Reorganisation Proposal and Placing Programme

RNS Number : 7179T

Fair Oaks Income Limited

29 March 2021

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, TO US PERSONS OR INTO ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

29 March 2021

Fair Oaks Income Limited (the "Company")

(Incorporated in Guernsey under The Companies (Guernsey) Law, 2008, as amended, with registered number 58123 and registered as a Registered Closed-ended Collective Investment Scheme with the Guernsey Financial Services Commission)

Reorganisation Proposal and Placing Programme

Fair Oaks Income Limited today announces the publication of a prospectus (the "Prospectus") and circular (the "Circular") in relation to the Reorganisation Proposal and Placing Programme Proposal.

Professor Claudio Albanese, Chairman, commented:

"The Board is pleased to put forward the Proposals, which facilitate an extension of Shareholders' investments through a new class of 2021 Shares deployed through the new Master Fund III , while also offering an option to elect for Realisation Shares and establishing a twelve-month placing programme.

Master Fund III is characterised by a fixed investment period and life, during which Fair Oaks will continue to utilise its tactical approach to investing across the CLO capital structure, seeking to take advantage of well-defined investment opportunities in both control equity and secondary mezzanine securities.

The investment opportunity leverages Fair Oaks' in-depth fundamental research, long track record and experience in structuring and negotiating investments and ongoing monitoring of the underlying portfolios. In addition to improving corporate fundamentals, the potential for attractive risk-adjusted returns for Shareholders is supported by the compelling financing levels currently available to CLO equity investors, which have the potential to benefit both new investments and the refinance or reset of existing investments."

Further details in relation to the Proposals can be found in the Circular and the Prospectus, which are available on the Company's website at http://www.fairoaksincome.com .

The Prospectus has been approved by the Financial Conduct Authority and will shortly be made available for inspection at The National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

Capitalised terms used in this announcement shall, unless otherwise defined, bear the same meaning as in the Circular.

Enquiries

Fair Oaks Income Limited	[e-mail] www.fairoaksincome.com
Fair Oaks Capital Limited Miguel Ramos Fuentenebro	[phone]
Numis Securities Limited (Joint Bookrunners, Joint Brokers and Joint Financial Advisers) Nathan Brown/ Matt Goss	[phone]
Liberum Capital Limited (Joint Bookrunners, Joint Brokers and Joint Financial Advisers) Chris Clarke/ Gillian Martin	[phone]

Reorganisation Proposal

Overview

The purpose of the proposed reorganisation is to allow those Shareholders who wish to extend the life of their investment in the Company beyond the planned end date of Master Fund II, to be able to do so by having their 2017 Shares re-designated as 2021 Shares, with such 2021 Shares investing in a new master fund, Master Fund III, which will have a planned end date of 12 June 2028 and an investment objective and policy substantially similar to that of Master Fund II.

Those Shareholders who do not wish to extend the life of their investment to participate in Master Fund III will need to make an express election to have their existing 2017 Shares re-designated as Realisation Shares, which will continue to participate solely in Master Fund II.

Key features of the Shares

2021 Shares

· The 2021 Shares are designed to enable Shareholders to extend the life of their investment in the Company. As the 2021 Shares will be substantively invested through Master Fund III, the 2021 Shares will have an expected life to the planned end date of Master Fund III, being 12 June 2028 [1] .

· Initially, Master Fund III's portfolio will comprise solely its interest in Master Fund II . However, the 2021 Shares are expected over time to benefit from the further diversification and scale within Master Fund III's portfolio provided by newly originated investments made at the time of the deployment of any proceeds of the Placing Programme and also the reinvestment of principal amounts distributed by Master Fund II .

· The Investment Adviser believes that there are ongoing investment opportunities available in the CLO market and therefore that the 2021 Shares represent an attractive option for Shareholders.

· In respect of the 2021 Shares, the investment objective of the Company will be to generate attractive, risk-adjusted returns, principally through income distributions. On the basis of market conditions as at the date of this document, the Company aims to target a NAV total return of between 12 and 14 per cent. per annum^[2] over the planned life of Master Fund III.

Realisation Shares

· The Realisation Shares are designed to enable Shareholders to maintain the life of their investment in the Company. As the Realisation Shares will (continue to) be substantively invested through Master Fund II , the Realisation Shares will have an expected life to the planned end date of Master Fund II , being 12 June 2026[3].

