Financial Statements For the Year Ended 30 June 2021

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	12
Consolidated Statement of Comprehensive Income	13
Consolidated Statement of Financial Position	15
Consolidated Statement of Changes in Net Assets Attributable to Unitholders	17
Consolidated Statement of Cash Flows	18
Notes to the Financial Statements	19
Directors' Declaration	65
Independent Auditor's Report	66
Additional Information for Listed Public Entities	72

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 Secretary	Emma Spear
Custodian	Australian Executor Trustees LimitedABN 84 007 869 794Level 19, 60 Castlereagh 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 2021

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 2021.

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

Principal activities and significant changes in state of affairs

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

The Group also provides a guarantee to J&F Australia Pty Ltd (J&F), a wholly owned subsidiary of Rural Funds Management, earning a return equivalent to an equity rate of return calculated on the amount of the guarantee during the year.

The following activities of the Group changed during the year:

In November 2020, the Group settled on the Maryborough acquisition, consisting of 5,258 hectares of sugar cane farms and 7,740 megalitres of water entitlements located in Maryborough, Queensland and associated plant and equipment for approximately $83.7m including transaction costs. The farms have the potential to be progressively converted to approximately 2,200 hectares of macadamia orchards with a substantial portion of the remaining area able to be used for cropping. Cropping operations have been performed on an interim basis for unleased portions of land where macadamia developments have not commenced.

In November 2020, the Group purchased the Riverton property located in the Fitzroy region in Queensland for $6.5m including transaction costs with potential for development into macadamia orchards.

In December 2020, the Group purchased the Stoneleigh property which will form part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $6.6m including transaction costs with potential for development into macadamia orchards.

In December 2020, the Group completed the sale of the Mooral almond orchard and associated plant and equipment for a contracted price of approximately $98.0m excluding transaction costs and adjustments. A remaining portion of the land contracted for $4.1m as part of the transaction was settled in February 2021.

In December 2020, the Group purchased an additional 1,655 hectares of land as part of the Homehill property, located in the Fitzroy region in Queensland for $4.3m including transaction costs.

In February 2021, the Group purchased the Corrowah property which will form part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $1.9m including transaction costs with potential for development into macadamia orchards.

In February 2021, the Group increased the guarantee to J&F Australia Pty Ltd (J&F), a wholly owned subsidiary of Rural Funds Management, from $82.5m to $99.9m to facilitate an increase in J&F's supply of cattle to JBS as part of its grain fed business. The guarantee earns a return for RFF equivalent to an equity rate of return which is calculated on the amount of the guarantee during the year.

Directors' Report

30 June 2021

Principal activities and significant changes in state of affairs (continued)

In March 2021, the Group purchased the Tongola property which will farm part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $3.2m including transaction costs with potential for development into macadamia orchards.

In May 2021, the Group completed the sale of the Wattlebank property located in the Fitzroy region in Queensland for approximately $1.0m. Water entitlements associated with the property were not sold as part of the transaction.

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

Operating results

The consolidated net profit after income tax of the Group for the year ended 30 June 2021 amounted to $119,634,000 (2020: $48,988,000). The consolidated total comprehensive income of the Group for the year ended 30 June 2021 amounted to $123,917,000 (2020: $61,938,000).

The Group holds investment property, bearer plants and derivatives at fair value. After adjusting for the effects of fair value adjustments, depreciation, impairments, non-cash tax expense and one-off transaction costs during the year, the profit would have been $40,423,000 (2020: $45,427,000), representing adjusted funds from operations (AFFO).

Adjusted funds from operations (AFFO)

The adjusted funds from operations (AFFO) calculated below effectively represents the underlying and recurring cash earnings from the Group's operations from which distributions are funded:

	2021	2020
	$'000	$'000
Net profit before income tax from continuing operations	120,292	49,096
Change in fair value of interest rate swaps	(12,923)	7,624
Depreciation and impairments - other	840	2,244
Depreciation - bearer plants	4,032	4,838
Change in fair value of biological assets (unharvested crops)	(1,028)	-
Change in fair value of bearer plants	(1,007)	499
Change in fair value of investment property	(42,289)	(16,194)
Impairment of property - owner occupied	1,651	-
Change in fair value of financial assets/liabilities	(116)	(510)
Impairment of intangible assets	4,188	798
Straight-lining of rental revenue	852	(1,232)
Interest component of JBS feedlot finance lease	(769)	(789)
Income tax payable (RF Active)	(432)	(884)
Gain on sale of assets	(32,868)	(4,032)
Net profit before income tax from discontinued operations	-	1,502
Depreciation and impairments	-	649
Change in fair value of investment property	-	1,250
Income tax payable (RF Active)	-	(57)
Loss on disposal	-	29
Loss on disposal - one off transaction costs	-	596
AFFO	40,423	45,427
AFFO cents per unit	11.9	13.5

Directors' Report

30 June 2021

Financial position

The net assets of the consolidated Group have increased to $648,544,000 at 30 June 2021 from $557,966,000 at 30 June 2020. At 30 June 2021, the Group had total assets of $1,041,904,000 (2020: $914,920,000).

At 30 June 2021, 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 $122,402,000 (2020: $129,246,000). Directors obtain independent valuations on RFF properties ensuring that each property will have been independently valued every two years or more often where appropriate. These valuations attribute a value to the water entitlements held by the Group. The Directors have taken into account the most recent valuations on each property and consider that they remain a reasonable estimate of fair value. On this basis the fair value of water entitlements at 30 June 2021 was $212,580,000 (2020: $226,945,000). The value of water entitlements is illustrated in the table below:

	2021	2020
	$'000	$'000
Intangible assets (water entitlements)	110,418	117,262
Investment in CICL	11,464	11,464
Investment in BIL	520	520
Total book value of water entitlements	122,402	129,246
Revaluation of intangible assets per valuation	90,178	97,699
Adjusted total water entitlements	212,580	226,945

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.

	2021$'000	2020$'000
Net assets per Consolidated Statement of Financial Position	648,544	557,966
Revaluation of intangible assets per valuation	90,178	97,699
Adjusted net assets	738,722	655,665
Adjusted NAV per unit	2.17	1.94

Property leasing

At 30 June 2021 the Group held 66 (2020: 41) properties as follows:

3 almond orchards (4,139 planted hectares);
7 vineyards (666 planted hectares);
3 macadamia orchards (261 planted hectares);
3 macadamia orchards under development (118 hectares);
2 properties with potential for areas to be developed into macadamia orchards (3,467 hectares);
21 cattle properties made up of 16 breeding, backgrounding and finishing properties (672,342 hectares) and 5 cattle feedlots with combined capacity of 150,000 head;
2 cropping properties (7,905 hectares).
Maryborough, a total of 25 properties, with areas under development into macadamia orchards, leased out and owner operated (total 5,258 hectares).

During the year ended 30 June 2021, the properties held by the Group recorded an increment in the fair value of investment properties of $42,289,000 (2020: $16,194,000), an increment in bearer plants revaluation of $6,510,000 (2020: $12,451,000), an impairment of intangibles of $4,188,000 (2020: $798,000) relating to water entitlements and an impairment in property – owner occupied of $1,651,000 (2020: nil) relating to properties carrying out various cropping operations.

Directors' Report

30 June 2021

Property leasing (continued)

Almond orchards

The three fully established almond orchard properties (including water entitlements) are located in Hillston, NSW and Darlington Point, NSW and are leased to tenants who make regular rental payments. These encompass a planted area of 4,139 hectares (2020: 4,947 hectares):

Yilgah 1,006 planted hectares (2020: 1,006 hectares);
Tocabil 603 planted hectares (2020: 603 hectares);
Kerarbury 2,530 planted hectares (2020: 2,530 hectares).

These properties are under lease to the following tenants:

Select Harvests Limited (SHV) 1,006 planted hectares (2020: 1,221 hectares);
Olam Orchards Australia Pty Limited (Olam) 3,133 planted hectares (2020: 3,133 hectares);

For its almond orchards the Group owns water entitlements of 55,525ML (2020: 67,743ML) comprising groundwater, high security river water, general security river water, supplementary river water, and domestic and stock river water. In addition, the Group owns 21,430ML (2020: 21,430ML) of water delivery entitlements that provide access to water delivery through CICL, with a low annual allocation expected to be provided.

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 (2020: 936ML). All vineyards are leased to Treasury Wine Estates Limited and produce premium quality grapes. Six of the vineyards are leased until June 2026 and one is leased until June 2022.

Macadamia orchards

Three established macadamia orchards are located near Bundaberg, QLD and leased to the following tenants:

2007 Macgrove Project (M07) 234 hectares (2020: 234 hectares);
RFM Farming Pty Limited 27 hectares (RFM) (2020: 27 hectares).

The Cygnet property located in Bundaberg, Queensland is currently unleased with 37 hectares of macadamia plantings.

The Swan Ridge South property located in Bundaberg, Queensland is currently unleased and under development to 40 hectares of planned macadamia plantings.

The Nursery Farm property located in Bundaberg, Queensland is currently unleased with 41 hectares of macadamia plantings and a macadamia tree nursery.

The Riverton property and Rookwood Farms aggregation, totaling 3,467 hectares, located in the Fitzroy region in Queensland are currently unleased which have been identified as potential development sites for macadamia orchards.

Cattle property

Cattle properties held by the Group comprise of cattle breeding, backgrounding and finishing properties and cattle feedlots.

Rewan located near Rolleston in central Queensland 17,479 hectares (2020: 17,479 hectares);
Mutton Hole and Oakland Park located in far north Queensland 225,800 hectares (2020: 225,800 hectares);
Natal aggregation located near Charters Towers in north Queensland 390,600 hectares (2020: 390,600 hectares);
Comanche located in central Queensland 7,600 hectares (2020: 7,600 hectares);
Cerberus located north west of Rockhampton in central Queensland 8,280 hectares (2020: 8,280 hectares);
Dyamberin located in the New England region of New South Wales 1,728 hectares (2020: 1,728 hectares);
Woodburn located in the New England region of New South Wales 1,063 hectares (2020: 1,063 hectares);
Cobungra located in the East Gippsland region of Victoria 6,497 hectares (2020: 6,497 hectares);
Petro, High Hill and Willara located in Western Australia 6,196 hectares (2020: 6,196);
Yarra located south west of Rockhampton in central Queensland 2,173 hectares (2020: 2,173);

Directors' Report

30 June 2021

Property leasing (continued)

Cattle property (continued)

Homehill located north west of Rockhampton in central Queensland 4,925 hectares (2020: 3,270); and
Prime City, Mungindi, Caroona, Beef City and Riverina, 5 cattle feedlots with a combined capacity of 150,000 head (2020:150,000 head).

The properties comprise a combined 672,342 hectares and are leased to the following tenants:

Australian Agricultural Company Limited, leasing Rewan;
Cattle JV Pty Limited, a wholly owned subsidiary of RFM, leasing Mutton Hole and Oakland Park;
DA & JF Camm Pty Limited, a member of the Camm Agricultural Group, leasing the Natal aggregation;
Elrose Enterprises Pty Limited, leasing Comanche;
Katena Pty Limited, leasing Cerberus; and
Stone Axe Pastoral Company Pty Limited, leasing Dyamberin, Woodburn, Cobungra, Petro, High Hill and Willara.

In addition to this, JBS Australia Pty Limited (JBS) leases the Prime City, Mungindi, Caroona, Beef City and Riverina feedlots.

The remaining properties are not currently leased as at 30 June 2021.

The lease arrangement for the Natal aggregation includes a $10 million secured loan provided to the lessee and a $5 million cattle leasing arrangement to fund the purchase of cattle.

The lease arrangement for the Cerberus property includes a $1.6 million financing facility to fund the purchase of cattle. On 1 July 2021, the lease on the Cerberus property by Katena Pty Ltd was terminated by mutual agreement and all amounts owing to the Group have since been paid. A long-term lessee is currently being sought.

Cropping property

Cropping properties held by the Group comprise of:

Lynora Downs, a 4,963 hectare (2020: 4,958 hectare) cropping property located near Emerald, QLD is leased to Cotton JV Pty Limited (Cotton JV), a joint venture between RFM and Queensland Cotton Corporation Pty Limited (a subsidiary of Olam International Limited) until April 2022.
Mayneland, a 2,942 hectare (2020: 2,942 hectare) cropping property located 25 km north of Lynora Downs in central Queensland, is leased to RFM Farming Pty Limited (a wholly owned subsidiary of RFM) until 30 June 2022. A long-term lessee is being sought.

Maryborough

The Maryborough properties located in Queensland, comprise of 5,258 hectares and 7,740 ML of water entitlements, with areas having potential to be developed into approximately 2,200 hectares of macadamia orchards. While in the development phase, parts of the property will be:

Under development into macadamia orchards
Leased out to different parties for cropping operations
Owner occupied and carrying out various cropping operations

Other activities

The Group provides a $99,900,000 (2020: $82,500,000) limited guarantee to J&F Australia Pty Ltd (J&F). The guarantee is currently used to support $99,900,000 of J&F's debt facility which is used for cattle purchases, feed and other costs associated with finishing the cattle on the feedlots, enabling J&F to supply cattle to JBS Australia Pty Limited (JBS) for its grain fed business. The guarantee earns a return for RFF equivalent to an equity rate of return which is calculated on the amount of the guarantee during the year.

Breeder assets under finance lease with a net book value of $17,778,000 (2020: $14,383,000) are leased to Cattle JV Pty Limited.

Agricultural plant and equipment with a net book value of $3,422,000 (2020: $6,449,000) is owned by the Group and leased to M07, Cotton JV, Cattle JV and RFM Farming. Agricultural plant and equipment with a net book value of $5,294,000 (2020: $520,000) is used for the Group's cropping operations and developments.

Directors' Report

30 June 2021

Banking facilities

At 30 June 2021 the core debt facility available to the Group was $380,000,000 (2020: $335,000,000), with a drawn balance of $344,143,000 (2020: $297,248,000). The facility is split into two tranches with a $270,000,000 tranche expiring in November 2022 and a $110,000,000 tranche expiring in November 2023. At 30 June 2021, RFF had active interest swaps totaling 53.2% (2020: 61.6%) of the drawn balance to manage interest rate risk.

Distributions

	Cents	Total
	per unit	$
Distribution declared 2 June 2020, paid 31 July 2020	2.7118	9,158,113
Distribution declared 1 September 2020, paid 30 October 2020	2.8203	9,542,697
Distribution declared 2 December 2020, paid 29 January 2021	2.8203	9,558,150
Distribution declared 1 March 2021, paid 30 April 2021	2.8203	9,572,536
Distribution declared 1 June 2021, paid 30 July 2021	2.8203	9,586,215
Earnings per unit
Net profit after income tax for the year ($'000)		119,634
Weighted average number of units on issue during the year		338,961,068
Basic and diluted earnings per unit (total) (cents)		35.29

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 other expenses such as corporate overheads 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 2021 is 1.89% (2020: 1.99%).

Matters subsequent to the end of the year

On 1 July 2021, the lease on the Cerberus property by Katena Pty Ltd was terminated by mutual agreement and all amounts owing to the Group have since been paid. A long-term lessee is currently being sought.

On 8 July 2021, the Group announced that it was undertaking a fully underwritten equity raise for $100.0m to fund the development of 1,000ha of macadamia orchards, acquire cattle properties to be leased by corporate lessees, and for the acquisition of 8,338 megalitres of Lower Murrumbidgee ground water entitlements for $38.4m. The purchase is expected to settle in August 2021, and the entitlements will be leased to a private farming company for five years.

