PrivateInvest First Mortgage Income Fund - Evergreen Ratings April 2023

RATING OVERVIEW

RECOMMENDATION & CONCLUSION

Evergreen has reviewed the PrivateInvest First Mortgage Income Fund ("the Fund") offering and given it a Commended rating PrivateInvest is a property loan funds manager with a flat operational structure The business has a strong compliance focus, with nonexecutive Directors on its Trustee board and sub committees (Compliance and Investment Review), and capital preservation is embedded in the firm’s culture

The PrivateInvest First Mortgage Income Fund ("the Fund”) offers sophisticated investors monthly income derived from property loans which provides returns uncorrelated to listed instruments The Fund is a traditional ‘pure play’ private debt strategy, which has nil exposure to subordinate debt and no debt leverage (gearing). The Manager focuses exclusively on property finance, by offering short term loans typically between 6 months to 2 years which are secured by registered first mortgages

Evergreen Ratings is cognisant of the current credit environment deteriorating and the challenges ahead for the credit sector. Evergreen believes the Manager is well positioned to perform its functions diligently through the next phase of the business cycle by offering investors appropriate risk-adjusted returns from prudently managing private debt loans.

RATING

COMMENDED

While the Fund has a track record of meeting its return objective, in a benign credit environment, the Manager’s rigour and due diligence on each loan with defined exit strategies and lending to quality Borrowers, should assist the Fund to achieve its future objectives.

STRENGTHS

The Manager applies a high level of governance to the Fund The Trustee has external non-executive Directors on its Trustee Board, its Compliance Committee and Investment Review Committee, and has engaged an independent fund administrator and registry

*Refer to the final page for a description of the Ratings scale.

The Fund’s underwriting facility provides liquidity to Borrowers by acting as a line of credit (as required) reducing fund capital mismatch, and potential dilutionary effect on fund returns being overweight in cash.

WEAKNESSES

The loan origination book network requires a period of consolidation to bed down the new loan management system and reach its 2023 targets This includes increasing loan enquiry weekly run rate and improving support of loan origination sources across its five channels.

The related party loan, with entities associated with the CEO / Director, which was initially provided when they were a non-executive Director, is a conflict of interest to the Manager, in the operation of the Fund.

ISSUES TO NOTE

Nils Miller has entities associated with two Related Party loans, both in Orange, NSW (for Borrodell Drive and Ploughmans Lane), which were provided before his employment as a non-executive Director At the time of writing, the Related Party loans are due to be repaid by November 2023. The Trustee has expressed their intention of not loaning to any Director’s in future, however, the IM states the Trustee may make related party loans if due diligence and governance procedures are met

DIFFERENTIATING FACTORS

While the Fund is exposed to property finance risks, the Manager prefers property developer bridging finance and civil works loans that offer better risk adjusted returns

A $25 million underwriting facility provides more certainty to Borrowers by operating as a line of credit

The Manager seeks pre-paid income in advance from Borrowers, which provides more reliable fund income returns

The Manager will work with Borrowers if they experience any difficulties and exhaust all options first (e.g. extend loan and or inject capital as required), and will only draw on the Borrowers first mortgage as a last resort, to protect the trust and investors capital.

One loan is cross collateralised, which provides $400,000 of additional security linked to another loan, who is the same Borrower. In both loans, the Fund takes primary security as first mortgage, where one loan has extended first ranking security to the other loan. At the time of writing, the Fund didn’t hold any other cross collateralisation between loans

PrivateInvest went through a restructure in 2020, changed Trustee name / replaced two Directors, and relocated headquarters to Perth, as it sought to ensure ongoing nonexecutive Director input and separation of duties. The Trustee has gone through a period of change as the Fund grew and is starting to achieve operational rhythm in performing its duties

PrivateInvest didn’t write any new loans for the Fund, between July to November 2022, as resources were directed towards securing a large loan of $34 million for another fund in its stable

The management fee of 1 95% p a would appear to be on the upper end, when compared to peers for similar wholesale private debt funds

ABOUT THE PRODUCT

FUND PARTICULARS

Fund name

Dominant strategy

Fund structure

Trustee / Investment Manager

At the time of writing, the Fund was exposed to 13 loans which has concentration risk. This is mitigated by the Manager spending significant energy on loan due diligence, particularly legal contract risks and ensuring valuations and numbers stack up. The Fund offers diversification across loan type, size, sector, maturity and geographical spread

PrivateInvest First Mortgage Income Fund (PIFF)

Invests into loans providing first mortgage finance to participants in commercial, industrial and to a lesser extent residential property in Australia. The loan size range is typically between $3 million to $25 million and are secured by registered first mortgages over Australian real estate

Open-ended, unregistered managed investment scheme

PrivateInvest Capital Securities Limited ACN 611 892 249 AFSL No 491287 / PrivateInvest First Management Pty Limited ACN 625 468 215