· The composition of Master Fund II 's portfolio will be unchanged by the implementation of the Proposals. However, over time Master Fund II 's portfolio will become less diversified as its investments are realised.

· In respect of the Realisation Shares, the investment objective of the Company is to generate attractive, risk-adjusted returns, principally through income distributions. On the basis of market conditions as at the date of this document, the Company will continue to target a NAV total return[4]   of between 12 and 14 per cent. per annum over the planned life of Master Fund II.

· Based on the results of Shareholder consultations received to date, it is expected that the Realisation Share class will represent a relatively small proportion of the Company's share capital and therefore the Realisation Shares are currently expected to benefit from lower levels of secondary market liquidity than the 2021 Shares. The Realisation Shares may also have a greater concentration of ownership than the 2021 Shares.

Shareholders should be aware that, even if the Reorganisation Proposal becomes unconditional and the Proposals are implemented, if the aggregate Net Asset Value (as at 31 March 2021) of the existing 2017 Shares elected for Realisation Shares does not exceed $30 million (equivalent to approximately 10 per cent. of the aggregate Net Asset Value of the Company as at the latest practicable date prior to the publication of the Circular), existing 2017 Shares so elected will not be re-designated into Realisation Shares and instead will be re-designated into 2021 Shares.  

This condition has been established in recognition that, if the Realisation Share class was created with an aggregate Net Asset Value of less than $30 million, such a small Share class would be expected to:

· trade inefficiently in the secondary market (for example with negligible trading liquidity and/or a material spread between the quoted bid and offer prices); and

· impose a disproportionate administrative and cost burden on the Company (for example in establishing and maintaining the associated separate custody arrangements and London Stock Exchange quotation).

Secondary Market Placing

To the extent that Shareholders wish to consider realising their investment in the Company, rather than hold either Realisation Shares or 2021 Shares, then the Company has engaged its corporate brokers, Numis Securities Limited and Liberum Capital Limited, to seek to generate secondary market demand from Shareholders or new investors willing to hold 2021 Shares. Numis Securities Limited and Liberum Capital Limited can only execute bargains with Qualified Investors. There can be no assurance as to the extent or price of any demand that can be generated under this mechanism.

Re-designation of 2017 Shares and ring-fencing of assets

2017 Shares will be re-designated as 2021 Shares and, proportionate to the Elections made and in relation to 2017 Shares, as Realisation Shares. The Company's assets and liabilities will thereafter be segregated into two pools which will be accounted for separately and managed in accordance with the Company's investment objective and the Revised Investment Policy.

Realisation Shares and 2021 Shares will in the future rank only for dividends or other distributions declared, paid or made on the respective share class after their re-designation.

Contribution Agreement

The Company has entered into the Contribution Agreement with Master Fund II (acting by the General Partner), Master Fund III (acting by the General Partner) and the General Partner. Under the Contribution Agreement, upon the Effective Date, the Company will transfer to Master Fund III such portion of the Company's limited partnership interests in Master Fund II (as at the Effective Date) which are attributable to those 2017 Shares which are to be re-designated as 2021 Shares at the Effective Date pursuant to the Reorganisation Proposal (the "Transferred Interest"). In consideration for such transfer, the Company will receive a limited partnership interest in Master Fund III which reflects an equivalent value to the Transferred Interest which Master Fund III receives from the Company.

The Contribution Agreement is conditional upon the Admission of the re-designated 2021 Shares.

Distributions

Master Fund II will continue in accordance with the MFII Partnership Agreement to distribute both its net income and all net principal realised from CLO securities.

In respect of the limited partnership interests in Master Fund II which will be held by the Company on behalf of the Realisation Shares, it is intended that Master Fund II 's income distributions will be used by the Company to pay dividends on the Realisation Shares. It is intended that all future repayment of principal received by the Company with respect to Master Fund II 's underlying investments during the remainder of its life will be used by the Company to make ad hoc returns of capital by way of a compulsory partial redemption of Realisation Shares.