On 15 July 2021, the Group completed the sale of a portion of surplus land on Kerarbury for approximately $1.6m.

No other 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 agricultural property 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. Responsibility of water licences that are leased to external parties then requires the tenant to meet the legislative requirements for these licences. There have been no known significant breaches of any environmental requirements applicable to the Group.

Directors' Report

30 June 2021

Climate change risk

RFM is aware of the potential risks that climate change could present to the Group's assets. RFM has committed to a climatic diversification strategy in order to mitigate these risks. Some of the areas that RFM is focused on is the impact of emissions from Group's assets, including carbon dioxide, methane, and nitrous oxide.

The Group's assets produce these emissions through its agricultural infrastructure and machinery, cattle assets and through the application of fertiliser. As part of RFM's ongoing strategy to mitigate and improve climate related risks, RFM will continue to monitor emissions and seek to implement infrastructure and practice changes. RFM considers that climate change may present risks for the Group primarily in the form of residual risk of the Group's assets at the end of the lease terms. These risks may be mitigated by how the assets are managed. External valuations consider these types of factors as well as other risks when determining the valuations of the assets.

COVID-19 outbreak

The outbreak of Coronavirus Disease 2019 was ongoing during the year ended 30 June 2021 and as at the date of the financial statements. There have been unprecedented measures put in place by the Australian Government, as well as governments across the globe, to contain the coronavirus which has led to significant uncertainty and has had a significant impact on the Australian and global economies. Following the outbreak, the Group continues to operate with no significant impacts to its ongoing operation to date. RFM will continue to monitor the potential impacts of the outbreak.

Units on issue

339,900,556 units in Rural Funds Trust were on issue at 30 June 2021 (2020: 337,713,420). During the year 2,187,136 units (2020: 3,449,827) were issued by the Trust and nil (2020: nil) were redeemed.

Indemnity of Responsible Entity and Custodian

In accordance with its constitution, Rural Funds Group indemnifies the Directors, Company Secretary 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.

Information on Directors of the Responsible Entity

Guy Paynter	Non-Executive Chairman
Qualifications	Bachelor of Laws from The University of Melbourne
ExperienceSpecial responsibilities	Guy Paynter is a former director of broking firm JB Were. Guy 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's agricultural interestsinclude cattle breeding in the Upper Hunter region in New South Wales.Member of Audit Committee and Remuneration Committee
Directorships of other listed entitiesin the last three years	RFM Poultry

Directors' Report

30 June 2021

Information on Directors of the Responsible Entity (continued)

David Bryant	Managing Director
Qualifications	Diploma of Financial Planning from the Royal Melbourne Institute ofTechnology and 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-scale agriculturalproperty assets and associated water entitlements. RFM managesapproximately $1.3 billion of agricultural assets. David is responsible forleading the RFM management team, maintaining key commercialrelationships and sourcing new business opportunities.
Special responsibilities	Managing Director
Directorships of other listed entitiesin the last three years	RFM Poultry
Michael Carroll	Non-Executive Director
Qualifications	Bachelor of Agricultural Science, La Trobe University and Master ofBusiness Administration, Melbourne University Business School. Michaelhas also completed the Advanced Management Program, HarvardBusiness School and is a Fellow of the Australian Institute of CompanyDirectors.
Experience	Chair of Viridis Ag Pty Limited and the Australian Rural LeadershipFoundation. Director of Paraway Pastoral Company Limited, GeneticsAustralia and the Regional Investment Corporation. Michael also runs hisown cattle business in south west Victoria.
	Former board positions include Select Harvests Limited, Elders Limited,Sunny Queen Australia Pty Limited, Tassal Group Limited, the AustralianFarm Institute, Warrnambool Cheese and Butter Factory CompanyHoldings Limited, Queensland Sugar Limited, Rural Finance Corporationof Victoria, Meat and Livestock Australia and the Geoffrey Gardiner DairyFoundation.
	Michael's executive experience includes establishing and leading theNational Australia Bank's Agribusiness division and as a Senior Adviser inNAB's internal investment banking and corporate advisory team. Prior tothatMichaelworkedforMonsantoAgriculturalProducts andabiotechnology venture capital company.
Special responsibilities	Chairman of Audit Committee and Remuneration Committee
Directorships of other listed entitiesin the last three years	Michael held previous roles as Chairman of Elders Limited and Director ofSelect Harvests Limited, Tassal Group Limited and RFM Poultry.

Directors' Report

30 June 2021

Information on Directors of the Responsible Entity (continued)

Julian Widdup	Non-Executive Director
Qualifications	Bachelor of Economics, Master of Business Administration and UniversityMedal from the Australian National University. Completed the SeniorExecutive Leadership Program at Harvard Business School. Fellow of theInstitute of Actuaries of Australia and Fellow of the Australian Institute ofCompany Directors.
Experience	Julian Widdup is currently a director of the Australian CatholicSuperannuation & Retirement Fund, Screen Canberra and CulturalFacilities Corporation. He worked in the financial services industry for over20 years including as a senior executive of asset management companies,Palisade Investment Partners and Access Capital Advisers (nowWhitehelm Capital). Julian brings extensive experience to the RFM boardhaving been a director of Darwin International Airport, Alice Springs Airport,NZ timberland company Taumata Plantations Limited, Regional LivestockExchange Investment Company, Merredin Energy power utility and theVictorian AgriBioscience Research Facility.
Special responsibilities	Member of Audit Committee and Remuneration Committee
Directorships of other listed entitiesin the last three years	RFM Poultry

Interests of Directors of the Responsible Entity

	Guy PaynterUnits	David Bryant*Units	Michael CarrollUnits	Julian WiddupUnits
Balance at 30 June 2019	1,059,104	14,414,854	27,623	-
Additions	500,000	823,180	57,111	110,203
Balance at 30 June 2020	1,559,104	15,238,034	84,734	110,203
Additions	-	-	133,668	5,562
Balance at 30 June 2021	1,559,104	15,238,034	218,402	115,765

*Includes interests held by Rural Funds Management Limited as the Responsibly Entity.

Company Secretary of the Responsible Entity

Emma Spear is RFM's company secretary. Emma joined RFM in 2008, is a member of CPA Australia and is admitted as a Legal Practitioner of the Supreme Court of the ACT.

Meetings of Directors of the Responsible Entity

During the financial year 19 meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows:

Directors meetings		Audit Committee meetings		Remuneration Committeemeetings
No. eligibleto attend	No.attended	No. eligibleto attend	No.attended	No. eligibleto	No.attended
15	15	2	2	2	2
15	15	-	-	-	-
1515	1515	22	22	22	22
					attend

Non-audit services

Fees of $20,395 (2020: $15,960) were paid or payable to PricewaterhouseCoopers for compliance audit services provided for the year ended 30 June 2021.

Directors' Report

30 June 2021

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 2021 has been received and is included on page 12 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

25 August 2021

Auditor's Independence Declaration

As lead auditor for the audit of Rural Funds Group for the year ended 30 June 2021, 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 Trust and the entities it controlled during the period.

Rod Dring Sydney Partner 25 August 2021

PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

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Liability limited by a scheme approved under Professional Standards Legislation.

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2021

		2021	2020
	Note	$'000	$'000
Continuing operations
Revenue	B3	67,166	66,818
Other income	B3	3,935	4,397
Management fees		(11,017)	(9,621)
Property expenses		(2,829)	(2,038)
Finance costs		(10,498)	(10,255)
Cost of goods sold		(484)	-
Other expenses		(5,609)	(4,938)
Gain on sale of assets		32,868	4,032
Depreciation and impairments - other		(840)	(2,244)
Change in fair value of investment property	C2	42,289	16,194
Change in fair value of bearer plants	C3	1,007	(499)
Depreciation - bearer plants	C3	(4,032)	(4,838)
Impairment of intangible assets	C5	(4,188)	(798)
Impairment of property - owner occupied	C6	(1,651)	-
Change in fair value of biological assets	F7	1,136	-
Change in fair value of interest rate swaps		12,923	(7,624)
Change in fair value of financial assets/liabilities		116	510
Net profit before income tax from continuing operations		120,292	49,096
Income tax expense	D1	(658)	(1,553)
Net profit after income tax from continuing operations		119,634	47,543
Net profit before income tax from discontinued operations		-	1,502
Income tax expense on discontinued operations		-	(57)
Net profit after income tax from discontinued operations		-	1,445

Net profit after income tax		119,634	48,988
Other comprehensive income:
Items that will not be reclassified to profit or loss
Revaluation increment - Bearer plants	C3	5,503	12,950
Income tax relating to these items	D1	(1,220)	-
Other comprehensive income for the year, net of tax		4,283	12,950
Total comprehensive income attributable to unitholders		123,917	61,938

The accompanying notes form part of these financial statements.

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2021

		2021	2020
	Note	$'000	$'000
Total net profit after income tax for the year attributableto unitholders arising from:
Rural Funds Trust		117,696	44,627
RF Active (non-controlling interest)		1,938	4,361
Total		119,634	48,988

Total comprehensive income for the year attributable tounitholders arising from:
Rural Funds Trust		121,979	57,577
RF Active (non-controlling interest)		1,938	4,361
Total		123,917	61,938

Total comprehensive income for the year attributable tounitholders arising from:
Continuing operations		123,917	60,493
Discontinued operations		-	1,445
Total		123,917	61,938

Earnings per unit
Basic and diluted earnings per unit from continuing operations:
Per stapled unit (cents)		35.29	14.15
Per unit of Rural Funds Trust (cents)		34.72	12.85
Per unit of RF Active (cents)		0.57	1.30
Basic and diluted earnings per unit attributable to the unitholders:
Per stapled unit (cents)	B4	35.29	14.58
Per unit of Rural Funds Trust (cents)	B4	34.72	13.28
Per unit of RF Active (cents)	B4	0.57	1.30

The accompanying notes form part of these financial statements.

Consolidated Statement of Financial Position

As at 30 June 2021

		2021	2020
	Note	$'000	$'000
ASSETS
Current assets
Cash and cash equivalents	F1	11,647	5,085
Trade and other receivables	F2	4,945	5,446
Other current assets	F3	4,995	2,688
Assets held for sale	C8	1,621	63,358
Biological assets	F7	2,988	-
Income tax receivable	D2	477	-
Total current assets		26,673	76,577
Non-current assets
Investment property	C2	596,924	474,838
Plant and equipment - bearer plants	C3	160,782	153,528
Financial assets	C4, E2	107,177	100,225
Intangible assets	C5	110,418	106,551
Property - owner occupied	C6	28,284	-
Plant and equipment - other	C7	8,716	3,201
Derivative financial assets	E3	2,930	-
Total non-current assets		1,015,231	838,343
Total assets		1,041,904	914,920
LIABILITIES
Current liabilities
Trade and other payables	F4	3,195	3,502
Current tax payable	D2	-	1,533
Interest bearing liabilities	E1	2,456	3,814
Derivative financial liabilities	E3	3,604	3,666
Distributions payable	E8	10,022	9,460
Total current liabilities		19,277	21,975
Non-current liabilities
Interest bearing liabilities	E1	344,143	297,248
Deferred tax liabilities	D2	7,450	5,855
Other non-current liabilities	F5	4,421	3,877
Derivative financial liabilities	E3	18,069	27,999
Total non-current liabilities		374,083	334,979
Total liabilities (excluding net assets attributable tounitholders)		393,360	356,954
Net assets attributable to unitholders		648,544	557,966
Total liabilities		1,041,904	914,920

*Water entitlements are held at cost less accumulated impairment in the Consolidated Statement of Financial Position in accordance with accounting standards. Refer to note B1 Segment information, for disclosure of the Directors' valuation of water entitlements, which are supported by independent property valuations.

Consolidated Statement of Financial Position

As at 30 June 2021

		2021	2020
	Note	$'000	$'000
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
Unitholders of Rural Funds Trust
Issued units	E7	380,440	355,923
Asset revaluation reserve	F6	48,347	59,412
Retained earnings		206,767	131,628
Parent entity interest		635,554	546,963
Unitholders of RF Active
Issued units	E7	4,700	4,651
Retained earnings		8,290	6,352
Non-controlling interest		12,990	11,003
Total net assets attributable to unitholders		648,544	557,966

Consolidated Statement of Changes in Net Assets Attributable to Unitholders

For the year ended 30 June 2021

2021	Note	Issuedunits$'000	Assetrevaluationreserve$'000	Retainedearnings$'000	Total$'000	Noncontrollinginterest$'000	Total$'000
Balance at 1 July 2020		355,923	59,412	131,628	546,963	11,003	557,966
Other comprehensive income		-	4,283	-	4,283	-	4,283
Total other comprehensive income		-	4,283	-	4,283	-	4,283
Profit before income tax		-	-	117,527	117,527	2,765	120,292
Income tax expense	D1	-	-	169	169	(827)	(658)
Total comprehensive income for theyear		-	4,283	117,696	121,979	1,938	123,917
Transfer on disposal of bearer plants toretained earnings		-	(15,348)	15,348	-	-	-
Issued units
Units issued during the year		4,871	-	-	4,871	49	4,920
Issue costs		-	-	-	-	-	-
Total issued units	E7	4,871	-	-	4,871	49	4,920
Distributions to unitholders	B5, E7	19,646	-	(57,905)	(38,259)	-	(38,259)
Balance at 30 June 2021		380,440	48,347	206,767	635,554	12,990	648,544

		Issued	Assetrevaluation	Retained		Noncontrolling
2020		units	reserve	earnings	Total	interest	Total
		$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 July 2019		358,269	46,462	114,565	519,296	6,576	525,872
Other comprehensive income		-	12,950	-	12,950	-	12,950
Total other comprehensive income		-	12,950	-	12,950	-	12,950
Profit before income tax		-	-	45,213	45,213	5,385	50,598
Income tax expense	D1	-	-	(586)	(586)	(1,024)	(1,610)
Total comprehensive income for theyear		-	12,950	44,627	57,577	4,361	61,938
Issued units
Units issued during the year		6,494	-	-	6,494	66	6,560
Issue costs		79	-	-	79	-	79
Total issued units	E7	6,573	-	-	6,573	66	6,639
Distributions to unitholders	B5, E7	(8,919)	-	(27,564)	(36,483)	-	(36,483)
Balance at 30 June 2020		355,923	59,412	131,628	546,963	11,003	557,966

The accompanying notes form part of these financial statements.

Consolidated Statement of Cash Flows

For the year ended 30 June 2021

		2021	2020
	Note	$'000	$'000
Cash flows from operating activities
Receipts from customers (inclusive of GST)		64,194	71,021
Payments to suppliers (inclusive of GST)		(29,318)	(26,723)
Interest received		126	139
Finance income		13,197	10,218
Finance costs		(10,498)	(10,881)
Income tax paid		(2,293)	(439)
Net cash inflow from operating activities		35,408	43,335

Cash flows from investing activities
Payments for investment property	C2	(84,163)	(59,779)
Payments for plant and equipment - bearer plants	C3	(4,457)	(2,997)
Payments for intangible assets	C5	(8,055)	(3,250)
Payments for financial assets		(7,096)	(27,243)
Payments for property - owner occupied	C6	(29,959)	-
Payments for plant and equipment	C7	(7,187)	(2,228)
Proceeds from sale of Mooral assets		97,330	-
Proceeds from sale of investment property		960	-
Proceeds from sale of plant and equipment		968	173
Proceeds from sale of intangible assets		-	6,668
Proceeds from sale of poultry assets		-	71,913
Transaction costs on disposal of poultry assets		-	(596)
Distributions received		64	50
Net cash outflow from investing activities		(41,595)	(17,289)

Cash flows from financing activities
Proceeds from issue of units	E7	4,920	6,639
Proceeds from borrowings		185,293	78,101
Repayment of borrowings		(139,766)	(72,316)
Distributions paid		(37,698)	(35,973)
Net cash inflow/(outflow) from financing activities		12,749	(23,549)

Net increase in cash and cash equivalents held		6,562	2,497
Cash and cash equivalents at the beginning of the year		5,085	2,588
Cash and cash equivalents at the end of the year		11,647	5,085

The accompanying notes form part of these financial statements.

