Company and Portfolio Update
Summary by AI BETAClose X
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The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No.596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019.
19 March 2026
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)
COMPANY AND PORTFOLIO UPDATE
The Board has undertaken a review, in conjunction with Fair Oaks Capital, of the Company's reporting framework, capital structure and dividend policy in light of the evolution of the portfolio and the broader CLO market.
Following recent engagement with holders of a significant percentage of the Ordinary Shares regarding the conclusions of this review, which indicated broad support for the proposed consequential changes, the Company announces the following measures intended to optimise the Company's approach to generating attractive risk-adjusted returns, principally through income distributions.
EUR-based reporting and dividend currency
- Over recent years the Company's portfolio has become predominantly Euro-denominated, currently representing 93% of the portfolio(1).
- The Board therefore believes that transitioning the Company's reporting and dividend currency from US Dollars to Euros will better reflect the underlying composition of the portfolio, simplify the Company's operations, and eliminate the costs associated with hedging Euro portfolio exposures into US dollars estimated to be 40bps per annum(2).
Redenomination of Ordinary Shares into EUR
- In conjunction with the change of reporting and dividend currency, the Board believes it appropriate to propose a redenomination from US Dollars to Euros of the Company's Ordinary Shares(3).
Consolidation of Ordinary Shares
- Following the redenomination, the Board additionally intends to implement a 1-for-10 consolidation of the Ordinary Shares(3) with the objective of improving trading dynamics, liquidity and market perception.
Revised dividend policy for Ordinary Shares centred on a sustainable base level of income with potential for enhanced distributions
- The Company's existing dividend policy is to pay fixed quarterly dividends of 2 US cents per Ordinary Share, currently representing an annual dividend yield of 16.9% based on the last published NAV and c.17.8% based on the current share price(4).
- The Board believes that, in light of the evolution of the Company's portfolio, a revised dividend policy is more appropriate, and in particular highlights:
o As older, seasoned positions amortise or are exited, future distributions by the Company will increasingly be supported by new investments with attractive risk-adjusted returns consistent with current market conditions(5).
o A more significant percentage of the portfolio is currently invested in CLO debt and mezzanine tranches, generating more stable and predictable income streams relative to CLO equity securities(6).
o Certain distributions from the portfolio, including the initial distributions from newer CLOs, are conservatively classified as returns of principal rather than income .
o Returns across CLO equity and debt are cyclical and the current level of fixed dividend may constrain the Investment Adviser's flexibility to make investment decisions consistent with the objective of delivering attractive long-term shareholder returns.
- Under the revised dividend policy for the Ordinary Shares(3), the Company would establish a target base level of income with potential for enhanced distributions by:
o Establishing a target base quarterly dividend of 1.00 EUR cent per Ordinary Share(7), which is equivalent to an annualised dividend yield of c.10% of the last published NAV. This is intended to provide Ordinary Shareholders with a clear and sustainable foundation for dividends while maintaining appropriate flexibility in the management of portfolio cash flows, including the ability to supplement distributions over the course of the year.
o Provide the potential for surplus portfolio income received above this target base level to be distributed to Ordinary Shareholders, typically through an enhanced fourth quarterly dividend. The Investment Adviser's income projection, based on current portfolio composition and prevailing market conditions, estimates a net income return of 12.0 to 12.5%, for the current year ending 31 December 2026(8).
Capital allocation
- The Board will retain the ability to allocate surplus capital in the manner it considers most beneficial to shareholders, including through an ongoing commitment to the Company's share buyback programme should the Company's shares trade at a material discount to NAV, reinvestments when attractive investment opportunities arise, and potentially to dividends.
- The Investment Adviser will continue to reinvest 25% of its quarterly fees into Company shares when the shares trade at a discount to NAV, providing an ongoing signal of confidence in the portfolio and strategy.
The Company intends to make a further announcement in due course and to convene the necessary general meetings to seek shareholder approval for the currency designation and share consolidation.
It is intended that Ordinary Share dividends for the current year ended 31 December 2026 will be declared at a level consistent with the revised dividend policy set out above, and therefore that the above package of corporate changes will take effect before the declaration of the Company's first quarterly dividend which is expected in early May 2026.
Richard Burwood, Chairman, commented:
"Since launch, both the Company's portfolio and the underlying CLO market have evolved materially. The portfolio is now predominantly Euro-denominated and more diversified across CLO debt and equity positions. The Board believes it is appropriate that the Company's structure evolves accordingly, ensuring that reporting, capital allocation and distributions are aligned with the underlying asset base and the long-term interests of shareholders.
The proposed transition to Euro reporting and dividends is a logical consequence of this evolution. It removes approximately 40 basis points of annual hedging costs and aligns distributions with the currency of both the portfolio and a significant percentage of the investor base. In parallel, the introduction of a revised dividend policy is intended to provide a clear and sustainable base level of distributions, while maintaining flexibility to deliver enhanced distributions, including a potential supplemental year-end dividend which the Board expects to be a regular feature of the distribution profile. The Board considers this approach to be both prudent and supportive of long-term income stability.
