RURAL FUNDS GROUP — Proxy Solicitation & Information Statement 2014

Sep 11, 2014

10 September 2014

Dear Investor

The documents accompanying this letter set out proposed changes to your investment in the Rural Funds Group (RFF).

Rural Funds Management Ltd (RFM) as responsible entity of RFF is convening a general meeting so that you may consider the adoption of a new constitution (Resolution 1), facilitating some changes to your investment.

The new constitution provides an appropriate framework for an entity operating in a listed environment. This is in contrast to RFF's current 10 year old constitution, a legacy of the previous unlisted, operating environment. For example, capital raising in the new constitution links the price of the offer to the market value of RFF securities, rather than net tangible assets under the current constitution.

In addition, the new constitution contains provision for RFF to be stapled to another trust, RF Active. This trust has been established to house the small amount of "active" assets being units in RFM StockBank currently owned by RFF and plant and equipment used for almond farming recently owned by RFF. The separation of active assets from RFF's passive assets is sensible as it allows each trust to adopt a different risk profile with RFF's current passive rental income, which represents the vast majority of RFF's revenue stream, to continue to receive flow through taxation treatment and thus be taxed in the hands of investor. Distributions from RF Active are expected to be taxed at the corporate rate, currently 30%, and any franking credits distributed to investors.

The proposed fees charged by RFM have been simplified and Resolution 2 seeks your approval to remove the acquisition fee and insert a termination fee. RFM has established operating systems specifically for RFF as a major client, and in the event RFM was removed as responsible entity, it would need to downsize its business accordingly. This fee is intended to cover the costs this would entail.

There are two documents and a Proxy Form included in your pack. The Notice of Meeting and Explanatory Memorandum set out the details of the general meeting and how you can participate. The Product Disclosure Statement facilitates the issue of units in RF Active. You should read both documents carefully and consult your financial adviser before deciding how to vote. You can vote by attending the meeting or completing the Proxy Form and returning it in the envelope provided. Should you wish to attend the meeting please contact RFM Investor Services on 1800 026 665 or email investorservices@ruralfunds.com.au.

The RFM Directors recommend that you vote in favour of Resolution 1. The Directors are not able to provide a recommendation regarding Resolution 2 as this resolution considers fees payable to RFM.

Yours faithfully

David Bryant Managing Director

All Correspondence to:

	By Mail	Boardroom Pty LimitedGPO Box 3993Sydney NSW 2001 Australia
	By Fax:	Level 7, 207 Kent Street,Sydney NSW 2000 Australia+61 2 9290 9655
		By Phone: (within Australia) 1300 737 760
		(outside Australia) +61 2 9290 9600

YOUR VOTE IS IMPORTANT

For your vote to be effective it must be recorded before 10:00am (AEDT) on Monday, 6 October 2014.

TO VOTE BY COMPLETING THE PROXY FORM

STEP 1 APPOINTMENT OF PROXY

Indicate who you want to appoint as your Proxy.

If you wish to appoint the Chair of the Meeting as your proxy, mark the box. If you wish to appoint someone other than the Chair of the Meeting as your proxy please write the full name of that individual or body corporate. If you leave this section blank, or your named proxy does not attend the meeting, the Chair of the Meeting will be your proxy. A proxy need not be a unitholder of the trust. Do not write the name of the issuer trust or the registered unitholder in the space.

Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by contacting the trust's unit registry or you may copy this form.

To appoint a second proxy you must:

(a) complete two Proxy Forms. On each Proxy Form state the percentage of your voting rights or the number of units applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together in the same envelope.

STEP 2 VOTING DIRECTIONS TO YOUR PROXY

To direct your proxy how to vote, mark one of the boxes opposite each item of business. All your units will be voted in accordance with such a direction unless you indicate only a portion of units are to be voted on any item by inserting the percentage or number that you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item for all your units your vote on that item will be invalid.

Proxy which is a Body Corporate

Where a body corporate is appointed as your proxy, the representative of that body corporate attending the meeting must have provided an "Appointment of Corporate Representative" prior to admission. An Appointment of Corporate Representative form can be obtained from the trust's unit registry.

STEP 3 SIGN THE FORM

The form must be signed as follows:

Individual: This form is to be signed by the unitholder.

Joint Holding: where the holding is in more than one name, all the unitholders should sign. Power of Attorney: to sign under a Power of Attorney, you must have already lodged it with the registry. Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: this form must be signed by a Director jointly with either another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form should be signed by that person. Please indicate the office held by signing in the appropriate place.

STEP 4 LODGEMENT

Proxy forms (and any Power of Attorney under which it is signed) must be received no later than 48 hours before the commencement of the meeting, therefore by 10:00 am (AEDT) on Monday, 6 October 2014. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy forms may be lodged using the enclosed Reply Paid Envelope or:

By Fax	+ 61 2 9290 9655
 By Mail	Boardroom Pty LimitedGPO Box 3993,Sydney NSW 2001 Australia
In Person	Level 7, 207 Kent Street,Sydney NSW 2000 Australia

Attending the Meeting

If you wish to attend the meeting please bring this form with you to assist registration**.**

Your Address

This is your address as it appears on the trust's unit register. If this is incorrect, please mark the box with an "X" and make the correction in the space to the left. Unitholders sponsored by a broker should advise their broker of any changes.

Please note, you cannot change ownership of your units using this form.

PROXY FORM

STEP 1 APPOINT A PROXY

I/We being a member/s of Rural Funds Group (Trust) and entitled to attend and vote hereby appoint:

the Chair of the Meeting (mark box)

OR if you are NOT appointing the Chair of the Meeting as your proxy, please write the name of the person or body corporate (excluding the registered unitholder) you are appointing as your proxy below

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chair of the Meeting as my/our proxy at the General Meeting of the Trust to be held at RFM Office, Level 2, 2 King Street, Deakin ACT 2600 on Wednesday, 8 October 2014 at 10:00 am (AEDT) and at any adjournment of that meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit.

