Annual Report
for the year ended 30 June 2022
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About Rural Funds Management Limited (RFM)
Rural Funds Management Limited is the
responsible entity and manager of Rural Funds
Group. RFM is an agricultural fund and asset
manager established in 1997. The management
team includes specialist fund managers, finance
professionals, horticulturists, agronomists and
other agricultural managers. RFM’s company
culture is informed by its long-standing motto
“Managing good assets with good people”.
About Rural Funds Group (ASX: RFF)
Rural Funds Group is an agricultural Real Estate
Investment Trust (REIT) listed on the ASX under
the code RFF. RFF owns a diversified portfolio of
Australian agricultural assets which are leased
predominantly to corporate agricultural operators.
RFF targets distribution growth of 4% per annum
by owning and improving farms that are leased to
good counterparties.
Rural Funds Group (ASX: RFF) stapled group comprising:
Rural Funds Trust ARSN 112 951 578 and
RF Active ARSN 168 740 805
Responsible Entity: Rural Funds Management Limited
ACN 077 492 838 AFSL 226701
Issued on: 30 September 2022
Cover image: Almond trees in bloom, Tocabil orchard, Hillston NSW, August 2022.
Water storage at Mayneland, central Queensland, July 2022.
Table of contents
Letter from the Managing Director
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Fund overview
Sustainability
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ASX additional information
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Financial Statements
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Investor information
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04
06
10
20
22
98
Letter from the
Managing Director
Dear Unitholder,
We are pleased to present to you the Rural
Funds Group (“RFF” or “the Fund”) Annual
Report for the year ended 30 June 2022
(FY22).
Rural Funds Management (RFM) has pursued
two strategies since the Fund was listed to
improve asset values and increase the income
producing potential of certain assets. These
two strategies are improving the productivity
of farms and developing farms to higher and
better use. Both strategies featured in the
activities of the Fund during FY22.
Improving the productivity of farms
The Fund acquired $179 million of assets
during FY22 including cropping and
cattle properties in central Queensland,
chosen for their productivity improvement
potential.1 Throughout the year productivity
developments also continued on many of the
cattle and cropping properties owned by RFF.
At year end the Fund recorded $134 million
of valuation increases, with $105 million
attributable to cattle properties such as Natal,
Rewan, Comanche and Cerberus.
During the year the Fund entered into a
10-year lease with Australian Agricultural
Company (ASX: AAC) for the cattle properties
Comanche and Homehill. A 25-year lease was
also implemented with Clarke Creek Energy
Pty Ltd on the property Cerberus. This lease
is only for a portion of the property which is
unsuitable for grazing or pasture production.
The leased area will contain 17 wind turbines
as part of the broader Clarke Creek renewable
energy precinct.
Lease activity within the cropping sector
included a five-year lease extension on Lynora
Downs at the end of FY22, following the
implementation of productivity developments.
The success of cropping developments has
encouraged RFM to continue to expand
the number of assets within this sector.
Similar productivity developments to those
implemented on Lynora Downs are being
deployed on nearby cropping property
Mayneland. During FY22 the Fund acquired
an additional cropping property, Baamba
Plains, downstream from Lynora Downs and
Mayneland. Productivity developments will
begin on this property shortly before it is
presented to potential lessees.
As a result of these acquisitions, some
properties will be operated within the Fund
while productivity developments progress.
However, consistent with other leasing
arrangements entered in FY22, the strategy
remains to lease these assets after initial
development is complete. These initial
developments will provide the opportunity
for higher lease income and higher quality
lessees.
Developing properties to higher and better
uses
RFM continued to focus on developing
macadamia orchards in the Rockhampton,
Bundaberg and Maryborough regions of
Queensland, converting assets to more
profitable horticultural operations. Despite
rainfall impacting the development schedule,
477 ha of orchards were planted in FY22. A
total of 3,000 ha is expected to be planted by
year end 2024. An additional 2,000 ha is to be
developed in subsequent years.
Looking to FY23 and beyond
RFM will continue its focus on developing
macadamia orchards in Queensland and productivity
improvements on other recently acquired assets. Both
activities are expected to benefit property values and
income production in future years.
In an environment of rising inflationary expectations,
RFM continues to consider the impact of higher
potential debt costs. To provide some protection
the Fund has an average weighted hedge duration
of 8.6 years and an increased number of hedges
commencing in FY24. The Fund also has a majority
of leases that benefit from inflation, either through
CPI linked indexation clauses or market rent review
mechanisms.
FY23 forecast AFFO is 11.3 cpu.2 Additional AFFO
generation is expected as capital is deployed on
macadamia developments beyond FY23 and as other
assets in the development pipeline are leased. RFM
has confirmed FY23 forecast distributions of 11.73 cpu
plus 0.47 cpu franking credits.
We look forward to updating you during the year.
If you have any queries about your investment, we
encourage you to contact our Investor Services team.
Yours faithfully
David Bryant
Managing Director
Rural Funds Management Limited
Shortly after the release of the FY22 results, RFM
announced RFF had entered into agreements to lease
up to 3,000 ha of macadamia orchards for a 40-year
period.2 The lessee is a company managed by The
Rohatyn Group (TRG) on behalf of a joint venture
between TRG and a global institutional investor.
Two mature macadamia orchards were also acquired
during the year. These will be operated by the Fund
while a lessee is sought.
Adjacent to the macadamia developments in
Rockhampton, two properties were acquired and
leased in FY22. Mort & Co, Australia’s largest privately
owned beef lot-feeding company, has leased the
properties for a 20-year period. Subject to council
approval, Mort & Co proposes to develop a beef cattle
feedlot on one property with the other property to
produce crops for cattle feed.
Progressing sustainability initiatives
During the year, RFM progressed sustainability
initiatives and began reviewing the applicability of
various reporting frameworks. RFM are also assessing
emissions quantification for certain assets within
the Fund noting that most assets are under lessee
control who in turn are responsible for Scope 1 and 2
emissions.3
Several projects to better understand how
management decisions could reduce emissions or
how the Fund’s assets could participate in carbon
abatement were also progressed throughout FY22. A
section of this Annual Report details RFM’s process,
practices and future intentions with respect to
sustainability.
Reporting FY22 financial results
Earnings were approximately 52% higher on a per unit
basis4, primarily a consequence of higher valuations
and additional lease income. Adjusted property
assets increased by $338 million primarily because of
acquisitions and higher valuations of existing assets.
Similarly, the adjusted net asset value increased 24%
to $2.69 per unit.
Gearing at 30 June 2022 was 30.2%, which is at the
lower end of the target gearing range of 30–35%.
Adjusted funds from operations (AFFO), a measure
of cash flow generated by the Fund, was 11.7 cents
per unit (cpu). This is in line with previously forecast
distributions of 11.73 cpu.
Almond trees in bloom, Tocabil orchard, Hillston NSW, August 2022.
1.
2.
3.
4.
Includes Kaiuroo deposit of $18.5m which has a settlement period of up to November 2023.
TRG lease subject to Foreign Investment Review Board (FIRB) approval. The agreement is for an initial 1,200 ha, and an additional 1,800 ha expected in FY24,
subject to completion of the water supply for the Rockhampton orchards. FY23 forecast AFFO assumes FIRB approval is received and the lease commences (FY23
forecast AFFO if TRG lease does not proceed is 10.1 cpu).
Further information is contained in the RFM June 2022 Newsletter available at www.ruralfunds.com.au.
Earnings calculated TCI/weighted average units.
5
Fund overview
Sector information and asset map2
The portfolio of assets is diversified by
climatic zone and agricultural sector.
The Fund seeks to invest in sectors
in which Australia has a comparative
advantage and the manager, RFM,
has operating knowledge. Assets are
leased predominantly to corporate
agricultural operators.
Lease income growth is achieved
through indexation mechanisms,
productivity improvements and higher
and better use developments.
FY23f revenue by sector1
1
1
1
2
7
1
1
6
9
16
2
Cattle
Properties:
22
35%
35%
Description:
675,744 ha of breeding and
backgrounding land. 150,000 head
feedlot capacity.
FY22 value:
$534.7m
FY23f revenue:
$32.1m (35%)
Corporate and
listed lessees:
Almonds
Properties:
3
32%
Macadamias
13%
Properties:
17
Cattle
Cropping
Vineyards
Almonds
Macadamias
Other
1.
Updated forecast 12 September 2022. Figures shown are subject to rounding.
Includes income from annual water allocation sales, revenue from owner
occupied properties and agistment. “Other” includes: other short-term leases
and income from annual water allocation sales. Farming operations AFFO
contribution represents 6% FY23f from cattle, macadamias and cropping
sectors. Sector percentages include forecast AFFO contributions from owner
occupied properties including Beerwah and Bauple (macadamias); unleased
Maryborough properties and Baamba Plains (cropping); Yarra and Cerberus
(cattle). Includes The Rohatyn Group (TRG) macadamias lease which is
subject to FIRB approval.
New planting material at Glendorf macadamia orchard
Maryborough, Queensland, April 2022.
Description:
1,006 ha of mature orchards and
3,133 ha of maturing orchards.
Description:
736 ha of mature orchards, 477
ha of newly planted orchards and
523 ha in development phase.
FY22 value:
$400.0m
FY23f revenue:
$29.7m (32%)
Corporate and
listed lessees:
Cropping
11%
Properties:
19
Description:
15,200 ha of irrigated cropping
and dryland cropping land.
FY22 value
$186.9m
FY23f revenue:
$10.3m (11%)
Corporate and
listed lessees:
FY22 value:
$178.3m
FY23f revenue:
$11.9m (13%)
Corporate and
listed lessees:
Vineyards
5%
Properties:
7
Description:
666 ha of mature vineyards.
FY22 value:
$60.0m
FY23f revenue:
$4.2m (5%)
Corporate and
listed lessees:
2.
Shaded areas denote climatic zones differentiated by rainfall seasonality (source: Bureau of Meteorology); see Climatic Diversification discussion paper dated 20
June 2016. Numbers in the circles/boxes on map show number of assets. Blue square boxes denote cattle feedlots. Cattle property Kaiuroo, which has a settlement
period of up to November 2023, included in number of properties; value of deposit and interest on deposit included in FY22 value and FY23f revenue. FY23f
revenue includes AFFO contribution from farming operations from owner-occupied properties that RFF is currently operating (Beerwah and Bauple –Macadamias;
unleased Maryborough properties and Baamba Plains –Cropping; Yarra and Cerberus –Cattle). Other income of 4% not shown. Includes The Rohatyn Group (TRG)
macadamias lease which is subject to FIRB approval.
7
Financial results and portfolio highlights
Financial results
Portfolio highlights
Earnings per unit
55.58 cents1
FY23f AFFO per unit
11.3 cents3
FY23f distribution per unit
11.73 cents
plus 0.47 cent franking credit
Gearing
30.2%5
Portfolio of assets
$1.5b2
Adjusted NAV per unit
$2.692
Number of properties
684
WALE
11.8 years6
Key activities by sector
Cattle
• Entered a 10-year lease with Australian Agricultural Company (ASX: AAC) for two existing
properties.
• Entered a 20-year lease with Mort & Co for two properties acquired during the period.
• Entered a 25-year lease with Clarke Creek Energy Pty Ltd for a portion of an existing
property.
JBS Guarantee investment expanded from $100m to $132m.
•
• Acquired two cattle properties to begin productivity improvements prior to seeking lessees.7
Cropping
• Extended lease with existing joint-venture lessee Queensland Cotton and RFM for five
years.
• Acquired a cropping property to begin productivity improvements prior to seeking a lessee.
Macadamias
• Subject to Foreign Investment Review Board (FIRB) approval, entered a 40-year lease
with The Rohatyn Group (TRG) for up to 3,000 ha of macadamia orchards in Bundaberg,
Maryborough and Rockhampton.8
• Acquired two mature macadamia orchards and additional development sites.
Pivot irrigation at Lynora Downs, central Queensland, February 2022.
Weighted average lease expiry (WALE)6
WALE = 11.8 years
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY37
FY38
FY42
FY46
FY63
Earnings calculated TCI/weighted average units.
Assets adjusted for the independent valuation of water entitlements which are recognised at the lower of cost or fair value on balance sheet.
AFFO assumes FIRB approval is received and the TRG lease commences (FY23 forecast AFFO if TRG lease does not proceed is 10.1 cpu). Assumes one-month
BBSW of 3.5% from January 2023 to June 2023.
Cattle property Kaiuroo, which has a settlement period of up to November 2023, included in number of properties.
Gearing calculated as external borrowings/adjusted total assets.
Updated forecast 12 September 2022, assumes FIRB approval and the TRG lease commences. WALE is calculated as the FY23 attributable forecast rent and the
year of lease expiry.
One property (Kaiuroo) has a settlement period of up to November 2023.
TRG lease announced 12 September 2022. The agreement is for an initial 1,200 ha, and an additional 1,800 ha expected in FY24, subject to completion of the water
supply for the Rockhampton orchards.
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9
Sustainability
During FY22, Rural Funds Management Limited (RFM) continued
to make progress on sustainability initiatives.
RFM’s aim is to provide useful information to investors about
its sustainability initiatives, particularly the environmental and
social aspects which RFM deems to be relevant to the Rural
Funds Group (RFF, the Fund). Appropriate governance is another
important element of sustainability and investors are encouraged
to refer to the Corporate Governance Statement. For further
information, visit the RFM website at www.ruralfunds.com.au.
During FY22, RFM completed a detailed review of various
sustainability reporting frameworks. As a result of this review,
RFM has decided to commit to several actions including:
•
•
•
•
disclosure of activities that align with the United Nations
Sustainable Development Goals (UN SDGs) in the FY22
Annual Report
allocation of oversight for sustainability within RFM's
leadership team
an update to the Corporate Governance Statement to outline
RFM’s approach to managing material exposures with
specific refence to climate change exposure
presentation of climate-related considerations with reference
to the Task Force on Climate-related Financial Disclosures
(TCFD) framework and a review of further aspects of the
TCFD during FY23.
RFM also aims to implement practices and projects which benefit
the environment and address climate change. Updates of the
various initiatives RFM is undertaking to consider greenhouse gas
emission reduction, carbon sequestration and carbon storage, are
provided in the following pages.
United Nations Sustainable Development Goals
The United Nations Sustainable Development Goals (UN SDGs) are a global plan for environmental
sustainability and social progress. RFM activities are addressing the UN SDGs through appropriate land
and water stewardship, the production of sustainable food and fibre, investment in sustainability solutions
and ensuring desirable, fair and equal opportunity working conditions. A summary of activities relevant to
the UN SDGs are presented below.
• Where possible, implementing best practice husbandry and horticultural practices to increase
productivity.
Owning agricultural assets that contribute to sustainable food production.
•
•
Improving our approaches to promote gender equality.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Increasing the use of renewables, where feasible, by promoting the phasing out of diesel pumps and
utilising solar at cattle watering points.
Improving work health and safety approaches to protect employees.
Providing a range of financial and non-financial benefits, and wellbeing initiatives.
Implementing recruitment approaches that promote equal opportunity.
Providing skills development and training opportunities to all staff.
Improving on farm circularity principles to increase resource efficiency.
Improving fertiliser application techniques to reduce potential for nutrients loss and improve productivity.
Trialling resource efficient macadamia cultivars capable of producing higher yields and high-quality nuts.
Improving farm water use efficiency through investment in sustainable irrigation solutions and
implementation of improved water use practices.
Quantify and review baseline emissions of assets for which the Fund receives the operational proceeds,
that can inform management practices.
Acquiring and developing assets using practices that consider climate change risks.
Review of reporting frameworks eg TCFD.
Increasing our on-farm biodiversity by restoring vegetation and excluding stock from certain areas.
Protecting significant species.
Reducing herbicide and pesticide application through precision agriculture techniques.
