CIFU.L Regulatory News (CIFU)

RNS Announcement

Carador Income Fund plc

18 May 2015

INTERIM MANAGEMENT STATEMENT

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

The following interim management statement relates to the period from 1 January 2015 to 18 May 2015 and has been prepared solely to provide information to meet the requirements of the Transparency (Directive 2004/109/EC) Regulations 2007, as amended.

HIGHLIGHTS

Carador Income Fund Plc ("Carador" or the "Company"), a listed investment company investing in the senior secured loans of companies through collateralized loan obligations, today publishes its interim management statement for the period from 1 January 2015 to 18 May 2015:

Financial highlights:

- Total dividends of $0.050 per U.S. Dollar Share declared in 2015 in line with the target set in January 2015.

- Total 2015 NAV return per U.S. Dollar Share of 1.68% as at 31 March 2015.

- Total 2015 share return per U.S. Dollar Share of 2.95% as at 15 May 2015.

- Historic dividend yield of 11.5% (share price as at 15 May 2015).

- 1.31x dividend cover for the first quarter of 2015.

Portfolio Highlights:

- The portfolio has been actively managed throughout the reporting period.

- Over $149 million notional has been traded over the reporting period.

- All investments in the portfolio are valued using an average of traded prices, firm bids or third party broker dealer mark to market valuations.

- 66% of the estimated March NAV portfolio is now invested in income notes, of which 84% are in post-financial crisis deals.

INVESTMENT OBJECTIVE

The Company's investment objective is to produce attractive and stable returns with low volatility compared to equity markets by investing in a diversified portfolio of senior notes of collateralised loan obligations ("CLOs"(1)), collateralised by senior secured bank loans and equity and mezzanine tranches of CLOs.

The Company seeks to achieve its investment objective through investment in cashflow CLO transactions, managed by portfolio managers with proven track records. It seeks to achieve diversification across asset class, geography, manager and maturity profile.

U.S. DOLLAR SHARE NAV AND SHARE PRICE PERFORMANCE

As at 18 May 2015, all shares in issue were the U.S. Dollar shares. The performance of the Company by both Share Price and NAV is set out below. Total share price return is presented from 1 January to 15 May (the last available closing price prior to publishing this report) and total NAV return per share is presented from 1 January to 31 March (the last available NAV prior to publishing this report).

The NAV total return summary above does not include the dividend of $0.0250 per U.S. Dollar Share in respect of the period from 1 January 2015 to 31 March 2015 that was paid on 6 May 2015.

INVESTMENT MANAGER'S REPORT

Loan Market Overview

The U.S. loan market rallied for the first four months of 2015. Returns for the S&P/LSTA Index were 3.06% through April, which represents the strongest increase for the period since 2012. The energy sector contributed four basis points to the overall returns, with oil and gas loans up 3.92% through April.(4)

The average bid of the S&P/LSTA Index climbed in April on the back of strong technicals amid continued CLO demand for assets and limited new loan supply, which was driven by a combination of slow new-issue and strong prepayments. The index ended April at 97.57 as compared with 95.92 at the end of 2014. The percent of loans trading at par or higher increased to a 14-month high of 64% by April month end, from 40% in March month end and from just 2.7% at the end of last year.(4)

The S&P European Leveraged Loan Index (ELLI) increased 2.95% for the year to April 30. Issuance in Europe is dominated by cross-border transactions with issuers taking advantage of investor appetite and limited new activity. (4)

CLO Market Overview

After a slow start in January and despite a limited loan supply, CLO new issuance has picked up. In total, $10.07 billion of new CLOs from 18 transactions were printed during April, bringing the year through April issuance to $40.8 billion. Full year U.S. CLO issuance was $124.1 billion in 2014. (4)

In Europe, issuance rose to €4.39 billion of new CLOs from 11 deals through the end of April; full year issuance for 2014 amounted to €14.49 billion.(4)

It is expected that CLO issuance will remain high, but lower than 2014 levels, due to a lack of collateral, excess spread compression and US risk retention rules that will take effect in 2016.