Notes to the Financial Statements

30 June 2021

A. REPORT OVERVIEW

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 incorporated and domiciled in Australia. The Directors of the Responsible Entity authorised the Financial Report for issue on 25 August 2021 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 section G3.

COVID-19 outbreak

Basis of preparation

The Trusts have common business objectives and operate collectively as an economic entity 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 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.

These financial statements are consolidated financial statements and accompanying notes of both Rural Funds Trust and RF Active.

Rounding of amounts

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, 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.

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.

Notes to the Financial Statements

30 June 2021

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.

The following are areas for which significant judgements, estimates or assumptions are made:

Valuation of property related assets

Independent valuations on the Group's properties are obtained, ensuring that each property will have been independently valued every two financial years or more often where appropriate. Independent valuation reports assess and provide value for properties in their entirety.

Significant judgement is applied in order to allocate the total property value, as disclosed in the independent valuation reports where applicable, to investment property, bearer plants and water entitlements. The allocation technique will vary depending on the nature of the lease arrangement.

Where information is available, each component of the property, meaning the land and infrastructure, the trees and any water assets, disclosed in the financial statements as investment property, bearer plants and water entitlements, will be allocated on an encumbered (subject to lease) basis.

If this information is not available, the valuation report may provide additional information, such as the summation basis of the unencumbered (not subject to lease) value, evidence of other market transactions and the analysis of those component parts, which along with other sources, including the nature of capital expenditure on the property, is used to determine the encumbered allocation to components. Significant judgement is applied as part of these allocations, which vary from property to property, given the individual circumstances of the leasing arrangements. The allocation technique may change to reflect the best estimate of fair value attributable to each component at reporting date. Allocation techniques are disclosed in Note C1.

Estimation of useful lives of bearer plants

The useful lives of bearer plants have been estimated by assessing industry data. The useful lives of bearer plants are disclosed in Note C3.

Comparative amounts

Comparative amounts have not been restated unless otherwise noted.

Notes to the Financial Statements

30 June 2021

B. RESULTS

B1 Segment information

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Directors of the Responsible Entity. During the year ended 30 June 2021, the Group held property in agricultural sectors presented in five segments (2020: six segments) each holding and leasing agricultural property and equipment. Segment revenue includes rental income, finance income and interest income. Segment property assets include investment property, bearer plants, intangible assets, property – owner occupied, financial assets and plant and equipment. Revenue and property assets not categorised in these sectors are managed at a corporate level. Liabilities and direct or indirect expenses are not allocated to individual segments as these are reviewed by the chief operating decision maker on a consolidated basis.

Segment revenue and revaluation movements

	Almonds	Cattle	Vineyards	Cropping	Macadamias	Other	Total
2021	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Rental revenue	30,755	13,788	4,037	3,814	1,301	231	53,926
Rental revenue -straight-lining	(859)	(8)	18	-	-	(3)	(852)
Interest received	2	120	-	-	-	4	126
Finance income	12	13,920	-	-	34	-	13,966
Total revenue	29,910	27,820	4,055	3,814	1,335	232	67,166

Gain on disposal	32,481	186	-	-	-	201	32,868
Depreciation -bearer plants	(2,798)	-	(1,016)	-	(218)	-	(4,032)
Depreciation -property (owner occupied)	-	-	-	(24)	-	-	(24)
Change in fair value through profitor loss	(1,490)	45,623	(2,634)	1,748	(5,673)	-	37,573
Revaluation increment through other comprehensive income	643	-	4,068	-	792	-	5,503
Total revaluation	(848)	45,623	1,434	1,748	(4,881)	-	43,076
Revaluation of water entitlements per director's valuation	7,333	-	642	-	355	438	8,768
Total revaluation	6,485	45,623	2,076	1,748	(4,526)	438	51,844

Revaluation for the cattle segment largely relates to the external valuation of Rewan, Oakland Park, Mutton Hole, Cobungra and the Natal Aggregation. The revaluation increment is mainly due to market movements.

Revaluation of the Maryborough assets has been allocated to the Cropping and Macadamias. The revaluation largely relates to transaction costs that have been written off as part of the acquisition. Refer to section B1 – Maryborough note for further details of the segment allocation.

Refer to section C1 for details on properties valued during the year.

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Segment revenue and revaluation movements (continued)

	Almonds	Cattle	Vineyards	Cropping	Macadamias	Poultry(discontinued)	Other	Total
2020	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Rental revenue	33,457	12,235	3,891	3,296	1,335	5,136	270	59,620
Rental revenue -straight-lining	678	501	56	-	(3)	-	-	1,232
Interest received	-	80	-	-	-	24	35	139
Finance income	-	10,981	-	-	6	-	-	10,987
Total revenue	34,135	23,797	3,947	3,296	1,338	5,160	305	71,978

Loss on disposal	-	-	-	-	-	(625)	-	(625)

Depreciation - bearer plants	(3,656)	-	(965)	-	(217)	-	-	(4,838)

Change in fair value through profit or loss	2,473	12,866	-	(534)	44	(1,250)	558	14,157
Revaluation increment through other comprehensiveincome	12,335	-	-	-	615	-	-	12,950
Total revaluation	14,808	12,866	-	(534)	659	(1,250)	558	27,107
Revaluation of water entitlements per director'svaluation	6,867	-	-	-	(29)	(2,595)	16,687	20,930
Total revaluation	21,675	12,866	-	(534)	630	(3,845)	17,245	48,037

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Segment assets

	Almonds	Cattle	Vineyards	Cropping	Macadamias	Unallocated	Total
2021	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Investment property	126,189	305,151	34,540	83,300	47,744	-	596,924
Plant and equipment -bearer plants	125,580	-	23,815	-	11,387	-	160,782
Financial assets -property related	11,762	90,846	738	-	952	14	104,312
Intangible assets (water)	66,707	1,848	500	4,236	4,464	32,663	110,418
Property -owner occupied	-	-	-	28,284	-	-	28,284
Plant and equipment	100	640	-	2,065	5,911	-	8,716
Assets held for sale	1,621	-	-	-	-	-	1,621
Total property assets per statutory accounts	331,959	398,485	59,593	117,885	70,458	32,677	1,011,057
Revaluation of intangible assets per director's valuation	50,349	-	5,330	-	408	34,091	90,178
Total adjusted property assets at director'svaluation	382,308	398,485	64,923	117,885	70,866	66,768	1,101,235
Other assets per statutory accounts	-	-	-	-	-	30,847	30,847
Total adjusted assets	382,308	398,485	64,923	117,885	70,866	97,615	1,132,082

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Segment assets (continued)

	Almonds	Cattle	Vineyards	Cropping	Macadamias	Unallocated	Total
2020	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Investment property	127,519	249,534	38,170	47,896	11,719	-	474,838
Plant and equipment -bearer plants	126,805	-	19,756	-	6,967	-	153,528
Financial assets -property related	12,621	83,382	720	-	817	17	97,557
Intangible assets (water)	66,707	2,947	500	3,672	1,161	31,564	106,551
Plant and equipment	-	510	-	1,048	1,643	-	3,201
Assets held for sale	63,358	-	-	-	-	-	63,358
Total property assets per statutory accounts	397,010	336,373	59,146	52,616	22,307	31,581	899,033
Revaluation of intangible assets per director's valuation	59,306	-	4,688	-	53	33,652	97,699
Total adjusted property assets at director'svaluation	456,316	336,373	63,834	52,616	22,360	65,233	996,732
Other assets per statutory accounts	-	-	-	-	-	15,887	15,887
Total adjusted assets	456,316	336,373	63,834	52,616	22,360	81,120	1,012,619

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Maryborough allocation

The Maryborough properties located in Queensland, comprise of 5,258 hectares and 7,740 ML of water entitlements, with areas having potential to be developed into a planned 2,200 hectares of macadamia orchards. While in the development phase, parts of the property will be:

Under development into macadamia orchards (classified as investment property)
Leased out to different parties for cropping operations (classified as investment property)
Owner occupied and carrying out various cropping operations (classified as property owner occupied). While these properties are being operated by the Group, the intention is for these properties to be leased out and/or developed into macadamia orchards.

Revaluation movements for the year largely relates to transaction costs that have been written off as part of the acquisition.

Revaluation

	Cropping	Macadamias	Other	Total
2021	$'000	$'000	$'000	$'000
Change in fair value of investment property	(1,249)	(1,137)	-	(2,386)
Impairment of property (owner occupied)	(1,651)	-	-	(1,651)
Depreciation - property (owner occupied)	(24)	-	-	(24)
Impairment of intangible assets	(301)	(166)	-	(467)
Total revaluation	(3,225)	(1,303)	-	(4,528)

Assets
	Cropping	Macadamias	Unallocated	Total
2021	$'000	$'000	$'000	$'000
Investment property	21,351	21,455	-	42,806
Plant and equipment - bearer plants	-	1,053	-	1,053
Property - owner occupied	28,284	-	-	28,284
Intangible assets	4,235	2,342	-	6,577
Total property assets per statutoryaccounts	53,870	24,850	-	78,720
Revaluation of intangible assets perdirector's valuation	-	-	-	-
Total adjusted property assets atdirector's valuation	53,870	24,850	-	78,720

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Net asset value adjusted for water rights

The chief operating decision maker of RFF assesses the segments on property asset values adjusted for water rights. RFF owns permanent water rights and entitlements which 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.

The book value of the water rights (including investments in BIL and CICL recognised as financial assets) at 30 June 2021 is $122,402,000 (2020: $129,246,000).

Independent valuations on the Group's properties are obtained, ensuring that each property will have been independently valued every two years or more often where appropriate. Independent valuation reports assess and provide value for properties in their entirety. The independent valuation reports contains information with which judgement is applied in order to allocate values to investment property, bearer plants and water entitlements. The Directors have taken into account the most recent valuations on each property and consider that they remain a reasonable estimate and on this basis the fair value of water entitlements before deferred tax adjustments at 30 June 2021 was $212,580,000 (2020: $226,945,000) representing the value of the water rights of $90,178,000 (2020: $97,699,000) above cost.

The following is a reconciliation of the book value at 30 June 2021 to an adjusted value based on the Directors' valuation of the water rights which are assessed by the chief operating decision maker.

	Per StatutoryConsolidatedStatement ofFinancialPosition$'000	Revaluation ofwaterentitlementsper Directors'valuation$'000	Directors'valuation(Adjusted)$'000
Assets
Total current assets	26,673	-	26,673
Total non-current assets	1,015,231	90,178	1,105,409
Total assets	1,041,904	90,178	1,132,082
Liabilities
Total current liabilities	19,277	-	19,277
Total non-current liabilities	374,083	-	374,083
Total liabilities (excluding net assets attributableto unitholders)	393,360	-	393,360
Net assets attributable to unitholders	648,544	90,178	738,722
Net asset value per unit ($)	1.91		2.17

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

		30 June 21Adjusted	30 June 20Adjusted		Most Recent IndependentValuation
	Area*	propertyvalue	propertyvalue	Date	EncumberedValuation
30 June 2021		$'000	$'000	$'000	$'000
Almonds
Mooral (NSW)	808 ha	-	75,879	Mar 2020	76,000
Yilgah (NSW)	1,006 ha	106,563	105,112	Mar 2021	107,000
Tocabil (NSW)	603 ha	48,876	47,119	Mar 2021	49,000
Kerarbury (NSW)	2,530 ha	226,472	223,282	Mar 2021	228,000
Cattle
Rewan (QLD)	17,479 ha	50,400	43,159	Dec 2020	50,400
Mutton Hole (QLD)	140,300 ha	16,680	9,209	Jun 2021	16,680
Oakland Park (QLD)	85,500 ha	8,500	5,605	Jun 2021	8,500
Natal Aggregation (QLD)	390,600 ha	88,500	63,700	Jun 2021	88,500
Comanche (QLD)	7,600 ha	24,238	22,003	Jun 2020	21,997
Cerberus (QLD)	8,280 ha	13,963	13,849	Jun 2020	13,844
Dyamberin (NSW)	1,729 ha	13,959	13,900	Jun 2020	13,900
JBS Feedlots Finance Lease Receivable (NSW/QLD)	150,000 hd	55,615	54,846	N/A	N/A
Woodburn (NSW)	1,063 ha	7,397	7,300	Jun 2020	7,300
Cobungra (VIC)	6,497 ha	40,800	35,050	Jun 2021	40,800
Petro (WA)	2,942 ha	12,221	11,700	Dec 2019	11,700
High Hill (WA)	1,601 ha	4,967	4,900	Dec 2019	4,900
Willara (WA)	1,653 ha	4,985	4,900	Dec 2019	4,900
Yarra (QLD)	2,173 ha	6,245	6,194	Jun 2020	6,150
Homehill (QLD)	4,925 ha	12,875	7,750	Jun 2020	11,839

Cropping
Lynora Downs (QLD)	4,963 ha	41,500	33,736	Jun 2021	41,500
Mayneland (QLD)	2,942 ha	20,450	17,832	Apr 2020	17,500
Maryborough – Cropping (QLD)	3,962 ha	53,870	-	Nov 2020	53,806
Macadamias
Swan Ridge (QLD)	130 ha	6,679	6,653	Oct 2019	6,400
Moore Park (QLD)	104 ha	3,882	3,953	Oct 2019	4,000
Bonmac (QLD)	27 ha	2,797	2,852	Oct 2019	2,900
Cygnet (QLD)	37 ha	2,826	1,770	Apr 2021	2,800
Swan Ridge South (QLD)	40 ha	1,692	1,645	-	-
Nursery Farm (QLD)**	41 ha	5,914	3,028	Apr 2021	3,800
Riverton (QLD)	1,015 ha	4,900	-	Mar 2021	4,520
Rookwood Farms (QLD)***	2,452 ha	10,463	-	Mar 2021	7,070
Maryborough – Macadamias (QLD)	1,296 ha	24,850	-	Nov 2020	20,853

Vineyards
Kleinig (SA)	206 ha	22,997	22,286	Mar 2021	23,100
Geier (SA)	243 ha	27,562	27,748	Mar 2021	27,700
Dohnt (SA)	30 ha	1,196	1,019	Mar 2021	1,200
Hahn (SA)	50 ha	5,069	5,154	Mar 2021	5,100
Mundy and Murphy (SA)	55 ha	4,093	4,062	Mar 2021	4,100
Rosebank (VIC)	82 ha	3,788	3,365	Mar 2021	3,800
Water rights
River water (NSW)	8,754 ML	65,655	65,216	Jun 2021	65,655
River water (QLD)****	3,710 ML	1,099	1,795	Jun 2020	1,099
Total property and water assets		1,054,538	957,571

Cattle finance leases and other assets		35,582	29,031
Plant and equipment		8,716	3,201
Other receivables and equipment leases		2,399	3,161
Plant and equipment held for sale		-	3,768
Total adjusted property assets		1,101,235	996,732

* Unless otherwise denoted, the almond, vineyard and macadamia areas refer to planted and planned development areas.

