Regarding: Rural Funds Management Ltd. V. Bonitas Research LLC

October 1, 2019

Dear Mr. Fraser,

This is to respond to your correspondence of September 9, 2019 on behalf of your client Rural Funds Management Ltd. (“RFF”).

We are not going to spend much time familiarizing you with the laws of the United States as we assume you reviewed those laws before deciding to commence an action in Australia against an entity and person who do not do business there, and never been physically present there. You likely understand that the United States safeguards commercial as well as political speech under the First Amendment of the Constitution. You also are probably familiar with the liberal discovery policies of United States courts. To abrogate and avoid the First Amendment protections we hold, as well as to put up roadblocks toward a full airing of the financial unsoundness of your client through a vibrant discovery process, you have commenced litigation in Australia and invited us to participate. We respectfully decline the invitation. Australian courts have no jurisdiction over us, and we will contest the enforcement of any orders or judgments you obtain that certainly will be contrary to the discoverable facts, as well as United States and Texas law and policy.

However, United States Courts do have jurisdiction over RFF as a large percentage of its publicly traded shares were historically held by United States investors. In fact, prior to our initial report on August 6, 2019, United States investors had significant ownership of RFF shares and occasionally held more RFF shares than any other country worldwide, including Australia.

In light of the recent affirmation of our opinions regarding RFF’s financial precariousness by a reputable and totally independent research firm, Bucephalus Research, we are considering a defamation action in the United States against your client. We appreciate we will have to meet a malice standard, but we are more confident than ever that we can do so. Please confirm that you or your client’s Texas counsel will voluntarily accept service of a complaint which, unlike yours, clearly would have no jurisdictional infirmities.

By this letter we are not intending to participate in any way in litigation in Australia.

Very truly yours,

Matthew Wiechert, Bonitas Research LLC

Executive Summary of Comments to Rural Funds (ASX: RFF) September 6, 2019

On August 6, 2019 we published our initial opinion (“Report”) on Rural Funds Group (ASX: RFF) (“RFF”, the “Company”). RFF categorically denied our allegations and adopted a strategy of non-disclosure. In an attempt to credibly rebut our allegations, RFF engaged Ernst & Young to produce a limited scope of work review (“E&Y Report”) which, in our opinion, failed to “address the whole saga”.

The E&Y Report is not an audit, not a clean bill of health, and did not refute our Report’s allegations. While RFF shouts victory, we think the E&Y Report backfired on RFF by highlighting that RFF Management’s fair value calculations included an “incorrect application of AASB 116” specific to RFF’s bearer plants and “identified inconsistencies” specific to RFF’s water entitlement assets.

In RFF Management’s hasty approach to convince the market that our allegations were untrue, RFF made a mistake and revealed how RFF eluded PwC’s audit oversight to include fabricated profits and net asset values in its reported Financial Statements.

RFF’s application of accounting standards led to two restatements in two years, FY’16 and most recently FY’18, both specific to RFF’s application of AASB 116 towards bearer plant valuations. New disclosure revealed that RFF Management took its independent external appraisal valuation for an entire property and, at their sole discretion, decide the fair value allocations into specific accounting classifications of investment property, bearer plants and water entitlements.

This accounting mechanism allowed RFF Management to allocate whatever portion of fair value it wanted within each of its three asset types. The impact of these changes and new disclosures is significant in that it allowed RFF to artificially inflate the value of its assets while concealing its actions from PwC and the investment community.

RFF failed to explain how in the last 8 years its mature almond trees increased in value from A$ 17.9 million to A$ 82 million!

RFF failed to explain how in the last 5 years its Vineyards increased in value from A$ 12.9 million to A$ 37.7 million with only A$ 152,000 of additional investment!

In our experience, subtle and nuanced applications of accounting policy changes are used to facilitate “accounting gimmickry” or “financial shenanigans” and conceal from auditors fake transactions and fabricated inputs for assumptions and judgements determined solely by RFF Management.

We received a document preservation request from a Texas law firm on behalf of RFF which suggests RFF started the process for a potential defamation lawsuit in Texas. Others have attempted to sue us before. To be clear, we have never retracted an opinion. We have never removed or modified a report published on our website. We stand by or work and are prepared to defend ourselves legally if necessary.

We are aware that the next step in this process is document discovery, which would legally force RFF to reveal key internal documents which we believe contains evidence that RFF artificially inflated its reported profits and net asset values. We encourage additional disclosure from RFF so that investors know the truth and RFF Management can no longer take advantage of unsuspecting minority shareholders.

Beware to those that invest in the public markets. There are plenty of criminals that raise money from unsuspecting investors with stamps of approval from Big 4 auditors. RFF Management has proven their interest in burying our allegations in the past, playing a game with market participants of deflection and deception instead of transparency and disclosure.

The TRUTH will prevail. Because of this, we remain short RFF and believe RFF’s equity is ultimately worthless.