RURAL FUNDS GROUP — Investor Presentation 2021

Feb 17, 2021

Managed by:

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Financial results presentation half-year ended 31 December 2020

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18 February 2021
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Disclaimer and glossary of terms

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Disclaimer

This presentation has been prepared by Rural Funds Management Limited (ACN 077 492 838, AFSL 226 701) ( RFM ) as the responsible entity of Rural Funds Group ( RFF ) and has been authorised for release by the Board of RFM. RFF is a stapled security, incorporating Rural Funds Trust (ARSN 112 951 578) and RF Active (ARSN 168 740 805). The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. Please note that, in providing this presentation, RFM has not considered the investment objectives, financial circumstances or particular needs of any particular recipients.

This presentation is not, and does not, constitute an offer to sell or the solicitation, invitation or recommendation to purchase any securities, and neither this presentation nor anything contained herein shall form the basis of any contract or commitment. In particular, this presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. This presentation must not be released or distributed in the United States. Any securities described in this presentation have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws.

RFM has prepared this presentation based on information available to it at the time of preparation. No representation or warranty is made as to the fairness, accuracy or completeness of the information, opinions and conclusions contained in this presentation or any other information that RFM otherwise provides. To the maximum extent permitted by law, RFM, its related bodies corporate and its officers, employees and advisers are not liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on this presentation or otherwise in connection with it.

This presentation includes ‘forward-looking statements’. These forward-looking statements are based on current views, expectations and beliefs as at the date they are expressed. They involve known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of RFF to be materially different from those expressed or implied by the forward-looking statements. Accordingly, there can be no assurance or guarantee regarding these statements and you must not place undue reliance on these forward-looking statements. RFM and RFF disclaim any responsibility for the accuracy or completeness of any forward-looking statements.

Glossary

Adjusted NAV - Net Asset Value (NAV) adjusted for the independent valuation of water entitlements; Adjusted total assets - Total assets adjusted for the independent valuation of water entitlements; ASX - Australian Securities Exchange; AFFO - Adjusted funds from operations, a financial metric used in the REIT sector to measure available cash flow from operations (adjustment relates to non-cash tax expense); BBSW - Bank Bill Swap Rate; CAGR - Compound annual growth rate; Counterpart - A party other than RFF involved in a financial transaction, usually referring to the lessee of a property; CPI - Consumer Price Index; CY – Calendar year; DPU - Distributions per Unit; EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortisation; Fair value - Value of an asset as determined by an independent valuation; Gearing - Calculated as external borrowings/adjusted total assets; Group - Term used for the Rural Funds Group; ha - Hectare(s); HY21 - Half-year ended 31 December 2020; LVR - Loan to valuation ratio, a bank covenant calculated as debt divided by tangible assets (including water entitlements); ML - Megalitre; m - Million(s); NAV - Net asset value, calculated as assets less the value of liabilities (does not recognise fair value of water entitlements); P&E – Plant and equipment; Pro forma - Financial statements based on certain assumptions and projections; Total assets - Total value of assets as presented on the balance sheet (water entitlements recorded at the lower of cost or fair value); REIT - Real Estate Investment Trust; RFF - Rural Funds Group (ASX:RFF); RFM - Rural Funds Management Limited, manager and responsible entity for RFF.

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Cover image: Elongating inflorescences, or racemes, which will bear between 100 to 800 flowers, Swan Ridge macadamia orchard Bundaberg - central Queensland, August 2020.

2

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Contents

1. HY21 financial results

Presenters

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2. Strategy and portfolio update

3. Conclusion 4. Appendices

David Bryant Tim Sheridan Daniel Yap James Powell Managing Director Chief Operating Chief Financial General Manager – Officer Officer Investor Relations & Marketing

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3

HY21 financial 1 results

Mary River, water source for Maryborough macadamia orchard developments, central Queensland, August 2020.

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4

Key activities and highlights

Assets secured and macadamia orchard developments commenced.