In respect of the limited partnership interests in Master Fund II which will be held by Master Fund III, it is intended that Master Fund II 's income distributions will be used by Master Fund III to make income distributions to the Company, which in turn the Company intends to use to pay dividends on the 2021 Shares. It is intended that all future repayment of principal received by Master Fund III with respect to Master Fund II 's underlying investments during the remainder of its life will be used by Master Fund III during its investment period to make new portfolio investments.

Dividends

The Company inte nds to pay quarterly dividends to holders of Realisation Shares representing an amount in aggregate at least equal to the gross income from investments received by the Company in the relevant financial period attributable to the Realisation Shares' interest in Master Fund II and Qualifying Short Term Investments, less expenses of the Company.

The Board intends to pay quarterly dividends to holders of 2021 Shares representing an amount in aggregate at least equal to the gross income received by the Company from investments in the relevant financial year that are attributable to the 2021 Shares' interest in Master Fund III and qualifying short term investments, less a proportionate share of the expenses of the Company.

Duration of the Company

Currently, under the Existing Articles, the Company is required to convene an extraordinary general meeting in 2024 but on or before 12 June 2024 to propose to Shareholders the Continuation Resolution. If that Continuation Resolution is passed by Shareholders, a further Continuation Resolution will be proposed on the nearest Business Day falling every two years thereafter. If a Continuation Resolution is not passed, the Board shall draw up proposals for the voluntary liquidation of the Company.

As part of the Reorganisation Proposal, a resolution is sought at the Extraordinary General Meeting which, if passed, would amend the Existing Articles so as to change the date by which the Continuation Resolution is to be proposed to 12 June 2028, being a date which aligns with the planned end date of Master Fund III, but excluding possible extension periods of Master Fund III either (i) through extending the time period during which further persons may be admitted as limited partners of Master Fund III by up to two additional consecutive one year periods at the discretion of the General Partner; and/or (ii) by or Master Fund III's term otherwise ending on a later date due to it continuing to hold any investment in a CLO issuer which was made during the Commitment Period, or any reset, upsize, reissue or re-financing thereof, and for which it has acted as originator for risk retention purposes).

Investment Objective and Revised Investment Policy

The investment objective of the Company will be unchanged, which is to generate attractive, risk-adjusted returns, principally through income distributions.

The Company will continue as a feeder fund and will pursue its investment objective and policies by investing directly in Master Fund II and Master Fund III (with those assets of the Company attributable to the Realisation Shares being invested in Master Fund II and with those assets of the Company attributable to the 2021 Shares and C Shares being invested in Master Fund III).

The investment policy of the Company is to invest (either directly and/or indirectly through Master Fund II and/or Master Fund III) in US, UK and European CLOs or other vehicles and structures which provide exposure to portfolios consisting primarily of US, UK and European floating-rate senior secured loans and which may include non-recourse financing. The Company implements its investment policy by:

(i)   with respect to those assets of the Company attributable to the Realisation Shares: investing in Master Fund II; and

(ii)   with respect to those assets of the Company attributable to the 2021 Shares and C Shares: investing in Master Fund III.

The Company will at all times invest and manage its assets with the objective of spreading investment risk and in accordance with its investment policy. It will not invest in other listed closed ended investment funds. The Company will not conduct any trading activity which is significant in the context of its group as a whole.

The Company may also invest in Qualifying Short Term Investments if at any time the Company holds any un-invested cash.

The Company will not have any borrowings except for short term borrowings for working capital and cash flow purposes. Such borrowings may not exceed 20 per cent. of NAV in aggregate, and also of the NAV of each Share class. If there is any short term borrowing, assets of the Company may be pledged as security against it.

In order to achieve an appropriate level of certainty for Shareholders, the investment objectives and policies of Master Fund II and Master Fund III have been entrenched in the MFII Partnership Agreement and the MFIII Partnership Agreement respectively and cannot be varied without an amendment to the respective agreements, which in each case would require the consent of the limited partners thereof holding commitments in aggregate which are equal to or exceed 75 per cent. of the total commitments therein. No amendments to the MFII Partnership Agreement and the MFIII Partnership Agreement respectively may be made which would cause the Company to be in breach of the Listing Rules of the FCA.

