INVESTMENT STRATEGY

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Investment Strategy

The Fund is in the business of providing business and property finance and will primarily invest in loans, credit approved operating leases, and finance peer to peer lending over essential business use assets and property located in Australia or securities backed by such assets.

All key asset allocation decisions including investment selection and approval will be made by the Investment Manager and its Investment Committee. When making investments on behalf of the Fund, the Investment Manager will utilise industry leading credit approval criteria.

This will focus on the financial strength, business tenure and stability of the borrower.

In addition:

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borrowers will typically be Australian listed and unlisted corporate or long established businesses.

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if they are existing clients of the Fund’s loan originators, borrowers will have a positive payment history with the Fund’s loan originators.

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the assets financed are generally of an essential nature (equipment such as IT equipment, mining equipment and energy efficient hardware are ranked highly in terms of absolute necessity of operation); and

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the Fund’s investments will, where possible, be further secured by guarantees and charges over property, leases and related assets granted by the borrowers or security issuers.

The Investment Manager has established detailed credit matrices with its loan originators as part of its credit approval process. These credit matrices are tailored to the borrower, industry and asset type and are under continual review and subject to changes in factors including but not limited to, the level of economic activity, industry competition, asset obsolescence and portfolio composition.
Payments under the Fund’s loan and security investments are usually made monthly or quarterly in advance by the borrower. These payments are also preferably by direct debit or through other automatic payment arrangements.

In addition to the amounts payable by the borrower under the Fund’s loans, the profitability of the Fund can be assisted by the Secondary Income generated at the end of each loan term and loan originator commissions and OEM rebates which may be received at the start of the lease term. Secondary Income can add considerably to the Fund’s return on original equipment cost and is derived from equipment sale proceeds and loan extensions beyond the original loan term. A typical loan is for a term of between 2 and 5 years with payments structured to suit borrowers’ cash-flows during the term of the loan. The Fund’s business equipment assets will generally be fully or substantially depreciated by the end of the loan term to minimise end of term asset value risk. Where appropriate the Investment Manager on behalf of the Fund may enter into fixed price asset re-sale agreements with equipment manufacturers to further reduce end of term asset value risk.

Borrowing Powers

The Directors may exercise all borrowing powers on behalf of the Fund and may charge or pledge the Fund’s assets as security for such borrowings. The Fund may not make additional borrowings if the total borrowings exceed four times the last published Net Asset Value of the Fund without written notice to the Shareholders.