Fair Oaks Income Limited

FINANCIAL STATEMENTS FAIR OAKS INCOME LIMITED ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 CONTENTS Company Overview Highlights 1 Summary Information 2 Strategic Review Chair’s Statement 4 Investment Adviser’s Report 6 Strategic Report 20 Governance Board of Directors 27 Disclosure of Directorships in Public Companies 28 Directors’ Report 29 Corporate Governance 34 Statement of Directors’ Responsibilities 40 Directors’ Remuneration Report 41 Audit Committee Report 42 Management Engagement Committee Report 46 Independent Auditor’s Report 48 Financial Statements Statement of Comprehensive Income 55 Statement of Changes in Shareholders’ Equity 56 Statement of Financial Position 57 Statement of Cash Flows 58 Notes to the Financial Statements 59 Additional Information Portfolio Statement (unaudited) 93 Management and Administration 94 Appendix – Alternative Performance Measures (unaudited) 95 COMPANY OVERVIEW 1 Highlights 31 December 2024 31 December 2023 2021 Shares Net Asset Value US$211,775,810 US$215,416,244 Net Asset Value per share US$0.5614 US$0.5638 Share last-price at year-end US$0.5400 US$0.5500 Discount to Net Asset Value (3.80%) (2.45%) Ongoing charges figure (2021 Shares only) 1 0.46% 0.45% Ongoing charges figure (look through basis) 2 1.40% 1.37% 31 December 2024 31 December 2023 Realisation Shares Net Asset Value US$23,961,546 US$28,523,929 Net Asset Value per share US$0.5832 US$0.5715 Share last-price at year-end US$0.5710 US$0.5700 Discount to Net Asset Value (2.26%) (0.26%) Ongoing charges figure (Realisation Shares only) 1 0.38% 0.41% Ongoing charges figure (look through basis) 2 1.32% 1.32% • The Company’s Net Asset Value (“NAV”) return per 2021 Share was 14.91% 3 (31 December 2023: 12.98%) for the year ended 31 December 2024 on a total return basis (with dividends reinvested). The NAV return per Realisation Share was 17.35% 3 (31 December 2023: 13.82%) for the year ended 31 December 2024 on the same basis. • As at 31 December 2024, the Company’s total market capitalisation was US$227.2 million, comprising US$203.7 million of 2021 Shares and US$23.5 million of Realisation Shares 4 . • The Company’s 2021 Shares closed at a last-price of US$0.5400 on 31 December 2024 (31 December 2023: US$0.5500). The 2021 Shares traded at an average discount to NAV of 1.5% during the year ended 31 December 2024 (31 December 2023: Discount 11.71%). • The Company’s Realisation shares closed at a last-price of US$0.5710 on 31 December 2024 (31 December 2023: US$0.5700). The Realisation Shares traded at an average discount to NAV of 0.7% during the year ended 31 December 2024 (31 December 2023: Discount 4.29%). • The Company declared dividends of 8.00 US cents per 2021 Share and Realisation Share in the year ended 31 December 2024 (31 December 2023: 8.00 US cents per 2021 Share and Realisation Share). 1 Total ongoing charges, calculated in accordance with the AIC guidance, is at the Company level only for the period divided by the average NAV for the year. Charges of the underlying Master Funds are not included. See “Appendix” on pages 95 to 98. 2 Total ongoing charges, calculated in accordance with the AIC guidance, including the Company and the underlying funds divided by the average NAV for the year. See “Appendix” on pages 95 to 98. 3 See “Appendix” on pages 95 to 98. 4 Market capitalisation calculated based on the closing 2021 Share price and Realisation Share price at 31 December 2024. COMPANY OVERVIEW 2 Summary Information Principal Activity Fair Oaks Income Limited (‘the Company”) was registered in Guernsey under the Companies (Guernsey) Law, 2008 on 7 March 2014. The Company’s registration number is 58123 and it is regulated by the Guernsey Financial Services Commission as a registered closed-ended collective investment scheme under The Registered Collective Investment Scheme Rules and Guidance 2021. The Company began trading on the Specialist Fund Segment (“SFS”) of the London Stock Exchange on 12 June 2014. Reorganisation On 19 April 2021, the Company announced the result of its reorganisation proposal, being that 62,562,883 2017 Shares had been elected for re- designation as Realisation Shares (the “Realisation Shares”), representing 13.4% of the 2017 Shares in issue, and 405,815,477 2017 Shares were re-designated as 2021 Shares (the “2021 Shares”), representing the balance of 86.6% of the 2017 Shares in issue (including 650,000 shares held in Treasury). The Company makes its investments through FOIF II LP (the “Master Fund II”) and FOMC III LP (the “Master Fund III”), in both of which the Company is a limited partner (the “Master Fund II” and the “Master Fund III” together the “Master Funds”). The Master Fund II was registered in Guernsey on 24 February 2017 and the Master Fund III was registered in Guernsey on 10 March 2021 under The Limited Partnerships (Guernsey) Law, 1995. The purpose of the reorganisation was to allow those Shareholders who wished to extend the life of their investment in the Company beyond the planned end date of the Master Fund II, to be able to do so by having their 2017 Shares redesignated as 2021 Shares, with such 2021 Shares investing in the new Master Fund III, which has a planned end date of 12 June 2030 and an investment objective and policy substantially similar to that of the Master Fund II. On 17 September 2024 and 6 December 2024, the Company returned US$2,850,050 and US$2,100,000 by way of a compulsory partial redemption of Realisation Shares, which amounted to 5,082,007 and 3,738,331 Realisation Shares (31 December 2023: US$3,255,010 compulsory partial redemption amounted to 5,672,083 shares). On 29 February 2024, the Company issued 848,660 2021 Shares from treasury at a price US$0.5775. The Treasury shares were issued at a premium leading to no dilution for the existing shareholders. During the year ended 31 December 2024 the Company bought back 5,603,189 2021 Shares for US$3,016,924 (31 December 2023: 20,699,431 shares for US$10,468,165). At 31 December 2024, the Company has 41,086,020 (31 December 2023: 49,906,358) Realisation Shares and 377,255,540 (31 December 2023: 382,010,069) 2021 Shares in issue. The Realisation Shares invest solely into the Master Fund II and the 2021 Shares invest solely into the Master Fund III. At 31 December 2024, the Company had direct holdings of 9.59% (31 December 2023: 9.59%) in the Master Fund II and 95.61% holding in Master Fund III (31 December 2023: 95.43%), which in turn had a holding of 62.21% in the Master Fund II (31 December 2023: 62.21%). Together, the Company held a direct and indirect holding of 69.06% in the Master Fund II (31 December 2023: 68.96%). The Master Funds At 31 December 2024, the Master Fund II had six limited partners (31 December 2023: six limited partners), including Fair Oaks Founder II LP, a related entity. At 31 December 2024, the Master Fund III had three limited partners (31 December 2023: three limited partners), including Fair Oaks Founder VI LP. The General Partner of the Master Funds is Fair Oaks Income Fund (GP) Limited (the “General Partner” or “GP”). COMPANY OVERVIEW 3 Summary Information (continued) Principal Activity (continued) Cycad and Wollemi The Master Funds hold investments in Wollemi Investments I LP ("Wollemi"), a Guernsey limited partnership established on 9 March 2021. Aligned with the Company's investment policy, Wollemi invests in Collateralised Loan Obligations ("CLOs"). Previously, Wollemi held an investment into Cycad Investments LP, a limited partnership registered in the United States of America on 2 June 2017. Cycad also invested into CLOs. Cycad was liquidated during the year. At 31 December 2024, the Master Fund II had direct holdings of 76.94% (31 December 2023: 89.43%) and Master Fund III had a direct holding of 14.82% (31 December 2023: 10.57%) in Wollemi. Founder Partners Fair Oaks Founder II LP, a Guernsey limited partnership, has been established to act as the Founder Limited Partner of Master Fund II. Fair Oaks Founder VI LP, a Guernsey limited partnership, has been established to act as the Founder Limited Partner of Master Fund III. Investment Objective and Policy The investment objective of the Company is to generate attractive, risk-adjusted returns, principally through income distributions. The investment policy of the Company is to invest (either directly and/or indirectly through the Master Funds) in US, UK 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. The Company implements its investment policy by: 1. with respect to those assets of the Company attributable to the Realisation Shares: investing in Master Fund II; and 2. with respect to those assets of the Company attributable to the 2021 Shares and any future C Shares: investing in Master Fund III. If at any time the Company holds any uninvested cash, the Company may also invest on a temporary basis in the following Qualifying Short Term Investments: • cash or cash equivalents; • government or public securities (as defined in the Financial Conduct Authority (“FCA”) Rules); • money market instruments; • bonds; • commercial paper; or • other debt obligations with banks or other counterparties having a single A rating or (if a fund) investing with no leverage in assets rated at least single A, according to at least one internationally recognised rating agency selected by the Board of Directors (the “Board”) (which may or may not be registered in the EU). The aggregate amount deposited or invested by the Company with any single bank or other non- government counterparty (including their associates) shall not exceed 20% of the NAV in aggregate, and also of the NAV of each share class, at the time of investment. The Company cannot make any other types of investment without shareholder consent to a change of investment policy by ordinary resolution at a general meeting of the Company. STRATEGIC REVIEW 4 Chair's Statement The independent Board of the Company is pleased to present its Annual Report and Financial Statements for the financial period ended 31 December 2024. The Company’s 2021 Share NAV and share price generated a total return (with dividends reinvested) of +14.91% and +13.06% respectively in 2024. The Company’s 2021 Shares closed at a mid-price of 54.0 US cents as of 31 December 2024, representing a discount to NAV of -3.80%. The Company’s Realisation Share NAV and share price generated a total return (with dividends reinvested) of +17.35% and +14.99% respectively. The Company’s Realisation Shares closed at a mid-price of 57.1 US cents as of 31 December 2024, representing a discount to NAV of -2.26%. Figure 1.1 – Total return: 2021 Shares NAV and share price in 2024 The total return for the JP Morgan US leveraged loan index in 2024 was +9.43%. 5 In the same period, the JP Morgan US high yield total return was +8.94% 6 . Table 1.2 – Total returns in 2024 5-7 FY 2024 total return Company’s 2021 NAV +14.91% Company’s 2021 Share price +13.06% J.P. Morgan US Leveraged Loan index +9.33% J.P. Morgan US High Yield index +8.75% Cash flow and dividends The CLOs which the Master Funds hold have experienced an annualised default rate since inception of 0.37% 7 and had CCC and below exposure of 4.58% 8 as at 31 December 2024, both well below the market’s average of 1.72% 9 and 5.11% 10 , respectively. As a result of the strong fundamental performance of the portfolio, all CLO equity and debt investments made their scheduled distributions in 2024. 5 J.P. Morgan. Leveraged Loan Index Summary Market Index Value. Data as at 31 December 2024. 6 J.P. Morgan. Domestic HY Summary Market Index Value. Data as at 31 December 2024. 7 Fair Oaks Capital data. Annualised default rate of the control CLO equity positions since inception. Data as at 31 December 2024. 8 Intex. Caa1, Caa2, Caa3, Ca and C rated assets (Moody’s). Based on loan facility rating from Moody’s. Data as at 31 December 2024. 9 Average based on PitchBook LCD’s US Leveraged Loan Index lagging 12-month loan default rate based on principal amount, since Jun-14. Data as at 31 December 2024. 10 Pitchbook LCD. Data as at 31 December 2024. STRATEGIC REVIEW 5 Chair's Statement (continued) Cash flow and dividends (continued) The Company paid 8.0 US cents in dividends per 2021 Share in respect to the year ending December 2024. The dividends are well-covered by the distributions received by the Master Funds. The dividend yield for the 2021 Shares was 14.8% as of the end of December, based on the closing share price. 11 Figure 1.3 – Cumulative dividends per share since inception (US cents per 2021 Share) The projected gross return of the portfolio's positions at December 2024 valuations is 22%, assuming a 2% annual default rate compared to the current trailing 12-month loan default rates of 0.91% and 0.42% in the US and Europe, respectively. 12 Share buyback programme The Board continued through the financial period to implement the Company’s share buyback programme announced in September 2022, repurchasing 5.6 million 2021 Shares in 2024, equivalent to 1.5% of the 2021 Shares in issue at the start of the year. The share buyback was further supported by the Adviser’s commitment to reinvest 25% of management fees should the shares trade at a discount. The 2021 Shares ended the year trading at a -3.8% discount to NAV, which compared to a -25.4% discount for the Alternative Funds Ex-3i category. Material events On 22 April 2024, the Company was pleased to announce the appointment of Trina Le Noury as a non-executive Director of the Company. Ms. Le Noury was appointed as Audit Committee Chair upon the resignation of Mr. Bridel in December 2024. Further to the announcement made on 22 April 2024, and in line with the Board’s succession plan, the Company announced that Mr. Bridel had resigned as a Non-Executive Director of the Company effective close of business on 31 December 2024. Richard Burwood Chair 11 Dividend yield is calculated using the most recent dividend annualised and Fair Oaks Income Fund 2021 Share price as at 31 December 2024. 12 Intex as at 31 December 2024. Assuming 2% annual default rate after 12m, linear increase from 0.91% to 2% in year 1. 70c recovery rate, 25% prepayment rate, reinvestment in new loans with 3.5% spread at 99.5c. Call scenario assumes loans are called at 97.5c. Other assumptions available on request. 14c 28c 41c 52c 61c 66c 76c 86c 94c 102c 0c 20c 40c 60c 80c 100c 120c Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 STRATEGIC REVIEW 6 Investment Adviser’s Report Portfolio Review As at 31 December 2024, the Master Funds held 15 CLO equity positions and 11 CLO mezzanine investments offering exposure to 1,268 loan issuers 13 and 15 CLO managers. Subordinated note positions represented 84.6% of the portfolio’s market value. 14 Figure 1.1 – Portfolio composition of the Master Funds 15 Figure 1.2 – Historical rating breakdown (excl. cash) 16 During 2024, Master Fund III invested in the majority equity of one new European CLO, Fair Oaks Loan Funding V (which is managed by Fair Oaks Capital Limited), and in four mezzanine positions. 13 As at 31 December 2024. Based on the underlying loans in CLOs held by the Master Funds. 14 As at 31 December 2024. Percentage by market value of control CLO equity positions. 15 Fair Oaks Capital as at 31 December 2024 and 31 December 2023. Breakdown by market value of the CLO investments held by the Master Funds which includes its share in Wollemi Investments I LP (“Wollemi LP”). 16 Fair Oaks’ data on Original CLO ratings at month-end. NAV weighted. Historical breakdown excludes cash. Fair Oaks Income Fund monthly reports, RNS statements, trustee reports; as at 31 December 2024. BB Rated CLO Notes 1.0% (2023: 1.6%) B Rated CLO Notes 14.5% (2023: 14.4%) Subordinated Notes 84.6% (2023: 84.0%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Subordinated notes B BB STRATEGIC REVIEW 7 Investment Adviser’s Report (continued) Portfolio Review (continued) Fair Oaks Loan Funding V: • CLO backed by a portfolio of European broadly syndicated loans. • The manager of this CLO’s portfolio is Fair Oaks Capital Limited, the investment advisor to the Company and Master Fund II, Master Fund III and Wollemi. • This CLO’s current target portfolio has a principal value of €350 million across an expected 138 unique bank loan issuers, with an expected weighted average exposure per issuer of approximately 0.69%. • The potential total return for this investment, as estimated by the general partner of the Master Fund III, is 14.6% (USD hedged) per annum. On a look through basis, the Company sold four CLO equity positions and six mezzanine positions in 2024. Additionally, the strong loan market and the control equity positions held enabled it to direct the liquidation of three CLO equity positions. Figure 1.3 – Currency breakdown (excl. cash) All CLO equity investments (including reset and refinancings) completed since July 2019 have included ESG- related investment criteria in the CLO’s documentation. CLO investments subject to ESG investment criteria represented 77.9% of all CLO equity investments in the portfolio as of the end of 2024. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% USD EUR STRATEGIC REVIEW 8 Investment Adviser’s Report (continued) Portfolio Review (continued) Figure 1.4 – Subordinated note investments subject to ESG investment restrictions 17 Figure 1.5 – Collateral geographical (top five) and currency breakdown 18 17 The proportion of the Fund’s investments which include ESG-focused investment criteria is being reported as per the Fund’s investments with ESG- focused investment criteria as defined by Fair Oaks Capital. 18 Intex as at 31 December 2024. Based on loan par value weighted by the Master Funds’ proportional ownership of CLO Notes. Subordinated note investments subject to ESG investment restrictions 77.9% (2023: 76.8%) Other subordinated notes 22.1% (2023: 23.2%) STRATEGIC REVIEW 9 Investment Adviser’s Report (continued) Portfolio Review (continued) Figure 1.6 – Industry diversification by Moody’s (top 10) 19 Figure 1.7 – Rating breakdown 20 In Fair Oaks’ opinion, the focus on originating and controlling CLO subordinated note investments has resulted in superior fundamental performance. Lower fees in primary investments also allowed the construction of more conservative portfolios with no need to “stretch for yield”. As a result, the Master Funds have benefitted from below-average exposure to sectors such as retail or energy. Figure 1.8 compares the annualised equity distributions received by the Master Fund II with the US market median. While there is some variability in distributions from quarter to quarter due to differing payment periods, equity distributions in Oct-24 and Jan-25 were impacted by the presence of some older (now liquidated) CLOs in the Master Fund II portfolio. 19 Intex as at 31 December 2024. Based on loan par value weighted by the Master Funds’ proportional ownership of CLO Notes. 20 Intex as at 31 December 2024. Based on Moody’s sectors and loan par value weighted by the Master Funds’ proportional ownership of CLO Notes. 13.0% 10.7% 9.7% 6.6% 6.0% 5.6% 5.2% 4.9% 4.7% 3.5% 0% 2% 4% 6% 8% 10% 12% 14% Healthcare & Pharmaceuticals High Tech Industries Services: Business Banking, Finance, Insurance & Real Estate Telecommunications Services: Consumer Beverage, Food & Tobacco Chemicals, Plastics & Rubber Construction & Building Hotel, Gaming & Leisure 1% 4% 4% 9% 16% 37% 21% 5% 3% 0% 5% 10% 15% 20% 25% 30% 35% 40% Baa3 and above Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 and below STRATEGIC REVIEW 10 Investment Adviser’s Report (continued) Portfolio Review (continued) Figure1.8 – Annualized Equity Distributions (over par) 21 Figure 1.9 – Overcollateralisation (“OC”) test headroom 22 Looking at the sustainability of these cashflows, the OC test headroom, which determines whether distributions may be temporarily diverted from the CLO Equity, remains sufficient, reducing the potential for any future cash- flow diversion. The average CLO equity test value is 4% above its threshold. Assuming 70% recovery in case of default, it would require in excess of 14% cumulative defaults to generate the par loss required to erode 4% headroom, before considering the positive effect of any cash-flow diversion. 25 21 Intex, Barclays as at 31 January 2025. Based on annualised quarterly distributions (as a percentage of par) of US equity notes directly held by the Master Fund II. 22 Intex as at 31 January 2025. STRATEGIC REVIEW 11 Investment Adviser’s Report (continued) Portfolio Review (continued) US Loan Market Update The trailing 12-month US loan default rate fell from 1.53% in December 2023 to 0.91% in December 2024. The US loan distress ratio (loans trading below 80c, a potential indicator of the direction of future defaults) decreased from 6.36% in December 2023 to 4.64% in December 2024. 23 According to Pitchbook LCD’s December 2024 quarterly survey of market participants, the expectation is that the US loan default rate, at the end of 2025, will be between 1.0% and 1.49%. Forecasts from rating agencies and bank research range from 2.0% to 6.0%, however it is important to note that the definition of default in these reports varies. 24 Figure 1.10 – US loan default rate 25 The average bid price of the LSTA US leveraged loan index was 97.33c at the end of 2024, compared to 96.21c at the end of 2023. 23 PitchBook LCD as at 31 December 2024. LSTA US leveraged loan index. Distress ratio by issuer count and default rate by principal amount. 24 PitchBook LCD as at 09 December 2024. LCD’s Quarterly US Leveraged Finance Survey. 2025 forecasts from YE-24 reports: JP Morgan, Citi Bank, Bank of America, Deutsche Bank, S&P and Moody’s. 25 PitchBook LCD as at 31 December 2024. LSTA US leveraged loan index. Distress ratio by issuer count and default rate by principal amount. 0% 1% 2% 3% 4% 5% Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23 Jun-23 Aug-23 Oct-23 Dec-23 Feb-24 Apr-24 Jun-24 Aug-24 Oct-24 Dec-24 STRATEGIC REVIEW 12 Investment Adviser’s Report (continued) US Loan Market Update (continued) Figure 1.11 - US loan price distribution 26 Figure 1.12 –Average bid price of US leveraged loans, BB and B rated loans 27 There were net inflows of US$9.5bn from prime loan funds in 2024, compared to US$17.3bn of outflows in 2023 and $13.5bn in 2022. Towards the end of 2024, changing expectations surrounding the path of US interest rates (as catalysed by a shifting geopolitical landscape with expectations of new tariffs and inflationary policy) accelerated this demand for floating-rate loans. This positive technical demand supported the increase in average US loan prices during 2024. 26 Pitchbook LCD as at 31 December 2024. LSTA US Leveraged Loan Index. 27 PitchBook LCD as at 31 December 2024. 0% 10% 20% 30% 40% 50% 60% 70% Dec-19 Apr-20 Aug-20 Dec-20 Apr-21 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23 Aug-23 Dec-23 Apr-24 Aug-24 Dec-24 Below 70 Below 80 Below 90 70c 75c 80c 85c 90c 95c 100c 105c Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 US LLI BB loans B loans STRATEGIC REVIEW 13 Investment Adviser’s Report (continued) US Loan Market Update (continued) Figure 1.13 – Flows into loan funds by year 28 Aided by an improving credit environment, loan maturities were successfully extended in 2024 through refinancings. The notional of US loans maturing in 2025-2026 has fallen from US$258bn as of year-end 2023 to US$57bn as of year-end 2024. Figure 1.14 – Maturity wall of the US loan market of performing loans (US$bn) 29 28 PitchBook LCD as at 31 December 2024. 29 PitchBook LCD as at 31 December 2024. LSTA US LLI maturity breakdown. -40 -30 -20 -10 0 10 20 30 40 50 60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $bn 2020 2021 2022 2023 2024 STRATEGIC REVIEW 14 Investment Adviser’s Report (continued) European Loan Market Update The trailing 12-month European loan default rate fell from 1.62% in December 2023 to 0.42% in December 2024. The European distress ratio (loans trading below 80c, a potential indicator of the direction of future defaults) decreased from 4.32% in December 2023 to 2.05% in December 2024. 30 European loan default rate forecasts from rating agencies and bank research for 2024 range from 1.0% to 2.7%. 31 Figure 1.15 – European loan default rate 34 The average bid price of the Morningstar European Leveraged Loan Index was 98.01c at the end of 2024, compared to 96.02c at the end of 2023. This represents the highest year end value for the index since 2021. Figure 1.16 - Average bid price of European leveraged loans, BB and B rated loans 32 30 PitchBook LCD as at 31 December 2024. LSTA US LLI maturity breakdown. 31 2025 forecasts from YE-24 reports: Barclays, Morgan Stanley, Citi Bank, Deutsche Bank, S&P, and Moody’s. 32 Pitchbook LCD as at 31 December 2024. Morningstar European Leveraged Loan Index. 0% 1% 2% 3% Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 70 75 80 85 90 95 100 105 ELLI BB loans B loans STRATEGIC REVIEW 15 Investment Adviser’s Report (continued) European Loan Market Update (continued) In Europe, the notional of European loans maturing in 2025-2026 has fallen from €58bn as of year-end 2023 to €11bn as of year-end 2024. The proportion of loans due in the next two years is lower than that at the start of 2023 (3.2% vs 4.7%) 33 due to a similar dynamic observed in the US, as the loan market address near-term maturities through refinancings amid strong demand for floating-rate instruments in an uncertain interest rate environment. Figure 1.17 – Maturity wall of the European loan market of performing loans (€bn) 36 US CLO Market Update US primary CLO new issuance was US$202bn in 2024, compared to US$116bn in 2023. 2024 refinancings and resets totalled US$84bn (212 deals) and US$223bn (451 deals), compared to US$5bn (14 deals) and US$20bn (43 deals) in 2023. Despite record high CLO new issuance in 2024, there has been a marked divergence between CLO gross and net issuance (with a US net supply of US$55bn 34 ) over the year. As redemptions reached record levels, this offset gross supply and supported demand for new CLO issuance (35% of CLOs were outside their reinvestment period at start of 2024). Net AAA-rated supply was even negative over the year, at -US$4 billion, helping to support spread tightening. 37 Forecasts for CLO gross new issuance in 2025 are US$155-200bn and forecasts for refi/reset volume are US$100-300bn. 35 However, net issuance is expected to continue to be markedly lower, at US$35-40bn. 36 33 PitchBook LCD as at 31 December 2024. Morningstar European Leveraged Loan Index. Distribution by year of maturity. 34 Bank of America, “CLO Weekly”, 07 February 2025. 35 PitchBook LCD as at 31 December 2024. 2025 forecasts from YE-24 reports: JP Morgan, BNP Paribas, Barclays, Citi, Bank of America, Deutsche Bank 36 Nomura, “2025 CLO Outlook”, 19 November 2024. STRATEGIC REVIEW 16 Investment Adviser’s Report (continued) European Loan Market Update (continued) Figure 1.18 – US CLO new issue volume 37 Figure 1.19 – US CLO AAA primary spreads (bps) 38 Demand for CLO debt from new investors and existing investors has helped to drive CLO spreads tighter across the capital structure in 2024. Notably, assets in US CLO ETFs grew to US$22bn by December 2024, increasing by US$15.8bn in 2024 alone and bringing a new source of demand for CLO debt. 39 Demand for AAA CLOs from existing investors is also likely to grow given lower capital requirements for US banks. 40 37 PitchBook LCD as at 31 December 2024. CLO databank. 38 JP Morgan as at 31-Dec-23. US CLO AAA primary spreads. 39 Bloomberg and Fair Oaks Capital as at 31 December 2024. 40 Nomura, “2025 CLO Outlook”, 19 November 2024. $0bn $50bn $100bn $150bn $200bn $250bn 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 50 100 150 200 250 300 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 USD CLO AAA Primary Spread Average since Mar-13 Average since Mar-20 STRATEGIC REVIEW 17 Investment Adviser’s Report (continued) US CLO Market Update (continued) Figure 1.20 – US CLO ETF flows 42 Continued demand for floating-rate instruments and limited net CLO issuance are expected to lead to continued CLO spread tightening in 2025. Should rates remain higher-for-longer in the US, we believe this has the potential to further support CLO spread tightening. Attractive CLO financing rates, along with an active loan market, will be constructive for new-issue CLO equity transactions. European CLO Market Update As CLO spreads tightened over the course of 2024, gross European CLO issuance hit a new record high in 2024. The European CLO market saw gross new issuance of €48bn in 2024, compared to €27bn in 2023. 2024 refinancings and resets totaled €3bn and €31bn (73 deals), compared to €0bn and €2bn (5 deals) in 2023. 41 Nevertheless, a similar trend to the US emerged over the year, as net supply was limited to €23bn. While higher than 2023, this net issuance is below 2021 and 2022. 42 Forecasts for European CLO new issuance in 2025 are in the range of €45-50bn and forecasts for 2025 refi/resets are €35-60bn. 43 Net European CLO issuance is expected to be lower, at €25bn, driven by continued prepayments of CLO debt. 44 41 PitchBook LCD as at 31 December 2024. CLO databank. 42 Bank of America and Fair Oaks Capital as at 31 December 2024. 43 2025 forecasts from YE-24 reports: JP Morgan, Barclays, Citi, BNP Paribas, Bank of America. 44 Deutsche Bank, “EUR CLO 2025 Outlook”, 19 November 24. $0bn $5bn $10bn $15bn $20bn $25bn Sep-20 Feb-21 Jul-21 Dec-21 May-22 Oct-22 Mar-23 Aug-23 Jan-24 Jun-24 Nov-24 STRATEGIC REVIEW 18 Investment Adviser’s Report (continued) European CLO Market Update (continued) Figure 1.21 – European CLO new issue volume 44 Figure 1.22 - European AAA primary spreads (bps) 45 Sustained demand for floating-rate products, minimal idiosyncratic risk, and slower spread compression relative to other credit assets, we expect continued spread tightening in 2025. Supported by an attractive spread and strong fundamentals, such spread tightening should create good opportunities to invest in CLO equity. We believe CLOs are a compelling way to maintain attractive all-in return levels without ongoing rates volatility. 45 JP Morgan as at 31 December 2024. European CLO AAA primary spreads. €0bn €10bn €20bn €30bn €40bn €50bn €60bn 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 50 100 150 200 250 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 EUR CLO AAA Primary Spread Average since Mar-13 Average since Mar-20 STRATEGIC REVIEW 19 Investment Adviser’s Report (continued) Outlook We believe that the Company and the Master Funds are well positioned to generate attractive risk-adjusted returns in 2025: • Stable and attractive dividend yield: current dividend yield of 14.8%. 46 • Low CLO financing rates: will support new CLO equity investments and the optimisation of the capital structure of existing CLO equity investments. • Existing, high-quality portfolio: all CLO equity and debt investments made their scheduled distributions in 2024. • Strong sourcing ability: the Master Funds benefits from strong, long-term relationships with CLO managers, including preferential access to Fair Oaks-managed CLOs. • Strong alignment of interest. Ongoing reinvestment of 25% of quarterly management fees whenever the Company trades at any discount to NAV • Structural advantages: supported by a rigorous valuation policy and fixed life of the Master Funds. We continue to believe that the high-quality portfolio of primarily first-lien, senior secured loans with attractive long-term, non-mark-to-market financing represents one of the most attractive risk-adjusted opportunities available to investors in the current market environment. Fair Oaks Capital Limited 17 April 2025 46 As at 31 December 2024. STRATEGIC REVIEW 20 Strategic Report Risks and uncertainties The Board of Directors is responsible for and has in place a rigorous risk management framework and risk matrix to identify, assess, mitigate, manage, review and monitor those risks. This is all reviewed at least quarterly by the Board and on a more frequent basis by the Investment Adviser. The Directors have carried out a robust assessment of the principal, secondary and emerging risk areas relevant to the performance of the Company including those that would threaten its business model, future performance, solvency and liquidity. The principal risks are detailed below. Throughout the year, due regard has been paid to emerging risks, although during the period changes to the identified risks can be characterised as being evolving in nature rather than new and previously unidentified risks. After considering the risks associated with relevant uncertainties created by emerging risks (including the potential impact on markets and supply chains of changes in US trade policy), the Board believes that the Company and the Master Funds are well placed to manage its business risks successfully. The Board is in regular communication with the Investment Adviser who continues to closely monitor the performance of the respective investments of the Master Funds and update the Company on current and emerging risks. In respect of the Company’s system of internal controls and reviewing its effectiveness, the Directors: • are satisfied that they have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; and • have reviewed the effectiveness of the risk management and internal control systems including material financial, operational and compliance controls (including those relating to the financial reporting process) and no significant failings or weaknesses were identified. The Risk Committee reviews the Company’s overall risks at least four times a year and monitors the risk control activity designed to mitigate these risks. Principal and emerging risks The principal and emerging risks associated with the Company include: Risk/Description Control / Mitigation Investment and financial risk - Market risk -Increased Market risk is the risk of changes in market prices affecting the Company’s income and/or the value of its investments. This is impacted by a variety of factors including macro- economic conditions, increased geo- political risk, increased default rates, higher interest rate spreads, exchange rates, inflation and general market pricing of similar CLO investments which will all effect the Company and its Net Asset Value. This risk cannot be mitigated in full but the impact can be reduced by diversification of the underlying CLO portfolio. The Company’s objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on investments. The Company’s market risk is monitored closely and managed and mitigated as far as possible by the Investment Adviser through active portfolio management and the maintenance of a diversified investment portfolio. STRATEGIC REVIEW 21 Strategic Report (continued) Principal and emerging risks (continued) Risk/Description (continued) Control / Mitigation (continued) The Company’s exposures to market risk mainly comes from movements in the fair value of its investments in the Master Funds and on a look-through basis to the underlying CLO investments Investment and financial risk - Credit risk – Increased Credit risk arises principally from debt securities held. The risk is that underlying CLO investments or financial assets held by the Company default, leading to investment losses, a reduction in cash flows receivable by the Master Funds and a fall in the Company’s NAV. For the Company this is impacted by a variety of factors including deterioration in underlying credit ratings and credit ratings of counterparties and the secondary market for CLO investments maybe less liquid. The Company considers and aggregates all elements of credit risk exposure, such as individual obligation default risk, country risk and sector risk. The Risk Committee formally monitors the investment performance of the Company at least four times a year, including when the Investment Adviser reports on the performance of the Company’s portfolio at the Board meetings. The investment guidelines and restrictions, as detailed in the prospectus of the Company, ensures adequate diversification of the Master Funds’ underlying investments. The Company’s policy on credit risk mirrors that of the Master Funds’, which is to minimise its exposure to counterparties with perceived higher risk of default by dealing only with counterparties that meet the credit standards set out in the Company’s prospectus. The high rates of global inflation in 2022-24 have increased the cost of raw materials and labour for many companies. While most companies have demonstrated a strong ability to pass costs on to their customers, continued high rates of inflation increase the risk of a drop in profit margins and cash flow and an increase in the risk of default. Simultaneously, the sharp increase in USD and Euro interest rates since 2023 has increased the interest cost for borrowers of the loans held by CLOs. Changes in US trade policy will similarly have a cost impact on some companies. This is likely to contribute to an increase in financial distress at borrowers and a resulting increase in the loan default rate. While the valuation and the projected returns of CLO investments always assume some loan defaults, a prolonged period of elevated defaults could have a significant negative impact on the cash flows received from and the valuations of CLO investments held by the Master Funds. The Investment Adviser carries out extensive due diligence on the Master Funds’ underlying CLO investments and monitors credit ratings performance regularly. Credit risk is mitigated as far as possible by the Investment Adviser through active portfolio management and the maintenance of a diversified investment portfolio. The Investment Adviser seeks to achieve this diversification of the portfolio for this risk in terms of underlying assets, industry concentration, geography and maturity profile, please see the Investment Adviser’s Report and Note 5 of the Financial Statements for further details of this diversification. STRATEGIC REVIEW 22 Strategic Report (continued) Principal and emerging risks (continued) Risk/Description (continued) Control / Mitigation (continued) Financial risk – Counterparty risk – Stable Counterparty risk can arise through the Company’s exposure to particular counterparties for executing transactions and the risk that the counterparties will not meet their contractual obligations. Financial risk – Liquidity risk – Stable Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Master Funds’ CLO investments are not publicly traded or freely marketable, and there may be limited or no secondary market liquidity, as a result the realisation of assets to create liquidity in a timely manner maybe difficult. Counterparty exposures are monitored by the Investment Adviser and movements reported regularly to the Board. The Company’s cash management policy ensures cash and cash equivalents are only to be placed with designated institutions that meet the credit standards set out in the Company’s prospectus. In addition, the aggregate amount deposited or invested by the Company with any single bank or other non-government counterparty (including their associates) shall not exceed 20% of the NAV in aggregate, and also of the NAV of each Share class, at the time of investment. The Administrator and Investment Adviser review the Company’s income and cash flow forecasts on a monthly or ad hoc basis as required to ensure, as far as possible, the Company will always have sufficient liquidity to meet its liabilities when due. The Board reviews cash flow forecasts quarterly and ad hoc as required for buy-backs and distributions. Solvency tests are required prior to the Company making any distributions. Compliance and regulatory risk – Stable Compliance and regulatory risk can arise where processes and procedures are not followed correctly or where incorrect judgement causes the Company to be unable to meet its objectives or obligations, exposing the Company to the risk of loss, sanction or action by Shareholders, counterparties or regulators. The Company is required to comply with the Prospectus Rules, the Disclosure Guidance and Transparency Rules and the Market Abuse Directive (as implemented in the UK through Financial Services and Markets Authority). Any failure to comply could lead to criminal or civil proceedings. The Investment Adviser and Administrator monitor compliance with regulatory requirements and the Administrator presents a report at quarterly Board meetings. STRATEGIC REVIEW 23 Strategic Report (continued) Principal and emerging risks (continued) Risk/Description (continued) Control / Mitigation (continued) Environmental, Social and Governance (ESG) risk – Stable Failure of the Company to identify potential future ESG requirements could lead to the Company’s shares being less attractive to investors. Failure to engage with stakeholders and actions arising from activist shareholders. The Investment Adviser has been a signatory to the UN Principles for Responsible Investment (“UN PRI”) since July 2016 and is committed to applying the UN PRI to all stages of its investment criteria. All CLO equity investments completed by the Master Funds since 2019 have included ESG-related investment criteria that prohibit investment in certain industry sectors which are considered to be environmentally or socially harmful. The Board, the Investment Adviser and all other service providers continue to monitor developments in ESG regulatory and reporting requirements and are committed to increasing awareness in credit markets. The Board, Investment Adviser and Joint Brokers are engaging in regular dialogue with the shareholders in order to understand their views or concerns and to better understand their investment goals. Governance of the CLOs in which the Master Funds invest is strictly controlled by detailed provisions in each CLO’s Offering Memorandum and by the appointed CLO trustees. Political and Economic Risk – Increased The risk of a complex mix of political and economic risks, with a growing concern for geopolitical instability and its impact on trade and global cooperation. The Master Funds’ CLO investments do not hold any securities in the Russia/Ukraine region and as such the performance and creditworthiness of the underlying CLOs have not been significantly impacted. Commodity prices due to the invasion of Ukraine (mainly oil/gas, metals and wheat) have impacted some of the companies to which the CLOs have exposure but many companies were already subject to input price inflation before the Ukraine invasion and it is not expected that the additional cost inflation will significantly impact the performance of the CLOs. The current conflict in the Middle East region is unlikely to impact the performance or creditworthiness of the underlying CLOs. The impact of further escalations in the area are continuously monitored by the Board, especially the possible impact on oil prices and supply chain disruptions. STRATEGIC REVIEW 24 Strategic Report (continued) Principal and emerging risks (continued) Risk/Description (continued) Control / Mitigation (continued) Political and Economic Risk – Increased (continued) The imposition of import tariffs by the new US administration is likely to have a negative impact on the profitability of some US loan issuers, which will face higher input costs, and some European loan issuers, who may experience lower export sales to the US. The precise impacts are difficult to assess given the uncertainty over US policy and the complexity of international supply chains. The Investment Adviser continues to carefully monitor the performance of the Master Funds’ investments, working closely with the Directors on emerging risks to the Company. Going Concern The Directors have assessed the financial position of the Company as at 31 December 2024 and the factors that may impact its performance (including the potential impact on markets and supply chains of changes in US trade policy) in the forthcoming year. Changes in US trade policy The imposition of import tariffs by the new US administration is likely to have a negative impact on the profitability of some US loan issuers, which will face higher input costs, and some European loan issuers, who may experience lower export sales to the US. The precise impacts are difficult to assess given the uncertainty over US policy and the complexity of international supply chains. The Company’s Investment Adviser is closely monitoring the situation and its early assessment is that the Master Funds’ portfolios’ exposure to the imposition of US tariffs is relatively limited and thus the impact on the Company’s performance will not be significant. Following due consideration and after a review of the Company’s holdings in cash and cash equivalents, investments and a consideration of the income deriving from, and the viability of, the investment in the Master Funds, the Directors believe that it is appropriate to adopt the going concern basis in preparing the Financial Statements, as the Company has adequate financial resources to meet its liabilities as they fall due. Viability Statement The Directors have conducted a robust assessment of the viability of the Company over a three-year period from the date of signing this report to April 2028, taking account of the Company’s current position and the potential impact of the principal and emerging risks documented above. In making this statement, the Directors have considered the resilience of the Company, taking into account its current position, the principal risks facing the Company in severe but plausible scenarios and the effectiveness of any mitigating actions. This assessment has considered the potential impacts of these risks on the business model, future performance, solvency and liquidity over the period. The Directors have determined that the three-year period to April 2028 is an appropriate period over which to provide its viability statement as this is a reasonable period over which risks relating to the asset class should be considered. STRATEGIC REVIEW 25 Strategic Report (continued) Viability Statement (continued) At 31 December 2024, the Company is primarily invested into the Master Fund III. The Master Fund III has a planned end date of 12 June 2028. The Company is also invested into the Master Fund II which has a planned end date of June 2026. In making their three-year assessment, various factors were taken into consideration by the Directors, which included the Company’s NAV, net income, capital repayments and resulting cash flows and dividend cover over the period. These metrics were subjected to stress tests which involved flexing a number of main assumptions underlying the forecast and default rates significantly higher than the five-year average. Where appropriate, this analysis was carried out to evaluate the potential impact of the Company’s principal risks actually occurring, primarily, severe changes to macro-economic conditions, increased defaults, deterioration in underlying credit ratings and downgrading or illiquidity of non-investment grade loans. Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to April 2028. Management Arrangements Investment Adviser The Directors are responsible for the determination of the Company’s investment policy and have overall responsibility for the Company’s activities. The Company has, however, entered into an Investment Advisory Agreement with the Investment Adviser under which the Investment Adviser has been appointed to provide investment advisory services, which include analysing the progress of all assets and investments of the Company and advising the Company on liquidity and working capital retention issues, subject to the overriding supervision of the Directors. The Directors consider that the interests of shareholders, as a whole, are best served by the continued appointment of the Investment Adviser to achieve the Company’s investment objectives. A summary of these terms, including the investment advisory fee and notice of termination period, is set out in Note 8 of the Financial Statements. Custody Arrangements The Company’s underlying assets in Master Fund II are held in custody by BNP Paribas Securities Services S.C.A., Guernsey Branch, (“BNP”) pursuant to an agreement dated 9 March 2017 and the Company’s underlying assets in Master Fund III are held in custody by U.S. Bank Global Corporate Trust Services, UK Branch (“US Bank”) (together the “Custodians”), pursuant to an agreement dated 26 March 2021. The Company’s underlying assets in the Master Funds are registered in the name of the respective Custodian in each case within a separate account designation and may not be appropriated by the Custodian for its own account. The Board conducts an annual review of the custody arrangements as part of its general internal control review. The Board also monitors the credit rating of the Custodians, to ensure the financial stability of the Custodians are being maintained to acceptable levels. As at 31 December 2024, the credit rating of BNP was A1 as rated by Moody’s (31 December 2023: A2) and A+ by Standard & Poor’s (31 December 2023: A+) and the credit rating of US Bank was A2 (31 December 2023: A2) as rated by Moody’s and A+ (31 December 2023: A+) by Standard & Poor’s. STRATEGIC REVIEW 26 Strategic Report (continued) Management Arrangements (continued) Administrator Administration and Company Secretarial services are provided to the Company by Apex Fund and Corporate Services (Guernsey) Limited (formerly Sanne Fund Services (Guernsey) Limited (the “Administrator”)). The Administrator also provides these services to Master Fund II, Master Fund III, Wollemi and the General Partner to these funds. Other services which the Administrator provides the Company include assisting with the AIFMD, Common Reporting Standard and FATCA reporting. A summary of the terms, including fees, is set out in Note 8 of the Financial Statements. GOVERNANCE 27 Board of Directors The Directors of the Company, all of whom are non-executive and independent, are listed as follows: Richard Burwood (Chair of the Board and Chair of the Management Engagement Committee). Mr. Burwood has over 35 years’ experience in Banking and Investment Management. During 18 years with Citibank London, Mr. Burwood spent 11 years as a fixed income portfolio manager spanning both banks/finance investments and Asset Backed Securities. Mr. Burwood moved to Guernsey in 2010, initially working as a portfolio manager for EFG Financial Products, managing the Treasury department’s Fixed Income portfolio. From 2011 to 2013, Mr. Burwood worked as the Business and Investment Manager for Man Investments, Guernsey. In 2013 Mr. Burwood joined the board of TwentyFour Income Fund Ltd, a company specialising in asset- backed securities, and in 2014 he joined the board of RoundShield Fund, a Guernsey private equity fund, focused on European small to mid- cap opportunities. From 2015 to 2023, Mr. Burwood was a Board Member of Funding Circle SME Income Fund Ltd, which provided investors access to a diversified pool of SME loans originated through Funding Circle’s marketplaces in the UK, US and Europe.Mr. Burwood also serves on the boards of Habrok, a hedge fund specialising in Indian equities, and EFG International Finance, a structured note issuance company based in Guernsey. Richard is a Guernsey resident. Fionnuala Carvill (Chair of the Risk Committee and the Nomination & Remuneration Committee). Ms. Carvill is a Non-Executive Director of Investec Bank (Channel Islands) Limited, Partners Group Private Equity Limited, The Chartered Institute for Securities & Investment Future Foundation and Guernsey Community Foundation. Previous executive positions held include Managing Director of Kleinwort Benson (Channel Islands) Investment Management Limited, Director of Kleinwort Benson (Channel Islands) Limited, Commission Secretary and Head of Innovation at the Guernsey Financial Services Commission, and Director of Rothschild Bank (CI) Limited. She is a former board member of The Chartered Institute for Securities & Investment, a Liveryman of the Worshipful Company of International Bankers, and was granted Freedom of the City of London in 2007. Fionnuala holds a Master’s degree in Corporate Governance (Distinction), is a Chartered Fellow of The Chartered Institute for Securities & Investment; a Fellow of the London Institute of Banking & Finance (Chartered Institute of Bankers); a member of the Institute of Directors; a Fellow of The Chartered Governance Institute and a Chartered Governance Professional. With her charitable directorships she holds roles from fundraising and capacity building to governance and impact assessment. Fionnuala is a Guernsey resident. Katriona (“Trina”) Le Noury (Chair of the Audit Committee). Ms. Le Noury is a qualified chartered accountant with more than 20 years' experience working in the funds industry. She is an Independent Non- Executive Director of JPEL Private Equity Limited and Tufton Assets Limited, both London listed investment companies, as well as Bansk Group GP Limited, the general partner to a Guernsey private investment fund, and two not-for-profit organisations. Before becoming an Independent Non-Executive Director in 2023, Ms. Le Noury held senior management positions at two separate Private Equity firms, including holding directorships on the respective firms' fund General Partner boards. Ms. Le Noury has a first- class honors degree in Mathematics from Aberdeen University, holds a Diploma in Company Direction from the Institute of Directors, and is a Fellow of the Association of Chartered Certified Accountants. Trina is a Guernsey resident. GOVERNANCE 28 Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges The following summarises the Directors’ directorships in other public companies: Company Name Stock Exchange Richard Burwood None Fionnuala Carvill Partners Group Private Equity Limited London Stock Exchange – Main Market Trina Le Noury Tufton Assets Limited JPEL Private Equity Limited London Stock Exchange – SFS London Stock Exchange – Main Market GOVERNANCE 29 Directors' Report The Directors of the Company are pleased to submit their Annual Report and the Audited Financial Statements (the “Financial Statements”) for the year ended 31 December 2024. In the opinion of the Directors, the Annual Report and Audited Financial Statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. The Company The Company was incorporated and registered in Guernsey on 7 March 2014 under the Companies (Guernsey) Law, 2008. The Company’s registration number is 58123 and it is regulated by the Guernsey Financial Services Commission (“GFSC”) as a registered closed-ended collective investment scheme. The Company’s ordinary shares were listed on the Specialist Fund Segment (“SFS”) of the London Stock Exchange (“LSE”) on 12 June 2014. Results and Dividends The results for the year are shown in the Statement of Comprehensive Income on page 55. The Board declared dividends of US$34,391,508 during 2024 (2023: US$35,667,058) followed by an additional dividend declaration of US$8,366,317 on 6 February 2025 in relation to the year ended 31 December 2024 (dividends declared in relation to the year ended 31 December 2023: US$8,651,028). Further details of dividends declared or paid are detailed in Note 4. The Board paid or declared dividends to shareholders representing an amount in aggregate at least equal to the gross income from investments, which are received from the Master Funds in the relevant financial period attributable to the Company’s investment in the Master Funds, and Qualifying Short Term Investments less expenses of the Company. Independent Auditor KPMG Channel Islands Limited were appointed on 12 May 2014 and continued to serve as Auditor during the financial year. A resolution to re-appoint KPMG Channel Islands Limited as Auditor will be put to the forthcoming Annual General Meeting (“AGM”). Directors and Directors’ Interests The Directors, all of whom are independent and non-executive, are listed on page 27. None of the Directors has a service contract with the Company and no such contracts are proposed. Each independent non-executive Director is entitled to a basic fee of £45,000 (31 December 2023: £45,000) each per annum. The Nomination and Remuneration committee recommended an increase of £3,000 in the fee of the Audit Committee Chair which was approved by the Board in January 2024. The Directors had the following interests in the Company at 31 December 2024 and 31 December 2023, held either directly or beneficially: 31 December 2024 31 December 2023 No. of 2021 No. of 2021 Shares Percentage Shares Percentage Name Jon Bridel 47 40,000 0.01% 40,000 0.01% 47 All shares held by a person closely associated to Mr. Bridel. Mr. Bridel resigned from the Board on 31 December 2024. GOVERNANCE 30 Directors' Report (continued) Substantial Shareholdings As at 31 March 2025, being the date of the latest shareholder analysis prior to the publication of these Financial Statements, the following 2021 Shareholders had holdings in excess of 5% of the issued 2021 Share Capital: Name No. of 2021 Shares Percentage of 2021 Shares Vidacos Nominees account #25 71,972,811 17.74% Nortrust Nominees account #1 32,218,310 7.94% Vidacos Nominees account #54 23,922,224 5.89% CGWL Nominees account #1 22,988,338 5.66% There were no significant shareholder changes in the period from 31 March 2025 and the date of signing this report. Related Parties Details of transactions with related parties are disclosed in Note 8 to these Financial Statements. Regulatory Requirements Since being admitted to the SFS on 12 June 2014, the Company has complied with the Prospectus Rules, the Disclosure Guidance and Transparency Rules and the Market Abuse Directive (as implemented in the UK through Financial Services and Markets Authority). Foreign Account Tax Compliance Act The Foreign Account Tax Compliance Act (“FATCA”) became effective on 1 January 2013. The legislation is aimed at determining the ownership of US assets in foreign accounts and improving US tax compliance with respect to those assets. On 13 December 2013, the States of Guernsey entered into an intergovernmental agreement (“IGA”) with US Treasury, in order to facilitate the requirements under FATCA. The Company registered with the Internal Revenue Service (“IRS”) on 21 November 2014 as a Foreign Financial Institution (“FFI”). Common Reporting Standard The Common Reporting Standard (“CRS”), formerly the Standard for Automatic Exchange of Financial Account Information, became effective on 1 January 2016. CRS is an information standard for the automatic exchange of information developed by the Organisation for Economic Co-operation and Development (“OECD”). CRS is a measure to counter tax evasion and it builds upon other information sharing legislation, such as FATCA, the UK- Guernsey IGA for the Automatic Exchange of Information and the European Union Savings Directive, and has superseded the UK-Guernsey Intergovernmental Agreement for the Automatic Exchange of Information with effect from 1 January 2016. Reporting under CRS in Guernsey is completed by the Company on an annual basis. Alternative Investment Fund Managers Directive (“AIFMD”) The Company is categorised as a non-EU Alternative Investment Fund (“AIF”) (as defined in the AIFMD) and the Board of the Company is a non-EU Alternative Investment Fund Manager (“AIFM”) (as defined in the AIFMD) for the purposes of the AIFMD and as such neither it nor the Investment Adviser will be required to seek authorisation under the AIFMD. However, following national transposition of the AIFMD in a given EU member state, the marketing of ordinary shares in AIFs (as defined in the AIFMD) that are established outside the EU (such as the Company) to investors in that EU member state will be prohibited unless certain conditions are met. GOVERNANCE 31 Directors' Report (continued) Alternative Investment Fund Managers Directive (“AIFMD”) (continued) The Directors have appointed the Risk Committee to manage the relevant disclosures to be made to investors and the necessary regulators. On 18 February 2015, the FCA confirmed that the Company was eligible to be marketed via the FCA’s National Private Placement Regime and the Company complied with Article 22 and 23 of the AIFMD for the year ended 31 December 2024. In January 2017, the Company was authorised to market in Sweden, Finland and Luxembourg. As the Board of the Company is the AIFM, the details of the Company’s remuneration policy for the Directors is outlined on page 41 and in accordance with the principles established by AIFMD. Non-Mainstream Pooled Investments The Company’s ordinary shares are considered as “excluded securities” for the purposes of the FCA Rules regarding the definition and promotion of non-mainstream pooled investments (“NMPI”) because the returns to investors holding the Company’s ordinary shares are, and are expected to continue to be, predominantly based on the returns from ordinary shares and debentures held indirectly by the Company. The Board therefore believes that independent financial advisers can recommend the Company’s ordinary shares to retail investors, although financial advisers should seek their own advice on this issue. Reporting Fund Regime The Company was accepted into the UK Reporting Fund regime with effect from 7 March 2014. Under this regime, which effectively replaced the UK Distributor Status regime, an offshore investment fund operates by reference to whether it opts into the reporting regime (“Reporting Funds”) or not (“Non-reporting Funds”). A UK investor who disposes of an interest in a Reporting Fund should be subject to tax on any gains realised as capital gains rather than income. Such investors will also be subject to income tax on the distributions received from the offshore fund and their share of the excess of the offshore fund’s reported income over the distributions made (i.e. they will be subject to income tax on their share of the offshore fund’s income regardless of whether this is distributed or not). Shareholders should seek their own professional advice as to the tax consequences of the UK Reporting Fund regime. Anti-bribery and Corruption The Board acknowledge that the Company’s international operations may give rise to possible claims of bribery and corruption. In consideration of The Bribery Act 2010, enacted in the UK, at the date of this report the Board conducted an assessment of the perceived risks to the Company arising from bribery and corruption to identify aspects of business which may be improved to mitigate such risks. The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to carry out business fairly, honestly and openly. Criminal Finances Act The Board of the Company has a zero tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion. The Board has satisfied itself in relation to its key service providers that they have reasonable provisions in place to prevent the criminal facilitation of tax evasion by their own associated persons and will not work with service providers who do not demonstrate the same zero tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion. GOVERNANCE 32 Directors' Report (continued) UK Modern Slavery Act The Board acknowledges the requirement to provide information about human rights in accordance with the UK Modern Slavery Act. The Board conducts the business of the Company ethically and with integrity, and has a zero tolerance policy towards modern slavery in all its forms. As the Company has no employees, all its Directors are non-executive and all its functions are outsourced, there are no further disclosures to be made in respect of employees and human rights. Employee Engagement & Business Relationships The Company conducts its core activities through third-party service providers and does not have any employees. The Board recognises the benefits of encouraging strong business relationships with its key service providers and seeks to ensure each is committed to the performance of their respective duties to a high standard and, where practicable, that each provider is motivated to adding value within their sphere of activity. Details on the Board’s approach to service provider engagement and performance review are contained in the Management Engagement Committee Report. Whistleblowing The Board has considered the AIC Code recommendations in respect of arrangements by which staff of the Investment Adviser, Custodian or Administrator may, in confidence, raise concerns within their respective organisations about improprieties in matters of financial reporting or other matters. It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken within their organisation. Environmental and Social Policy Over the course of the last decade, renewable energy has grown materially as governments and investors started to realise the need for sustainable energy sources. In 2024, countries worldwide continued to pursue decarbonisation plans and the renewable growth trend is expected to continue going forward as more countries join the Paris Climate Accord which aims to achieve the goal of net-zero carbon emissions by 2050. The Company is a closed-ended investment company which has no employees or offices and therefore its own direct environmental impact is minimal. The Company operates by outsourcing significant parts of its operations to reputable professional companies, who are required to comply with all relevant laws and regulations and take account of social, environmental, ethical and human rights factors, where appropriate. The Board notes that the underlying entities which the CLOs are invested in will have a social and environmental impact over which it has limited control. Europe, however, has seen the emergence of CLOs subject to Environmental, Social and Corporate Governance (“ESG”) investment criteria. The inclusion of ESG language in CLOs has become more prevalent and is likely to develop from sector-based negative screening towards ESG scoring. The Master Funds have been at the forefront of these developments and, as of the end of December 2024, 84.6% of all CLO equity investments in the Master Funds’ portfolio included ESG investment restrictions. These restrictions exclude any underlying collateral debt obligation whose primary business activity is, amongst others, oil, gas or thermal coal extraction, upstream palm oil production, trade in weapons or firearms, hazardous chemicals, pesticides and wastes, ozone-depleting substances, endangered or protected wildlife or wildlife products, tobacco and predatory lending. The Company has no direct greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions-producing sources, including those within its underlying CLOs portfolio. In carrying out its investment activities and in conjunction with suppliers, the Company aims to conduct itself responsibly, ethically and fairly. GOVERNANCE 33 Directors' Report (continued) Environmental and Social Policy (continued) In addition, the Investment Adviser has been a signatory to the UN Principles for Responsible Investment (“UN PRI”) since July 2016 and is committed to applying the UN PRI to all stages of its investment criteria and to increasing awareness in credit markets. EU Sustainable Finance Disclosure Regulation - Article 6 - Sustainability Risk A sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of an investment. The Investment Adviser integrates sustainability risks into its investment decisions in two ways. Firstly, its analysis of the managers of the CLOs in which the Company/Master Funds invest considers any sustainability risks at the manager level that could impact either the effective management of the CLO or the secondary market value of the CLO securities. Secondly, the Investment Adviser considers sustainability risks at the level of the borrowers of the loans in the CLOs’ portfolios. The realisation of sustainability risks at these borrowers could increase the probability of borrowers defaulting on loans held by the CLOs and a consequent erosion of the CLOs’ collateral pools. The Investment Adviser has determined that sustainability risks, while relevant to the Company’s and Master Funds’ portfolio, present an extremely limited risk to the value of its investments. The manager-related sustainability risks are mitigated by the tight controls enforced on CLO managers by the CLO indenture and trustee, the manager replacement provisions in the indenture and the fact that CLO investors are protected by their security over the CLO collateral. The sustainability risks related to the borrowers of loans in the CLO portfolios are mitigated by the diversification of the CLO portfolios and by the analysis undertaken on the loan borrowers by equity investors, lenders and rating agencies. “Sustainability factors” are environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. Due to the current lack of detailed relevant information available from the borrowers of loans in CLO portfolios, the Investment Adviser does not consider the adverse impacts of investment decisions on sustainability factors. The investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities. By order of the Board Richard Burwood Director 17 April 2025 GOVERNANCE 34 Corporate Governance Compliance The Board has taken note of the Code of Corporate Governance issued by the Guernsey Financial Services Commission (“Guernsey Code”). The Guernsey Code provides a governance framework for GFSC licensed entities, authorised and registered collective investment schemes. Companies reporting in compliance with the UK Corporate Governance Code (the “UK Code”) or the Association of Investment Companies Code of Corporate Governance (“AIC Code”), are deemed to satisfy the provisions of the Guernsey Code. The UK Code is available on the Financial Reporting Council website, www.frc.org.uk. As a Guernsey incorporated company and under the SFS Rules for companies, it is not a requirement for the Company to comply with the UK Code. However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have considered the principles and recommendations of the AIC Code. The AIC Code addresses all the principles and provisions set out in the UK Code as well as setting out additional provisions on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and provisions of the AIC Code will provide more relevant information to shareholders. The AIC code is available on the AIC website, www.theaic.co.uk. For the year ended 31 December 2024, the Company complied substantially with the relevant provisions of the AIC Code and it is the intention of the Board that the Company will comply with those provisions throughout the year ending 31 December 2025, with the exception of the provisions listed below: • The appointment of a Senior Independent Director: Given the size and composition of the Board it is not felt necessary to separate the roles of Chair and Senior Independent Director. The Board considers that all the independent Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns can be conveyed. • Internal audit function: The Board has reviewed the need for an internal audit function and due to the size of the Company and the delegation of day-to-day operations to regulated service providers, an internal audit function is not considered necessary. The Directors will continue to monitor the systems of internal controls in place in order to provide assurance that they operate as intended. • The appointment of Executive Directors: Due to the broad range of experience of the Board and given the nature of the Company’s activity and that the majority of Directors are deemed to be independent under the AIC Code, it is not considered necessary to appoint Executive Directors. In January 2024, the Financial Reporting Council published the 2024 UK Corporate Governance Code (“the 2024 Code”). The 2024 Code is applicable to companies with a premium listing on the London Stock Exchange, regardless of where they are incorporated. To comply with elements of the UK Listing Rules these companies must apply the Principles of the 2024 Code and comply with or explain against the Provisions. Following the updates to the 2024 Code, AIC issued its 2024 Code which applies to accounting periods beginning on or after 1 January 2025, with the exception of Provision 34. This provision is applicable for accounting periods beginning on or after 1 January 2026. The Company is currently assessing the impact of revised 2024 Code and AIC Code. Composition and Independence of Directors Mindful of the length of service of the original Board, the Company devised a succession plan. On 27 September 2023, Professor Claudio Albanese stepped down as Chair of the Board and was succeeded by independent non-executive director, Richard Burwood, who was appointed to the Board on the same date. Professor Albanese remained on the Board as an independent non-executive director until his retirement from the Board in December 2023. GOVERNANCE 35 Corporate Governance (continued) Composition and Independence of Directors (continued) On 22 April 2024, the Board were pleased to announce the appointment of Trina Le Noury as a non-executive Director of the Company. Ms. Le Noury replaced Mr. Bridel as the new Chair of the Audit Committee on 1 January 2025, upon Mr. Bridel’s resignation. Mr. Bridel served on the Board since its inception in 2014 and has provided effective independent judgment on issues of strategy, performance, resources and conduct. Appointment process: The Directors appointment process involved identifying gaps and needs in the Board’s composition and then reviewing the skill set of potential candidates with a view to making an appointment that fills the identified gaps and needs. Following this process, the Board formally appointed Richard Burwood in 2023. The Board engaged OSA Recruitment (“OSA”), an independent search consultancy with no connection to the Company or its Directors, to assist with the above appointment. During the year OSA was engaged to conduct the search then presented a short list of potential candidates to join the Board and take on the role of Audit Committee Chair. In addition, the Board had suggested some potential candidates for OSA to include to their long list. The result of the search produced a final shortlist of three candidates, which included Ms. Le Noury. All of the serving members of the Board reviewed the curriculum vitae for each of the candidates and met them as part of the formal interview process. As at 31 December 2024, the Board of Directors comprised three non-executive and independent Directors as set out below. The Company has no executive Directors or any employees. The biographies of the Board are disclosed on page 27. Richard Burwood is the Chair of the Board and the Management Engagement Committee. Trina Le Noury is the Chair of the Audit Committee. Fionnuala Carvill is the Chair of the Risk Committee and the Nomination and Remuneration Committee. In considering the independence of the Chair, the Board has taken note of the provisions of the AIC Code relating to independence and has determined that Mr. Burwood is an Independent Director. As Chair, Mr. Burwood is responsible for the leadership of the Board and ensuring effectiveness in all aspects of its role. Under the terms of their appointment, all non-executive Directors are subject to re-election annually at the AGM. At the Annual General Meeting of the Company, due to take place on 5 June 2025, shareholders will be asked to re-elect all the Directors of the Company. At the Company’s last Annual General Meeting, which was held on 5 June 2024, no substantial number of votes were cast against any resolutions. The most noticeable resolution was the issue of a further 38.2 million 2021 Shares, of which 9 percent voted against it. The Directors are kept up to date on various matters such as Corporate Governance issues through bulletins and training materials provided from time to time by the Company Secretary, the AIC and other professional bodies. The Board receives quarterly reports from the Company's advisers and meets at least quarterly to review the overall business of the Company and to consider matters specifically reserved for its disposal. At these meetings the Board monitors the investment performance of the Company. The Directors also review the Company’s activities every quarter to ensure that they adhere to the Company’s investment policy. Additional ad hoc reports are received as required and Directors have access at all times to the adv ice and services of the Company Secretary, who is responsible for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with. GOVERNANCE 36 Corporate Governance (continued) Board Diversity At 31 December 2024, the Board of Directors of the Company comprises one male director and two female directors. The Board is committed to diversity and is supportive of increased gender and ethnic diversity. During 2022, Fionnuala Carvill was appointed as the Company’s first female Director, Trina Le Noury was then appointed as the second female Director during the year under review. Going forward the Board will ensure there is an equal balance of gender in candidates for considered and the Company will also consider industry best practice and recognised guidance including the requirements on listed companies arising from the Hampton Alexander review and the Parker Review. The Nomination and Remuneration Committee regularly reviews the structure, size and composition of the Board, taking into account the challenges and opportunities facing the Company. The Board is also committed to appointing the most appropriate available candidates taking into account the skills and attributes of both existing members and potential new recruits and thereby the balance of skills, experience and approach of the Board as a whole which will lead to optimal Board effectiveness. In considering future candidates, appointments will be based on merit as a primary consideration, with the aim of bringing an appropriate range of the specific skills, experience, independence, and knowledge needed to ensure a rounded Board and the diversity benefits each candidate can bring to the overall Board composition. As at 31 December 2024, the Company did meet the targets specified in the Listing Rules 9.8.6R(9)(a)(i) with the Board comprising over 40 percent women as currently two out of the three Directors on the Board are women. All board appointments are based on merit and objective criteria, taking into account the benefits of diversity. It is however the Board's intention to continue to meet the target specified in Listing Rule 9.8.6R(9)(a)(i) as the Board is refreshed over time. The Company is externally managed and does not have executive functions, specifically it does not have a CEO or CFO. The Company considers the role of Chairs of the permanent sub-committees, being Audit Committee, Risk Committee, Nomination and Remuneration Committee and Management Engagement Committee, to be senior positions and of these senior roles three are performed by a woman. Directors’ Performance Evaluation The Board has established an informal system for the evaluation of its own performance and that of the Company’s individual Directors. It considers this to be appropriate having regard to the non-executive role of the Directors and the significant outsourcing of services by the Company to external providers. The Directors undertake, on an annual basis by means of an internal questionnaire, an assessment of the effectiveness of the Board, particularly in relation to its oversight and monitoring of the performance of the Investment Adviser and other key service providers. The evaluations consider the balance of skills, experience, independence and knowledge of the Company. The Board also evaluates the effectiveness of each of the Directors. The Company Secretary collates the results of the questionnaires and the consolidated results are reviewed by the Board as a whole. In respect of the AGM, which will be held in June 2025, the Board is of the view that each Director seeking re- election should be elected given their extensive knowledge of international financial markets, funds and risk management. This experience is evidenced within the biographies of the Board as disclosed on page 27. Collectively, the blend of skillsets demonstrates the importance of the contribution of each Director and why they should each be re-elected at the forthcoming AGM. The Chair also has responsibility for assessing the individual Board members’ training and development requirements. GOVERNANCE 37 Corporate Governance (continued) Directors’ Remuneration With effect from 27 August 2015, it is the responsibility of the Nomination and Remuneration Committee to determine and approve the Directors’ remuneration, having regard to the level of fees payable to non-executive Directors in the industry generally, the role that individual Directors fulfil in respect of Board and Committee responsibilities and the time committed to the Company’s affairs. The Chair’s remuneration is decided separately and is approved by the Board as a whole. No Director has a service contract with the Company and details of the Directors’ remuneration can be found in the Directors’ Remuneration Report on page 41. Directors’ and Officers’ Liability Insurance The Company maintains Directors’ and Officers’ liability insurance on behalf of the Directors in relation to the performance of their duties as Directors. Relations with Shareholders The Company reports to shareholders twice a year by way of the Interim Report and Unaudited Condensed Financial Statements and the Annual Report and Audited Financial Statements. In addition, NAVs are published monthly and the Investment Adviser publishes monthly reports to shareholders on its website www.fairoaksincome.com. The Board receives quarterly reports on the shareholder profile of the Company and regular contact with major shareholders is undertaken by the Company’s corporate brokers and the executives of the Investment Adviser. Any issues raised by major shareholders are reported to the Board on a regular basis. The Chair and individual Directors are willing to meet shareholders to discuss any particular items of concern regarding the performance of the Company. Members of the Board, including the Chair and the Audit Committee Chair, and the Investment Adviser are also available to answer any questions which may be raised by any shareholder at the Company’s Annual General Meeting. Stakeholders and Section 172 Whilst directly applicable to UK domiciled companies, the intention of the AIC Code is that matters set out in section 172 of the Companies Act, 2006 (“s172 of the Companies Act”) are reported. The Board considers the view of the Company’s other key stakeholders as part of its discussions and decision making process. As an investment company, the Company does not have any employees and conducts its core activities through third- party service providers. Each provider has an established track record and, through regulatory oversight and control, are required to have in place suitable policies to ensure they maintain high standards of business conduct, treat customers fairly, and employ corporate governance best practice. The Board’s commitment to maintaining the high-standards of corporate governance recommended in the AIC Code, combined with the directors’ duties incorporated into the Companies (Guernsey) Law, 2008, the constitutive documents, the Disclosure Guidance and Transparency Rules, and Market Abuse Regulation, ensures that shareholders are provided with frequent and comprehensive information concerning the Company and its activities. Whilst the primary duty of the Directors is owed to the Company as a whole, the Board considers as part of its decision making process the interests of all stakeholders. Particular consideration is given to the continued alignment between the activities of the Company and those that contribute to delivering the Board’s strategy, which include the Investment Adviser and Administrator. The Board respects and welcomes the views of all stakeholders. Any queries or areas of concern regarding the Company’s operations can be raised with the Secretary. GOVERNANCE 38 Corporate Governance (continued) Directors’ Meetings and Attendance The following table shows the attendance at Board and Committee meetings during the year. There were four quarterly Board meetings, four Audit Committee meetings, four Risk Committee meetings, two Nomination & Remuneration Committee meetings, and four Management Engagement Committee meetings were held during the year. Board Audit Committee Risk Committee Management Engagement Nomination & Remuneration Committee Number of meetings held Richard Burwood 4/4 4/4 4/4 4/4 2/2 Trina Le Noury (appointed to the Board 22 April 2024) 3/4 2/4 3/4 2/4 1/2 Fionnuala Carvill 4/4 4/4 4/4 4/4 2/2 Jon Bridel 4/4 4/4 4/4 4/4 2/2 The Chair is responsible for ensuring the Directors receive complete information in a timely manner concerning all matters which require consideration by the Board. Through the Board’s ongoing programme of shareholder engagement and the reports produced by each key service provider, the Directors are satisfied that sufficient information is provided so as to ensure the matters set out in s172 of the Companies Act are taken into consideration as part of the Board’s decision-making process. Board Committees Audit Committee The Audit Committee met four times during the year. It comprises the entire Board and was chaired by Jon Bridel. Mr. Bridel resigned as Chair of the Audit Committee and Trina Le Noury succeeded him on 1 January 2025. The key objectives of the Audit Committee include a review of the Financial Statements to ensure they are prepared to a high standard and comply with all relevant legislation and guidelines, where appropriate, and to maintain an effective relationship with the Auditor. With respect to the Auditor, the Audit Committee’s role will include the assessment of their independence, review of the Auditor’s engagement letter, remuneration, performance and any non-audit services provided by the Auditor. For the principal duties and report of the Audit Committee please refer to the Audit Committee Report on page 42. Risk Committee The Risk Committee met four times during the year. It comprises the entire Board and is chaired by Fionnuala Carvill. The principal function of the Risk Committee is to identify, assess, monitor and, where possible, oversee the management of risks to which the Company’s investments are exposed, principally to enable the Company to achieve its target investment objective of a total return of 12% to 14% per annum over the planned life of the Company, with regular reporting to the Board. As the Company is an internally managed non-EU AIFM for the purposes of AIFMD, the Directors have appointed the Risk Committee to manage the additional risks faced by the Company as well as the relevant disclosures to be made to investors and the necessary regulators. On 18 February 2015, the FCA confirmed that the Company was eligible to be marketed via the FCA’s National Private Placement Regime and the Company complied with Articles 22 and 23 of the AIFMD for the year ended 31 December 2024. In January 2017, the Company was authorised to market in Sweden, Finland and Luxembourg. GOVERNANCE 39 Corporate Governance (continued) Board Committees (continued) Management Engagement Committee The Management Engagement Committee (“MEC”) met four times during the year. It comprises the entire Board and is chaired by Richard Burwood. The MEC is responsible for the regular review of the terms of the Investment Advisory Agreement and the performance of the Administrator and the Investment Adviser and also the Company’s other service providers. For the principal duties of the MEC, please refer to the Management Engagement Committee Report on page 46. Nomination and Remuneration Committee The Nomination and Remuneration Committee met twice during the year. It comprises the entire Board and is chaired by Fionnuala Carvill. The Nomination and Remuneration Committee is responsible for reviewing the structure, size and composition of the Board, to consider the succession planning for directors, reviewing the leadership needs of the organisation, identifying candidates for appointment to the Board, agreeing a framework for Director remuneration, ensuring management of the Company are appropriately incentivised to enhance performance and reviewing the appropriateness of the remuneration policy on an ongoing basis. In order to identify appropriate candidates for appointment to the Board, the Nomination and Remuneration Committee will appoint an independent consultant. Internal Control Review and Risk Management System The Board of Directors is responsible for putting in place a system of internal controls relevant to the Company and for reviewing the effectiveness of those systems. The review of internal controls is an ongoing process for identifying and evaluating the risks faced by the Company, and which are designed to manage risks rather than eliminate the risk of failure to achieve the Company’s objectives. It is the responsibility of the Board to undertake risk assessment and review of the internal controls in the context of the Company’s objectives that cover business strategy, operational, compliance and financial risks facing the Company. These internal controls are implemented by the Company’s three main service providers: the Investment Adviser, the Administrator and the Custodian. The Board receives periodic updates from these main service providers at the quarterly Board meetings of the Company. The Board is satisfied that each service provider has effective controls in place to control the risks associated with the services that they are contracted to provide to the Company and are therefore satisfied with the internal controls of the Company. The Board considers the arrangements for the provision of Investment Advisory, Administration and Custody services to the Company on an ongoing basis and a formal review is conducted annually. As part of this review the Board considered the quality of the personnel assigned to handle the Company’s affairs, the investment process and the results achieved to date. GOVERNANCE 40 Statement of Directors' Responsibilities The Directors are responsible for preparing the Directors’ Report and Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the Companies (Guernsey) Law, 2008 which give a true and fair view of the state of affairs of the Company and its profit or loss for that period. In preparing the Financial Statements the Directors are required to: • select suitable accounting policies and apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; • assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors are also responsible for the keeping of proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies (Guernsey) Law, 2008 and the Listing Rules of the SFS of the London Stock Exchange. They are also responsible for the system of internal controls, safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that they have complied with these requirements in preparing the Financial Statements. The Directors are also responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom and Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. So far as the Directors are aware, there is no relevant audit information of which the Company’s auditor is unaware, having taken all the steps the Directors ought to have taken to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Responsibility Statement Each of the Directors, who are listed on page 27, confirms to the best of their knowledge and belief: • the Financial Statements, prepared in accordance with IFRS as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.1.12R; • the Management Report (comprising the Chair’s Statement, the Investment Adviser’s Report, the Directors’ Report, the Strategic Report and other Committee Reports) includes a fair review of the development and performance of the business during the year, and the position of the Company at the end of the year, together with a description of the principal risks and uncertainties that the Company faces, as required by DTR 4.1.8R and DTR 4.1.9R; and • the Annual Report, comprising the Financial Statements, Strategic Review and Governance report, taken as a whole, is fair, balanced and understandable. Signed on behalf of the Board by: Richard Burwood Director 17 April 2025 GOVERNANCE 41 Directors' Remuneration Report The Company’s policy in regard to Directors’ remuneration is to ensure that remuneration is competitive, aligned with shareholder interests, relatively simple and transparent, and compatible with the aim of attracting, recruiting and retaining suitably qualified and experienced directors. No element of the Directors’ remuneration is performance related, nor does any Director have any entitlement to pensions, share options or any long term incentive plans from the Company. The Company’s Articles limit the fees payable to Directors in aggregate to US$400,000 per annum. The Directors have received the following remuneration during the year in the form of Directors’ fees: 31 December 2024 31 December 2023 Per Annum Actual Actual £ £ £ Richard Burwood 1 45,000 45,000 11,835 Jon Bridel 2 48,000 48,000 45,000 Fionnuala Carvill 45,000 45,000 45,000 Trina Le Noury 3 48,000 31,107 - Professor Claudio Albanese 4 45,000 - 45,052 169,107 146,887 1 Appointed to the Board as Chair on 27 November 2023. 2 Resigned from the Board on 31 December 2024. 3 Appointed to the Board on 22 April 2024. 4 Resigned from the Board on 31 December 2023. For the year ended 31 December 2024, each Director is entitled to a fee of £45,000 per annum (31 December 2023: £45,000 per annum). During 2024 the Nomination and Remuneration Committee recommended a £3,000 increase in the Audit Committee Chair remuneration. This was approved by the Board in January 2024. Directors’ and Officers’ liability insurance cover is maintained by the Company on behalf of the Directors. The Directors were appointed as non-executive Directors by letters issued on their respective appointments. Each Director’s appointment letter provides that, upon the termination of their appointment, they must resign in writing. The Directors’ appointments can be terminated in accordance with the Articles and without compensation. The notice period for the removal of Directors is three months as specified in the Director’s appointment letter. The Articles provide that the office of director shall be terminated by, among other things: (a) written resignation; (b) unauthorised absences from Board meetings for six months or more; (c) unanimous written request of the other Directors; or (d) an ordinary resolution of the Company. The amounts payable to Directors as at 31 December 2024 and 31 December 2023, shown in Note 8 to the Financial Statements, related to services as non-executive Directors. No Director has a service contract with the Company, nor are any such contracts proposed. Richard Burwood Director 17 April 2025 GOVERNANCE 42 Audit Committee Report The Company has established an Audit Committee with formally delegated duties and responsibilities within written terms of reference (which are available from the Company’s website). Chair and Membership The Committee comprises the entire Board and is chaired by Trina Le Noury who took over chairmanship from Mr. Bridel who retired on 31 December 2024. Only independent Directors serve on the Audit Committee and members of the Audit Committee have no links with the Company’s Auditor and are independent of the Investment Adviser. The membership of the Audit Committee and its terms of reference are kept under review. The relevant qualifications and experience of each member of the Audit Committee is detailed on page 27 of these Financial Statements. The Audit Committee’s intention is to meet at least three times a year in any full year and it meets the Auditor during those meetings. Duties The Audit Committee’s main role and responsibilities are to provide advice to the Board on whether the Annual Report and Audited Financial Statements, taken as a whole, are fair, balanced and understandable and alongside the Interim Report and Unaudited Condensed Financial Statements, provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. The Audit Committee gives full consideration and recommendation to the Board for the approval of the contents of the Interim and Annual Financial Statements of the Company, which includes reviewing the Auditor’s report. The other principal duties include to consider the appointment of the Auditor, to discuss and agree with the Auditor the nature and scope of the audit, to keep under review the scope, results and effectiveness of the audit and the independence and objectivity of the Auditor, to review the Auditor’s letter of engagement, the Auditor’s planning report for the financial year and management letter and to analyse the key procedures adopted by the Company’s service providers. The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of the Company’s internal control and risk management systems as they relate to the financial reporting process. The Audit Committee also focuses particularly on compliance with legal requirements, accounting standards and the relevant Listing Rules and ensuring that an effective system of internal financial and non-financial controls is maintained. The Audit Committee also reviews, considers and, if thought appropriate, recommends for the purposes of the Company’s Financial Statements valuations prepared by the Investment Adviser. These valuations are the most critical element in the Company’s Financial Statements and the Audit Committee questions them carefully. Financial Reporting and Significant Risk The Audit Committee has an active involvement and oversight in the preparation of both the Interim Report and Unaudited Condensed Financial Statements and the Annual Report and Audited Financial Statements and in doing so is responsible for the identification and monitoring of the principal risks associated with the preparation of the Financial Statements. After discussion with the Investment Adviser and KPMG Channel Islands Limited (“KPMG”), the Audit Committee determined that the key risk of material misstatement of the Company’s Financial Statements related to the valuation of investments. • Valuation of Master Fund III – The Company’s investment in the Master Fund III had a fair value of US$193,511,462 as at 31 December 2024 and represents substantially all the net assets of the Company and as such is the biggest factor in relation to the accuracy of the Financial Statements. This investment is valued in accordance with the Accounting Policies set out in Note 2 to the Financial Statements. The Financial Statements of the Master Fund III for the year ended 31 December 2024 were audited by KPMG who issued an unmodified audit opinion dated 17 April 2025. GOVERNANCE 43 Audit Committee Report (continued) Financial Reporting and Significant Risk (continued) The Audit Committee has reviewed the Audited Financial Statements of the Master Fund III and the accounting policies and determined the Company’s fair value of the investment in the Master Fund III as at 31 December 2024 to be reasonable. • Valuation of Master Fund II – The Company’s direct investment in the Master Fund II had a fair value of US$23,961,902 as at 31 December 2024. This investment is valued in accordance with the Accounting Policies set out in Note 2 to the Financial Statements. The Financial Statements of the Master Fund II for the year ended 31 December 2024 were audited by KPMG who issued an unmodified audit opinion dated 17 April 2025. The Audit Committee has reviewed the Audited Financial Statements of the Master Fund II and the accounting policies and determined the Company’s fair value of the investment in the Master Fund II as at 31 December 2024 to be reasonable. Financial Reporting and Audit The Audit Committee reviews the Company’s accounting policies applied in the preparation of its Annual Financial Statements together with the relevant critical judgements, estimates and assumptions and, upon taking the appropriate advice from the Auditor, determined that these were in compliance with IFRS, as issued by the IASB and were reasonable. The Audit Committee reviewed the materiality levels applied by the Auditor to the Financial Statements as a whole and was satisfied that materiality levels were appropriate. The Auditor reports to the Audit Committee all material corrected and uncorrected differences. The Auditor explained the results of their audit and that on the basis of their audit work, there were no uncorrected differences proposed that were material in the context of the Financial Statements as a whole. The Audit Committee also reviews the Company’s financial reports as a whole to ensure that such reports appropriately describe the Company’s activities and to ensure that all statements contained in such reports are consistent with the Company’s financial results and projections. Accordingly, the Audit Committee was able to advise the Board that the Annual Report and Audited Financial Statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. External Auditor The Audit Committee has responsibility for making a recommendation on the appointment, re-appointment and removal of the Auditor. KPMG was appointed as the first Auditor of the Company in 2014. During the year, the Audit Committee received and reviewed the audit plan and strategy from KPMG. It is standard practice for the Auditor to meet privately with the Audit Committee without the Investment Adviser being present at each Audit Committee meeting. The board has undertaken a review of KPMG as auditors and do not feel it necessary to put the audit out to tender at this stage. To assess the effectiveness of the Auditor, the Audit Committee will review: • The Auditor’s fulfilment of the agreed audit plan and variations from it; • The Auditor’s assessment of its objectivity and independence as auditor of the Company; • The Audit Committee Report from the Auditor highlighting the major issues that arose during the course of the audit; and • Feedback from the Investment Adviser and Administrator evaluating the performance of the audit team. Where non-audit services are to be provided to the Company by the Auditor, full consideration of the financial and other implications on the independence of the auditor arising from any such engagement will be considered before proceeding. All non-audit services are pre-approved by the Audit Committee after it is satisfied that relevant safeguards are in place to protect the auditors’ objectivity and independence. GOVERNANCE 44 Audit Committee Report (continued) External Auditor (continued) To fulfil its responsibility regarding the independence of the Auditors, the Audit Committee considered: • a report from the Auditor describing its arrangements to identify, report and manage any conflicts of interest; and • the extent of non-audit services provided by the Auditor. During the year ended 31 December 2024, KPMG provided non-audit and audit services as listed below. KPMG confirmed that the non-audit services provided during the year had not impacted on their independence and outlined the reasons for this. In addition, KPMG directors are subject to periodic rotation of assignments on audit clients under applicable laws, regulations and independence rules. Their rotation policies comply with the FRC Revised Ethical Standard 2019 and Revised Ethical Standards 2024 effective from 15 December 2024,which states that the engagement director should be rotated after serving in this capacity for the relevant period of no longer than five years. This rotation policy is continually monitored. Steven Stormonth was first appointed as the audit engagement director for the year ended 31 December 2019 audit so stepped down after the 2023 audit and was succeeded by Fiona Babbe. The following table summarises the remuneration payable to KPMG and to other KPMG International member firms for audit and non-audit services during the year ended 31 December 2024 and 31 December 2023, translated into the presentation currency at the exchange rate prevailing at 31 December 2024 and 31 December 2023, respectively. 31 December 2024 31 December 2023 KPMG Channel Islands Limited US$ US$ – Annual Audit of the Company and related entities * 440,151 431,450 – Interim review 58,616 56,686 Other KPMG International member firms – Agreed upon procedures – Fair Oaks CLOs - - * Increase in audit fees are due to inflationary increases and the effect of foreign exchange Internal Controls As the Company’s investment objective is to invest all of its assets into the Master Funds, the Audit Committee, after consultation with the Investment Adviser and Auditor, considers the key risk of misstatement in its Financial Statements to be the valuation of its investments in the Master Funds, but is also mindful of the risk of the override of controls by its two main service providers: the Investment Adviser and the Administrator. The Investment Adviser and the Administrator together maintain a system of internal control on which they report to the Board. The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Investment Adviser and Administrator provide sufficient assurance that a sound system of risk management and internal control, which safeguards shareholders’ investment and the Company’s assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary. The Audit Committee is responsible for reviewing and monitoring the effectiveness of the internal financial control systems and risk management systems on which the Company is reliant. These systems are designed to ensure proper accounting records are maintained, that the financial information on which the business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. Such a system of internal financial controls can only provide reasonable and not absolute assurance against misstatement or loss. GOVERNANCE 45 Audit Committee Report (continued) Internal Controls (continued) In accordance with the guidance published in the ‘Turnbull Report’ by the FRC, the Audit Committee has reviewed the Company’s internal control procedures. These internal controls are implemented by the Investment Adviser and the Administrator. The Audit Committee has performed reviews of the internal financial control systems and risk management systems during the year. The Audit Committee is satisfied with the internal financial control systems of the Company. On behalf of the Audit Committee Trina Le Noury Audit Committee Chair 17 April 2025 GOVERNANCE 46 Management Engagement Committee Report The Company has established a Management Engagement Committee (“MEC”) with formally delegated duties and responsibilities within the written terms of reference (which are available from the Company’s website www.fairoaksincome.com). Chair and Membership The MEC meets at least once a year. It comprises the entire Board and is chaired by Richard Burwood who took over chairmanship from Claudio Albanese who retired on 31 December 2023. Only independent Directors serve on the MEC and members of the MEC have no links with the Investment Adviser or any other service provider. The MEC is responsible for the regular review of the terms of the Investment Advisory Agreement and the performance of the Administrator and the Investment Adviser and also the Company’s other service providers. The membership of the MEC and its terms of reference are kept under review. Key Objectives To review performance of all service providers (including the Investment Adviser). Responsibilities • To annually review the performance, relationships and contractual terms of all service providers (including the Investment Adviser); • To review the terms of the Investment Advisory Agreement from time to time to ensure that the terms thereof conform with market and industry practice and remain in the best interests of Shareholders and make recommendations to the Board on any variation to the terms of the Investment Advisory Agreement which it considers necessary or desirable; • To recommend to the Board whether the continuing appointment of the Adviser is in the best interests of the Company and Shareholders, and the reasons for this recommendation; • To monitor compliance by providers of other services to the Company with the terms of their respective agreements from time to time; • To review and consider the appointment and remuneration of providers of services to the Company; and • To consider any points of conflict which may arise between the providers of services to the Company. MEC Meetings Only members of the MEC and the Company Secretary have the right to attend MEC meetings. However, representatives of the General Partner, Investment Adviser and other service providers may be invited by the MEC to attend meetings as and when appropriate. Main Activities during the year The MEC reviewed the performance, relationships and contractual terms of all service providers during the year. Furthermore, the MEC reviewed the approaches to GDPR, Criminal Justice Act, Anti-bribery, cyber security, ESG, discrimination and diversity & equality, amongst other matters, by its service providers. Continued Appointment of the Investment Adviser and other Service Providers The Board continually evaluates the Investment Adviser and other service providers, it reviews investment performance at each Board meeting and a formal review of all service providers is conducted annually by the MEC. The annual third-party service provider review process includes two-way feedback, which provides the Board with an opportunity to understand the views, experiences and any significant issues encountered by service providers during the year. GOVERNANCE 47 Management Engagement Committee Report (continued) Continued Appointment of the Investment Adviser and other Service Providers (continued) As part of the Board’s annual performance evaluation, feedback is received on the quality of service and the effectiveness of the working relationships with each of the Company’s key service providers. Richard Burwood Management Engagement Committee Chair 17 April 2025 48 Independent Auditor's Report to the Members of Fair Oaks Income Limited Our opinion is unmodified We have audited the financial statements of Fair Oaks Income Limited (the “Company”), which comprise the statement of financial position as at 31 December 2024, the statements of comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and notes, comprising material accounting policies and other explanatory information. In our opinion, the accompanying financial statements: • give a true and fair view of the financial position of the Company as at 31 December 2024, and of the Company’s financial performance and cash flows for the year then ended; • are prepared in accordance with International Financial Reporting Standards; and • comply with the Companies (Guernsey) Law, 2008. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Key Audit Matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2023): The risk Our response Financial assets at fair value through profit or loss (“Investments”) US$217.47 million; (2023 US$220.47 million) Refer to pages 42 to 45 (Audit Committee Report), note 2 (Material Accounting Policies), note 3 (Use of Judgements and Estimates) and note 6 (Financial Assets at Fair Value Through Profit or Loss) Valuation of investments: Basis: The Company holds investments in FOIF II LP (“Master Fund II”) and FOMC III LP (“Master Fund III”) (together the “Master Funds”) which are designated at fair value through profit or loss and represents 92.25% of the Company’s net assets. Our audit procedures included: Control evaluation: We assessed the design and implementation of the control over the valuation of the Company’s Investments. 