Placing Programme

The Placing Programme will open on 23 April 2021 and will close on 25 March 2022 (or any earlier date on which it is fully subscribed). The maximum number of 2021 Shares to be issued pursuant to the Placing Programme is such number of 2021 Shares under the Placing Programme as represents 20 per cent. of the 2021 Shares then in issue following the Effective Date and the maximum number C Shares to be issued pursuant to the Placing Programme is 350 million, subject to any issues of 2021 Shares and/or C Shares being capped at an aggregate issue value of US$350 million. Such Shares will, subject to the Company's decision to proceed with a Placing at any given time, be issued at the relevant Placing Price. No 2021 Shares will be issued at a discount to the Net Asset Value per 2021 Share at the time of the share issue. The Company will not issue any 2021 Shares at a discount of 10 per cent. of more to the middle market price of the 2021 Shares at the relevant time without further Shareholder approval. C Shares will always be issued at US$1 per C Share.   The aggregate Net Proceeds of the Placing Programme will depend on the number of Shares issued pursuant to it and the relevant Placing Price in respect of each Placing under the Placing Programme. The Directors intend to use the net proceeds of each Placing, after costs, to invest in Master Fund III.

Extraordinary General Meeting (which also constitutes a class meeting of the holders of the 2017 Shares)

In connection with the Proposals, the Extraordinary General Meeting has been convened for 1.30 p.m. on 16 April 2021 at which the Resolutions will be put to Shareholders to:

Resolution 1:	adopt the New Articles;
Resolution 2:	approve the re-designation of 2017 Shares as 2021 Shares, unless and to the extent that Elections are made for the re-designation of 2017 Shares as Realisation Shares (and provided that the aggregate Net Asset Value (as at 31 March 2021) of the 2017 Shares elected for Realisation Shares exceeds US$30 million), the re-designation of their 2017 Shares as Realisation Shares;
Resolution 3:	authorise the Directors to issue new C Shares and 2021 Shares and to do so on a non-pre-emptive basis.

Action to be taken: Making an Election

(i) For those Shareholders wishing to extend the duration of their investment in the Company:

Those Shareholders who wish to extend the duration of their investment in the Company beyond the planned end date of Master Fund II do not need to make an election.

However, such Shareholders should vote in favour of the Resolutions. The Resolutions, if passed, will cause 2017 Shares to be re-designated as 2021 Shares upon the Effective Date, unless and to the extent that an Election is received from a Shareholder to have their 2017 Shares re-designated as Realisation Shares.

(ii) For those Shareholders not wishing to extend the duration of their investment in the Company:

Those Shareholders who do not wish to extend the duration of their investment to participate in Master Fund III will need to make an express election to have their existing 2017 Shares redesignated as Realisation Shares upon the Effective Date. The Realisation Shares will continue to participate solely in Master Fund II.

Shareholders who do not make valid Elections (as well as Excluded Shareholders) shall be deemed to have agreed to the re-designation of all of their 2017 Shares as 2021 Shares with effect from the Effective Date.

Overseas Shareholders should refer to the information in the Circular under the heading "Overseas Shareholders".

Certain considerations and risks relating to the Proposals

The implementation of the Reorganisation Proposal carries with it certain considerations and risks for Shareholders as described below:

(i)  Shareholders will need to consider the tax consequences of the re-designation of their 2017 Shares based on their particular circumstances. Please refer to the Circular for details relating to taxation.

(ii)  For those Shareholders wishing for their 2017 Shares to be re-designated as 2021 Shares, please note there are risks in participating in an investment in the 2021 Shares and Master Fund III. You are advised to carefully consider the risk factors set out in the "Risk Factors" section of the Prospectus, in particular, those paragraphs relating to Master Fund III and to shares issued pursuant to the Placing Programme.

(iii)  Holders of 2021 Shares will, from the Effective Date, continue to be exposed to the assets and liabilities of Master Fund II (indirectly through the Company's participation in Master Fund III, which will in turn hold a proportion of the interests in Master Fund II ).

(iv)  For those Shareholders wishing for their 2017 Shares to be re-designated as Realisation Shares, please note there are risks in participating in an investment in the Realisation Shares and Master Fund II . You are advised to carefully consider the risk factors set out in the "Risk Factors" section of the Prospectus, in particular, those paragraphs relating to the Company and the Company's investment in Master Fund II . Additionally, Shareholders should be aware of the following considerations and risks in respect of the Realisation Shares:

(i)  The Realisation Shares have an expected life to the planned end date of Master Fund II, being 12 June 2026[5].