**Nursery Farm includes the value of immature trees in the nursery which is not accounted for in the external valuation. Cost of immature trees approximates fair value.

***Rookwood Farms aggregation comprises of the Stoneleigh, Corrowah and Tongola properties. Encumbered valuation for the Tongola property has not yet been obtained.

****Comparative value relates to the Wattlebank property sold during the year. Water entitlements associated with the property were not sold as part of the transaction.

Notes to the Financial Statements

30 June 2021

B1 Segment information (continued)

Total property assets by property (continued)

Revaluations from external valuations

The cattle properties have increased in value during the year ended 30 June 2021. An external valuation was completed for Rewan during the half year ended 31 December 2021. External valuations were obtained for the Natal aggregation, Cobungra, Oakland Park and Mutton Hole properties during second half of the year ended 30 June 2021. The total uplift for the year ended 30 June 2021 has been largely due to the external valuer's assessment of the value of the land which can be measured by an increase in the rate of adult equivalents for the property. The uplift has been driven by improved demand and market sentiment for cattle properties in the respective regions. All of the Group's cattle properties have been valued by an independent valuer within the last 18 months. Demand and market sentiment have also been affected by a decrease in the cost of funding. Further information on the significant unobservable inputs adopted by the external valuer in the fair value measurement of the properties is described in note C1.

Adjusted property values movements after the most recent independent valuation

Increases to the adjusted property value from the last encumbered valuation is primarily a result of new acquisitions or capital expenditure subsequent to the valuation, designed to improve an asset's productivity and value.

Decrease to the adjusted property value from the last encumbered valuation is primarily a result of depreciation on the bearer plants.

Notes to the Financial Statements

30 June 2021

B2 Adjusted funds from operations (AFFO)

The following presents the components of adjusted funds from operations (AFFO) and provides a reconciliation from AFFO to Net profit after income tax which is assessed by the chief operating decision maker.

	2021	2020
	$'000	$'000
Continuing operations
Revenue	67,166	66,818
Other income	3,935	4,397
Cost of goods sold (cropping operations)	(484)	-
Change in fair value of biological assets (harvested crops)	108	-
Management fees	(11,017)	(9,621)
Property expenses	(2,829)	(2,038)
Finance costs	(10,498)	(10,255)
Other expenses	(5,609)	(4,938)
Straight-lining of rental revenue	852	(1,232)
Interest component of JBS feedlot finance lease	(769)	(789)
Income tax payable on public trading trust (RF Active)	(432)	(884)
Discontinued operations
Revenue	-	5,160
Other income	-	4
Management fees	-	(334)
Property expenses	-	(28)
Finance costs	-	(626)
Other expenses	-	(150)
Income tax payable on public trading trust (RF Active)	-	(57)
Adjusted Funds From Operations (AFFO)	40,423	45,427
Change in fair value of interest rate swaps	12,923	(7,624)
Depreciation and impairments - other	(840)	(2,893)
Depreciation - bearer plants	(4,032)	(4,838)
Change in fair value of investment property	42,289	16,194
Change in fair value of investment property - discontinued operations	-	(1,250)
Change in fair value of financial assets/liabilities	116	510
Change in fair value of biological assets (unharvested crops)	1,028	-
Change in fair value of bearer plants	1,007	(499)
Impairment of intangible assets	(4,188)	(798)
Impairment of property - owner occupied	(1,651)	-
Straight-lining of rental revenue	(852)	1,232
Interest component of JBS feedlot finance lease	769	789
Income tax expense	(226)	(669)
Gain on sale of assets	32,868	4,003
Loss on disposal - one off transaction costs on disposal	-	(596)
Net profit after income tax	119,634	48,988

AFFO cents per unit	11.9	13.5

Notes to the Financial Statements

30 June 2021

B3 Revenue

	2021	2020
Continuing operations	$'000	$'000
Rental income	53,074	55,716
Finance income	13,966	10,987
Interest received	126	115
Total	67,166	66,818

The Group's revenue is largely comprised of income under leases and finance income. All revenue is stated net of the amount of goods and services tax (GST).

Rental income arises from the leasing of property assets and operational plant and equipment and is accounted for on a straight-line basis over the period of the lease. The respective leased assets are included in the Consolidated Statement of Financial Position based on that nature.

Finance income arises from the provision of financial guarantees and working capital loans, finance leases on cattle feedlots and cattle breeders and leased agricultural plant and equipment and recognised on an accrual basis using the effective interest rate method.

Other Income

	2021	2020
	$'000	$'000
Sale of temporary water allocations	3,275	4,308
Other income	176	89
Sale of agricultural produce	484	-
Other income - discontinued operations	-	4
Total	3,935	4,401

Expenses

Expenses such as Responsible Entity fees, property expenses and overheads are recognised on an accruals basis. Interest expenses are recognised on an accrual basis using the effective interest method.

B4 Earnings per unit

	2021	2020
Per stapled unit
Net profit after income tax for the year ($'000)	119,634	48,988
Weighted average number of units on issue during the year (thousands)	338,961	336,035
Basic and diluted earnings per unit (total) (cents)	35.29	14.58
Per unit of Rural Funds Trust
Net profit after income tax for the year ($'000)	117,696	44,627
Weighted average number of units on issue during the year (thousands)	338,961	336,035
Basic and diluted earnings per unit (total) (cents)	34.72	13.28
Per unit of RF Active
Net profit after income tax for the year ($'000)	1,938	4,361
Weighted average number of units on issue during the year (thousands)	338,961	336,035
Basic and diluted earnings per unit (total) (cents)	0.57	1.30

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

Notes to the Financial Statements 30 June 2021

B5 Distributions

The group paid and declared the following distributions during the year:

Cents	Total
per unit	$
2.7118	9,158,113
2.8203	9,542,697
2.8203	9,558,150
2.8203	9,572,536
2.8203	9,586,215

Notes to the Financial Statements

30 June 2021

C. PROPERTY ASSETS

This section includes detailed information regarding RFF's properties, which are made up of multiple line items on the Consolidated Statement of Financial Position including Investment property, Plant and equipment – bearer plants, Financial assets – property related, Intangible assets, Property – owner occupied and Plant and equipment – other.

C1 RFF property assets

		2021	2020
		$'000	$'000
Investment property	C2	596,924	474,838
Plant and equipment - bearer plants	C3	160,782	153,528
Financial assets - property related	C4	104,312	97,557
Intangible assets	C5	110,418	106,551
Property - owner occupied	C6	28,284	-
Plant and equipment - other	C7	8,716	3,201
Asset held for sale	C8	1,621	63,358
Total		1,011,057	899,033

Rental income and fair value movements from RFF property assets

	2021	2020
Continuing operations	$'000	$'000
Rental income from property assets	67,040	66,703
Change in fair value of investment property	42,289	16,194
Revaluation increment/(decrement) - bearer plants	6,510	12,451
Depreciation - bearer plants	(4,032)	(4,838)
Discontinued operations
Rental income from property assets	-	5,136
Change in fair value of investment property	-	(1,250)
Loss on disposal	-	(625)

Leasing arrangements

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

	2021	2020
	$'000	$'000
Within 1 year	52,016	56,860
Between 1 and 2 years	51,510	56,959
Between 2 and 3 years	49,673	56,902
Between 3 and 4 years	50,140	55,239
Between 4 and 5 years	50,758	55,785
Later than 5 years	305,258	370,538
Total	559,355	652,283

Notes to the Financial Statements

30 June 2021

C1 RFF property assets (continued)

Key changes to the property portfolio during the year:

In November 2020, the Group settled on the Maryborough acquisition, consisting of 5,258 hectares of sugar cane farms and 7,740 megalitres of water entitlements located in Maryborough, Queensland and associated plant and equipment for approximately $83.7m including transaction costs. The farms have the potential to be progressively be converted to approximately 2,200 hectares of macadamia orchards with a substantial portion of the remaining area able to be used for cropping.
In November 2020, the Group purchased the Riverton property located in the Fitzroy region in Queensland for $6.5m including transaction costs with potential for development into macadamia orchards.
In December 2020, the Group purchased the Stoneleigh property which will form part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $6.6m including transaction costs with potential for development into macadamia orchards.
In December 2020, the Group completed the sale of the Mooral almond orchard and associated plant and equipment for a contracted price of approximately $98.0m excluding transaction costs and adjustments. A remaining portion of the land contracted for $4.1m as part of the transaction was settled in February 2021.
In December 2020, the Group purchased an additional 1,655 hectares of land as part of the Homehill property, located in the Fitzroy region in Queensland for $4.3m including transaction costs.
In February 2021, the Group purchased the Corrowah property which will form part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $1.9m including transaction costs with potential for development into macadamia orchards.
In March 2021, the Group purchased the Tongola property which will form part of the Rookwood Farms aggregation, located in the Fitzroy region in Queensland for $3.2m including transaction costs with potential for development into macadamia orchards.
In May 2021, the Group completed the sale of the Wattlebank property located in the Fitzroy region in Queensland for a contracted price of approximately $1.0m. Water entitlements associated with the property were not sold as part of the transaction.

Macadamia development

The Group is developing macadamia orchards across a number of properties located in Queensland, Australia. As part of the development, costs relating to the acquisition, construction and development of macadamia orchards will be capitalised to the respective asset class that the cost relates to. The asset classes identified are investment property, bearer plants and water entitlements.

Investment Property

This includes costs associated with the acquisition for land, buildings, orchard and irrigation infrastructure and any costs directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management.

Bearer Plants

This includes costs associated with the acquisition of macadamia trees, planting costs, growing costs incurred for the trees to reach maturity including fertiliser and watering costs and costs associated with establishing the macadamia trees in the orchard and bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management.

Water entitlements

This includes costs associated with the purchase of water entitlements. Water entitlements are deemed ready for use on acquisition.

Borrowing costs

Borrowing costs may be capitalised on qualifying assets up until the property is ready for use. Borrowing costs relating to the acquisition, construction and development of the macadamia orchards are capitalised to the respective asset classes up until the property is deemed ready for use. Properties could be deemed ready for use when the property has been leased or when the property is operating in a manner as intended by management, for example, a macadamia orchard may be deemed operational when the orchard is fully planted and the trees have reached maturity.

Notes to the Financial Statements

30 June 2021

C1 RFF property assets (continued)

Valuations

Independent valuations on the Group's properties are obtained, ensuring that each property will have been independently valued every two financial years or more often where appropriate. Independent valuers engaged hold recognised and relevant professional qualifications with experience in agricultural properties.

The following existing properties had relevant independent valuations during the year ended 30 June 2021:

Almond properties	Kerarbury, Yilgah, Tocabil
Cattle properties	Rewan, Natal Aggregation, Cobungra, Oakland Park, Mutton Hole
Macadamia properties	Cygnet, Nursery Farm
Vineyard properties	Geier, Kleinig, Hahn, Rosebank, Mundy and Murphy, Dohnt
Cropping properties	Lynora Downs
Maryborough properties	Maryborough
Other	Unleased High Security Murrumbidgee Water

The Directors have considered independent valuations and market evidence where appropriate to determine the appropriate fair value to adopt. The Directors have adopted all valuations from independent valuers in the years where valuations have been obtained.

The Directors have deemed that independent valuations were not required on the remaining properties as there have been no material changes to the industry, physical and geographical conditions of these properties in which the independent valuers have previously assessed. For these properties, the Directors have performed internal assessments, considering the latest valuation reports, that the carrying amount is still reflective of the fair value of the properties at reporting date.

The Group's properties, including those under development, are carried 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. Independent valuation reports assess and provide value for properties in its entirety. The independent valuation reports contain information with which judgement is applied in order to allocate values to investment property, bearer plants and water entitlements, where relevant.

Judgement is applied in order to allocate the total property value, as disclosed in the independent valuation reports, to each component; investment property, bearer plants and water entitlements. The allocation technique will vary depending on the nature of the lease arrangement.

Where information is available, such as when provided by the external valuer, each component of the property, meaning the land and infrastructure, the trees and any water assets, disclosed in the financial statements as investment property, bearer plants and water entitlements, will be allocated on an encumbered (subject to lease) basis.

If this information is not available, the valuation report may provide additional information, such as the summation basis of the unencumbered (not subject to lease) value, which along with other sources, including the nature of capital expenditure on the property, is used to determine the encumbered allocation to components. Judgement is applied as part of these allocations which vary from property to property given the individual circumstances of the leasing arrangements. The allocation technique may change to reflect the best estimate of fair value attributable to each component at reporting date.

Valuation reports obtained during the year ended 30 June 2021 have referred to circumstances of uncertainty as a result of the outbreak of COVID-19. For the avoidance of doubt, such references have not meant that the valuations cannot be relied upon but rather ensures transparency of the fact that in the current circumstances, less certainty can be attached to the valuation than would otherwise be the case. Discussions held with the valuers have confirmed that there is no expected material impact to the valuations as a result of COVID-19.

Significant accounting judgements, estimates and assumptions in relation to valuation of property assets

At the end of each reporting period, the Directors update their assessment of fair value of each property, considering the most recent independent valuations. The Directors determine a property's value using reasonable fair value estimates from the most recent independent valuer's valuation reports.

Independent valuation reports assess and provide fair values for properties in their entirety. Judgement is applied in order to allocate the total property values as disclosed in the independent valuation reports, to investment property, bearer plants, property – owner occupied and water entitlements. The independent valuation reports contain information with which judgement is applied to allocate values to investment property, bearer plants, property – owner occupied and water entitlements.

Notes to the Financial Statements

30 June 2021

C1 RFF property assets (continued)

Valuations (continued)

Investment property, Bearer plants and Property – owner occupied

The main level 3 inputs used by the Group include discount rates, terminal capitalisation rates, capitalisation rates, rate per area of land, adult equivalent rates and carrying capacity estimated in the respective valuations based on comparable transactions and industry data. At the end of each reporting period, the directors update their assessment of the fair value of each property. Changes in level 3 fair values are analysed at each reporting date and during discussions with the independent valuers.

Description*			Fair value atPrimary valuationAllocation technique		Unobservable inputs**	Range of inputs
	2021	2020	technique			2021	2020
	$'000	$'000				%	%
Almond orchard	251,769		303,203 Discounted Cash	Rental base	Discount rate (%)	6.75 -7.50	7.00 -7.75
property			Flow
				Component based	Terminal Capitalisation Rate (%)	8.25 -12.50	8.50 -12.50
Cattle property and	305,151		249,534 Summation	Component based	$ per adult equivalent (AE) carrying	$3,804 -	$2,600 -
infrastructure			assessment		capacity (Backgrounding properties)	$7,381	$7,381

			Productive unit		$ per adult equivalent (AE) carrying	$1,426 -	$870 -
					capacity (Breeder properties)	$2,000	$1,507
Vineyardproperty	58,355		57,926 Discounted Cash	Component based	Discount rate (%)	7.50 -8.50	8.25 -8.75
and infrastructure			Flow
					Terminal Capitalisation rate (%)	8.25 -10.00	7.50 -8.00

Cropping property	111,584		47,896 Summation	Component based	$ per irrigated hectare	$15,250 -	$16,750 -
and infrastructure			assessment			$20,000	$20,000
					Average $ per plantable hectare
					(Maryborough)	$10,430	-
Macadamia orchard	59,131		18,686 Discounted Cash	Rental	Discount rate (%)	7.25 -8.50	7.25 -8.50
property			Flow	base/Proportionate
					Terminal Capitalisation rate (%)	7.25 -8.50	7.25 -8.50

				Component based	Average $ per plantable hectare	$12,508	-
					(Development)
Total	785,990	677,245

The following table summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurement:

*Fair values disclosed exclude water assets.