• Additional land and water secured for macadamia orchard development program :

• Maryborough: 5,258 ha of sugar cane farms and 8,060 ML of water entitlements.

• Rockhampton: two cattle properties and contracts exchanged to acquire 21,600 ML of water entitlements upon completion of Rookwood Weir.

• Macadamia orchard developments commenced: 500 ha planned for CY21.

• Disposal of almond orchard : at 21% premium to adjusted book value, providing funds for reinvestment.[1]

• Increase of guarantee associated with JBS operated feedlots[2] : from $82.5m to $99.9m (January 2021), providing increased revenue from implementation.

• FY22 forecast distributions of 11.73 cents per unit : in line with 4% annual growth target:

• No rent relief required by lessees due to COVID-19.

• FY21 forecasts confirmed.

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HY21 results highlights

AFFO per unit Distributions per unit 6.6 cents 5.64 cents on track with FY21f  4% on HY20

Earnings per unit[3] Gearing 17.26 cents 30.2%  94% on HY20 Lower end of 30–35% target Adjusted NAV per unit FY22f distributions per unit $2.01 11.73 cents  4% on FY20  4% on FY21

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Notes:

1. Excluding portion of land ($4.1m) awaiting necessary approvals; expected to settle prior to 30 June 2021

2. Guarantee provided to J&F Australia Pty Ltd.

3. Earnings calculated TCI/weighted average units (see page 18).

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5

Property movements

Capital recycled into macadamia development assets.

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• Key movements:

• a) Almonds : disposal of Mooral almond orchard for $77.1m, depreciation of $1.4m net of development capex of $4.2m and revaluation of $0.2m.[2, 3]

• b) Cropping : acquisition of 22 sugar cane farms (Maryborough) for $56.4m (leased/operated as cropping properties prior to being converted to macadamia orchards), development capex of $3.8m, P&E of $2.9m net of depreciation of $0.1m.

• c) Cattle : acquisition of additional area for existing cattle property (Rockhampton) for $4.3m, cattle $5.3m, revaluations of $7.8m, development capex of $3.9m and P&E of $0.1m.[4]

• d) Macadamias : acquisition of three sugar cane farms (Maryborough) for $18.3m and two cattle properties (Rockhampton) for $13.1m (for nearterm development to macadamia orchards), development capex of $2.5m, P&E of $1.8m net of depreciation of $0.2m.[3, 5 ]

• e) Vineyards : revaluation of $0.1m net of bearer plants depreciation of $0.5m.[3]

• For details of independent valuations see page 23.

Adjusted property assets movements ($m) by sector[1]

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Notes:

1. The sector totals presented in the chart are net of written-off transaction costs and inclusive of capex. Acquisition amounts include stamp duty. Revaluations include straight-lining adjustment for rent and finance lease adjustments. Adjusted property assets include plant and equipment (P&E).

2. Mooral disposal excludes portion of land ($4.1m) awaiting necessary approvals; expected to settle prior to 30 June 2021.

3. Directors’ valuation applied to bearer plants, which are treated as property, plant and equipment and depreciated in accordance with AASB116.

4. Addition to existing property Homehill (Dec 2020 $4.3m). Revaluation includes Rewan for $7.1m.

5. Cattle property acquisitions include Riverton (Nov 2020 $6.5m) and Stoneleigh (Dec 2020 $6.6m).

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6

Earnings and balance sheet summary

HY21 AFFO and DPU on track for full-year forecasts. FY22 forecast distributions announced.

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Income and earnings metrics

• Property revenue has decreased primarily as a result of the poultry asset disposal ($71.4m), offset by the income from new acquisitions, development capital expenditure, lease indexation and increase in J&F guarantee income.

• TCI increased 97% and EPU increased 94% mainly due to the gain associated with the disposal of the Mooral almond orchard and independent valuation of Rewan cattle property.[4 ]

• Gearing of 30% at lower end of 30–35% target range.

