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27 June 2024

A quarterly update from our CEO – June pre-tax returns of 7.43%

Paul Bendall

I am pleased to report that our fund has delivered a solid performance over the last quarter, achieving an annualised pre-tax return of 7.43%.

This marks an increase from the previous quarter and brings us to our highest return since December 2008.

This result has been achieved through an increase in our lending volumes and an overall increase in our average interest rate as older loans originated at lower levels have been repaid. We signalled in our last newsletter that we were building a pipeline of quality opportunities and this has eventuated. As always, we remain patient to ensure we optimise returns rather than maximise them. This means finding the right balance between risk and return.

Economic Environment and Fund Resilience

The current economic climate presents significant challenges, with high living costs and persistent inflation affecting many of us. While we remain optimistic about the future, we understand the importance of stability during these times. Our fund has continued to perform well, providing consistent and reliable investment returns amid the volatility seen in other asset classes. As a conservative fund dedicated to wealth protection, we are committed to safeguarding your investments and offering reassurance and confidence during these uncertain times.

This has been evidenced in the performance of our loan book. As of 31 May 2024, our overall loan arrears remain low, and our non-performing loans sit at 0.73%. For context, the nonperforming loans at 90 days for the main four trading banks, at the end of March 2024, range between 0.5% and 0.8%, so we are comfortably within this risk profile.

Additionally, our fund consistently delivers higher returns compared to major bank term deposits and other on-call savings accounts. Over the past few months, we’ve observed a gradual decline in one-year term deposit rates, with the current average 12-month term deposit rate at major banks being 5.90%. Our quarterly rate ending 30 June is 1.53% higher, demonstrating our commitment to providing an annualised pre-tax return that is at least 100 basis points above the average 12-month term deposit rates offered by the main banks. Although it must be remembered that the characteristics of our fund differ from a bank term deposit.

There is no doubt that the economy still has challenges ahead, especially while interest rates remain elevated. Every economic cycle presents opportunities, and we are well placed to take advantage of these.

New Wholesale Fund

We are excited to introduce a new wholesale fund, a strategic move that aligns with our long-term vision of continuing to grow our market share. By securing longer-term funds from wholesale investors via the wholesale fund, we will better match the growing needs of our borrowing customers. This initiative will open new lending markets for us, benefiting all our investors. You can find more details here.

Technology and Client Portal Progress

We have made significant advancements in our technology systems, particularly with our client portal. We know many of you are eagerly awaiting its launch. While it has taken longer than anticipated, our priority is to deliver a secure and effective platform. Cyber security remains paramount, and we are committed to providing a great option for our investors.

Leadership Team Update

We are also pleased to announce Sam Burgess. who has been our Head of Lending for the past two years, is now our Chief Investment Officer. Some of you may have met Sam at our Investor Meetings. His extensive knowledge and skills will undoubtedly drive our continued success. Sam looks forward to meeting more of you in his new role.

As we head into winter, it’s hard to believe how quickly the year has flown by. Our team has been busy, not only with our regular operations but also planning our Investor Meetings for later in the year. You can find more details about these events later in our newsletter.

Once again, thank you for the trust you place in FMT.

Paul Bendall

CEO

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The newsletter contains an introduction to the FMT Wholesale Fund, details about updates to the FMT leadership team, a report on the economy from Tony Alexander and more.

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