KEY ELEMENTS DESCRIPTION

8 August 2018 Australia

Unregistered managed investment scheme (is a “wholesale fund” and not required to be registered under the Corporations Act)

KEY ELEMENTS DESCRIPTION

Geographic mandate

Open Investment timeframe

Management fee

Trustee fee

Performance fee

High water mark

Benchmark

Distributions

Funds under management Investment source

Australia Open-ended No minimum, withdrawals subject to available funds

1 95% p a (on the loan drawn balance)

0.25% p.a. (on the loan drawn balance)

$55.5M (PIFF), $114.6M (Firm wide) as at February 2023

Wholesale and sophisticated investors only (who satisfy section 761GA and section 9 of the Corporations Act)

Minimum investment

Minimal additional investment

Reinvestments

Unit price

Entry fee

Exit fee

Applications Redemptions

$100,000 (may be reduced at the discretion of the Trustee)

$10,000 (may be reduced at the discretion of the Trustee)

Distributions can be reinvested monthly into the Fund

$1 00 per unit since inception Nil Nil

Allotted during the month Units are generally issued shortly following the Application approval, or within a month of approval.

Redemptions applied during the month It is the aim to process redemptions when the next loan is repaid or when new Investors’ subscriptions are accepted by the Fund

KEY ELEMENTS DESCRIPTION

Liquidity

While the Fund offers monthly redemptions, Investors should consider the Fund is illiquid, as the Trustee is generally only able to satisfy significant withdrawal requests as individual loans mature and are repaid

Address

Perth Office: Ground Floor, 561 Stirling Highway Cottesloe, Western Australia 6011

Sydney Office: 2 Short Street, Double Bay NSW 2028

Website

www.privateinvest.com.au

ABOUT THE MANAGER

PrivateInvest Pty Limited (“PI”) (parent entity) is a financial services company specialising in private, commercial, non-bank finance in the Australian real estate sector PrivateInvest focuses its efforts on development opportunities in the commercial property market.

PrivateInvest Pty Limited was initially established in 2010 as an investment management entity for the Mark Roberts family holdings. It originally provided consultancy advisory into the not-for-profit sector with the key objective of increasing social and affordable housing supply in Australia. Both Mark Roberts and Naomi Roberts are founding Directors of the parent entity

In 2018, Mark Roberts observed the growth in the alternative finance sector in Australia away from lending by mainstream banks was likely to continue and grow, and positioned PrivateInvest to be a leading non-bank commercial lender.

PrivateInvest First Management Pty Limited (PIFM) and The PrivateInvest First Mortgage Income Fund (“the Fund” know as PIFF) was established in 2018 to provide investment opportunities to wholesale and sophisticated Investors through its lending to qualified Borrowers in the Australian commercial property sector.

PIFM offer four types of investments for sophisticated investors:

The First Mortgage Income Fund is a “pooled fund” comprised of registered first mortgages

Select Mortgage Trusts offer larger, individual registered first mortgages for investors seeking direct investment, allowing Investors to select the loan, to invest in

Capital Trusts instrument which offers registered second mortgage and preferential equity placements, for investors pursuing returns further up the risk curve

Impact Investments Trusts which provide a platform for investors to make a positive difference in the community.

The major shareholders in PI are:

Roberts Capital (Roberts) = 66 4%

My Helpa Pty Limited (N Miller) = 20.6% Sundowner Enterprises (L Boyatzis) = 10 0%

Sarah de Rozario Family Entity = 3 0%

PI owns 100% of PIFM.

PIFM has a policy to provide ongoing equity ownership to staff for reward of the business reaching its targets and growth goals Nils Miller, Leon Boyatzis and Sarah de Rozario are equity owners which diversifies the shareholders and fosters business succession planning, while the Roberts family remain the majority shareholders

PrivateInvest has no debt, is profitable and covering its costs to do business

PrivateInvest invested $1 million into the Fund, during the current FY23

PRODUCT OVERVIEW STRATEGY

The Fund seeks exposure to a diversified range of private debt loans (secured by first mortgage) mostly construction and civil works, with an exclusive focus on commercial property development opportunities The types of loans may vary across commercial and industrial projects, site finance for land and land development, residential projects and residual stock projects

OBJECTIVE

To provide wholesale and sophisticated Investors with a professionally managed exposure to a diversified portfolio of finance and term debt opportunities secured by registered first mortgages over Australian real estate.

FUM

As at February 2023, the firm wide FUM was $114 6 million, with $55 5 million in the PrivateInvest First Mortgage Income Fund, and there were 82 unitholders in the Fund

INVESTMENT PROCESS

The Manager’s investment process involves a series of loan approval steps and procedures which may be summarised as follows:

1. Receive loan request from loan origination channel

2 Initially analyse and assess loan to determine its ‘bankability’

3. If a positive view towards loan is initially formed, will discuss with broader team and Investment Review Committee (IRC) to receive further feedback

4 If the broader team is positive about the loan, an indicative ‘term sheet’ is issued to the Borrower, which has indicative terms and conditions

5 Once the Borrower, executes the ‘term sheet’, full due diligence is conducted on the loan and a ‘credit paper’ is produced.