Learning how to better capture the co-benefits of our on farm natural capital.
lessees to promote food security
Establishing and promoting effective partnerships. Including with:
∙ critical service providers and lessees to implement new energy solutions
∙
∙ experts to improve resource efficiency
∙ community groups to improve regional services and
∙ specific charitable organisations.
Wheat crop at Baamba Plains, central
Queensland, August 2022.
10
11
Environment and climate change
RFM understands its environmental responsibility as
custodians of agricultural assets. RFM acknowledges
that appropriate stewardship is critical to the
successful long-term, sustainable performance of the
Fund’s assets. RFM acknowledges the risk of climate
change and the need for continued environmental
stewardship.
The Task Force on Climate-related Financial
Disclosures (TCFDs) framework is built on four pillars
of disclosure: governance, strategy, risk management,
and metrics and targets. Using this framework,
RFM has presented how climate-related risks and
opportunities are currently considered, as well as
actions planned to be undertaken in FY23.
Governance
Governance of climate-related risks and opportunities.
The approach to managing material climate-related risks is through RFM’s Risk Management Policy (Policy). The Board
has ultimate responsibility for overseeing and monitoring compliance of the risk management framework listed in the
Policy. The Internal Compliance Committee reviews current risk reports to provide quarterly updates to the Board with
the Company Secretary responsible for overseeing compliance of the Policy. Some climate-related risks are already
captured and managed within RFM’s risk management system, which is an organisation-wide system that assists in the
identification and reporting of various risks.
FY22 progress:
FY23 planned actions:
• Updated the Corporate Governance
Statement to reference climate and
environmental risk considerations in
response to ASX recommendation 7.4.
•
•
Review Risk Management Policy to consider if there is
appropriate reference to climate-related risks and update the
risk management system accordingly.
Review Environmental Policy to further consider appropriate
climate-related risks.
Strategy
Strategies to address actual and potential impacts of climate-related risks and opportunities.
RFM has a climatic diversification strategy to mitigate the risks climate change could present to the Fund.
RFM considers that climate change may present risks for the Fund, primarily in the form of residual risk of the Fund’s
assets at the end of the lease terms. External valuations consider these types of factors as well as other risks when
determining the valuations of the assets.
Efforts to mitigate and adapt to climate change may also produce opportunities for the Fund - these will vary depending
on region and commodity.
When acquiring assets, RFM considers data such as long-term historical temperature, rainfall, flood risk, fire risk, water
availability and water reliability. Development of assets considers these factors as well as appropriate infrastructure (eg
irrigation systems) and asset design.
FY22 progress:
FY23 planned actions:
•
•
•
Implementation of an enhanced risk
management system.
Research of initiatives that either reduce
greenhouse gas emissions or store
carbon in vegetation or soil (see case
study).
Established sustainability responsibility
within the leadership team and
additional internal resources to focus on
sustainability objectives.
•
•
Review baseline emissions of assets for which the Fund receives
the operational proceeds that can inform management practices.
Review Environmental Policy to further consider appropriate
climate-related risks.
Dryland wheat at Lynora Downs, central Queensland, July 2022.
Risk management
Climate-related risk identification, assessment and management.
RFM considers climate-related risk in assessing acquisitions, developments and operational activities and manages
them through various strategies as outlined under "Strategy".
Where applicable, lessees are required to manage certain climate-related physical risks (eg fire hazard) and adhere to
best practices to reduce the impact on biological assets (eg almond trees).
FY22 progress:
FY23 planned actions:
•
Implemented an enhanced risk
management system.
•
•
•
Review Risk Management Policy to consider if there is appropriate
reference to climate-related risks and update the risk management
system accordingly.
Review Environmental Policy to further consider appropriate climate-
related risks.
Review additional processes which consider climate change risk
assessment in asset selection.
Metrics and targets
Metrics and targets to assess and manage climate-related risks and opportunities.
As an agricultural real estate investment trust most RFF assets are leased. The emissions produced by these assets are
under the operational control of lessees. In accordance with the NGER Act, Scope 1 emissions (from the direct result
of activities) and Scope 2 emissions (indirect from the consumption of energy) are reported by lessees, not the Fund.
To inform management practices of assets from which the Fund receives the operational proceeds, RFM intends to
commence quantification and the review of baseline emissions. This data may also assist with the consideration of any
appropriate future metrics or targets.
FY22 progress:
FY23 planned actions:
•
Identified assets for which emissions
will be quantified.
• Quantify and review baseline emissions of assets for which the Fund
receives the operational proceeds, which can inform management
practices and the consideration of any appropriate targets.
Continue research for opportunities to increase on-farm carbon
storage, on properties managed by RFM and those which are leased.
Continue to work with lessees to reduce emissions (eg renewable
energy projects) as applicable.
•
•
12
13
Case study: Greenhouse Gas (GHG) reduction
research and initiatives
RFM has continued to research initiatives that seek to
understand, quantify, and reduce emissions produced
in agriculture. RFM is reviewing several methodologies,
including beef herd management, soil carbon
sequestration, vegetation as well as emissions and
renewable energy assessments.
Beef herd management – cattle properties
During FY20, RFM, in conjunction with Meat and Livestock
Australia (MLA), undertook an initial assessment of the
emissions intensity of Mutton Hole, Rewan, Comanche
and grazing land in NSW using the Farm Greenhouse
Accounting Framework Tools developed by The University
of Melbourne under the PICCC. This assessment was
conducted by one of Australia’s leading experts in
GHG emissions and the carbon balance of farms. RFM
is updating this assessment to capture trend data for
emissions, year on year, noting, some of these properties
are now leased and will be excluded.
During FY23, RFM will internalise emissions tracking to
improve monitoring and decision-making.
Soil carbon sequestration – cattle properties
Improving soil carbon sequestration involves implementing
improved management activities in grazing, bare fallow or
cropping land to store carbon in the soil. The efficacy of
these changes is determined through soil sampling which
establishes existing soil carbon levels and changes over
time.
During FY22, RFM arranged a feasibility study of a soil
carbon project for cattle properties, and commenced a
baseline soil carbon analysis on other suitable properties.
These properties were leased in FY22 however the project
is expected to continue.
Vegetation – various property types
Vegetation projects involve reforestation, revegetation
or protecting native vegetation. These projects take
carbon dioxide from the atmosphere and store it in
vegetation while they grow.
During FY22, RFM engaged a firm to assess the
feasability of tree planting on properties within the
RFF portfolio. This project will continue in FY23.
Emissions assessment – macadamia orchards
Building on the activities undertaken in FY21, RFM
engaged a firm to establish baseline carbon storage
and emissions data from mature macadamia orchards
owned by RFF. This data will be used to quantify
the impacts that changes to orchard management
practices have on net emissions.
Renewable Energy – various property types
Almond orchard solar installation:
RFM has worked with AGL and Olam to assist in
developing a renewable energy system for the
Kerarbury almond orchard.
The system proposed comprises a 6 MW (megawatt)
solar array and a 4.3 MWh (megawatt hour) battery
which will produce approximately 12,000 MWh per
year. The system is expected to provide renewable
energy to move large volumes of water which are
required to irrigate the almond trees. The project is
projected to lower GHG emissions by approximately
9,300 tonnes of CO2 equivalent annually.
Solar pumps:
At the Mutton Hole and Oakland Park cattle
properties, dams have been fenced and additional
solar pumps installed to improve the sustainability of
operations and reduce emissions.
Mustering cattle at Mutton Hole station,
Carpentaria, northern Queensland, July 2021.
14
15
Measuring tree growth at Glendorf macadamia orchard, Maryborough Queensland, February 2022.
Case study: Resource-efficient macadamia orchards
In FY22, RFM established an orchard monitoring
project. Under the project, orchard metrics necessary
for precision agronomic management are collected
and combined with remote real-time digital monitoring
of plant, soil, and environmental variables to monitor
yield in mature orchards. Real-time digital data is
captured through sap flow meters, soil moisture
monitoring probes, and weather infrastructure located
in the orchard. This information, combined with
yield data, has been used to modify practices and
improve nutrient efficiency. Further improvements are
expected to be realised as the project progresses.
Additionally, RFM, in collaboration with The University
of Queensland, intends to begin macadamia tree
cultivar trials on the Fund’s properties. These trials
seek to develop resource efficient cultivars capable of
producing higher yields and high-quality nuts.
RFM is also supporting the implementation of
circularity principles on mature orchards to ensure that
every part of the macadamia tree and nut is reused
or recycled, with little or nothing going to landfill.
Actions include composting organic waste, including
macadamia husk, pruning waste and weeds such
as mistletoe. This occurs on-farm and incorporates
compost into the topsoil across the tree rows. This
compost increases carbon levels and improves water-
holding capacity of the soil.
Protection of endangered Sandhill Pine Woodland,
Tocabil, Hillston NSW, September 2022.
Case Study: Valuing biodiversity - Tocabil
RFM and the Western Local Land Services (WLLS)
have begun a project to protect and enhance the
endangered Sandhill Pine Woodland on the Fund’s
property, Tocabil.
In August 2022, RFM and WLLS agreed to enact
the Tocabil Sandhill Pine Woodland Endangered
Ecological Community Restoration project.
The project sits under the NSW Government’s
Environmental Trust program and will work to
protect the 95-ha area of the Sandhill Pine Woodland
on Tocabil, which is listed as an Endangered
Ecological Community (EEC) under the Biodiversity
Conservation Act 2016.
RFM and WLLS will regenerate the ecological
community by direct seeding constituent endemic
species, controlling pest rabbits and weeds and
managing stock grazing pressure. This work aims
to progress targets set by the NSW Government for
this EEC and is a collaborative effort from Local Land
Services, Greening Australia, Australian Network
for Plant Conservation, Aboriginal communities and
Department of Planning and Environment.
Social
RFM’s guiding motto “managing good assets with
good people” speaks to the importance of our
people and the value we place on their contribution.
We select our people for their experience and
passion for the agricultural industry and our
business, and their respectful, precise, diligent,
honest, and ethical approach to work.
Employee benefits
We respect our people, value, and reward their
contribution. This is achieved by offering a range of
financial and non-financial benefits, and wellbeing
initiatives. These are presented in Figure 1.
Figure 1: Financial and non-financial benefits and
wellbeing initiatives
RFM corporate staff, Canberra, June 2022.
Financial benefits
Non-financial benefits
Wellbeing benefits
• Competitive remuneration
• Discretionary bonuses
• Primary and secondary
•
Flexible work options
• Professional development
courses
carer paid parental leave1
• Study support (financial and
• Paid domestic violence
leave)
leave
• Salary sacrifice options
including novated car
leases, superannuation,
and purchased leave
• Attendance at conferences
• Professional memberships
• Salary continuance insurance2
•
• Recruitment referral program
Life insurance2
• Employee Assistance
Program, including
five sessions annually
for counselling/
support
• Social activities
• Professional services
and other support for
domestic violence
situations
Diversity and inclusion
We recognise that there is gender and cultural
disparity in the agricultural industry. We continue
to strive to remove bias from our recruitment
processes. Our primary target is to ensure the
candidate pool at each stage of recruitment is
reflective of the diversity mix of total applications
received.
Using a mix of approaches, we are striving to improve
our gender and diversity mix. RFM has a Diversity
Policy in place which is overseen by the National
Manager – People and Safety. RFM’s business
includes corporate staff working primarily from
Canberra and Sydney offices as well as operational
staff in the macadamia, livestock, and cotton sectors.
Additionally, we are actively building a pipeline
of potential future employees through targeted
recruitment strategies, by engaging with university
and/or secondary school students, industry, and
regional events. These events provide us with
opportunities to promote agriculture, financial
services, horticulture, livestock and cropping
industries to relevant groups of potential future
employees.
We have obtained approval as a standard business
sponsor and can recruit internationally.
RFM’s corporate staff (the category most relevant
to the Fund) are comprised of 60% male and 40%
female employees (throughout the year these ranges
were 60% to 67% male and 33% to 40% female).
RFM’s leadership team is comprised of seven
members; five of whom are male and two female.
RFM’s Board is comprised of five members; four of
whom are male, and one female.
The Board receives bi-annual data on the gender
diversity mix of the various business units and
committees within RFM.
16
1.
2.
Subject to qualifying criteria.
Permanent employees working over 15 hours per week and under age 65.
17
Learning and development
The continual development of our people's
skills and expertise is fundamental to allow us
to respond to and leverage change as it occurs
within our industries. Additionally, development
of our people allows us to work more precisely
and excel at improving and managing our assets.
We are proud of the training and development
opportunities we provide for our people. These
include attendance at conferences, external
courses, internal courses delivered by external
and internal facilitators, and on-the-job training.
Formal study is also supported, both financially
and by way of paid leave to complete study
requirements. Vocational education, including
traineeships are encouraged in key roles, and
several staff commenced and/or completed these
qualifications over the last year.
Our focus on employee development is integral
to being able to work more precisely and achieve
better and safer outcomes. Precision is an
important element of our culture and an area
where we have focused over the last two years.
Doing precise work provides many benefits,
including achieving a safer workplace. Employee
development activities support our employees’
progression through the business, with many
employees developing and demonstrating the
skills required to move into more senior roles.
Looking to the future, we will continue to focus
on being more precise. However, we will also
focus on other key areas where we can improve
our performance. We will turn our attention to
upskilling our existing and emerging leaders,
developing their management and leadership
capacity, and improving cultural understanding
for Indigenous people. In some of our operational
areas, there are large pockets of Indigenous
people, and their participation in our workforce
has increased. We value the diversity this brings to
our workforce. However, it has been identified that
this is an area where we need to further develop
our skills and engage more broadly, to ensure the
best outcomes can be achieved for our Indigenous
people and the business.
In conjunction with developing our internal
capacity, we are also networking with regional
councils and Indigenous groups to identify how we
can provide employment opportunities and assist
in developing Indigenous and local community
skills. We believe a collaborative approach will
yield good outcomes for our business and the
wider community.
Inspecting newly planted macadamia trees, Glendorf,
Maryborough Queensland, April 2022.
Safety
During the year, the implementation of our
online safety management system (SMS) was
expanded beyond its core functions and we
began implementing additional features. This
will bring all safety policies, procedures, risk
assessments, meetings, machinery inspections
and other safety tasks to the online environment,
making it easier and more precise for our people
to access and provide information. Additionally,
we continued to monitor for better and more
precise approaches to safety and implemented
these wherever practical. The Board receives
monthly updates on all safety incidents.
The Fund’s lessees are also required to comply
with safety and environmental obligations,
and these are included in our leases. We
reviewed and strengthened our engagement
processes and management of contractors,
many of whom work on the Fund’s properties
undertaking development activities. Contractors
have access to the online safety system for
important induction and safety information and
to provide key documents. The streamlining
of the SMS included guidance for our people
about consulting with managers and monitoring
contractors on the ground.
RFM staff at Kerarbury almond orchard, Riverina NSW, April 2022.
Community support
Supporting our local communities and organisations,
particularly where there is a connection with
the agricultural sector, our organisation, or our
employees, is very important to us. During the last
year we have supported the following groups:
•
•
•
•
•
•
•
The Children’s Medical Research Institute
Meg’s Children
Beyond Blue
Hartley Lifecare
Gogango community
Tahen Agricultural Project
Employee sporting teams
More information about these groups is available on
the RFM website.
Looking to the future, we will continue to support
our local communities and other groups that
have a direct impact in the agricultural sector
and agricultural communities. A key focus will
be promoting and supporting activities in the
agricultural sector and strengthening our Indigenous
engagement and support. We will actively look to
support initiatives that meet these criteria and allow
us to make a positive impact.
Rice crop at Tahen, Battambang region,
Cambodia, January 2022.
18
19
ASX additional
information
Additional information required by the ASX Limited (ASX) Listing Rules and not disclosed elsewhere in
this report is set out below. This information is effective as at 9 September 2022.
