Announcement PDF DUXTON WATER LIMITED JUNE 2023 HALF-YEAR REPORT PROUDLY SUPPORTING AUSTRALIAN IRRIGATORS AND FARMERS ACN 611 976 517 CONTENTS Key Highlights 6 Directors’ Report 12 Lead Auditor’s Independence Declaration 31 Statement of Profit or Loss and Other Comprehensive Income 32 Statement of Financial Position 33 Statement of Changes in Equity 34 Statement of Cash Flows 35 Condensed Notes to the Financial Statements 36 Directors’ Declaration 47 Independent Auditor’s Report 48 Corporate Directory 50 HALF-YEAR 2023 SNAPSHOT Duxton Water’s Investment Manager operates Australian agricultural businesses in viticulture, dried fruit, nuts, broadacre, bees, dairies, apples and water. In any given year, the Duxton businesses produce 15-20 different commodities and provide jobs for over 500 people living in rural communities. -2.81% $401M TOTAL SHAREHOLDER RETURNS (6 MONTHS) 1 WATER PORTFOLIO VALUE 2 1 Total portfolio return is based on NAV movements and includes franked dividends for the 6 month period to 30 June 2023. 2 Non-statutory value, adjusting for water entitlements held at cost in Financial Statements of $303.2m. $1.80 PER SHARE NET ASSET VALUE (POST TAX) 2 $1.70 88.8GL 53% TOTAL WATER OWNED LEASED PORTFOLIO PER SHARE SHARE PRICE HALF-YEAR KEY HIGHLIGHTS Dear Shareholders, I am pleased to share with you the 2023 half-year financial report for Duxton Water Limited (“the Company” or “Duxton Water”). Over the last 6 months, the devastating effects from the recent southern Murray Darling Basin (“sMDB”) floods have continued to impact basin irrigators. As a business, we remain committed to supporting our customers through this difficult period. Our balance sheet has remained resilient through one of the wettest periods of the last 60 years. Our diversified portfolio of water entitlements has continued to bode well for shareholders, with our general security portfolio being a stand out in terms of performance. I’m also pleased to report that in line with previously stated dividend guidance, we paid a 3.4 cent (fully franked) dividend to shareholders in April 2023. The Company is committed to continuing to provide Shareholders with a bi-annual dividend franked to the maximum extent possible. GROWTH We were pleased to announce on 3 July 2023, that Duxton Water has entered into an agreement to acquire $39.1 million of high-security water entitlements from Treasury Wine Estates (“TWE”) on 30 June 2023. We see this transaction as an important move towards expanding our business and continuing to support Australian farming businesses. This transaction includes the acquisition of 4,770 megalitres of high security entitlements in the Lower Murray, a region known for having a high density of permanent horticulture plantations. This acquisition not only allows us to scale our portfolio but also increases our exposure to high-security water entitlements ahead of forecasted dry conditions. The transaction involves the leaseback of 3,815 megalitres (80% of acquired water entitlements) for the next five years. The transaction includes a call option for TWE to buy the entitlements back from D2O. Details of this transaction are available in the Company’s recent ASX announcements. This type of transaction allows Australian farming businesses to free up capital from their balance sheets, giving them the flexibility to invest in land and production assets, all while still maintaining access to water security in the long term. To fund the acquisition, the Company invited its existing Eligible Shareholders to participate in a partially underwritten 1:4 Non-renounceable Entitlement Offer (“Offer”). This represented an opportunity for existing shareholders to acquire additional shares in the Company at $1.50 per share. The Offer was successfully completed and raised its maximum of $44.2 million, with new shares being issued on 8 August 2023. PAGE 6 DUXTON WATER LIMITED HALF-YEAR REPORT In July 2023, the Company also successfully completed a $7.25 million underwritten Institutional Placement to institutional and sophisticated investors. Any surplus funds raised though the Company’s recent capital raising activities will be used to further expand the Company’s water portfolio or to reduce debt. OPERATIONAL PERFORMANCE Duxton Water reported a net profit after tax of $2.8 million (half-year ended 30 June 2022: $4.4 million) for the half-year ended 30 June 2023. Despite the wettest conditions in 60 years, which resulted in extremely low water allocation prices, the Company’s leasing revenue and realisation of capital gains from rebalancing its permanent portfolio contributed to this positive result. We sold most of our unleased water allocations before the end of 2022 to support summer irrigation. As a result, the sale of these unleased water allocations were recorded in FY2022, and did not have a material impact to the current half year results. Over the past