Merricks Capital Systematic Commodity Strategy

> As an evolution of the existing fundamental discretionary trading strategy, the Merricks Capital

Systematic Commodity Strategy provides a more targeted access to the risk premia associated with

commodities than a traditional discretionary commodity fund

> Merricks Capital Soft Commodities Fund has evolved it’s process from a pure discretionary

fundamental investment strategy to a fundamental investment approach that uses a systematic

process of filtering, selecting and timing of commodity trades

> This strategy is superior to the traditional discretionary commodity trading fund for the following reasons:

> Generates a broader opportunity set

> Has a higher hit rate

> Scalable

> Weekly Liquidity

> More accurately positions for asymmetrical payoff

> Enhanced entry and exit timing

> Defined hard stop loss on every position

> Lower cost

The Evolution

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> Merricks Capital Systematic Commodity Strategy provides a more targeted access to the risk premia

associated with commodities than a directional approach traditionally used

> Merricks Capital has identified the major market drivers of it’s investment universe within defined market

conditions

> The strategy uses a systematic process using these drivers and defined market conditions to determine

the timing of the application of risk premia to markets. These market elements include:

> Fund positioning, open interest, volume

> Implied market risk premia (volatility, skew and curve shape)

> Percentile historical ranking of current pricing

> Seasonality (timing of high/low supply, high/low demand and weather events)

Introduction

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Define Universe

Determine the

fundamental

catalyst (the drivers)

Apply systematic

process to test and

refine potential trade

opportunities

Systematically

overlay existing

market conditions to

provide entry and

exit timing

Apply fundamental

trade selection

process

Merricks fundamental understanding of why and when this risk premia should exist is a key edge to designing the

systematic strategy for the Fund to efficiently capture the risk premia

MERRICKS HAS IDENTIFIED TWO MAJOR FUNDAMENTAL DRIVERS OF MARKET PRICE

ACTION

The combination of these independent drivers creates a successful process of selection, timing

and sizing of profitable commodity trades

SEASONALITY

> Due to the 6 month growing cycle of agricultural commodities, commodity markets display identifiable seasonal

trends based on definable fundamental factors such as crop cycles, weather risk periods and demand patterns.

Understanding these fundamental factors and having a repeatable systematic process of filtering, defined entry

and exit points, selection and sizing of trades is the key to profitably exploiting these opportunities

> The seasonality driver generates trading signals by identifying seasonal trends in outright commodities and

spreads and applying a systematic approach to refine the fundamental opportunity set

> Aligning the portfolio composition with seasonal trends, by investing during periods with a high probability of risk

events, the strategy is able to participate in fundamental events (e.g weather) which provides the portfolio with an

asymmetrical payoff where gains are disproportionate to losses

POSITIONING

> Commodity markets display a strong tendency to react to changes in speculative positioning

> The positioning driver uses a systematic process to predict price action using CFTC reported speculative

positioning data, volume and open interest. This process identifies crowdedness of market participants and the

timing and velocity of money in and out of markets

> By aligning the portfolio with money flow, the strategy captures short covering events, aligns the portfolio with

market momentum and predicts the timing of market trend changes

Fundamental Price Drivers

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OBJECTIVE AND METHODOLOGY

> A proprietary program has been built to refine the fundamental assessment of seasonal

trends

> The following parameters are defined and observed by the program:

> Hit Rating – number of years with positive return, >80% forms a trend

> Average Return – average return of the trend in the past 10 years

> Volatility – volatility of the daily returns in the past 10 years

> Sharpe Ratio – taking into account average returns, volatility and duration

> Upside downside Ratio – max cumulated gains over max cumulated loss

Each trade is sized according to historical volatility, historical payoff and hit rating

> A stop loss is applied at -5% on each individual trade to enhance payoff

> As with all sustainable systematic trades, the key to success is having a

fundamental prior or expectation of why each trade should work and a fundamental

trade selection process to determine which trades are added to the portfolio

Seasonality Driver

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SEASONALITY EXAMPLE – SUPPLY FACTOR

Long April MDEX Crude Palm Oil in USD

> Prior expectation: Palm production is at its low point for the year and stocks are tightest

> Trade dates : 29 Jan to 19 Feb

> Back testing Period : 2006 - 2015

> Hit Rating : 100% (10/10 years)

> Average Return : 5.7%

> Sharpe Ratio : 3.5

> Holding Period : 21 Days

Seasonality

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OBJECTIVE AND METHODOLOGY

> Merricks has developed a systematic process that uses CFTC positioning data, market volume

and open interest to predict price action

> When market participant expectations become aligned, speculative positioning becomes crowded.