Distribution of equity securities
Holding size
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Unitholders
4,747
6,187
2,635
3,791
193
Class
Ordinary fully stapled securities
Ordinary fully stapled securities
Ordinary fully stapled securities
Ordinary fully stapled securities
Ordinary fully stapled securities
Substantial Unitholders
Unitholder
The Vanguard Group, Inc
Argo Investments Limited
Number of units
36,322,226
19,170,328
Holders of less than marketable parcels
%
9.5%
5.0%
Twenty largest unitholders
Unitholder
HSBC Custody Nominees Australia Limited
J P Morgan Nominees Australia Pty Limited
Argo Investments Limited
CiITICORP Nominees Pty Ltd
Netwealth Investments Limited
Rural Funds Management Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
Bryant Family Services Pty Ltd
One Managed Investment Funds Ltd
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
SCCASP Holdings Pty Ltd
BNP Paribas Nominees Pty Ltd ACF Clearstream
Neweconomy Com Au Nominees Pty Limited <900 Account>
BNP Paribas Nominees Pty Ltd
Boskenna Pty Ltd
DGMH Super Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
CITICORP Nominees Pty Ltd
Number of units
65,391,947
48,817,649
19,170,328
17,318,295
13,093,978
12,538,659
10,122,417
8,229,756
3,768,012
2,800,000
2,775,553
1,723,632
1,663,073
1,499,726
1,459,587
1,425,769
1,353,044
960,407
943,281
916,488
%
17.071%
12.744%
5.005%
4.521%
3.418%
3.273%
2.643%
2.148%
0.984%
0.731%
0.725%
0.450%
0.434%
0.392%
0.381%
0.372%
0.353%
0.251%
0.246%
0.239%
The number of holders of less than marketable parcels, being $500 based on the ASX unit closing price
of $2.55 as at 9 September 2022 is set out below:
On-market buy-back
RFF confirms there is no on-market buy-back facility in operation.
Number of unitholders
741
Number of units
37,484
Voting rights
The voting rights attaching to the ordinary units, set out in section 253C of the Corporations Act 2001,
are:
(i) On a show of hands, each member of a registered scheme has one vote; and
(ii) On a poll, each member of the scheme has one vote for each dollar of the value of the total interests
they have in the scheme.
Securities exchange
The Fund is listed on the ASX. The ASX reserves the right (but without limiting its absolute discretion) to
remove Rural Funds Trust (RFT), or RF Active (RFA) from the official list if any of their securities cease to
be “stapled” together, or any securities are issued by RFA which are not stapled to equivalent securities
in RFT, or any securities are issued by RFT which are not stapled to equivalent securities in RFA.
20
21
Financial
Statements
for the year ended 30 June 2022
Rural Funds Group
Contents
Corporate Directory
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
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
Directors’ Declaration
Independent Auditor’s Report
Additional Information for Listed Public Entities
23
1
24
2
35
13
36
14
38
16
40
18
41
19
42
20
90
68
91
69
76
Rural Funds Group
Corporate Directory
Registered Office
Responsible Entity
Directors
Level 2, 2 King Street
DEAKIN ACT 2600
Rural Funds Management Limited
ABN 65 077 492 838
AFSL 226701
Level 2, 2 King Street
DEAKIN ACT 2600
Ph: 1800 026 665
Guy Paynter
David Bryant
Michael Carroll
Julian Widdup
Andrea Lemmon
Company Secretary
Emma Spear
Custodian
Auditors
Share Registry
Bankers
Australian Executor Trustees Limited
ABN 84 007 869 794
Level 19, 60 Castlereagh Street
SYDNEY NSW 2000
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
BARANGAROO NSW 2000
Boardroom Pty Limited
Level 12, 225 George Street
SYDNEY NSW 2000
Ph: 1300 737 760
Australia and New Zealand Banking Group Limited (ANZ)
242 Pitt Street
SYDNEY NSW 2000
Rabobank Australia Group
Darling Park Tower 3
201 Sussex Street
SYDNEY NSW 2000
National Australia Bank (NAB)
Level 6, 2 Carrington Street
SYDNEY NSW 2000
Stock Exchange Listing
Rural Funds Group units (Rural Funds Trust and RF Active form a
stapled investment vehicle) are listed on the Australian Securities
Exchange (ASX)
ASX Code
RFF
22
1
23
Rural Funds Group
Directors’ Report
30 June 2022
Rural Funds Group
Directors’ Report
30 June 2022
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 2022.
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.
Principal activities and significant changes in state of affairs (continued)
In December 2021, the Group completed the acquisition Beerwah and Bauple, consisting 475ha of mature
macadamia orchards located in south-east Queensland, for $66.6m including transaction costs, associated plant
and equipment and shares in Marquis Macadamias Limited.
In December 2021, the Group renegotiated and increased its core debt facility to $520,000,000 (2021:
$380,000,000). As part of this, the maximum loan to value ratio requirement was increased to 55% (2021: 50%).
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.
In January 2022, the Group completed the disposal of two Maryborough cropping properties for $3.8 million in
exchange for additional land on a Maryborough macadamia property and cash consideration valued at $3.8 million.
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
David Bryant
Michael Carroll
Julian Widdup
Andrea Lemmon
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed on 1 November 2021)
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. 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
Groups also carries out cropping and macadamia operations on an interim basis for unleased properties and
properties under development.
The Group also provides a guarantee to J&F Australia Pty Ltd (J&F), a wholly owned subsidiary of RFM, 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 July 2021, the Group completed the sale of surplus land on Kerarbury for approximately $1.6m.
On 2 August 2021 the Group completed a fully underwritten equity raise for $100.0m to fund the development of
1,000ha of macadamia orchards, the acquisition of cattle properties to be leased by corporate lessees, and the
acquisition of 8,338 megalitres (ML) of Lower Murrumbidgee ground water entitlements.
In August 2021 the Group completed the purchase of 8,338ML of Lower Murrumbidgee ground water entitlements
for approximately $38.4m including transaction costs. The water entitlements are leased to a private farming
company for a term of five years.
In November 2021 the Group leased an area on the Nursery Farm property in Bundaberg, Queensland to an
external operator, Dalwood Nursery Pty Ltd. The arrangement provides a supply of macadamia trees to RFF to be
planted on various developments in Queensland including Bundaberg, Rockhampton, and Maryborough.
In November 2021, the Group completed the acquisition of Baamba Plains, a 4,130ha cropping property located
in central Queensland for $34.0m including transaction costs and including $2.5m of associated plant and
equipment.
In November 2021, the Group paid a $17.2m deposit on Kaiuroo, a 27,879ha aggregation of four cattle and
cropping properties located in central Queensland. An extended settlement date of up to two years has been
negotiated, allowing RFM to begin productivity developments and to seek a lessee prior to settlement.
In December 2021, the Group acquired The Pocket, to be managed as part of the existing Yarra property, a 1,917ha
cattle and cropping property located near Rockhampton, Queensland for $14.6m including transaction costs and
associated plant and equipment.
In December 2021, the Group completed the acquisition of the Coolibah and River Block cattle properties totaling
724ha, located near Rockhampton, Queensland for $4.9m including transaction costs. The properties will be
managed as one property.
In January 2022, the $10 million secured loan and outstanding amounts on the $5 million cattle leasing arrangement
provided to the Camm Agricultural Group were repaid in full.
In February 2022, RFF unitholders voted in favour of increasing the J&F guarantee from $100 million to $114
million, with approval for the guarantee to increase to $132 million.
In February 2022 the National Australia Bank Limited (NAB) was included in the Group’s banking syndicate as part
of the tranche expiring in November 2023.
In February 2022, the Group entered into a 10-year lease with Australian Agricultural Company for the Comanche
and Home Hill properties to commence in May 2022.
In March 2022, the Group completed the acquisition of Thirsty Creek, a 762ha cattle property located near
Rockhampton, Queensland for $6.5m including transaction costs.
In April 2022, the Group increased the J&F guarantee from $114 million to $132 million to facilitate an increase in
J&F’s supply of cattle to JBS as part of its grain fed business.
In May 2022, the Group entered into a 20-year lease with Mort & Co Lot Feeders Pty Limited for the Coolibah,
River Block and Thirsty Creek properties to commence in May 2022.
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 2022 amounted to
$209,136,000 (2021: $119,634,000). The consolidated total comprehensive income of the Group for the year ended
30 June 2022 amounted to $210,206,000 (2021: $123,917,000).
The Group holds investment property, bearer plants, owner-occupied property and derivatives at fair value. After
adjusting for the effects of unrealised fair value adjustments, depreciation, impairments and non-cash tax expense,
the profit would have been $44,215,000 (2021: $40,423,000), representing adjusted funds from operations (AFFO).
24
2
3
25
Rural Funds Group
Directors’ Report
30 June 2022
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:
Rural Funds Group
Directors’ Report
30 June 2022
Financial position (continued)
Adjusted net asset value
Net profit before income tax
Change in fair value of investment property
Change in fair value of bearer plants
Impairment of property - owner occupied
Impairment of intangible assets
Depreciation - bearer plants
Depreciation and impairments - other
Change in fair value of biological assets
(unharvested crops)
Change in fair value of biological assets
(prior year unharvested crops realised during the year)
Change in fair value of financial assets/liabilities
Change in fair value of interest rate swaps
Straight-lining of rental revenue
Interest component of JBS feedlot finance lease
Income tax payable (RF Active)
Gain on sale of assets
AFFO
AFFO cents per unit
Financial position
2022
$'000
210,463
(123,191)
4,103
912
1,059
5,533
1,634
2021
$'000
120,292
(42,289)
(1,007)
1,651
4,188
4,032
840
(1,819)
(1,028)
814
(669)
(51,852)
735
(3,187)
-
(320)
44,215
11.7
-
(116)
(12,923)
852
(769)
(432)
(32,868)
40,423
11.9
The following depicts the net assets of the Group following the revaluation of water entitlements comprising
intangible assets and investments in BIL and CICL per these valuations.
Net assets per Consolidated Statement of Financial Position
Revaluation of intangible assets per valuation
Adjusted net assets
Adjusted NAV per unit ($)
Property leasing
2022
$'000
917,011
110,316
1,027,327
2021
$'000
648,544
90,178
738,722
2.69
2.17
At 30 June 2022 the Group held 67 (2021: 66) properties as follows:
•
•
•
•
•
•
3 almond orchards (4,139 planted hectares);
7 vineyards (666 planted hectares);
7 macadamia orchards (814 planted hectares);
10 properties with potential for areas to be developed into macadamia orchards with development under way
(5,505 hectares)
21 cattle properties made up of 16 breeding, backgrounding and finishing properties (675,744 hectares) and
5 cattle feedlots with combined capacity of 150,000 head;
19 cropping properties (15,200 hectares).
During the year ended 30 June 2022, the properties held by the Group recorded an increment in the fair value of
investment properties of $123,191,000 (2021: $42,289,000), impairment of bearer plants of $5,446,000 (2021:
$6,510,000 increment), an impairment of intangibles of $1,059,000 (2021: $4,188,000) relating to water
entitlements and an increment property – owner occupied of $374,000 (2021: $1,651,000 decrement) relating to
properties carrying out various cropping operations.
The net assets of the consolidated Group have increased to $917,011,000 at 30 June 2022 from $648,544,000 at
30 June 2021. At 30 June 2022, the Group had total assets of $1,403,829,000 (2021: $1,041,904,000).
Almond orchards
At 30 June 2022, 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 $169,663,000 (2021:
$122,402,000). Directors obtain independent valuations on RFF properties ensuring that each property will have
been independently valued at least 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 2022 was $279,979,000 (2021: $212,580,000). The value of water entitlements is
illustrated in the table below:
Intangible assets (water entitlements)
Investment in CICL
Investment in BIL
Total book value of water entitlements
Revaluation of intangible assets per valuation
Adjusted total water entitlements
2022
$'000
157,679
11,464
520
169,663
110,316
279,979
2021
$'000
110,418
11,464
520
122,402
90,178
212,580
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 (2021: 4,139 hectares):
• Yilgah 1,006 planted hectares (2021: 1,006 hectares);
•
Tocabil 603 planted hectares (2021: 603 hectares);
• Kerarbury 2,530 planted hectares (2021: 2,530 hectares).
These properties are under lease to the following tenants:
• Select Harvests Limited (SHV) 1,006 planted hectares (2021: 1,006 hectares);
• Olam Orchards Australia Pty Limited (Olam) 3,133 planted hectares (2021: 3,133 hectares);
For its almond orchards the Group owns water entitlements of 55,525ML (2021: 55,525ML) 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 (2021: 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 (2021: 936ML). Six 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
held for sale as at 30 June 2022.
26
4
5
27
Rural Funds Group
Directors’ Report
30 June 2022
Property leasing (continued)
Macadamia orchards
Three established macadamia orchards are located near Bundaberg, Queensland and leased to the following
tenants:
•
•
Swan Ridge and Moore Park, 234 hectares (2021: 234 hectares), located in Bundaberg currently leased to
the 2007 Macgrove Project (M07)
Bonmac, 27 hectares (RFM) (2021: 27 hectares), located in Bundaberg currently leased to RFM Farming.
Beerwah and Bauple, 475 hectares (2021: nil) located in the Glass House mountains and Wide Bay regions of
Queensland are unleased and currently operated by the Group.
Cygnet, located in Bundaberg, Queensland consists of 37 hectares (2021: 37 hectares) of newly established
plantings and is currently operated by the Group.
Nursery Farm, located in Bundaberg, Queensland consists of 41 hectares (2021: 41 hectares) of newly established
plantings, operated by the Group and a macadamia tree nursery, leased to an external party.
Swan Ridge South, located in Bundaberg, Queensland totaling 123 hectares (2021:123 hectares) with potential for
macadamia plantings.
The 23 Maryborough properties located in Queensland, have potential to be developed into approximately 2,200
hectares of macadamia orchards. 7 of these properties totaling,1,915 hectares are under development.
The Riverton property and Rookwood Farms aggregation, totaling 3,467 hectares (2021: 3,467 hectares), located
in the Fitzroy region in Queensland under development 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 (2021: 17,479 hectares);
•
• Mutton Hole and Oakland Park located in far north Queensland 225,800 hectares (2021: 225,800 hectares);
•
Natal aggregation located near Charters Towers in north Queensland 390,600 hectares (2021: 390,600
hectares);
•
Comanche located in central Queensland 7,600 hectares (2021: 7,600 hectares);
•
Cerberus located north west of Rockhampton in central Queensland 8,280 hectares (2021: 8,280 hectares);
•
Dyamberin located in the New England region of New South Wales 1,728 hectares (2021: 1,728 hectares);
• Woodburn located in the New England region of New South Wales 1,063 hectares (2021: 1,063 hectares);
•
•
•
•
•
•
•
Cobungra located in the East Gippsland region of Victoria 6,497 hectares (2021: 6,497 hectares);
Petro, High Hill and Willara located in Western Australia 6,196 hectares (2021: 6,196 hectares);
Yarra located south west of Rockhampton in central Queensland 4,090 hectares (2021: 2,173 hectares);
Homehill located north west of Rockhampton in central Queensland 4,925 hectares (2021: 4,925 hectares);
Coolibah and River Block located south west of Rockhampton in central Queensland 724 hectares (2021: nil);
Thirsty Creek located south west of Rockhampton in central Queensland 762 hectares (2021: nil);
Prime City, Mungindi, Caroona, Beef City and Riverina, 5 cattle feedlots with a combined capacity of 150,000
head (2021:150,000 head).
A deposit has been paid on Kaiuroo, located north west of Rockhampton in central Queensland, 27,879
hectares (2021: nil) with an extended settlement period of up to 24 months from November 2021.
•
The properties comprise a combined 663,374 hectares and are leased to the following tenants:
•
•
•
•
Australian Agricultural Company Limited, leasing Rewan, Comanche and Home Hill;
Cattle JV Pty Limited (Cattle JV), 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;
Stone Axe Pastoral Company Pty Limited, leasing Dyamberin, Woodburn, Cobungra, Petro, High Hill and
Willara;
• Mort & Co Lot Feeder Pty Limited, leasing Coolibah, River Block and Thirsty Creek; and
•
Clarke Creek Energy Pty Limited, leasing a portion of Cerberus.