(ii)  The composition of Master Fund II's portfolio will be unchanged by the implementation of the Proposals. However, over time, Master Fund II's portfolio will become less diversified as its investments are realised.

(iii)  It is expected that the Realisation Share class will represent a relatively small proportion of the Company's share capital, therefore, the Realisation Shares are currently expected to benefit from lower levels of secondary market liquidity than the 2021 Shares.

(iv)  The Realisation Shares may also have a greater concentration of ownership than the 2021 Shares.

(v)  The Realisation Shares may not be created. As discussed above, even if the Reorganisation Proposal becomes unconditional and is implemented, the re-designation of existing 2017 Shares into Realisation Shares is, furthermore, conditional upon the aggregate Net Asset Value (as at 31 March 2021) of the existing 2017 Shares elected for Realisation Shares exceeding US$30 million, and if this condition is not met, existing 2017 Shares elected for Realisation Shares will instead be re-designated into 2021 Shares upon the implementation of the Reorganisation Proposal.

(vi)  All Shareholders (irrespective of whether you wish to remain solely invested in Master Fund II or to participate in Master Fund III) should carefully consider the risk factors set out in the "Risk Factors" section of the Prospectus.

Shareholders who are in any doubt as to the contents of the Circular or as to the action to be taken should immediately seek their own personal financial advice from an independent professional adviser authorised under the Financial Services and Markets Act 2000 (as amended).

Expected timetable

Date of the Circular	26 March 2021
Publication of the Prospectus	26 March 2021
Latest time and date for receipt of Forms of Proxy	1.30 p.m. on 14 April 2021
Latest time and date for receipt of CREST Proxy Instructions	1.30 p.m. on 14 April 2021
Latest time and date for receipt of Form of Election	1.00 p.m. on 16 April 2021
Latest time and date for receipt of CREST Election Instructions	1.00 p.m. on 16 April 2021
Record Date for entitlement to make an Election	close of business on 16 April 2021
Extraordinary General Meeting	1.30 p.m. on 16 April 2021
Results of the Extraordinary General Meeting published	16 April 2021
Results of the Elections published	19 April 2021
Effective Date	22 April 2021
Admission of the re-designated 2021 Shares	8.00 a.m. on 22 April 2021
Despatch of replacement share certificates to the holders of Realisation Shares and 2021 Shares	week commencing 26 April 2021

Note: Each of the times and dates set out below is subject to change. References to a time of day are to London time. Any changes to the timetable will be notified by publication of a notice through a regulatory information service.

Fair Oaks Income Limited

Fair Oaks Income Limited is a registered closed-ended investment company incorporated in Guernsey. The Company was admitted to trading on the Specialist Fund Market of the London Stock Exchange (now the Specialist Fund Segment of the Main Market of the London Stock Exchange) on 12 June 2014.

The Company will continue as a feeder fund and will pursue its investment objective and policies by investing directly in Master Fund II and Master Fund III (with those assets of the Company attributable to the Realisation Shares being invested in Master Fund II and with those assets of the Company attributable to the 2021 Shares and C Shares being invested in Master Fund III).

The investment policy of the Company is to invest (either directly and/or indirectly through Master Fund II and/or Master Fund III) in US, UK and European CLOs or other vehicles and structures which provide exposure to portfolios consisting primarily of US, UK and European floating-rate senior secured loans and which may include non-recourse financing.

Dealing codes

The dealing codes for the 2021 Shares and Realisation Shares are as follows;

2021 Share ISIN:   GG00BNNLWT35
2021 Share SEDOL:                               BNNLWT3
2021 TIDM:                                             FAIR

Realisation Share ISIN:    GG00BF00L342

Realisation Share SEDOL:   BF00L34
Realisation Share TIDM:   FA17

Important Information

This announcement which has been prepared by, and is the sole responsibility of, the directors of the Company, has been approved for the purposes of section 21 of the FSMA by Fair Oaks Capital Limited, which is authorised and regulated by the Financial Conduct Authority.

This announcement is an advertisement and does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor.

