APPENDIX 4E

Financial report

Name of entity: Rural Funds Group

ARSN: Rural Funds Group comprising Rural Funds Trust (ARSN 112 951 578) RF Active (ARSN 168 740 805)

For the year ended: 30 June 2017

Corresponding period: 30 June 2016

Results for announcement to the market

	$'000	Up/Down	% movement
Revenues from ordinary activities	41,573	Up	57%
Net profit after income tax	43,326	Up	9070%
Total comprehensive income attributable to	34,238	Down	(2%)
unitholders
	Amount persecurity(cents)	Frankedamount persecurity	Tax rate forfrankingcredit
June 2016 distribution per security(record date 30 June 2016, paid 20 July 2016)	2.2325	Nil	N/A
September 2016 distribution per security(record date 30 September 2016, paid 28 October 2016)	2.4100	Nil	N/A
December 2016 distribution per security(record date 29 December, paid 31 January 2017)	2.4100	Nil	N/A
March 2017 distribution per security(record date 31 March 2017, paid 28 April 2017)	2.4100	Nil	N/A
June 2017 distribution per security(record date 30 June 2017, paid 31 July 2017)	2.4100	Nil	N/A

Record date for determining entitlements for the	30 June 2017
June 2017 distribution

No amounts of foreign sourced dividends or distributions are included in the above distributions.

Net tangible assets per security

	30 June 2017	30 June 2016
Net tangible assets per unit ($)	0.98	0.90

Adjusted Net asset value per security

	30 June 2017	30 June 2016
Adjusted Net asset value per	1.58	1.43
unit including water entitlements
held at market value ($)

Details of associates

Name of entity:	RFM StockBank	Perth Markets Limited
Percentage holding:	33.50%	0.00%
Contribution to reporting entity's	$78,000	$1,226,000
profit/(loss) from ordinary
activities during the period

Additional Appendix 4E disclosure requirements can be found in the Directors' Report and the 30 June 2017 Consolidated Financial Statements and accompanying notes.

Dividend Reinvestment Plan

Rural Funds Group operates a distribution reinvestment plan in which all unitholders resident in Australia and New Zealand are eligible to participate at their election. The number of units received from a distribution is based on dividing the distribution (after deduction of taxes or any other payment or levy applicable) by the average of the daily volume weighted average price of units sold on the ASX during the 20 trading days before the record date less a discount of 1.5% on the calculated price.

Unitholders may change their participation in the plan at any time. However, in order to be valid and effective for a distribution payable, the election form to change participation must be submitted to the unit registry by the day after the nominated record date for that distribution.

Audit

This report is based on the consolidated financial statements which have been audited by PricewaterhouseCoopers. There are no items of dispute with the auditor and the audit is not subject to qualification.

Rural Funds Group (RFF)

Financial Statements For the Year Ended 30 June 2017

Rural Funds Group comprises: Rural Funds Trust ARSN 112 951 578 and RF Active ARSN 168 740 805

Corporate Directory	1
Directors' Report	2
Auditor's Independence Declaration	11
Consolidated Statement of Comprehensive Income	12
Consolidated Statement of Financial Position	13
Consolidated Statement of Changes in Net Assets Attributable to Unitholders	15
Consolidated Statement of Cash Flows	16
Notes to the Financial Statements	17
Directors' Declaration	57
Independent Auditor's Report	58
Additional Information for Listed Public Entities	64

Corporate Directory

Registered Office	Level 2, 2 King StreetDEAKIN ACT 2600
Responsible Entity	Rural Funds Management LimitedABN 65 077 492 838AFSL 226701Level 2, 2 King StreetDEAKIN ACT 2600Ph: 1800 026 665
Directors	Guy PaynterDavid BryantMichael CarrollJulian Widdup
Company Secretaries	Andrea LemmonStuart Waight
Custodian	Australian Executor Trustees LimitedABN 84 007 869 794Level 22, 207 Kent StreetSYDNEY NSW 2000
Auditors	PricewaterhouseCoopersOne International Towers SydneyWatermans QuayBARANGAROO NSW 2000
Share Registry	Boardroom Pty LimitedLevel 12, 225 George StreetSYDNEY NSW 2000Ph: 1300 737 760
Bankers	Australia and New Zealand Banking Group Limited (ANZ)242 Pitt StreetSYDNEY NSW 2000
	Rabobank Australia GroupDarling Park Tower 3201 Sussex StreetSYDNEY NSW 2000
Stock Exchange Listing	Rural Funds Group units (Rural Funds Trust and RF Active form astapled investment vehicle) are listed on the Australian SecuritiesExchange (ASX)
ASX Code	RFF

Directors' Report

30 June 2017

Rural Funds Group (RFF or the Group) comprises the stapled units in two Trusts, Rural Funds Trust (RFT) (ARSN 112 951 578) and RF Active (RFA) (ARSN 168 740 805) (collectively, the Trusts). The Directors of Rural Funds Management Limited (RFM) (ACN 077 492 838, AFSL 226701), the Responsible Entity of Rural Funds Group present their report on the Group for the year ended 30 June 2017.

In accordance with AASB 3 Business Combinations, the stapling arrangement referred to above is regarded as a business combination and Rural Funds Trust has been identified as the parent for the purpose of preparing the consolidated financial report.

The Directors' report is a combined report that covers both Trusts. The financial information for the Group is taken from the Consolidated Financial Statements and notes.

Directors

The following persons held office as Directors of the Responsible Entity during the year and up to the date of this report:

Guy Paynter	Non-Executive Chairman
David Bryant	Managing Director
Michael Carroll	Non-Executive Director
Julian Widdup	Non-Executive Director (appointed 15 February 2017)

Principal activities and significant changes in nature of activities

The principal activity of the Group during the year was the leasing of agricultural properties and equipment. The Group is a lessor of agricultural property with revenue derived from leasing almond orchards, macadamia orchards, poultry property and infrastructure, vineyards, cattle properties, cotton properties, agricultural plant and equipment, and water rights.

The following activities of the Group changed during the year:

The Group purchased three cattle properties, Rewan, Mutton Hole and Oakland Park, in central and far north Queensland, leased to Cattle JV Pty Limited (CJV), a wholly owned subsidiary of RFM.
The Group purchased Lynora Downs, a 4,880 hectare cotton property located in Central Queensland. Cotton JV Pty Limited, a joint venture between RFM and Queensland Cotton Corporation Pty Limited (a subsidiary of Olam International Limited), operates and has leased Lynora Downs for a period of five years, with an option to extend for a further five years; and
The Group acquired a 9,549 megalitre (ML) high security Murrumbidgee River water entitlement which will generate revenue through the sale of annual water allocations until it is required for future horticultural developments.

Operating results

The consolidated net profit after income tax of the Group for the year ended 30 June 2017 amounted to $43,326,000 (restated 2016: $483,000 loss). The consolidated total comprehensive income of the Group for the year ended 30 June 2017 amounted to $34,238,000 (2016: $34,774,000).

The Group holds investment property, bearer plants and derivatives at fair value. After adjusting for the effects of fair value adjustments, depreciation, impairments and one-off transaction costs during the year the profit before tax would have been $25,599,000 (2016: $14,342,000) representing adjusted funds from operations (AFFO).

Directors' Report

30 June 2017

Adjusted funds from operations (AFFO)

		Restated
	2017	2016
	$'000	$'000
Net profit before income tax	45,167	439
Change in fair value of investment property	(17,191)	(3,343)
Change in fair value of plant and equipment - bearer plants	2,498	9,029
Change in fair value of interest rate swaps	(5,311)	7,116
Depreciation and impairments	1,568	939
Gain on sale of assets	(33)	(290)
Share of net profit of associate attributable to change in fair value ofinvestment property	(1,099)	-
One-off transaction costs	-	452
AFFO	25,599	14,342
AFFO cents per unit	12.51	9.26

Having eliminated fair value adjustments and one-off transaction costs, the adjusted funds from operations (AFFO) effectively represents funds from operations from the property rental business.

Financial position

The net assets of the consolidated Group have increased to $357,678,000 at 30 June 2017 from $207,864,000 at 30 June 2016.

At 30 June 2017 the Group had total assets of $543,003,000 (2016: $379,039,000).

At 30 June 2017, the Group held total water entitlements (including investments in Barossa Infrastructure Limited (BIL) and Coleambally Irrigation Co-operative Limited (CICL)) at a book value of $121,469,000 (2016: $69,534,000). Independent valuations as at 30 June 2017 were received on the established almond orchard properties and vineyards that attribute a value to the water entitlements held by the Group. The Directors consider that these valuations remain reasonable estimates of the fair value at 30 June 2017 and on this basis the fair value of water entitlements at 30 June 2017 was $166,012,000 (2016: $97,949,000). The value of water entitlements is illustrated in the table below:

	2017	2016
	$'000	$'000
Intangible assets (water entitlements)	108,738	59,691
Investment in CICL	12,222	9,334
Investment in BIL	509	509
Total book value of water entitlements	121,469	69,534
Revaluation of water entitlements per valuation	44,543	28,415
Adjusted total water entitlements	166,012	97,949

Directors' Report

30 June 2017

Financial position (continued)

Adjusted net asset value

The following depicts the net assets of the Group following the revaluation of water entitlements comprising intangible assets and investments in BIL and CICL per these valuations.

	2017$'000	2016$'000
Net assets per Consolidated Statement of Financial Position	357,678	207,864
Revaluation of water entitlements per valuation	44,543	28,415
Adjusted net assets	402,221	236,279
Adjusted NAV per unit	1.58	1.43

Significant changes in state of affairs

In July 2016, the Group successfully completed a non-renounceable rights issue of $61,000,000 (1 new unit for every 4 existing units) in order to fund the acquisition of three cattle properties, as well as macadamia orchards located near Bundaberg, QLD, which were acquired in March 2016, and an additional 1,000 hectares of almond development at the Kerarbury property.

In July 2016, the Group negotiated an increase to its debt facility from $147,500,000 to $200,000,000.

In July and August 2016 the Group acquired three cattle properties: Rewan, a 17,479 hectare cattle finishing property near Rolleston, QLD and two breeding properties, Oakland Park and Mutton Hole, located near the Gulf of Carpentaria in far north Queensland and comprising a combined area of 225,800 hectares. The properties and livestock has been be leased for ten years to Cattle JV Pty Limited, a wholly owned subsidiary of RFM.

In December 2016, the Group acquired a 9,549 megalitre (ML) high security Murrumbidgee River water entitlement. The acquisition represents one of the largest ever sales of high security Murrumbidgee River water entitlements and will provide a cornerstone resource for future horticultural developments. In the interim, the Group will generate revenue from the sale of annual water allocations.

In December 2016, the Group acquired Lynora Downs, a 4,880 hectare cotton property located in Central Queensland. RFM and Queensland Cotton Corporation Pty Limited, a subsidiary of Olam International Limited, have established a joint venture, Cotton JV Pty Limited, which leases and operates Lynora Downs for a period of five years, with an option to extend for a further five years.

In December 2016, the Group negotiated an increase to its debt facility from $200,000,000 to $250,000,000 along with a one year extension to the facility expiry, now being December 2019. Concurrent to this process, the debt facility was syndicated with Rabobank Australia Group (Rabobank) with existing financier Australia and New Zealand Banking Group Limited (ANZ).

In June 2017, the Group successfully completed a non-renounceable rights issue of $78,623,000 (2 new units for every 9 existing units), in order to reduce gearing and create balance sheet capacity to further build the Group's portfolio of quality agricultural assets. The equity proceeds raised were also applied against the debt drawn to acquire the Lynora Downs cotton property and a parcel of Murrumbidgee River high security water entitlements, both of which were acquired using debt in December 2016.

In the opinion of the Directors, there were no other significant changes in the state of affairs of the Group during the year.

Directors' Report

30 June 2017

Property leasing

At 30 June 2017 the Group held 35 properties as follows:

17 poultry farms (303,216 square metres);
3 almond orchards (2,414 planted hectares);
1 almond orchard under development (2,500 planted hectares at completion);
7 vineyards (666 planted hectares);
3 macadamia orchards (259 planted hectares);
3 cattle properties (243,300 hectares).
1 cotton property (1,038 irrigable hectares)

During the year ended 30 June 2017, the properties held by the Group recorded a fair value of investment properties increment of $17,191,000 (2016: $3,343,000) and a fair value of bearer plants decrement of ($11,687,000) (2016: $26,495,000 increment).