Loan due diligence includes acquiring an independent valuation report on the first mortgage loan, and in depth analysis of the loan’s key characteristics and loan assessment checklist

6. The ‘credit paper’ is provided to the IRC, prior to IRC meeting Initial questions are circulated by IRC, covering ‘loan assessment checklist’ and any loan specific issues, and questions are answered prior to the IRC meeting

7 IRC meeting is held and loan is discussed in entirety, including addressing the ‘loan assessment checklist’, as well as loan modelling and feasibility. Due to depth of work completed between steps 2-6, the IRC meeting is the last step to ensure all risks are suitably mitigated Any risks that are not suitably mitigated, are covered under additional ‘conditions precedent/conditions subsequent’ (CP/CS) to final loan approval These must be reasonable before a loan approval letter can be issued

8. A final loan approval letter, with all necessary CP/CS is issued, and PrivateInvest lawyers will verify and satisfy the CP’s

Generally 70% of loan enquiries are derived from external finance brokers, while the remaining 30% of loan enquiries are direct enquiries and repeat clients. Of this they expect to receive between 10-15 loan enquiries from external brokers each week, and on average seek to write 5% of loans they see, or approximately one loan every two weeks, that satisfies Trustee Due Diligence.

Evergreen reviewed loan enquiries firm wide and found over 200 total loan enquiries occurred in 2022, which is around minimum target, while 9 loans settled during 2022, which is in line with 5% of loan enquiries. Evergreen prefer to see loan enquiries consolidate further to reach 5-10 per week, to ensure a larger pipeline of loan settlements

LOAN ORIGINATION

The Loan Originator (either external broker, or the Manager) is responsible for sourcing the lending opportunity

The Trustee is responsible for provision of finance, protecting interests of fund investors, and approval of loan applications

The Manager is responsible for managing and assessing loans on behalf of the Trustee

The Underwriter guarantees facility will be funded, subject to satisfactory due diligence; and

The Investment Review Committee is an advisor to the Trustee in relation to loans

The loan origination process involves the following five parties: PrivateInvest sources loans via a combination of its own networks, other lenders, and through a national network of external finance brokers They keep a database of around 600 external finance brokers, where 200 are active brokers with 25 finance houses

Nils Miller, CEO, is responsible for leading the PrivateInvest Loan Origination and Credit Process Nils is assisted by Andy Parsons and they are both responsible for managing the pipeline of loans from enquiry through to credit approval. Once legal documentation commences, they assist Naomi Roberts who is responsible for the legal and management of this process through to settlement Rohan Barraclough (from Marshall Investments) is joining PrivateInvest in April 2023 in the Perth office and will be focusing on loan and capital origination Both Nils and Andy operate out of the Sydney office, which assists with staff access to properties across Australia.

Evergreen acknowledges the relative limited experience of Andy Parsons should be complemented by the experience and oversight provided by both Nils Miller and Rohan Barraclough

PrivateInvest are experiencing current demand increasing for property related business loans without a decrease in quality, which positions the Manager well for growing its loans as the current business cycle of tighter monetary and fiscal conditions result in tougher credit conditions imposed on households and businesses.

LOAN METRICS AND LOAN MANAGEMENT

Each loan is assessed using a series of metrics appropriate to the loan being financed and is specific to its particular risks as identified during the due diligence process

The general loan metric categories used by the Fund are summarised as follows:

The initial formal process of analysis and risk assessment determines if an initial positive (or neutral) view may be formed, otherwise the loan will be rejected They include:

Who is the borrower, their past history, development and industry capability

What is the quality of the underlying asset being secured against the loan? Where is the location of the asset, its area's performance and population? Is there access to the loan security if the borrower defaults?

What is the borrowers servicing capacity, either fully drawn or capitalised loan and risk?

How does the Fund get repaid and what is the risk of not being repaid?

LOAN ASSESSMENT CHECKLIST

6

Australian capital cities, selected major regional towns and growth corridors

Further to meeting the above loan metrics and key thresholds, a loan assessment checklist is completed to ensure the loan conforms to the PrivateInvest Investment Information Memorandum and Policy Guidelines

LOAN DUE DILIGENCE AND INVESTMENT REVIEW COMMITTEE (IRC)

When a loan is identified as suitable, the Manager reviews the Borrowers financial information, independent reports that relate to the loan, and a valuation by a qualified valuer Borrowers who demonstrate a clear exit strategy to repay the loan and underlying income to service the loan are preferred.