This results in a disproportionate upside/downside ratio. Positioning the portfolio in the right way,

in the right market conditions ensures that the portfolio will exploit a change in market sentiment

producing an asymmetrical payoff

> Absolute change and the rate of change of speculative positioning, volume and open interest

provide signals that identify momentum as well as the beginning and end of trends

> System conditions are based on weekly changes to CFTC non-commercial positioning, changes

in open interest and volume and overall net positioning of non-commercials

> The following filters are combined to determine the weekly results:

> Winning Percentage

> Annualized Return

> Max Drawdown

> Sharpe Ratio – taking into account returns and volatility

> Each trade is sized on a score based conviction rating

> Portfolio Manager discretion is used to eliminate trades that do not meet the fundamental

selection hurdle

Positioning Driver

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POSITIONING EXAMPLE

2016 trades for buying Soymeal on Positive Change

> Prior expectations: Soymeal shorts were crowded with record net short non-commercial

positioning on ideal weather condition in South American despite the crop not yet harvested.

Flooding in Argentina triggered a massive short covering rally.

> Number of Trades : 15

> Winning Percentage: 67%

> Annualized Return: 7.6%

> Sharpe Ratio: 1.56

> Max Drawdown: -1.6%

Positioning

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

2014 1.4% -0.5% -1.7% 0.9% 6.5% -0.3% 3.4% 4.0% 1.4% 7.6% 5.9% 3.3% 31.9%

2015 7.0% 1.1% -1.4% -1.8% 1.6% 5.2% 1.8% -0.2% 2.5% 3.8% 3.3% 3.3% 26.3%

2016 3.8% -4.1% 2.6% 11.0% 10.0% 0.3% -3.1% -0.7% -1.5% -0.1% 4.9% 1.5% 24.7%

2017 -1.0% -0.0% 3.6% 0.6% 1.0% - - - - - - - 4.2%

* Performance numbers include management fees and administrative cost

Year ReturnsAverage Net

Exposure

Average Gross

ExposureAnnualised Vol Sharpe Sortino

Peak to

Trough

Days to

Recover

2014 31.89% -14.5% 254.7% 9.4% 3.37 6.05 -4.45% 7

2015 26.34% -7.0% 246.0% 9.4% 2.80 5.37 -4.56% 46

2016 24.73% 43.2% 263.7% 13.7% 1.78 3.63 -6.98% 17

2017 (YTD) 4.20% 18.0% 232.9% 6.2% 10.27 16.57 -2.81% 21

* Performance numbers include management fees and administrative cost

*Backtest for 2014 is compiled using training data from 2004-2013

*Backtest for 2015 is compiled using training data from 2005-2014

Performance

SYSTEMATIC COMMODITY STRATEGY PERFORMANCE

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Performance

PERFORMANCE METRICS

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Investment Universe

INVESTMENT UNIVERSE

> Grains, oilseeds, vegetable oils,

dairy, sugar, cotton, energy & livestock

INVESTABLE SECTORS

> Trading futures

SPECIALISTS AND ADVANTAGE

> Traders have worked for the large

food companies in Australia

> Vast industry contacts and

experience across the world

> Regular travel to view farms,

bulk handler operations and

meetings with all market participants

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Commodity Exchange Currency

Soft Red Winter Wheat CBOT USD

Hard Red Winter Wheat KCBT USD

Hard Red Spring Wheat MGEX USD

Milling Wheat MATIF EUR

Feed Wheat LIFFE GBP

Corn CBOT/SAFEX USD/ZAR

Soybean CBOT USD

Soybean Oil CBOT USD

Soybean Meal CBOT USD

Canola WCE CAD

Rapeseed MATIF EUR

Crude Palm Oil MDEX MYR

Sugar NYB USD

White Sugar LIFFE USD

Cotton NYB USD

Heating Oil NYMEX USD

RBOB Gasoline NYMEX USD

Crude Oil NYMEX/ICE USD

Ethanol CBOT USD

Gas Oil ICE USD

Livestock CME USD

Portfolio Construction

Average Number of Positions 40 Target Volatility 10% pa Bull Calendar Spread Up to 100%