The Chair of the Meeting intends to vote undirected proxies in favour of each of the items of business.

STEP2	VOTING DIRECTIONS* If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your vote will notbe counted in calculating the required majority if a poll is called.
Resolution 1	ForAgainstAbstain*The name of the Fund be changed to Rural Funds Trust, the Stapling provisions be adopted and the new FundConstitution be adopted in accordance with the draft constitution submitted to the meeting and signed by the chairman forthe purpose of identification in accordance with section 601GC(1)(a) Corporations Act and to give effect to the Stapling.
Resolution 2	That RFM be authorised to amend the Constitution to remove the acquisition fee and include the termination fee, as setout in the explanatory memorandum under the heading 'Resolution 2', which may be payable to RFM in the event that it isremoved as responsible entity of the Fund.
STEP3	SIGNATURE OF UNITHOLDERSThis form must be signed to enable your directions to be implemented.
Individual or Unitholder 1Unitholder 2				Unitholder 3
Sole Director and Sole Company SecretaryDirector					Director / Company Secretary

Contact Name…………………………………………….... Contact Daytime Telephone………………………................................ Date / / 2014

Rural Funds Management Ltd (RFM) AFSL 226701 as responsible entity for

Rural Funds Group Notice of General Meeting

Rural Funds Group ARSN 112 951 578

Notice of General Meeting

Rural Funds Group ARSN 112 951 578

Notice is given that a general meeting of Rural Funds Group (Fund) will be held at:

Location	RFM Office, Level 2, 2 King Street, Deakin ACT 2600
Date	8 October 2014
Time	10am

Special Business

Stapling and Constitutional amendments

To consider, and if in favour, pass the following as a special resolution:

1 "The name of the Fund be changed to Rural Funds Trust, the Stapling provisions be adopted and the new Fund Constitution be adopted in accordance with the draft Constitution submitted to the meeting and signed by the chairman for the purpose of identification in accordance with section 601GC(1)(a) Corporations Act and to give effect to the Stapling."

Termination fee

To consider, and if in favour, pass the following resolution as a special resolution:

2 "That RFM be authorised to amend the Constitution to remove the acquisition fee and include the termination fee, as set out in the Explanatory Memorandum under the heading 'Resolution 2', which may be payable to RFM in the event that it is removed as responsible entity of the Fund."

Dated 5 September 2014

By order of the board

Andrea Lemmon Company Secretary Rural Funds Management Limited

Voting Exclusion Statement

In relation to Resolution 1 and Resolution 2, in accordance with the Corporations Act, RFM and its associates are not entitled to vote their interest on a resolution if they have an interest in the matter other than as a Member.

The Chair may disregard votes cast by such persons. However, the Chair need not disregard a vote if:

• a. it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
• b. it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Voting Entitlement

It has been determined that under regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the Meeting, persons registered as holders of RFF Units as at 10.00am (AEST) on 6 October 2014, will be entitled to attend and vote at the Meeting (subject to any voting exclusion).

Notes

• a. A Member who is entitled to attend and cast a vote at the meeting is entitled to appoint a proxy.
• b. The proxy need not be a Member of the Fund. A Member who is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise.
• c. If you wish to appoint a proxy and are entitled to do so, then complete and return the attached proxy form.
• d. A corporation may elect to appoint a representative in accordance with the Corporations Act in which case RFM will require written proof of the representative's appointment which must be lodged with or presented to RFM before the meeting.
• e. If you have any queries on how to cast your votes then please call RFM Client Services on 1800 026 665 during business hours.

Explanatory Memorandum

Rural Funds Group ARSN 112 951 578

Resolution 1: Stapling and Constitutional amendments

RFM Directors' Recommendation

The RFM Directors' recommend you vote in favour of this resolution.

Introduction

• 1 The Fund (currently known as the Rural Funds Group) is a unitised trust listed on the Australian Securities Exchange (ASX) with net assets as at 30 June 2014 of approximately $136.2 million. The Fund directly and indirectly holds a diverse range of agricultural assets including:
  • a. almond orchards;
  • b. water entitlements;
  • c. poultry farms;
  • d. vineyards; and
  • e. units held in RFM StockBank.
• 2 The Fund also provides finance for certain plant and equipment used for farming and working capital. The purpose of Resolution 1 is to update the Fund Constitution and create a Stapled investment structure.

Constitution

3 The current Constitution of the Fund was adopted well before the Fund was listed on the ASX. Part of the purpose of Resolution 1 is to update the Fund Constitution to make it more consistent with a listed Real Estate Investment Trust (REIT) constitution and provide greater flexibility (including the capacity to raise additional equity) in the operations and conduct of the Fund. Other than as set out in Resolution 2 there is no change in the current fee structure as a result of the proposed changes under Resolution 1.

Stapling

• 4 The second purpose of Resolution 1 is to create a Stapled investment vehicle. It is expected for the financial year ended 2015 the Fund will no longer be a public trading trust. It will cease to be liable for tax at the corporate tax rate and taxable income from its operations and investments would be distributed on a 'pre tax' basis to Members. While the Fund will no longer be able to distribute its profits in the form of franked dividends, the franking credits from any franked dividend received by the Fund can be passed on to Members.
• 5 A second trust, called RF Active, has been created to hold all active assets.

What is Stapling?

• 6 Stapling is a contractual arrangement between two legal entities under which the entities agree that their securities are to be traded together. In this case, the Stapled Securities will consist of one unit in the Fund and one unit in RF Active.
• 7 If Resolution 1 is approved, Fund units will only be able to be traded with corresponding units in RF Active and vice versa.