Detailed due diligence on the loan and Borrower commences after an Indicative Term Sheet is executed. A brief is provided to lawyers on the pending formal documentation of the loan

Credit and assessment checks are undertaken on the property, project, Directors of the Borrower and on the Borrowers history / track record

The Manager produces a ‘credit paper’ on the loan, which is reviewed by the IRC, who critically evaluate any risks or mitigation strategies to be considered, and if the loan meets the investment criteria and objectives of the Fund. Following the review, the IRC provides in-principle approval to the Trustee to proceed, which is subject to meeting a list of Conditions Precedent, due diligence and formal legal documentation

Once final due diligence is satisfied by the Manager, they seek approval of the Trustee to proceed on the loan and legal documentation is prepared, including certification by the lawyers that the documentation meets all Conditions Precedent. Upon meeting all conditions, the loan proceeds to final close Following loan settlement, the Manager monitors the loan and its performance via the loan management system.

HOW IS THE PRODUCT MANAGED

TRUSTEE / CUSTODIAN

The Trustee, PrivateInvest Capital Securities Limited (PICSL) (ACN 611 892 249) obtained its AFSL (No 49127) on 17 February 2017

PICSL was appointed as Trustee of the PrivateInvest First Mortgage Income Fund on the 22 September 2020 Previously the Trustee of the Fund was Alternative Finance Custodians Pty Ltd (ACN 625 475 818), who executed the Fund Constitution on 24 April 2018.

The Trustee Board meets monthly (except December and January) and is comprised of the following personnel:

Mark Roberts (Group Executive Chairman)

Leon Boyatzis (Director – Funds Management)

Nils Miller (Director - CEO)

Peter Folland (non-executive Director)

Greg Peel – (non-executive Director and Chair of IRC)

Elizabeth Court (Director) – was previously non-executive Director, until 1Q2023

Naomi Roberts (Director - Company Secretary)

The Trustee is also the Custodian, and PrivateInvest explored appointing an external Custodian, however, PrivateInvest prefers to work with Borrowers in the event of any loan defaults which doesn’t suit having an external Custodian, who would not undertake to work out a loan and would likely place it into administration

INVESTMENT MANAGEMENT (THE MANAGER)

PrivateInvest First Management Pty Limited (PIFM) (ACN 625 468 215) registered 11 April 2018, was known by a different name previously as Alternative Finance Management Pty Ltd (between 11 April 2018 to 7 July 2020) The company headquarters were relocated to Perth, WA (from Victoria), when the change of name occurred.

COMPLIANCE COMMITTEE

The Compliance Committee meets quarterly and is comprised of the following personnel:

Roger Campbell – Chair and Compliance consultant

Leon Boyatzis (Compliance Officer)

Naomi Roberts

KEY PEOPLE

Mark Roberts Nils Miller

Group Executive Chairman, Founding Managing Director

INVESTMENT REVIEW COMMITTEE (IRC)

The Investment Review Committee meets regularly (usually twice a month) at the request of the Manager when it has a new loan, to present for an in-principle approval, and is comprised of the following personnel:

Greg Peel – Chair (non-executive Director)

Mark Roberts

Leon Boyatzis

Nils Miller

Tim Jones

Tom Ellen

Elizabeth Court

Peter Folland (non-executive Director)

Andy Parsons

Leon Boyatzis

Chief Executive Officer, Trustee Board Member Director, Head of Funds Management

Naomi Roberts

Sarah de Rozario

Andy Parsons

Group Finance Manager Finance Investment Analyst

Greg Peel

Elizabeth Court

Non-Executive Director Chair – Investment Review Committee Director, Trustee Board Member

Peter Folland

Non-Executive Director, Trustee Board Member

KEY BIOGRAPHIES

Mark is the founding Managing Director of PrivateInvest and his family holdings are the major shareholder of the PrivateInvest group. Mark has over 30 years’ direct experience in the property industry in both public and private sectors.

Mark seeks to build quality professional teams, and is a strong advocate for having the right culture and values in an organisation

Mark has extensive real estate experience spanning across finance, funds management, development, asset and investment management He has a solid history of direct property investments into medium to large scale developments for his own entities, and as founding Managing Director for a national ASX listed property entity prior to the establishment of PrivateInvest

Mark Roberts

Founding Managing Director

Nils Miller CEO

Nils' experience includes banking, corporate advisory and finance experience across a range of industry sectors. Previously Nils worked with Investec Australia in a senior role in the Infrastructure Finance and Investment Team, where he worked closely with a range of stakeholders including investors, developers and governments to develop and deliver innovative, affordable housing solutions

Over his career, Nils has acted as an adviser, lender, investor and developer in the property and infrastructure sectors, with responsibility for principal investment, asset management, oversight of institutional, strategic and investor partnerships, business development, strategic positioning and team strategy.