six months, one of our main priorities has been to expand our leased portfolio. I am pleased to inform you that starting from 1 July 2023, Duxton Water’s annualised leasing revenue is expected to increase to $7.6 million, compared to $7.4 million last year at the same time. Annualised leasing revenue is expected to rise to $9.0 million once settlement of the TWE transaction takes place, and the new leases commence. With great pleasure, I am pleased to announce that during the period, our portfolio exceeded a market value of above $400 million for the first time. Our portfolio composition of high security, general security, and groundwater entitlements allows us to generate balanced results over the climatic cycle. Looking forward, there are several factors that may lead to positive performance over the next 6-12 months. This will largely be driven by the normalisation of weather conditions which has already seen demand for leases, allocation prices, and lease yields improve on the back of recent weather outlooks. We will continue to actively manage and position our portfolio to work within the climatic cycle. This will give us the best chance to continue to meet our business objectives and provide balanced returns to our shareholders over a longer term period. DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 7 DIVIDENDS Duxton Water remains committed to providing shareholders with a bi-annual dividend. During the half-year ended 30 June 2023, in line with previously provided targets, Duxton Water paid a 3.4 cent (fully franked) dividend to shareholders on 28 April 2023. The Board of Duxton Water is pleased to formally announce and declare the interim 2023 dividend of 3.5 cents (fully franked) to be paid to shareholders on 27 October 2023. Owning a diverse portfolio of water entitlements helps to generate returns across extreme parts of the climatic cycle. In particular, the Company’s general security assets have continued to perform exceptionally over the last couple of years. With that said, it gives me great pleasure to reaffirm our long-term dividend guidance to the end of 2024. Our long-term dividend history and guidance can be seen below: DUXTON WATER PERFORMANCE & DIVIDENDS (SINCE INCEPTION) 2.25 2.00 $1.80 per share $1.70 per share 1.50 1.25 3.4 3.5 3.6 Jun 24 2.8 3.3 Dec 23 2.7 3.2 Jun 23 Dec 18 2.6 3.1 Dec 22 2.5 3.0 Jun 22 2.4 2.9 Jun 21 2.3 Jun 18 0.50 Dec 17 0.75 Dec 20 1.00 Jun 20 $ Per Share 1.75 3.7 0.25 NAV per Share PAGE 8 DUXTON WATER LIMITED HALF-YEAR REPORT Share Price Dividend Announced Dividend Paid Dec 24 Dec 21 Dec 19 Jun 19 Jun 17 Dec 16 Jun 16 0.00 Dividend Target DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 9 HALF-YEAR KEY HIGHLIGHTS 2023 HALF-YEAR KEY HIGHLIGHTS 2022 NET ASSET VALUE (NAV) PERFORMANCE Duxton Water’s (post-tax) NAV1 decreased by 10 cents from $1.90 per share to $1.80 per share in the 6 months to 30 June 2023. Adding back the 3.4 cents per share fully franked dividend that was paid to shareholders in April 2023, Duxton Water has generated a -2.81% NAV1 return over the last 6 months. This result is largely reflective of a fall in entitlement values across both high and general security assets held within the portfolio. The Company’s statutory NAV is prepared in accordance with Australian Accounting Standards, which stipulate that water assets are to be carried at the lower of cost or net realisable value. Therefore, asset revaluation uplift is not able to be booked in the statutory accounts and is subsequently excluded from the statutory NAV of $1.22 per share. At 30 June 2023, the Company has $98 million of unrealised capital gain excluded from the Company’s statutory financial statements. From a statutory perspective, should Duxton Water be able to recognise this $98 million of revaluation uplift, the statutory NAV for Duxton Water at 30 June 2023 (net of tax provisions) would be in line with the Company’s non-statutory NAV of $1.80 per share. At 30 June 2023: • Share Price: $1.70 per share • Non-statutory Post-tax NAV: $1.80 per share • Non-statutory Pre-tax NAV: $2.06 per share • Statutory Post-tax NAV: $1.22 per share The Board and I would like to thank you for your continued support and investment in Duxton Water Limited, and we look forward to reporting on our full-year results in early 2024. Kind regards Ed Peter Chairman 1. Non-statutory value, adjusting for water entitlements held at cost in Financial Statements of $303.2m. PAGE 10 DUXTON WATER LIMITED HALF-YEAR REPORT DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 11 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDING 30 JUNE 2023 The Directors of Duxton Water Limited submit herewith the Directors’ report, the financial report of Duxton Water Limited (“the Company”) or (“Duxton Water”) for the half-year ended 30 June 2023 and the Independent Auditor’s Review Report thereon. In order to comply with