CIFU.L Regulatory News (CIFU)

RNS Announcement

Carador Income Fund plc

17 November 2014

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 July 2014 to 17 November 2014 and has been prepared solely to provide information to meet the requirements of the Transparency (Directive 2004/109/EC) Regulations 2007.

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 July 2014 to 17 November 2014:

Financial highlights:

- Total dividends of $0.1040 per U.S. Dollar Share declared and paid in 2014 in line with the target set in October 2013.

- Total 2014 NAV return per U.S. Dollar Share of 5.06% as at 30 September 2014.

- Total 2014 share return per U.S. Dollar Share of 6.54% as at 14 November 2014.

- Historic dividend yield of 11.5% (share price as at 14 November 2014).

- 1.03x dividend cover for the first three quarters of 2014.

Portfolio Highlights:

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

- Over $126m has been traded over the reporting period.

- 50% of the portfolio estimated October NAV is now invested in CLO 2.0 Income Notes including 7 control positions.

- October look-through loan portfolio weighted average coupon of 4.5%, for CLO 2.0 Income Note positions, against a weighted average cost of finance of approximately Libor +180bp.(1)

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"(2)), 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, manager and maturity profile.

U.S. DOLLAR SHARE NAV AND SHARE PRICE PERFORMANCE

As at 17 November 2014, the Company only had one share class outstanding, the U.S. Dollar Share Class. The performance of the Company by both Share Price and NAV is set out below. Total share price return is presented from 1 July to 14 November (the last available closing price prior to publishing this report) and total NAV return per share is presented from 1 July to 30 September (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 July 2014 to 30 September 2014 which was paid on 5 November 2014.

INVESTMENT MANAGER'S REPORT

U.S. Loan Market Overview

The U.S. loan market supply:demand dynamic tipped in favour of the buyer during the third quarter. U.S. retail investors continued to withdraw money from daily liquidity loan funds (a total of $9.3 billion was withdrawn in Q3) and, whilst new CLO issuance remained robust at $32.4 billion over the quarter, the outflow coincided with a marked pick-up in primary M&A driven loan supply. Third quarter M&A based loan volume reached $79.2 billion accounting for 60% of the total for the quarter. The imbalance drove primary loan spreads wider and secondary prices lower.(5)

In the primary market U.S. institutional loan spreads, on average over the quarter, widened by 37bp and 18bp for BB and B loans, respectively.(5) The impact on the secondary market is best illustrated in the number of loans trading at or above par. The share of U.S. broadly syndicated loans trading above par dropped to 19% at the end of September down from 33% at the end of August and 59% at the start of the quarter. Those trading above 101 now account for just 4% of the market.(6)

October has proved a volatile month for secondary loan prices with declines in the first weeks of the month followed by a relatively rapid rebound in the final week of October. The S&P U.S. Leveraged Loan Index returned 0.26% in October.(7)

European Loan Market Overview

European loan market technicals remained strong, led by new CLOs ramping up their portfolios. European loan new issue volume reached €65.1 billion cumulative to September 2014. This is almost as high as the €67.2 billion recorded for the full year 2013. July remains the stand-out month, accounting for 70% of primary activity in Q3. As primary market volumes have fallen from the July peak, CLOs have supported European loan prices in the secondary market. (5)

U.S. CLO Market Overview

As noted above CLO volumes remain strong with just under $11.2 billion new U.S. deals issued in October, however the weight of supply continues to maintain AAA at unattractive levels. Recent primary CLOs have been issuing AAA in the mid-150bps area, this is in marked contrast to Europe where regulations and the potential ECB ABS buying program have combined to bring primary CLO AAA down to the mid-120bps area.(8)

European CLO Market Overview

European CLO issuance of over €12 billion in 2014 is well ahead of 2013's total of €7.4 billion. This includes 4 CLOs for €1.8 billion in October. Several managers have issued 3 or more CLOs in 2014, including Alcentra, Blackstone/GSO, and Carlyle. The 2015 European CLO pipeline has now started to build with a reported 20 managers having mandated arrangers on new transactions.(8)

Default Rates

The lagging twelve month U.S. loan default rate continued to fall with the current level of 0.64% (by number of loans) a 2.5 year low. The default rate by principal amount stands at 3.28% including Energy Future Holdings (TXU).(7)

Carador Portfolio

The portfolio has made significant progress over 2014 in the rotation out of older pre-financial crisis CLOs ('CLO 1.0') into CLOs issued post financial crisis ('CLO 2.0'). We estimate that as at the end of October 2014 approximately 49% of the portfolio by NAV is invested in CLO 2.0 Income Notes with just 20% in CLO 1.0 Income Notes. The remaining 31% is allocated to Mezzanine Notes, 11% in CLO 1.0 and 20% in CLO 2.0.

The CLO 2.0 Income Note portfolio has been invested in both the primary and secondary markets at risk adjusted IRRs in the low double digits and includes seven control stakes. The weighted average cost of AAA on the CLO 2.0 Income Note investments is L+130bp and the total weighted average cost of finance is L+180bp.

Outlook

We intend to continue to rotate out of existing positions into CLO 2.0 Income Notes which we believe will provide a more sustainable income generation. With a strong pipeline of CLO issuance, we believe the Company is well positioned to take advantage of any relative value opportunities that arise between primary and secondary markets, the U.S. and Europe, and CLO Income Notes and CLO Mezzanine Notes.

DIVIDENDS

Including the 3Q 2014 dividend paid to shareholders on 5 November 2014 the Company has paid out total dividends in 2014 of $0.1040 per U.S. Dollar Share, equivalent to a historic dividend yield of 11.5% (based on the share price as at 14 November 2014).

MATERIAL EVENTS

On 21 July 2014 the Company announced a dividend of $0.0250 per U.S. Dollar Share in respect of the period from 1 April to 30 June 2014.

On 21 October 2014 the Company announced a dividend of $0.0250 per U.S. Dollar Share in respect of the period from 1 July to 30 September 2014.

On 26 August 2014 the Company released its unaudited interim report including condensed interim financial statements for the half year to 30 June 2014.

For further information, please contact:

Mark Moffat

GSO / Blackstone

+44 (0) 20 7104 4668

Notes:

(1) Thomson Reuters LPC and Intex as at October 31, 2014.

(2) 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.

(3) Bloomberg closing price as at relevant month end.

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

(5) S&P Capital IQ, LCD Quarterly Review, Third Quarter 2014.

(6) Thomson Reuters, October 2014.

(7) S&P Capital IQ, Loan Stats, November 2014.

(8) Morgan Stanley, CLO Tracker, November 2014.

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.