Leon Boyatzis Director, Head of Funds Management

Leon has over 25 years experience in accounting, finance, funds management and property valuation He has held senior property industry funds management roles for listed, unlisted, retail and wholesale funds ranging from private family offices to large multinational organisations, including Multiplex and Brookfield

Leon has expertise in investment, property valuation, and finance, where he developed detailed feasibility and investment models to support valuation analysis, accounting analysis including property cashflow, and fund models to drive strategic decision making and internal valuations

Leon has been the responsible manager for a number of responsible entities holding AFS Licences

Naomi Roberts Founding Director Legal/Governance and Compliance

Naomi has experience in the property and funds management industries, with expertise in compliance, corporate governance and legal functions Naomi’s real estate experience includes working in the family private business which involved direct development of commercial, industrial, retail and residential projects

Naomi was previously involved in an ASXlisted national affordable rental retirement management company which became Australia’s largest in its sector, providing asset, facilities, tenancy and funds management services to institutional, wholesale and retail owners.

Naomi is the Responsible Manager on the PrivateInvest Australian Financial Services Licence

Elizabeth Court Director

Elizabeth has experience in banking, finance and treasury including as an economist. Her background combines financial risk management, debt advisory, treasury policy together with client relationship management, corporate governance, systems, and training. Within the financial services sector, her experience includes: Treasury Consultant with ANZ Bank, Assistant Treasurer with Colly Farms Cotton (Australia’s largest producer of cotton), Corporate Treasury Advisor with Societe Generale, and Consultant with Barrington Treasury Services

Elizabeth retired her position in 2022 as Membership Director of the Private Wealth Network, an independent membership organisation of over 200 Family Offices

Sarah de Rozario Group Finance Manager

Sarah is a Certified Practicing Accountant and finance executive with over 20 years’ experience in the areas of business and finance, strategy, risk and compliance, process engineering and governance

Sarah was formerly the CFO for ACE Interactive (a leading software developer), with responsibility for the planning, implementation and management of the organisation’s finance functions including planning, budgeting, forecasting and reporting. She was also the CFO for Hockey WA and a member of the Risk and Governance Committee and was responsible for strategic planning and key initiatives with the management team, together with the assessment of organisational performance.

Andy Parsons Finance Investment Analyst

Andy joined PrivateInvest in 2022 and is responsible for working with the loan origination team on drafting credit papers, the capital origination team on the drafting of IMs and the finance feasibility analysis with the Funds management team.

Andy was previously a Lending Analyst in the Loan Origination Services team at Auswide Bank, where he was responsible for providing client services for third-party brokers. Andy supported the end-to-end lending process for loan applications, preparing credit papers for credit assessment by the credit team, completing due diligence activities, and verifying supporting financial information provided as part of home loan applications

Greg Peel Chair – Investment Review Committee Non-Executive Director

Greg has over 35 years’ experience in the banking and finance industry including corporate finance, credit and risk management, and business banking Greg is experienced in areas of enterprise development, funding and business modelling, and partnership identification and development, particularly in the area of social finance and impact investment

Greg established Bendigo and Adelaide Bank’s Business and Asset Finance divisions and the Strategic Market division Greg cofounded and was CEO and Managing Director of Community Sector Banking, a financial institution focused on not-for-profit, impact investing and social infrastructure financing

Greg was the Director of Business Development with the NSW Aboriginal Land Council where he was responsible for the development of a corporatisation strategy, enterprise and housing policy Greg has held numerous advisory roles and directorships.

Peter Folland Non-Executive Director, Trustee Board Member

Peter has over 35 years’ experience as a Chartered Accountant in public practice where he provided accounting and taxation advice to SME clients in a broad range of sectors.

In 2000, Peter established a commercial property syndication business and since that time he has been involved in management of over 25 property trusts and syndicates, raised over $300 million equity, and acquired approximately 35 industrial, commercial, residential and retail properties

Peter has acted as trustee director and cosyndicate manager, and was involved in property management, syndicate management, and accounting and tax compliance.

Peter brings valuable property fund management expertise together with governance, financial management, and compliance experience to PrivateInvest

RISK MANAGEMENT & COMPLIANCE

FUND MANAGEMENT ENTITIES / PARTNERS

PrivateInvest focus on ensuring a good degree of corporate governance and compliance is maintained The Trustee Board meetings, Investment Review Committee, and Compliance Committee’s all have nonexecutive Directors who provide a further layer of risk management, governance and compliance oversight The Chairman seeks a majority vote on any loan presented to the Trustee, and if a Director (Executive and nonExecutive) does not vote in favour, the loan will not proceed Directors are tasked with acting in the best interests of Unit Holders and the Fund and Directors are appointed for their expertise and guidance to ensure a properly functioning Board

Evergreen reviewed the minutes of the various meetings for the Trustee (Sept, Oct, Nov 2022), Investment Review Committee (Oct 2022, Jan 2023), Compliance Committee (April, Aug, Oct 2022) and found adequate recording of meetings, discussion and items noted.