Refinance activity has picked up during the period, with 10 CLO refinancings priced year to date. Most post financial crisis CLOs have the ability to refinance the liabilities after their non-call period (two years as a general rule). One benefit of refinancing is to reduce the cost of CLO debt, increasing equity returns. At the same time, amendments in the deal documents are implemented to achieve Volcker compliance, increase the size of the covenant-lite bucket, update the S&P Recovery Rate or remove any future ability to refinance. On the negative side, the associated costs will impact equity distributions. It is estimated that the equity holders will need on average 2.4 payments before the cost of the refinancing is offset from higher future distributions.(5)

New investors have entered the CLO market due to the positive performance and attractive structures. Interest from insurance companies, asset management firms and Korean banks has increased. Additionally, European investors have also been attracted by the increase in U.S. CLOs meeting the EU risk retention compliance rules.(6)

The decline in the oil price has had a limited impact on the CLO market over the period. On average, U.S. CLOs' direct exposure to the oil and gas sector is 4.0%. Diversification among issuers and sub-sectors has helped to mitigate the negative effects.(6)

As of the end of April, the JPM CLOIE Index has experienced positive returns across all tranches, with post-crisis BBs and BBBs as the best performers returning 4.04% and 3.67%, respectively.(7)

Default Rates

With two defaults in April (Walter Energy and Sabine Oil & Gas), the S&P lagging default rate, by number, increased to 0.72% as of the April month end. However, the lagging default rate by principal amount decreased to a one-year low of 1.26%, from 3.79% in the previous month, as Energy Future Holdings (formerly known as TXU), exited the lagging-12-months rolls.(4)

In Europe, the lagging 12-month default rate for the S&P European Leveraged Loan Index (ELLI) was 2.8% as of April month end, down from 4.9% at the end of 2014.(4)

Carador Portfolio

The portfolio has continued with the rotation out of older pre-financial crisis CLOs ('CLO 1.0') into CLOs issued post financial crisis ('CLO 2.0'). As at the end of March 2015, approximately 55.41% of the portfolio by NAV was invested in CLO 2.0 income notes with 10.8% in CLO 1.0 income notes. The remaining 33.79% was allocated to mezzanine notes, with 7.87% in CLO 1.0 and 25.92% in CLO 2.0.

Carador traded over $149 million notional including mezzanine and income notes over the reporting period. The Investment Manager has reduced CLO 1.0 income note exposure and high U.S. Dollar priced CLO 1.0 mezzanine notes into lower priced CLO 2.0 mezzanine notes and CLO 2.0 income notes, which it believes will have a more stable NAV profile going forward.

Outlook

With the portfolio rotation almost completed, the Investment Manager believes the Company is well positioned to take advantage of any new market opportunities that arise.

DIVIDENDS

On 6 May 2015, the Company paid a dividend of $0.025 per U.S. Dollar Share for the 1Q 2015 period. It follows the Company's announcement in January 2015, on the basis of current market conditions, of maintaining a target annual dividend of $0.100 per U.S. Dollar Share distributed evenly in four quarterly payments for 2015.

MATERIAL EVENTS

On 22 January 2015 the Company announced a dividend of $0.0250 per U.S. Dollar Share in respect of the period from 1 October 2014 to 31 December 2014.

On 30 January 2015, the Company's investment manager, GSO / Blackstone Debt Funds Management LLC, announced the appointment of J. Richard ("Dik") Blewitt as the Company's new portfolio adviser following the resignation of Mark Moffat. All other members of the investment manager's structured credit investment team remain unchanged.

On 23 April 2015, the Company announced a dividend of $0.0250 per U.S. Dollar Share in respect of the period from 1 January 2015 to 31 March 2015.

On 30 April 2015, the Company announced that the annual general meeting of the Company will take place at the offices of State Street Fund Services (Ireland) Limited, 78 Sir John Rogerson's Quay, Dublin 2 at 3.00 p.m. on 25 June 2015.

On 30 April 2015, the Company released its annual report and audited financial statements for the year ended 31 December 2014.

For further information, please contact:

Dik Blewitt

GSO / Blackstone

+1 212 503 2035

Notes:

(1) CLOs are debt securities backed by a diverse portfolio of loan assets. The CLO uses the cashflows from this portfolio of assets to back the issuance of multiple classes of rated debt securities which, together with the Equity Notes, are used to fund the purchase of the underlying loans.

(2) Bloomberg closing price as at relevant date.

(3) Carador NAV total return, dividends reinvested in security.

(4) S&P Capital IQ LCD, April 2015.

(5) Wells Fargo Securities, The CLO Salmagundi: Refi Pain and Gain, April 2015.

(6) Moody's CLO Interest, April 2015.