Rural Funds Group
Directors’ Report
30 June 2022
Property leasing (continued)
Cattle property (continued)
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 2022.
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.
Cerberus and Yarra are currently being operated by the Group, allowing for capital improvement designed to
improve the productivity of the properties while a long-term lessee is currently being sought.
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. On 28 January 2022, the secured loan and
outstanding amounts on the cattle facility were fully repaid.
Cropping property
Cropping properties held by the Group comprise of:
•
Lynora Downs, a 4,963 hectare (2021: 4,963 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 2027.
• Mayneland, a 2,942 hectare (2021: 2,942 hectare) cropping property located 25 km north of Lynora Downs in
central Queensland, to be leased to RFM Farming Pty Limited (a wholly owned subsidiary of RFM) until 30
June 2023. A long-term lessee is being sought.
• Baamba Plains, a 4,130 hectare (2021: nil) cropping property located 60 km south-east of Emerald in central
Queensland. A capital development program has been designed to improve the productivity of the property.
The property is currently operated by the Group on an interim basis while a long-term lessee is being sought.
The 23 Maryborough properties located in Queensland, have potential to be developed into approximately
2,200 hectares of macadamia orchards. 16 of these properties are currently being leased out or owner
occupied for various cropping operations.
•
Other activities
The Group provides a $132,000,000 (2021: $99,900,000) limited guarantee to J&F Australia Pty Ltd (J&F). The
guarantee is currently used to support $132,000,000 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 herd assets under finance lease of $16,365,000 (2021: $17,778,000) are leased to Cattle JV.
Agricultural plant and equipment with a net book value of $2,248,000 (2021: $3,422,000) is owned by the Group
and leased to M07, Cattle JV and RFM Farming. Agricultural plant and equipment with a net book value of
$14,282,000 (2021: $5,294,000) is used for the Group’s cropping operations and developments.
Banking facilities
At 30 June 2022 the core debt facility available to the Group was $520,000,000 (2021: $380,000,000), with a drawn
balance of $455,100,000 (2021: $344,143,000). The facility is split into two tranches with a $110,000,000 tranche
expiring in November 2023 and a $410,000,000 tranche expiring in November 2024. At 30 June 2022, RFF had
active interest swaps totaling 40.2% (2021: 53.2%) of the drawn balance to manage interest rate risk.
Distributions
Distribution declared 1 June 2021, paid 30 July 2021
Distribution declared 1 September 2021, paid 29 October 2021
Distribution declared 1 December 2021, paid 31 January 2022
Distribution declared 1 March 2022, paid 29 April 2022
Distribution declared 1 June 2022, paid 29 July 2022
Cents
per unit
2.8203
2.9331
2.9331
2.9331
2.9331
Total
$
9,586,215
11,168,247
11,185,881
11,203,970
11,219,540
28
6
7
29
Rural Funds Group
Directors’ Report
30 June 2022
Earnings per unit
Net profit after income tax for the year ($'000)
Weighted average number of units on issue during the year
Basic and diluted earnings per unit (total) (cents)
Indirect cost ratio
209,136
378,226,507
55.29
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 2022 is 2.11% (2021: 1.89%).
Matters subsequent to the end of the year
On 22 July 2022, the Group completed the acquisition of Brooklands, a 978ha property west of Rockhampton in
Central Queensland for $5.9m including transaction costs. This property will be incorporated as part of Rookwood
Farms.
On 9 August 2022, the Group completed the acquisition of Greenfields, a 230ha property west of Rockhampton in
Central Queensland for $3.0m including transaction costs. This property will be incorporated as part of Rookwood
Farms.
In August 2022, the following changes were made to the Group’s loan covenant and banking requirements. The
interest cover ratio was decreased for the Group to be not less than 2.00:1.00 with distributions permitted if the
interest cover ratio is not less than 2.15:1.00. In addition, the hedging requirement was decreased to 30% for the
year ending 30 June 2023.
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.
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.
Rural Funds Group
Directors’ Report
30 June 2022
COVID-19 outbreak
The outbreak of Coronavirus Disease 2019 was ongoing during the year ended 30 June 2022 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
382,514,759 units in Rural Funds Trust were on issue at 30 June 2022 (2021: 339,900,556). During the year
42,614,203 units (2021: 2,187,136) were issued by the Trust and nil (2021: 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
Qualifications
Experience
Special responsibilities
Non-Executive Chairman
Bachelor of Laws from The University of Melbourne
Guy Paynter is a former director of broking firm JB Were. Guy brings to
RFM more than 30 years of experience in corporate finance. Guy is a
former member of the Australian Securities Exchange (ASX) and a former
associate of the Securities Institute of Australia (now known as the
Financial Services Institute of Australasia). Guy’s agricultural interests
include cattle breeding in the Upper Hunter region in New South Wales.
Member of Remuneration Committee and Audit Committee (resigned 29
March 2022)
Directorships of other listed entities
in the last three years
RFM Poultry
David Bryant
Qualifications
Experience
Managing Director
Diploma of Financial Planning from the Royal Melbourne Institute of
from The University of
Technology and Masters of Agribusiness
Melbourne.
David Bryant established RFM in February 1997 and leads the RFM team.
RFM manages approximately $2.0 billion of agricultural assets. David
focuses on strategic planning, maintaining key commercial relationships
and sourcing new business opportunities.
Special responsibilities
Managing Director
Directorships of other listed entities
in the last three years
RFM Poultry
30
8
9
31
Rural Funds Group
Directors’ Report
30 June 2022
Rural Funds Group
Directors’ Report
30 June 2022
Information on Directors of the Responsible Entity (continued)
Information on Directors of the Responsible Entity (continued)
Michael Carroll
Qualifications
Experience
Non-Executive Director
Bachelor of Agricultural Science, La Trobe University and Master of
Business Administration, Melbourne University Business School. Michael
has also completed the Advanced Management Program, Harvard
Business School and is a Fellow of the Australian Institute of Company
Directors.
Chair of Viridis Ag Pty Limited and the Australian Rural Leadership
Foundation. Director of Paraway Pastoral Company Limited, Genetics
Australia and the Regional Investment Corporation. Michael also runs his
own cattle business in south west Victoria.
Former board positions include Select Harvests Limited, Elders Limited,
Sunny Queen Australia Pty Limited, Tassal Group Limited, the Australian
Farm Institute, Warrnambool Cheese and Butter Factory Company
Holdings Limited, Queensland Sugar Limited, Rural Finance Corporation
of Victoria, Meat and Livestock Australia and the Geoffrey Gardiner Dairy
Foundation.
Michael’s executive experience includes establishing and leading the
National Australia Bank’s Agribusiness division and as a Senior Adviser in
NAB’s internal investment banking and corporate advisory team. Prior to
that Michael worked
for Monsanto Agricultural Products and a
biotechnology venture capital company.
Special responsibilities
Chairman of Audit Committee and Remuneration Committee
Directorships of other listed entities
in the last three years
Michael held previous roles as Chairman of Elders Limited and Director of
Select Harvests Limited, Tassal Group Limited and RFM Poultry.
Julian Widdup
Qualifications
Experience
Non-Executive Director
Bachelor of Economics, Master of Business Administration and University
Medal from the Australian National University. Completed the Senior
Executive Leadership Program at Harvard Business School. Fellow of the
Institute of Actuaries of Australia and Fellow of the Australian Institute of
Company Directors.
is currently a director of
the Australian Catholic
Julian Widdup
Superannuation & Retirement Fund, Screen Canberra and Cultural
Facilities Corporation. He worked in the financial services industry for over
20 years including as a senior executive of asset management companies,
Palisade
Investment Partners and Access Capital Advisers (now
Whitehelm Capital). Julian brings extensive experience to the RFM board
having been a director of Darwin International Airport, Alice Springs Airport,
NZ timberland company Taumata Plantations Limited, Regional Livestock
Exchange Investment Company, Merredin Energy power utility and the
Victorian AgriBioscience Research Facility.
Special responsibilities
Member of Audit Committee and Remuneration Committee
Directorships of other listed entities
in the last three years
RFM Poultry
Andrea Lemmon
Qualifications
Experience
Diploma in Financial Planning from Deakin University
Chair of Marquis Macadamias Limited and non-executive Director of
Marquis Marketing.
Andrea Lemmon was employed by RFM from its inception in 1997 until her
retirement in October 2018. During her tenure with RFM, Andrea held a
variety of senior executive roles and was responsible for overseeing RFM’s
investment into the macadamia industry. Additionally, Andrea’s extensive
experience consists of previously serving as a non-executive director of
Perth Markets Limited and Market City Operator.
Special responsibilities
Member of Audit Committee and Remuneration Committee
Directorships of other listed entities
in the last three years
None noted
Interests of Directors of the Responsible Entity
Balance at 30 June 2020
Additions
Balance at 30 June 2021
Additions
Balance at 30 June 2022
Guy Paynter David Bryant*
Units
1,559,104
-
1,559,104
185,606
1,744,710
Units
15,238,034
-
15,238,034
1,087,428
16,325,462
Michael
Carroll
Units
84,734
133,668
218,402
36,338
254,740
Julian
Widdup
Units
110,203
5,562
115,765
19,261
135,026
Andrea
Lemmon
Units
-
-
-
183,357
183,357
*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 20 meetings of Directors (including committees of Directors) were held. Attendances by
each Director during the year were as follows:
Directors meetings
Audit Committee meetings
No. eligible
to attend
No.
attended
No. eligible
to attend
No.
attended
17
17
17
17
10
16
15
17
17
10
2
-
2
2
1
2
-
2
2
1
Remuneration Committee
meetings
No. eligible
to
attend
1
-
1
1
1
No.
attended
1
-
1
1
1
Guy Paynter
David Bryant
Michael Carroll
Julian Widdup
Andrea Lemmon
Non-audit services
Fees of $35,647 (2021: $20,395) were paid or payable to PricewaterhouseCoopers for compliance audit services
provided for the year ended 30 June 2022.
32
10
11
33
Rural Funds Group
Directors’ Report
30 June 2022
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 2022 has been received and is included on page 13 of the financial report.
35
The Directors’ report is signed in accordance with a resolution of the Board of Directors of Rural Funds
Management Limited.
David Bryant
Director
31 August 2022
Auditor’s Independence Declaration
As lead auditor for the audit of Rural Funds Group for the year ended 30 June 2022, 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
Partner
PricewaterhouseCoopers
Sydney
31 August 2022
34
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
12
Liability limited by a scheme approved under Professional Standards Legislation.
35
13
Rural Funds Group
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Rural Funds Group
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Revenue
Other income
Management fee
Asset management fee
Property expenses
Other expenses
Finance costs
Cost of goods sold - farming operations
Property and other expenses - farming operations
Gain on sale of assets
Depreciation and impairments - other
Change in fair value of investment property
Change in fair value of bearer plants
Depreciation - bearer plants
Impairment of intangible assets
Impairment of property - owner occupied
Change in fair value of biological assets - farming operations
Change in fair value of interest rate swaps
Change in fair value of financial assets/liabilities
Net profit before income tax
Income tax expense
Net profit after income tax
Other comprehensive income:
Items that will not be reclassified to profit or loss
Revaluation increment - Bearer plants
Revaluation increment - Property - owner occupied
Income tax (expense) / benefit relating to these items
Other comprehensive income for the year, net of tax
Total comprehensive income attributable to unitholders
Note
B3
B3
C2
C3
C3
C5
C6
F4
D1
C3
C6
D1
2022
$'000
81,865
3,475
(6,850)
(5,138)
(3,457)
(6,638)
(11,186)
(7,708)
(1,745)
320
(1,634)
123,191
(4,103)
(5,533)
(1,059)
(912)
5,054
51,852
669
210,463
(1,327)
209,136
(1,343)
1,286
1,127
1,070
210,206
2021
$'000
67,650
3,451
(6,295)
(4,722)
(2,591)
(5,523)
(10,498)
(484)
(324)
32,868
(840)
42,289
1,007
(4,032)
(4,188)
(1,651)
1,136
12,923
116
120,292
(658)
119,634
5,503
-
(1,220)
4,283
123,917
Total net profit after income tax for the year attributable to
unitholders arising from:
Rural Funds Trust
RF Active (non-controlling interest)
Total
Total comprehensive income for the year attributable to
unitholders arising from:
Rural Funds Trust
RF Active (non-controlling interest)
Total
Earnings per unit
Note
2022
$'000
2021
$'000
206,812
2,324
209,136
117,696
1,938
119,634
207,882
2,324
210,206
121,979
1,938
123,917
Basic and diluted earnings per unit attributable to the unitholders:
Per stapled unit (cents)
Per unit of Rural Funds Trust (cents)
Per unit of RF Active (cents)
B4
B4
B4
55.29
54.68
0.61
35.29
34.72
0.57
36
14
15
37
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
Rural Funds Group
Consolidated Statement of Financial Position
As at 30 June 2022
Rural Funds Group
Consolidated Statement of Financial Position
As at 30 June 2022
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Assets held for sale
Biological assets
Inventories
Income tax receivable
Total current assets
Non-current assets
Investment property
Plant and equipment - bearer plants
Financial assets
Intangible assets
Property - owner occupied
Plant and equipment - other
Deposits
Derivative financial assets
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Unearned income
Interest bearing liabilities
Derivative financial liabilities
Distributions payable
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Deferred tax liabilities
Other non-current liabilities
Derivative financial liabilities
Total non-current liabilities
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
Unitholders of Rural Funds Trust
Issued units
Asset revaluation reserve
Retained earnings
Parent entity interest
Unitholders of RF Active
Issued units
Retained earnings
Non-controlling interest
Note
E7
F9
E7
2022
$'000
2021
$'000
465,076
49,417
385,183
899,676
6,721
10,614
17,335
380,440
48,347
206,767
635,554
4,700
8,290
12,990
Total net assets attributable to unitholders
917,011
648,544
Note
F1
F2
F3
C8
F4
F5
D2
C2
C3
C4, E2
C5
C6
C7
C9
E3
F3
F6
F7
E1
E3
E8
E1
D2
F8
E3
2022
$'000
4,961
6,742
1,922
715
7,826
455
1,038
2021
$'000
11,647
4,945
4,995
1,621
2,988
-
477
23,659
26,673
786,981
190,488
97,729
157,679
68,427
16,530
18,504
33,698
10,134
596,924
160,782
107,177
110,418
28,284
8,716
-
2,930
-
1,380,170
1,403,829
1,015,231
1,041,904
5,153
657
2,723
589
11,756
20,878
3,195
-
2,456
3,604
10,022
19,277
455,100
344,143
7,634
3,206
-
465,940
7,450
4,421
18,069
374,083
486,818
393,360
Total liabilities (excluding net assets attributable to
unitholders)
Net assets attributable to unitholders
Total liabilities
648,544
1,041,904
*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.
917,011
1,403,829
38
The accompanying notes form part of these financial statements.
16
The accompanying notes form part of these financial statements.