The Investment Review Committee and Compliance Committee assist the Trustee to meet its fund obligations

INVESTMENT REVIEW COMMITTEE (IRC)

The IRC is tasked by the Trustee to ensure any proposed loans meet the investment criteria, objectives and mandate of the Fund The IRC is governed by its Charter and its members represent and serve the interests of unitholders in the Fund They oversee and appraise loan recommendations by the Manager, identify and manage conflicts of interest and perform its functions as per the IRC Charter.

The IRC critically evaluates each loan via a deep dive into each credit paper Detailed loan analysis occurs covering characteristics and background, property description and development management, security, valuation, borrower and guarantees, key risks and mitigation, and any relevant conditions precedent that apply for final loan approval.

The IRC’s chair, Greg Peel, and Peter Folland, are non-executive Directors They provide an additional layer of oversight and judgment, which is critical to ensuring the IRC carries out its functions appropriately.

Evergreen observed the chair Greg Peel, applies appropriate due diligence on each loan with particular focus on ensuring sufficient capacity and experience of the Borrower, that the valuation, security and contracts stack up, and exit strategies are credible for each loan

COMPLIANCE COMMITTEE

The Compliance Committee receives a quarterly report from Leon Boyatzis, Compliance Officer on PrivateInvest activities and operation of its products and services and if they remain appropriate including its financial services license and law has been complied with

Leon Boyatzis brings his experience with PPB Advisory, where he was as Director of their Real Estate Division between October 2010 to February 2014 and managed a distressed loan book in the aftermath of the Global Financial Crisis of 2008/09.

Naomi Roberts provides legal and governance oversight to the Compliance Committee and Group entities including legal documentation of loans and liaison with the Borrower until settlement

Roger Campbell, is an external compliance consultant, who is Chair of the Compliance Committee. He provides an additional layer of rigour to the compliance process, via regular compliance questionnaires and updates each quarter including applying his industry knowledge derived from regular contact with external clients He instigated the independent review of the AML programme

RISK REGISTER

The Compliance Committee keep a Risk Register which details 16 risks which they monitor Out of these, 11 risks had a moderate risk rating, and 6 risks had a likelihood they ‘might occur’. There was no change in risks or ratings and owners have been assigned to each risk and noted on the Risk Register

Evergreen observed existing controls and monitoring were in place and comments and actions recorded to mitigate and manage these risks

BREACH REGISTER AND COMPLAINTS REGISTER

The Breach register and Complaints register had no incidents recorded since the Fund’s inception.

CONFLICT OF INTERESTS REGISTER

The Trustee, maintains a Conflicts of Interest register and the following conflicts were recorded and noted:

Mark Roberts

Directorships of Associated Entities: Director - PrivateInvest Pty Limited (626 703 026) and Director – PrivateInvest First Management Pty Limited (ACN 625 468 215)

Leon Boyatzis

Directorships of Associated Entities: Director - PrivateInvest Pty Limited (626 703 026)

Responsible Manager – Tyche Asset Management Pty Ltd – AFSL.

Nils Miller

Directorships of Associated Entities: Director - PrivateInvest Pty Limited (626 703 026)

Related Party - Borrodell Drive, Orange Loan

Related Party - Ploughmans Lane, Orange Loan.

Nils Miller has equity in the loans (Orange Loan) noted above Should any voting be required in relation to these loans, Nils abstains from any voting or providing any opinion or future recommendations on these loans

Evergreen has been given assurances related to the above related party loans to Nils Miller, that the original loans occurred before Nils’ full-time employment with PrivateInvest on 1 March 2022 as CEO, when he was a nonexecutive Director While Nils is not the majority shareholder in either project, he has a material interest.

AUDITORS

Pitcher Partners Auditors provide another layer of governance and compliance by reviewing the Fund accounts annually, which is not a legal requirement for a wholesale fund.

UNDERWRITING FACILITY

PrivateInvest operate a $25 million underwriting facility, where the underwriter agrees to fund a loan (subject to prior approval) and the Fund pays back the underwriter when it receives amounts from investors The underwriting facility is provided by the Manager via the shareholders of PIFM, which is a related party to the Fund and the Trustee has delegation rights

The underwriting facility achieves the dual purpose of provide greater certainty to Borrowers by advancing loans (if the Fund is not able to do so) and ensures the Fund does not hold too much cash which would otherwise dilute fund returns

As the time of writing, the underwriting facility was drawn by $16 million It is the Trustees preference to repay the underwriting facility if drawn, as investors provide capital to the Fund, and to draw down on available funds from the underwriting facility as loans are written However, when the underwriting facility is nil or not drawn, the Trustee may delay applications from investors, until loans are ready to be drawn.