		6 mths ended	6 mths ended
		31 December 2020	31 December 2019
	Property revenue - $ Total comprehensive income (TCI) - $	33,916,000 58,425,000	37,592,000 29,731,000
	Earnings per unit (EPU)1- cents	17.26	8.9
	Adjusted funds from operations (AFFO) - $	22,170,000	23,656,000
	AFFO per unit - cents	6.6	7.1
	Distributions per unit (DPU) - cents	5.64	5.42
	AFFO payout ratio	85%	76%

• Adjusted NAV per unit $2.01, representing 4% increase to the prior period.

• Forecasts:

• FY21 forecast AFFO of 11.7 cents per unit (CPU) confirmed

• FY21 forecast DPU of 11.28 cents confirmed

• FY22 forecast DPU of 11.73 CPU (representing 4% increase on FY21f).

• Refer to pages 18 to 22 for further information.

Balance sheet summary

		As at 31 December 2020	As at 30 June 2020
	Total assets - $ Adjustment for water at fair value - $	982,580,000 81,411,000	914,920,000 97,699,000
	Adjusted total assets2- $ External borrowings - $	1,063,991,000 321,816,000	1,012,619,000 301,023,000
	Gearing3- $	30.2%	29.7%
	Net asset value (NAV) - $	599,814,000	557,966,000
	NAV per unit - $	1.77	1.65
	Adjusted NAV2- $	681,225,000	655,665,000
	Adjusted NAV per unit1- $	2.01	1.94

Notes:

1. Earnings calculated TCI/weighted average units (see page 18).

2. Assets adjusted for the independent valuation of water entitlements which are recognised at the lower of cost or fair value on balance sheet.

3. Gearing calculated as external borrowings/adjusted total assets.

4. For tax purposes the capital gain as a result of the disposal of Mooral will be attributed to FY21 distributions (11.28 cents per unit - unchanged). This capital gain has been partly attributed to the December 2020 distribution with the remainder expected to be attributed to remaining FY21 distributions. See ASX disclosure dated 28 January 2021 for further information.

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7

Debt facility and interest rate hedges

Facility tenor extended.

Debt facility metrics

		31 December 2020	30 June 2020
Debt facility	Term debt facility limit1, 2 $380.0m $335.0m Term debt drawn $319.2m $297.2m Headroom $60.8m $37.8m Cost of debt3 3.22% 3.74%
Covenants	Loan to Value Ratio (LVR)1, 5 40.3% 39.1% Interest Cover Ratio (ICR)1, 4 8.98 5.85 Adj. Net Tangible Assets (NTA)1 $681.2m $655.7m
Hedging	Total amount hedged6 $183.0m $183.0m Proportion debt hedged1, 7 57.3% 61.6% Weighted average duration8 8.0 years 8.5 years

Interest rate hedges (FY21 to FY25)

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$200m 3.20%
$190m
3.15%
183.0 183.0 183.0 183.0 183.0
$180m
3.10%
$170m
3.06% 3.06% 3.06% 3.06% 3.06%
3.05%
$160m
$150m 3.00%
FY21 FY22 FY23 FY24 FY25
Average hedged amount (LHS) Weighted average hedge rate (RHS)
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Debt facility tenor

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$300m
$250m
$200m
$150m
270.0
$100m
60.8
$50m
49.2
$-
FY21 FY22 FY23 FY24
Tenor expiry
Debt drawn Undrawn
Facility limit ($m)
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Notes:

1. Key financial covenants for FY21: LVR <50%, ICR >3.00x, with distribution permitted at >3.15x, Adj. NTA including water entitlements >$400m, 40% hedging requirement.

2. Security: real property mortgages, general security agreement, cross guarantees between RFF and subsidiaries.

3. Cost of debt calculated as total interest expense plus cost of hedges, divided by average debt drawn.

4. ICR calculated on EBITDA. ICR HY21 higher due to gain on Mooral sale.

5. LVR calculated as term debt drawn plus guarantee of $82.5m (as at 31 Dec 2020) divided by directly secured assets based on independent valuations. Guarantee increased to $99.9m February 2021.