**There were no significant inter-relationships between unobservable inputs that materially affect fair values. Unobservable inputs are based on assessments by external valuers.

Notes to the Financial Statements

30 June 2021

C1 RFF property assets (continued)

Valuations (continued)

Primary valuation technique

External valuations typically assess property values using different valuation techniques.

Discounted cash flow	Valuation based on future net rental cash flows discounted to the presentvalue. The terminal value (as determined by the terminal capitalisation rate)is typically assessed and discounted in these types of valuations. The valuermay also use comparative sales as supporting information.
Summation assessment	Assessment of the property on an asset by asset basisbased oncomparative sales evidence and typically driven by a rate per productivehectare and assessment of other components such as water and supportingbuildings.
Productive unit	Assessment on the property driven by the value per adult equivalent headthat is supported by the property and carrying capacity of the property.

Allocation technique

Independent valuation reports assess and provide value for properties in their entirety. Component allocation techniques are adopted to allocate the total property value to investment property, bearer plants, property – owner occupied and water entitlements. The component allocation technique applied is assessed on each external valuation to ensure that the allocation technique is consistent with the nature and characteristics of the property including any lease encumbrances. The allocation technique may change to reflect the best estimate of fair value attributable to each component at reporting date.

The following allocation techniques have been applied:

Rental base	Applied for properties with long term indexed leases by allocating value tocomponent assets using the rental base. The rental base is identifiable andgenerally determined by the cost of the assets. The allocation by rental basereflects the encumbered nature of the assets where rental incomes are notaffected by short term market fluctuations in the value of the assets due tolack of rental review mechanism.
Component based	The encumbered value is allocated based on information in the valuationreport which enables the allocation by components on an encumbered basis.To determine the allocation of components on an encumbered basis, theexternal valuer will assess various factors such as market indicators,comparable sales data of encumbered assets, comparable rental data andother relevant information such as replacement cost concepts.
Component based – Almonds	Applied for properties where leases include rental reviews. Information isprovided in the valuation to allocate the encumbered value of the property towater assets, investment property and bearer plants on an encumberedbasis.Firstly, the approach allocated value to water assets based on comparableencumbered rental data. The value of land was determined based oncomparable sales data. Orchard infrastructure including irrigation wasdetermined based on a replacement cost assumption adjusted for anestimate of the age of the assets. Bearer plants was identified as being theresidual value of the total encumbered value of the property.
Proportionate	Applied for properties where leases include rental reviews and wherecomponent based information is not able to be used. For properties withwater assets, the allocation considers the unencumbered value of waterassets and allocates this on a proportionate basis to the encumbered valueof the property. Judgement is then applied to allocate encumbered values toinvestment property and bearer plants using available information, includinginformation from the valuation report and the nature of capital expenditureon the relevant property.

Notes to the Financial Statements

30 June 2021

C1 RFF property assets (continued)

Valuations (continued)

Unobservable inputs

Unobservable inputs are assumptions based on the assessments and determinations made by external valuers in their capacity as qualified experts which are key inputs in the valuation techniques utilised.

Discount rate (%)	The higher the discount rate the lower the fair value
Terminal capitalisation rate (%)	The higher the terminal capitalisation rate the lower the fair value
$ per irrigated hectare	The higher the value per irrigated hectare, the higher the fair value
Average $ per plantable hectare	The higher the value per plantable hectare, the higher the fair value
$ per adult equivalent carryingcapacity	The higher the value per adult equivalent carrying capacity, the higher thefair value

C2 Investment property

2021	Almondproperty	Cattleproperty	Vineyardproperty	Croppingproperty	Macadamiaproperty	Poultryproperty	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Opening net book amount	127,519	249,534	38,170	47,896	11,719	-	474,838
Acquisitions	-	4,413	-	22,599	36,932	-	63,944
Additions	3,717	6,507	11	5,433	4,483	-	20,151
Capitalisation of borrowingcosts	-	-	-	-	68	-	68
Classified as held for sale ordisposals	(3,392)	(774)	-	-	-	-	(4,166)
Amortisation of lease incentives	-	(200)	-	-	-	-	(200)
Fair value adjustment	(1,655)	45,671	(3,641)	7,372	(5,458)	-	42,289
Closing net book amount	126,189	305,151	34,540	83,300	47,744	-	596,924
2020	Almondproperty	Cattleproperty	Vineyardproperty	Croppingproperty	Macadamiaproperty	Poultryproperty	Total
Opening net book amount	136,016	193,447	37,651	46,260	4,857	71,096	489,327
Acquisitions	-	38,753	-	-	5,329	-	44,082
Additions	7,911	3,908	519	2,170	904	285	15,697
Classified as held for sale ordisposals	(18,881)	-	-	-	-	(70,131)	(89,012)
Amortisation of lease incentives	-	(200)	-	-	-	-	(200)
Fair value adjustment	2,473	13,626	-	(534)	629	(1,250)	14,944
Closing net book amount	127,519	249,534	38,170	47,896	11,719	-	474,838

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

Notes to the Financial Statements

30 June 2021

C2 Investment property (continued)

Investment properties are held for long-term rental yields and capital growth and are not occupied by the Group. RFF measures and recognises investment property at fair value where the valuation technique is based on unobservable inputs. Changes in fair value are presented through profit or loss in the Consolidated Statement of Comprehensive Income.

Capital expenditure that enhances the future economic benefits of the assets are capitalised to investment property. Incentives provided are also capitalised to the investment property and are amortised on a straight-line basis over the term of the lease as a reduction of rental revenue.

C3 Plant and equipment – bearer plants

2021	Bearer	Bearer	Bearer	Total
	Plants -	Plants -	Plants -
	Almonds	Vineyards	Macadamias
	$'000	$'000	$'000	$'000
Opening net book amount	126,805	19,756	6,967	153,528
Additions	948	-	3,845	4,793
Capitalisation of borrowing costs	-	-	1	1
Disposals	(18)	-	-	(18)
Depreciation and impairment	(2,798)	(1,016)	(218)	(4,032)
Fair value adjustment - profit and loss	-	1,007	-	1,007
Fair value adjustment - other comprehensive	643	4,068	792	5,503
income
Closing net book amount	125,580	23,815	11,387	160,782

2020	Bearer	Bearer	Bearer	Total
	Plants -	Plants -	Plants -
	Almonds	Vineyards	Macadamias
	$'000	$'000	$'000	$'000
Opening net book amount	145,226	20,721	6,968	172,915
Additions	2,897	-	100	2,997
Classified as held for sale or disposals	(29,998)	-	-	(29,998)
Depreciation and impairment	(3,655)	(965)	(217)	(4,837)
Fair value adjustment - profit and loss	-	-	(499)	(499)
Fair value adjustment - other comprehensive
income	12,335	-	615	12,950

Bearer plants are solely used to grow produce over their productive lives and are accounted for under AASB 116 Property, Plant and Equipment.

Bearer plants are held for long-term rental yields and are not operated by the Group. RFF initially measures and recognises bearer plants at cost. After initial measurement, the Group adopts the revaluation model and bearer plants are carried at fair value less any accumulated depreciation and accumulated impairment losses.

Bearer plants are subject to revaluations based on the Group's valuation policies. Increases in the carrying amounts arising from revaluation of bearer plants are recognised in other comprehensive income and accumulated in net assets attributable to unitholders under asset revaluation reserve. Revaluation increases which reverse a decrease previously recognised in profit and loss are recognised in profit or loss. Revaluation decreases which offset previous increases are recognised in other comprehensive income in the asset revaluation reserve. Any other decreases are recognised in profit and loss.

Bearer plants are subject to depreciation over their respective useful lives calculated on a straight-line basis on the carrying amount. Depreciation commences when bearer plants are assumed ready for use which is based on when the trees reach maturity. The useful lives and maturity assumptions used for each class of depreciable asset are shown below:

Notes to the Financial Statements

30 June 2021

C3 Plant and equipment – bearer plants (continued)

Fixed asset class:	Useful life:	Depreciation commences from years:
Almond bearer plants	30 years	6 years
Vineyard bearer plants	40 years	4 years
Macadamia bearer plants	45 years	13 years

At the end of each annual reporting period, the useful life, maturity assumptions and carrying amount of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate.

Bearer plants as stated on a historical cost basis is as follows:

	2021	2020
	$'000	$'000
Cost	130,585	148,698
Accumulated depreciation	(12,809)	(14,389)
Accumulated impairment	(1,827)	(2,840)
Bearer plants at historical cost less accumulated impairment	115,949	131,469
C4 Financial assets – property related
	2021	2020
	$'000	$'000
Financial Assets - property related
Investment - BIL	520	520
Investment - CICL	11,464	11,464
Finance Lease - Breeders	17,778	14,383
Finance Lease - Feedlots	55,615	54,846
Finance Lease - Equipment	1,066	978
Cattle Facility - Katena Pty Ltd ATF Schafferius Family Trust	532	1,300
Finance Lease - DA & JF Camm Pty Limited	6,004	1,881
Term Loan - DA & JF Camm Pty Limited	10,000	10,000
Other receivables	1,333	2,185
Total	104,312	97,557

Barossa Infrastructure Ltd (BIL) is an unlisted public Company supplying non-potable supplementary irrigation water for viticulture in the Barossa. The Group holds a minority interest in BIL.

Coleambally Irrigation Co-operative Limited (CICL) is one of Australia's major irrigation companies 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. The Group holds a minority interest in CICL.

Finance Lease – Breeders is comprised of breeders owned by the Group which have been leased to Cattle JV Pty Limited, a wholly-owned subsidiary of Rural Funds Management Limited, for a term of ten years ending in 2026. As part of the arrangement, the lessee is required to maintain the breeder herd and maintain an active breeding program. During the year, additional breeders were leased to Cattle JV Pty Limited and were included as part of the breeder herd. The expected credit loss on the finance lease is assessed on the value of the breeder herd secured against the finance lease. This assessment involves the monitoring of the value of the breeder herd through a bi-annual mustering process conducted by Cattle JV Pty Limited and an annual valuation process. There has been no expected credit loss recognised at 30 June 2021 (2020: nil).

Finance Lease – Feedlots is comprised of feedlots leased to JBS Australia Pty Limited (JBS) for a term of ten years ending in 2028 with a repurchase call option exercisable by JBS and a sale put option exercisable by the Group. The call option held by JBS can be exercised from year six but will incur a break fee if exercised before year ten.

Finance Lease – Equipment is comprised of agricultural plant and equipment leased to 2007 Macgrove Project and Cattle JV Pty Limited.

A $1,600,000 cattle financing facility with a term of ten years was extended to Katena Pty Ltd, the lessee of the Cerberus property to fund the purchase of trade cattle. The facility is due to expire in September 2028. The balance drawn as at 30 June 2021 is $532,000 (2020: $1,300,000). Its fair value approximates its carrying amounts. On 1 July 2021, the lease arrangement with Katena Pty Ltd was terminated by mutual agreement and all amounts owing to the Group have since been paid

Notes to the Financial Statements

30 June 2021

C4 Financial assets – property related (continued)

Finance Lease – DA & JF Camm Pty Limited comprises of cattle owned by the Group and leased to DA & JF Camm Pty Limited, the lessee of the Natal aggregation, as part of a $5,000,000 facility. The facility is secured and due to expire in December 2022. The gross balance drawn as at 30 June 2021 is $6,004,000 (2020: $1,881,000). The balance drawn net of security deposits held is $4,789,000 (2020: $1,505,0000). A $10,000,000 loan secured by properties with a term of ten years was also extended to DA & JF Camm Pty Limited and is due in December 2027. Its fair value approximates the carrying amount. The expected credit loss on the finance lease and term loan are based on an assessment of the value of the security held. There has been no expected credit loss recognised at 30 June 2021 (2020: nil).

Other receivables relates to recognition of rental revenue on a straight-line basis in accordance with AASB 16 Leases.

Significant accounting judgements in the valuation of Coleambally Irrigation Co-operative and Barossa Infrastructure Limited shares

The investments in BIL and CICL are treated the same as water rights, that is, recorded at historical cost less accumulated impairment losses and not revalued.

Finance leases

Finance leases are measured at amortised cost. Each lease payment was allocated as a reduction to the finance lease receivable and as finance income. The finance income was charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the receivable for each period. These represent leases of property or biological assets where all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are substantially transferred from the lessor.

Minimum lease payments receivable under non-cancellable finance leases of feedlots, breeders and equipment not recognised in the financial statements, are receivable as follows:

	2021	2020
	$'000	$'000
Within 1 year	5,880	5,234
Between 1 and 2 years	5,876	5,201
Between 2 and 3 years	5,858	5,200
Between 3 and 4 years	5,802	5,185
Between 4 and 5 years	23,183	5,148
Later than 5 years	63,567	81,788
Total	110,166	107,756

Notes to the Financial Statements

30 June 2021

C5 Intangible assets

Intangible assets are made up of water rights and entitlements. Refer to note B1 for Directors' valuation of water rights and entitlements.

2021	Almonds	Cattle	Vineyards	Cropping	Macadamias	Poultryinfrastructure(discontinued)	Unallocated	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Non-current
Opening net book amount	66,707	2,947	500	3,672	1,161	-	31,564	106,551
Additions	-	-	-	4,537	3,518	-	-	8,055
Transfers	-	(1,099)	-	-	-	-	1,099	-
Impairment	-	-	-	(3,973)	(215)	-	-	(4,188)
Closing net book amount	66,707	1,848	500	4,236	4,464	-	32,663	110,418
Cost	67,462	2,560	500	8,209	4,765	-	32,663	116,159
Accumulated impairment	(755)	(712)	-	(3,973)	(301)	-	-	(5,741)
Net book amount	66,707	1,848	500	4,236	4,464	-	32,663	110,418

2020	Almonds	Cattle	Vineyards	Cropping	Macadamias	Poultryinfrastructure(discontinued)	Unallocated	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Non-current
Opening net book amount	76,660	1,599	500	3,672	815	1,049	34,236	118,531
Additions	758	2,060	-	-	432	-	-	3,250
Classified as held for sale	(10,711)	-	-	-	-	-	-	(10,711)
Disposals	-	-	-	-	-	(1,049)	(2,672)	(3,721)
Impairment	-	(712)	-	-	(86)	-	-	(798)
Closing net book amount	66,707	2,947	500	3,672	1,161	-	31,564	106,551
Cost	67,462	3,659	500	3,672	1,247	-	31,564	108,104
Accumulated impairment	(755)	(712)	-	-	(86)	-	-	(1,553)
Net book amount	66,707	2,947	500	3,672	1,161	-	31,564	106,551

Notes to the Financial Statements

30 June 2021

C5 Intangible assets (continued)

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.

The impairment recognised during the year in the cropping segment largely relates to the Lynora Downs property based on the 30 June 2021 independent valuation.