The proposed share consolidation and redenomination are presentational changes with no impact on underlying value, designed to improve trading dynamics and address inefficiencies associated with the current share price level. Taken together, these measures establish a clearer, more efficient and more durable framework for the Company going forward."
Portfolio Update
The Company's portfolio has evolved over time, including a shift towards predominantly Euro-denominated assets and a broader allocation across CLO debt, mezzanine and equity positions, as outlined above, while performance has remained consistent with expectations.
As discussed in the Company's February factsheet, the portfolio continues to perform as expected, with cash generation and credit performance remaining resilient despite recent market volatility. Recent increases in the leveraged loan market distress ratio , from low levels, have been largely driven by ongoing concerns in the software sector particularly in relation to potential AI-related disruption. Over February, the average bid loan price declined from 95.7c to 94.6c in the US and from 95.9c to 95.2c in Europe. Year-to-date, software has returned -7.01% in Europe. European loans have continued to prove more resilient than their US counterparts, reflecting lower average software exposure of approximately 10% in European CLOs compared to 15-16% in US BSL CLOs. The Company's portfolio remains well diversified and has limited exposure to the sectors most affected by recent market weakness.
Moving into March, geopolitical tensions escalated following US and Israeli strikes on Iran, reigniting conflict across the Middle East. The resulting volatility in energy markets has contributed to a more cautious tone across risk assets, with European loan prices declining further to 94.4c as at 10 March. Primary CLO issuance is expected to moderate in the near term as market participants assess the broader implications for credit markets. However, direct exposure within CLO portfolios to issuers materially affected by the Iran conflict remains limited, and such periods of market dislocation may create opportunities for constructive portfolio rotations and risk mitigation.
As disclosed in the November 2025 monthly performance report, the Master Fund in which the Company is invested has two open warehouse facilities, one US and one European. The ramp-up of the European warehouse is continuing at current lower loan prices and the Master Fund expects to acquire the equity in a new issue European CLO in the coming months. The US warehouse is currently being liquidated following a tightening in US loan spreads over the past year, which has reduced the attractiveness of the CLO equity arbitrage. The Master Fund does not expect any significant impact on NAV from the US warehouse liquidation and currently expects to reallocate the capital proceeds into CLO debt at attractive levels.
LEI: 2138008KETEC1WM5YP90
For further information:
Fair Oaks Income Limited
Email: contact@fairoaksincome.com
Fair Oaks Capital Limited
Investor Relations
DDI: +44 (0) 20 3034 0400
Email: ir@fairoakscap.com
Apex Corporate Services (Guernsey) Limited
Email: fairoaksgrp@apexgroup.com
Deutsche Numis
Nathan Brown, Investment Banking
DDI: +44 (0) 20 7547 0569
Email: n.brown@dbnumis.com
Panmure Liberum
Chris Clarke, Investment Banking
DDI: +44 (0) 20 3100 2190
Email: chris.clarke@liberum.com
Liminal
Julian Rea
DDI: +44 (0) 20 778 1103
Email: julian@liminalcomms.com
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 investment policy of the Company is to invest (either directly and/or indirectly through FOIF II LP and FOMC LP (the "Master Fund")) in US and European CLOs or other vehicles and structures which provide exposure to portfolios consisting primarily of US and European floating-rate senior secured loans and which may include non-recourse financing.
Notes
(1) Source Intex. Portfolio currency based on NAV as at 28 February 2026 and currency denominations of all CLO investments, excluding cash.
(2) Plus the benefit of not being required to retain cash for potential margin calls.
(3) Ordinary Shares of no par value with LSE trading code FAIR. The currency redenomination, share consolidation and revised dividend policy will not apply to the Realisation Shares with LSE trading code FA17.
(4) Based on Ordinary Share NAV as at 28 February 2026 and share price as at 17 March 2026.
(5) The Investment Adviser has indicated a prospective target IRR on new transactions of 12-14% per annum.
(6) 38% of the portfolio as at 28 February 2026.
(7) Assuming the proposed currency transition is implemented but prior to the proposed Ordinary Share consolidation.
(8) Projection of future income is based on current estimates and market conditions which may vary in the future, cannot be guaranteed, and is not a forecast of profits.
Important Information
This announcement is for information purposes only and is not an offer to invest. All investments are subject to risk. Past performance is no guarantee of future returns. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results. Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements relate to matters that are not historical facts regarding the Company's investment strategy, financing strategies, investment performance, results of operations, financial condition, prospects and dividend policies of the Company and the instruments in which it will invest. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in general market conditions, legislative or regulatory changes, changes in taxation regimes or development planning regimes, the Company's ability to invest its cash in suitable investments on a timely basis and the availability and cost of capital for future investments. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by FSMA, the UK Listing Rules, the Prospectus Regulation Rules made under Part VI of the FSMA or the Financial Conduct Authority or other applicable laws, regulations or rules.
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Fair Oaks Income Limited 2021 Shs NPV (FAIR)Fair Oaks Income Limited Realisation Shs NPV (FA17)
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