Great Southern 2008 Almond Income Project

	AIP08 frost event, Spring 2011
	Change of RE and Scheme Arrangements
	Fund Overview
	Fund Leasehold Assets
	Performance & Financial Information

Frost Event, Spring 2011

In late September, an unseasonal cold snap resulted in a frost event that affected a small section of the AIP08 almond orchard area on the Mooral property near Hillston, NSW.

RFM has undertaken a preliminary sample audit to assess the extent of the damage to the AIP08 almond orchard area. To demonstrate the impact this event may have on final harvest, a comparison of budgeted yield to forecast yield incorporating the frost damage is shown below:

Scheme	2012 Budget t/ha	Forecast t/ha	t/ha Variance	% Variance
AIP08	2.32	2.10	-0.22	-10%

The impact on final revenue cannot be quantified with certainty until the orchard has been harvested in 2012 and the almond price for the 2012 harvest is known. Assuming the price received is the same as the 2011 harvest ($4.70/kg), forecast changes to revenue are shown below:

Scheme	2012 Budget Revenue	Forecast Revenue	Revenue Variance	% Variance
AIP08	$2,489,710	$2,249,763	-$239,948	-10%

Frosts at Hillston during the August flowering period are not common events. RFM is currently investigating the cost effectiveness of installing sprinklers to warm the orchard floor to discourage frosts in the future, prioritising areas that are most susceptible to this kind of damage. We will keep you updated on the outcomes of this investigation.

Should you require any further information please contact Adviser Services on 1300 880 295 or email adviserservices@ruralfunds.com.au.

Change of RE and Scheme Arrangements

Rural Funds Management Ltd (RFM) was appointed the Responsible Entity (RE) for the Almond Income Project 2008 (AIP08) at a growers' meeting on the 26 February 2010.

The Australian Taxation Office (ATO) withdrew Product Ruling (PR) 2007/102 for AIP08 effective 26 February 2010. In its place the ATO has issued a new PR (2010/28) and applied it retrospectively from 26 February 2010 to give Growers continuity. The new PR is valid until 30 June 2011.

The new ruling enables the Commissioner to exercise their discretion under the non-commercial loss (NCL) rules for the 2011 and 2012 financial year providing that the Grower has carried on their Almond growing business during the financial year, and that the Grower has incurred a taxation loss for that year.

Growers who have forfeited, transferred, cancelled or redeemed their interest prior to the completion of the Project, and Growers who terminate their interest after incurring expenses post 26 February 2010 will not receive the benefit of the Commissioner’s discretion for the purpose of the NCL rules under the new PR.

The new PR is available under Key Documents. A Grower’s own individual circumstances will determine how tax laws apply to them. A Grower should obtain tax advice from a registered tax agent on these issues. RFM is not a registered tax agent under the Tax Agent Services Act 2009 and cannot provide tax advice to specific Growers.

Fund Overview

The aim of the AIP08 is to provide investors ("Growers") with the opportunity to operate an almond growing business capable of generating competitive risk-adjusted returns.

AIP08 Growers participate in the business of growing and selling almonds for the world market. Each Grower is licensed to occupy and farm one or more Almondlots each consisting of an area of 0.2158 hectares (ha). Each Almondlot is planted with approximately 60 almond trees and has sufficient water entitlements delivered via a modern irrigation system to cultivate and farm the trees. Grower returns are dependent upon the performance of their almond growing business. Returns are generated from the almond sale proceeds, less the annual operating and management costs including the lease of land and operational infrastructure. The AIP08 terminates on 30 June 2028 with no further obligations to the Growers.

The operational management of the AIP08 is led by the RFM farming team. This team has significant expertise in almond orchard design, development and ongoing management, and is currently responsible for maintaining 1,814ha of almond orchards at Hillston in New South Wales.

As Responsible Entity, RFM is responsible for orchard operations, maintenance, harvesting, pre-processing and delivery. RFM also manages all accounting and administrative functions of the AIP08.

Fund Leasehold Assets

The almond orchard farmed by AIP08 is situated on the Mooral Property in Hillston, New South Wales. The Mooral Property is owned by RFM RiverBank, a unit trust also managed by RFM.

Hillston is known as a production centre for agriculture commodities including citrus, wine-grapes, cotton, potatoes and cherries. An independent report obtained at the beginning of the project stated that the weather at Hillston area is favourable for almond growing and compares well with other Almond growing regions in Australia.