Almond orchards

Established almond orchard properties (including water entitlements) are located near Hillston, NSW and are leased to tenants who make regular rental payments. On these properties, 2,414 hectares (2016: 2,414 hectares) are applied to almond growing: 1,006 hectares (2016: 1,006) at Yilgah, 808 hectares (2016: 808) at Mooral and 600 hectares at Tocabil (2016: 600). The full almond area is under lease to the following tenants:

Select Harvests Limited (SHV) 1,221 hectares (2016: 1,221);
RFM Almond Fund 2006 (AF06) 272 hectares (2016: 272);
RFM Almond Fund 2007 (AF07) 73 hectares (2016: 73);
RFM Almond Fund 2008 (AF08) 206 hectares (2016: 206);
Olam Orchards Australia Pty Limited (Olam) 600 hectares (2016: 600);
Rural Funds Management Limited (RFM) 42 hectares (2016: 42).

The Group underwent a rent review for the properties leased to Select Harvests Limited which was effective from 1 July 2016.

The Group had two almond orchards which are under lease to Olam. Tocabil was leased to Olam in March 2015. The full 600 hectares of almond orchard at Tocabil is established and fully leased. The Kerarbury property was leased to Olam from September 2015. A 2,500 hectare almond orchard is being developed in accordance with the lease of this property.

For its almond orchards the Group owns water entitlements of 77,922ML (2016: 59,985ML). During the year, a total of 17,937ML (2016: 26,766ML) of water entitlements were purchased. At 30 June 2017 no deposits were paid for an additional water entitlements (2016: 6,591ML).

For its almond orchards the Group also owns 21,430ML (2016: 21,430ML) of water delivery entitlements.

Poultry property

The poultry property and infrastructure held by the Group includes 17 poultry growing farms located in Griffith, NSW and Lethbridge, VIC and 1,432ML of water entitlements (2016: 1,432ML). Leases are in place with RFM Poultry, a scheme managed by RFM, for 100% (2016: 100%) of the poultry property and infrastructure, with remaining lease terms between 7 and 19 years. The poultry growing operations are performed by RFM Poultry which is contracted with Baiada Poultry Pty Limited and Turi Foods Pty Limited.

Vineyards

The vineyard properties held by the Group include seven vineyards, with six located in South Australia, in the Barossa Valley, Adelaide Hills and Coonawarra regions, and one located in the Grampians in Victoria. For its vineyards, the Group owns 936ML of water entitlements (2016: 936ML). All vineyards are leased to Treasury Wine Estates and produce premium quality grapes. Six of the vineyards are leased until June 2026 and one is leased until June 2022.

Directors' Report

30 June 2017

Property leasing (continued)

Macadamia orchards

Established macadamia orchards located near Bundaberg, QLD are leased to the following tenants:

2007 Macgrove Project (M07) 234 hectares (2016: 234);
Rural Funds Management Limited (RFM) 25 hectares (2016: 25).

Cattle property

Cattle properties held by the Group comprise a total of 243,279 hectares and are leased to Cattle JV Pty Limited, a wholly owned subsidiary of RFM, for ten years. Rewan is a 17,479 hectare cattle finishing property located near Emerald, QLD. Oakland Park and Mutton Hole are neighbouring breeding properties near Normanton, QLD with a combined total of 225,800 hectares.

Cotton property

A 4,880 hectare cotton property was acquired during the year and is located near Emerald, QLD. 18,487ML of water entitlements were acquired with the property. The property is leased to Cotton JV Pty Limited (CotJV), a joint venture between RFM and Queensland Cotton Corporation Pty Limited (a subsidiary of Olam International Limited), for five years.

Other activities

The Group held a 33.50% stake in RFM StockBank (2016: 33.50%), a scheme managed by RFM, which operates a livestock leasing business. Under the livestock leasing operation, RFM StockBank retains ownership of the livestock and leases them to farmers in return for a placement fee which is similar to interest, and an upfront fee from the livestock agent. RFM, as Responsible Entity for RFM StockBank, has commenced the windup of RFM StockBank. A final capital return was paid to investors on 9 August 2017.

Agricultural plant and equipment with a net book value of $5,127,000 (2016: $4,178,000) is owned by the Group and leased to AF06, AF07, AF08, M07, Cotton JV and Cattle JV.

Breeder assets with a net book value of $10,953,000, acquired during the year, are leased to Cattle JV Pty Limited.

The Group sold its 8.96% interest in Perth Markets Limited (PML), a stapled entity which owns the Market City site in Canning Vale, WA. RFF acquired 5,275,000 PML securities at $1 per security in February 2016, and sold them during March 2017 at $1.147 per security.

Banking facilities

At 30 June 2017 the core debt facility available to the Group was $250,000,000 (2016: $147,500,000), with a drawn down balance of $164,500,000 (2016: $146,500,000). The facility limit was increased to $250,000,000 in December 2016 with a one year extension to the facility expiry, being December 2019. Concurrent to this process, the debt facility has been syndicated with Rabobank Australia Group (Rabobank) selected as part of a syndicate with existing financier Australia and New Zealand Banking Group Limited (ANZ). At 30 June 2017 RFF had active interest rate swaps totaling 53.5% (2016: 60%) of the drawn down balance to manage interest rate risk.

Distributions

	Cents	Total
	per unit	$
Distribution paid 29 July 2016	2.2325	3,691,602
Distribution paid 28 October 2016	2.4100	4,986,940
Distribution paid 31 January 2017	2.4100	4,996,810
Distribution paid 28 April 2017	2.4100	5,006,323
Distribution declared 7 June 2017, paid 31 July 2017	2.4100	6,130,580

Directors' Report

30 June 2017

Earnings per unit

Net profit after income tax for the year ($'000)	43,326
Weighted average number of units on issue during the year	204,617,207
Basic and diluted earnings per unit (total) (cents)	21.17

Indirect cost ratio

The indirect cost ratio (ICR) is the ratio of the Group's management costs over the Group's average net assets for the year, expressed as a percentage.

Management costs include management fees and reimbursement of other expenses in relation to the Group, but do not include transactional and operational costs such as brokerage. Management costs are not paid directly by the unitholders of the Group.

The ICR for the Group for the year ended 30 June 2017 is 3.29% (2016: 2.43%). The ICR for the year has been impacted by costs associated with the rights issue completed in July 2016 and June 2017.

Matters subsequent to the end of the year

No matter or circumstance has arisen since the end of the year that has significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

Likely developments and expected results of operations

The Group expects to continue to derive its core future income from the holding and leasing of investment property, bearer plants and water entitlements. Management is continually looking for growth opportunities in agricultural and related industries.

Environmental regulation

The operations of the Group are subject to significant environmental regulations under the laws of the Commonwealth and States or Territories of Australia. Water usage for irrigation, domestic and levee purposes, including containing irrigation water from entering the river, water course or water aquifer are regulated by the Water Management Act 2000. Water licences are leased to external parties who are then responsible to meet the legislative requirements of these licences. There have been no known significant breaches of any environmental requirements applicable to the Group.

Units on issue

254,380,898 units in Rural Funds Trust were on issue at 30 June 2017 (2016: 165,357,290). During the year 89,023,608 units were issued by the Trust (2016: 33,215,055) and nil (2016: nil) were redeemed.

Indemnity of Responsible Entity and Custodian

In accordance with its constitution, Rural Funds Group indemnifies the Directors, Company Secretaries and all other officers of the Responsible Entity and Custodian when acting in those capacities, against costs and expenses incurred in defending certain proceedings.

Rounding of amounts

The Group is an entity to which ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 applies and accordingly amounts in the consolidated financial statements and Directors' report have been rounded to the nearest thousand dollars.

Directors' Report

30 June 2017

Information on Directors of the Responsible Entity

Guy PaynterQualificationsExperience	Non-Executive ChairmanBachelor of Laws from The University of MelbourneGuy Paynter is a former director of broking firm JB Were and brings toRFM more than 30 years of experience in corporate finance. Guy is aformer member of the Australian Securities Exchange (ASX) and a formerassociate of the Securities Institute of Australia (now known as theFinancial Services Institute of Australasia). Guy is also Chairman of BillPeach Group Limited (previously known as Aircruising Australia Limited).Guy's agricultural interests include cattle breeding in the Upper Hunterregion in New South Wales.
Special responsibilitiesDirectorships currently held in otherlisted entities and during the threeyears prior to the current year	Member of Audit Committee and Remuneration CommitteeRFM Poultry
David BryantQualifications	Managing DirectorDiploma of Financial Planning from the Royal Melbourne Institute ofTechnology and a Masters of Agribusiness from The University ofMelbourne.
Experience	David Bryant established RFM in February 1997 and since that time hasled the team that is responsible for the acquisition of large scaleagricultural property assets and associated water entitlements. RFMmanages over $600 million of agricultural assets. On a day-to-day level,David is responsible for leading the RFM Executive, maintaining keycommercial relationships and sourcing new business opportunities.
Special responsibilitiesDirectorships currently held in otherlisted entities and during the threeyears prior to the current year	Managing DirectorRFM Poultry
Michael CarrollQualifications	Non-Executive DirectorBachelor of Agricultural Science from La Trobe University and a Mastersof Business Administration from The University of Melbourne's MelbourneBusiness School. Michael has completed the Advanced ManagementProgram at Harvard Business School, Boston, and is a Fellow of theAustralian Institute of Company Directors.
Experience	Michael Carroll serves a range of food and agricultural businesses in aboard and advisory capacity. Michael is on the boards of Tassal GroupLimited, Select Harvests Limited, Paraway Pastoral Company, SunnyQueen Pty Limited, and the Gardiner Dairy Foundation. Michael also hassenior executive experience in a range of companies, includingestablishing and leading the National Australia Bank (NAB) Agribusinessdivision.
Special responsibilitiesDirectorships currently held in otherlisted entities and during the threeyears prior to the current year	Chairman of Audit Committee and Remuneration CommitteeMichael is on the Board of Tassal Group Limited, RFM Poultry and SelectHarvests Limited.

Directors' Report

30 June 2017

Information on Directors of the Responsible Entity (continued)

Julian WiddupQualifications	Non-Executive DirectorBachelor of Economics from the Australian National University. Julian isa Fellow of the Institute of Actuaries of Australia and a Fellow of theAustralian Institute of Company Directors.
Experience	Julian brings extensive experience to the RFM board having previouslyserved as a director of Palisade Investment Partners, DarwinInternational Airport, Alice Springs Airport, NZ timberland companyTaumata Plantations Limited, Regional Livestock Exchange InvestmentCompany, Merredin Energy power generation company, VictorianAgriBioscience Research Facility, Casey Hospital in Melbourne andMater Hospital in Newcastle.
Special responsibilitiesDirectorships currently held in other	Member of Audit Committee and Remuneration Committee.RFM Poultry
listed entities
Directorships held in other listedentities during the three years priorto the current year	None noted

Interests of Directors of the Responsible Entity

	Guy Paynter	David Bryant	Michael Carroll
	Units	Units	Units
Balance at 30 June 2015	382,156	3,656,191	-
Additions	151,100	3,987,152	-
Balance at 30 June 2016	533,256	7,643,343	-
Additions	281,440	4,034,839	19,389
Balance at 30 June 2017	814,696	11,678,182	19,389

Company Secretaries of the Responsible Entity

Stuart Waight and Andrea Lemmon are RFM's joint company secretaries. Stuart joined RFM in 2003, is a Chartered Accountant and is RFM's Chief Operating Officer. Andrea has been with RFM since 1997 and is RFM's Executive Manager Funds Management.

Meetings of Directors of the Responsible Entity

During the financial year 16 meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows:

	Directors meetingsp		Audit Committeemeetings		Remuneration Committeemeetings
	No. eligibleto attend	No.attended	No. eligibleto attend	No.attended	No. eligibleto attend	No.attended
Guy Paynter	16	15	1	1	1	1
David Bryant	16	16	-	-	-	-
Michael Carroll	16	14	1	1	1	1
Julian Widdup	7	7	1	1	1	1

Directors' Report

30 June 2017

Non-audit services

During the year ended 30 June 2017 fees of $6,369 (2016: $6,121) were paid or payable to PricewaterhouseCoopers for compliance audit services provided.

Auditor's independence declaration

The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended 30 June 2017 has been received and is included on page 11 of the financial report.

The Directors' report is signed in accordance with a resolution of the Board of Directors of Rural Funds Management Limited.

David Bryant Director

21 August 2017

Auditor's Independence Declaration

As lead auditor for the audit of Rural Funds Group for the year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Rural Funds Group and the entities it controlled during the period.