The underwriting facility when drawn earns the income distribution from the Fund and an underwriting line fee of 2% for the amount made available. The underwriter is a unit holder in the Fund and does not have any right of security over any assets in the Fund

PrivateInvest’s intention is to source a preferred external underwriter, now that the Fund has sufficient scale, and they have started to look for an underwriting partner

Evergreen views the underwriting facility favourable as provides competitive advantages

PRIVACY POLICY / ANTI-MONEY LAUNDERING AND COUNTERTERRORISM FINANCING ACT 2006 (“AML/CTF ACT”)

The Trustee has a written privacy policy designed to protect investors personal information, which covers collection, storage, use and disclosure of personal information

The Trustee has relevant AML / CTF checks in place to screen out any high-risk clients. The Manager didn’t proceeded with three (3) Borrowers who were unsuccessful in sourcing finance for loans, as identified in the high-risk category from the Managers own searches

INSURANCE – INVESTMENT MANAGEMENT

PrivateInvest Pty Limited, PICSL and PIFM, who are ‘the insured’ has an Investment Managers Insurance Policy (by London Australian Underwriting Pty Ltd), which provides cover of $2,000,000 for Professional Indemnity & Fund Reimbursement; Directors and Officers Liability & Company Reimbursement etc

TRACK RECORD ANALYSIS

PERFORMANCE ANALYSIS

The Fund returned an annualised yield of 8.41% (1 year) and 8.71% p.a. since inception (after fees / expenses) as at February 2023 This is within the Fund’s range of targeted returns of 7.5% to 9% p.a. (The target fund return was adjusted higher to 8.25% to 9.25% p a effective from March 2023 in response to higher interest rates)

At the time of writing, 40% of loans in the Fund, are on pre-paid interest, where interest expenses are paid in advance by the Borrower, which provides income certainty for the Fund The Manager has no target for loans to be on pre-paid interest, however there is a preference for it and has started writing these into loan contracts from the 2nd half of 2022

The Fund, loan rates are increasing on new loans written (in response to higher rates, from the tightening cycle by the RBA, since May 2022) However, loan rate increases are expected to be modest, as the Manager is being prudent to ensure the right balance between loan rates, quality of Borrowers and loan risk

The Fund has had no defaults or impairment of capital since inception, however this has been during a benign credit environment

LOAN TO VALUE RATIO (LVR)

The average weighted LVR of the Fund was 60.1% (fully drawn basis), and all loans are being managed within Credit Guidelines parameters of up to 70% LVR maximum

FEES

The Fund fees and recoveries payable by the Fund are an Investment management fee of 1.95% p.a. and a Trustee fee of 0.25% p.a.

There are no entry or exit fees payable by investors in relation to the application or redemptions of units in the Fund

PrivateInvest earn separate fees directly from the Borrower which are separate to the Fund which includes a loan establishment fee of 13% of loan (which covers payment to loan brokers usually around 1%), a flat rate Discharge fee of $2,000 plus GST or alternatively if there are multiple lots, a $500 plus GST fee per Lot discharge, and a Rollover fee of 1-2% (However, not always charged. For example, circumstances outside the control of the Borrower)

PrivateInvest receive no other benefits or offer any other services (except the underwriting facility) to the Fund including building or construction, and therefore does not receive any other fees

TRANSPARENCY & REPORTING

The Manager has been transparent in its dealings with Evergreen Ratings and provided requests for information in a timely manner, with sufficient detail and explanation.

The Manager provides regularly fund reports and updates to fund unitholders each month The Manager, has engaged the following external services providers:

Pitcher

McMahon Clarke for legal services

RSM International as Trustee and Compliance auditor

LOAN BOOK

Evergreen Ratings viewed a sample of loans in the existing loan book and found the loans met existing credit guidelines and Manager due diligence. While each loan has its inherent risks, valuations were appropriate, and the quality of the Borrower and exit strategy was sufficient While this provided a level of comfort, the Borrower would likely meet their ongoing commitments, the Fund is exposed to various risks These include the ability of the loan to refinance, property valuation declines, property project delays, planning and approval risks, and Borrower repayment risks.

Automic Group Pty Ltd as fund administrator for unit registry services

Partners Auditors for fund auditing services that ensures independence, integrity and quality

The loan maturity is spread 33.3% each over < 3mths and 6-12 months, 25% over 3-6 months, and 8% of loans > 12months as at February 2023 The loan book has a short duration with mid-point around 6 months

The geographic location of the loans is spread across NSW at 71 0%, QLD at 10 8%, and WA at 18.2% as at February 2023.