How will Stapling be achieved?

• 8 If Members approve Resolution 1:
  • a. Members will receive a notional distribution of approximately $1.2 million or $0.01 per unit they hold;
  • b. RFM as responsible entity of the Fund will (as agent of the Members) subscribe for units in RF Active on the basis of one unit in RF Active for each unit the Member holds in the Fund;
  • c. the units in RFM StockBank will be transferred to RF Active and the Vendor Finance Arrangement repaid;
  • d. each unit in the Fund will be Stapled to a unit in RF Active;
  • e. the current Rural Funds Group will be renamed Rural Funds Trust; and
  • f. the Stapled units will be listed on the ASX and the Stapled entity will be referred to as Rural Funds Group and trade as RFF.

Does my investment materially alter?

• 9 No. Plant and equipment previously owned by the Fund was sold to RF Active on 30 June 2014. The consideration received by the Fund comprised the novation of the related external borrowings and a Vendor Finance Arrangement for the balance.
• 10 The plant and equipment is used for farming almond orchards which are leased to a number of entities in particular the Almond Funds. The Almond Funds between them currently hold the 50,000 units on issue in RF Active. These units were issued for $1 per unit.
• 11 Although the Fund's investment in RFM StockBank, as a minority interest in a unit trust is not considered active, this asset is considered to be best held by RF Active, so that the Fund's activities are limited to its core operations of leasing agricultural properties. Therefore the demerger and Stapling will see the Fund's investment in RFM StockBank transferred to RF Active. The external borrowing relating to the RFM StockBank investment will also be transferred.
• 12 As part of the demerger and Stapling, the Fund intends to make a distribution of approximately $0.01 per unit to Members. RFM as agent of the Members will use this distribution to subscribe for units in RF Active for each Member. RF Active will use the subscription money to repay the Vendor Finance Arrangement, redeem the units held by the Almond Funds (for their issue price) and provide ongoing working capital. The Almond Funds will cease to be members of RF Active. All Members of the Fund will become Unitholders of RF Active in the same proportion as their investment in the Fund. The income of the Fund (after payment of expenses) will be distributed to Members (before tax) so that Members pay tax on that income received at their marginal tax rate, in a manner similar to most REITs.

Who will manage the Stapled group?

13 After the Stapling is implemented RFM will continue to manage both the Fund and RF Active.

What assets will be transferred?

• 14 Cash will be transferred, via the distribution of approximately $0.01 per unit, to provide for working capital.

• 15 The units held by the Fund in RFM StockBank will be transferred to RF Active.

• 16 The plant and equipment which was previously owned by the Fund and sold to RF Active on 30 June 2014 will remain in RF Active. The plant and equipment consists of farming plant and equipment relevant to the almond orchards including harvest equipment, tractors, demountable buildings, vehicles and other ancillary plant and equipment.

• 17 RF Active will also assume the external borrowings relating to RFM StockBank, and the plant and equipment.

• 18 The net assets of RF Active following the demerger and Stapling will be $1.153m and this effectively represents the value of the Fund demerged and is approximately 1% of the Fund's net assets.

What are the costs associated with undertaking the Stapling proposal?

• 19 The total cost of the Stapling project, including the establishment of RF Active, is estimated to be $425,000. This estimate includes:
  • a. preparation of the documents by RFM employees, printing and postage, registry charges to reflect the corporate activity $255,000;
  • b. external legal costs associated with the project $70,000; and
  • c. ASIC , ATO, ASX and stamp duty costs associated with RF Active registration instruments of relief, exemption and listing $100,000.

What is the financial position of RF Active?

• 20 As at 30 June 2014, RF Active has total net assets of $31,931 (unaudited). The assets and liabilities and borrowings of RF Active as at 30 June 2014 are set out in the RF Active PDS.
• 21 The current unitholding in RF Active is 50,000 units issued at $1 per unit to the Almond Funds. Immediately prior to the issue of Units under this Offer the Almond Funds will cease to be members of RF Active and be repaid their $50,000.
• 22 Assuming Members approve Resolution 1, then after the Stapling the units in RFM StockBank will be transferred to RF Active and the Vendor Finance Arrangement will be repaid.

What is the Vendor Finance Arrangement?

• 23 The Vendor Financing Arrangement was provided by RFF to RF Active as part of the sale of the plant and equipment. The terms include:
  • a. a loan of up to $700,000 (drawn as at 30 June 2014 to $629,525) with the following terms:
    • i. interest rate of bank bill swap rate plus margin. A line fee is also applicable;
    • ii. a term of three years; and
    • iii. the capacity of RFF to take security over the assets of RF Active; and
  • b. a working capital loan of up to $750,000 (currently drawn to approximately $316,312).

What will happen with RF Active post demerger and Stapling?

• 24 Following completion of the demerger and Stapling the plant and equipment will remain in RF Active. Further RFF will transfer its investment in RFM StockBank to RF Active.
• 25 RFM StockBank is a registered managed investment scheme of which RFM is the responsible entity. RFM StockBank raises capital to purchase livestock (both cattle and sheep) which are then leased to third party operators. The RFF investment in RFM StockBank represents approximately 39% of the units on issue in RFM StockBank.
• 26 As units in RFF will be Stapled to Units in RF Active the Vendor Financing Arrangement between RFF and RF Active will be repaid.

What will be the Combined Rural Funds Group borrowings?