provisions of the Corporations Acts 2001, the Directors’ report as follows: DIRECTORS The names of the Directors of the Company that held office during and since the end of the interim period are: Mr Edouard Peter Mr Stephen Duerden Mr Dirk Wiedmann Mr Dennis Mutton Dr Vivienne Brand Mr Brendan Rinaldi The above named Directors held office since the start of the financial year unless otherwise stated. The office of Company Secretary is held by Mrs Katelyn Adams. PRINCIPAL ACTIVITIES There has been no change in the principal activities of the Company. The Company has continued to acquire and manage a portfolio of Australian water entitlements primarily focused on the southern Murray Darling Basin. Income is derived through the provision of water supply solutions to mainly primary producers through a combination of long-term lease arrangements and the sale of temporary water allocations to support Australian agricultural production. There were no significant changes in the nature of the activities of the Company during the period. PAGE 12 DUXTON WATER LIMITED HALF-YEAR REPORT DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 13 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 REVIEW OF OPERATIONS OPERATIONAL PERFORMANCE • Duxton Water has delivered a half-year net profit after tax of $2.8 million for the period ended 30 June 2023 (half-year ended 30 June 2022: $4.4 million). • New leases commencing 1 July 2023 will offset existing lease arrangements that expired on 30 June 2023. • Successfully negotiated a substantial acquisition and lease-back transaction of water entitlements. • The D2O permanent water portfolio has reached $401 million . Over the last 6 months: HY2023 HY2022 Difference Share Price $1.70 $1.69 +1 cent NAV (post-tax) $1.80 $1.90 -10 cents Dividends Paid 3.4 cents 3.2 cents +0.2 cents Water Portfolio Valuation ($m) $401m $381m +$20m Water Owned (GL) 88.8GL 84.6GL +4.2GL Leased % 53% 67% -17% The Company’s half-year result was largely driven by the Company’s leasing revenue stream, and profits generated from rebalancing the permanent water portfolio. This is a positive result given the challenging conditions observed over the last 6 months. The recent floods reduced demand for long-term leases, and caused allocation prices to reach as low as $1/ML in some zones at 30 June 2023. The leased portfolio has served as an excellent hedge for the persistent low allocation prices. Duxton Water has maintained at least 50% of its water entitlement portfolio locked in long-term leases throughout what we believe was the wettest part of the climatic cycle, and by doing so, it has reduced exposure to the extremely low allocation prices seen over the last few months. The Company took a proactive approach to the unleased portion of its portfolio by selling forward contracts and allocation sales early in the season. Prior to 31 December 2022, the Company sold most of its unleased water allocations to support summer irrigation. This decision resulted in benefits for the Company, as it was able to sell at higher prices compared to the first half of 2023. However, it also meant that revenue from the sale of unleased allocations was mainly reflected in 2022, rather than the first six months of 2023. As we move into the second half of the financial year, Duxton Water typically experiences a stronger operating performance compared to the first half. This is due to the start of the new water year, which brings new seasonal allocations, the commencement of new water leases, and the settlement of forward allocation sale contracts as we head into the peak irrigation season (summer). Further to that, weather conditions have started to normalise after three consecutive La Niña events. As a result, there has been an increase in demand for our water products. We believe that all these factors may contribute to a strong start to the second half of 2023. Leased Unleased WATER SECURITY BREAKDOWN 12% 12% 3% 72% Murray 1% Murrumbidgee Goulburn Lachlan Mallee ENTITLEMENT VALUE BY REGION 19% 79% HS 2% GS ACTIVE MANAGEMENT OF LONG-TERM WATER LEASES Duxton Water continued to strengthen its portfolio of long-term water leases over the last 6 months. The Company has successfully executed several new leases with multiple Australian farming businesses, most of them starting on 1 July 2023. Every year, the Company’s lease book naturally undergoes turnover as existing leases expire and new ones begin. During the 2022/2023 water year, D2O added approximately 19 GL of new leases from both existing and new customers. These new leasing arrangements offset the anticipated revenue drop-off that would have occurred on 1 July 2023. 