17
39
Rural Funds Group
Consolidated Statement of Changes in Net Assets Attributable to Unitholders
For the year ended 30 June 2022
Rural Funds Group
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
2022
Note
Balance at 1 July 2021
Other comprehensive income
Total other comprehensive
income
Profit before income tax
Income tax expense
Total comprehensive income
for the year
Issued units
Units issued during the year
Issue costs
Total issued units
Distributions to unitholders
Balance at 30 June 2022
D1
E7
B5,E7
Issued
units
$'000
380,440
-
Asset
revaluation
reserve
$'000
48,347
1,070
Retained
earnings
$'000
206,767
-
Non-
controlling
interest
$'000
12,990
-
Total
$'000
635,554
1,070
Total
$'000
648,544
1,070
-
-
-
-
1,070
-
1,070
-
1,070
-
-
207,143
(331)
207,143
(331)
3,320
(996)
210,463
(1,327)
1,070
206,812
207,882
2,324
210,206
103,788
(2,770)
101,018
(16,382)
465,076
-
-
-
-
49,417
-
-
-
(28,396)
385,183
103,788
(2,770)
101,018
(44,778)
899,676
2,061
(40)
2,021
-
17,335
105,849
(2,810)
103,039
(44,778)
917,011
Issued
units
$'000
355,923
-
Asset
revaluation
reserve
$'000
59,412
4,283
Retained
earnings
$'000
131,628
-
Non-
controlling
interest
$'000
11,003
-
Total
$'000
546,963
4,283
Total
$'000
557,966
4,283
4,283
-
4,283
-
4,283
-
-
117,527
169
117,527
169
2,765
(827)
120,292
(658)
4,283
117,696
121,979
1,938
123,917
-
-
-
-
-
2021
Note
Balance at 1 July 2020
Other comprehensive income
Total other comprehensive
income
Profit before income tax
Income tax expense
Total comprehensive income
for the year
Transfer on disposal of bearer
plants to retained earnings
Issued units
Units issued during the year
Issue costs
Total issued units
Distributions to unitholders
Balance at 30 June 2021
D1
E7
E7
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Finance income
Finance costs
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for investment property
Payments for plant and equipment - bearer plants
Payments for financial assets - property related
Payments for intangible assets
Payments for property - owner occupied
Payments for plant and equipment
Payments for deposits
Payments for financial assets - other
Payments for other assets
Settlement of financial assets - property related
Proceeds from sale of intangible assets
Proceeds from sale of property - owner occupied
Proceeds from sale of plant and equipment
Proceeds from assets held for sale
Proceeds from sale of Mooral assets
Proceeds from sale of investment property
(15,348)
15,348
-
-
-
Distributions received
4,871
-
4,871
19,646
380,440
-
-
-
-
48,347
-
-
-
(57,905)
206,767
-
4,871
-
4,871
(38,259)
635,554
49
-
49
-
12,990
-
4,920
-
4,920
(38,259)
648,544
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of units
Proceeds from borrowings
Repayment of borrowings
Distributions paid
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
F1
Note
D2
G4
C2
C5
C6
C7
C9
C8
E7
2022
$'000
71,961
(37,080)
49
14,671
(11,446)
(561)
37,594
(60,377)
(40,014)
(936)
(46,093)
(52,777)
(10,438)
(18,504)
(4,427)
(5,997)
18,205
581
3,283
458
1,621
-
-
65
2021
$'000
64,194
(29,318)
126
13,197
(10,498)
(2,293)
35,408
(84,163)
(4,457)
-
(8,055)
(29,959)
(7,187)
-
(7,096)
-
-
-
-
968
-
97,330
960
64
(215,350)
(41,595)
103,039
378,220
(267,145)
(43,044)
171,070
(6,686)
11,647
4,961
4,920
185,293
(139,766)
(37,698)
12,749
6,562
5,085
11,647
40
The accompanying notes form part of these financial statements.
18
The accompanying notes form part of these financial statements.
19
41
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 31 August 2022 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
The outbreak of Coronavirus Disease 2019 was ongoing during the year ended 30 June 2022 and as at the date
of the report. 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.
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
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.
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.
42
20
21
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d
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o
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e
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s
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s
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e
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47
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 2022 is $169,663,000 (2021: $122,402,000).
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 contain 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 2022 was $279,979,000 (2021: $212,580,000) representing the value of the water rights of $110,316,000
(2021: $90,178,000) above cost.
The following is a reconciliation of the book value at 30 June 2022 to an adjusted value based on the Directors’
valuation of the water rights which are assessed by the chief operating decision maker.
Assets
Total current assets
Total non-current assets
Total assets
Liabilities
Total current liabilities
Total non-current liabilities
Total liabilities (excluding net assets attributable to
unitholders)
Net assets attributable to unitholders
Net asset value per unit ($)
Per Statutory
Consolidated
Statement of
Financial
Position
$'000
Revaluation
of water
entitlements
per
Directors'
valuation
$'000
23,659
1,380,170
1,403,829
-
110,316
110,316
Directors'
valuation
(Adjusted)
$'000
23,659
1,490,486
1,514,145
20,878
465,940
486,818
-
-
-
110,316
0.30
1,027,327
2.69
20,878
465,940
486,818
917,011
2.39
Rural Funds Group
Notes to the Financial Statements
30 June 2022
B1 Segment information (continued)
30 June 2022
Almonds
Yilgah (NSW)2
Tocabil (NSW)
Kerarbury (NSW)
Cattle
Rewan (QLD)
Mutton Hole (QLD)
Oakland Park (QLD)
Natal Aggregation (QLD)
Comanche (QLD)
Cerberus (QLD)
Dyamberin (NSW)
JBS Feedlots Finance Lease Receivable (NSW/QLD)
Woodburn (NSW)
Cobungra (VIC) 2
Petro (WA)
High Hill (WA)
Willara (WA)
Yarra (QLD)3
Homehill (QLD)
Coolibah aggregation (QLD)4
Thirsty Creek (QLD)
Cropping
Lynora Downs (QLD)
Mayneland (QLD)
Maryborough – Cropping (QLD)
Baamba Plains (QLD)
Macadamias
Swan Ridge (QLD)
Moore Park (QLD)
Bonmac (QLD)
Cygnet (QLD)
Swan Ridge South (QLD)
Nursery Farm (QLD)5
Riverton (QLD)
Rookwood Farms (QLD)6
Maryborough – Macadamias (QLD)7
Beerwah(QLD)
Bauple (QLD)
Vineyards2
Kleinig (SA)
Geier (SA)
Dohnt (SA)
Hahn (SA)
Mundy and Murphy (SA)
Rosebank (VIC)
Water rights
River water (NSW)
River water (QLD)
Ground water (NSW)
Total property and water assets
30 June 22
Adjusted
property
value
$'000
30 June 21
Adjusted
property
value
$'000
Most Recent Independent
Valuation
Date
$'000
Encumbered
Valuation
$'000
Area1
1,006 ha
603 ha
2,530 ha
105,000
52,851
242,130
106,563
48,876
226,472
Mar 2021
Mar 2022
Mar 2022
107,000
53,000
242,000
17,479 ha
140,300 ha
85,500 ha
390,600 ha
7,600 ha
8,280 ha
1,728 ha
150,000 hd
1,063 ha
6,497 ha
2,942 ha
1,601 ha
1,653 ha
4,090 ha
4,925 ha
724 ha
762 ha
62,400
16,838
8,654
137,756
35,064
24,318
21,000
58,802
11,250
40,800
13,514
6,404
5,861
23,822
19,476
5,683
5,220
50,400
16,680
8,500
88,500
24,238
13,963
13,959
55,615
7,397
40,800
12,221
4,967
4,985
6,245
12,875
-
-
Nov 2021
Jun 2021
Jun 2021
Apr 2022
Apr 2022
Apr 2022
Mar 2022
N/A
Mar 2022
Jun 2021
Nov 2021
Nov 2021
Nov 2021
Dec 2021
Apr 2022
Apr 2022
Apr 2022
62,400
16,680
8,500
137,250
35,000
24,300
21,000
N/A
11,250
40,800
13,200
5,840
5,375
23,600
19,325
5,625
5,220
4,963 ha
2,942 ha
3,165 ha
4,130 ha
41,709
24,554
47,639
30,673
41,500
20,450
53,870
-
Jun 2021
Nov 2021
Apr 2022
Nov 2021
41,500
23,300
47,633
30,000
130 ha
104 ha
27 ha
37 ha
123 ha
41 ha
1,015 ha
2,452 ha
1,915 ha
340 ha
135 ha
7,188
4,487
3,141
3,294
1,619
6,193
18,447
17,356
50,210
35,638
17,969
6,679
3,882
2,797
2,826
1,692
5,914
4,900
10,463
24,850
-
-
206 ha
243 ha
30 ha
50 ha
55 ha
82 ha
21,100
25,373
715
4,800
4,100
3,900
22,997
27,562
1,196
5,069
4,093
3,788
Sep 2021
Sep 2021
Sep 2021
Apr 2021
Sep 2021
Apr 2021
Mar 2021
Apr 2022
Apr 2022
Dec 2021
Dec 2021
Mar 2021
Mar 2021
Mar 2021
Mar 2021
Mar 2021
Mar 2021
7,000
4,550
3,200
2,800
1,600
3,800
4,520
12,775
39,614
36,307
18,443
23,100
27,700
1,200
5,100
4,100
3,800
8,754 ML
2,155 ML
8,338 ML
77,910
1,113
38,355
1,384,326
65,655
1,099
-
1,054,538
Jun 2022
Jun 2020
Jul 2021
77,910
1,099
38,355
Valuations are encumbered unless not applicable (for example where a property is not subject to lease or at acquisition)
1 Unless otherwise denoted, the almond, vineyard and macadamia areas refer to planted and planned development areas.
Swan Ridge South, Riverton, Rookwood Farms, Maryborough – Macadamias refer to total property area.
2 Director valuations adopted at 30 June 2022. Dohnt vineyard is held for sale.
3 Includes the acquisition of The Pocket during the year ended 30 June 2022
4 Coolibah aggregation comprises of the Coolibah and River Block properties.
5 Nursery Farm includes the value of trees in the nursery which are not accounted for in the external valuation. Cost of trees in the tree
nursery approximates fair value.
6 Rookwood Farms aggregation comprises of the Stoneleigh, Corrowah and Tongola properties.
7 All properties valued at April 2022 except Glendorf.
48
26
27
49
Rural Funds Group
Notes to the Financial Statements
30 June 2022
B1 Segment information (continued)
30 June 2022
Cattle finance leases and other assets
Plant and equipment
Other receivables and equipment leases
Kaiuroo deposit
Total adjusted property assets
Revaluations from external valuations
30 June 22
Adjusted
30 June 21
Adjusted
Most Recent Independent
Valuation
property
value
$'000
property
value
$'000
Date
$'000
Encumbered
Valuation
$'000
17,431
16,530
2,120
18,504
1,438,911
35,582
8,716
2,399
-
1,101,235
The cattle properties have increased in value during the year ended 30 June 2022. External valuations were
obtained for the Natal aggregation, Rewan, Comanche, Cerberus, Woodburn, Dyamberin, Petro, High Hill, Willara
and Yarra during the year ended 30 June 2022. The total uplift for the year ended 30 June 2022 has been largely
due to the external valuer’s assessment of the value of the land. The uplift has largely been driven by improved
demand and market sentiment for cattle properties in the respective regions supported by comparable sales
transactions. All of the Group’s properties have been valued by an independent valuer within the last 24 months.
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.
Directors’ valuations adopted for Yilgah almond property, Cobungra cattle property and vineyard properties at 30
June 2022. Independent desktop valuations were considered as part of the fair value assessment on these
properties.
A number of properties acquired during the period were subject to independent valuations. Revaluation movements
for these properties largely relate to transaction costs incurred that were written off in the independent valuations.
Adjusted property values movements after the most recent independent valuation
Increases to the adjusted property value from the last 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 adjusted property value from last valuation is primarily a result of depreciation on the bearer plants.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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.
Revenue
Sale of agricultural produce - farming operations
Other income
Cost of goods sold - farming operations
Change in fair value of biological assets
(realised from harvested crops)
Change in fair value of biological assets
(prior year unharvested crops realised during the year)
Management fee
Asset management fee
Property expenses
Finance costs
Other expenses
Property and other expenses - farming operations
Straight-lining of rental revenue
Interest component of JBS feedlot finance lease
Income tax payable (RF Active)
Adjusted Funds From Operations (AFFO)
Change in fair value of investment property
Change in fair value of bearer plants
Impairment of property - owner occupied
Impairment of intangible assets
Depreciation - bearer plants
Depreciation and impairments - other
Change in fair value of biological assets
(unharvested crops not realised)
Change in fair value of biological assets
(prior year unharvested crops realised during the year)
Change in fair value of financial assets/liabilities
Change in fair value of interest rate swaps
Straight-lining of rental revenue
Interest component of JBS feedlot finance lease
Income tax expense
Gain on sale of assets
Net profit after income tax
AFFO cents per unit
2022
$'000
73,956
7,909
3,475
(7,708)
3,235
814
(6,850)
(5,138)
(3,457)
(11,186)
(6,638)
(1,745)
735
(3,187)
-
44,215
123,191
(4,103)
(912)
(1,059)
(5,533)
(1,634)
1,819
(814)
669
51,852
(735)
3,187
(1,327)
320
209,136
2021
$'000
67,166
484
3,451
(484)
108
-
(4,722)
(6,295)
(2,591)
(10,498)
(5,523)
(324)
852
(769)
(432)
40,423
42,289
1,007
(1,651)
(4,188)
(4,032)
(840)
1,028
-
116
12,923
(852)
769
(226)
32,868
119,634
11.7
11.9
50
28
29
51
Rural Funds Group
Notes to the Financial Statements
30 June 2022
B5 Distributions
The group paid and declared the following distributions during the year:
Distribution declared 1 June 2021, paid 30 July 2021
Distribution declared 1 September 2021, paid 29 October 2021
Distribution declared 1 December 2021, paid 31 January 2022
Distribution declared 1 March 2022, paid 29 April 2022
Distribution declared 1 June 2022, paid 29 July 2022
Cents
per unit
2.8203
2.9331
2.9331
2.9331
2.9331
Total
$
9,586,215
11,168,247
11,185,881
11,203,970
11,219,540
Rural Funds Group
Notes to the Financial Statements
30 June 2022
B3 Revenue
Rental income
Sale of agricultural produce - farming operations
Finance income
Interest received
Total
* Represented to include sale of agricultural produce – farming operations.
2022
$'000
54,452
7,909
19,455
49
81,865
2021
$'000
53,074
484
13,966
126
67,650
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 primarily arises from the leasing of property assets 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
Sale of temporary water allocations
Other income
Total
Expenses
2022
$'000
3,142
333
3,475
2021
$'000
3,275
176
3,451
Expenses such as Responsible Entity fees, property expenses and overheads are recognised on an accruals basis.
Interest expenses are recognised on an accrual basis using the effective interest method.
B4 Earnings per unit
Per stapled unit
Net profit after income tax for the year ($'000)
Weighted average number of units on issue during the year (thousands)
Basic and diluted earnings per unit (total) (cents)
Per unit of Rural Funds Trust
Net profit after income tax for the year ($'000)
Weighted average number of units on issue during the year (thousands)
Basic and diluted earnings per unit (total) (cents)
Per unit of RF Active
Net profit after income tax for the year ($'000)
Weighted average number of units on issue during the year (thousands)
Basic and diluted earnings per unit (total) (cents)
2022
2021
209,136
378,227
55.29
206,812
378,227
54.68
2,324
378,227
0.61
119,634
338,961
35.29
117,696
338,961
34.72
1,938
338,961
0.57
Basic earnings per unit are calculated on net profit attributable to unitholders of the Group divided by the weighted
average number of issued units.
52
30
31
53
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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
Investment property
Plant and equipment - bearer plants
Financial assets - property related
Intangible assets
Property - owner occupied
Plant and equipment - other
Asset held for sale
Deposits
Total
Income and fair value movements from RFF property assets
Rental income from property assets
Sale of agricultural produce - farming operations
Change in fair value of investment property
Revaluation increment/(decrement) - bearer plants
Depreciation - bearer plants
Leasing arrangements
2022
$'000
786,981
190,488
89,271
157,679
68,427
16,530
715
18,504
1,328,595
C2
C3
C4
C5
C6
C7
C8
C9
2022
$'000
73,907
7,909
123,191
(5,446)
(5,533)
2021
$'000
596,924
160,782
104,312
110,418
28,284
8,716
1,621
-
1,011,057
2021
$'000
67,040
484
42,289
6,510
(4,032)
Minimum lease payments receivable under non-cancellable operating leases of investment properties, bearer
plants, water rights and plant and equipment not recognised in the financial statements, are receivable as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
Total
2022
$'000
53,804
53,362
53,942
54,602
47,478
274,282
537,470
2021
$'000
52,016
51,510
49,673
50,140
50,758
305,258
559,355
Key changes to the property portfolio during the year:
•
•
•
In July 2021, the Group completed the sale of surplus land on Kerarbury for approximately $1.6m.