27 The Combined Rural Funds Group borrowings once the demerger and Stapling has been completed, including all subsidiaries, will be supported by cross guarantees and indemnities. The Combined Rural Fund Group borrowing facilities of the Rural Funds Group include:

Term debt facility

• a. Facility limit of $97.5 million with $2 million annual amortisation commencing 30 September 2016.
• b. The facility has a term of five years commencing December 2013.
• c. Interest rate is bank bill swap rate plus margin and a line fee is applicable.
• d. There is a 50% loan to security ratio covenant. The loan to security ratio as at 30 June 2014 was 42.8%.
• e. Interest cover ratio 2.25 times with distribution lock up at 2.5 times for the period ending 30 June 2014, increasing to 3.00 times with distribution lock up at 3.15 times for the period commencing 1 July 2018.
• f. A covenant that the net tangible assets of the Combined Rural Funds Group be maintained above $100,000,000 at all times.
• g. There is no minimum capitalisation requirement for RFF.

Revolving asset (plant and equipment) finance facility

• a. Facility limit of $3.5 million.
• b. Individual loans within the facility tied to specific items of plant and equipment when they are purchased and a requirement for repayment as the item is sold.
• c. Term of each individual loan and interest rate tied to the item and expected useful life of the relevant plant and equipment.

What is the notional value of the Stapled Securities?

• 28 Based on the 30 June 2014 audited financial statements:
  • a. RFF had a net asset value of $137.5 million or $1.17 per unit;
  • b. no assets are being sold or acquired (outside of RFF and RF Active) as a result of the Stapling; and
  • c. the net asset value of the Stapled Security would be divided as follows:
    • i. 99% per RFF unit; and
    • ii. 1% per RF Active unit.

How will Stapled Securities be traded?

29 After Stapling the Fund units and RF Active units will be quoted on the ASX as Stapled Securities and will trade under the ASX code 'RFF'.

How many Stapled Securities will I hold after the Stapling?

30 You will hold the same number of Stapled Securities as units in the Fund as at the Record Date. For example, if you hold 20,000 units in the Fund on the Record Date, immediately after the demerger and Stapling you will hold 20,000 Stapled Securities.

What are my tax consequences if the Stapling proposal proceeds?

31 The demerger and Stapling will require the Fund make a distribution to Members equal to the net value of assets that will be transferred to RF Active, the repayment of the Vendor Finance Arrangement and the working capital requirements. This distribution will be applied, on behalf of Members, to subscribe for units in RF Active. That is, an estimated distribution $1,170,992 or about $0.01 per Fund unit will be made to Members.

• 32 Neither RFM nor its directors are registered under the Tax Agent Services Regime to provide tax advice to individual Members. Accordingly Members should take advice from an appropriately qualified advisor on the taxation implications of the arrangements, taking into account their particular circumstances.
• 33 The following taxation comments are in respect to Members that are Australian tax residents who hold their units on capital account for investment purposes and only considers the Australian tax position. Members who are residents of, or subject to taxation in, other countries should also obtain advice on the tax consequences of the demerger and Stapling in that country.

The tax status of the Fund

• 34 The separation of all remaining operational assets into RF Active in the year end 30 June 2014 resulted in the Fund only holding assets that derive rental or other 'passive' income. This should mean that the Fund will be a 'flow through' fund (rather than a public trading trust) for tax purposes from the income year ending 30 June 2015. A similar exercise was undertaken to remove the operational assets from the Fund's 100% subsidiary, the RFM Chicken Income Fund (CIF).
• 35 As the Fund is no longer a public trading trust, it is no longer liable for tax at the corporate tax rate and income from its operations and investments will be distributed on a 'pre tax' basis to Members each year.
• 36 While the Fund will no longer be able to distribute its profits in the form of franked dividends, the franking credits from any franked dividend received by the Fund may be passed on to eligible Members.
• 37 However, the Fund's other 100% owned subsidiary, the Australian Wine Fund, is a tax consolidated group with significant carry forward losses, and is unlikely to generate or distribute franking credits to the Fund in the foreseeable future.
• 38 It is therefore likely that tax will be paid by Members on their share of the net (taxable) income of the Fund each year, consistent with other investment funds that derive passive income (including for example REITs).

How will RF Active be taxed?

• 39 RF Active will be taxed as a public trading trust.
• 40 As a public trading trust, RF Active:
  • a. will pay tax at the corporate tax rate (currently 30%) on the profit it generates from its operational activities; and
  • b. may, from time to time, make distributions to Members of the profit generated from its trading activities.
• 41 Distributions by RF Active to Members will be regarded as dividends for tax purposes (which may be franked).

Tax consequences of distribution by the Fund

• 42 Where the Fund is no longer a public trading trust and it distributes its income (or creates a present entitlement of Members to all of the income it derives each year), distributions to Members will be made on a 'pre tax' basis. This means that each Member will include their proportionate share of the Funds net (taxable) income in their assessable income each year.
• 43 To the extent that distributions are of capital amounts, and do not represent net (taxable) income of the Fund they will not be taxable as ordinary income to Unitholders.
• 44 As capital, a distribution will proportionately reduce each Member's CGT cost base in respect of their Fund units, but should not increase the amount taxable as ordinary income to Members for the year.
• 45 In the event that the amount of a distribution is greater than the cost base of a Member's Fund units, the cost base will reduce to nil and the excess will give rise to a taxable capital gain.
• 46 The tax consequences of distributions made by the Fund are determined at the time of distribution.

On what terms will RF Active units be issued?

• 47 RF Active's constitution contains substantially the same provisions as the replacement constitution that it is proposed will be adopted for the Fund.
• 48 Accordingly, RF Active units will be issued on substantially the same terms as units in the Fund.