47% 53% 1 1 WATER PORTFOLIO DIVERSIFICATION The Company has also focused on diversifying its leased portfolio in terms of commodity exposure, entitlement type, and duration. The Company has a mix of 3, 5 and 10-year leases across high security, general security, and groundwater entitlement types, therefore mitigating the risk of a substantial drop-off in any single year. From 1 July 2023, Duxton Water’s annualised leasing revenue is expected to start at $7.6 million, compared to $7.4 million at the same time last year. As part of the recent acquisition and leaseback of water entitlements with TWE, the Company has agreed to enter into two long-term lease agreements that will result in an additional $1.4 million of lease income in the initial year, along with indexation in the subsequent years. These leases are effective once settlement of the acquisition takes place. Once this takes place, annualised leasing revenue is expected to be $9.0 million. Duxton Water anticipates commencing the new water year with 53% of the portfolio under lease. This is expected to increase to 61% after the settlement of the two additional leases to TWE. The Board of Duxton Water remains committed to its long-term target of having between 70%-80% of the portfolio allocated to long-term lease arrangements. In the past six months, there has been an increase in demand for leases when compared to the first half of 2022. This is due to the drier weather outlook forecasted by several weather agencies. We continue to emphasise the importance of irrigators having a strong water strategy in place as Australia has a variable climate, with the tendency to experience extremes over the course of a climatic cycle (e.g. 10 years). Groundwater 1. Non-statutory value, adjusting for water entitlements held at cost in Financial Statements of $303.2m. PAGE 14 DUXTON WATER LIMITED HALF-YEAR REPORT DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 15 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 SUBSTANTIAL ACQUISITION AND LEASEBACK The Company was pleased to announce on 3 July 2023 that Duxton Water has entered into an agreement to acquire $39.1 million of high-security water entitlements from Treasury Wine Estates (“TWE”) on 30 June 2023. We saw this transaction to be a significant growth opportunity for our Company as we look to scale the water portfolio to support the needs of the Australian farming businesses. The entitlements acquired are in the Lower Murray, a region well known for the increased water demand due to the expansion in permanent horticulture. This transaction also involved the leaseback of 80 per cent of the acquired entitlement volume and a call option for TWE to buy the water entitlements back from D2O. More details can be found in the Company’s recent ASX announcements. This kind of transaction allows Australian farming businesses to free up capital from their balance sheets while retaining access to water security in the long run. For D2O, this presents a great opportunity to expand its balance sheet, while also reinforcing its business ties with the sector. PORTFOLIO SUMMARY AT 30 JUNE 2023 Duxton Water owns and manages a diversified portfolio of Australian water entitlements across 19 different entitlement types and zones. At 30 June 2023, Duxton Water’s portfolio is valued at $401 million1 (30 June 2022: $381 million). WATER PORTFOLIO CHANGE IN MARKET VALUE (5 YEARS) $450 $400 $71 $350 $401 Δ to Jun 23 Jun 23 $59 $300 $250 $20 $-5 $256 $200 $150 $100 $50 $0 Jun 19 Δ to Jun 20 Δ to Jun 21 Δ to June 22 1. Non-statutory value, adjusting for water entitlements held at cost in Financial Statements of $303.2m. PAGE 16 DUXTON WATER LIMITED HALF-YEAR REPORT DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 17 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 ENTITLEMENT TYPE HELD 31/12/2022 ML CHANGE 30/06/2023 VIC 1A Goulburn HR 11,164 - 11,164 VIC 1A Goulburn LR 1,401 - 1,401 VIC 1B Boort HR 376 - 376 VIC 3 Goulburn HR 421 - 421 VIC 6 Murray HR 5,817 - 5,817 VIC 6 Murray LR 313 - 313 VIC 6B Murray HR 1,248 96 1,344 VIC 7 Murray HR 5,216 2,121 7,337 NSW Murray 10 HS 3,010 - 3,010 NSW Murray 10 GS 14,491 - 14,491 NSW Murray 11 HS 7,710 1,785 9,495 NSW Murray 11 GS 7,225 - 7,225 NSW Murray 11 Supp 83 - 83 NSW Murrumbidgee 13 HS 2,884 - 2,884 NSW Murrumbidgee 13 GS 8,822 - 8,822 NSW Lachlan Valley – Jemalong Irrigation GS 2,660 - 2,660 NSW Lachlan Valley – GS 4,504 - 4,504 SA Murray HS 4,901 - 4,901 SA Mallee Prescribed Wells Area – Parilla Red Zone 500 - 500 SA Mallee Prescribed Wells Area – Parilla Green Zone 846 1,200 2,046 83,591 5,202 88,793 Total Breakdown by zone of permanent water entitlements held by the Company at 30 June 2023. PAGE 18 DUXTON WATER LIMITED HALF-YEAR REPORT DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 MARKET OVERVIEW MDBA ACTIVE STORAGES - JUNE 2005 TO PRESENT The start of 2023 continued to be wet, with La Niña underway for the third year in a row, causing flooding across many cropping regions. This led to farm disruptions in several regions in the southern Murray Darling Basin and resulted in financial losses for many farming businesses. By March 2023, La Niña finally dissipated, with rainfall fluctuating between April to June. During these months, the Bureau of Meteorology (“BOM”) issued and subsequently maintains their forecast of an El Niño alert. 