In August 2021 the Group completed the purchase of 8,338ML of Lower Murrumbidgee ground water
entitlements for approximately $38.4m including transaction costs. The water entitlements are leased to a
private farming company for a term of five years.
In November 2021 the Group leased an area on the Nursery Farm property in Bundaberg, Queensland to
an external operator, Dalwood Nursery Pty Ltd. The arrangement provides a supply of macadamia trees
to RFF to be planted on various developments in Queensland including Bundaberg, Rockhampton, and
Maryborough.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C1 RFF property assets (continued)
Key changes to the property portfolio during the year: (continued)
•
•
•
•
•
•
•
In November 2021, the Group completed the acquisition of Baamba Plains, a 4,130ha cropping property
located in central Queensland for $34.0m including transaction costs and including $2.5m of associated
plant and equipment.
In November 2021, the Group paid a $17.2m deposit on Kaiuroo, a 27,879ha aggregation of four cattle
and cropping properties located in central Queensland. An extended settlement date of up to two years
has been negotiated, allowing RFM to begin productivity developments on selected locations of the
property and to seek a lessee prior to settlement.
In December 2021, the Group acquired The Pocket, to be managed as part of the existing Yarra property,
a 1,917ha cattle and cropping property located near Rockhampton, Queensland for $14.6m including
transaction costs and associated plant and equipment.
In December 2021, the Group completed the acquisition of the Coolibah and River Block cattle properties
totaling 724ha, located near Rockhampton, Queensland for $4.9m including transaction costs. The
properties will be managed as one property.
In December 2021, the Group completed the acquisition Beerwah and Bauple, consisting 475ha of mature
macadamia orchards located in south-east Queensland, for $66.6m including transaction costs,
associated plant and equipment and shares in Marquis Macadamias Limited.
In January 2022, the Group completed the disposal of two Maryborough cropping properties for $3.8m in
exchange for additional land on a Maryborough macadamia property and cash consideration valued at
$3.8m.
In March 2022, the Group completed the acquisition of Thirsty Creek, a 762ha cattle property located near
Rockhampton, Queensland for $6.5m including transaction costs.
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 plantings
have been established.
54
32
33
55
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C1 RFF property assets (continued)
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.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 2022:
Almond properties
Cattle properties
Macadamia properties
Cropping properties
Other
Kerarbury, Tocabil
Natal Aggregation, Rewan, Comanche, Cerberus, Dyamberin, Woodburn,
Petro, High Hill, Willara, Homehill, Yarra
Rookwood Farms, Swan Ridge, Moore Park, Bonmac, Swan Ridge South,
Maryborough - Macadamias
Mayneland, Maryborough - Cropping
Unleased High Security Murrumbidgee River Water
The following properties had relevant independent desktop valuations during the year ended 30 June 2022:
Almond properties
Cattle properties
Vineyard properties
Yilgah
Cobungra
Geier, Kleinig, Hahn, Rosebank, Mundy and Murphy
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 periods
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.
Independent desktop valuations were obtained for a number of properties during the year. The Directors have
considered these desktop valuations as part of the fair value assessment at 30 June 2022.
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 underlying 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. Conditions associated with individual assets are considered as part of the valuation allocation.
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 2022 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.
56
34
35
57
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Rural Funds Group
Notes to the Financial Statements
30 June 2022
C1 RFF property assets (continued)
Valuations (continued)
Primary valuation technique
External valuations typically assess property values using different valuation techniques.
Discounted cash flow
Summation assessment
Productive unit
(secondary valuation
technique)
Allocation technique
Valuation based on future net rental cash flows discounted to the present value.
The terminal value (as determined by the terminal capitalisation rate) is typically
assessed and discounted in these types of valuations. The valuer may also use
comparative sales as supporting information.
Assessment of the property on an asset-by-asset basis based on comparative
sales evidence and typically driven by a rate per productive hectare and
assessment of other components such as water and supporting buildings.
Assessment on the property driven by the value per adult equivalent head that
is supported by the property and carrying capacity of the property.
Although this is a secondary valuation technique, it has been determined that
this is a common way to compare properties.
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
Component based
Component based – Almonds
and Macadamias
Proportionate
Applied for properties with long term indexed leases by allocating value to
component assets using the rental base. The rental base is identifiable and
generally determined by the cost of the assets. The allocation by rental base
reflects the encumbered nature of the assets where rental incomes are not
affected by short term market fluctuations in the value of the assets due to lack
of rental review mechanism.
The encumbered value is allocated based on information in the valuation report
which enables the allocation by components on an encumbered basis.
Conditions associated with individual assets are considered as part of the
valuation allocation.
To determine the allocation of components on an encumbered basis, the
external valuer will assess various factors such as market indicators,
comparable sales data of encumbered assets, comparable rental data and other
relevant information such as replacement cost concepts.
Applied for properties where leases include rental reviews. Information is
provided in the valuation to allocate the encumbered value of the property to
water assets, investment property and bearer plants on an encumbered basis.
Firstly, the approach allocates value to water assets based on comparable
encumbered rental data. The value of land is determined based on comparable
sales data. Orchard infrastructure including irrigation is determined based on a
replacement cost assumption adjusted for an estimate of the age of the assets.
Bearer plants are identified as being the residual value of the total encumbered
value of the property.
Applied for properties where leases include rental reviews and where
component-based information is not able to be used. For properties with water
assets, the allocation considers the unencumbered value of water assets and
allocates this on a proportionate basis to the encumbered value of the property.
Judgement is then applied to allocate encumbered values to investment property
and bearer plants using available information, including information from the
valuation report and the nature of capital expenditure on the relevant property.
37
59
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3
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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/planted hectare
The higher the value per irrigated/planted 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 carrying
capacity
The higher the value per adult equivalent carrying capacity, the higher the
fair value
C2 Investment property
2022
Opening net book amount
Acquisitions
Additions
Capitalisation of borrowing costs
Classified as held for sale or
disposals
Transfer to intangible assets
Transfer from property - owner
occupied
Amortisation of lease incentives
Almond
property
Cattle
property
Vineyard
property
Cropping
property
Macadamia
property
Total
$'000
$'000
126,189
-
305,151
21,958
1,356
-
4,417
-
-
-
-
-
-
-
-
(200)
$'000
34,540
-
924
-
(542)
-
-
-
$'000
83,300
-
4,012
-
-
(2,556)
$'000
47,744
-
27,710
246
-
-
$'000
596,924
21,958
38,419
246
(542)
(2,556)
-
-
9,541
9,541
-
(200)
Fair value adjustment
13,535
101,764
805
4,175
2,912
123,191
Closing net book amount
141,080
433,090
35,727
88,931
88,153
786,981
2021
Opening net book amount
Acquisitions
Additions
Capitalisation of borrowing costs
Classified as held for sale or
disposals
Amortisation of lease incentives
Fair value adjustment
Almond
property
127,519
Cattle
property
249,534
Vineyard
property
38,170
Cropping
property
47,896
Macadamia
property
11,719
-
3,717
-
4,413
6,507
-
(3,392)
(774)
-
11
-
-
22,599
5,433
36,932
4,483
-
-
68
68
-
(4,166)
-
(1,655)
(200)
45,671
-
(3,641)
-
7,372
-
(5,458)
(200)
42,289
Total
474,838
63,944
20,151
Closing net book amount
126,189
305,151
34,540
83,300
47,744
596,924
Investment properties comprise land, buildings and integral infrastructure including shedding, irrigation and
trellising.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C2 Investment property (continued)
Macadamia properties under development include Maryborough – Macadamias, Riverton, Rookwood Farms and
Swan Ridge South. Development costs for these properties have been capitalised.
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
2022
Opening net book amount
Acquisitions
Additions
Capitalisation of borrowing costs
Classified as held for sale or disposals
Depreciation and impairment
Fair value adjustment - profit and loss
Fair value adjustment - other comprehensive
income
Closing net book amount
2021
Opening net book amount
Additions
Capitalisation of borrowing costs
Disposals
Depreciation and impairment
Fair value adjustment - profit and loss
Fair value adjustment - other comprehensive
income
Closing net book amount
Bearer
Plants -
Almonds
$'000
125,580
-
363
-
-
(2,808)
-
Bearer
Plants -
Vineyards
$'000
23,815
-
-
-
(173)
(1,213)
(1,413)
Bearer
Plants -
Macadamias
$'000
11,387
35,480
5,001
14
-
(1,512)
(2,690)
Total
$'000
160,782
35,480
5,364
14
(173)
(5,533)
(4,103)
1,813
(3,756)
600
(1,343)
124,948
17,260
48,280
190,488
Bearer
Plants -
Almonds
$'000
126,805
948
-
(18)
(2,798)
-
Bearer
Plants -
Vineyards
$'000
19,756
-
-
-
(1,016)
1,007
Bearer
Plants -
Macadamias
$'000
6,967
3,845
1
-
(218)
-
Total
$'000
153,528
4,793
1
(18)
(4,032)
1,007
643
4,068
792
5,503
125,580
23,815
11,387
160,782
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, including planting costs and direct costs associated with establishing these plants
to maturity. 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.
60
38
39
61
Rural Funds Group
Notes to the Financial Statements
30 June 2022
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C3 Plant and equipment – bearer plants (continued)
C4 Financial assets – property related (continued)
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:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
Total
2022
$'000
6,027
6,005
5,960
5,797
21,888
61,360
107,037
2021
$'000
5,880
5,876
5,858
5,802
23,183
63,567
110,166
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:
Fixed asset class:
Almond bearer plants
Vineyard bearer plants
Macadamia bearer plants
Depreciation commences from:
Useful life:
6 years
30 years
40 years
4 years
45 - 55 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:
Cost
Accumulated depreciation
Accumulated impairment
Bearer plants at historical cost less accumulated impairment
C4 Financial assets – property related
Financial Assets - property related
Investment - BIL
Investment - CICL
Finance Lease - Breeders
Finance Lease - Feedlots
Finance Lease - Equipment
Cattle Facility - Katena Pty Ltd ATF Schafferius Family Trust
Finance Lease - DA & JF Camm Pty Limited
Term Loan - DA & JF Camm Pty Limited
Other receivables
Total
2022
$'000
172,268
(15,330)
(5,752)
151,186
2022
$'000
520
11,464
16,365
58,802
1,522
-
-
-
598
89,271
2021
$'000
130,585
(12,809)
(1,827)
115,949
2021
$'000
520
11,464
17,778
55,615
1,066
532
6,004
10,000
1,333
104,312
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, 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.
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 and an annual valuation process. There has been no expected credit
loss recognised at 30 June 2022 (2021: 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.
The secured loan and cattle finance extended to DA & JF Camm Pty Limited was fully repaid in January 2022.
Other receivables relate to recognition of rental revenue on a straight-line basis in accordance with AASB 16
Leases.
62
40
41
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4
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C5 Intangible assets (continued)
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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.
C6 Property – owner occupied
2022
Land
Building
Irrigation
Total
Opening net book amount
Acquisitions
Additions
Transfer to investment property
Disposals
Depreciation
Impairment
Fair value adjustment - other comprehensive
income
Closing net book amount
$'000
27,405
45,563
482
(9,002)
(3,265)
-
(659)
1,272
$'000
816
5,753
433
(529)
(25)
(174)
(253)
14
$'000
63
-
546
(9)
-
(4)
-
-
$'000
28,284
51,316
1,461
(9,540)
(3,290)
(178)
(912)
1,286
61,796
6,035
596
68,427
2021
Land
Building
Irrigation
Total
Opening net book amount
Additions
Impairment
Depreciation
Closing net book amount
$'000
-
29,056
(1,651)
-
27,405
$'000
-
840
-
(24)
816
$'000
-
63
-
-
63
$'000
-
29,959
(1,651)
(24)
28,284
Property – owner occupied relates to owner occupied property that is being used to conduct farming operations by
the Group and accounted for under AASB 116 Property, Plant and Equipment. Property – owner occupied are held
under the revaluation model. As at 30 June 2022, this included properties that were operated by the Group including
the Maryborough properties (cropping), Baamba Plains (cropping), Beerwah, Bauple (macadamias), Cerberus and
Yarra (cattle.)
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:
Land
Buildings
Irrigation
Useful life:
Not applicable
20 years
40 years
43
65
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C6 Property – owner occupied (continued)
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.
Property – owner occupied as stated on a historical cost basis is as follows:
2022
Cost
Accumulated depreciation and impairment
Net book amount
2021
Cost
Accumulated depreciation and impairment
Net book amount
C7 Plant and equipment – other
Land
$'000
62,834
(1,038)
61,796
Land
$'000
29,056
(1,651)
27,405
Building
Irrigation
$'000
6,450
(415)
6,035
$'000
600
(4)
596
Building
Irrigation
$'000
$'000
840
(24)
816
63
-
63
Opening net book amount
Additions
Transfers from finance lease - equipment
Transfers from held for sale
Disposals
Depreciation
Decrement (depreciation capitalised to developments)
Impairment
Closing net book amount
Cost
Accumulated depreciation
Accumulated impairment
Net book amount
2022
$'000
8,716
10,438
44
-
(382)
(1,456)
(830)
-
16,530
26,767
(8,959)
(1,322)
16,486
Total
$'000
69,884
(1,457)
68,427
Total
$'000
29,959
(1,675)
28,284
2021
$'000
3,201
7,187
-
248
(767)
(787)
(337)
(29)
8,716
16,711
(6,673)
(1,322)
8,716
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 attends to properties where assets are located
on a regular basis.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
C7 Plant and equipment – other (continued)
The depreciation rates used for each class of depreciable asset are shown below:
Fixed asset class:
Capital works in progress
Plant and equipment
Farm vehicles and equipment
Useful life:
Not applicable
2-16 years
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
Investment property
Bearer plants
Total
At 30 June 2022, assets held for sale relates to the Dohnt vineyard.
C9 Deposits
Deposit for acquisition of Kaiuroo property
Total
Note
C2
C3
2022
$'000
542
173
715
2022
$'000
18,504
18,504
2021
$'000
1,621
-
1,621
2021
$'000
-
-
The Kaiuroo deposit includes stamp duty calculated on the amount paid.
C10 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 the
balance of settlement of the Kaiuroo property.
Investment property
Bearer plants
Intangible assets
Plant and equipment
Total
2022
$'000
142,709
17,254
34,263
570
194,796
2021
$'000
16,235
38,923
35,432
140
90,730
66
44
45
67
Rural Funds Group
Notes to the Financial Statements
30 June 2022
D. TAX
Since 1 July 2014 both Rural Funds Trust and RFM Chicken Income Fund (a subsidiary of Rural Funds Trust at
the time) 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. Rural Funds Trust considers
itself an attribution managed investment trust (AMIT) 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:
Current tax
Deferred tax
Adjustments in respect of deferred income tax of previous years
Income tax expense reported in the Statement of Comprehensive
Income
Income tax expense is attributable to:
Profit from continuing operations
Total
Deferred income tax expense included in income tax expense comprises:
Increase in deferred tax liabilities
Total
Amounts charged or credited directly to equity
Capitalised issue costs
Change in fair value taken through asset revaluation reserve
Total
2022
$'000
-
1,327
-
1,327
1,327
1,327
184
184
(16)
(1,127)
(1,143)
68
2021
$'000
283
378
(3)
658
658
658
1,596
1,596
-
1,220
1,220
46
Rural Funds Group
Notes to the Financial Statements
30 June 2022
D1 Income tax expense (continued)
Numerical reconciliation of income tax expense to prima facie tax payable
Net profit before income tax
At the statutory income tax rate of 30% (2021: 30%)
Tax effect of amounts that are not taxable in determining taxable income
Adjustments in respect of tax of previous years
Total
Franking credits
2022
$'000
210,463
63,139
(61,812)
-
1,327
2021
$'000
120,292
36,088
(35,427)
(3)
658
At 30 June 2022 there are $3,755,000 of franking credits available to apply to future income distributions (2021:
$2,434,000).