C6 Property – owner occupied

2021	Land	Building	Irrigation	Total
	$'000	$'000	$'000	$'000
Opening net book amount	-	-		-
Additions	29,056	840	63	29,959
Impairment	(1,651)	-	-	(1,651)
Depreciation	-	(24)	-	(24)
Closing net book amount	27,405	816	63	28,284

2020	Land	Building	Irrigation	Total
	$'000	$'000	$'000	$'000
Opening net book amount	-	-	-	-
Additions	-	-	-	-
Depreciation and impairment	-	-	-	-
Closing net book amount	-	-	-	-

Property – owner occupied relates to owner occupied property that is being used to conduct cropping operations by the Group and accounted for under AASB 116 Property, Plant and Equipment. Property – owner occupied are held under the revaluation model.

These assets are subject to revaluations based on the Group's valuation policies. Increases in the carrying amounts arising from revaluation of Property are recognised in other comprehensive income and accumulated in net assets attributable to unitholders under asset revaluation reserve. Revaluation increases which reverse a decrease previously recognised in profit and loss are recognised in profit or loss. Revaluation decreases which offset previous increases are recognised in other comprehensive income in the asset revaluation reserve. Any other decreases are recognised in profit and loss.

Elements of Property – owner occupied are subject to depreciation over their respective useful lives calculated on a straight-line basis on the carrying amount. The useful lives and for each class of depreciable asset are shown below:

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

Fixed asset class:	Useful life:
Land	Not applicable
Buildings	20 years

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

Notes to the Financial Statements

30 June 2021

C6 Property – owner occupied (continued)

Property – owner occupied as stated on a historical cost basis is as follows:

2021	Land	Building	Irrigation	Total
	$'000	$'000	$'000	$'000
Cost	29,056	840	63	29,959
Accumulated depreciation and impairment	(1,651)	(24)	-	(1,675)
Net book amount	27,405	816	63	28,284

2020	Land	Building	Irrigation	Total
	$'000	$'000	$'000	$'000
Cost	-	-	-	-
Accumulated depreciation and impairment	-	-	-	-
Net book amount	-	-	-	-

C7 Plant and equipment – other

2021	Plant and equipment
	$'000
Opening net book amount	3,201
Additions	7,187
Transfers from held for sale	248
Disposals	(767)
Depreciation	(787)
Decrement (depreciation capitalised to developments)	(337)
Impairment	(29)
Closing net book amount	8,716
Cost	16,711
Accumulated depreciation	(6,673)
Accumulated impairment	(1,322)
Net book amount	8,716

2020 Plant and equipment

	$'000
Opening net book amount	8,537
Additions	2,228
Classified as held for sale or disposals	(4,671)
Depreciation	(1,600)
Impairment	(1,293)
Closing net book amount	3,201
Cost	10,043
Accumulated depreciation	(5,549)
Accumulated impairment	(1,293)
Net book amount	3,201

Notes to the Financial Statements

30 June 2021

C7 Plant and equipment – other (continued)

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 removing 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 Group manages and monitors its leased assets and physically attend to properties where assets are located on a regular basis.

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

Fixed asset class:	Useful life:
Capital works in progress	Not applicable
Plant and equipment	2-16 years
Farm vehicles and equipment	2-16 years

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 and loss.

C8 Assets held for sale

	Note	2021	2020
		$'000	$'000
Investment property	C2	1,621	18,881
Bearer plants	C3	-	29,998
Intangible assets	C5	-	10,711
Plant and equipment	C7	-	3,768
Total		1,621	63,358

At 30 June 2021, investment property held for sale related to a portion of surplus land on Kerarbury contracted for sale for $1.6m. The sale was completed on 15 July 2021.

During the year, the Group completed the sale of the Mooral almond orchard and associated plant and equipment for a contracted price of approximately $98.0m excluding transaction costs and adjustments. The Mooral almond orchard is not considered a separate line of business and has not been treated as a discontinued operation.

C9 Capital commitments

Capital expenditure across all properties largely relates to macadamia developments, almond property improvements, cattle property developments and cropping property developments. These commitments are contracted for but not recognised as liabilities. Increase in the commitments during the year largely relates to contracted purchases of water entitlements in relation to Rookwood Weir.

	2021	2020
	$'000	$'000
Bearer plants	16,235	2,728
Investment property	38,923	22,050
Intangible assets	35,432	-
Total	90,590	24,778

Notes to the Financial Statements

30 June 2021

D. TAX

Since 1 July 2014 both Rural Funds Trust and RFM Chicken Income Fund (a subsidiary of Rural Funds Trust) became flow through trusts for tax purposes. As a result, it is no longer probable that a tax liability will be incurred in these entities in relation to future sale of assets for a gain or through trading. RFM Chicken Income Fund was treated as a flow through trust up until the date of disposal. RFM Australian Wine Fund (a subsidiary of Rural Funds Trust) is the head of a separate tax consolidated group, taxed in its own right. RF Active (a subsidiary of Rural Funds Trust) is a public trading trust and is taxed as a company.

D1 Income tax expense

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 in 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 net assets attributable to unitholders, in which case the deferred tax is adjusted directly against net assets attributable to unitholders.

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.

The major components of income tax expense comprise:

	2021	2020
	$'000	$'000
Current tax	283	1,533
Deferred tax	378	77
Adjustments in respect of deferred income tax of previous years	(3)	-
Income tax expense reported in the Statement of ComprehensiveIncome	658	1,610
Income tax expense is attributable to:
Profit from continuing operations	658	1,553
Profit from discontinued operation	-	57
Total	658	1,610

Deferred income tax expense included in income tax expense comprises:
Increase in deferred tax liabilities	1,596	77
Total	1,596	77
Amounts charged or credited directly to equity
	2021	2020
	$'000	$'000
Change in fair value taken through asset revaluation reserve	1,220	-
Total	1,220	-

Notes to the Financial Statements

30 June 2021

D1 Income tax expense (continued)

Numerical reconciliation of income tax expense to prima facie tax payable

	2021	2020
	$'000	$'000
Net profit before income tax	120,292	50,598
At the statutory income tax rate of 30% (2020: 30%)	36,088	15,179
Tax effect of amounts that are not taxable in determining taxableincome	(35,427)	(12,977)
Adjustments in respect of tax of previous years	(3)	-
General capital gain tax discount on the sale of capital assets	-	(592)
Total	658	1,610

Franking credits

At 30 June 2021 there are $2,434,000 of franking credits available to apply to future income distributions (2020: $901,000).

D2 Deferred tax and current tax payable

	2021	2020
	$'000	$'000
Deferred tax liabilities
Bearer plants	5,051	3,795
Plant and equipment	1,026	2,208
Fair value investment property	4,838	4,461
Other assets	383	60
Gross deferred tax liabilities	11,298	10,524
Set off of deferred tax assets	(3,848)	(4,669)
Net deferred tax liabilities	7,450	5,855

	Deferred tax assets

Net deferred tax assets	-	-
Set off of deferred tax liabilities	(3,848)	(4,669)
Gross deferred tax assets	3,848	4,669
Unused income tax losses	3,592	4,411
Other	33	35
Investments	223	223

Recognised tax assets and liabilities

	Current income tax		Deferred income tax
	2021	2020	2021	2020
	$'000	$'000	$'000	$'000
Opening balance	(1,533)	(439)	(5,855)	(5,778)
Charged to income	(283)	(1,533)	(375)	(77)
Credited to equity	-	-	(1,220)	-
Tax payments	2,293	439	-	-
Closing balance	477	(1,533)	(7,450)	(5,855)
Tax expense in the Consolidated Statement of ComprehensiveIncome			658	1,610
Amounts recognised in the Consolidated Statement of Financial Position:
Deferred tax asset			-	-
Net deferred tax liability			(7,450)	(5,855)

Notes to the Financial Statements

30 June 2021

E. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT

RFM, the Responsible Entity of RFF, is responsible for managing the policies designed to optimise RFF's capital structure. This is primarily monitored through an internal gearing ratio target range of 30-35% calculated as interest bearing liabilities on adjusted total assets. The optimal capital structure is reviewed periodically, although this may be impacted by market conditions which may result in an actual position which may differ from the desired position.

E1 Interest bearing liabilities

	2021	2020
	$'000	$'000
Current
Equipment loans (ANZ)	2,407	3,775
J&F Guarantee - Borrowing loss provision	49	39
Total	2,456	3,814
Non-current
Borrowings (ANZ)	220,252	190,008
Borrowings (Rabobank)	123,891	107,240
Total	344,143	297,248

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.

J&F Guarantee Accounting policy

Subsequent to initial recognition, financial guarantee contracts are measured as financial liabilities at the higher of any loss allowance calculated and the amount initially recognised. A loss allowance is recognised for expected credit losses on a financial guarantee contract. The expected credit loss is assessed based on the probability of default and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the risk of default at reporting date is compared to the risk of default at the date of initial recognition. Consideration is made to factors that could impact the financial guarantee such as actual or expected significant adverse changes in business, financial or economic conditions, and any material / adverse changes to the operating results of the associated parties of the financial guarantee.

J&F Guarantee

The J&F Guarantee is a $99.9 million limited guarantee provided by the Group to J&F Australia Pty Ltd (J&F), a wholly owned subsidiary of Rural Funds Management Limited, for a period of ten years from August 2018. From the provision of this guarantee, the Group earns a guarantee fee classified as finance income as noted in B3, paid on a monthly basis. The guarantee is currently used to support $99.9 million of J&F's debt facility which is used for cattle purchases, feed and other costs associated with finishing the cattle on the feedlots, enabling J&F to supply cattle to JBS Australia Pty Limited (JBS) for its grain fed business. Given J&F's primary source of income is from payments from JBS, a J&F default is only likely to occur in the event of a JBS default. In the event of a JBS default, J&F would cease buying cattle and commence selling cattle in the feedlots. As cattle are sold, J&F bank loans would be repaid. Given that lot-fed cattle can gain up to 2kgs per day, and are sold on a per kg basis, a material fall in the cattle price would be required for there to be a shortfall. The guarantee would be called to cover any shortfall between J&F borrowings and cattle sales, but limited to $99.9 million, or up to a maximum of $100.0 million if any future increases in the guarantee have been agreed.

The guarantee fee received from J&F during the year was $7,117,000 (2020: $5,622,000). The return to the Group relating to the guarantee fee arrangement for the year was approximately 10.6% (2020: 11.0%) inclusive of interest offset savings. There was no event of default during the year, and as a result, the guarantee has not been called.

Notes to the Financial Statements

30 June 2021

E1 Interest bearing liabilities (continued)

J&F Guarantee (continued)

The financial guarantee was recognised at fair value at inception, which was nil. Subsequently, it is carried at the value of the expected credit loss. The credit loss has been calculated considering the likelihood of the financial guarantee being triggered and its financial impact on the Group. In calculating the allowance, consideration is given to counterparty risk associated with the arrangement, with JBS being the ultimate counterparty. The credit risk of JBS was determined to not have increased significantly since initial recognition, therefore the loss allowance for the guarantee has been recognised at an amount equal to 12-month expected credit losses. Consideration is also given to the value of cattle in assessing any potential shortfall should the guarantee be called by the Group. The credit loss allowance is recognised at fair value through profit or loss. The additional credit loss provision recognised in the year was $10,000.

As part of the JBS transaction, the Group purchased five feedlots from JBS Australia Pty Limited (JBS) and leased them back to JBS. The feedlots are classified as a finance lease with a repurchase call option exercisable by JBS and a sale put option exercisable by the Group as noted in C4. The call option held by JBS can be exercised from year six in 2024 but will incur a break fee if exercised before year ten in 2028.

Borrowings

At 30 June 2021 the core debt facility available to the Group was $380,000,000 (2020: $335,000,000), split into two tranches, with a $270,000,000 tranche expiring in November 2022 and a $110,000,000 tranche expiring in November 2023.

As at 30 June 2021 RFF had active interest rate swaps totaling 53.2% (2020: 61.6%) of the drawn down balance to manage interest rate risk. Hedging requirements under the terms of the borrowing facility may vary with bank consent.

Loan covenants

Under the terms of the updated borrowing facility, the Group was required to comply with the following financial covenants for the year ended 30 June 2021:

maintain a maximum loan to value ratio of 50%;
maintain net tangible assets (including water entitlements) in excess of $400,000,000;
a minimum hedging requirement of 40% of debt drawn under the borrowing facility; and
an interest cover ratio for the Group not less than 3.00:1.00.

The loan to value ratio calculation includes the J&F guarantee of $99.9 million (2020: $82.5 million).

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

Loan amounts are provided at the Bankers' floating rate, plus a margin. For bank reporting purposes, these assets are valued at market value based on latest external valuation report. Refer to section B1 for Directors' valuation of water rights and entitlements.

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 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.

Notes to the Financial Statements

30 June 2021

E1 Interest bearing liabilities (continued)

The following assets are pledged as security over the loans:

2021	Investmentproperty	Waterlicences	Plant andequipment- BearerPlants	Financialassets	Plant andequipment	Assetsheld forsale	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Mortgage: LeasedProperties	596,924	75,648	160,782	70,464	-	1,621	905,439
Other assetsEquipment loans	--	34,770-	--	24,848-	-8,716	--	59,6188,716
Total	596,924	110,418	160,782	95,312	8,716	1,621	973,773

2020	Investmentproperty	Waterlicences	Plant andequipment- Bearer	Financialassets	Plant andequipment	Assetsheld forsale	Total
	$'000	$'000	Plants$'000	$'000	$'000	$'000	$'000
Mortgage: Leased	474,838	74,987	153,528	12,649	-	59,590	775,592
PropertiesOther assetsEquipment loans	--	31,564-	--	74,093-	-3,201	-3,768	105,6576,969

E2 Financial assets – other (non-property related)

	2021	2020
	$'000	$'000
Investment - Macadamia Processing Co	824	664
Investment - Almondco Australia Limited	2,041	2,004
Total	2,865	2,668

The Group's investments in Marquis Macadamias Limited (formerly Macadamia Processing Co Limited) and Almondco Australia Limited are held at fair value through profit and loss (level 3 – see section E4).

E3 Derivative financial instruments measured at fair value

	2021	2020
	$'000	$'000
Derivative financial assets
Non-current
Interest rate swaps	2,931	-
Total other assets	2,931	-
Derivative financial liabilities
Current
Interest rate swaps	3,604	3,666
Total other liabilities	3,604	3,666

Non-current
Interest rate swaps	18,069	27,999
Total other liabilities	18,069	27,999

The Group's derivative financial instruments are held at fair value (level 2 - see section E4).

Notes to the Financial Statements

30 June 2021

E4 Fair value measurement of assets and liabilities

This note explains the judgements and estimates made in determining fair values of Investment property, Plant and equipment – bearer plants and financial assets and liabilities 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 each item into the three levels prescribed under Australian Accounting Standards as mentioned above.

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.

RFF's financial assets and liabilities relating to interest rate swap derivatives are level 2.

At 30 June 2021, all non-financial assets are level 3.

RFF's unlisted equity investments, BIL, CICL, Marquis Macadamias Ltd (formerly MPC) and Almondco are level 3.

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 (2020: nil).

Valuation techniques used to determine fair values

Specific valuation techniques used to value financial instruments via level 2 inputs include:

the use of quoted market prices or dealer quotes for similar instruments;
the fair value of interest rate swaps is calculated as the present value of estimated future cash flows based on observable yield curves

Specific valuation techniques used to value financial assets, investment property and bearer plants via level 3 are discussed in section C1.

