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

The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.9%* in November and 10.0%* on an annualised basis since inception.

During the month, the Fund’s largest agricultural loan (10% allocation) received a partial repayment with a $12m property sale. The mixed farming dairy and cropping property was sold to a farming business via an off-market property sales campaign and is the culmination of a six month long due diligence process. Based on the residual security position, the effective LVR for the loan is 56%. Two mainstream banks have provided refinance terms on the residual debt balance which we expect to occur Q1 2024.

Despite El Niño’s typical association with hot and dry weather in eastern Australia, several regions, including the New South Wales south coast, have recently experienced heavy rainfall. The Bureau of Meteorology (BOM) clarifies that El Niño is still active and historically, about half of El Niño events have featured significant rainfall events around early December or late November. While the BOM’s long-range outlook forecasted a generally dry spring, the unexpected rainfall has normalised totals for parts of Queensland, NSW, the Northern Territory, and northern Western Australia. We have been reducing our portfolio exposure to loan investments more reliant on rainfall over the past 12-18 months (broadacre cropping represents 8%, compared to 17% of the Fund 18 months ago) and are targeting new investments with less reliance on rainfall, such as horticulture with high-security water rights or agricultural supply chain processing assets.

Lending opportunities are increasing in our agriculture investment pipeline with new senior secured opportunities in horticulture, mixed farming and farmgate dairy. There is approximately $550m in agriculture, from cropping, pre-farm gate horticulture, dairy and dairy processing/manufacturing in the pipeline of investment opportunities. We expect the Fund to remain fully deployed from a cash perspective into Q1 2024.

*These returns are stated net of fees and costs

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