6. Current hedges only.

7. Proportion hedged calculated as current hedges/term debt drawn.

8. Duration remaining as at 31 December 2020 and includes forward start hedges.

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8

Strategy and 2 portfolio update

Cultivation of planting material for macadamia orchard developments, Nursery Farm, Bundaberg - central Queensland, August 2020.

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9

Recycling capital into macadamia developments

Capital realised from assets developed by RFM.

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• RFM has over two decades of experience developing and operating agricultural assets in the cropping, viticulture, poultry, almond and macadamia sectors.

• Funding for the macadamia developments will include capital from the sale assets developed by RFM, including:

• Poultry sheds: 44 poultry sheds constructed following acquisition of 110 sheds in 2003. Sold in December 2019 for $71.4m, in line with depreciated value.

• Almond orchard: 808 ha orchard developed 2006 to 2008. Sold in December 2020 for $93.3m[1] , a 21% premium to adjusted book value.

• The investment into macadamias is consistent with RFM’s strategy of investing in sectors in which RFM has development and operating knowledge.

Examples of assets developed by RFM

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Geier vineyard development (also page 17), Barossa Valley - South Australia, August 2000.

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Poultry shed construction,
Griffith - New South Wales, August 2006.
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Almond orchard development,
Hillston - New South Wales, April 2008.
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10

Note:

1. Excluding portion of land ($4.1m) awaiting necessary approvals; expected to settle prior to 30 June 2021.

Development progress

Year one development program commenced.

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Planned macadamia orchard locations

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• RFM horticultural staff have relocated to central Queensland to oversee the macadamia developments. Year one development program (2021 calendar year) includes:

• Rockhampton: 50 ha - one property.

• Bundaberg: 100 ha (38 ha completed) - three properties, and expansion of macadamia tree nursery to supply planting material.

• Maryborough: 350 ha - three properties.

• Macadamia lessee update: lessee negotiations ongoing. Existing earnings and balance sheet capacity to enable commencement of the developments while continuing to fund distributions.

• Income from assets surplus to year one development program:

• Rockhampton: cattle properties expected to be leased.

• Maryborough: approximately 47% of sugar cane properties leased. RFM will crop established cane on behalf of RFF on remaining properties.

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Ground preparation, Maryborough, Feb 2021.

Macadamia tree planting, Bundaberg, Jan 2021.

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11

Enhancing the portfolio

The investment into macadamias is consistent with RFM’s strategy of investing in sectors in which Australia participates globally and improving portfolio diversification.

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Assets map, sector information and key lessees[1]

Note:

1. Shaded areas denote climatic zones differentiated by rainfall seasonality. Source: Bureau of Meteorology; see Climatic Diversification discussion paper, 20 June 2016. Numbers in the circles/boxes on map show number of assets. Blue square boxes denote cattle feedlots. Murrumbidgee HS water entitlement (8,754 ML) with a value of $65.2m not shown.

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12

Revenue growth and improving lease metrics

The investment into macadamias is expected to provide increased earnings and WALE in future years.

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FY21f revenue by sector and year of lease expiry[1]

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16.0
WALE = 11.1 years
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY21 revenue ($m)
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Year of lease expiry

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Note:

13

1. Excludes assets not leased. Other income (FY21f 5%) not shown. Weighted average lease expiry (WALE) calculated as the FY21 forecast rent and the year of lease expiry.

Conclusion 3

Livestock forage crop (sorghum) growing under a new irrigation pivot at Comanche, Rockhampton - central Queensland, January 2021.

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14

Performance metrics

Historical distribution growth of at least 4% per annum: in line with strategy.

