department of Sustainability and Environment, 2008.

Urban water markets: Contributed to this study on the potential for markets for urban water resources to promote optimal water resource and environmental outcomes. The report assessed several options including end user entitlement trading, third-party access, and wholesale or retail markets. The report developed practical conclusions to guide potential reforms. Joint Steering Committee on Water Sensitive Cities / National Water Commission, 2008.

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Daniel Baker | Senior Consultant

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Qualifications

First Class Honours – Bachelor of Interdisciplinary Studies (Sustainability) Australian National University 2012-2013

Bachelor of Interdisciplinary Studies (Sustainability) Australian National University 2009-2012

Employment history

Trained in environmental economics and public policy, Daniel has significant experience in Australian water markets, water infrastructure and policy reform. Underpinned by his deep knowledge in rural water, Daniel currently manages the provision of Aither’s market leading water markets advice and valuation services to Australian agribusinesses, major Australian rural banks, domestic and international investors, and local governments.

Since joining Aither in 2013, Daniel has led the development of Aither’s water markets data analysis capabilities and production of the annual Aither Water Markets Report series. Daniel is currently managing the delivery of Aither’s grant from the Business Research and Innovation Initiative (BRII) to improve transparency and reliability of water market information and enhance consumer confidence in Australia’s water markets.

In the past year, Daniel led the analysis and reporting for Aither’s independent report on the price impacts of supply-side drivers of water allocation prices in the southern Murray-Darling Basin. Daniel refined and use Aither’s proprietary water allocation price model to estimate the water market price impacts of the Australian Government’s water buyback program. Daniel also recently managed an independent review of water entitlement management and water security for a major irrigation water supplier in South Australia.

July 2016 – present Senior Consultant

Aither

June 2013 – June 2016

Consultant

Aither

2010 – 2011

Program officer

Department Regional Australia, Regional Development and Local Government

Before joining Aither, Daniel gained valuable experience at the former Commonwealth Department of Infrastructure, Transport, Regional Development and Local Government. Daniel worked on a range of national infrastructure, regional Australian and employment building projects and programs. Projects included major transport, tourism and public developments. Daniel was also involved in delivering infrastructure improvements to some of Australia’s most in-need regional communities and local governments.

Daniel was awarded First Class Honours in a Bachelor of Interdisciplinary Studies (Sustainability) from the Australian National University in 2013. His thesis focused on the management of regulatory divergence across international emissions trading schemes.

2010

Program officer

Sharp-minded, inquisitive and diligent, Daniel brings a dimension of discipline and critical thinking to Aither’s team.

Department of Infrastructure, Transport, Regional Development and Local Government

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Project summary

Victorian water markets and policy risks: Aither was engaged to provide a contemporary assessment of the value and benefits of Water Markets in Victoria in the context of recent changes in supply and demand. Daniel was responsible for research and report drafting – including developing comparisons of the Victorian system with non-market based systems. The project investigated the implications of recent changes in water demand and impacts on industry, as well as what policy settings (if any) may need changing to cope with any adjustment pressure. Victorian Department of Environment, Land, Water and Planning, 2016.

Business Research and Innovation Initiative (BRII) – feasibility report: Aither was funded under BRII to develop a solution to improve transparency and reliability of water market information and enhance consumer confidence in Australia’s water markets. Daniel is project managing a 12 week engagement to deliver a feasibility report on Aither’s user-focused, web-based water markets information and insights platform solution. Commonwealth Department of Industry, 2017.

Water Market Drivers Report: Aither was engaged to deliver a major publicly released research and analysis report on the trends and drivers of water market activity across NSW. Daniel was responsible for overseeing and quality assuring both qualitative and quantitative analysis methods, and analysis of policy and regulatory issues and constraints associated with market use and development. NSW DPI Water, 2017.

Irrigated agriculture transaction advice: Daniel regularly leads Aither’s engagements with domestic and international investors to provide transaction due diligence advice in relation to the purchase of Australian irrigated agricultural assets. Aither has recently provided several asset specific transaction advice to a major North American institutional investor. Various confidential private sector clients, ongoing.

Advisory retainers: Daniel has been engaged by several Australian investment groups to provide ongoing water market and related commercial advisory services under retainer arrangements. Daniel provides these clients with market leading strategic advice to inform investment portfolio, market participation and strategy decision making. Various confidential private sector clients, ongoing.

Water portfolio valuations: Daniel manages Aither’s engagements with a large Australian agricultural enterprise, a global NGA, a major Australian superfund and a major Australian bank to provide ongoing water entitlement and portfolio valuation assessments. Aither currently values approximately 90 different entitlement types across Australia on a monthly and quarterly basis. Various confidential private sector clients, ongoing.

