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Merricks Capital Agriculture Credit Fund Portfolio and Market Update – December 2023

The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.9%* in December and 10.1%* on an annualised basis since inception.

One new loan settled during the month with one of Australia’s largest sweet corn and green beans producers. The loan will represent 7.8% of the Fund with an LVR of 52%. The business has farming properties along the east coast of Australia, from Townsville, QLD to Mafra, VIC. This geographic spread protects against specific weather risks and allows the business to supply the major supermarkets year-round. The heavy rainfall events in December in far north Queensland did not impact the farms. The 18-month loan is forecast to deliver a net IRR of 11.1% to investors.

The Fund portfolio was unaffected by the December rain events on Australia’s east coast. Minor flooding delayed some orchard CAPEX for an avocado producer near Brisbane, however no existing trees were damaged. A farming asset in Bundaberg did experience a one-week delay when harvesting watermelons.

Two loans had underlying property assets go under contract during the month, which will see an estimated $33m or 10.4% of NAV repaid to the Fund in Q1 2024. The recycled capital will be redeployed into the significant pipeline of investment opportunities over the next two quarters.

With an investment pipeline of $450m and $160m of new opportunities in due diligence across horticulture, beef cattle and irrigated cropping, we expect the Fund to remain fully deployed, from a cash perspective during Q1 2024. Increasing investment opportunities arise from the shifts in subsector allocation to downstream food processing and farm infrastructure, driven by expected variable weather conditions and mid-cycle commodity prices in 2024. These macro factors come when many banks are at maximum capacity to lend into agriculture, and borrowers seek alternate capital providers to bridge capital requirements on modestly leveraged asset bases (~55% LVRs).

*These returns are stated net of fees and costs

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