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Historical performance metrics (inc. FY21f)[1]

Notes:

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1. Adjusted NAV and trading price at relevant financial year end except $2.01 (as at 31 December 2020) and $2.49 (as at 12 February 2021). Compound annual growth rate (CAGR) calculated daily. 2. 1 July 2014 to 12 February 2021. Total unitholder return assumes RFF dividends reinvested. Index return S&P/ASX 300 A-REIT Accumulation Index.

15

Conclusion

Macadamia developments commenced. FY22 forecast distributions announced.

1. Material assets secured for the 5,000 ha macadamia developments.

2. Initial funding provided from capital recycling : AFFO lower than prior corresponding period as a result of capital recycling but in line with full year forecast, and expected to increase following completion of developments.

3. Macadamia developments commenced : 500 ha of macadamia orchards planned to be developed in CY21.

4. Existing earnings and balance sheet capacity to commence the developments : while continuing to fund distributions.

5. RFM in process of securing lessees : to further increase revenue generation.

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RURAL FUNDS GROUP (ASX: RFF)

o ASX-listed agricultural Real Estate Investment Trust (REIT). Included in the S&P/ASX 300 index.

o Owns a diversified portfolio of agricultural assets leased predominantly to corporate operators.

o Target distribution growth of 4% per annum.

o Income growth achieved through lease indexation, productivity improvements and conversion of assets to higher and better use.

6. FY22 forecast distributions of 11.73 cents per unit : in line with 4% DPU growth strategy.

o Managed by a specialist agricultural farm and fund manager with over 24 years experience.

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16

Appendices 4

Geier vineyard prior to harvest, Barossa Valley - South Australia, January 2021.

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17

HY21 results – summarised comprehensive income

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Summarised statement of comprehensive income

• Property revenue has decreased primarily as a result of the poultry asset disposal, offset by the income from new acquisitions, development capital expenditure, lease indexation and increase in J&F guarantee income.

• Other income relates to unleased Murrumbidgee High Security Water annual allocation sales.

• Property expenses increased largely due to new properties under development.

• Finance costs decreased as a result of debt repayment and lower BBSW rate.

• Gain on sale of assets primarily related to sale of the Mooral property.

• Depreciation and impairments related mainly to plant and equipment owned within RF Active.

• Property revaluations of $1.7m (including bearer plants, investment property, property-owner occupied, and intangibles). Total assets reconciliation see page 22.

• Income tax expense relates to RF Active and AWF (see slide 20).[1] RFT treated as a flow-through trust for tax purposes.

	6 mths ended	6 mths ended
	31 December 2020	31 December 2019
	$	$
Property revenue	33,916,000 33,916,000	37,592,000 37,592,000
Revenue
Other income	2,859,000 (1,156,000) (2,491,000) (5,424,000) (5,280,000) 32,538,000 (268,000) (2,019,000) 5,832,000 (467,000) (1,651,000) (24,000) 2,939,000 59,304,000 (879,000) 58,425,000 - 58,425,000 338.4m 17.26 cents	1,409,000 (869,000) (2,543,000) (5,044,000) (5,667,000) (503,000) (604,000) (2,904,000) 8,698,000 (86,000) - (24,000) 178,000 29,633,000 (517,000) 29,116,000 615,000 29,731,000 335.1m 8.87 cents
Property expenses
Other expenses
Management fees2
Finance costs
Gain on sale of assets
Depreciation and impairments
Property revaluations - Bearer plants
Property revaluations - Investment property
Property revaluations - Intangible assets
Property revaluations – Property-owner occupied
Change in fair value of financial assets/liabilities
Change in fair value of derivatives
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income
Total comprehensive income
Weighted average units
Earnings per unit3

Notes:

1. RFM Australian Wine Fund (AWF) is a subsidiary of Rural Funds Trust (RFT) that has formed its own tax consolidated group.

2. Calculated 1.05% adjusted total assets.

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1. Calculated TCI/weighted average units.

18

HY21 results – AFFO composition

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Composition of AFFO (pre-tax)

• AFFO is pre-tax and excludes fair value adjustments, depreciation and impairment to represent RFF’s property rental business.