Constitutional amendments

• 49 Certain amendments are required to be made to the RFF Constitution in order to:
  • a. provide RFM with greater flexibility in operating the Fund as an ASX listed property trust;
  • b. facilitate Stapling of Fund units to units in the RF Active; and
  • c. deal with units held by Foreign Members.
• 50 In February 2014, the Australian Securities and Investments Commission (ASIC) released Regulatory Guide 134 'Managed Investments: Constitutions' (RG134), which specifies the matters which must be addressed in a registered scheme's constitution. Amendments are also recommended to the Constitution to bring it into line with RG134.
• 51 The current constitution contains a cap on the level of borrowings to no more than 50% of the gross asset value of the Fund excluding working capital borrowings. It is proposed as part of the constitutional amendments this cap be removed. The removal of this cap will allow RFM to increase borrowings and not breach the terms of the Constitution, however it is not the intention of RFM to increase borrowings to 50% of the gross asset value of the Fund. RFM considers it is appropriate the Constitution not contain such a restrictive covenant. The current borrowings with the bank limit the loan to security ratio to 50%.
• 52 The material Constitutional amendments are explained in the Schedule to this Explanatory Memorandum.
• 53 A full copy of the proposed replacement constitution can be downloaded at www.ruralfunds.com.au.

What is happening with Foreign Members?

54 There may be certain Members outside of Australia and New Zealand where the making of an offer of units in RF Active is prohibited or where the compliance costs of making an offer to an existing Foreign Member makes compliance uneconomic. In those circumstances, the units held by those Foreign Members will be transferred to a Sale Nominee appointed by RFM. The Sale Nominee will receive the distribution from RFF, subscribe for RF Active units and once Stapled will sell the Stapled Securities through the Sale Facility and remit the proceeds to the Foreign Members.

Sale Facility

• 55 Given the very small number of Foreign Members in RFF (approximately 0.32% as at 27 June 2014) and the legal restriction relating to making an offer to them of RF Active units, Foreign Members will not receive Stapled Securities.
• 56 Instead, Foreign Members will have the Stapled Securities to which they would otherwise be entitled sold through the Sale Facility in such a manner and at such a price and on such terms as the Sale Nominee determines in good faith (and at the risk of the Foreign Members). The Stapled Securities to be sold by the Sale Nominee will be sold on the ASX and there can be no assurance as to the price at which Stapled Securities will be sold. Sale proceeds will be paid to the Foreign Members immediately thereafter.

What happens if the resolution is not approved?

57 If Resolution 1 is not approved the Fund will continue in its current form and RFM will continue to manage the Fund for the benefit of Members.

Resolution 2: Termination fee

• 58 The Fund Constitution currently includes a clause which entitles RFM to an acquisition fee of 2% of the total purchase price of any assets acquired by the Fund. RFM has proposed the acquisition fee of 2% be removed and in its place a termination fee be incorporated into the Constitution. The termination fee will be equal to 1.5% of the gross asset value of the Fund. The fee will only be payable to RFM in the event that it is removed as responsible entity of the Fund, other than for failing to properly perform its duties.
• 59 The fee has been proposed as compensation to RFM for the removal of the acquisition fee and is only payable in the event RFM ceases to be the responsible entity of the Fund. The Rural Funds Group is RFM's major client and if RFM was removed as responsible entity, RFM would need to downsize its business accordingly. This fee would be applied to cover the costs of paying out office and equipment leases, staff redundancies and other similar expenses which would be payable in the event RFM was removed as responsible entity.
• 60 If Resolution 2, is not approved, the acquisition fee will remain and the termination fee will not be included in the Constitution for the Fund. Resolution 1 is not conditional on Resolution 2 being successful.
• 61 If Resolution 2 is approved a fee similar to this fee will be included in the RF Active constitution before RF Active units are issued to Members.

Key dates

Dispatch of Notice of Meeting, Explanatory Memorandum and Product DisclosureStatement to Members	15 September 2014
Last date for lodgement of proxy forms	6 October 2014 (by 10am AEST)
Meeting of RFF Members	8 October 2014 (by 10am AEST)

If Resolution 1 is approved

Last day of ASX trading of Fund units	9 October 2014
Deferred settlement trading of Stapled Securities begins	10 October 2014
Record Date	14 October 2014
Last date for registration of transfers of Fund units
Stapling commencement date	15 October 2014
New RF Active units allotted
Dispatch of holding statements for Stapled Securities	21 October 2014
Stapled Securities commence trading on a normal (T + 3) settlement basis	22 October 2014

• These dates are indicative only and may change.

Glossary

Almond Funds	Rural Funds Management Limited ACN 077 492 838 as responsibleentity for RFM Almond Fund 2006 ARSN 117 859 391, RFM AlmondFund 2007 ARSN 124 998 527 and RFM Almond Fund 2008 ARSN127 947 960.
ASIC	Australian Securities and Investments Commission.
ASX	ASX Limited ABN 98 008 624 691.
Combined Rural Funds Group	means RFF, RF Active and all their subsidiaries and controlled entitiesafter Stapling.
Constitution	means the constitution of the Fund.
Corporations Act	Corporations Act 2001 (Cth).
Foreign Member	means a person not resident in Australia, New Zealand, Hong Kong,Malaysia or the United Kingdom who RFM considers will participate inthe Sale Facility.
Fund	Rural Funds Group ARSN 112 951 578 to be renamed RuralFunds Trust.
Listing Rules	means the ASX Listing Rules.
Manager	means the responsible entity of the Fund, which is currently RFM.
Member	means a person who holds a unit in the Fund.
Record Date	14 October 2014 or such other date as nominated by RFM.
RF Active	means RF Active ARSN 168 740 805.
RF Active PDS	means the product disclosure statement for units in RF Active whichaccompanies this Notice of Meeting and Explanatory Memorandum.
RFM	Rural Funds Management Limited ACN 077 492 838.
RFM StockBank	means RFM StockBank ARSN 153 436 803.
Sale Facility	has the meaning set out in the Explanatory Memorandum.
Sale Nominee	the person independent of RFM appointed to sell the StapledSecurities on behalf of Foreign Members.
Stapled Securities	means one unit in the Fund Stapled to one unit in RF Active.
Stapling	means the act of combining the units in the Fund to units in RF Activeso they trade as a single security.
Vendor Finance Arrangement	means the financing arrangement as set out in theExplanatory Memorandum.