9,000 8,000 7,000 6,000 5,000 The extreme wet conditions caused demand for allocation water to soften, which caused spot prices to fall well below their long-term averages for the third year in a row. Further to that, the impact of the recent floods has increased sell side pressure within water entitlement markets, as irrigators look to generate cash ahead of the upcoming farming season. This has been exacerbated by the challenging economic conditions that have presented over the last 6-12 months (higher interest rates, higher input costs, and in some cases lower commodity prices). 4,000 3,000 2,000 Maximum Storage Long-term Average 2023 2022 2021 2020 2019 2018 2017 2015 2016 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 From 1 January 2023 to 30 June 2023, the collective entitlement markets experienced a contraction of around 3%, following a period of record highs in late 2022. That being said, water has continued to demonstrate its resilience as an asset class in various challenging economic conditions. Since the Company’s inception in September 2016, water entitlement values have experienced a compound annual growth rate of 12%. 2001 - 2000 1,000 Active Storage DAILY INFLOWS TO THE MURRAY DARLING BASIN The Board of Duxton Water remains confident in the value of water as an investment class. The demand and supply drivers that underpin permanent water prices remain strong. We remain committed to actively managing our portfolio of entitlements to continue creating value for our shareholders in the long run. 280,000 260,000 240,000 220,000 200,000 In early July, the spot market resets as new seasonal allocations are issued. Spot prices opened the new water year at $85-$100/ML across most regions and continued to trade between $70-$120/ML throughout the month. Pricing as high as $170/ML has been observed in mid-August 2023. 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2019-20 2020-21 2021-22 2022-23 2023-24 1 Jun 1 May 1 APr 1 Mar 1 Feb 1 Jan 1 Dec 1 Nov 1 Oct 1 Sep 1 Aug 1 Jul 0 1 Jun Megalitres (ML) SYSTEM INFLOWS AND STORAGE LEVELS At 30 June 2023, dam storage levels in the Murray Darling Basin continue to be high. This is a result of record inflows experienced during the 2022-2023 water year and reduced demand for water due to increased rainfall and flooding events. The Northern Basin remains at 93%, while the Southern Basin sits at 94%. This has allowed for 2023-2024 opening season allocations for high security entitlements to be higher than last year, and one of the highest on record. However, with storages still at nearly 100%, there is a high risk of spill this year. The risk of spill is a water accounting assessment. It does not refer to flood risks downstream of the storages. Long term average DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 21 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 WEATHER OUTLOOK The weather outlook for the 2023-2024 water year continues to be drier than average. The latest long-term range for September to November indicates a high likelihood of belowmedian rainfall for much of Australia. Likewise, for the same period, warmer than median temperatures are likely for most of Australia. GOVERNMENT WATER BUYBACKS Since the change in government, The Minister for the Environment and Water, has made it clear that the current Government is committed to delivering the Basin Plan in full. This includes recommencing water buybacks in an effort to speed up progress on the water recovery targets as outlined in the Murray Darling Basin Plan. The ENSO outlook is currently sitting at El Niño Alert, which means there is a 70% chance of El Niño developing this year. The most recent update on 1 August 2023 states that El Niño development is likely in the coming weeks. El Niño has already been declared by several international weather agencies, including the National Oceanic and Atmospheric Administration in the United States, and The World Meteorological Organisation. In February 2023, the Minister announced the Government would be conducting an entitlement purchase program (“buybacks”) for the remaining 49.2 GL under the “Bridging the Gap” water recovery target. This voluntary water buyback opened in March 2023, and closed in May 2023. The Government has not yet formally communicated the results of this buyback initiative. Further to that, all international climate models surveyed by the BOM suggest that a positive IOD event is also likely to develop in late winter or early spring. A positive IOD can suppress winter–spring rainfall over much of central and southeast Australia, and can enhance the drying effects of El Niño. Over the past six months, there has been much uncertainty and discussion surrounding the likelihood of meeting the Basin Plan water savings targets by the official deadline of 30 June 2024. Recently the Minister has recognised that the Basin Plan is “off track” and has pointed out the need for a time extension. This comes after the Murray Darling Basin Authority advised that full implementation of the Basin Plan by the original deadline is not possible. Overall, the Basin Plan aims to recover 2,750 GL, plus an additional 450 GL with efficiency projects. As of June 2023, a shortfall of approximately 614 GL - 739 GL exists against all targets. 