RFM as the RE for the project has entered into a 20 year Almond Crop Supply Agreement with Almondco Australia Limited, whereby Almondco will process, market and sell the Almonds on behalf of the Growers (the "Almond Crop Supply Agreement").

The almonds from the Project will be delivered to Almondco’s processing plant where they will be graded according to quality, size and colour. The Almond Crop Supply Agreement obliges Almondco to use its endeavours to sell the almonds at the best price available at the time of sale. As part of this obligation Almondco will determine which value added processes should be applied in order to attempt to maximize the value of the almonds.

The Almond Grove is expected to reach full maturity/production after 7 years and forecast to be cash flow positive in 2014. The photographs below were taken in March 2010.

Performance & Financial Information

Table 2: AIP08 financial information and fees

	Amount per Almondlot
Management Fees The fees and costs for managing your investment.	2007/08 Year 0	2008/09 Year 1	2009/10 Year 2	2010/11 Year 3	2011/12 Year 4	2012/13 - onwards	How and when paid
Growers' Initial and Ongoing Management Fee Management fees for Years 0, 1, and 2, of the Project.	$5,500 (incl $500 GST)	$2,400 (incl $218.18 GST) (Includes the Licence Fee of $1,085) plus 100% of the Total Almond Revenue (inclusive of GST received during the Finacial Year as set out below)	$2,400 (incl GST) plus 100% of Total Almond Revenue	$2,400 plus 100% of Total Almond Revenue	For FY12 $2,400 (incl GST)	-	$5,000 is due for payment on application on or before 15 June 2008. The $2,400 fee for the period from 1 July 2008 to 30 June 2009 will be invoiced by 1 February 2009 and shall be due for payment on 28 February 2009. The $2,400 fee for the period from 1 July 2009 to 30 June 2010 (Year 2) will be invoiced immediately following the appointment of RFM as RE to the Project and will be payable within 14 days. The $2,400 fee for the period from 1 July 2010 (Year 3) will be invoice by 1 July 2010 and payable by 30 July 2010. The $2,400 fee for the period from 1 July 2011 (Year 4) will be invoice by 1 July 2011 and payable by 30 July 2011. The $2,400 fee for the period from 1 July 2007 to 30 June 2008 will be invoiced by 1 February 2008 and shall be due for payment on 28 February 2008. The $2,400 fee for the period from 1 July 2008 to 30 June 2009 will be invoiced by 1 October 2008 and shall be due for payment on 31 October 2008.
Ongoing Management Fee The Responsible Entity's management fee from Year 3 of the Project onwards.	-	-	$250 (incl GST)	$250 (incl GST) indexed to CPI from 1 July 2010	$250 (incl GST) indexed to CPI from 1 July 2010	$250 (incl GST) per Almondlot adjusted for CPI from 1 July 2010	The $250 fee for the period from 1 July 2009 to 30 June 2010 will be invoiced immediately after RFM becomes the responsible entity and payable within 14 days. For each subsequent period, the fee shall be invoiced by 1 July each financial year and payable by 31 July each financial year.
Licence Fee The annual licence fee payable per Almondlot.	-	-	Included in the Management Fees	Included in the Management Fees	Included in the Management Fees	The Grower's Proportional Share of the forecast lease between RFM as the responsible entity and RFM as the responsible entity for RFM RiverBank.	Invoiced on 1 July each year. Any forecast vs actual adjustments invoiced in July of following year.
Operating Costs and Expenses Each Grower's Proportional Share of the operating costs and expenses from 2009-10 financial year onwards.						The Grower's Proportional Share of the forecast Operating Costs and Expenses reasonably incurred or accrued by the responsible entity.	For each subsequent period, any balance due will be invoiced each year by 1 July commencing on 1 July 2012 and shall be due for payment on 31 July each year commencing on 31 July 2012. Any forecast versus actual adjustments invoiced in July of the following year.
Performance Fee						From the Financial Year ending 30 June 2014 22.5% (plus GST) of any AIP08 revenue above a specified threshold being the Notional Distribution Amount as set out in the Licence and Management Agreement.	The Performance Fee will be a bonus payable to the responsible entity of AIP08 only in years where the net return to Growers for that year exceeds the Notional Distribution Amount. From the financial year ending 30 June 2014 onwards, RFM as responsible entity will be entitled to a performance fee equal to 22.5% (plus GST) of any AIP08 revenue above a specified threshold.