Schedule

Summary of Constitutional amendments

Resolution 1

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Fund name	Rural Funds Group.	Rural Funds Trust.	It is proposed that theFund's name be changedto Rural Funds Trust.If the stapling proposalis approved, the stapledentity will be referred to asRural Funds Group whichwill include the Rural FundsTrust and RF Active.
Assets held on trust	RFM must hold theFund's assets on trust forMembers.	No changes.	The Fund will continueto operate as a trust.The investment in RFMStockBank will betransferred to RF Active.However, the remainingassets of the Fund willcontinue to be held ontrust by RFM for the benefitof Members.
Trust divided into units	Beneficial interests in theFund are divided into units.Each unit confers an equalundivided interest in theFund as a whole and doesnot confer any interest inany particular asset.	No changes except thatwhile stapling applies, thenumber of units issued inthe Fund must be equal tothe number of RF Activeunits issued.	No material changesare proposed to thereplacement constitution.
Applying for unitsand options	The Manager mayissue units and optionsto acquire units atits discretion.	The Manager has thepower to issue units andoptions to acquire units.In addition, the Managerhas the discretion to issuepartly paid units. A partlypaid unit is a unit whereonly part of the capitalvalue of the unit is paid upfront by a Member. Subjectto the terms of	The replacementconstitution allows theManager to issue partlypaid units. The currentconstitution does not.Otherwise no materialchanges are proposed.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
		issue of the partly paidunits, the Manager maycall upon the Member topay further instalmentsof the capital value of theunit from time to time.Generally, Membersentitlements in relation topartly paid units will becalculated by reference tothe amount they have paidup on their partly paid unitsin proportion to the unpaidportion of their partlypaid units.
Issue price of units	The Manager is permittedto issue units at their netasset value less transactioncosts and a marketingfee. The Manager alsohas the discretion toapply a 50% discount tothe issue of units under arights issue or distributionreinvestment plan.	The replacementconstitution permits theManager to issue unitsat their net asset valueless transaction costs.The Manager will havediscretion to issue unitsat a 50% discount to theweighted average marketprice under a rights issuesor distribution reinvestmentplan. In addition, theManager will be given thepower to issue units ata discount of up to 50%to the weighted averagemarket price under aplacement offer or a unitpurchase plan.While stapling applies,the Manager will onlybe permitted to issuea unit in the Fund if acorresponding unit in RFActive is also issued to theapplicant. The Manager willhave discretion to allocatepart of the issue price fora stapled security to a unitin the Fund and a unit inRF Active.The Manager will not beable to charge marketingfees in connection with	The replacementconstitution providesthe Manager withadditional powers to issuediscounted offers underplacements and securitypurchase plans.RFM has removed its rightto charge marketing fees inconnection with the issueof units. Transaction fees,which constitute the 'buyspread', will continue toapply. As the Fund is nowlisted, it is also appropriatefor the Manager to issueunits relative to their tradingprice on the ASX. Withoutthese amendments it willbe difficult for the Fund toraise further capital. Otherproposed changes in thereplacement constitutionare required in order tofacilitate the staplingproposal.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
		the issue of units. Thereplacement constitutionallows the Manager toapply a fee reduction to theissue price of units.
Transfer andtransmission of units	Members may transferunits. Transfers must bein a form approved by theManager and will not beeffective until registered bythe Manager. The Managermay refuse to recordany transfer of unitswithout giving reasonsfor the refusal.	The replacementconstitution recognises thatwhilst the Fund is listed onthe ASX the Manager mayonly decline to process atransfer of units if requiredunder the ASX ListingRules or ASX SettlementOperating Rules. Thereplacement constitutionalso recognises that whileunits are quoted on theASX unit certificates willnot be issued.The replacementconstitution also dealswith the transmission of aMember's units in the eventof their death, insolvencyor mental incapacity.The replacementconstitution also allows theManger to assume thata person who is actingunder a power of attorneyon behalf a Member hasthe power to deal with thatMember's units.	The replacementconstitution limits thecircumstances in which theManager can prevent a unittransfer being processedwhilst units are quoted onthe ASX. The proceduresset out in the replacementconstitution regarding thetransmission of units inthe event of the death,insolvency or mentalincapacity of a Memberare consistent withstatutory requirements andtherefore will not changethe manner in which theFund is operated.
Redemption of interest	Currently Members canonly redeem their unitsin accordance with theterms of a withdrawal offermade by the Manager.Redemption proceedspayable to Members mustbe calculated based uponthe net asset value of a unitless transaction costs andan administration fee.	No changes except thatwhile stapling applies, thenumber of units issued inthe Fund must be equal tothe number of RF Activeunits issued.	The ASX Listing Rulesprohibit the redemption oflisted securities. For thisreason, the replacementconstitution containsprocedures to facilitatean on market buy backof units. For registeredschemes, the CorporationsAct specifies the termson which a withdrawaloffer must be made for anon listed scheme. Thereplacement constitutiongives the Manager the