• Property expenses relate to costs directly attributable to the properties (e.g. insurance, rates on unleased properties, applicable cost recovery). Other expenses relate to non-property overheads (e.g. ASX, bank, audit, registry fees, cost recovery).

• Property leases are largely triple net.

	6 mths ended	6 mths ended
	31 December 2020	31 December 2019
	$	$
Property revenue	33,899,000 36,600,000 (1,156,000) (869,000)
Property expenses
Net property income	32,743,000 35,731,000
Other income	2,859,000 (2,491,000) (5,424,000)	1,409,000 (2,543,000) (5,044,000)
Other expenses
Management fees
EBITDA	27,687,000	29,553,000
Income tax payable (RF Active)	(237,000) (5,280,000)	(230,000) (5,667,000)
Finance costs
AFFO	22,170,000	23,656,000
AFFO per unit1	6.6 cents 5.64 cents	7.1 cents 5.42 cents
DPU

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Note:

19

1. Based on the weighted average number of units on issue during the half year.

HY21 results – reconciliation of net profit to AFFO

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Reconciliation of net profit after tax to AFFO

• Non-cash items added back to reconcile net profit after tax to AFFO.

• Key adjustments include: • Property revaluations includes $7.1m relating to the Rewan cattle property, $1.1m relating to the Mooral property and ($4.5m) relating to the Maryborough properties.

• • Depreciation and impairments related mainly to plant and equipment owned within RF Active.

• • Gain on sale of assets primarily related to sale of the Mooral property.

• • Straight-lining reflects a smoothing of rent earned over a lifetime of the lease (under AASB16 for leases with fixed indexation).

• • Interest component of JBS feedlot finance lease reflects indexation due to finance lease classification.

	6 month ended	6 mths ended
	31 December 2020	31 December 2019
	$	$
Net profit after income tax	58,425,000	29,116,000
Adjusted for:	(3,714,000) (2,939,000) 268,000 2,019,000 24,000 (32,538,000) 521,000 (538,000) 21,528,000 642,000 22,170,000 6.6 cents	(8,113,000) (178,000) 604,000 2,405,000 24,000 503,000 (646,000) (346,000) 23,369,000 287,000 23,656,000 7.1 cents
Property revaluations
Change in fair value of interest rate swaps
Depreciation and impairment
Depreciation - Bearer Plants
Change in fair value of financial assets/liabilities
Gain on sale of assets
Straight-lining of rental income
Interest component of JBS feedlot finance lease
FFO
Adjusted for income tax expense
AFFO
AFFO per unit1

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Note:

20

1. Based on the weighted average number of units on issue during the half year.

HY21 results – summarised balance sheet

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Summarised balance sheet

• Water entitlements are recorded as intangible assets, and held at the lower of cost less accumulated impairment or fair value in accordance with accounting standards and ASIC guidance. The adjustment for water entitlements shows the difference between book value and fair value (based on current independent valuations).

• Water entitlements total 118,485 ML and water delivery entitlements total 21,430 ML, representing a fair value of $206.5m or 19% of total adjusted assets.

• See page 23 for details of independent valuations.

	As at	As at
	31 December 2020	30 June 2020
	$	$
Cash	10,924,000 952,695,000 8,022,000 10,939,000 982,580,000 2,612,000 319,243,000 28,726,000 1,606,000 6,454,000 24,125,000 382,766,000 599,814,000 338,905,436 1.77 0.24 2.01	5,085,000 892,064,000 6,969,000 10,802,000 914,920,000 3,814,000 297,248,000 31,665,000 1,533,000 5,855,000 16,839,000 356,954,000 557,966,000 337,713,420 1.65 0.29 1.94
Property investments
Plant and equipment
Other assets
Total assets
Interest-bearing liabilities:
- Current
- Non-current
Derivative financial liabilities
Current tax liabilities
Deferred tax liabilities
Other liabilities
Total liabilities
Net assets
Units on issue
NAV per unit
Adjustment for water entitlements fair value per unit
Adjusted NAV per unit