CMC Heraghty Sydney Partner PricewaterhouseCoopers

21 August 2017

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2017

			Restated
		30 June	30 June
		2017	2016
	Note	$'000	$'000

Revenue	6	41,573	26,549
Other income		72	76
Management fees		(4,393)	(3,165)
Property expenses		(1,473)	(1,256)
Finance costs		(7,891)	(5,612)
Other expenses		(2,494)	(2,763)
Share of net profit - equity accounted investments		1,304	61
Gain on sale of assets		33	290
Depreciation and impairments		(1,568)	(939)
Change in fair value of plant and equipment - bearer plants		(2,498)	(9,029)
Change in fair value of investment property	12	17,191	3,343
Change in fair value of interest rate swaps		5,311	(7,116)
Net profit before income tax		45,167	439
Income tax expense	7	(1,841)	(922)
Net profit/(loss) after income tax		43,326	(483)
Other comprehensive income:
Revaluation (decrement)/increment - bearer plants	24	(9,189)	35,524
Revaluation decrement other	24	-	(14)
Income tax relating to these items	7	101	(253)
Other comprehensive income/(loss) for the year, net of tax		(9,088)	35,257
Total comprehensive income attributable to unitholders		34,238	34,774

Total comprehensive income for the year attributable to
unitholders arising from:Rural Funds Trust		34,131	34,644
RF Active (non-controlling interest)		107	130
		34,238	34,774

Earnings per unit
Basic and diluted earnings per unit from continuing operations:
Per stapled unit (cents)	26	21.17	(0.31)
Per unit of Rural Funds Trust (cents)	26	21.12	(0.39)
Per unit of RF Active (cents)	26	0.05	0.08

Refer to note 2 for details of restatement as a result of the amendments made to Accounting Standards AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.

Consolidated Statement of Financial Position

As at 30 June 2017

			Restated	Restated
		2017	2016	2015
	Note	$'000	$'000	$'000
ASSETS
Current assets
Cash and cash equivalents	9	3,838	3,034	712
Trade and other receivables	10	4,608	7,239	2,729
Other current assets	13	1,800	2,501	307
Total current assets		10,246	12,774	3,748
Non-current assets
Investments accounted for using the equity method	15	-	9,041	3,903
Financial assets	14	23,916	10,078	617
Plant and equipment	11	5,127	4,178	3,153
Plant and equipment - bearer plants	11	121,193	113,206	67,581
Investment property	12	273,783	168,951	142,379
Intangible assets	16	108,738	59,691	28,965
Deferred tax assets	21,22	-	1,120	2,317
Total non-current assets		532,757	366,265	248,915
Total assets		543,003	379,039	252,663
LIABILITIES
Current liabilities
Trade and other payables	17	5,138	6,920	2,038
Interest bearing liabilities	18	3,204	3,030	657
Income tax payable		-	-	29
Distributions payable	25	6,368	3,901	2,947
Total current liabilities		14,710	13,851	5,671
Non-current liabilities
Interest bearing liabilities	18	164,500	146,500	91,451
Other non-current liabilities	19	1,634	1,634	1,553
Derivative financial liabilities	20	3,878	9,190	2,048
Deferred tax liabilities	21,22	603	-	-
Total non-current liabilities		170,615	157,324	95,052
Total liabilities (excluding net assets attributableto unitholders)		185,325	171,175	100,723
Net assets attributable to unitholders		357,678	207,864	151,940
Total liabilities		543,003	379,039	252,663

Refer to note 2 for details of restatement as a result of the amendments made to Accounting Standards AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.

Consolidated Statement of Financial Position

As at 30 June 2017

			Restated	Restated
		2017	2016	2015
	Note	$'000	$'000	$'000
NET ASSETS ATTRIBUTABLE TOUNITHOLDERS
Unitholders of Rural Funds Trust
Issued units		252,880	134,110	111,711
Asset revaluation reserve	24	27,575	36,663	1,406
Accumulated profit		73,860	35,218	37,427
Parent entity interest		354,315	205,991	150,544
Unitholders of RF Active
Issued units		3,066	1,683	1,323
Accumulated profit		297	190	73
Non-controlling interest		3,363	1,873	1,396
Total net assets attributable to unitholders		357,678	207,864	151,940

Water entitlements are held at cost in the Consolidated Statement of Financial Position in accordance with accounting standards. Refer to note 5 for disclosure of the Directors' valuation of water entitlements, which are supported by independent property valuation.

Refer to note 2 for details of restatement as a result of the amendments made to Accounting Standards AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.

Consolidated Statement of Changes in Net Assets Attributable to Unitholders

For the year ended 30 June 2017

2017	Note	Issuedunits	Retainedearnings	Assetrevaluationreserve	Total	Noncontrollinginterest	Total
		$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 July 2016Restated		134,110	35,218	36,663	205,991	1,873	207,864
Other comprehensive income		-	-	(9,088)	(9,088)	-	(9,088)
Total other comprehensiveincome		-	-	(9,088)	(9,088)	-	(9,088)
Profit before income tax		-	45,050	-	45,050	117	45,167
Income tax expense	7	-	(1,831)	-	(1,831)	(10)	(1,841)
Total comprehensive income forthe year		-	43,219	(9,088)	34,131	107	34,238
Issued units
Units issued during the year	23	140,577	-	-	140,577	1,420	141,997
Issue costs	23	(5,264)	-	-	(5,264)	(37)	(5,301)
Total issued units		135,313	-	-	135,313	1,383	136,696
Distributions to unitholders	25	(16,543)	(4,577)	-	(21,120)	-	(21,120)
Balance at 30 June 2017		252,880	73,860	27,575	354,315	3,363	357,678

2016Restated	Note	Issuedunits	Retainedearnings	Assetrevaluationreserve	Total	Noncontrollinginterest	Total
		$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 July 2015		111,711	37,440	1,406	150,557	1,383	151,940
Other comprehensive income		-	-	35,257	35,257	-	35,257
Total other comprehensiveincome		-	-	35,257	35,257	-	35,257
Profit before income tax		-	388	-	388	51	439
Income tax expense	7	-	(1,001)	-	(1,001)	79	(922)
Total comprehensive income forthe year		-	(613)	35,257	34,644	130	34,774
Issued units
Units issued during the year	23	36,449	-	-	36,449	368	36,817
Issue costs	23	(1,661)	-	-	(1,661)	(8)	(1,669)
Total issued units		34,788	-	-	34,788	360	35,148
Distributions to unitholders	25	(12,389)	(1,609)	-	(13,998)	-	(13,998)
Balance at 30 June 2016		134,110	35,218	36,663	205,991	1,873	207,864

Refer to note 2 for details of restatement as a result of the amendments made to Accounting Standards AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.

The accompanying notes form part of these financial statements.

Consolidated Statement of Cash Flows

For the year ended 30 June 2017

		2017	2016
	Note	$'000	$'000
Cash flows from operating activities
Receipts from customers		48,600	29,255
Payments to suppliers		(13,672)	(9,492)
Interest received		95	80
Finance costs		(8,109)	(5,612)
Net cash inflow from operating activities	32	26,914	14,231

Cash flows from investing activities
Payments for acquisition of macadamia leasing business		-	(7,291)
Payments for investment property		(87,641)	(23,275)
Payments for bearer plants		(19,673)	(13,606)
Payments for intangible assets		(49,758)	(30,381)
Payments for financial assets		(13,882)	(9,359)
Payments for plant and equipment		(1,788)	(1,760)
Payments for deposits		-	(2,242)
Payments for equity accounted investments		-	(5,275)
Proceeds from sale of investment property		-	1,162
Proceeds from sale of assets		60	348
Proceeds from sale of / Distributions from equity accounted		10,345	234
investmentsDistributions received		11	11
Net cash outflow from investing activities		(162,326)	(91,434)

Cash flows from financing activities
Proceeds from issue of units		136,696	35,148
Proceeds from borrowings		18,174	58,079
Repayment of borrowings		-	(657)
Distributions paid		(18,654)	(13,045)
Net cash inflow from financing activities		136,216	79,525

Net increase in cash and cash equivalents held		804	2,322
Cash and cash equivalents at the beginning of the period		3,034	712
Cash and cash equivalents at the end of the period	9	3,838	3,034

Notes to the Financial Statements

30 June 2017

1 General information

This financial report covers the consolidated financial statements and notes of Rural Funds Trust and its Controlled Entities including RF Active (Rural Funds Group, the Group or collectively the Trusts). Rural Funds Group is a for profit entity domiciled in Australia. The Directors of the Responsible Entity authorised the Financial Report for issue on 21 August 2017 and have the power to amend and reissue the Financial Report.

Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian dollars which is the parent entity's functional and presentation currency.

The separate financial statements and notes of the parent entity, Rural Funds Trust, have not been presented within this financial report as permitted by amendments made to the Corporations Act 2001. Parent entity information is included in note 34.

2 Summary of significant accounting policies

Basis of preparation

The accounting policies that have been adopted in respect of the financial report are those of Rural Funds Management (RFM) as Responsible Entity of the Trusts.

The Trusts have common business objectives and operate as an economic entity collectively known as Rural Funds Group.

The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, and other authoritative pronouncements of the Australian Accounting Standards Board, the Corporations Act 2001 and the Trusts' Constitution. The report has been prepared on a going concern basis.

The financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The significant accounting policies used in the preparation and presentation of these financial statements are provided below and are consistent with prior reporting periods unless otherwise stated. The financial statements are based on historical cost, except for the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

As permitted by ASIC Corporations (Stapled Group Reports) Instrument 2015/838, issued by the Australian Securities and Investments Commission, these financial statements are consolidated financial statements and accompanying notes of both Rural Funds Trust and RF Active.

Principles of consolidation

The consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost.

Intragroup assets, liabilities, equity, income, expenses and cash flows relating to transactions between entities in the consolidated Group have been eliminated in full for the purpose of these financial statements.

Appropriate adjustments have been made to the controlled entity's financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a 30 June financial year end.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Principles of consolidation (continued)

Controlled entities

In accordance with AASB 3 Business Combinations, Rural Funds Trust is deemed to control RF Active from the stapling date of 16 October 2014. Rural Funds Trust is considered to be the acquirer of RF Active due to the size of the respective entities and as the stapling transaction and capitalisation of RF Active was funded by a distribution from Rural Funds Trust that was compulsorily used to subscribe for units in RF Active.

Associates

Associates are entities over which the Group has significant influence but not control or joint control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.

The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends or distributions receivable from associates are recognised as a reduction in the carrying amount of the investment.

Business combinations

Business combinations are accounted for by applying the acquisition method which requires an acquiring entity to be identified in all cases. The acquisition date under this method is the date that the acquiring entity obtains control over the acquired entity.

The fair value of identifiable assets and liabilities acquired are recognised in the consolidated financial statements at the acquisition date.

Goodwill or a discount on acquisition may arise on the acquisition date, this is calculated by comparing the fair value of the consideration transferred and the amount of non-controlling interest in the acquirer with the fair value of the net identifiable assets acquired. Where the consideration is greater than the identifiable assets, the excess is recorded as goodwill. Where the net assets acquired are greater than the consideration, the measurement basis of the net assets are reassessed and then a discount on acquisition recognised in the Consolidated Statement of Comprehensive Income.

All acquisition-related costs are recognised as expenses in the periods in which the costs are incurred except for costs to issue debt or equity securities.

Any contingent consideration which forms part of the combination is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity then it is not remeasured and the settlement is accounted for within equity. Otherwise subsequent changes in the value of the contingent consideration liability are measured through the statement of comprehensive income.

Comparative amounts

Comparative amounts have been restated to reflect changes in accounting standards relating to bearer plants, as disclosed in the Plant and equipment – bearer plants section of note 2 to the financial statements.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Revenue

Revenue is recognised when the amount of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the entity and specific criteria relating to the type of revenue as noted below, have been satisfied.

Revenue from the leasing of investment property, water rights, bearer plants, property, plant and equipment and infrastructure, where the Group is a lessor, is recognised in income over the lease term on an accruals basis. The respective leased assets are included in the Consolidated Statement of Financial Position based on that nature.

Interest revenue is recognised using the effective interest rate method.

All revenue is stated net of the amount of goods and services tax (GST).

Income tax

The charge for current income tax expense is based on the profit adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is charged/credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on management's judgement, the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Goods and services tax (GST)

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of GST.

The net amount of GST recoverable from, or payable to, the ATO is included as part of trade and other receivables or payables in the consolidated statement of financial position.

Cash flows in the consolidated statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term investments with less than 3 months of original maturity which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Bank overdrafts also form part of cash equivalents for the purpose of the consolidated statement of cash flows and are presented within current liabilities on the consolidated statement of financial position.

Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less an allowance for doubtful debts.

Collectability of trade receivables is reviewed on an ongoing basis. Individual impairment is identified at a counterparty specific level following objective evidence that a financial asset is impaired. This may be after an interest or principal payment is missed or when information comes to hand that would indicate an inability to meet repayments. An allowance for doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the originally assessed effective interest rate and taking into account the amount of security held. The amount of the allowance is recognised in the income statement.

Debts which are known to be uncollectible are written off when identified. Write-offs are charged against accounts previously established for impairment allowance or directly to the income statement.

Where the debt is in relation to amounts due on almond groves and the impact of non-payment would result in the cancellation of the almond grove rights, which would revert to the Group, then the impairment provision is measured against the value of the rights that would be obtained by the Group.

Intangible assets

Water rights

Permanent water rights and entitlements are recorded at historical cost less accumulated impairment losses. Such rights have an indefinite life, and are not depreciated. The carrying value is tested annually for impairment as well as for possible reversal of impairment. If events or changes in circumstances indicate impairment, or reversal of impairment, the carrying value is adjusted to take account of impairment losses.

Financial instruments

Financial instruments are recognised initially using trade date accounting, i.e. on the date that the Group becomes party to the contractual provisions of the instrument.

On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred).

a. Financial assets

Financial assets are divided into the following categories which are described in detail below:

loans and receivables; and
financial assets at fair value through profit or loss.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Financial instruments (continued)

Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument and its purpose. A financial instrument's category is relevant to the way it is measured and whether any resulting income and expenses are recognised in profit or loss or in other comprehensive income.

b. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers but also incorporate other types of contractual monetary assets.

After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss.

Discounting is omitted where the effect of discounting is considered immaterial.

Significant receivables are considered for impairment on an individual asset basis when they are past due at the reporting date and when objective evidence is received that a specific counterparty will default.

The amount of the impairment is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

For trade receivables, impairment provisions are recorded in a separate allowance account with the loss being recognised in profit or loss. When confirmation has been received that the amount is not collectable, the gross carrying value of the asset is written off against the associated impairment provision.

Subsequent recoveries of amounts previously written off are credited against other income in profit or loss.

In some circumstances, the Group renegotiates repayment terms with customers which may lead to changes in the timing of the payments, the Group does not necessarily consider the balance to be impaired, however assessment is made on a case-by-case basis.

c. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets:

acquired principally for the purpose of selling in the near future;
designated by the entity to be carried at fair value through profit or loss upon initial recognition; or,
which are derivatives not qualifying for hedge accounting.

The Group has some derivatives which are designated as financial assets at fair value through profit or loss.

Assets included within this category are carried in the consolidated statement of financial position at fair value with changes in fair value recognised in finance income or expenses in profit or loss.

Any gain or loss arising from derivative financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using a valuation technique where no active market exists.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Financial instruments (continued)

d. Financial liabilities

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are reported in profit or loss are included in the income statement line items "finance costs".

Financial liabilities are classified as either financial liabilities 'at fair value through profit or loss' or other financial liabilities depending on the purpose for which the liability was acquired. Although the Group uses derivative financial instruments in economic hedges of interest rate risk, it does not hedge account for these transactions.

The Group's financial liabilities include borrowings and trade and other payables, which are measured at amortised cost using the effective interest rate method.

All of the Group's derivative financial instruments that are not designated as hedging instruments in accordance with the strict conditions explained in AASB 139 Financial Instruments: Recognition and Measurement are accounted for at fair value through profit or loss.

e. Impairment of financial assets

At the end of the reporting period the Group assesses whether there is any objective evidence that a financial asset or group of financial assets is impaired.

f. Financial assets at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of the estimated future cash flows discounted at the financial assets original effective interest rate.

Impairment on loans and receivables is reduced through the use of an allowance account, all other impairment losses on financial assets at amortised cost are taken directly to the asset.

Plant and equipment

Classes of plant and equipment other than bearer plants are measured using the cost model as specified below.

The asset is carried at its cost less any accumulated depreciation and any impairment losses. Costs include purchase price, other directly attributable costs and the initial estimate of the costs of dismantling and restoring the asset, where applicable.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

The depreciation rates used for each class of depreciable asset are shown below:

Fixed asset class:	Depreciation rate:
Capital works in progress	Nil
Plant and equipment	3-16 years
Motor vehicles	6-16 years

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Plant and equipment (continued)

At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings.

Plant and equipment - bearer plants

Amendments to AASB 116 Property, Plant and Equipment and AASB 141 Agriculture distinguish bearer plants from other biological assets. Bearer plants are solely used to grow produce over their productive lives and are seen to be similar to an item of machinery. They will therefore now be accounted for under AASB 116 Property, Plant and Equipment.

The Group's wine grape vines, almond trees and macadamia trees qualify as bearer plants under the new definition in AASB 141 Agriculture. As required under the standards, the change in accounting policy has been applied retrospectively to the earliest period presented in the financial statements. As a consequence, the vines and trees were classified to property, plant and equipment effective 1 July 2015 and prior year financial statement balances restated with the fair value at 1 July 2015 adopted as the cost base of the asset.

The bearer plants continue to be measured at fair value, any increase in the carrying amount above cost is recognised in asset revaluation reserve, and any decrease in the carrying amount below cost is recognised in profit and loss. The financial effect of this change is shown in the table below.

Consolidated Statement ofComprehensive income (extract)	As originallystated		Restated
	For the year ended	Increase/(Decrease)	For the yearended
	30 June		30 June
	2016		2016
	$'000	$'000	$'000
Change in fair value of biological assets	26,495	(35,524)	(9,029)
Net profit before income tax	35,963	(35,524)	439
Income tax (expense)/benefit	(1,175)	253	(922)
Net profit after income tax	34,788	(35,271)	(483)
Other comprehensive income	(14)	35,271	35,257
Total comprehensive income	34,774	-	34,774
Earnings per unit (cents)	22.46	(22.77)	(0.31)

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Plant and equipment - bearer plants (continued)

The effect of this change on the financial position is shown in the extract from the statement of financial position below.

Consolidated Statement ofFinancial Position (extract)	As originally stated		Restated	As originally stated		Restated
	30 June	Increase/	30 June	1 July	Increase/	1 July
	2016	(Decrease)	2016		2015 (Decrease)	2015
	$'000	$'000	$'000	$'000	$'000	$'000
Biological assets	113,206	(113,206)	-	67,581	(67,581)	-
Plant and equipment - bearer plants	-	113,206	113,206	-	67,581	67,581
Total assets	379,039	-	379,039	252,663	-	252,663
Total liabilities	171,175	-	171,175	100,723	-	100,723
Net assets	207,864	-	207,864	151,940	-	151,940
Retained earnings	70,489	(35,271)	35,218	37,440	-	37,440
Asset revaluation reserve	1,392	35,271	36,663	1,406	-	1,406
Total equity	207,864	-	207,864	151,940	-	151,940

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Investment property

Investment properties, comprise land, buildings and integral infrastructure including irrigation and trellising.

Investment properties are held for long-term rental yields and are not occupied by the Group. They are carried at fair value and changes in fair value are presented in the income statement.

Leases

Leases of fixed assets or biological assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred from the lessor, are classified as finance leases.

Lease payments for operating leases, where substantially all of the risks and benefits have not been transferred from the lessor, are charged as expenses on a straight-line basis over the life of the lease term.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Provisions are measured at the present value of management's best estimate of the outflow required to settle the obligation at the end of the reporting period. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the unwinding of the discount is taken to finance costs in the income statement.

Provisions for distributions

Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the reporting period.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are recognised as an expense in the period in which they are incurred.

Earnings per unit

Basic earnings per unit are calculated on net profit attributable to unitholders of the Group divided by the weighted average number of issued units.

Interest bearing liabilities

Interest bearing liabilities are initially recognised at fair value less any related transaction costs. Subsequent to initial recognition, interest bearing liabilities are stated at amortised cost. Any difference between cost and redemption value is recognised in the statement of comprehensive income over the entire period of the borrowings on an effective interest basis. Interest-bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer the settlement of the liability for at least twelve months from the balance sheet date.

Notes to the Financial Statements

30 June 2017

2 Summary of significant accounting policies (continued)

Issued units

Ordinary units are classified as liabilities in accordance with AASB 132 Financial Instruments: Presentation. Incremental costs directly attributable to the issue of ordinary units and unit options which vest immediately are recognised as a deduction from net assets attributable to unitholders, net of any tax effects. There is no equity relating to the Group.

Rounding of amounts

Parent entity information

The financial information of the parent entity, Rural Funds Trust, disclosed in note 34 has been prepared on the same basis as the consolidated financial statements, except as set out below.

Investments in subsidiaries and associates

Investments in subsidiaries and associates are accounted for at historical cost less any accumulated impairment. Distributions received from equity investments are recognised in the parent entity's profit or loss when its right to receive the distribution is established.

New accounting standards and interpretations

Standard Name	Effectivedate forthe Group	Requirements	Impact
AASB 15 Revenuefrom contracts withcustomers	1 Jan 2018	Recognise contractedrevenue when control of agood or service transfers to acustomer. The notion ofcontrol replaces the existingnotion of risks and rewards.	It is not expected that thisstandard will have a materialimpact on the Group.
AASB 16 Leases	1 Jan 2019	Introduces a single leaseaccounting model andrequires lessees to recogniseon the balance sheet an asset(right of use) and acorresponding liability (leasecommitment) for leases with aterm of more than 12 months.	There is no impact onreported financial position orperformance expected for theGroup as it is a lessor innature.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods.

Notes to the Financial Statements

30 June 2017

3 Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements, estimates and assumptions in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Management has identified the following critical accounting policies for which significant judgements, estimates or assumptions are made.

Valuations

Directors obtain independent valuations where appropriate. Directors have considered independent valuations and market evidence where appropriate to determine the appropriate fair value to adopt. Independent property valuations were obtained for almond orchard properties, from independent valuer, CBRE Valuations Pty Limited in June 2017. Independent property valuations were obtained for vineyard properties from independent valuer, Gaetjens Pickett Valuers in June 2017. Independent property valuations were obtained for the cattle properties situated near the Gulf of Carpentaria in Queensland from independent valuer, Herron Todd White in June 2017.

Independent valuations were completed for properties within the last 12 months for the Central Queensland cattle and cotton properties and the Tocabil almond orchard property. CBRE Valuations Pty Limited completed the valuation on the cattle property in December 2016, and the cotton property in October 2016. Colliers International Consultancy and Valuation Pty Limited completed the valuation on the Tocabil property in November 2016. The Directors have concluded that there has been no material change to the industry and geographical conditions in which the independent valuers previously assessed these assets. Valuations have not been commissioned for the year end and as such, Directors' valuations have been adopted for these properties in the financial statements.

Independent valuations were not completed during the year for the poultry property and infrastructure and the macadamia orchard properties. The poultry property and infrastructure have not been independently valued due to the Directors adopting a more conservative view in line with assumptions applied with those assets. The macadamia orchard properties have not been independently valued due to the value of the assets and as there has been no material change to the industry and geographical conditions of the properties in which the independent valuers previously assessed these assets. Directors' valuations have been adopted for these properties in the financial statements.

The Group's properties, including those under development, are valued at fair value excluding the value of water rights. Water rights are treated as intangible assets, which are held at historical cost less accumulated impairment losses. The valuation model used judgement by using discount rates, capitalisation rates and comparable sales in calculating the values and allocating those values over investment property and bearer plants.

Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits.

Recognition therefore involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised. Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of deferred tax assets.

Notes to the Financial Statements

30 June 2017

3 Significant accounting judgements, estimates and assumptions (continued)

Valuation of Barossa Infrastructure Limited and Coleambally Irrigation Co-operative Limited shares

The shares in Barossa Infrastructure Limited (BIL) and Coleambally Irrigation Co-operative Limited (CICL) have been valued using the number of megalitres of water that the Group is entitled to under the BIL and CICL schemes as supported by an external valuation on an 'in use' basis, or at initial cost. These methods are used due to a lack of evidence of trading in BIL and CICL shares.

4 Working capital

The deficiency in working capital at 30 June 2017 is due to the timing of distributions. Based on the forecast cash flows, the Group believes it can pay all of its debts as and when they fall due.

5 Segment information

The Group operates in one operating segment (2016: one segment), being the holding and leasing of agricultural property and equipment.

Water rights and entitlements

The Board reviews the business based on the internal and external valuations of its properties.

Permanent water rights and entitlements are held at historical cost less accumulated impairment losses. The book value of the water rights (including investments in BIL and CICL) at 30 June 2017 is $121,469,000 (2016: $69,534,000).

In June 2017 independent property valuations were performed by CBRE Valuations Pty Limited on the almond orchard properties that attribute a value to the water entitlements held by the Group. The Directors consider that these valuations are reasonable estimates of the fair value at 30 June 2017. These valuations value the water rights at 30 June 2017 at $166,012,000 (2016: $97,949,000) representing a movement in the value of the water rights above cost of $44,543,000 (2016: $28,415,000).

The following is a comparison of the book value at 30 June 2017 to an adjusted value based on the Directors' valuation of the water rights.

	Per StatutoryConsolidatedStatement ofFinancialPosition	Revaluation ofwaterentitlementsper Directors'valuation	AdjustedConsolidatedStatement ofFinancialPosition
	$'000	$'000	$'000
Assets
Total current assets	10,246	-	10,246
Total non-current assets	532,757	44,543	577,300
Total assets	543,003	44,543	587,546
Liabilities
Total current liabilities	14,710	-	14,710
Total non-current liabilities	170,615	-	170,615
Total liabilities (excluding net assetsattributable to unitholders)	185,325	-	185,325
Net assets attributable to unitholders	357,678	44,543	402,221
Net asset value per unit ($)	1.41	0.17	1.58

Notes to the Financial Statements

30 June 2017

6 Revenue

	2017	2016
	$'000	$'000
Rental revenue	41,479	26,469
Interest received	94	80
Total	41,573	26,549

7 Income tax expense

The major components of income tax expense comprise:

		Restated
	2017	2016
	$'000	$'000
Current tax	-	-
Deferred tax	2,021	957
Adjustments in respect of current income tax of previous years	-	(29)
Adjustments in respect of deferred income tax of previous years	(180)	(6)
Income tax expense/(benefit) reported in the Statement ofComprehensive Income	1,841	922

Income tax expense is attributable to:
Profit from continuing operations	1,841	922
Total	1,841	922
Deferred income tax expense/(benefit) included in income tax expense comprises:
Decrease in deferred tax assets	1,120	2,332
Increase/(decrease) in deferred tax liabilities	721	(1,382)
Total	1,841	950

Amounts charged or credited directly to equity		Restated
	2017	2016
	$'000	$'000
Capitalised issue costs	(16)	(6)
Change in fair value taken through asset revaluation reserve	(101)	253
Total	(117)	247

Numerical reconciliation of income tax expense to prima facie tax payable

		Restated
	2017	2016
	$'000	$'000
Accounting profit before tax from continuing operations	45,167	439
At the statutory income tax rate of 30% (2016: 30%)	13,550	132
Tax effect of amounts that are not deductible/(taxable) indetermining taxable income	(11,504)	884
Adjustments in respect of tax of previous years	(180)	(35)
Imputation credits received	(25)	(59)
Total	1,841	922

Notes to the Financial Statements

30 June 2017

7 Income tax expense (continued)

From 1 July 2014 both Rural Funds Trust and RFM Chicken Income Fund (a subsidiary of Rural Funds Trust) are flow through trusts for tax purposes. As a result, it is no longer probable that a lax liability will be incurred in these entities in relation to future sale of assets for a gain or through trading.

Franking credits

At 30 June 2017 there are $156,000 of franking credits available to apply to future RF Active income distributions (2016: $59,000).

8 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the Group:

	2017	2016
	$	$
PricewaterhouseCoopers Australia:
Audit and review of financial statements	250,637	210,508
Compliance audit	6,370	6,121
Total	257,007	216,629

9 Cash and cash equivalents

	2017	2016
	$'000	$'000
Cash at bank	3,838	3,034
Total	3,838	3,034

Reconciliation of cash

Cash and cash equivalents reported in the Consolidated Statement of Cash Flows are reconciled to the equivalent items in the Consolidated Statement of Financial Position as follows:

	Cash and cash equivalents	3,838	3,034
10	Trade and other receivables
		2017	2016
		$'000	$'000
	Current
	Trade receivables	1,756	6,056
	Sundry receivables	1,175	433
	Receivables from related parties	1,677	750
	Total	4,608	7,239

Trade receivables are non-interest bearing and are generally on 30 day terms.

Notes to the Financial Statements

30 June 2017

11 Plant and equipment

2017	Capital works inprogress	Plant andequipment	Bearer Plants -Almonds	Bearer Plants -Macadamias	Bearer Plants -Vineyards	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Opening net book amount	379	3,799	89,614	6,143	17,449	117,384
Additions	-	1,788	19,250	-	424	21,462
Disposals	-	(27)	-	-	-	(27)
Depreciation and impairment	-	(812)	-	-	-	(812)
Transfers	(379)	379	-	-	-	-
Change in fair value	-	-	(13,579)	(24)	1,916	(11,687)
Closing net book amount	-	5,127	95,285	6,119	19,789	126,320
2016Restated	Capital works inprogress	Plant andequipment	Bearer Plants -Almonds	Bearer Plants -Macadamias	Bearer Plants -Vineyards	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Opening net book amount	44	3,109	42,735	-	24,846	70,734
Additions	335	1,484	12,200	6,930	-	20,949
Disposals	-	(58)	-	-	-	(58)
Depreciation	-	(736)	-	-	-	(736)
Change in fair value	-	-	34,679	(787)	(7,397)	26,495
Closing net book amount	379	3,799	89,614	6,143	17,449	117,384

Notes to the Financial Statements

30 June 2017

12 Investment property

	2017	2016
	$'000	$'000
Opening balance	168,951	142,379
Acquisitions	64,452	1,116
Additions	23,189	23,275
Change in fair value	17,191	3,343
Disposals	-	(1,162)
Total	273,783	168,951

Amounts recognised in profit and loss

Rental income from investment property, bearer plants andwater entitlements	39,077	25,319
Change in fair value	17,191	3,343

Direct operating expenses incurred during the year that did not generate rental income amounted to $97,000 (2016: $100,000).

Leasing arrangements

Minimum lease payments receivable under non-cancellable operating leases of investment properties, bearer plants, plant and equipment and water rights not recognised in the financial statements, are receivable as follows:

Within one year	44,683	35,318
Later than one year, but not later than five years	204,238	156,153
Later than five years	547,107	458,560
Total	796,028	650,031

13 Other current assets

	2017$'000	2016$'000
Prepayments	401	118
Deposits	1,399	1,066
Deposits - water purchases	-	1,317
Total	1,800	2,501

Notes to the Financial Statements

30 June 2017

14 Financial assets

	2017	2016
	$'000	$'000
Non-current
Investment - BIL	509	509
Investment - CICL	12,222	9,334
Investment - RFM Poultry	130	133
Finance Lease - Breeders	10,953	-
Investment - Macadamias Processing Co	102	102
Total	23,916	10,078

Coleambally Irrigation Co-operative Limited (CICL) is Australia's fourth largest irrigation company and is wholly owned by its farmer members. CICL's irrigation delivery system delivers water to 400,000 hectares of area across the Coleambally Irrigation District, in the Riverina, near Griffith, NSW.

15 Investments accounted for using the equity method

	RFM StockBank		Perth Markets Limited
	2017	2016	2017	2016
	$'000	$'000	$'000	$'000
Summarised financial information forassociates
Summarised balance sheet
Total current assets	568	14,670	-	6,714
Total non-current assets	-	-	-	135,014
Total current liabilities	(568)	(3,053)	-	(2,506)
Total non-current liabilities	-	-	-	(81,777)
Net assets	-	11,617	-	57,445

Reconciliation to carrying amounts
Opening net assets	11,617	11,643	57,445	-
Net assets at date of gaining significant influence
through:
- Initial equity issue			-	56,416
Profit for the period	238	588	24,027	1,029
Distributions paid during the period	(11,406)	-	(3,471)	-
Other comprehensive income	-	-	3,077	-
Distributions provided for	(449)	(614)	-	-
Disposal of interest in Perth Markets Limitedduring the year	-	-	(81,078)	-
Closing net assets	-	11,617	-	57,445
Group's share in %	33.50%	33.50%	0.00%	8.96%
Group's share in $'000	-	3,894	-	5,147
Carrying value of investment	-	3,894	-	5,147

Notes to the Financial Statements

30 June 2017

15 Investments accounted for using the equity method (continued)

	RFM StockBank		Perth Markets Limited
	20172016		2017	2016
	$'000	$'000	$'000	$'000
Summarised statement of comprehensive income
Revenue	741	2,328	11,303	5,764
Profit from continuing operations	239	588	24,027	1,029
Other comprehensive income	-	-	3,077	-
Total comprehensive income	239	588	27,104	1,029
Distributions received or receivable from associate	4,018	173	323	-

RFM, as Responsible Entity for RFM StockBank, has commenced the windup of RFM StockBank. A final capital return was paid to investors on 9 August 2017.

There are no commitments or contingencies relating to investments accounted for using the equity method.

Notes to the Financial Statements

30 June 2017

16 Intangible assets

Intangible assets are made up of water rights and entitlements. Refer to note 5 for Directors' valuation of water rights and entitlements.

2017	Almonds	Poultry infrastructure	Vineyards	Macadamias	Cotton	Other	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Non-current
Opening net book amount	57,540	1,049	500	602	-	-	59,691
Additions	11,450	-	-	206	3,672	34,430	49,758
Impairment	(657)	-	-	-	-	(54)	(711)
Closing net book amount	68,333	1,049	500	808	3,672	34,376	108,738
Cost	69,193	1,049	500	808	3,672	34,430	109,652
Accumulated amortisation andimpairment	(860)	-	-	-	-	(54)	(914)
Net book amount	68,333	1,049	500	808	3,672	34,376	108,738


2016	Almonds	Poultry infrastructure	Vineyards	Macadamias	Cotton	Other	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Non-current
Opening net book amount	27,416	1,049	500	-	-	-	28,965
Additions	30,327	-	-	54	-	-	30,381
Acquisitions	-	-	-	548	-	-	548
Impairment	(203)	-	-	-	-	-	(203)
Closing net book amount	57,540	1,049	500	602	-	-	59,691
Cost	57,743	1,049	500	602	-	-	59,894
Accumulated amortisation andimpairment	(203)	-	-	-	-	-	(203)

Notes to the Financial Statements

30 June 2017

17 Trade and other payables

	2017	2016
	$'000	$'000
Trade payables	1,087	659
Accruals	1,375	694
Sundry creditors	2,676	5,567
Total	5,138	6,920

18 Interest bearing liabilities

	2017$'000	2016$'000
Current
Equipment loans (ANZ)	3,204	3,030
Total	3,204	3,030
Non-current
Borrowings (ANZ)	105,280	146,500
Borrowings (Rabobank)	59,220	-
Total	164,500	146,500

Notes to the Financial Statements

30 June 2017

18 Interest bearing liabilities (continued)

Borrowings with Australian and New Zealand Banking Group (ANZ) and Rabobank Australia Group (Rabobank) are secured by:

a fixed and floating charge over the assets held by Australian Executor Trustee Limited (AETL) as custodian for Rural Funds Trust, RFM Chicken Income Fund, RFM Australian Wine Fund (a subsidiary of Rural Funds Trust) and RF Active; and
registered mortgages over all property owned by the Rural Funds Trust and its subsidiaries provided by AETL as custodian for Rural Funds Trust and its subsidiaries.

The following assets are pledged as security over the loans:

2017	Investmentproperty	Waterlicences	Plant and equipment -Bearer Plants	Financialassets	Plant andequipment	TOTAL
	$'000	$'000	$'000	$'000	$'000	$'000
Mortgage: Leased Properties	273,783	74,362	121,193	12,833	-	482,171
Other assets	-	34,376	-	11,083	-	45,459
Equipment loans	-	-	-	-	5,127	5,127
Total	273,783	108,738	121,193	23,916	5,127	532,757
Restated
2016	Investmentproperty	Waterlicences	Plant and equipment -Bearer Plants	Financialassets	Plant andequipment	TOTAL
	$'000	$'000	$'000	$'000	$'000	$'000
Mortgage: Leased Properties	168,951	59,691	113,206	9,843	-	351,691
Equipment loans	-	-	-	-	4,178	4,178

Total 168,951 59,691 113,206 9,843 4,178 355,869

Notes to the Financial Statements

30 June 2017

18 Interest bearing liabilities (continued)

Loan amounts are provided at the Bankers' floating rate, plus a margin. For bank reporting purposes, these assets are valued at market value. Refer to note 5 for Directors' valuation of water rights and entitlements.

Borrowings

At 30 June 2017 the core debt facility available to the Group, and due to expire in December 2019, was $250,000,000 (2016: $147,500,000). As at 30 June 2017 RFF had active interest rate swaps totalling 53.5% (2016: 60%) of the drawn down balance to manage interest rate risk.

Loan covenants

Under the terms of the borrowing facility, the Group is required to comply with the following financial covenants:

maintenance of a maximum loan to value ratio of 50%;
maintenance of net tangible assets (including water entitlements) in excess of $200,000,000; and,
an interest cover ratio for the Group not less than 2.75:1.00.

Rural Funds Group has complied with the financial covenants of its borrowing facilities during the year.

19 Other non-current liabilities

		2017$'000	2016$'000
	Lessee deposits	1,634	1,634
	Total	1,634	1,634
20	Derivative financial instruments
		2017	2016

	$'000	$'000
Non-current
Interest rate swaps	3,878	9,190
Total other liabilities	3,878	9,190

Notes to the Financial Statements

30 June 2017

21 Deferred tax

	2017	2016
	$'000	$'000
Deferred tax liabilities
Plant and equipment - bearer plants	4,103	3,513
Plant & equipment	1,936	2,381
Fair value investment property	1,519	515
Gross deferred tax liabilities	7,558	6,409
Set off of deferred tax assets	(6,955)	(6,409)
Net deferred tax liabilities	603	-

Deferred tax assets
Investments	227	227
Legal costs	36	80
Other	53	21
Unused income tax losses	6,639	7,201
Gross deferred tax assets	6,955	7,529
Set off of deferred tax liabilities	(6,955)	(6,409)
Net deferred tax assets	-	1,120

The deferred tax assets include an amount of $6,955,000 (2016: $7,200,000), which includes $6,615,000 (2016: $7,151,000) of carried forward tax losses of the RFM Australian Wine Fund. The Group has concluded that the deferred tax assets will be recoverable using the estimated future taxable income based on budgets and the contracted cash flows of the subsidiary. The losses can be carried forward indefinitely and have no expiry date.

22 Recognised tax assets and liabilities

	Current income tax		Deferred income tax
	2017	2016	2017	2016
	$'000	$'000	$'000	$'000
Opening balance	-	(29)	1,120	2,317
Credited/(charged) to income	-	29	(1,841)	(950)
Credited to equity	-	-	118	(247)
Closing balance	-	-	(603)	1,120
Tax expense/(credit) in the Consolidated Statement of ComprehensiveIncome			1,841	922
Amounts recognised in the Consolidated Statement of Financial Position:
Deferred tax asset			-	1,120
Deferred tax liability			(603)	-

Notes to the Financial Statements

30 June 2017

23 Issued units

	2017		2016
	No.	$'000	No.	$'000
Units on issue at the beginning of the year(thousands)	165,357	135,793	132,142	113,034
Units issued during the year (thousands)	89,024	136,696	33,215	35,148
Distributions to unitholders	-	(16,543)	-	(12,389)
Units on issue at the end of the year	254,381	255,946	165,357	135,793

The holders of ordinary units are entitled to participate in distributions and the proceeds on winding up of the Group. On a show of hands at meetings of the Group, each holder of ordinary units has one vote in person or by proxy, and upon a poll each unit is entitled to one vote.

The Group does not have authorised capital or par value in respect of its units.

24 Asset revaluation reserve

		Restated
	2017	2016
	$'000	$'000
Opening balance	36,663	1,406
Bearer plants revaluation	(9,189)	35,524
Net decrement in financial assets	-	(14)
Total comprehensive income	(9,189)	35,510
Income tax applicable	101	(253)
Closing balance	27,575	36,663

25 Distributions

The Group paid and declared the following distributions in the year:

		Cents	Total
		per unit	$
	Distribution paid 29 July 2016	2.2325	3,691,602
	Distribution paid 28 October 2016	2.4100	4,986,940
	Distribution paid 31 January 2017	2.4100	4,996,810
	Distribution paid 28 April 2017	2.4100	5,006,323
	Distribution declared 7 June 2017, paid 31 July 2017	2.4100	6,130,580
26	Earnings per unit
			Restated
		2017	2016
	Per stapled unit
	Net profit after income tax for the year ($'000)	43,326	(483)
	Weighted average number of units on issue during the year	204,617,207	154,854,317
	Basic and diluted earnings per unit (total) (cents)	21.17	(0.31)

Notes to the Financial Statements

30 June 2017

26 Earnings per unit (continued)

	2017	Restated2016
Per unit of Rural Funds Trust
Net profit after income tax for the year ($'000)	43,219	(613)
Weighted average number of units on issue during the year	204,617,207	154,854,317
Basic and diluted earnings per unit (total) (cents)	21.12	(0.39)
Per unit of RF Active
Net profit after income tax for the year ($'000)	107	130
Weighted average number of units on issue during the year	204,617,207	154,854,317
Basic and diluted earnings per unit (total) (cents)	0.05	0.08

27 Capital commitments

Significant capital expenditure relating to the Kerarbury almond development, contracted for but not recognised as liabilities is as follows:

		Restated
	2017	2016
	$'000	$'000
Bearer plants	26,265	67,955
Investment property	42,024	33,039
Intangible assets	16,032	39,655
Total	84,321	140,649

28 Fair value measurement of assets and liabilities

Fair value hierarchy

This note explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the Australian Accounting Standards.

AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy. The level in the fair value hierarchy is determined having regard to the nature of inputs used to determine fair value. The hierarchy is as follows:

Level 1 Fair value based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date (such as publicly traded equities).
Level 2 Fair value based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 One or more significant inputs to the determination of fair value is based on unobservable inputs for the asset or liability.

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

Financial assets and liabilities

Fair value hierarchy

	Level 1	Level 2	Level 3	Total
	$'000	$'000	$'000	$'000
2017
Recurring fair value measurements
Financial assets
Equity securities (listed)	130	-	-	130
Equity securities (unlisted)	-	-	12,833	12,833
Total	130	-	12,833	12,963
Financial liabilities
Derivatives	-	3,878	-	3,878
Total	-	3,878	-	3,878

2016
Financial assets
Equity securities (listed)	133	-	-	133
Equity securities (unlisted)	-	-	9,945	9,945
Total	133	-	9,945	10,078
Financial liabilities
Derivatives	-	9,190	-	9,190
Total	-	9,190	-	9,190

The Group's policy is to recognise transfers into and out of fair value hierarchy levels at the end of the reporting period. There were no transfers in the current year (2016: nil).

Valuation techniques used to determine fair values

Specific valuation techniques used to value financial instruments include:

the use of quoted market prices or dealer quotes for similar instruments;
the present value of the estimated future cash flows based on observable yield curves to determine the fair value of the interest rate swaps; and,
discounted cash flow analysis to determine the fair value of the remaining financial instruments.

All of the resulting fair value estimates are included in level 1 or 2 except for unlisted equity securities which are level 3, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

Financial assets and liabilities (continued)

Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the years ended 30 June 2017 and 30 June 2016:

	2017	2016
	$	$
Unlisted equity securities
Opening balance	9,945	520
Additions	2,888	9,437
Losses recognised in other comprehensive income	-	(12)
Closing balance	12,833	9,945

Valuation inputs and relationship to fair value

Description	Fairvalue$'000	Unobservableinputs	Range ofinputs	Relationship ofunobservableinputs to fairvalue
Investment in BIL	509	Price of water entitlements	+/- 10%	+/- $50,000
Investment in CICL	12,222	Price of water entitlements	+/- 10%	+/- $121,000
Investment in MPC	102	Price of macadamias	+/- 10%	+/- $10,000
Closing balance	12,833	-	-	-

The Group's investment in Macadamia Processing Co. Limited is held at cost.

Non-financial assets

Fair value hierarchy

This note explains the judgements and estimates made in determining fair values of the non-financial assets that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its non-financial assets and liabilities into the three levels prescribed under Australian Accounting Standards as mentioned above. At 30 June 2017 all non-financial assets are level 3.

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

Non-financial assets (continued)

	Level 3	Total
	$'000	$'000
2017
Investment properties
Almond orchard property	95,605	95,605
Poultry property and infrastructure	83,011	83,011
Vineyard property	25,435	25,435
Macadamia orchard property	2,015	2,015
Cotton property	24,157	24,157
Cattle property	43,560	43,560
Plant and equipment - bearer plants
Almond orchard	95,285	95,285
Vines	19,789	19,789
Macadamia orchard	6,119	6,119
Total non-financial assets	394,976	394,976

Restated
2016Investment properties
Almond orchard property	58,329	58,329
Poultry property and infrastructure	86,011	86,011
Vineyard property	23,156	23,156
Macadamia orchard property	1,455	1,455
Plant and equipment - bearer plants
Almond orchard	89,614	89,614
Vines	17,449	17,449
Macadamia orchard	6,143	6,143
Total non-financial assets	282,157	282,157

The Group's policy is to recognise transfers in to and transfers out of fair value hierarchy levels as at the end of the reporting period. There were no transfers between levels for recurring fair value measurements during the year.

Valuation techniques used to determine level 3 fair values

Directors obtain independent valuations where appropriate. At the end of each reporting period, the Directors update their assessment of fair value of each property, taking into account the most recent independent valuations. The Directors determine a property's value within a range of reasonable fair value estimates.

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available the Directors consider information from a variety of sources including:

current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences;
discounted cash flow projections based on reliable estimates of future cash flows; and
capitalised income projections based upon a property's estimated net market income, and a capitalisation rate derived from an analysis of market evidence.

All resulting fair value estimates for properties are included in level 3.

Fair value measurements using significant unobservable inputs (level 3)

	Investment property					Plant and equipment - bearer plants
	Almondorchardproperty	Poultryproperty andinfrastructure	Vineyardproperty	Macadamiaorchardproperty	Cottonproperty	Cattleproperty	Almondorchard		Vines Macadamiaorchard	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Opening balance 1 July 2016	58,329	86,011	23,156	1,455	-	-	89,614	17,449		6,143 282,157
Additions	19,292	-	-	560	2,079	1,258	19,250	424	-	42,863
Acquisitions	-	-	-	-	22,935	41,517	-	-	-	64,452
Fair value adjustment	17,984	(3,000)	2,279	-	(857)	785	(13,579)	1,916	(24)	5,504
Closing balance 30 June 2017	95,605	83,011	25,435	2,015	24,157	43,560	95,285	19,789		6,119 394,976
Opening balance 1 July 2015	36,927	91,917	13,535	-	-	-	42,735	24,846		- 209,960
Additions	23,138	-	-	137	-	-	12,200	-	1,405	36,880
Acquisitions	-	-	-	1,116	-	-	-	-	5,525	6,641
Disposals	(1,162)	-	-	-	-	-	-	-	-	(1,162)
Fair value adjustment	(574)	(5,906)	9,621	202	-	-		34,679 (7,397)	(787)	29,838
Closing balance 30 June 2016	58,329	86,011	23,156	1,455	-	-	89,614	17,449		6,143 282,157

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

Valuation inputs and relationships to fair value

The following table summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurements. See above for the valuation techniques adopted.

Description		Fair value at	Unobservable inputs*		Range of inputs	Relationship of unobservableinputs to fair value
	2017	2016		2017	2016
	$'000	$'000		%	%
Almond orchard property		190,890 147,943	Discount rate	8.75%	9.00%	The higher the discount and
(excluding water licences)**			Capitalisation rate	8.50%	n/a	capitalisation rate, the lower the
						fair value.
Poultry property and	83,011	86,011	Capitalisation rate		10.75% - 14.20% 10.75% - 13.00%	The higher the capitalisation rate,
infrastructure (excluding						the lower the fair value.
water licences)**
Vineyard (excluding water	45,224	40,605	Discount rate	9.55%	9.75%	The higher the discount rate, the
licences)**						lower the fair value.
Cotton property and	24,157	-	Discount rate	9.00%	n/a	The higher the discount rate, the
infrastructure (excluding			$ per ha of land area by use	$1,200 - $17,000		lower the fair value.
water licenses)**						The higher the value per hectare
						of land, the higher the value.
Cattle property and	43,560	-	Discount rate	9.00%	n/a	The higher the discount rate, the
infrastructure (excluding			$ per adult equivalent	$650 - $4,250		lower the fair value.
water licenses)**			carrying capacity			The higher the value per each
						adult equivalent carrying capacity,the higher the value.

Macadamia orchard property	8,134	7,598	Discount rate	9.00%	9.00%	The higher the capitalisation rate,
(excluding water licences)**						the lower the fair value.

* There were no significant inter-relationships between unobservable inputs that materially affect fair values.

** Water licences are held at historical cost less accumulated impairment, as detailed in note 16 to the consolidated financial statements.

Notes to the Financial Statements

30 June 2017

28 Fair value measurement of assets and liabilities (continued)

Valuation processes

Directors obtain independent valuations where appropriate. Directors have considered independent valuations and market evidence where appropriate to determine the appropriate fair value to adopt.

The main level 3 inputs used by the Group include discount rates and capitalisation rates estimated in the respective valuations based on comparable transactions and industry data. Changes in level 3 fair values are analysed at each reporting date during the valuation discussion between management and external valuers. As part of this discussion management presents updated model inputs and explains the reason for any fair value movements.

29 Financial risk management

The Group is exposed to a variety of financial risks through its use of financial instruments. This note discloses the Group's objectives, policies and processes for managing and measuring these risks. The Group's overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets.

The Group does not speculate in financial assets.

The most significant financial risks which the Group is exposed to are described below:

Specific risks

Market risk interest rate risk and price risk
Credit risk
Liquidity risk

Financial instruments used

The principal categories of financial instrument used by the Group are:

Trade receivables
Cash at bank
Bank overdraft
Trade and other payables
Floating rate bank loans
Interest rate swaps

Financial risk management policies

Risks arising from holding financial instruments are inherent in the Group's activities and are managed through a process of ongoing identification, measurement and monitoring.

The Responsible Entity is responsible for identifying and controlling the risks that arise from these financial instruments.

The risks are measured using a method that reflects the expected impact on the results and net assets attributable to unitholders of the Group from changes in the relevant risk variables. Information about these risk exposures at the reporting date, measured on this basis, is disclosed below.

Concentrations of risk arise where a number of financial instruments or contracts are entered into with the same counterparty, or where a number of counterparties are engaged in similar business activities that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.

Notes to the Financial Statements

30 June 2017

29 Financial risk management (continued)

Liquidity risk and capital management

The table below reflects all contractually fixed repayments and interest resulting from recognised financial assets and liabilities as at 30 June 2017. The amounts disclosed in the table are the contractual undiscounted cash flows, except for interest rate swaps and bills of exchange where the cash flows have been estimated using interest rates applicable at the reporting date.

		Less than 6 months		6 months to 1 year		1 to 3 years		3 to 5 years		Over 5 years	Total
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Financial assets												-
Cash and cash equivalents	3,838	3,034	-	-	-	-	-	-	-	-	3,838	3,034
Trade and otherreceivables	4,608	7,239	-	-	-	-	-	-	-	-	4,608	7,239
Finance Lease - Breeders	601	-	601	-	2,413	-	2,413		- 15,344	-	21,372	-
Investment - BIL	-	-	-	-	-	-	-	-	509	509	509	509
Investment - CICL	-	-	-	-	-	-	-		- 12,222	9,334	12,222	9,334
Investment - MPC	-	-	-	-	-	-	-	-	102	102	102	102
Investment - RFP	-	-	-	-	-	-	-	-	130	133	130	133
Total	9,047	10,273	601	-	2,413	-	2,413		- 28,307	10,078	42,781	20,351
Financial liabilities												-
Interest bearing liabilities	2,201	2,560	2,201	3,560	173,306	155,740	-	-	-	-		177,708 161,860
Trade and other payables	5,138	6,920	-	-	-	-	-	-	-	-	5,138	6,920
Equipment loans	531	485	494	447	1,566	1,564	874	803	154	149	3,619	3,448
Interest rate swaps	-	568	-	-	877	1,301	294	244	2,707	7,077	3,878	9,190
Total	7,870	10,533	2,695	4,007	175,749	158,605	1,168	1,047	2,861	7,226		190,343 181,418

The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained.

Notes to the Financial Statements

30 June 2017

29 Financial risk management (continued)

Liquidity risk and capital management (continued)

The Responsible Entity of the Group defines capital as net assets attributable to unitholders. The Group's objectives when managing capital are to safeguard the going concern of the Group and to maintain an optimal capital structure.

The Group is able to maintain or adjust its capital by divesting assets to reduce debt or adjusting the amount of distributions paid to unitholders.

Interest rate swaps held for hedging

Interest rate risk is managed by using a floating rate debt and through the use of interest rate swap contracts. The Group does not speculate in the trading of derivative instruments.

Interest rate swap transactions are entered into by the Trust to exchange variable and fixed interest payment obligations to protect long-term borrowings from the risk of increasing interest rates. The economic entity has variable interest rate debt and enters into swap contracts to receive interest at variable rates and pay interest at fixed rates.

The notional principal amounts of the swap contracts approximates 53.5% (2016: 60%) of the Group's drawn down debt at 30 June 2017.

At balance date, the details of the interest rate swap contracts are:

	Effective averageinterest rate payable		Balance
	2017	2016	2017	2016
	%	%	$'000	$'000
Maturity of notional amounts
Settlement - between 0 to 3 years	3.40	3.44	35,000	75,000
Settlement - 3 to 5 years	2.70	-	15,000	-
Settlement - greater than 5 years	3.19	3.42	38,000	13,000
Total			88,000	88,000

Notes to the Financial Statements

30 June 2017

29 Financial risk management (continued)

Interest rate swaps held for hedging (continued)

The following interest rate swap contracts have been entered into at 30 June 2017 but are not yet effective.

	Effective averageinterest rate payable		Balance
	2017	2016	2017	2016
	%	%	$'000	$'000
Maturity of notional amounts
Settlement - between 3 to 5 years	-	2.50	-	10,000
Settlement - greater than 5 years	3.04	3.10	100,000	75,000
Total			100,000	85,000

The net gain recognised on the swap derivative instruments for the year ended 30 June 2017 was $5,311,000 (2016: $7,116,000 loss).

At 30 June 2017 the Group had the following mix of financial assets and liabilities exposed to variable interest rates:

	2017	2016
	$'000	$'000
Cash	3,838	3,034
Interest bearing liabilities	(164,500)	(146,500)
Total	(160,662)	(143,466)

At 30 June 2017, 1.91% (2016: 2.03%) of the Group's debt is fixed, excluding the impact of interest rate swap contracts.

Credit risk

The maximum exposure to credit risk (excluding the value of any collateral or other security) at balance date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets. This has been disclosed in the Consolidated Statement of Financial Position and notes to the financial statements.

Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations.

Notes to the Financial Statements

30 June 2017

29 Financial risk management (continued)

Market risk

Interest rate risk (sensitivity analysis)

At 30 June 2017, the effect on profit before tax and equity as a result of changes in the interest rate, net of the effect of interest rate swaps, with all other variables remaining constant, would be as follows:

2017	2016
$'000	$'000

10,395	6,556
(11,525)	(7,221)

10,395	6,556
(11,525)	(7,221)

30 Key management personnel

Directors

The Directors of RFM are considered to be key management personnel of the Group. The Directors of the Responsible Entity in office during the year and up to the date of this report are:

Guy Paynter David Bryant Michael Carroll Julian Widdup (appointed 15 February 2017)

Interests of Directors of the Responsible Entity

Units in the Group held by Directors of RFM or related entities controlled by Directors of RFM as at 30 June 2017 are:

	Guy Paynter	David Bryant	Michael Carroll
	Units	Units	Units
Balance at 30 June 2015	382,156	3,656,191	-
Additions	151,100	3,987,152	-
Balance at 30 June 2016	533,256	7,643,343	-
Additions	281,440	4,034,839	19,389
Balance at 30 June 2017	814,696	11,678,182	19,389

Notes to the Financial Statements

30 June 2017

30 Key management personnel (continued)

Other key management personnel

In addition to the Directors noted above, RFM, as Responsible Entity of the Group is considered to be key management personnel with the authority for the strategic direction and management of the Group.

The constitutions of Rural Funds Trust and RF Active (the stapled entities forming the Group) are legally binding documents between the unitholders of the Group and RFM as Responsible Entity. Under the constitutions, RFM is entitled to the following remuneration:

Management fee: 0.6% per annum (2016: 0.6%) of the gross value of Group assets; and,
Asset management fee: 0.45% per annum (2016: 0.45%) of the gross value of Group assets.

Compensation of key management personnel

No amount is paid by the Group directly to the Directors of the Responsible Entity. Consequently, no compensation as defined in AASB 124 Related Party Disclosures is paid by the Group to the Directors as key management personnel. Fees paid to RFM as Responsible Entity are disclosed in note 31.

Notes to the Financial Statements

30 June 2017

31 Related party transactions

Transactions between the Group and related parties are on commercial terms and conditions.

Responsible Entity (Rural Funds Management) and related entities

Transactions between the Group and the Responsible Entity and its associated entities are shown below:

	30 June	30 June
	2017	2016
	$'000	$'000
Management fee	1,883	1,809
Asset management fee	2,510	1,356
Total management fees	4,393	3,165
Expenses reimbursed to RFM	2,491	2,231
Expenses reimbursed to RFM Poultry	229	-
Expenses due to Murdock Viticulture	-	199
Distribution paid/payable to RFM	834	376
Total amount paid to RFM and related entities	7,947	5,971
Rental income received from RFM Almond Fund 2006	2,029	1,945
Rental income received from RFM Almond Fund 2007	606	588
Rental income received from RFM Almond Fund 2008	1,549	1,498
Rental income received from RFM	336	372
Rental income received from RFM Farming Pty Limited	148	390
Rental income received from Cattle JV	2,694	-
Rental income received from Cotton JV	991	-
Rental income received from RFM Poultry	10,520	10,449
Rental income received from 2007 Macgrove Project	744	140
Rental income received from RMA Macadamias	290	-
Finance lease income from Cattle JV	790	-
Expenses charged to RFM Poultry	1	54
Distribution received/receivable from RFM Poultry	14	14
Distribution received/receivable from RFM StockBank	4,018	234
Water sale proceeds from RFM Almond Fund 2006	44	59
Water sale proceeds from RFM Almond Fund 2007	12	16
Water sale proceeds from RFM Almond Fund 2008	34	44
Water sale proceeds from RFM	7	9
Water sale proceeds from RFM Farming Pty Limited	30	52
Interest income from Cattle JV	9	-
Total amounts received from RFM and related entities	24,866	15,864

Murdock Viticulture is a vineyard manager 28% owned by RFM.

Notes to the Financial Statements

30 June 2017

31 Related party transactions (continued)

Debtors (including finance lease receivable)

	2017	2016
	$'000	$'000
RFM Farming Pty Limited	27	3
RFM	3	41
RFM Macadamias Pty Limited	-	20
2007 Macgrove Project	345	538
Cattle JV	11,770	-
Cotton JV	485	-
Total	12,630	602

Creditors

	2017	2016
	$'000	$'000
RFM	472	153
Total	472	153

Entities with influence over the Group

			2016
Units	%	Units	%
8,632,418	3.39	5,153,833	3.12

	2017		2016
Units	%	Units	%
3,897,259	33.50	3,897,259	33.50
108,615	1.58	108,615	1.58
		2017

Notes to the Financial Statements

30 June 2017

32 Cash flow information

Reconciliation of net profit/(loss) after income tax to cash flow from operating activities:

	2017	Restated2016
	$'000	$'000
Net profit/(loss) after income tax	43,326	(483)
Cash flows excluded from profit attributable to operating activities
Non-cash flows in profit
Share of net profit - equity accounted investments	(1,304)	(61)
Change in fair value of bearer plants	2,498	8,776
Change in fair value of investment property	(17,191)	(3,343)
Change in fair value of interest rate swaps	(5,311)	7,116
Depreciation and impairments	1,568	939
Gain on sale of assets	(33)	(290)
Distributions received	-	(36)
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables	2,618	(4,510)
Decrease in other assets	701	48
Increase/(decrease) in trade and other payables	(1,782)	4,878
Decrease in deferred tax asset (net)	1,824	1,197
Net cash inflow from operating activities	26,914	14,231

Notes to the Financial Statements

30 June 2017

33 Events after the reporting date

34 Parent entity

The individual financial statements of the parent entity, Rural Funds Trust, show the following aggregate amounts:

		Restated
	2017	2016
	$'000	$'000
Statement of Financial Position
ASSETS
Current assets	9,977	13,285
Non-current assets	499,645	340,371
Total assets	509,622	353,656
LIABILITIES
Current liabilities	11,126	10,578
Non-current liabilities	170,013	157,324
Total liabilities (excluding net assets attributable tounitholders)	181,139	167,902
Net assets attributable to unitholders	328,483	185,754
Total liabilities	509,622	353,656

Statement of Comprehensive Income
Net profit after income tax	37,386	(1,365)
Other comprehensive income for the period, net of tax	(8,850)	34,664
Total comprehensive income attributable to unitholders	28,536	33,299

Directors' Declaration

30 June 2017

In the Directors of the Responsible Entity's opinion:

1 The financial statements and notes of Rural Funds Group set out on pages 12 to 56 are in accordance with the Corporations Act 2001, including:
- a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
- b. giving a true and fair view of the Group's financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and
2 There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the persons performing the chief executive officer and chief financial officer functions as required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Board of the Directors of Rural Funds Management Limited.

David Bryant Director

21 August 2017

Independent auditor's report

To the stapled security holders of Rural Funds Group

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of Rural Funds Trust (the Registered Scheme) and its controlled entities (including RF Active) (together Rural Funds Group, or the Group) is in accordance with the Corporations Act 2001, including:

(a) giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

What we have audited

The Group financial report comprises:

the consolidated statement of financial position as at 30 June 2017
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in net assets attributable to unitholders for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant accounting policies
the directors' declaration.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates.

The structure of Rural Funds Group is commonly referred to as a "stapled group". In a stapled group the securities of two or more entities are 'stapled' together and cannot be traded separately. In the case of the Group, the units in Rural Funds Trust have been stapled to the units in RF Active. For the purposes of consolidation accounting, Rural Funds Trust is 'deemed' the parent and the consolidated report reflects the consolidation of Rural Funds Trust and its controlled entities, including RF Active.

Materiality

For the purpose of our audit we used overall Group materiality of $3.5 million, which represents approximately 1% of the Group's net assets.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.
We chose Group net assets because, in our view, it is the benchmark against which the financial position of the Group is most reliably measured.
We used a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.

Audit scope

Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.

The audit of the group was performed by a team primarily in Sydney which included individuals with industry expertise and valuation experts.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit Committee.

Key audit matter

How our audit addressed the key audit matter

Valuation of investment properties(Refer to note 3, 12) $273.8m

Investment properties are carried at fair value.All agricultural assets, which comprise investmentproperties, bearer plants, and water entitlements havebeen externally valued in the last 12 months, with theexception of the Poultry property and infrastructureand the macadamia orchard properties which wereexternally valued at 30 June 2016. The directorsmonitor and update the key inputs of the valuationmodel and consider whether any significant marketindicators suggest that the valuation has changed andas such an updated external valuation is needed.Key variables in the valuation model included discountrates, capitalisation rates, passing rents andcomparable sales. Factors such as prevailing marketconditions, and the individual nature, condition,location and the expected future income of theseproperties impacted these variables.This was a key audit matter because of the:size of the investment property balance in theconsolidated statement of financial positionquantum of revaluation gains that could directlyimpact the consolidated statement ofcomprehensive income through the net fair valuegain/loss of investment propertiesinherently subjective nature of investmentproperty valuations due to the use of assumptionsand estimates in the valuation modelsensitivity of valuations to keyinputs/assumptions in the model such as thediscount rate and capitalisation rates.

We compared a sample of inputs used in the valuationmodel, such as rental income and lease terms, to therelevant tenancy schedules and lease agreements.We compared the market rents, discount rates andcapitalisation rates used in the valuation models for asample of investment properties to an acceptable rangewhich we determined based on benchmark marketdata. Where the rates used fell outside of ouranticipated range, we discussed the rationalesupporting the rates applied in the valuation withmanagement and obtained supporting documents forthe rationale provided.Where an external valuation of investment propertieswas obtained:We assessed the competency, qualifications,experience and objectivity of any external valuersused by the Group.We read the valuers' terms of engagement - wedid not identify any terms that might affect theirobjectivity or impose limitations on their workrelevant to the valuation.We inspected the final valuation reports andagreed the fair value as per the valuation to thevalue recorded in the Group's accounting records.

Key audit matter	How our audit addressed the key audit matter

Valuation of bearer plants(Refer to note 11) $121.2mThe Group's bearer plants include almond trees,macadamia trees and wine grape vines, which areclassified as Plant and equipment and carried at fairvalue.The valuations described in the Valuation ofinvestment properties key audit matter above aredetermined for the agricultural assets as a whole. Thevaluers also determine the value of the investmentproperty and water entitlements in isolation. As aresult, the directors determine the fair value of bearerplants as the residual value after deducting the fairvalue of land and water entitlements from the value ofthe agricultural assets. The fair value of waterentitlements are determined based on the volume ofwater and the market rates for water. For reference,water entitlements are carried at historic cost andassessed for impairment annually.This was a key audit matter because of the:size of the bearer plants on the consolidatedstatement of financial positionquantum of revaluation gains that could directlyimpact the consolidated statement ofcomprehensive income through the net fair valuegain/loss of bearer plantsinherently subjective nature and sensitivity of thevaluations due to the use of assumptions andestimates as described in the Valuation ofinvestment properties key audit matter.	In addition to the audit procedures described in theValuation of investment properties key audit matter,we performed the below procedures, amongst others,with respect to the value of bearer plants.We reperformed the calculation of the fair value ofbearer plants, by deducting the fair value of land andinfrastructure and water entitlements from the fairvalue of the agricultural asset.In respect of the fair value of water entitlements, weagreed the volume of water to waterentitlements certificatesagreed the water rate to market rates asquoted by the external valuers engaged tovalue the agricultural assets.We evaluated the directors' estimation of the fair valueof land and infrastructure by, for example, consideringcomparable sales transactions.We considered whether the methodology used todetermine the value of bearer plants was in line withthe requirements of Australian Accounting Standards.
Related party transactions(Refer to note 31)The Group's Responsible Entity, along with other fundsfor which it is the Responsible Entity, are consideredrelated parties of the Group. Key transactions withthese parties include:Lease of investment properties, land, buildingand plant and equipmentLease of bearer plantsLease of cattle for breedingLease of water entitlements.	We obtained an understanding of the Group'sprocesses for identifying related parties andrelated party transactions, through discussionswith management.For significant contracts entered into during theyear, we verified that the transactions wereapproved in accordance with internal proceduresincluding involvement of key personnel at theappropriate level by inspecting relevantsupporting documents.

Key audit matter

How our audit addressed the key audit matter

Management feesAsset management feesDistributions from investmentsRecharge of operating expensesWe considered the related party transactions to be akey audit matter due to the influence of related partieson the Group, as well as the potential impact of thesetransaction on the results of the Group. Additionally,because of their nature, they are pervasive and materialto the presentation of and disclosures within thefinancial report.

For a sample of lease income received during theyear, we agreed the lease income to the relevantsupporting documents including the leaseagreements and evaluated the directors' assertionthat the transactions were at arm's length bycomparing the transactions to the market datawhich was used by the external valuers in theirvaluation of the related investment property.For management and asset management fees, wecompared the rates used to determine fees to therates disclosed in the prospectus documents forthe related funds.We discussed the related party transactions withmanagement to obtain an understanding of thebusiness rationale for the transactions.For a sample of related party agreements, weassessed the rights and obligations of the partiesas per the terms and conditions of the agreementsand, taking these into account, whether thetransactions were recorded appropriately by theGroup.We assessed the adequacy of the disclosures inNote 31, of related party relationships andtransactions in light of the requirements ofAustralian Accounting Standards.

Other information

The directors of Rural Funds Management Limited (the Responsible Entity of the Group) (the directors) are responsible for the other information. The other information included in the Group's annual report for the year ended 30 June 2017 comprises the Directors' Report, and ASX additional information (but does not include the financial report and our auditor's report thereon), which we obtained prior to the date of this auditor's report. We also expect information to be made available to us after the date of this auditor's report, including Letter from the Managing Director and Corporate governance statement.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the other information not yet received as identified above, if we conclude that there is a material misstatements therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take.

Responsibilities of the directors for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Responsible Entity either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors\_responsibilities/ar1.pdf. This description forms part of our auditor's report.

PricewaterhouseCoopers

63 CMC Heraghty Sydney Partner 21 August 2017

Additional Information for Listed Public Entities

30 June 2017

Unitholder information

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 30 June 2017.

Distribution of equity securities

Analysis of number of unitholders by size of holding:

	Unitholders
1 - 1,000	803
1,001 - 5,000	1,810
5,001 - 10,000	1,257
10,001 - 100,000	3,051
100,000 and over	205

RFM considers that there are 150 holders of a less than marketable parcel of units at 30 June 2017.

Substantial unitholders

The number of substantial unitholders and their associates are set out below:

	Units held	%
JP Morgan Nominees Australia Limited	42,947,041	16.88
HSBC Custody Nominees (Australia) Limited	19,022,001	7.48
Netwealth Investments Limited (Wrap services)	15,052,089	5.92

Voting rights

Ordinary units

All ordinary units carry one vote per unit without restriction.

Additional Information for Listed Public Entities

30 June 2017

Twenty largest unitholders at 30 June 2017

	Units held	%
J P Morgan Nominees Australia Limited	42,947,041	16.88
HSBC Custody Nominees (Australia) Limited	19,022,001	7.48
Netwealth Investments Limited (Wrap services)	15,052,089	5.92
Rural Funds Management Limited	8,632,418	3.39
Argo Investments Limited	5,407,750	2.13
Citicorp Nominees Pty Ltd	4,773,138	1.88
Netwealth Investments Limited (Super services)	4,101,633	1.61
National Nominees Limited	3,730,899	1.47
Bryant Family Services Pty Ltd	2,629,493	1.03
Brispot Nominees Pty Ltd	1,751,482	0.69
BNP Paribas Noms Pty Ltd	1,568,550	0.62
SCCASP Holdings Pty Ltd	1,279,287	0.50
One Managed Investment Funds Limited	1,056,393	0.42
Merrill Lynch (Australia) Nominees Pty Limited	902,143	0.35
BNP Paribas Nominees Pty Ltd	881,665	0.35
HSBC Custody Nominees (Australia) - A/C 3	830,999	0.33
Boskenna Pty Ltd	814,696	0.32
Citicorp Nominees Pty Ltd	791,224	0.31
Bond Street Custodians Limited	601,049	0.24
WF Super Pty Ltd	592,566	0.23
Total	117,366,516	46.14

Securities exchange

The Group is listed on the Australian Securities Exchange (ASX).

Responsible Entity

Rural Funds Management Limited ABN 65 077 492 838 AFSL 226 701

Level 2, 2 King Street Deakin ACT 2600

www.ruralfunds.com.au

Telephone (Investor Services) 1800 026 665

Telephone (Adviser Services) 1300 880 295

Facsimile 1800 625 518

AI assistant

RURAL FUNDS GROUP — Annual Report 2017

65689_rns_2017-08-21_9a81fc7e-d8e3-4d9c-9444-6d03127b05a1.pdf

APPENDIX 4E

Financial report

Results for announcement to the market

Net tangible assets per security

Adjusted Net asset value per security

Details of associates

Dividend Reinvestment Plan

Audit

Rural Funds Group (RFF)

Contents

Corporate Directory

Directors' Report

30 June 2017

Directors

Principal activities and significant changes in nature of activities

Operating results

Directors' Report

Adjusted funds from operations (AFFO)

Financial position

Directors' Report

Financial position (continued)

Adjusted net asset value

Significant changes in state of affairs

Directors' Report

Property leasing

Almond orchards

Poultry property

Vineyards

Directors' Report

Property leasing (continued)

Macadamia orchards

Cattle property

Cotton property

Other activities

Banking facilities

Distributions

Directors' Report

Earnings per unit

Indirect cost ratio

Matters subsequent to the end of the year

Likely developments and expected results of operations

Environmental regulation

Units on issue

Indemnity of Responsible Entity and Custodian

Rounding of amounts

Directors' Report

Information on Directors of the Responsible Entity

Directors' Report

Information on Directors of the Responsible Entity (continued)

Interests of Directors of the Responsible Entity

Company Secretaries of the Responsible Entity

Meetings of Directors of the Responsible Entity

Directors' Report

Non-audit services

Auditor's independence declaration

Auditor's Independence Declaration

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Net Assets Attributable to Unitholders

Consolidated Statement of Cash Flows

Notes to the Financial Statements

1 General information

2 Summary of significant accounting policies

Basis of preparation

Principles of consolidation

Notes to the Financial Statements

2 Summary of significant accounting policies (continued)

Principles of consolidation (continued)

Controlled entities

Associates

Business combinations

Comparative amounts

Notes to the Financial Statements

2 Summary of significant accounting policies (continued)

Revenue

Income tax

RURAL FUNDS GROUP Annual Report 2017