Recipients of this announcement who are considering subscribing for 2021 Shares and/or C Shares are reminded that any such subscription must be made only on the basis of the information contained in the Prospectus which may be different from the information contained in this announcement. Subscription for 2021 Shares and/or C Shares is subject to specific legal or regulatory restrictions in certain jurisdictions. Persons distributing this announcement must satisfy themselves that it is lawful to do so. The Company assumes no responsibility in the event that there is a violation by any person of such restrictions.

This information is for general guidance only and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. This document contains statements that are or may be forward-looking statements. All statements other than statements of historical facts included in this document may be forward-looking statements, including statements that relate to the Company's future prospects, developments and strategies.

Forward-looking statements are identified by their use of terms and phrases such as "believe", "targets", "expects", "aim", "anticipate", "projects", "would", "could", "envisage", "estimate", "intend", "may", "plan", "will" or the negative of those, variations or comparable expressions, including references to assumptions. The forward-looking statements in this document are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results, performance and achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. Factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those described in the Risk Factors. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such entity and the environment in which each will operate in the future. All subsequent oral or written forward-looking statements attributed to the Company, the General Partner, Master Fund II, Master Fund III or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

Each forward-looking statement speaks only as at the date of this document. Except as required by law, regulatory requirement, the UK Prospectus Regulation, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules, the RCIS Rules and MAR, neither the Company nor any other party intends to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. The contents of these paragraphs relating to forward-looking statements are not intended to qualify the statements made as to sufficiency of working capital in this document.

This document does not constitute, and may not be used for the purposes of, an offer to sell or issue or the solicitation of an offer to buy or subscribe for any Shares to or from any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Investors should not subscribe for or purchase any transferable securities referred to in this announcement except on the basis of the information contained in the Prospectus (and any supplementary prospectus).

The distribution of this document and the offer and sale of Shares may be restricted by law and regulation. No action has been taken or will be taken by the Company, Numis or Liberum that would permit a public offering of the Shares, or possession or distribution of this document, in any jurisdiction where action for that purpose is required. Accordingly, persons into whose possession this document comes are required to inform them about and to observe such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions.

Nothing contained in this document is intended to constitute investment, legal, tax, accounting or other professional advice. This document is for information only and nothing in this document is intended to endorse or recommend a particular course of action. Prospective investors must rely upon their own professional advisers, including their own legal advisers and accountants, as to legal, tax, investment or any other related matters concerning the Company and an investment therein. Statements made in this document are based on the law and practice currently in force in England and Wales and in Guernsey, and are subject to change.

This document is not for distribution into the United States or any other Restricted Jurisdiction. The issue of the Shares has not been, and will not be, registered under the applicable securities laws of the United States or any other Restricted Jurisdiction ("Restricted Jurisdiction" being each of Australia, Canada, Japan, the Republic of South Africa and the United States) and, subject to certain exceptions, the Shares may not be offered or sold directly or indirectly within the United States or any other Restricted Jurisdiction or to, or for the account or benefit of, any persons within the United States or within any other Restricted Jurisdiction.

The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") or any US state securities laws. The Shares may not be offered, sold, pledged or otherwise transferred, directly or indirectly, within the United States or to, or for the account or benefit of, US Persons (as defined in Regulation S under the Securities Act) unless the offer and sale of the Shares has been registered un the Securities Act and the Company is registered under the US Investment Company Act of 1940, as amended (the "US Investment Company Act") or an applicable exemption from the registration requirements of the Securities Act and the US Investment Company Act are available.

The Shares have not been approved or disapproved by the SEC, any US state securities commission or any other US regulatory authority nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

The Shares are subject to restrictions on transferability and resale within the United States and may not be transferred or resold in the United States except pursuant to a valid exemption from the registration requirements of the Securities Act, the US Investment Company Act and state securities laws.

Numis Securities Limited ("Numis"), which is authorised and regulated in the UK by the FCA, is acting exclusively for the Company and no one else in connection with the Placing Programme and each Admission and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Placing Programme and each Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Placing Programme and each Admission or any other matter referred to in this document. This does not exclude or limit any responsibilities which Numis may have under FSMA or the regulatory regime established thereunder.