Supply-side drivers of water allocation prices in southern Murray-Darling Basin: Daniel led the analysis and reporting of Aither’s engagement with the Australian Government to identify supply-side drivers of water allocation prices in the southern Murray-Darling Basin. Refining and using Aither’s proprietary water allocation price model, Daniel assessed the impact of changing consumptive water availability (including the impact of the Australian Government’s buyback) under a range of seasonal conditions, and the drivers for the changes in water availability. Australian Government, 2016.

Contemporary irrigation trends and drivers in the southern Murray-Darling Basin: Aither was engaged by the Rural Industries Research and Development Corporation (RIRDC) to explore contemporary irrigation trends and drivers in the southern Murray-Darling Basin (sMDB). For this project, Daniel undertook extensive stakeholder consultation across the sMDB to inform the report. Rural Industries Research and Development Corporation (RIRDC), 2016.

NSW Office of Environment and Heritage portfolio valuation: Daniel in managing the 2017 five yearly review of the value the New South Wales NSW Office of Environment and Heritage’s (OEH) environmental water portfolio. NSW Office of Environment and Heritage, 2017.

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Monthly water market update reports: Daniel provides monthly water market updates for H2OX’s water exchange website. The updates provide a forward looking assessment of market conditions and intuitive updates on water availability, trade rules and industry demand. H2OX, ongoing.

2015-16 SARMS NPA Review: Aither was engaged to work with Jacobs to review the National Partnership Agreement on South Australian River Murray Sustainability Program (SARMS NPA). Daniel led a trend analysis of the South Australian water access entitlement market and an assessment of the capacity for the Irrigation Industry Improvement Program (3IP) to achieve water return targets given water market trends and program funding. Primary Industries and Regions South Australia (PIRSA), 2016.

Water entitlement portfolio due diligence: Aither was engaged by a private sector investor to provide independent due diligence advice which will be used inform the purchase of a large water entitlement portfolio in the southern Murray-Darling Basin. Daniel was responsible for providing historical trade analysis, price forecasts and strategic advice about other considerations related to the water entitlement portfolio being offered for sale. Confidential private sector client, 2015.

Cobar Shire Council - Strategic water portfolio assessment and options scoping: Daniel is leading an engagement with the Lower Macquarie Water Utilities Alliance (LMWUA) to undertake a strategic needs assessment of the water portfolio held by Cobar Shire Council (central west New South Wales). In the context of mitigating a likely future water supply shortfall in Cobar Shire, Daniel advised on recommendations to improve the management of Council’s water portfolio as well as scope mitigation options provided by engagement in water markets. Lower Macquarie Water Utilities Alliance, 2017.

Independent review of water entitlement management: Daniel led an independent review of water entitlement management arrangements for an irrigation water supplier located in South Australia. The findings of the review will be used to inform future decision-making by the irrigation water supplier on how to cost-effectively secure future water supply for network users and manage other associated risks. Confidential private sector client, 2016.

Scoping water market dashboard reporting: Daniel played a key research and reporting role in an engagement to scope options to improve the quality and relevance of water markets information provided by the Bureau of Meteorology. Daniel was also responsible for developing dashboard mockups to improve the presentation and usability of information, with a view to assisting the Bureau of Meteorology to deliver more value to end users. Bureau of Meteorology, 2014.

Phase 3 water trading strategy – implementation: Aither has an ongoing role advising Dubbo City Council on the management of its water entitlement portfolio. Daniel is leading implementation of its water trading strategy over a two year period. This includes reporting on water supply and demand and market conditions, advising on optimal use of water from Council’s portfolio, and undertaking water trading actions where required. Dubbo City Council, 2015-2017.

State-wide practical guidance on water entitlement management: Daniel led the development of a document to provide state-wide practical guidance on water entitlement management in New South Wales. The purpose of the guidance is to assist all NSW councils, with responsibility for urban water supply, to understand their water entitlement portfolios and adopt a more strategic approach to entitlement management. NSW Water Directorate, 2015.

Case for exemption to Commonwealth Procurement Rule 10.19: Daniel project managed an engagement with the Commonwealth Environmental Water Office (CEWO) to provide supporting information that the CEWO can use to secure an exemption to Commonwealth Procurement Rule 10.19 for environmental water market purchases (both allocation and entitlements). Gaining this exemption will give the Commonwealth Environmental Water Holder the ability to purchase water

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from market in an efficient and effective way while minimising any potential negative impact on other market participants. Commonwealth Environmental Water Office (CEWO), 2016.

Advice on QLD Water Arrangements: Aither was engaged by a confidential private sector client to provide advice on Queensland water arrangements across a number of catchments. Daniel was responsible for developing an overview of the different water entitlement products and water supply schemes, a summary of recent developments related to transitioning channel irrigation schemes in Queensland to local management, and an overview of water allocations, unallocated water and water use in selected catchments. Confidential private sector client, 2015.