70 65 55 50 45 40 35 30 CHANCE OF EXCEEDING THE MEDIAN RAINFALL FOR SEPTEMBER TO NOVEMBER 2023 25 20 CHANCE OF EXCEEDING MEDIAN RAINFALL(%) 80 To extend the Basin Plan deadline, the Minister will need to seek legislative changes to the Water Act (2007), which seems to be the likely path ahead. However, the Minister has been clear that delivering the Basin Plan in full is “not negotiable”. The Minister has reiterated that a mix of further entitlements buybacks and infrastructure upgrades may be an appropriate way forward. 70 65 55 50 45 40 35 30 CHANCE OF EXCEEDING THE MAXIMUM TEMPERATURE FOR SEPTEMBER TO NOVEMBER 2023 PAGE 22 DUXTON WATER LIMITED HALF-YEAR REPORT 25 20 CHANCE OF EXCEEDING MEDIAN MAX TEMP. (%) 80 DUXTON WATER LIMITED HALF-YEAR REPORT PAGE 23 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 FINANCIAL OVERVIEW During the period ended 30 June 2023, the Company: • The Company’s Net Asset Value1 closed at $1.80 per share. • In line with dividend guidance, paid a final 2022 fully franked dividend of 3.4 cents per share in April 2023. • Announced the 13th consecutive dividend of 3.5 cents per share and reaffirmed the Company’s dividend guidance out to late 2024. • Closed 10-year interest rates swaps resulting in a total cash settlement of $1.9 million. Pricing on the Company’s permanent water portfolio has softened since December 2022, which has contributed to the reduction in the Company’s (post-tax) NAV1. At 30 June 2023, the (post-tax) NAV1 from a Fair Market Value perspective closed at $1.80 per share compared to $1.90 per share at 31 December 2022. As previously stated, the recent price softening in entitlement markets is believed to be a combination of factors, including the ongoing impact of the recent floods in the agricultural community, and sellers looking to free up capital to support new season farming plans. DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2023 VALUATION EXPERT The portfolio continues to be valued on a dry equivalent basis by Aither Pty Ltd (‘Aither’). Aither employs a market valuation approach to determine a Fair Market Value, which draws on publicly available water trade data from the relevant state water registers as well as analysis of trade data obtained from market intermediaries to calculate a dollar per ML volume weighted average price for each entitlement and allocation type. The Fair Market Value is not in accordance with the recognition and measurement requirements of the Australian Accounting Standards in relation to the accounting treatment of water assets (intangible assets). Therefore, increases in the Fair Market Value of water assets are not reported in the statutory accounts. For financial statement reporting purposes, in accordance with the basis of preparation described in Note 2 of the financial statements, the Company’s permanent water entitlements are carried at cost less any accumulated impairment losses. Temporary water allocations related to these entitlements are recognised in the Statement of Financial Position at zero cost initially. Purchased temporary water allocations are recognised at cost when acquired. Presented below is a summary of the Company’s NAV on a Fair Market Value basis compared to the basis of preparation described in Note 2 of the financial statements. Despite this, the Company continued to take a strategic and active approach to managing the portfolio. In the first half of 2023, $5.8 million was realised on the sale of two parcels of permanent water entitlements. These were both sold above their respective valuations at the time. In addition to this, the Company made strategic water entitlement acquisitions at attractive valuations, resulting in a net increase in the water portfolio value. At 30 June 2023, the Company is carrying $98 million (or $0.83 per share) of unrealised capital gain on the water portfolio. This is excluded from the statutory financial statements due to the application of Australian Accounting Standards. The statutory NAV of the Company in accordance with Australian Accounting Standards (which excludes unrealised capital gains) at 30 June 2023 is $1.22 per share (31 December 2022: $1.23 per share). The company exited its remaining interest rate swap arrangements in April 2023 and received a cash consideration of $1.9 million. This c