Subject matter	Current constitution	Proposed replacementconstitution	Comments
			flexibility to determinewithdrawal processes incircumstances where thescheme is not registered.Under the replacementconstitution, the Managerhas opted not to imposeany administration fees onthe redemption of units.
Distributions of incomeand capital	The Manager maydetermine the net incomeof the Fund which is to bedistributed to Members.Members' entitlement todistributable income will bebased upon the number ofunits held by the Memberin proportion to the totalnumber of units on issue.The Manager may allowthe reinvestment ofdistributions in the Fund inexchange for a new issueof units.	In respect to thecalculation and paymentof distributions, thereplacement constitutioncontains provisions whichare comparable to thecurrent constitution.	No material changes.
Convening meetings	The Manager may at anytime convene a meetingof Members and mustdo so if required by theCorporations Act.	The Manager may at anytime convene a meetingof Members and mustdo so if required by theCorporations Act or theListing Rules.	No material changes.
Conduct of meetings	The Manager maydetermine the time andplace at which Membermeetings are convenedand the manner inwhich the meetingwill be conducted.	No material changes.
Quorum	The quorum for a meetingof Members is at leasttwo Members presentin person or by proxy,together holding at least10% of all units.	The quorum for a meetingat which an ordinary, aspecial resolution or anextraordinary resolutionis proposed, is twoMembers.	Other than a specialresolution to change theTermination Fee (refer tocommentary on Resolution2) a quorum for anymeeting is two members.
Chairman	The Manager may appointa person to chair a meetingof Members.	No material changes.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Proxies	The Manager maydetermine that anappointment of a proxyis valid even if it containsonly some of theinformation required underthe Corporations Act.Otherwise, the proceduresfor the appointment ofproxies will be as set out inthe Corporations Act.	The replacementconstitution provisionsdealing with proxiesare consistent with theCorporations Act.The replacementconstitution specifies thatvalid proxy forms for allMember meetings mustbe returned directly to theManager or its nominee.Otherwise, there are nomaterial changes.	The only material changeis that the replacementconstitution specifies thatproxy forms for all Membermeetings must be returneddirectly to the Manager orits nominee.
Voting	The current constitutiondoes not contain anyprovisions in relation toMembers voting rightshowever this is set out inthe Corporations Act.	Consistent with theCorporations Act, thereplacement constitutionprovides that on a showof hands, each Memberwill have one vote andon a poll each Memberwill have one vote foreach dollar investedin the Fund, based oncurrent unit value.	No material change.
Joint meetings	Not applicable.	The replacementconstitution provides thata Members' meeting maybe held in conjunction witha meeting of members ofRF Active.
Powers of the Manager	The Manager has broadpowers to deal with theFund assets and enter intocontracts of any kind onbehalf of the Fund.The Fund has a cap onthe level of borrowings tono more than 50% of thegross asset value of theFund excluding workingcapital borrowings.	No material changes otherthan the 50% borrowingcap has been removed.	The Manager has nocurrent intention ofincreasing the Fundborrowings in excess of50% of the gross assetvalue of the Fund excludingworking capital borrowings.
Manager's rights	The Manager and itsassociates may hold unitsin the Fund. Subject tothe Corporations Act, theManager may:	The Manager and itsassociates may holdand deal with interestsin the Fund.	The current constitutionand the replacementconstitution containcomparable provisions inrelation to related party

Subject matter	Current constitution	Proposed replacementconstitution	Comments
	a.deal with itself astrustee of another trustor in another capacity,an associate or withany Member;b.be interested in anycontract or transactionwith itself as trustee ofthe Fund or in anothercapacity, an associateor with any Member;andc.acting in the sameor similar capacity inrelation to any othermanaged investmentscheme.	Subject to theCorporations Act, theManager may deal withitself in any capacity, anassociate, including buyingan asset, selling propertyto the Fund underwritingan issue of interestsand paying any fee. TheManager may have aninterest in any contract,transaction with itself, anassociate and act in thesame or a similar capacityfor any other managedinvestment scheme.Whilst stapling applies,the Manager must considerthe interests of theMembers and membersof the stapled entities andoption holders as a wholeand not just the interest ofMembers of the Fund.	transactions. In all cases,the Manager will only bepermitted to enter intosuch transactions if ithas complied with theprocedures set out in theASX Listing Rules and theCorporations Act.The replacementconstitution containsadditional provisions whichallow the Manager to takeinto account the interest ofmembers of RF Active andoption holders.
Limitation of liability andindemnity	The Manager is not liablefor any loss suffered inany way relating to theFund except to the extentthat the Corporations Actimposes such liability.Subject to theCorporations Act, theliability of the Manager islimited to the Manager'sability to be indemnifiedfrom the assets.In addition, the Manager isentitled to be indemnifiedout of the assets forany liability incurred byit properly performingor exercising its powersor duties in relation tothe Fund.	The Manager is not liableto any person for matterssuch as:a.assets not maintainingor realising any specificvalue;b.not exercising anypower which isreasonably impracticalto exercise; andc.acting in good faith onthe advice or opinionor information obtainedfrom any person.The Manager is entitledto be indemnified out ofthe assets of the Fundfor all expenses, losses,damage and liabilities(whether actual contingentperspective or otherwise)incurred, arising out of or inconnection with the Fund.	No material change.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Fees and expenses	The Manager is entitled tobe paid the following fees:a.an application feeof up to 3% ofapplication money;b.a management fee of1.5% per annum of thegross asset value ofthe Fund;c.performance fee equalto 15% of the returnon equity in a financialyear that exceeds 15%per annum;d.farm management feeequal to 5% per annumof annual operatingcosts for farmingproperties;e.farm rental fee equal to5% per annum of theamount of annual rentalfor a farming property;andf.acquisition fee equalto 2% of the purchaseprice of an asset.The total amount of feesunder (d) and (e) abovemust not exceed 1% p.a.of the gross asset value ofthe Fund.In addition, the Manager isentitled to be reimbursedor to be paid from theFund, expenses associatedwith performing its dutiesas responsible entity.	The Manager is entitled tothe following fees:a.a management fee ofup to 1% p.a. of thegross asset value ofthe Fund;b.acquisition fee of upto 2% of the purchaseprice of an asset;c.asset management feeof up to 1% p.a. of thegross asset value ofthe Fund.Resolution 2 introduces theconcept of a terminationfee – see comments.	Other than the terminationfee (discussed below) themaximum fees RFM cancharge the Fund havebeen simplified.In the event Resolution 2is approved the acquisitionfee of 2% in (b) will beremoved.The stapling proposal andthe proposed constitutionalamendments required tofacilitate this can proceed,even if Members are notin favour of the proposedtermination fee.
Termination	The Fund terminates onthe earlier of:a.the 80th anniversary ofthe commencement ofthe Fund;b.the date specified bythe Manager; or	The termination provisionsin the replacementconstitution are consistentwith the Fund's currentconstitution except that itcontains provisions:a.that require the wind upto be completed as