Environmental water policy and management – Phase 1: Daniel played a key research and drafting role in Phase 1 of Aither’s engagement with the Australian Conservation Foundation (ACF) to articulate opportunities to improve environmental water management in the Murray-Darling Basin (MDB). In this phase, Daniel contributed to initial scoping of potential issues constraining, and opportunities for, improved approaches to environmental water management in the MDB. Australian Conservation Foundation, 2013.

Environmental water policy and management – Phase 2: Daniel played a key research and drafting role in Phase 2 of Aither’s engagement with the Australian Conservation Foundation (ACF) to articulate opportunities to improve environmental water management in the Murray-Darling Basin (MDB). In this phase, Daniel contributed to the assessment and prioritisation of issues constraining improved approaches to environmental water management in the MDB. Daniel also played a key role in the development of a position paper that articulated the ACF’s positions on opportunities to improve environmental water management in the MDB. Australian Conservation Foundation, 2014.

New South Wales water sharing plan economic analysis: Daniel led Aither’s engagement to undertake an economic analysis to establish how six New South Wales groundwater and one surface water water sharing plans (and associated water trading) have supported water dependent industries in New South Wales. Both quantitative and qualitative methods were used to establish whether water trade within the respective systems has occurred, encouraged the economically efficient use of water, and contributed to the resilience of agricultural (and other water dependent) industries, particularly during drought. New South Wales Natural Resources Commission, 2015.

Water markets outcomes update: In October 2014, Aither published its inaugural Water Markets Report 2013–14 Review and 2014–15 Outlook. A large Australian agricultural enterprise located in the Murray-Darling Basin engaged Aither to provide an update of this report for the 2014-15 water year. Daniel led the analysis of water market outcomes in the southern Murray-Darling Basin for the 2014-15 financial year for this project. Confidential private sector client, 2015.

Water market economic analysis in the southern Murray-Darling Basin to inform investment: Daniel was responsible for undertaking a year-to-date economic analysis of water market outcomes in the southern Murray-Darling Basin for the 2014-15 financial year. The analysis was provided to a large Australian agricultural enterprise to inform water investment strategies regarding the future purchase of high-value water-dependent agricultural assets. Confidential private sector client, 2015.

Southern Murray-Darling Basin water market valuation: Daniel led Aither’s engagement to provide a large Australian agricultural enterprise with a market value assessment for several Victorian water entitlement types in the southern Murray-Darling Basin as at 30 June 2015. To develop an accurate valuation, Daniel analysed publically available water trade data from the Victorian Water Register and consulted with a number of water brokers to establish a more reliable valuation. Confidential private sector client, 2015.

Advice on sales of unallocated groundwater and unregulated surface water: Daniel was responsible for undertaking research into previous examples of groundwater and unregulated surface water sales across Australia – including sale mechanisms and processes, and methodologies related

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to the setting of reserve price. The research fed into Aither’s economic and regulatory advice regarding the sale of unallocated and unregulated water in Victoria through the use of market mechanisms. Southern Rural Water, 2014.

Queensland Government irrigation review: Daniel played a key research and drafting role in a review of Australian jurisdictional experiences in irrigation scheme privatisation and corporatisation. The review informed consideration of local management arrangements for eight irrigation schemes in Queensland. The review analysed aspects of governance and corporate form; transition arrangements; assets, capital and pricing; policy and regulation; customer interaction; water entitlements and trade; environmental management; and tax. Queensland Department of Energy and Water Supply, 2013.

Aither Water Markets Report 2015-16: Daniel led the development of Aither’s Water Markets Report 2015-16. Daniel was responsible for leading the analysis of water market data and providing comment about water market outcomes in the southern Murray-Darling Basin for the 2015-16 financial year. Aither, 2015.

Aither Water Markets Report 2014-15: Daniel took a leading role in the development of Aither’s Water Markets Report 2014-15. Daniel was responsible for leading the analysis of water market data and providing comment about water market outcomes in the southern Murray-Darling Basin for the 2014-15 financial year. Daniel also contributed to the drafting of the report which provides information about water market activity in the 2014-15 water year. Aither, 2015.

Aither Water Markets Report 2013-14 : Daniel was responsible for undertaking a comprehensive analysis of water market outcomes in the southern Murray-Darling Basin for the 2013-14 financial year. This analysis was used as the foundation of Aither’s inaugural Water Markets Report 2013-14. The report provided information on recent water market activity, and fills a key information gap the market following the termination of the National Water Commission. Aither, 2014.

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Document history

Revision:

Revision no.	2
Author/s	Daniel Baker and Alexander Dunn
Checked	Daniel Baker
Approved	Chris Olszak

Distribution:

Valuation date	Friday 30 June 2017
Report date	Friday 21 July 2017
Revision date	Wednesday 26 July 2017
Issued to	Pitcher Partners Corporate Pty Ltd
Description	Final water entitlement valuation assessment

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Citation:

Do not cite, distribute or reproduce content from this document without the express permission of Aither Pty Ltd. Unless otherwise stated, this document remains confidential. © 2017 Aither Pty Ltd. All rights reserved.