Liberum Capital Limited ("Liberum"), which is authorised and regulated in the UK by the FCA, is acting exclusively for the Company and no one else in connection with the Placing Programme and each Admission and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Placing Programme and each Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Placing Programme and each Admission or any other matter referred to in this document. This does not exclude or limit any responsibilities which Liberum may have under FSMA or the regulatory regime established thereunder.

Other than the responsibilities or liabilities, if any, which may be imposed on Numis or on Liberum by FSMA or any regulatory regime established thereunder, neither Numis nor Liberum accepts any responsibility whatsoever or make any representation or warranty, express or implied, in respect of the contents of this document, including its accuracy, completeness or verification, in respect of any other statement made or purported to be made by it, or on its behalf, in connection with the Company, document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Numis (and its affiliates) and Liberum (and its affiliates) accordingly disclaim all and any liability, whether arising in tort, contract or otherwise, which it/they might otherwise be found to have in respect of this document or any such statement.

Information to distributors

Solely for the purposes of the product governance requirements contained within (a) the UK's implementation of EU Directive 2014/65/EU on markets in financial instruments, as amended ("UK MiFID II") and (b) the UK's implementation of Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing UK MiFID II, and in particular Chapter 3 of the Product Intervention and Product Governance Sourcebook of the FCA (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the C Shares and the 2021 Shares have been subject to a product approval process, which has determined that such securities to be issued pursuant to any Placing are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in the UK MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by the UK MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors should note that: (i) the price of the C Shares and the 2021 Shares may decline and investors could lose all or part of their investment; the C Shares and the 2021 Shares offer no guaranteed income and no capital protection; (ii) an investment in the C Shares or the 2021 Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom, and (iii) the C Shares and the 2021 Shares will be admitted to the Specialist Fund Segment, which is intended for institutional, professional, professionally advised and knowledgeable investors who understand, or who have been advised of, the potential risk from investing in companies admitted to the Specialist Fund Segment. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to any Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Numis and Liberum will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (i) an assessment of suitability or appropriateness for the purposes of the UK MiFID II; or (ii) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares. Each distributor is responsible for undertaking its own Target Market Assessment in respect of the Shares and determining appropriate distribution channels.

Key information documents

In accordance with the UK PRIIPs Regulation, a key information document is prepared in relation to the 2021 Shares, which is available on the Company's website: https://www.fairoaksincome.com and a key information document is prepared in relation to the Realisation Shares, which is available on the Company's website: https://www.fairoaksincome.com . If any tranche of C Shares is to be issued under the Placing Programme, a key information document in relation to such a tranche of C Shares will be prepared and made available on the Company's website: https://www.fairoaksincome.com .

It is the responsibility of each distributor of the Shares to ensure that its "retail clients" in the UK are provided with a copy of the key information document.

The Company is the manufacturer of the Shares for the purposes of the UK PRIIPs Regulation and neither Numis nor Liberum is a manufacturer for these purposes. Neither Numis nor Liberum makes any representation, express or implied, or accepts any responsibility whatsoever for the contents of the key information document prepared by the Company in relation to the Shares nor accepts any responsibility to update the contents of the key information document in accordance with the UK PRIIPs Regulation, to undertake any review processes in relation thereto or to provide such key information document to future distributors of Shares. Each of Numis, Liberum and their respective affiliates accordingly disclaims all and any liability whether arising in tort or contract or otherwise which it or they might have in respect of the key information document prepared by the Company.

 

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[1] excluding possible extension periods of Master Fund III through extending the time period during which further persons may be admitted as limited partners by up to two additional consecutive one year periods at the discretion of the General Partner or Master Fund III's term ending on a later date due to it continuing to hold any investment in a CLO issuer which was made during the Commitment Period, or any reset, upsize, reissue or re-financing thereof, and for which it has acted as originator for risk retention purposes).

[2] This is a target only and not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions at all. This target return should not be taken as an indication of the Company's expected or actual current or future results.

[3] or if later, such date on which Master Fund II ceases to hold any investment in a CLO issuer which was made during the Commitment Period and for which Master Fund II has acted as originator for risk retention purposes.

[4] This is a target only and not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions at all. This target return should not be taken as an indication of the Company's expected or actual current or future results.

[5] or if later, such date on which Master Fund II ceases to hold any investment in a CLO issuer which was made during the Commitment Period and for which Master Fund II has acted as originator for risk retention purposes.

 

END

 

 

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