DIRECTORS’ REPORT CONT. OPERATING AND FINANCIAL REVIEW (CONTINUED) 1. Review (continued) 2. Seasonal Conditions 14 Australian Agricultural Company Limited Climatic conditions affecting AACo’s property portfolio have been poor compared to recent seasons. The lack of rainfall has depressed producer  confidence and cattle prices in the region, the impact of which is reflected in these financial results for the three months to 31 March 2013. The AACo Group result for the 3 months to 31 March 2013 continued to be seriously impacted by the decision of the Australian Government in  June 2011 to suspend live cattle exports to Indonesia. The flow-on effects from this decision continue to be felt today, particularly by the sector in  Northern Australia.  Australia’s suspension of live exports prompted Indonesia to respond by restricting imports and accelerating its own strategy to achieve self- sufficiency in beef production. This resulted in almost a halving of cattle import permits issued by Indonesia. The timing of the issuance of import  permits meant cattle had to be shipped when the permits were available causing cattle to be exported at lower weights than usual.  This reduction in import permits has also meant cattle which would otherwise have been destined for the Indonesian market have remained in the  domestic market, with the increase in supply causing a drop in domestic cattle prices. AACo continues to work closely with Government and our supply chain partners in Indonesia to ensure compliance with the new live export regime. AACo has sold and delivered 41,186 head for the 3 months to 31 March 2013 (3 months to 31 March 2012 – 29,646 head) to drive operating  cashflows during this period. As at 31 March 2013 AACo had 55,024 head contracted for sale but not delivered at prices generally higher than the  spot price at 31 March 2013. Based on a review of the market conditions for the 3 months to 31 March 2013 no further impairment to AACo’s property values is required at 31  March 2013. The stage 1 civil works for the development of AACo’s Darwin abattoir have been completed. The Company announced to the ASX on 19 April  2013 that it intends to fund the construction from its own balance sheet. The completion of this facility will go some way to insulating AACo from  movements in domestic pricing and live export fluctuations by opening up another marketing channel. It will be well positioned to take advantage of  the current continued rising global beef price. Rainfall was well below average for AACo’s Northern Australia properties, and during the current season is now lower than the 2007 drought. The drier conditions have given rise to increased feed costs over the 3 months to 31 March 2013. The chart below shows the cumulative rainfall  probabilities for Wet Seasons (defined as October to March the following year) across AACo’s property portfolio excluding Darwin. The dots  represent where the most recent Wet Season fell on this probability curve. The chart implies that on all properties, other than Victoria River Group, rainfall has been below average and in some cases (e.g. Channel Group)  well below average. Apart from Aronui, all southern stations are well below average rainfall. The cumulative probability of the AACo weighted average rainfall (weighted by relative size of properties) being lower than the most recent Wet  season is 31%, which implies that rainfall has been greater than the most recent Wet Season in 69% of occasions over the last approximately 30  years (Source AACo).