D2 Deferred tax and current tax payable
Deferred tax liabilities
Bearer plants
Plant and equipment
Fair value investment property
Other assets
Gross deferred tax liabilities
Set off of deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Investments
Other
Unused income tax losses
Gross deferred tax assets
Set off of deferred tax liabilities
Net deferred tax assets
2022
$'000
2,947
1,447
4,895
1,276
10,565
(2,931)
7,634
47
61
2,823
2,931
(2,931)
-
2021
$'000
5,051
1,026
4,838
383
11,298
(3,848)
7,450
223
33
3,592
3,848
(3,848)
-
Recognised tax assets and liabilities
Current income tax
Deferred income tax
Opening balance
Charged to income
Credited to equity
Tax payments
2022
$'000
477
-
-
561
2021
$'000
(1,533)
(283)
-
2,293
Closing balance
Tax expense in the Consolidated Statement of Comprehensive Income
Amounts recognised in the Consolidated Statement of Financial Position:
Deferred tax asset
Net deferred tax liability
1,038
477
2022
$'000
(7,450)
(1,327)
1,143
-
(7,634)
1,327
-
(7,634)
2021
$'000
(5,855)
(375)
(1,220)
-
(7,450)
658
-
(7,450)
47
69
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 as a proportion of 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
Current
Equipment loans (ANZ)
J&F Guarantee - Borrowing loss provision
Total
Non-current
Borrowings (ANZ)
Borrowings (Rabobank)
Borrowings (NAB)
Total
2022
$'000
2,525
198
2,723
220,864
184,236
50,000
455,100
2021
$'000
2,407
49
2,456
220,252
123,891
-
344,143
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 consolidated 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 the 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 $132.0 million (2021: $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 $132.0 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 $132.0 million.
The guarantee fee received from J&F during the year was $9,662,000 (2021: $7,117,000). The return to the Group
relating to the guarantee fee arrangement for the year was approximately 10.8% (2021: 10.6%) inclusive of interest
offset savings. There was no event of default during the year, and as a result, the guarantee has not been called.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 $149,000 (2021: $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 but will incur a break fee if exercised before year ten in 2028.
Borrowings
At 30 June 2022 the core debt facility available to the Group was $520,000,000 (2021: $380,000,000), with a drawn
balance of $455,100,000 (2021: $344,143,000). The facility is split into two tranches, with a $470,000,000 tranche
expiring in November 2024 and a $110,000,000 tranche expiring in November 2023.
As at 30 June 2022 RFF had active interest rate swaps totaling 40.2% (2021: 53.2%) 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 2022:
• maintain a maximum loan to value ratio of 55% (2021: 50%);
• maintain net tangible assets (including water entitlements) in excess of $400,000,000;
•
an interest cover ratio for the Group not less than 3.00:1.00 with distributions permitted if the interest
cover ratio is not less than 3.15:1.00.
The loan to value ratio calculation includes the J&F guarantee of $132.0 million (2021: $99.9 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 the 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), Rabobank Australia Group (Rabobank) and
National Australia Bank (NAB) 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.
70
48
49
71
Rural Funds Group
Notes to the Financial Statements
30 June 2022
E1 Interest bearing liabilities (continued)
The following assets are pledged as security over the loans:
2022
Mortgage: Leased
Properties
Other assets
Equipment
Total
2021
Mortgage: Leased
Properties
Other assets
Equipment
Total
Investment
property
Water
licences
$'000
$'000
Plant and
equipment
- Bearer
Plants
$'000
Financial
assets
Plant and
equipment
Assets
held for
sale
Total
$'000
$'000
$'000
$'000
786,981
86,647
190,488
70,786
-
715 1,135,617
-
-
786,981
71,032
-
157,679
-
-
190,488
17,887
-
88,673
-
16,530
16,530
-
-
88,919
16,530
715 1,241,066
Investment
property
Water
licences
$'000
$'000
Plant and
equipment
- Bearer
Plants
$'000
Financial
assets
Plant and
equipment
Assets
held for
sale
Total
$'000
$'000
$'000
$'000
596,924
75,648
160,782
70,464
-
1,621
905,439
-
-
596,924
34,770
-
110,418
-
-
160,782
24,848
-
95,312
-
8,716
8,716
-
-
1,621
59,618
8,716
973,773
E2 Financial assets – other (non-property related)
Investment - Marquis Macadamias Limited
Investment - Almondco Australia Limited
Total
2022
$'000
5,270
3,188
8,458
2021
$'000
824
2,041
2,865
The Group acquired additional shares in Marquis Macadamias Limited during the year at a cost of $4.6m.
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). Fair value has
been assessed based on the operational nature of the companies, financial information relating to the investment
and management’s assessment of net realisable value.
E3 Derivative financial instruments measured at fair value
Assets
Non-current
Interest rate swaps
Total other assets
Current
Interest rate swaps
Total other liabilities
Non-current
Interest rate swaps
Total other liabilities
2022
$'000
2021
$'000
33,698
2,930
33,698
2,930
589
589
-
-
3,604
3,604
18,069
18,069
The Group’s derivative financial instruments are held at fair value (level 2 - see section E4).
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 2022, cattle biological assets are level 2, and all other non-financial assets are level 3.
RFF’s unlisted equity investments, BIL, CICL, Marquis Macadamias Ltd 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 (2021: 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.
72
50
51
73
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 are 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.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 40.2% (2021: 53.2%) of the Group's drawn down
debt at 30 June 2022.
At balance date, the details of the effective interest rate swap contracts are:
Maturity of notional amounts
Settlement - between 0 to 3
years
Settlement - 3 to 5 years
Settlement - greater than 5 years
Total
Effective average interest rate
payable
Balance
2022
%
3.42
3.06
3.01
2021
%
2.70
3.24
2.97
2022
$'000
13,000
93,000
77,000
183,000
2021
$'000
15,000
73,000
95,000
183,000
The following interest rate swap contracts that have been entered into but are not yet effective as at 30 June 2022
are:
Effective average interest rate
payable
Balance
Maturity of notional amounts
Settlement - between 3 to 5 years
Settlement - greater than 5 years
Total
2022
%
3.59
2.27
2021
%
-
1.99
2022
$'000
40,000
230,000
270,000
2021
$'000
-
90,000
90,000
The net gain recognised on the swap derivative instruments for the year ended 30 June 2022 was $51,852,000
(2021: $12,923,000 gain).
At 30 June 2022 the Group had the following mix of financial assets and liabilities exposed to variable interest
rates:
Cash
Interest bearing liabilities (non-current)
Total
2022
$'000
4,961
(455,100)
(450,139)
2021
$'000
11,647
(344,143)
(332,496)
At 30 June 2022, 0.55% (2021: 0.72%) of the Group’s debt is fixed, excluding the impact of interest rate swaps.
74
52
53
75
Rural Funds Group
Notes to the Financial Statements
30 June 2022
E6 Financial risk management (continued)
c.
Interest rate risk (sensitivity analysis)
At 30 June 2022, the effect on profit before tax and net assets attributable to unitholders as a result of changes in
the interest rate, including the effect of interest rate swaps, finance income and revaluation of derivatives, with all
other variables remaining constant, would be as follows:
Change in profit before income tax:
Increase in interest rate by 1%
Decrease in interest rate by 1%
Change in equity:
Increase in interest rate by 1%
Decrease in interest rate by 1%
d. Credit risk
2022
$'000
22,530
(25,135)
22,530
(25,135)
2021
$'000
17,353
(18,923)
17,353
(18,923)
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.
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54
77
Rural Funds Group
Notes to the Financial Statements
30 June 2022
E7 Issued units
Units on issue at the beginning of the period
Units issued during the year
Distributions to unitholders
Units on issue
2022
No.
339,900,556
42,614,203
-
$'000
385,140
103,039
(16,382)
2021
No.
337,713,420
2,187,136
-
$'000
360,574
4,920
19,646
382,514,759
471,797
339,900,556
385,140
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 $44,778,000 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
Distributions payable
Total
2022
$'000
11,756
11,756
2021
$'000
10,022
10,022
Rural Funds Group
Notes to the Financial Statements
30 June 2022
F. OTHER ASSETS AND LIABILITIES
F1 Cash and cash equivalents
Cash at bank
Total
Reconciliation of cash
2022
$'000
4,961
4,961
2021
$'000
11,647
11,647
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:
Cash and cash equivalents
F2 Trade and other receivables
Current
Trade receivables
Sundry receivables
Receivables from related parties
Total
2022
$'000
4,961
2022
$'000
6,239
154
349
6,742
2021
$'000
11,647
2021
$'000
3,427
787
731
4,945
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
Current
Prepayments
Deposits
Other
Total
Non-current
Deposits
Other
Total
2022
$'000
1,922
-
-
1,922
10,005
129
10,134
2021
$'000
797
4,137
61
4,995
-
-
-
78
56
57
79
Rural Funds Group
Notes to the Financial Statements
30 June 2022
F4 Biological assets
2022
Opening net book amount
Additions
Increases/(decrease) due to
biological
transformation
Decreases due to sales
Closing net book amount
Soy beans
$'000
-
2
Sugar Macadamias
$'000
$'000
-
2,988
1,440
2,696
Cropping
$'000
-
422
Cattle
$'000
-
2,930
Total
$'000
2,988
7,490
(2)
2,102
2,834
-
-
(5,349)
2,437
(2,349)
1,925
120
(8)
534
-
5,054
-
2,930
(7,706)
7,826
2021
Opening net book amount
Additions
Increases due to biological
transformation
Decreases due to sales
Closing net book amount
Soy beans
$'000
-
373
Sugar Macadamias
$'000
$'000
-
-
-
1,964
Cropping
$'000
-
-
105
(478)
-
1,030
(6)
2,988
-
-
-
-
-
-
Cattle
$'000
-
-
-
-
-
Total
$'000
-
2,337
1,135
(484)
2,988
Biological assets relate to the Group’s farming operations. In accordance with AASB 141 Agriculture the Group’s
biological assets have been recognised at fair value as determined based on the present value of expected net
cash flows from the crops.
Cattle biological assets as at 30 June 2022 relates to livestock acquired in June 2022. The cost of acquisition
approximates fair value at 30 June 2022.
Fair value has been based on expected net cash flows from the crops discounted from the time of harvest. The
main level 3 inputs used by the Group includes estimates based on production costs (including input and harvest
costs) and the estimated time of harvest adjusted for the risks of the cash flows.
Significant estimates used in determining the expected net cash flows:
Sugar from cane planted (tonnes per ha)
The higher the sugar from cane planted, the higher the fair value
Yield
Price ($ per tonne)
The higher the yield, the higher the fair value
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.
Judgements and estimates are made in determining the fair values of the biological assets that are recognised and
measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used
in determining fair value, the Group has classified its biological assets into three levels prescribed under the
accounting standards.
2022
Sugar
Macadamias
Cropping
Cattle
Total biological assets
2021
Sugar
Total biological assets
80
Level 1
$'000
Level 2
$'000
-
-
-
-
-
Level 1
$'000
-
-
-
-
-
2,930
2,930
Level 2
$'000
-
-
Level 3
$'000
2,437
1,925
534
-
4,896
Level 3
$'000
2,988
2,988
Total
$'000
2,437
1,925
534
2,930
7,826
Total
$'000
2,988
2,988
58
Rural Funds Group
Notes to the Financial Statements
30 June 2022
F4 Biological assets (continued)
Farming
operations
Sugar
Fair value at
2022
$'000
2,437
Macadamias
1,925
Cropping (mungbean)
184
Cropping (other crops)
350
Unobservable inputs**
Range of inputs
-
2021
$'000
2,988 Sugar from cane planted
(tonnes per ha)
Net price ($ per tonne)
(+/- 10%)
Macadamia yield
(tonnes)
(+/- 10%)
Farmgate NIS price ($
per tonne)
(+/-10%)
- Mungbean yield (tonnes
per ha)
(+/-10%)
Mungbean price ($ per
tonne)
(+/-10%)
Cost approximates fair
value less costs to sell
-
2022
2021
4.2 - 6.8
tonnes per ha
$479 - $586
per tonne
690.4 - 843.9
tonnes
$3,400 -
$4,200 per
tonne
0.90 - 1.10
tonnes per ha
$861 - $1,052
per tonne
-
4.3 - 7.0
tonnes per ha
$366 - $464
per tonne
-
-
-
-
-
Total
4,896
2,988
F5 Inventories
Current
Agricultural produce - farming operations
Other
Total
F6 Trade and other payables
Trade payables
Accruals
Sundry creditors
Total
F7 Unearned income
Unearned lease income
Total
F8 Other non-current liabilities
Lessee deposits
Total
2022
$'000
8
447
455
2022
$'000
2,142
2,136
875
5,153
2022
$'000
657
657
2022
$'000
3,206
3,206
2021
$'000
-
-
-
2021
$'000
1,597
1,413
185
3,195
2021
$'000
-
-
2021
$'000
4,421
4,421
59
81
Rural Funds Group
Notes to the Financial Statements
30 June 2022
F9 Asset revaluation reserve
Opening balance
Disposal of bearer plants
Property - owner occupied revaluation
Bearer plants revaluation
Total comprehensive income
Income tax applicable
Closing balance
2022
$'000
48,347
-
1,286
(1,343)
(57)
1,127
49,417
2021
$'000
59,412
(15,348)
-
5,503
5,503
(1,220)
48,347
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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 2022.
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
Andrea Lemmon (appointed on 1 November 2021)
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 2022
are:
Balance at 30 June 2020
Additions
Guy Paynter
Units
1,559,104
David
Bryant*
Units
15,238,034
-
-
Balance at 30 June 2021
1,559,104
15,238,034
Additions
185,606
1,087,428
Balance at 30 June 2022
1,744,710
16,325,462
Michael
Carroll
Units
84,734
133,668
218,402
36,338
254,740
Julian
Widdup
Units
110,203
5,562
115,765
19,261
135,026
Andrea
Lemmon
Units
-
-
-
183,357
183,357
*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 (2021: 0.6%) of adjusted total assets; and,
• Asset management fee: 0.45% per annum (2021: 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.
82
60
61
83
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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:
Management fee
Asset management fee
Total management fees
Expenses reimbursed to RFM
Expenses reimbursed to RFM Macadamias
Expenses reimbursed to the Cattle JV
Expenses reimbursed to the RFM Farming
Dividends declared to the Responsible Entity
Total amount paid to RFM and related entities
Rental income received from RFM Almond Fund
Rental income received from RFM
Rental income received from RFM Farming
Rental income received from Cattle JV
Rental income received from Cotton JV
Rental income received from 2007 Macgrove Project
Finance income from Cattle JV
Interest income from Cattle JV
Finance income from J&F Australia
Expenses charged to RFM Almond Fund
Expenses charged to RFM Macadamias
Expenses charged to RFM Farming
Expenses charged to Cattle JV
2022
$'000
6,850
5,138
11,988
8,290
6,927
383
363
1,460
29,411
-
20
1,748
2,001
2,871
1,296
1,835
-
9,662
-
305
69
152
2021
$'000
6,296
4,722
11,018
6,664
1,703
-
-
1,336
20,721
2,123
8
1,640
1,702
2,502
1,219
1,618
50
7,117
788
123
2
-
Total amounts received from RFM and related entities
19,959
18,892
The terms and nature of the historical transactions between the Group and related parties have not changed during
the year ended 30 June 2022. Transactions entered 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, service
recharge cost recoveries, professional service fees such as legal, audit and tax matter costs and regulatory fees
and charges. During the year ended 30 June 2022, additional costs were incurred by RFM on behalf of the Group
as a result of an increase in the Group’s operations.