The Loan book is comprised of the following loan sectors, Commercial at 20.1%, Industrial at 6 5%, Mixed Use at 15 3%, Residential subdivision at 26 0%, Residential Land at 21 4% and Service stations at 10 7% as at February 2023

The Loan book is comprised of the following loan types across Construction Built at 10 8%, Construction Land at 34 4%, Land at 52 5% and Investment at 0 3% as at February 2023

THIRD PARTY ADVISORS & SERVICE PROVIDERS

RATINGS SCALE

We have high confidence in this investment product

This is a Fund or Investment Product that has scored consistently very well across all areas of Evergreen Ratings’ research and analysis framework As a result, we believe the Fund has a very high probability of meeting its objectives

It is appropriately designed, with appropriate fees and has sufficient, high quality systems and resources, including risk management and corporate governance, to manage an appropriate outcome

We have confidence in this fund manager or investment

product

This is a Fund or Investment Product that has scored consistently well across most areas of Evergreen Ratings’ research and analysis framework As a result, we believe the Fund has a high probability of meeting its objectives

It is reasonably well designed, with fees more or less in line with the nature of the product and its peers The Manager has sufficient, quality systems and resources, including risk management and corporate governance, to manage an appropriate outcome

We have some confidence in this investment product

While this is a Fund or Investment Product that has scored well in some areas of Evergreen Ratings’ research and analysis framework, it did not score as well in other areas important to achieving a good investment outcome.

As a result, Evergreen Ratings believes it has a reasonable chance of meeting its investment objectives.

We have little confidence in the investment product

This is a Fund or Investment product that did not score well across most areas of Evergreen Ratings’ research and analysis framework. There is a lack of identifiable strengths across some or all of product design, fees, systems and governance, therefore placing doubt on the likelihood of the fund or product achieving its investment objectives.

This fund manager or investment product has been screened out Evergreen Ratings has either (i) conducted a preliminary review of the investment product and has identified material or structural flaws or (ii) the Manager has elected to not confirm some elements of the research process requisite in the ratings protocol to release the research report

DISCLAIMER & DISCLOSURE

This report, dated 12 April 2023, expires when the initial offer closes or after 12 months or if there are any material changes in relation to the information contained in this report or any disclosure or offer document issued in relation to this offer. This report was not prepared for inclusion in any offer document and investors must only rely on information contained in the offer document and other associated information. We reserve the right to change its opinion, ratings and/or withdraw the report at any time on reasonable grounds.

Evergreen Ratings Pty Ltd (ABN 91 643 905 257) (‘Evergreen Ratings’) is Authorised Representative 001283552 of Evergreen Fund Managers Pty Ltd trading as Evergreen Consultants (ABN 75 602 703 202, AFSL 486275). The group of companies is known as ‘Evergreen’. Evergreen is authorised to provide general advice to wholesale clients only. The report is only available to wholesale clients.

Any advice provided in this report is general advice only and does not consider the objectives, financial situation or particular needs of any particular person. It is not a recommendation to purchase, redeem or sell this particular product (Product). Before making an investment decision the reader must consider his or her financial circumstances or seek personal financial advice on its appropriateness. The reader should read the offer document for the Product before making any decision about whether to acquire the Product.

This report is intended to assist the reader in evaluating the Product. It is not intended to serve as a substitute to the reader exercising their own independent judgment and the reader should not seek to rely exclusively on this report in assessing the Product for their own purposes.

Evergreen Ratings receives a fee for the preparation of this Report, from either the fund manager, issuer or distribution partner of the Product. The fee received is not linked to the outcome of this report. Evergreen does not hold the financial product referred to in this document.

Evergreen Ratings uses a formal methodology for the assessment of funds. This methodology considers both qualitative and quantitative factors. A copy of the methodology is available upon request.

Evergreen Consultants provides investment consulting services including model management, approved product lists and other financial advice. Any potential Conflict of Interest is managed through our Conflict of Interest Policy, a copy of which is available at https://evergreenratings.com.au/

This report is current as at the date of issue. Evergreen Ratings assumes no obligation to update the document following publication. The information contained in this report has been prepared in good faith and is believed to be reliable at the time it was prepared. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this report. Evergreen Ratings reserves the right to withdraw the document at any time and discontinue future coverage of the Product. Financial conclusions, ratings and advice are reasonably held at the time of completion of the report but subject to change without notice.

This document is for the exclusive use of the person to whom it is provided by Evergreen Ratings and must not be used or relied upon by any other person without the consent of Evergreen Ratings. Except for any liability which cannot be excluded, Evergreen Ratings, its directors, officers, employees and agents disclaim all liability, whether direct or indirect for any error or inaccuracy in, misstatement or omission from, this document or any loss or damage suffered by the reader or any other person as a consequence of relying upon it.

Past performance is not an indication of future performance.

Evergreen Ratings has been paid a fee to produce this report. The report has been authorised by Angela Ashton on 12 April 2023. © 2023 Evergreen Ratings Pty Ltd. All rights reserved. This report may also contain third party material that is subject to copyright. Any unauthorised reproduction of this information is prohibited.