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21

HY21 results - total assets reconciliation

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Total assets reconciliation

	Investment property	Bearer plants	Intangible assets1, 3	Property – owner occupied	Financial assets – property2, 3	Plant and equipment	Other assets	Total	Adjustment for water entitlements at fair value1, 3	Adjusted total assets
	$	$	$	$	$	$	$	$	$	$
Balance as at 30 June 2020	493,719,000	183,526,000	117,262,000	-	97,557,000	6,969,000	15,887,000	914,920,000	97,699,000	1,012,619,000
Additions - Cattle	8,275,000	-	-	-	5,275,000	132,000	-	13,682,000	-	13,682,000
Additions - Cropping	29,080,000 3,328,000 31,749,000 11,000 (16,541,000) - 5,832,000 (100,000) 555,353,000	-	4,537,000	29,889,000	-	2,990,000	-	66,496,000	-	66,496,000
Additions - Almond orchard		890,000	-	-	-	-	-	4,218,000	-	4,218,000
Additions - Macadamias		735,000	2,509,000	-	32,000	1,818,000	-	36,843,000	-	36,843,000
Additions - Vineyards		-	-	-	-	-	-	11,000	-	11,000
Disposals		(30,016,000)	(10,711,000)	-	-	(3,543,000)	-	(60,811,000)	(16,288,000)	(77,099,000)
Depreciation and impairments		(2,019,000)	-	-	-	(268,000)	-	(2,287,000)	-	(2,287,000)
Fair value adjustment4		-	(467,000)	(1,651,000)	(24,000)	-	-	3,690,000	-	3,690,000
Other movements		-	-	-	18,000	(76,000)	5,976,000	5,818,000	-	5,818,000
Balance as at 31 December 2020		153,116,000	113,130,000	28,238,000	102,858,000	8,022,000	21,863,000	982,580,000	81,411,000	1,063,991,000

Notes:

1. Accounting standards and ASIC guidance require water entitlements to be recorded as intangible assets, and held at the lower of cost less accumulated impairment or fair value. The adjustment for water entitlements shows the adjustment to the fair value of the water entitlements held.

2. Relates to water entitlements held as part of the investment in Barossa Infrastructure Limited, Coleambally Irrigation Co-operative Limited, breeder herd finance lease, loan to Camm, loan to Katena, straight-lined asset, equipment finance leases and finance lease with JBS Australia for five feedlots, which are accounted for as financial assets.

3. Water entitlements of 118,485 ML and 21,430 ML of water delivery entitlements held by the Group representing a fair value of $206.5m.

4. Fair value adjustments as part of valuations for the half year ended 31 December 2020 and the Maryborough acquisition.

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Valuations, valuers and lease expiry

Policy to conduct independent valuations at least every two years and rotation of valuers every three years.

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Property valuation details

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Development assets and capital expenditure

Productivity and higher and better use developments underway across most sectors.

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Development and capital expenditure summary[1]

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Note:

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24

1. Five-year developments refer to development potential of assets. Pasture improvement includes stylo and leucaena. Cultivation area refers to development of additional areas for forage crops. Grazing area involves improving production of an existing area. Unallocated macadamia development area (4,500 ha) not included in forecast capital expenditure. Forecast capex includes rentable and non-rentable amounts.

Investment strategy

Higher-and-better-use and productivity improvement strategy seeks to increase total returns and income generation, supporting distribution growth.

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Spectrum of investment opportunities[1]

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Note:

1. The income and growth figures presented in the figure above have been provided to differentiate the profile of income and growth that can be derived from different assets. They are based on RFM’s experience and observations of agricultural lease transactions and historical rates of growth. They are neither forecasts nor projections of future returns. Past performance is not a guide to future performance.

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25

Environment, social and governance (ESG)

Policies and procedures addressing ESG issues.