Average Number of Longs 20 Gross Exposure Up to 4 times Bear Calendar Spread Up to 50%

Average Number of Shorts 20 Typical Gross 2.5 to 3 times Cross Border Basis Up to 100%

Exposure in the Same Commodity

Illiquid Assets 0% Net Exposure Up to 100% Cross Commodity in the Up to 70%

Same Geography/

Currency

Physical Assets 0% Directional Up to 100% Cross Commodity in Up to 50%

Position Limit Different Geography/

Currency

Position Stop Loss -5% Total Directional Up to 100% Other Spreads Up to 30%

Limit

Stop Loss -10% Positions held for 1 week - 3 months Currency Fully

Cut all exposure by 100% Hedged

POSITIONS PORTFOLIO PARAMETERS EXPOSURE LIMITS

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INSTITUTIONAL GRADE SYSTEMS AND INFRASTRUCTURE

> Portfolio is monitored with live P&L by the Risk Manager and the CIO

> Trading platform including a proprietary portfolio construction system, real time

P&L and real time risk/compliance monitoring

MERRICKS PORTFOLIO CONSTRUCTOR

> Merricks Portfolio Constructor is a proprietary system

> Designed to ensure Alpha driven investments are maximized and that risk is

correctly measured and understood

RISK MANAGEMENT

> Weekly Portfolio Risk Report

> Bloomberg Portfolio and Risk Analytics

> Monthly Commodity Stress Test

Risk Management

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Risk Management

> Runs every Monday

> Summary of risk and exposure

OVERVIEW

> Portfolio Parameter vs. Risk limits

> e.g. volatility, beta, systematic split, leverage

PORTFOLIO

PARAMETERS

> Net and gross exposure attribution

> e.g. country, sector, deal, security

EXPOSURE

> Liquidity risk of each commodity position

> % open interest, % daily volume

LIQUIDITY

RISKS

WEEKLY PORTFOLIO RISK REPORT

> Bloomberg PORT function OVERVIEW

> Risk attribution, scenario testing, VaR RISK ANALYSIS

BLOOMBERG PORTFOLIO AND RISK ANALYTICS

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Summary of Key Terms

INVESTMENT STRUCTURE

> Australian Unit Trust

TERMS FOR INVESTMENT

> Applications: Weekly

> Management fee: 0.8% pa of the Net Asset Value of the Fund

> Performance fee: 20% Performance Fee above 5% return

> Valuations: Weekly

> Redemptions: Weekly

> Minimum investment USD $2 million

> Managed Account Min. USD $5 million

KEY RELATIONSHIPS

> Brokers: JP Morgan, Morgan Stanley, INTL FC Stone & Goldman Sachs

> Administrator: Citco Fund Services

> Auditor: Ernst & Young

> Legal Counsel: DLA Piper Australia, Schulte Roth & Zabel LLP, Walkers (Cayman)

INVESTOR COMMUNICATIONS

> Net Asset Value produced weekly by Citco

> Weekly account statements

> Monthly Newsletter

> Audited annual financial statements

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Contact

Adam Lindell

Chief Operating Officer

Phone +61 3 8319 8105

adam.lindell@merrickscapital.com

Merricks Capital Pty Limited

Level 13, 644 Chapel Street

South Yarra, Victoria 3141

Australia

Phone +61 3 8319 8111

www.merrickscapital.com

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Disclaimer

This presentation is prepared and provided by Merricks Capital Pty Limited (ABN 45 126 528 005 AFSL 319477) on a

confidential basis for use only by the recipient (as a wholesale client under the Corporations Act 2001 (Cth) and should

not be forwarded to others. The information contained in this presentation is of a general nature only and is not to be

taken to contain any financial advice or recommendation. This presentation is neither an offer to sell nor a solicitation of

any offer to acquire interests or any other any investment. Neither Merricks Capital Pty Limited nor its directors, officers,

employees, agents or associates, or any party named in this presentation guarantees the performance of the Funds.

Past performance is not a reliable indicator of future performance.

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