(7) J.P. Morgan Collateralized Loan Obligation Index (CLOIE) Monitor, April 2015.

Note: Past performance is not necessarily indicative of future performance results and there can be no assurance that Carador will achieve comparable results in the future.

Important Information

Any reference herein to future returns or distributions is a target and not a forecast and there can be no guarantee or assurance that it will be achieved. The actual principal and income in any particular case will be determined by the cash flows received.

This document has been issued by GSO / Blackstone Debt Funds Management LLC (the "Manager"), a wholly owned subsidiary of GSO Capital Partners LP, which is registered as an investment adviser with the U.S. Securities and Exchange Commission. It does not constitute an invitation and should not be taken as an inducement to engage in any investment activity and is for the purpose of providing information about the Manager and certain of the Manager's affiliates, including without limitation, the Blackstone Group LP, GSO Capital Partners LP and GSO Capital Partners International LLP, collectively the "Manager's Affiliates". It may not be relied upon and should not be used for the purpose of making any investment decision. This document and the information contained herein is not for release, publication or distribution (directly or indirectly) in or into the United States, Canada, Australia or Japan or to any "U.S. person" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act") or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. It does not constitute or contain an offer of, or the solicitation of an offer to buy or subscribe for, securities for sale anywhere in the world, including in or into the United States, Canada, Australia or Japan. This document is being furnished to you solely for your information and no recipient may forward, reproduce, distribute, or make available in whole or in part, this document (directly or indirectly) to any other person. The distribution of this document in certain jurisdictions may be restricted by law and recipients of this document should inform themselves about and observe any such restrictions and other applicable legal requirements in their jurisdictions. Accordingly, recipients represent that they are able to receive this document without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business. By accepting this document, you agree to be bound by the foregoing limitations. This document has been prepared by Carador Income Fund PLC ("Carador") and is the sole responsibility of Carador. No liability whatsoever (whether in negligence or otherwise) arising directly or indirectly from the use of this document is accepted and no representation, warranty or undertaking, express or implied, is or will be made by Carador, the Manager or any of their respective directors, officers, employees, advisers, representatives or other agents ("Agents") for any information or any of the opinions contained herein or for any errors, omissions or misstatements. None of the Manager nor any of its respective Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to Carador or as to the truth, accuracy or completeness of this document, or any other written or oral statement provided. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in this document and nothing in this document is or should be relied on as a promise or representation as to the future.

Although the portfolio reflected in this document (the "Portfolio") is consistent with the investment strategy of the Company, there is no guarantee that the portfolio acquired will be identical to the make-up of the Portfolio. Moreover, the future investments to be made by the Company may differ substantially from the investments included in the Portfolio. Therefore, the Portfolio parameters, industry concentration, rating concentration, spread distribution and other factors related to the Portfolio could all be materially different than those of the future portfolio acquired by the Company.

Carador has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act") and investors will not be entitled to the benefits of that Act. The securities described in this document have not been and will not be registered under the Securities Act, or the laws of any state of the United States. Consequently, such securities may not be offered, sold or otherwise transferred within the United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, applicable state laws and under circumstances which will not require Carador to register under the Investment Company Act. No public offering of the securities is being made in the United States. If you are in the United States and are not either (a) a "qualified institutional buyer" (as defined in Rule 144a under the Securities Act) who is also a "qualified purchaser" (as defined in Section 2(a)(51) of the Investment Company Act) for purposes of Section 3(c)(7) of the Investment Company Act; or (b) an "accredited investor" (as defined in Rule 501 of the Securities Act) who is either a qualified purchaser or an eligible Investment Company Act investor, you should not open this document and should destroy it.

Certain information contained in this document constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "target," "intend," "continue" or "believe," or the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Carador described herein may differ materially from the events, results or performance reflected or contemplated in such forward-looking statements. Any projections, forecasts and estimates contained herein are based upon certain assumptions that Carador considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize and/or that actual events and consequences thereof will vary significantly from the assumptions upon which projections contained herein have been based. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and the Fund is under no obligation to update or keep current such information. Unless otherwise indicated, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date. Recipients of this document are encouraged to contact Carador's representatives to discuss the procedures and methodologies used to make the projections and other information provided herein.

Carador is an investment company with variable capital incorporated under the laws of Ireland and authorised by the Central Bank of Ireland as a professional investor fund. A copy of the Carador prospectus may be obtained from the website of the Company at www.carador.co.uk.