PORTFOLIO COMPOSITION

As At 31 December 2022

The current market is a rational market, sellers are willing to wait for the right price before they sell The Mk-IV class however is a short hold period, targeting less than 1-year and representing the closest thing to liquidity for the Fund. For this reason, we ask our valuers to price cars in this class at "priced to sell" values. The result is a value that is much more conservative than what the broader market might seek for the same car. We certainly look to get the best outcome regardless of valuation, but for providing Fund returns, we feel this approach represents the nature of the class best, even if it did result in a decline for the MkIV class in Q2 FY23.

Car indices HAGI & Hagerty generated above-average YoY returns in 2022 The results of Hagerty reflect a very broad market, which saw the most aggressive appreciation in ages, driven by the commuter car market. HAGI represents the other side of the spectrum, a very curated, narrow selection of the most prestigious cars Over 2022, these most elite of the elite cars (we're talking $20mm+ dollar cars), set historical records that drove appreciation for the overall index. As the market cools, the returns of these indices will begin to stablise.

But the cooling market is nothing to fear Yes, it does mean quick flips are not envogue, but it also typically means that serious collectors and wealthy individuals who understand valuation fundamentals and are willing to pay top dollar for the right car are driving top results

Funds Under Management

FUM grew by +13% QoQ. The Fund's unit price at 31 Dec 2021 was $118698, or $1.16431 pro forma for performance fees. The 31 Dec '22 unit price of $1.25172 represents a +3% QoQ and 8% YoY increase, pro forma for fees.

Trends Point To A Stabilizing Market

These days we can't read a car forum, facebook group or commentary section without the question "Is the car market cooling?" coming up The short answer to the question is, yes But there is no reason to fear a cooling car market, especially when you consider the context of what is cooling.

Is the car market cooling?

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The 2022 car market was some of the most aggressive appreciation in ages. Of course, what goes up doesn’t go up forever. Toward the end of the year, we started to see a different side of the market. Previously hot segments either levelled off or receded

That said, the market is very segmented, and different strata behave in different ways

In 2022, the market was inundated with amateur investors. As a result, commuter vehicles and "affordable" classics (lower priced vehicles and lower quality vehicles) posted the best and most consistent returns over that period However, this latest quarter hints that the segment is correcting from the chaotic trading, signalling a return to sanity after a long streak of massive increases

The higher quality and higher priced cars are starting to dominate the results. For this reason we are seeing high-end vehicles hold their ground despite economic anxiety revolving around the pandemic, inflation, and volatility in other markets.

These dynamics reflect that buyers of "affordable classics" are impacted by the economic outlook and volatility much more so than the deeper pocketed buyers of cars of distinction.

Because the affordable car segment is large enough that it can obscure and dominate the overall car market results, we parse the data to get a better view of the trends for the Fund's vehicles When we do this, we see that there is stability at the top.

But even more promisingly, manual transmission, mid-mounted engine, little to no electronic “nanny” systems highperformance coupes with this trifecta had a big year. These turn-of-the-century models are seen as purer, harder-core and don't have the emissions-friendly hybrid systems now mandatory for traversing Europe’s low-emissions zones. These types of cars might have minimalist performance appeal compared to the newer models, but they're used to maximum effect.

Our outlook for 2023: we expect appreciation for lower-priced cars to slow, while higher priced cars (Fund cars) will appreciate with the highest priced cars appreciating even faster