RFM Macadamias and RFM Farming perform management activities, including capital development and farm
management on behalf of the Group. Expenses include service recharge cost recoveries, costs relating to farm
management and capital development. These costs incurred by RFM Macadamias and RFM Farming are
subsequently reimbursed by the Group.
Rental income from RFM Farming largely relates to rental income from the Mayneland property. Rental income
from Cattle JV largely relates to rental income from Mutton Hole and Oakland Park. Rental income from Cotton JV
relates to rental income from the Lynora Downs.
Rental income from RFM Almond Fund 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
relate to the usage of water entitlement allocations for the Mooral orchard.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
G2 Related party transactions (continued)
Responsible Entity (Rural Funds Management) and related entities (continued)
Finance income from J&F Australia Pty Limited (J&F) relates to the $132.0 million (2021: $99.9 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
RFM Farming Pty Limited
RFM Macadamias Pty Limited
Cattle JV Pty Limited
Total
2022
$'000
-
1,639
16,769
18,408
2021
$'000
329
946
18,120
19,395
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.
Finance lease receivable from Cattle JV relates to the breeders and agricultural plant and equipment leased to
Cattle JV. $1,365,000 of the breeder lease balance was settled and $56,000 agricultural plant and equipment
principal repayments were received during the year.
Finance lease receivable from RFM Macadamias largely relates to the agricultural plant and equipment leased to
2007 Macgrove Project. $248,000 principal repayments were received during the year.
Creditors
Rural Funds Management Limited
RFM Farming Pty Limited
RFM Macadamias Pty Limited
Total
Custodian fees
Australian Executor Trustees Limited
Total
Financial Guarantee
2022
$'000
884
17
30
931
2022
$'000
365
365
2021
$'000
-
-
-
-
2021
$'000
309
309
The Group provides a $132.0 million (2021: $99.9 million) guarantee to J&F Australia Pty Limited (J&F), a
subsidiary of RFM. The guarantee is currently used to support $132.0 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.
Entities with influence over the Group
Rural Funds Management
Other
2022
Units
12,538,659
2021
%
3.28
Units
11,843,659
%
3.48
Andrea Lemmon is a director and chair of Marquis Macadamia Limited. Marquis Macadamia Limited provides
processing and selling services for the Group’s farming operations on the Beerwah and Bauple properties. The
Group also holds shares in Marquis Macadamia Limited. Marquis Macadamia Limited is not a related party as
defined by AASB 124 Related Party Disclosure. Procedures are in place to manage any potential conflicts of
interest.
84
62
63
85
Rural Funds Group
Notes to the Financial Statements
30 June 2022
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:
Statement of Financial Position
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Non-current liabilities
Total liabilities
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
Issued units
Asset revaluation reserve
Retained earnings
Total equity
Statement of Comprehensive Income
Net profit after income tax
Other comprehensive income for the year, net of tax
Total comprehensive income attributable to unitholders
2022
$'000
2021
$'000
29,321
1,321,574
1,350,895
16,746
458,306
475,052
465,075
47,505
363,263
875,843
207,328
2,413
209,741
19,183
977,665
996,848
12,563
374,422
386,985
380,440
45,093
184,330
609,863
118,089
1,435
119,524
Rural Funds Group
Notes to the Financial Statements
30 June 2022
G4 Cash flow information
Reconciliation of net profit after income tax to cash flow from operating activities
Net profit after income tax
Cash flows excluded from profit attributable to operating
activities
Non-cash flows in profit
Gain on sale of assets
Depreciation and amortisation/impairment - other
Depreciation - bearer plants
Amortisation of lease incentives
Finance income - lease receivable
Finance lease income received but excluded from profit
Capitalised borrowing costs
Change in fair value of investment property
Change in fair value of financial assets/liabilities
Change in fair value of bearer plants
Impairment of property - owner occupied
Impairment of intangible assets
Change in fair value of biological assets
Change in fair value of interest rate swaps
Straight-lining of rental revenue
Dividend income classified as investing cash flows
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables
Increase in inventories
Increase in other assets
Increase/(decrease) in trade and other payables
Increase in unearned income
Increase/(decrease) in net tax liabilities
(Decrease)/increase in other liabilities
Net cash inflow from operating activities
Net debt reconciliation
2022
$'000
209,136
(320)
1,634
4,103
200
(3,187)
-
(260)
(123,191)
(669)
5,533
912
1,059
(5,054)
(51,852)
735
(65)
(1,798)
(455)
(848)
1,789
657
750
(1,215)
37,594
2021
$'000
119,634
(32,868)
840
4,032
200
(769)
235
-
(42,289)
(116)
(1,007)
1,651
4,188
(1,136)
(12,923)
852
(64)
503
-
(4,159)
(305)
-
(1,635)
544
35,408
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:
Cash and cash equivalents
Borrowings - repayable within one year
Borrowings - repayable after one year
Net debt
Cash and cash equivalents
Gross debt - fixed interest rates
Gross debt - variable interest rates
Net debt
2022
$'000
4,961
(2,525)
(455,100)
(452,664)
4,961
(2,525)
(455,100)
(452,664)
2021
$'000
11,647
(2,407)
(344,143)
(334,903)
11,647
(2,407)
(344,143)
(334,903)
86
64
65
87
Rural Funds Group
Notes to the Financial Statements
30 June 2022
G7 Events after the reporting date
On 22 July 2022, the Group completed the acquisition of Brooklands, a 978 hectare property located west of
Rockhampton in Central Queensland for $5.9m including transaction costs.
On 9 August 2022, the Group completed the acquisition of Greenfields, a 230ha property west of Rockhampton in
Central Queensland for $3.0m including transaction costs. This property will be incorporated as part of Rookwood
Farms.
In August 2022, the following changes were made to the Group’s loan covenant and banking requirements. The
interest cover ratio was decreased for the Group to be not less than 2.00:1.00 with distributions permitted if the
interest cover ratio is not less than 2.15:1.00. In addition, the hedging requirement was decreased to 30% for the
year ending 30 June 2023.
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.
G8 Contingent liabilities
Other than what has been disclosed in the accounts there are no contingent liabilities as at 30 June 2022.
Rural Funds Group
Notes to the Financial Statements
30 June 2022
G5 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Group:
PricewaterhouseCoopers Australia:
Audit and review of financial statements
Other statutory assurance services:
Compliance audit
Total
G6 Other accounting policies
Cash and cash equivalents
2022
$
2021
$
379,576
396,657
35,647
415,223
20,395
417,052
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.
88
66
67
89
Rural Funds Group
Directors’ Declaration
30 June 2022
In the Directors of the Responsible Entity’s opinion:
1
The financial statements and notes of Rural Funds Group set out on pages 14 to 67 are in accordance
with the Corporations Act 2001, including:
36
89
a.
b.
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
giving a true and fair view of the Group’s financial position as at 30 June 2022 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
31 August 2022
90
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 2022 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 2022
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
68
Liability limited by a scheme approved under Professional Standards Legislation.
9191
69
Our audit approach
Key audit matters
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 $2,200,000, 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 are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit Committee.
Key audit matter
How our audit addressed the key audit matter
Valuation of agricultural properties, which
comprise:
- Investment property $787m
- Bearer plants $190.5m
- Intangibles (water entitlements) $157.7m
- Property – owner occupied $68.4m
(Refer to note C2, C3, C5 and C6)
The Group holds agricultural properties for long-term
leasing or for development into orchards. Cropping
operations are performed on an interim basis for
unleased portions of land where developments have not
commenced.
Each agricultural property held for leasing or
development comprises one or more of the following
three components:
• investment property (including land and infrastructure
attached to land)
• bearer plants (including almond trees, macadamia trees
and wine grape vines)
• water entitlements.
Agriculture properties on which cropping operations are
currently conducted by the Group are classified as
property–owner occupied.
The Group’s valuation policy requires agricultural
properties to be externally valued by an expert at least
every two years or more often where the Group considers
appropriate.
External valuations provide an aggregate value for each
agricultural property. Key variables and considerations
in the valuations can include discount rates, passing
rents, comparable sales, market rent, cattle carrying
capacity, value per cattle adult equivalent. Factors such
as associated lease agreements, prevailing market
conditions, and the individual nature, condition and
location of these properties impact these variables, and
overall valuations.
For a selection of external valuations obtained by the
Group, together with PwC real estate property valuation
experts:
• we assessed the competency, qualifications, experience
and objectivity of the external valuers
• we read the valuers’ terms of engagement to identify
any terms that might affect their objectivity or impose
limitations on their work relevant to the valuation
• we interviewed external valuers in relation to a
selection of properties subject to valuation and on the
rationale behind the chosen allocation techniques
• we compared a sample of inputs used in the valuation
and allocation models, such as rental income and lease
terms, to the relevant lease agreements and/or other
supporting documents
• we assessed the reasonableness of certain inputs
including, where applicable, market rents, discount rates
and capitalisation rates, rates per ha, cattle carrying
capacity, value per cattle adult equivalent used in the
valuation and allocation models, for a sample of
properties based on benchmark market data
• we inspected the final valuation reports and compared
the fair value as per the valuation to the value recorded
in the Group’s accounting records.
For properties not subject to external valuations, we
discussed with the directors and evaluated the directors’
internal assessment of the fair value of the properties and
their assertion that the properties are carried at fair value
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70
71
93
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
as per the latest external valuation report, adding any
capital expenditure made during the intervening period.
We conducted site inspections of selected macadamia
and cattle properties in Maryborough, Bundaberg and
around Rockhampton in Queensland.
We assessed the adequacy of the disclosures in Notes C1,
C2, C3, C5 and C6 of investment property, bearer plants,
water entitlements and property-owner occupied
considering the requirements of Australian Accounting
Standards.
The aggregate value of each agricultural property is
allocated across the components of investment property
(carried at fair value), bearer plants (carried under
revaluation model), water entitlements (carried at cost
less accumulated impairment), and property – owner
occupied (carried under revaluation model).
The directors, or external valuers where appropriate,
determined the suitable allocation technique to be
applied to each agricultural property, considering the
nature and characteristics of the property including any
lease encumbrances.
This was a key audit matter because:
• agricultural properties are fundamental to the Group’s
business model. Investment properties, bearer plants
and water entitlements, and property – owner occupied
form the majority of the Group’s assets in the
consolidated statement of financial position
• the nature of agricultural property valuations is
inherently subjective due to the use of assumptions and
estimates in the valuation model.
• the selection and application of allocation techniques
are inherently subjective due to the unique
characteristics of each property
• the valuations and allocation outcomes are sensitive to
key inputs/assumptions in the model such as the
discount rate and capitalisation rates, the utilisation of
comparable sales data and to allocation techniques.
94
72
Related party transactions
(Refer to note G2)
The Group’s Responsible Entity, along with other funds
for which it is the Responsible Entity, are considered
related parties of the Group.
Key transactions with these parties include:
• rental income from the lease of agricultural properties
• finance income from the lease of cattle
• finance and interest income
• management fees and asset management fees paid
• distributions from investments
• reimbursement of operating expenses and development
costs
• provision of a limited financial guarantee and receipt of
associated fee income
Related party transactions were a key audit matter due to
the significant impact of these transactions on the results
of the Group. Additionally, because of their nature, they
are pervasive and material to the presentation of and
disclosures within the financial report.
We developed an understanding of the Group’s relevant
controls and processes for identifying related parties and
related party transactions.
For significant contracts entered into during the year, we
verified that the transactions were appropriately
approved.
For a sample of lease income recorded during the year,
we compared the lease income to the relevant supporting
documents including the lease agreements.
For a sample of cropping expenses/macadamia
development costs recharged, we obtained and agreed to
relevant supporting documents including invoices.
For management fees and asset management fees, we
compared the rates used to determine fees to the rates
disclosed in the explanatory memorandum issued on
formation of the Group.
We discussed the related party transactions with
management to develop an understanding of the
business rationale for the transactions.
In relation to the financial guarantee, we developed an
understanding of the arrangement from reading the
historic Explanatory memorandum, subsequent
amendments and from discussions with management
and others of the purpose, terms and conditions, and
substance of the arrangement. For a sample of guarantee
income recorded we agreed to relevant supporting
documents including invoices.
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 2022,
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, Additional
Information for Listed Public Entities and the Corporate Directory. 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.
73
95
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
Partner
Sydney
31 August 2022
96
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97
Investor
information
How do I invest in Rural Funds Group (RFF)?
Can I reinvest my distribution?
RFF has a Distribution Reinvestment Plan (DRP)
which allows you to reinvest all, or part of any
distribution paid on your Units in additional Units,
instead of receiving the distribution in cash. New
Units are issued to you immediately after the
distribution is paid. Participation in the DRP is
optional.
Where can I find more information about
RFF?
Rural Funds Management website, www.
ruralfunds.com.au/investments/rural-funds-
group contains comprehensive information about
RFF including property portfolio, unit price,
announcements and publications. The website
also provides information on the manager,
Rural Funds Management Limited, including
Board, corporate governance, sustainability, and
experience.
RFF units are listed on the Australian Stock
Exchange (ASX: RFF). Units may be bought or
sold using a suitably licensed financial adviser,
stockbroker or online broking facility.
How do I find out what my units are worth?
RFF unit price, trading volume, announcements
and other information about units can be found
on the ASX website, www.asx.com.au or in the
financial section of major newspapers.
Can I receive all correspondence
electronically?
Yes, you can elect to receive all communications,
including the annual report, electronically by
completing the communications preferences
online via www.investorserve.com.au or by
completing a communications election form.
When do I receive a distribution?
RFF pays quarterly distributions, and the
announcements can be found on the ASX website.
RFF pays distributions via direct credit and
Unitholders will receive confirmation via email or
post confirming that the payment has been made
and a statement that sets out the details of the
payment.
98
Responsible Entity and Manager
Rural Funds Management Ltd
ABN 65 077 492 838
AFSL 226 701
Level 2, 2 King Street Deakin ACT 2600
Locked Bag 150 Kingston ACT 2604
Phone: 1800 026 665
Email: investorservices@ruralfunds.com.au
Website: www.ruralfunds.com.au
Registry
Boardroom Pty Limited
GPO Box 3993, Sydney NSW 2001
Phone: 1300 737 760
Website: www.boardroomlimited.com.au
Disclaimer and important information
This publication is not an offer of investment or product financial advice. Rural Funds Management Limited (RFM),
ABN 65 077 492 838 AFSL No. 226701, has prepared this publication based on information available to it. Although
all reasonable care has been taken to ensure that the facts and opinions stated herein are fair and accurate, the
information provided has not been independently verified. Accordingly, no representation or warranty, expressed or
implied, is made as to the fairness, accuracy or completeness or correctness of the information and opinions contained
within this document. Whilst RFM has taken all reasonable care in producing the information herein, subsequent
changes in circumstance may at any time occur and may impact on the accuracy of this information. Neither RFM,
nor its directors or employees, guarantee the success of RFM’s funds, including any return received by investors in
the funds. Past performance is not necessarily a guide to future performance. The information contained within this
document is a general summary only and has been prepared without taking into account any person’s individual
objectives, financial circumstances or needs. Before making any decisions to invest, a person should consider the
appropriateness of the information to their individual objectives, financial situation and needs, and if necessary seek
advice from a suitably qualified professional. Financial information in this publication is as at 30 June 2022, unless
stated otherwise.
RFM is the Responsible Entity and Manager for Rural Funds Group (ASX: RFF). RFF is a stapled entity incorporating
Rural Funds Trust ARSN 112 951 578 and RF Active ARSN 168 740 805. Australian Executor Trustees Limited is the
custodian for the Rural Funds Group. To read more about their privacy principles, please visit
www.aetlimited.com.au/privacy.
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Managed by: