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LONDON - Fair Oaks Income Limited announced Tuesday plans to extend the life of its Master Fund III (FOMC III LP) by transforming it into an evergreen structure, following positive engagement with shareholders.
The Guernsey-registered closed-ended investment scheme, which invests in collateralized loan obligations (CLOs), will introduce new liquidity provisions allowing holders of 2021 Shares to realize up to 20% of outstanding shares every four years at the prevailing net asset value, less costs.
The company cited evolution in the CLO market as the primary driver for the structural change, noting that CLO investments have become longer-term structures that are often reset and extended. According to the announcement, an evergreen structure would allow the fund to enhance returns by fully utilizing resets, avoiding premature portfolio liquidation, reducing transaction costs, and benefiting from lower service provider fees.
"The Board and the Investment Adviser believe that this flexibility has the potential to enhance returns for Master Fund III," the company stated in its press release.
Fair Oaks also plans to bring forward its scheduled continuation vote from June 2028 to 2025. No changes are proposed to the company’s dividend or share buyback policies, nor to the Investment Adviser’s commitment to reinvest 25% of fees into 2021 Shares when trading at a discount to NAV.
For shareholders with holdings of at least 15 million 2021 Shares who do not wish to extend their investment, the company is developing an "Upfront Exchange Opportunity" allowing them to redeem shares for in-specie consideration, resulting in direct partnership interest in Master Fund III, subject to certain conditions.
The company will convene a class meeting and extraordinary general meeting to seek shareholder approval for the proposed changes to its Articles.
Master Fund III was established in 2021 as a successor to Master Fund II, with approximately 13% of shareholders at that time electing to have their shares redesignated as Realisation Shares.
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