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Social Governance

Environment

Climate change Employment

Compliance committee

• Climate diversification • RFM, as responsible entity of • RFM has an internal strategy. RFF, has a range of staffcompliance committee

• • RFM will continue to monitor related policies including code consisting of emissions and seek to of conduct, HSE (health, safety representatives of different implement infrastructure and and environment), incident business units reporting to practice changes. RFM management, diversity and the RFM Board of Directors. considers climate change may equal opportunity. RFM has present risks primarily in the also implemented an Conflicts of interest and form of residual risk of the extensive HSE management related party transactions assets at the end of the lease system to educate employees terms. These risks may be and contractors. The RFM • RFM always acts in the best interest of the unitholders

• mitigated by how assets are Board receives a monthly HSE of the funds it manages.

• managed. External valuations report. • RFM has a ‘Conflict of

• consider these types of factors as well as other risks when Animal welfare Interest’ Management Policy. Additional

• determining the valuations of the assets. • RFM has policies and responsibilities are set out procedures in place that are in RFF’s Constitution, the

• Management of natural explicit about animal health Corporations Act, ASX resources and welfare. Listing Rules and Australian Financial Services Licence.

• • Leases require operators to Community engagement • The RFM Board receives a use appropriate agricultural monthly report covering • RFM has committed $1m over

• production methods, including compliance, any conflicts of three years to assist farmers in

• minimising environmental interest and related party impact, protecting Tahen, Cambodia with transactions. agricultural practices to

• biodiversity, management of water and soil health. improve farm productivity.

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RFM and Meat & Livestock Australia: reducing emissions on cattle properties

RFM is playing an active role in contributing to improved environmental outcomes within the livestock sector. The Australian red meat and livestock industry is currently responsible for 10% of all of Australia’s greenhouse gas (GHG) emissions – 50% less than 2005. While the industry has already halved its GHG emissions, it continues to seek to reduce its environmental impact through a target to be carbon neutral by 2030.

As part of achieving this target, RFM and Meat & Livestock Australia (MLA) worked with Research Scientist, Dr Natalie Doran-Browne to analyse a selection of RFF’s cattle properties. The study focused on assessing the emissions intensity of livestock production on the properties.

Emissions intensity calculates the GHG emissions generated per unit of farm product. In simple terms, lowering emissions intensity can be achieved by producing more kilograms of beef for the same level of GHG emissions.

The report calculated, that of the RFF properties analysed, from 2016-17 to 2018-19, GHG emissions intensity declined by 17% on the New South Wales properties and 43% on the Queensland properties. A reduction of this magnitude is the equivalent of not running about 2,800 average Australian cars for a year.

The report identified productivity improvements such as increased feed quality, as well as improved animal management practices, as contributing factors to the results. As outlined in the preceding article, RFM is enhancing the productivity on RFF cattle properties by improving pastures and developing cultivation areas. These productivity improvements aim to accelerate daily weight gain of cattle, and therefore lower emissions intensity.

RFM and MLA’s work will benefit the industry by increasing the awareness of emissions analysis, and by providing a process which can be followed by others in the industry to take steps towards carbon neutrality.

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26

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Rural Funds Management Limited

ACN 077 492 838 AFSL 226701

Level 2, 2 King Street, Deakin, ACT, 2600 T 02 6203 9700

F 1800 625 518

E management@ruralfunds.com.au

See the RFM website for details on RFM’s roles and responsibilities.

www.ruralfunds.com.au

Managed by:

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For further information:

Tim Sheridan David Bryant

Chief Operating Officer Managing Director T 02 6203 9700 T 02 6203 9700

E TSheridan@ruralfunds.com.au E DBryant@ruralfunds.com.au

James Powell

Tim Sheridan General Manager – Investor Relations Chief Operating Officerand Marketing T 02 6203 9700T 0420 279 374

E TSheridan@ruralfunds.com.auE JPowell@ruralfunds.com.au

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