Rural Funds : Notice of Meetings and Explanatory Memorandum

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Notice of Meetings and
Explanatory Memorandum
For	To be held on Friday, 4 February 2022 at 11:00am (AEDT) at the offices of

Rural Funds Management Limited, Level 2, 2 King Street Deakin ACT 2600.

This Notice of Meetings and Explanatory Memorandum is issued by Rural Funds Management Limited (ACN 077 492 838, AFSL 226 701) (RFM) as the Responsible Entity of Rural Funds Trust ARSN 112 951 578 and RF Active ARSN 168 740 805 collectively referred to as Rural Funds Group or RFF.

THIS IS AN IMPORTANT DOCUMENT

Please read the information in this document carefully. It is important that you either attend the Meetings,

or complete and lodge the enclosed Proxy Form or lodge your proxy electronically.

To ensure compliance with any ACT COVID-19 restrictions, if you will be attending the Meetings in person, please contact RFM Investor Services on 1800 026 665 (from within Australia) or [phone] (from outside Australia) from 8.30am to 5.00pm (local Canberra time), Monday to Friday, or email [e-mail] prior to the Meetings.

The Independent Expert has concluded that the Guarantee is fair and reasonable to the

Non-Associated Unitholders of RFF under the requirements of Listing Rule 10 and Chapter 2E

of the Corporations Act.

onlyTable of Contents

1. Letter from the Chairman

2. Location of Meetings and what you need to do

3.	Important Notices
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4.	Explanatory Memorandum
	4.1	What is being considered at the Meetings?
	4.2	Overview of the Guarantee
personal	4.3	Ownership of J&F
4.4	What is the impact of the Additional Guarantee on RFF?
	4.5	Why is Unitholder approval being sought?
	4.6	Funding
	4.7	Advantages of the Guarantee
	4.8	Disadvantages of the Guarantee
	4.9	What happens if the Additional Guarantee is approved?
	4.10	What happens if the Additional Guarantee is not approved?
	4.11	Risks associated with the Guarantee
	4.12	Value of the financial benefit received by RFM
	4.13	Directors interests
	4.14	Opinion of Independant Expert
5.	Independent Expert's Report
For6. Notice of Meetings
7.	Glossary

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For personal use only

1. Letter from the Chairman

Dear Unitholder

On behalf of Rural Funds Management Limited (RFM), the responsible entity and manager of Rural Funds Group (RFF), it is my pleasure to invite you to the Meetings of RFF unitholders (Unitholders) to be held at 11:00am (AEDT) on Friday, 4 February 2022 at the offices of Rural Funds Management Limited, Level 2, 2 King Street Deakin ACT 2600 (Meetings).

In August 2018, Unitholders approved the provision of a $75.0 million limited guarantee to J&F Australia Pty Ltd (J&F), a wholly owned subsidiary of RFM. This guarantee was approved with a ten-year term for which RFF is paid a monthly fee (Guarantee Fee). J&F has paid RFF the Guarantee Fee since August 2018.

At the same time, RFF agreed to purchase five of JBS Australia Pty Ltd's (JBS) Australian feedlots and leased those properties back to JBS. The Initial Guarantee allowed J&F to supply JBS with cattle, feed and associated costs used to stock feedlots.

On 14 April 2020, an increase to the guarantee to a total of $100.0 million (Current Guarantee) was approved by Unitholders. The FY21 return to RFF on the Current Guarantee was 10.6% (see section 4.4 of this document for further detail of historical returns).

Since the implementation of the arrangements between J&F and JBS (JBS Arrangements), the total cost of funding cattle entering the feedlots have increased due to increased cattle prices. High demand also continues for JBS's Australian grain fed beef products, both internationally and domestically. As a result of continued high demand and the increased cost of cattle, a further increase in the existing arrangements with JBS is required in order for J&F to continue funding the previously agreed level of cattle purchases. An increase to J&F's borrowings would require a commensurate increase in the amount of the Current Guarantee.

In order to facilitate JBS's immediate requirements, J&F requires a $14.0 million increase to the Current Guarantee, to support a commensurate increase in J&F's borrowings. However, Unitholder approval is being sought to increase the Current Guarantee by up to $32.0 million (the Additional Guarantee) to cover potential future operational requirements. If approved, the Additional Guarantee is expected to initially be $114.0 million in total, but with the flexibility to increase to maximum of $132.0 million if required.

The Additional Guarantee amount of $32.0 million is a variation to the Current Guarantee previously approved by Unitholders in August 2018 and April 2020. As J&F is a wholly owned subsidiary of RFM, the Additional Guarantee requires Unitholder approval under ASX Listing Rule 10.1.

The Meetings are therefore being convened to consider the Resolution to approve the Additional Guarantee.

The Independent Expert has concluded that the Guarantee is fair and reasonable to the Non-Associated Unitholders of RFF under the requirements of Listing Rule 10 and Chapter 2E of the Corporations Act.

Details of the Resolution and the Guarantee are provided in the Notice of Meetings and Explanatory Memorandum accompanying this letter.

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For personal use only

YOUR VOTE IS IMPORTANT

This Notice of Meetings and Explanatory Memorandum contains important information in relation to the Guarantee and a discussion of the benefits and risks of the Guarantee.

Please read the Notice of Meetings and the Explanatory Memorandum carefully in its entirety before making your decision and voting (whether in person, by corporate representative or by proxy) at the Meetings.

To ensure compliance with any ACT COVID-19 restrictions, if you will attend the Meetings in person, please contact RFM Investor Services on 1800 026 665 (from within Australia) or [phone] (from outside Australia) from 8.30am to 5.00pm (local Canberra time), Monday to Friday prior to the Meetings.

Yours sincerely,

Guy Paynter

Chairman

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For personal use only

2. Location of Meetings and what you need to do

LOCATION OF MEETINGS

11:00am (AEDT) on Friday, 4 February 2022 at the offices of:

Rural Funds Management Limited

Level 2

2 King Street

Deakin ACT 2600

WHAT YOU NEED TO DO

Step 1: Read the Notice of Meetings and Explanatory Memorandum

This Explanatory Memorandum is intended to provide Unitholders with information about the proposed Resolution contained in the Notice of Meetings.

You should read this Explanatory Memorandum in full before making any decision in relation to the Resolution.

Please refer to the Glossary at section 7 for the meaning of any defined terms in this Explanatory Memorandum.

Step 2: Vote on the Resolution

The Meetings will be held at 11:00am (AEDT) on Friday, 4 February 2022 at the offices of:

Rural Funds Management Limited

Level 2

2 King Street

Deakin ACT 2600

You can vote on the Resolution by attending the Meetings and voting in person (or for a body corporate, by a corporate representative voting for you), by completing and returning the enclosed Proxy Form or lodging it electronically, as described on the Proxy Form.

Proxy Forms must be received by the Registry by 11:00am (AEDT) on Wednesday, 2 February 2022.

For details on how to complete and lodge the Proxy Forms, please refer to the instructions on the Proxy Forms.

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