E5 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:

financial assets at amortised cost; and
financial assets at fair value through profit or loss.

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. Financial assets at amortised cost

Financial assets held with the objective of collecting contractual cash flows are recognised at amortised cost. After initial recognition these are measured using the effective interest method, less provision for expected credit loss. Any change in their value is recognised in profit or loss.

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

For trade receivables, finance lease receivables and loans receivables, impairment provisions are recorded in a separate allowance account with the loss being recognised in profit or loss. Subsequent recoveries of amounts previously written off are credited against other income in profit or loss.

Notes to the Financial Statements

30 June 2021

E5 Financial instruments (continued)

c. Financial assets at fair value through profit or loss

The group classifies the following financial assets at fair value through profit or loss:

debt investments that do not qualify for measurement at either amortised cost
equity investments for which the entity has not elected to recognise fair value gains and losses through other comprehensive income

The Group's derivatives, investments in Marquis Macadamias Ltd and Almondco are 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 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.

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 and are included in the income statement line item titled "finance costs".

Financial liabilities that measured at fair value through profit or loss include the Group's derivatives. All other financial liabilities are measured at amortised cost.

E6 Financial risk management

The Group is exposed to a variety of financial risks through its use of financial instruments. 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:

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

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

Loans and receivables
Finance lease receivables
Cash at bank
Bank overdraft
Trade and other payables
Floating rate bank loans
Interest rate swaps
a. 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 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 2021

E6 Financial risk management (continued)

b. Interest rate risk and 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 Group to exchange variable to 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 approximate 53.2% (2020: 62.6%) of the Group's drawn down debt at 30 June 2021.

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

	Effective average interest ratepayable		Balance
	2021	2020	2021	2020
	%	%	$'000	$'000
Maturity of notional amounts
Settlement - between 0 to 3 years	2.70	2.70	15,000	15,000
Settlement - 3 to 5 years	3.24	3.42	73,000	13,000
Settlement - greater than 5 years	2.97	3.06	95,000	155,000
Total			183,000	183,000

The following interest rate swap contracts that have been entered into but are not yet effective as at 30 June 2021 are:

	Effective average interest ratepayable		Balance
	2021%	2020%	2021$'000	2020$'000
Maturity of notional amounts
Settlement - greater than 5 years	1.99	1.99	90,000	90,000
Total			90,000	90,000

The net gain recognised on the swap derivative instruments for the year ended 30 June 2021 was $12,923,000 (2020: $7,624,000 loss).

At 30 June 2021 the Group had the following mix of financial assets and liabilities exposed to variable interest rates:

	2021	2020
	$'000	$'000
Cash	11,647	5,085
Interest bearing liabilities (non-current)	(344,143)	(297,248)
Total	(332,496)	(292,163)

At 30 June 2021, 0.72% (2020: 1.25%) of the Group's debt is fixed, excluding the impact of interest rate swaps.

Notes to the Financial Statements 30 June 2021

E6 Financial risk management (continued)

c. Interest rate risk (sensitivity analysis)

At 30 June 2021, the effect on profit before tax and net assets attributable to unitholders 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:

	2021$'000	2020$'000
Change in profit before income tax:
Increase in interest rate by 1%	17,353	19,749
Decrease in interest rate by 1%	(18,923)	(21,794)
Change in equity:
Increase in interest rate by 1%	17,353	19,749
Decrease in interest rate by 1%	(18,923)	(21,794)

d. 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 and associated impacts are also managed through security, in the form of guarantees, security deposits and property security in favor of the group. Counterparty credit risk for finance leases and term loans have also been assessed and accounted for through the recognition of credit loss provisions.

All of the entity's debt investments at amortised cost are considered to have low credit risk and the loss allowance recognised during the year was therefore limited to 12 months' expected losses. Management considers the credit risk to be low where the counterparty does not have material outstanding repayments and has capacity to meet its contractual debt obligations. Debt investments are secured against collateral which is monitored by management. In recognising any potential credit loss provisions, management also assesses the collateral held. Where the fair value of such collateral is greater than the debt investment, a lower loss allowance amount is recognised.

Notes to the Financial Statements 30 June 2021

E6 Financial risk management (continued)

e. Liquidity risk and capital management

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 manages liquidity risk by monitoring forecast cash flows and ensuring that adequate headroom on borrowing facilities are maintained. 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.

The table below reflects all contractually fixed repayments and interest resulting from recognised financial liabilities as at 30 June 2021. The amounts disclosed in the table are the contractual undiscounted cash flows which 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
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Financial assets
Financial liabilities
Interest bearing liabilities	1,660	1,564	1,660	1,564	348,846	231,258	-	73,948	-	-	352,166	308,334
Trade and other payables	3,195	3,502	-	-	-	-	-	-	-	-	3,195	3,502
Equipment loans	315	573	290	587	1,311	1,658	491	957	-	-	2,407	3,775
Interest rate swaps	1,802	1,833	1,802	1,833	7,134	7,003	6,039	6,838	4,230	6,280	21,007	23,787
Total	6,972	7,472	3,752	3,984	357,291	239,919	6,530	81,743	4,230	6,280	378,775	339,398

Notes to the Financial Statements 30 June 2021

E7 Issued units

	2021		2020
	No.	$'000	No.	$'000
Units on issue at the beginning of the period	337,713,420	360,574	334,263,593	362,854
Units issued during the year	2,187,136	4,920	3,449,827	6,639
Distributions to unitholders	-	19,646	-	(8,919)
Units on issue	339,900,556	385,140	337,713,420	360,574

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. Voting is determined based on the closing market value of each unit.

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

Distributions totaling $38,259,000 were declared during the year. Distributions are allocated to the components of equity which is comprised of issued units and retained earnings.

E8 Distributions payable

	2021	2020
	$'000	$'000
Distributions payable	10,022	9,460
Total	10,022	9,460

Notes to the Financial Statements

30 June 2021

F. OTHER ASSETS AND LIABILTIIES

F1 Cash and cash equivalents

	2021	2020
	$'000	$'000
Cash at bank	11,647	5,085
Total	11,647	5,085

Reconciliation of cash

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

	2021	2020
	$'000	$'000
Cash and cash equivalents	11,647	5,085
F2 Trade and other receivables
	2021	2020
	$'000	$'000
Current
Trade receivables	3,427	3,607
Sundry receivables	787	623
Receivables from related parties	731	1,216
Total	4,945	5,446

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.

The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue with no significant overdue amounts.

F3 Other current assets

	2021	2020
	$'000	$'000
Prepayments	797	2,101
Deposits	4,137	587
Inventory	61	-
Total	4,995	2,688

F4 Trade and other payables

	2021	2020
	$'000	$'000
Trade payables	1,597	725
Accruals	1,413	1,189
Sundry creditors	185	1,588
Total	3,195	3,502

Notes to the Financial Statements

30 June 2021

F5 Other non-current liabilities

	2021	2020
	$'000	$'000
Lessee deposits	4,421	3,877
Total	4,421	3,877
F6 Asset revaluation reserve
	2021	2020
	$'000	$'000
Opening balance	59,412	46,462
Disposal of bearer plants	(15,348)	-
Bearer plants revaluation	5,503	12,950
Total comprehensive income	5,503	12,950
Income tax applicable	(1,220)	-
Closing balance	48,347	59,412
F7 Biological assets
	2021	2020
	$'000	$'000
Opening net book amount	-	-
Additions	2,336	-
Increases due to biological transformation	1,136	-
Decreases due to sales	(484)	-
Closing net book amount	2,988	-

In November 2020, the Group settled on the Maryborough acquisition, consisting of 5,258 hectares of sugar cane farms and 7,740 megalitres of water entitlements located in Maryborough, Queensland. The farms have the potential to be progressively converted to approximately 2,200 hectares of macadamia orchards. Farms that are unleased or where development has not actively commenced have being retained for cropping operations in the short term.

Biological assets relate to the Group's cropping operations. In accordance with AASB 141 Agriculture the Group's biological assets have been recognised at fair value as determined based on the present value of expected net cash flows from the crops.

Fair value has been based on expected net cash flows from the crops discounted from the time of harvest. The main level 3 inputs used by the Group include estimates based on the expected sugar per hectare of cane planted, production costs (including input and harvest costs), and the estimated time of harvest adjusted for the risks of the cash flows.

	Fair value at			Range of inputs
Segment	30 June2021$'000	30 June2020$'000	Unobservable inputs	30 June2021	30 June2020
Biologicalassets (sugar)	2,988	-	Sugar from cane planted(tonnes per ha)	4.3 - 7.0tonnes per ha	-
			Net price($ per tonne)	$366.05 - $463.67per tonne	-
Total	2,988	-

Significant estimates used in determining the expected net cash flows:

Sugar from cane planted (tonnes per ha)	The higher the sugar from cane planted the higher the fair value
Net price ($ per tonne)	The higher the net price, the higher the fair value

Changes in the fair value of biological assets are recognised in the statement of comprehensive income in the year they arise.

Notes to the Financial Statements

30 June 2021

G. ADDITIONAL INFORMATION

G1 Key management personnel

Related parties are persons or entities that are related to the Group as defined by AASB 124 Related Party Disclosures. These include directors and other key management personnel and their close family members and any entities they control as well as subsidiaries and associates of the Group. The following provides information about transactions with related parties during the year as well as balances owed to or from related parties as at 30 June 2021.

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

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 2021 are:

	Guy PaynterUnits	David BryantUnits	Michael CarrollUnits	Julian WiddupUnits
Balance at 30 June 2019	1,059,104	14,414,854	27,623	-
Additions	500,000	823,180	57,111	110,203
Balance at 30 June 2020	1,559,104	15,238,034	84,734	110,203
Additions	-	-	133,668	5,562
Balance at 30 June 2021	1,559,104	15,238,034	218,402	115,765

*Includes interests held by Rural Funds Management Limited as the Responsibly Entity.

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 (2020: 0.6%) of adjusted total assets; and,
Asset management fee: 0.45% per annum (2020: 0.45%) of adjusted total 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 and payable to RFM as Responsible Entity are disclosed in note G2.

Notes to the Financial Statements

30 June 2021

G2 Related party transactions

Responsible Entity (Rural Funds Management) and related entities

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

	2021	2020
	$'000	$'000
Management fee	6,296	5,689
Asset management fee	4,722	4,266
Total management fees	11,018	9,955
Expenses reimbursed to RFM	6,664	5,222
Expenses reimbursed to RFM Macadamias	1,703	-
Expenses reimbursed to RFM Almond Fund	-	90
Dividends declared to the Responsible Entity	1,336	1,272
Total amount paid to RFM and related entities	20,721	16,539
Rental income received from RFM Almond Fund	2,123	2,640
Rental income received from RFM Almond Fund 2006	-	717
Rental income received from RFM Almond Fund 2007	-	266
Rental income received from RFM Almond Fund 2008	-	753
Rental income received from RFM	8	409
Rental income received from RFM Farming	1,640	2,168
Rental income received from Cattle JV	1,702	1,363
Rental income received from Cotton JV	2,502	2,320
Rental income received from 2007 Macgrove Project	1,219	1,096
Finance income from Cattle JV	1,618	1,198
Interest income from Cattle JV	50	87
Finance income from J&F Australia Pty Limited	7,117	5,622
Rental income received from RFM Poultry	-	5,158
Expenses charged to RFM Almond Fund	788	59
Expenses charged to RFM Macadamias	123	108
Expenses charged to RFM Farming	2	169
Total amounts received from RFM and related entities	18,892	24,133

The terms and nature of the historical transactions between the Group and related parties have not changed during the year ended 30 June 2021. Transactions entered into between related parties during the year have been reviewed.

The key movements during the year:

Expenses reimbursed to RFM relates to expenses incurred or paid by RFM on behalf of the Group which are subsequently reimbursed by the Group. Examples of these expenses include corporate overheads, professional service fees such a legal, audit and tax matter costs and regulatory fees and charges. During the year ended 30 June 2021, additional costs were incurred by RFM on behalf of the Group as a result of transaction activity including the sale of the Mooral almond orchard and property acquisitions and developments.

Expenses reimbursed to RFM Macadamias relates to expenses incurred or paid by RFM Macadamias on behalf of the Group in relation to the Group's macadamia developments.

Notes to the Financial Statements

30 June 2021

G2 Related party transactions (continued)

Responsible Entity (Rural Funds Management) and related entities (continued)

Rental income from RFM Almond Fund (RAF) relates to rent on the Mooral almond orchard which was previously charged to RFM Almond Fund 2006, RFM Almond Fund 2007, RFM Almond Fund 2008 and RFM's Almond Lots which merged to form RAF during the prior year ended 30 June 2020. Rental income from RAF ceased on 2 December 2020 when the Group completed the sale of the Mooral almond orchard and associated plant and equipment. Expenses charged to RFM Almond Fund largely relates to the usage of water entitlement allocations for the Mooral orchard.

Rental income from RFM Poultry ceased on 18 December 2019 when the poultry assets were sold to ProTen Investment Management Pty Ltd as trustee for ProTen Investment Trust (ProTen).

Finance income from J&F Australia Pty Limited (J&F) relates to the $99.9 million (2020: $82.5 million) limited guarantee provided to J&F, a wholly owned subsidiary of Rural Funds Management Limited. From the provision of this guarantee, the Group earns a guarantee fee classified as finance income.

Debtors and finance lease receivables

	2021	2020
	$'000	$'000
RFM Farming Pty Limited	329	307
RFM Macadamias Pty Limited	946	429
Cattle JV Pty Limited	18,120	14,352
Cotton JV Pty Limited	-	8
J&F Australia Pty Limited	-	575
RFM Almond Fund	-	721
Total	19,395	16,392

Receivables are not secured and have terms of up to 30 days. Finance lease receivables are secured by the Group's ownership of the relevant assets. Outstanding balances are settled through payment.

$172,000 was overdue from Cattle JV Pty Limited as at 30 June 2021. Interest is charged on any overdue amounts.

Creditors

	2021	2020
	$'000	$'000
RFM	-	195
Total	-	195
Custodian fees
	2021	2020
	$'000	$'000
Australian Executor Trustees Limited	309	286
Total	309	286

Financial Guarantee

The Group provides a $99.9 million (2020: $82.5 million) guarantee to J&F Australia Pty Limited (J&F), a subsidiary of RFM. The guarantee is currently used to support $99.9 million of J&F's debt facility which is used for cattle purchases, feed and other costs associated with finishing the cattle on the feedlots, enabling J&F to supply cattle to JBS Australia Pty Limited (JBS) for its grain fed business. The guarantee earns a return for RFF equivalent to an equity rate of return which is calculated on the amount of the guarantee during the year.

Notes to the Financial Statements

30 June 2021

G2 Related party transactions (continued)

Entities with influence over the Group

	2021		2020
	Units	%	Units	%
Rural Funds Management	11,843,659	3.48	11,843,659	3.51

Other

Michael Carroll was a director of Select Harvests Limited up to 25 January 2021. Select Harvests Limited leases orchards from Rural Funds Group. This is not a related party as defined by AASB 124 Related Party Disclosure. Transactions are on commercial terms and procedures are in place to manage any potential conflicts of interest. Mr. Carroll did not participate in the negotiation of these leases.

G3 Parent entity information

The Group was formed by the stapling of the units in two trusts, Rural Funds Trust and RF Active. In accordance with Accounting Standard AASB 3 Business Combinations, the stapling arrangement referred to above is regarded as a business combination and the Rural Funds Trust has been identified as the parent for preparing Consolidated Financial Reports. RFM Australian Wine Fund and Agricultural Income Trust Fund 1, holding the Group's vineyard assets, are wholly owned subsidiaries of Rural Funds Trust. The financial information of the parent entity, Rural Funds Trust 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.

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

	2021	2020
	$'000	$'000
Statement of Financial Position
ASSETS
Current assets	19,183	9,789
Non-current assets	977,665	859,031
Total assets	996,848	868,820
LIABILITIES
Current liabilities	12,563	12,639
Non-current liabilities	374,422	332,453
Total liabilities	386,985	345,092
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
Issued units	380,440	355,923
Asset revaluation reserve	45,093	59,006
Retained earnings	184,330	108,799
Total equity	609,863	523,728

	2021	2020
	$'000	$'000
Statement of Comprehensive Income
Net profit after income tax	118,089	52,769
Other comprehensive income for the year, net of tax	1,435	12,950
Total comprehensive income attributable to unitholders	119,524	65,719

Notes to the Financial Statements

30 June 2021

G4 Cash flow information

Reconciliation of net profit after income tax to cash flow from operating activities	2021	2020
	$'000	$'000
Net profit after income taxCash flows excluded from profit attributable to operatingactivities	119,634	48,988
Non-cash flows in profit
Gain on sale of assets	(32,868)	(3,407)
Depreciation and amortisation/impairment - other	840	2,893
Depreciation - bearer plants	4,032	4,838
Amortisation of lease incentives	200	200
Finance income - lease receivable	(769)	(789)
Finance lease income received but excluded from profit	235	-
Change in fair value of investment property	(42,289)	(14,944)
Change in fair value of financial assets/liabilities	(116)	(510)
Change in fair value of bearer plants	(1,007)	499
Impairment of property - owner occupied	1,651	-
Impairment of intangible assets	4,188	798
Change in fair value of biological assets	(1,136)	-
Change in fair value of interest rate swaps	(12,923)	7,624
Straight-lining of rental revenue	852	(1,232)
Dividend income classified as investing cash flows	(64)	(50)
Changes in operating assets and liabilities
Decrease/(increase)in trade and other receivables	503	(403)
Increase in other assets	(4,159)	(989)
Decrease in trade and other payables	(305)	(2,600)
(Decrease)/increase in net tax liabilities	(1,635)	1,171
Increase in other liabilities	544	1,248
Net cash inflow from operating activities	35,408	43,335

Net debt reconciliation

This section sets out an analysis of net debt and the movements in net debt for each of the years presented.

Reconciliation of net debt is presented below:

2021	2020
$'000	$'000
Cash and cash equivalents11,647	5,085
Borrowings - repayable within one year(2,407)	(3,775)
Borrowings - repayable after one year(344,143)	(297,248)
Net debt(334,903)	(295,938)

Cash and cash equivalents11,647	5,085
Gross debt - fixed interest rates(2,407)	(3,775)
Gross debt - variable interest rates(344,143)	(297,248)
Net debt(334,903)	(295,938)

Notes to the Financial Statements

30 June 2021

G5 Remuneration of auditors

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

	2021	2020
	$	$
PricewaterhouseCoopers Australia:
Audit and review of financial statements	396,657	379,473
Other statutory assurance services	-	90,168
Compliance audit	20,395	15,690
Total	417,052	485,331

G6 Other accounting policies

Cash and cash equivalents

Cash and cash equivalents comprise 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.

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.

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.

Notes to the Financial Statements

30 June 2021

G7 Events after the reporting date

On 8 July 2021, the Group announced that it was undertaking a fully underwritten equity raise for $100.0m to fund the development of 1,000ha of macadamia orchards, acquire cattle properties to be leased by corporate lessees, and for the acquisition of 8,338 megalitres of lower Murrumbidgee ground water entitlements for $38.4m. The purchase is expected to settle in August 2021, and the entitlements will be leased to a private farming company for five years.

On 15 July 2021, the Group completed the sale of a portion of surplus land on Kerarbury for approximately $1.6m.

G9 Contingent liabilities

Other than what has been disclosed in the accounts there are no contingent liabilities as at 30 June 2021.

Directors' Declaration

30 June 2021

In the Directors of the Responsible Entity's opinion:

1 The financial statements and notes of Rural Funds Group set out on pages 13 to 64 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 2021 and of its performance for the 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 A 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

25 August 2021

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 (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 2021 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 2021
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 financial statements, which include significant accounting policies and other explanatory information
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 & Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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.

PricewaterhouseCoopers, ABN 52 780 433 757

One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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 Group financial 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 $2 million, which represents approximately 5% of the Group's Adjusted Funds From Operations.
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 Adjusted Funds From Operations because, in our view, it is the benchmark against which the performance of the Group is most commonly measured.
We utilised a 5% 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 which included individuals with industry expertise and property 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 auditmatter
Valuation of agricultural properties, which comprise:	For a selection of external valuations obtained
- Investment property $596.9m	by the Group, together with PwC real estate
- Bearer plants $160.8m	property valuation experts:
- Water entitlements $110.4m	• we assessed the competency, qualifications,
- Property – owner occupied $28.3m	experience and objectivity of the external
(Refer to notes C2, C3, C5 and C6)	valuers
The Group holds agricultural properties for long-term leasing or	• we read the valuers' terms of engagement to
for development into orchards. Cropping operations are	identify any terms that might affect their
performed on an interim basis for unleased portions of land	objectivity or impose limitations on their
where developments have not commenced.	work relevant to the valuation
Each agricultural property held for leasing or development	• we interviewed external valuers in relation
comprises one or more of the following three components:	to a selection of properties subject to
• investment properties (including land and infrastructure	valuation and on the rationale behind the
attached to land)	chosen allocation techniques
• bearer plants (including almond trees, macadamia trees andwine grape vines)• water entitlements.	• we compared a sample of inputs used in thevaluation and allocation models, such asrental income and lease terms, to therelevant lease agreements
Agriculture properties on which cropping operations arecurrently conducted by the Group are classified as property –owner occupied.The Group's valuation policy requires agricultural properties tobe externally valued by an expert every two years or more oftenwhere the Group considers appropriate.	• we assessed the reasonableness of certaininputs including, where applicable, marketrents, discount rates and capitalisation rates,rates per ha, cattle carrying capacity, valueper cattle adult equivalent used in thevaluation and allocation models, for asample of properties based on benchmarkmarket data
External valuations provide an aggregate value for eachagricultural property. Key variables and consideration in thevaluations can include discount rates, passing rents, comparablesales, market rent, cattle carrying capacity, value per cattle adultequivalent. Factors such as associated lease agreements,prevailing market conditions, and the individual nature,	• we inspected the final valuation reports andcompared the fair value as per the valuationto the value recorded in the Group'saccounting records.
condition and location of these properties impact thesevariables, and overall valuations.	For properties not subject to externalvaluations, we discussed with the directors andevaluated the directors' internal assessment of
The aggregate value of each agricultural property is allocated	the fair value of the properties and their
across the components of investment properties (carried at fair	assertion that the properties are carried at fair

Key audit matter	How our audit addressed the key auditmatter
value), bearer plants (carried under revaluation model), waterentitlements (carried at cost less accumulated impairment), andproperty – owner occupied (carried under revaluation model).	value as per the latest external valuationreport, adding any capital expenditure madeduring the intervening period.
The directors, or external valuers where appropriate, determinedthe suitable allocation technique to be applied to eachagricultural property, considering the nature and characteristicsof the property including any lease encumbrances.	We conducted site inspections of two cattleproperties in Northern Queensland.We assessed the adequacy of the disclosures inNotes C1, C2, C3, C5 and C6 of investment
This was a key audit matter because:• agricultural properties are fundamental to the Group'sbusiness model. Investment properties, bearer plants andwater entitlements, and property – owner occupied form themajority of the Group's assets in the consolidated statement offinancial position	properties, bearer plants, water entitlementsand property-owner occupied considering therequirements of Australian AccountingStandards.
• the quantum of changes in fair value of agricultural propertiesdirectly impact the consolidated statement of comprehensiveincome
• the nature of agricultural property valuations is inherentlysubjective due to the use of assumptions and estimates in thevaluation model. The COVID-19 outbreak has caused anincrease in estimation uncertainty for fair value of properties
• the selection and application of allocation technique areinherently subjective due to the unique characteristics of eachproperty
• the valuations and allocation outcomes are sensitive to keyinputs/assumptions in the model such as the discount rate andcapitalisation rates, the utilisation of comparable sales dataand to allocation techniques.

Key audit matter	How our audit addressed the key auditmatter

Related party transactions	We developed an understanding of the Group's
(Refer to note G2)	relevant controls and processes for identifyingrelated parties and related party transactions.
The Group's Responsible Entity, along with other funds for
which it is the Responsible Entity, are considered related parties	For significant contracts entered into during
of the Group. Key transactions with these parties include:	the year, we verified that the transactions wereappropriately approved.
•rental income from the lease of agricultural properties and
plant and equipment	For a sample of lease income recorded during
•finance income from the lease of cattle	the year, we compared the lease income to the
•finance and interest income•management fees and asset management fees paid	relevant supporting documents including thelease agreements.
•distributions from investments
•reimbursement of operating expenses	For management fees and asset management
•provision of a limited financial guarantee and receipt of	fees, we compared the rates used to determine
associated fee income	fees to the rates disclosed in the explanatory
	memorandum issued on formation of the
Related party transactions were a key audit matter due to thesignificant impact of these transaction on the results of the	Group.
Group. Additionally, because of their nature, they are pervasive	We discussed the related party transactions
and material to the presentation of and disclosures within the	with management to develop an understanding
financial report.	of the business rationale for the transactions.
	In relation to the financial guarantee, we
	developed an understanding of the
	arrangement from reading the Explanatory
	memorandum, and from discussions withmanagement and others of the purpose, terms
	and conditions, and substance of the
	arrangement.
	We assessed the adequacy of the disclosures in
	Note G2, of related party relationships and
	transactions considering the requirements of
	Australian Accounting Standards.

Other information

The directors of the Responsible Entity are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2021, but does not include the financial report and our auditor's report thereon. Prior to the date of this auditor's report, the other information we obtained included the Directors' report and Additional Information for Listed Public Entities. We expect the remaining other information to be made available to us after the date of this auditor's report.

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

In connection with our audit of the financial report, our responsibility is to read the other information 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, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors of the Responsible Entity and use our professional judgement to determine the appropriate action to take.

Responsibilities of the directors of the Responsible Entity for the financial report

The directors of the Responsible Entity are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors of the Responsible Entity determines 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 of the Responsible Entity 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 intends 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1\_2020.pdf. This description forms part of our auditor's report.

PricewaterhouseCoopers

Rod Dring Sydney Partner 25 August 2021

Additional Information for Listed Public Entities

30 June 2021

Unitholder information

Additional information required by the ASX Limited listing rules and not disclosed elsewhere in this report is set out below. The information is effective as at 30 June 2021.

Distribution of equity securities

Analysis of number of unitholders by size of holding:

	Unitholders
	2021
1 - 1,000	2,155,479
1,001 - 5,000	16,698,978
5,001 - 10,000	20,107,323
10,001 - 100,000	95,372,887
100,001 and over	205,565,889

RFM considers that there are 480 holders of a less than marketable parcel of units at 30 June 2021.

Substantial unitholders

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

	Units held	%
HSBC Custody Nominees (Australia) Limited	48,979,177	14.41%
J P Morgan Nominees Australia Limited	42,274,820	12.44%

Voting rights

Ordinary units

All ordinary units carry one vote per unit without restriction.

Twenty largest unitholders at 30 June 2021

	Units held	%
HSBC Custody Nominees (Australia) Limited	48,979,177	14.41%
J P Morgan Nominees Australia Limited	42,274,820	12.44%
Argo Investments Limited	16,281,523	4.79%
Netwealth Investments Limited (Wrap services)	13,725,310	4.04%
Rural Funds Management Limited	11,843,659	3.48%
Citicorp Nominees Pty Limited	10,942,249	3.22%
Bryant Family Services Pty Ltd	3,377,583	0.99%
Netwealth Investments Limited (Super services)	2,896,498	0.85%
Morgan Stanley Australia Securities Pty Ltd	2,727,850	0.80%
One Managed Investment Funds Limited	2,500,000	0.74%
National Nominees Limited	2,150,528	0.63%
Woodross Nominees Pty Limited	1,859,221	0.55%
Neweconomy.com.au Nominees Pty Limited	1,795,751	0.53%
BNP Paribas Nominees Pty Ltd	1,732,711	0.51%
SCCASP Holdings Pty Limited	1,663,073	0.49%
Merrill Lynch (Australia) Nominees Pty Limited	1,391,253	0.41%
BNP Paribas Nominees Pty Ltd (Agency Lending)	1,384,887	0.41%
BNP Paribas Nominees Pty Limited	1,239,919	0.36%
Boskenna Pty Ltd	1,209,104	0.36%
BNP Paribas Noms Pty Limited	1,169,864	0.34%
Total	171,144,980	50.35%

Securities exchange

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

Rural Funds Management Limited:

ABN 65 077 492 838 AFSL 226 701

Rural Funds Group comprises:

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

Level 2, 2 King Street Deakin ACT 2600 Locked Bag 150 Kingston ACT 2604

T 1800 026 665
W www.ruralfunds.com.au
E [email protected]
E [email protected]

AI assistant

RURAL FUNDS GROUP — Annual Report 2021

65689_rns_2021-08-24_f04698dc-957d-4c83-becc-af9cdb87de8b.pdf

Financial Statements For the Year Ended 30 June 2021

Contents

Corporate Directory

Directors' Report

Directors

Principal activities and significant changes in state of affairs

Directors' Report

Principal activities and significant changes in state of affairs (continued)

Operating results

Adjusted funds from operations (AFFO)

Directors' Report

Financial position

Adjusted net asset value

Property leasing

Directors' Report

Property leasing (continued)

Almond orchards

Vineyards

Macadamia orchards

Cattle property

Directors' Report

Property leasing (continued)

Cropping property

Maryborough

Other activities

Directors' Report

Banking facilities

Distributions

Indirect cost ratio

Matters subsequent to the end of the year

Likely developments and expected results of operations

Environmental regulation

Directors' Report

Climate change risk

COVID-19 outbreak

Units on issue

Indemnity of Responsible Entity and Custodian

Rounding of amounts

Information on Directors of the Responsible Entity

Directors' Report

Information on Directors of the Responsible Entity (continued)

Directors' Report

Information on Directors of the Responsible Entity (continued)

Interests of Directors of the Responsible Entity

Company Secretary of the Responsible Entity

Meetings of Directors of the Responsible Entity

Non-audit services

Directors' Report

Auditor's independence declaration

Auditor's Independence Declaration

Consolidated Statement of Comprehensive Income

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

A. REPORT OVERVIEW

General information

COVID-19 outbreak

Basis of preparation

Rounding of amounts

Principles of consolidation

Controlled entities

Notes to the Financial Statements

Significant accounting judgements, estimates and assumptions

Valuation of property related assets

Estimation of useful lives of bearer plants

Comparative amounts

Notes to the Financial Statements

B. RESULTS

B1 Segment information

Segment revenue and revaluation movements

Notes to the Financial Statements

B1 Segment information (continued)

Segment revenue and revaluation movements (continued)

Notes to the Financial Statements

RURAL FUNDS GROUP Annual Report 2021