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Merricks Capital Agriculture Credit Fund Report update – June 2023

The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.9%* in June and 10.8%* for
the financial year (FY23). The Fund has returned 9.8%* on an annualised basis since inception.
The Fund declared a FY23 final distribution of 4.0%, a total distribution of 8.0% for FY23. The
distribution will be paid in the third week of August 2023. Floating rate loans benefited from a
further cash rate increase in Australia (0.25bps) during the month and accruing higher interest on
two loans for outstanding covenant breaches.

The first half of 2023 has had relatively favourable seasonal conditions for primary producers
with timely rainfall ensuring strong winter crops and pasture growth, particularly on the east
coast of Australia. At a commodity level, many prices have eased back to pre-pandemic norms
(5-year averages). Export conditions have improved from 2H 2022, however a slowing global
economy combined with drier outlook for next 12 months has us favouring new opportunities that
have water security (permanent plantings with high-security water) and high level of domestic
consumption (fruit & nuts, <33% exported, ABARES).

One new loan settled during the month, a 3.3% allocation of NAV funding an avocado producer
based in Blackbutt, southern Queensland to purchase a neighbouring avocado farm. The new
property will double the business operations and allow packing of their own fruit. The three-year
loan has a forecast investor IRR of 11.4% (net of fees and costs) at a 65% LVR.

Two key loan restructures occurred during the month. The first, a two-year extension to a business
operating a grain port on the Eyre Peninsula, SA, a 7.0% allocation for the Fund. The business
delivered a $12m EBITDA in FY23 (>3.5x interest coverage) and is run by an institutional asset
manager. The second, a 3.0% allocation to the Fund, secured by mixed-use rural and commercial
assets in Bowral, New South Wales. The borrower is currently in the process of transacting the
portfolio properties to reduce debt and the loan amendment is expected to increase forecast
investor IRR (est. +1%) to compensate for the delays in completing this sales process.

Across Australia and New Zealand, our outlook for senior secured agricultural credit remains
positive. While tighter credit markets have slowed the number of agricultural land sales, many
values held or exceeded 2022’s record highs. Our current pipeline of new loan investments totals
$190m across mixed-farming, cropping and meat & livestock with a weighted average LVR of 57%
and forecast investor IRR 11.7% (net of fees and costs).

*These returns are stated net of fees and costs
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