For information on this report:

Please contact: Chris Olszak Mobile: 0425 707 170 Email: chris.olszak@aither.com.au

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© 2017 Aither Pty Ltd. All rights reserved.

We understand that Pitcher Partners Corporate Pty Ltd is seeking water market valuation advice and services for several water systems within the Murray-Darling Basin. We understand that Pitcher Partners Corporate Pty Ltd does not wish for Aither to provide a legal assessment or a registered valuers assessment for any water access licence which relates to the aforesaid water entitlements.

This document has been prepared on the basis of information available to Aither Pty Ltd at the date of publication. Aither Pty Ltd makes no warranties, expressed or implied, in relation to any information contained in this document. This document does not purport to represent commercial, financial or legal advice, and should not be relied upon as such. Aither Pty Ltd does not accept responsibility or liability for any loss, damage, cost or expense incurred or arising by reason of any party using or relying on information provided in this document. Any party that uses information contained in this document for any purpose does so at its own risk.

The information contained in this document is confidential and must not be reproduced, distributed, referred to or used, in whole or in part, for any purpose without the express written permission of Aither Pty Ltd.

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Qualifications,�Declarations�and�Consents�

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Qualifications,�Declarations�and�Consents�

The�report�has�been�prepared�at�the�request�of�the�Independent�Directors�of�Duxton�Water�and�is�to�be� incorporated�in�the�Explanatory�Memorandum�to�be�given�to�Shareholders.�Accordingly,�it�has�been� prepared�only�for�the�benefit�of�the�Independent�Directors�and�those�persons�entitled�to�receive�the� Explanatory�Memorandum�and�should�not�be�used�for�any�other�purpose.�

The�report�represents�solely�the�expression�by�Pitcher�Partners�Corporate�of�its�opinion�as�to�whether�the� Proposed�Transaction�is�fair�and�reasonable�to�the�non�associated�shareholders�of�Duxton�Water.�Pitcher� Partners�Corporate�consents�to�this�report�being�incorporated�in�the�Explanatory�Memorandum.�

Statements�and�opinions�contained�in�this�report�are�given�in�good�faith�but,�in�the�preparation�of�this� report,�Pitcher�Partners�Corporate�has�relied�upon�the�information�provided�by�the�Independent�Directors� and�Management�of�Duxton�Water�and�DV.��Pitcher�Partners�Corporate�does�not�imply,�nor�should�it�be� construed,�that�it�has�carried�out�any�form�of�audit�or�verification�on�the�information�and�records�supplied� to�us�other�than�as�required�in�accordance�with�RG111.74�to�RG111.78.�Drafts�of�our�report�were�issued�to� the�Independent�Directors�for�confirmation�of�factual�accuracy.�

Furthermore,�recognising�that�Pitcher�Partners�Corporate�may�rely�on�information�provided�by�Duxton� Water�and�Duxton�Vineyards�and�their�respective�officers�and/or�associates,�Duxton�Water�has�agreed�to� make�no�claim�by�it�or�its�officers�and/or�associates�against�Pitcher�Partners�Corporate�to�recover�any�loss� or�damage�which�Duxton�Water,�or�its�associates�may�suffer�as�a�result�of�that�reliance�and�also�has�agreed� to�indemnify�Pitcher�Partners�Corporate�against�any�claim�arising�out�of�this�engagement,�except�where�the� claim�has�arisen�as�a�result�of�any�proven�wilful�misconduct�or�negligence�by�Pitcher�Partners�Corporate.�

Pitcher�Partners�Corporate�is�a�licensed�corporate�advisory�entity�of�Pitcher�Partners,�Chartered� Accountants.�Pitcher�Partners�is�a�chartered�accounting�firm�providing�a�full�range�of�accounting�and� advisory�services.�

The�Director�of�Pitcher�Partners�Corporate�involved�in�the�preparation�of�this�report�was�Piera�Murone.� Piera�Murone�is�a�representative�of�Pitcher�Partners�Corporate�and�has�many�years’�experience�in�the� provision�of�corporate�financial�advice,�including�specific�advice�on�valuations,�mergers�and�acquisitions,�as� well�as�the�preparation�of�expert�reports.�

Neither�Pitcher�Partners�Corporate,�Pitcher�Partners,�nor�any�partner�or�executive�or�employee�thereof�has� any�financial�interest�in�the�outcome�of�the�Offer.��Pitcher�Partners�Corporate�is�to�receive�a�fee�relating�to� the�preparation�of�this�report�of�$30,000�plus�GST�based�on�time�spent�at�normal�professional�rates.�

Pitcher�Partners��|��Independent�Expert�Report��

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