Subject matter	Current constitution	Proposed replacementconstitution	Comments
	c.the date on whichthe Fund terminatesin accordance withanother provision of theconstitution or by law.Following the termination ofthe Fund the Manager hasto complete the wind up ofthe Fund within 180 daysand distribute any surplusassets to the Members.	soon as practical afterthe termination date;b.that allow theManager to collect allunpaid calls on partlypaid units;c.that allow the Managerto transfer assets toMembers, in the form ofan in specie distributionduring the wind upprocess; andd.that require theManager to give RFActive notice of theproposed termination.
Amendments to theconstitution	The constitution maybe amended by specialresolution of members orby deed executed by theManager.Section 601GC(1)(b) Corporations Actwill require that anyamendments approved bythe Manager not adverselyaffect members' rights.	The replacementconstitution provides thatthe Manager may amendthe constitution. Againthis would be subject tosection 601GC(1)(b) whichwould require that theamendments not adverselyaffect members' rights.In addition, membershave a statutory right toamend the constitutionby special resolutionunder section 601GC(1)(a)Corporations Act.	No material change.
Complaints	The Manager mustrespond to a complaint assoon as practicable and inany event within 14 days ofreceipt of the complaint.The Manager's complaintsofficer must investigate thecomplaint and respond tothe complainant as soonas practicable and in anyevent not more than 45days after receiving thecomplaint. The responsemust include:a.a final determination ofthe complaint;	The complaint's handlingprocedures in thereplacement constitutionare substantially the sameas that contained in thecurrent constitution.An additional provisionis included to allowcomplaints in relationto stapled securities tobe addressed.	No material change.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Listing Rule compliance	b.the remedies availableto the Member; andc.information regardingany further avenues forthe complaint.The constitution providesthat whilst the Fund islisted, despite anythingcontained in theconstitution, the Managermay not do anything inrelation to the Fund whichwould be inconsistent with	The replacementconstitution contains thesame clause.	This clause is required tobe incorporated in all listedentities' constitutions.
Unmarketable parcels	the Listing Rules.The current constitutiondoes not contain anycomparable clause.	The replacementconstitution permits theManager to sell or buyback on market, smallunmarketable parcels ofstapled securities on behalfof Members who hold anunmarketable parcel.An unmarketable parcel isa security holding worthless than $500. Thisclause allows the Managerto facilitate the sale ofunmarketable parcels onceevery 12 months.
Stapling provisions	The current constitutiondoes not contain anycomparable provisions.	The replacementconstitution provides thatthe stapling provisionswill override any otherinconsistent provisions inthe constitution.The stapling provisionswill come into effect fromthe date Fund units arestapled to RF Active units.Whilst stapling applies, theconsent of each stapledentity must be obtainedto any amendments tothe constitution whichaffects stapling.

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Failure to provideaccount details	No comparable clause.	The replacementconstitution provides that ifa Member fails to providebank account detailsfor the electronic fundstransfer of units within14 days after receivingnotification from theManager, the Managermay apply that Member'sdistribution entitlementsto the Fund's distributionreinvestment plan.
Foreign Members	No comparable clause.	The amendmentsempower RFM asresponsible entity of theFund to determine which(if any) Members residentin countries other thanAustralia and New Zealandare foreign members. Thisdecision will be based onthe costs of making theoffer of RF Active unitscontained in the productdisclosure statementcompliant with the localjurisdiction. Where aMember is designateda Foreign Member, thenRFM will appoint a salenominee on behalf ofthe Foreign Member,receive a transfer of theForeign Member's unitsin the Fund, receive thedistribution from the Fundand then subscribe forRF Active units. The salenominee will then sell theStapled Securities and paythe sale consideration tothe Foreign Member assoon as practicable afterthe sale is complete.	This provision is onlyexpected to apply to a verysmall (if any) number ofMembers who are residentoutside Australia or NewZealand. Those affectedForeign Members may atany time before the RecordDate sell their units onthe ASX.

Resolution 2

Subject matter	Current constitution	Proposed replacementconstitution	Comments
Termination fee	No comparable clause	The additionalamendments propose afee of 1.5% of the grossassets of the Fund payableto RFM in the event it isremoved as responsibleentity of the Fund. Thefee is intended to beused by RFM towardsthe cost of retrenchingstaff, outstanding office,equipment leases andsimilar expenses.The quorum provisionsof the constitution havealso been amended torequire that any meetingof Members called toamend the termination feeis two members holding orrepresenting in person, byproxy or attorney is at least50% of units by value.	The fee has been proposedas compensation to RFMfor the removal of theacquisition fee and the lossof its role as responsibleentity of the stapled entity.The Rural Funds Groupis RFM's major client andif RFM was removed asresponsible entity, RFMwould need to downsizeits business accordingly.This fee would be appliedto cover the costs ofpaying out office andequipment leases, staffredundancies and othersimilar expenses whichwould be payable in theevent RFM was removedas responsible entity.

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