49 The fair value of the Company’s investment in the Master Funds reflects the Company’s proportionate share of the Master Funds’ net asset value. Master Fund III’s net asset value reflects its proportionate share of Master Fund II’s and Wollemi Investments I LP’s (“Wollemi”) net asset value and its own investment portfolio comprising Mezzanine and Equity Collateralised Loan Obligation positions (“CLO’s”). Master Fund II’s net asset value incorporates the fair value of its own investment portfolio which comprises: Mezzanine and Equity CLO’s and a proportionate share of the net asset value of Wollemi. Wollemi is also invested principally into a portfolio of Equity CLO positions. The fair value of 52% of the CLO’s held by the Master Funds and Wollemi are determined using indicative prices (“Price Quotes”) obtained from the independent third party valuation provider (the “Valuation Agent”) or other third party market sources. 48% of the fair value of CLO’s held by the Master Funds and Wollemi are determined by the Investment Adviser using internally generated models. Risk: The valuation of the Company’s Investments is considered a significant area of our audit, given that it represents the majority of the net assets of the Company. Inherent in that valuation is the use of significant estimates and judgements in determining the Challenging the Company’s investment valuations, including the use of our KPMG valuation specialist, we: • Assessed the objectivity, capability and competence of the Valuation Agent engaged by the Master Funds and Wollemi to provide Price Quotes; • Held discussions with the Investment Adviser to understand and assess the appropriateness of the valuation methodologies applied; • For the investments valued using the proportionate share of net asset value we: — assessed whether the net asset values were representative of their fair values; — recalculated the proportionate share of the net asset values; — agreed the fair value to a net asset value statement received from that fund’s administrator; — obtained the coterminous audited financial statements and agreed the audited net asset value to the net asset value statement; and — considered the basis of preparation of the audited financial statements, together with accounting policies applied and whether the audit opinion was unmodified. • Independently obtained the Valuation Agent’s pricing reports and agreed the Price Quotes provided by the Valuation Agent to those used in the Valuation of the CLOs held by the Master Funds and Wollemi; and 50 fair value of the underlying CLOs. •For 100% of the CLO positions held by the Master Funds and Wollemi, with the support of our KPMG valuation specialist, we determined independent reference prices either by obtaining relevant and reliable prices from external pricing sources where available, or through the use of fundamental cash flow modelling sourcing key inputs and assumptions used, such as default rates, prepayment rates, recovery rates and lag using historical information or market reports on the future development of these parameters and agreed the outcome to the prices used in the valuation of these CLOs. Assessing disclosures: We also considered the Company’s disclosures in relation to use of estimates and judgements in determining the fair value of Investments (Note 3), the Company’s Investment valuation policies (Note 2) and fair value disclosures (Note 6) for compliance with IFRS. Our application of materiality and an overview of the scope of our audit Materiality for the financial statements as a whole was set at $4.8 million, determined with reference to a benchmark of net assets of $235.7 million of which it represents approximately 2% (2023: 2%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2023: 75%) of materiality for the financial statements as a whole, which equates to $3.6 million. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding $240,000, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. 51 Independent Auditor's Report to the Members of Fair Oaks Income Limited (continued) Going concern The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period"). In our evaluation of the directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Company's financial resources or ability to continue operations over this period were: • Availability of capital to meet operating costs and other financial commitments; and • The recoverability of financial assets subject to credit risk. We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Company’s financial forecasts. We considered whether the going concern disclosure in note 2 to the financial statements gives a full and accurate description of the directors' assessment of going concern. Our conclusions based on this work: • we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and • we found the going concern disclosure in the notes to the financial statements to be acceptable. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation. Fraud and breaches of laws and regulations – ability to detect To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • enquiring of management as to the Company’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud; • reading minutes of meetings of those charged with governance; and • using analytical procedures to identify any unusual or unexpected relationships. As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks. 52 Independent Auditor's Report to the Members of Fair Oaks Income Limited (continued) Fraud and breaches of laws and regulations – ability to detect (continued) We performed procedures including • Identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; and • incorporating an element of unpredictability in our audit procedures. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company’s ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify noncompliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non- compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. 53 Independent Auditor's Report to the Members of Fair Oaks Income Limited (continued) Other information The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. We have nothing to report on other matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: • the Company has not kept proper accounting records; or • the financial statements are not in agreement with the accounting records; or • we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 40, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 54 Independent Auditor's Report to the Members of Fair Oaks Income Limited (continued) The purpose of this report and restrictions on its use by persons other than the Company’s members, as a body This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Fiona Babbe For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognised Auditors Guernsey 17 April 2025 FINANCIAL STATEMENTS 55 Statement of Comprehensive Income For the year ended 31 December 2024 1 January 2024 to 31 December 2024 1 January 2023 to 31 December 2023 Notes US$ US$ Revenue Net gains on financial assets at fair value through profit or loss 6 33,989,272 30,987,658 Interest income 7 732,373 1,117,468 Net foreign exchange gains 24,877 28,708 Total revenue 34,746,522 32,133,834 Expenses Investment advisory fees 8 151,933 211,438 Directors' fees and expenses 8 218,843 218,274 Legal and professional fees 11,039 29,969 Audit and interim review fees 192,655 161,709 Registrar fees 62,704 67,704 Listing fees 21,104 12,768 Administration fees 8 81,991 123,061 Broker fees 148,526 147,995 Other expenses 192,163 175,799 Total expenses 1,080,958 1,148,717 Profit and total comprehensive income for the year 33,665,564 30,985,117 Basic and diluted earnings per 2021 Share 11 0.0771 0.0685 Basic and diluted earnings per Realisation Share 11 0.0888 0.0769 All items in the above statement are derived from continuing operations. The accompanying notes on pages 59 to 92 form an integral part of the financial statements. FINANCIAL STATEMENTS 56 Statement of Changes in Shareholders' Equity For the year ended 31 December 2024 Note Share capital Share capital Retained earnings Retained earnings Total Equity Realisation Shares 2021 Shares Realisation Shares 2021 Shares US$ US$ US$ US$ US$ At 1 January 2024 51,996,697 372,680,688 (23,472,768) (157,264,444) 243,940,173 Total comprehensive income: Profit for the year - - 4,278,530 29,387,034 33,665,564 Total comprehensive profit for the year - - 4,278,530 29,387,034 33,665,564 Transactions with Shareholders: Dividends declared during the year 4 - - (3,890,863) (30,500,645) (34,391,508) Realisation Share redemptions paid during the year 10 (4,950,050) - - - (4,950,050) Treasury shares issued 10 - 490,101 - - 490,101 Share buy-backs 10 - (3,016,924) - - (3,016,924) Total transactions with Shareholders (4,950,050) (2,526,823) (3,890,863) (30,500,645) (41,868,381) At 31 December 2024 47,046,647 370,153,865 (23,085,101) (158,378,055) 235,737,356 Note Realisation Shares 2021 Shares Realisation Shares 2021 Shares US$ US$ US$ US$ US$ At 1 January 2023 Total comprehensive income: 55,251,707 383,148,853 (23,297,298) (152,757,973) 262,345,289 Profit for the year - - 4,190,991 26,794,126 30,985,117 Total comprehensive profit for the year - - 4,190,991 26,794,126 30,985,117 Transactions with Shareholders: Dividends declared during the year 4 - - (4,366,461) (31,300,597) (35,667,058) Realisation Share redemptions paid during the year 10 (3,255,010) - - - (3,255,010) Share buy-backs 10 - (10,468,165) - - (10,468,165) Total transactions with Shareholders (3,255,010) (10,468,165) (4,366,461) (31,300,597) (49,390,233) At 31 December 2023 51,996,697 372,680,688 (23,472,768) (157,264,444) 243,940,173 The accompanying notes on pages 59 to 92 form an integral part of the financial statements. FINANCIAL STATEMENTS 57 Statement of Financial Position As at 31 December 2024 31 December 2024 31 December 2023 Notes US$ US$ Assets Cash and cash equivalents 18,520,562 25,170,093 Other receivables and prepayments 12 14,350 593,446 Financial assets at fair value through profit or loss 6 217,473,364 220,466,340 Total assets 236,008,276 246,229,879 Liabilities Trade and other payables 13 270,920 2,289,706 Total liabilities 270,920 2,289,706 Net assets 235,737,356 243,940,173 Equity Retained earnings (181,463,156) (180,737,212) Share capital 417,200,512 424,677,385 Total equity 235,737,356 243,940,173 Net Assets attributable to 2021 Shareholders 211,775,810 215,416,244 Number of 2021 Shares 10 377,255,540 382,010,069 Net asset value per 2021 Share 0.5614 0.5638 Net Assets attributable to Realisation Shareholders 23,961,546 28,523,929 Number of Realisation Shares 10 41,086,020 49,906,358 Net asset value per Realisation Share 0.5832 0.5715 The Financial Statements on pages 55 to 92 were approved and authorised for issue by the Board of Directors on 17 April 2025 and signed on its behalf by: Trina Le Noury Richard Burwood Director Chair The accompanying notes on pages 59 to 92 form an integral part of the financial statements. FINANCIAL STATEMENTS 58 Statement of Cash Flows For the year ended 31 December 2024 Notes 2024 US$ 2023 US$ Cash flows from operating activities Profit for the year 33,665,564 30,985,117 Adjustments for: Net gains on financial assets at fair value through profit or loss 6 (33,989,272) (30,987,658) Net foreign exchange gains (24,877) (28,708) (348,585) (31,249) Decrease / (Increase) in receivables and prepayments 126,662 (23,023) Increase in trade and other payables 115,201 43,175 Income distributions received from Master Fund II 5,761,669 6,860,431 Income distributions received from Master Fund III 37,324,493 42,037,951 Capital distributions received from Master Fund II 6 3,096,786 370,269 Drawdowns paid to Master Funds 6 (8,748,266) (4,698,064) Net cash flow from operating activities 37,327,960 44,559,490 Cash flows used in financing activities Realisation Share redemptions paid (7,050,040) (1,155,020) Share buy-backs (3,050,921) (10,434,169) Treasury shares issued 10 490,101 - Dividends paid during the period 4 (34,391,508) (35,667,058) Net cash flow used in financing activities (44,002,368) (47,256,247) Net decrease in cash and cash equivalents (6,674,408) (2,696,757) Cash and cash equivalents at beginning of the year 25,170,093 27,838,142 Effect of foreign exchange rate changes during the year 24,877 28,708 Cash and cash equivalents at end of the year 18,520,562 25,170,093 The accompanying notes on pages 59 to 92 form an integral part of the financial statements. FINANCIAL STATEMENTS 59 Notes to the Financial Statements For the year ended 31 December 2024 1. GENERAL INFORMATION Fair Oaks Income Limited (the “Company”) was registered in Guernsey under the Companies (Guernsey) Law, 2008 on 7 March 2014. The Company’s registration number is 58123 and it is regulated by the Guernsey Financial Services Commission as a registered closed-ended collective investment scheme under The Registered Collective Investment Scheme Rules and Guidance 2021. The Company began trading on the Specialist Fund Segment (“SFS”) of the London Stock Exchange on 12 June 2014. Reorganisation On 19 April 2021, the Company announced the result of its reorganisation proposal, being that 62,562,883 2017 Shares had been elected for re-designation as Realisation Shares (the “Realisation Shares”), representing 13.4% of the 2017 Shares in issue, and 405,815,477 2017 Shares were re-designated as 2021 Shares (the “2021 Shares”), representing the balance of 86.6% of the 2017 Shares in issue (including 650,000 shares held in Treasury). The Company makes its investments through FOIF II LP (the “Master Fund II”) and FOMC III LP (the “Master Fund III”), in both of which the Company is a limited partner (the “Master Fund II” and the “Master Fund III” together the “Master Funds”). The Master Fund II was registered in Guernsey on 24 February 2017 and the Master Fund III was registered in Guernsey on 10 March 2021 under The Limited Partnerships (Guernsey) Law, 1995. The purpose of the reorganisation was to allow those Shareholders who wished to extend the life of their investment in the Company beyond the planned end date of the Master Fund II, being 12 June 2026, and to be able to do so by having their 2017 Shares re-designated as 2021 Shares. These 2021 Shares investing in the new Master Fund III, which has a planned end date of 12 June 2030 and an investment objective and policy substantially similar to that of Master Fund II. At 31 December 2024, the Company has 41,086,020 Realisation Shares (31 December 2023: 49,906,358 Realisation Shares) and 377,255,540 2021 Shares (31 December 2023: 382,010,069 2021 Shares) in issue. During the year ended 31 December 2024 the Company bought back 5,603,189 2021 Shares for US$3,016,924 and redeemed 8,820,338 Realisation Shares for US$4,950,050. The Realisation Shares invest solely into the Master Fund II and the 2021 Shares invest solely into the Master Fund III. At 31 December 2024, the Company had direct holdings of 9.59% (31 December 2023: 9.59%) in the Master Fund II and 95.61% (31 December 2023: 95.43%) holding in Master Fund III, which in turn had a holding of 62.21% (31 December 2023: 62.21%) in the Master Fund II. Together, the Company held a direct and indirect holding of 69.06% (31 December 2023: 68.96%) in the Master Fund II. The Master Funds At 31 December 2024, the Master Fund II had six limited partners (31 December 2023: six limited partners), including Fair Oaks Founder II LP, a related entity. At 31 December 2024, the Master Fund III had three limited partners (31 December 2023: three limited partners), including Fair Oaks Founder VI LP. The General Partner of the Master Funds is Fair Oaks Income Fund (GP) Limited (the “General Partner” or “GP”). Cycad and Wollemi In the prior year, the Master Fund II held an investment in Cycad Investments LP (“Cycad”). Cycad was a Limited Partnership registered in the United States of America on 2 June 2017. Aligned with the Company’s investment policy, Cycad also invested into Collateral Loan Obligations (“CLOs”). Cycad and Fair Oaks Founder III were both terminated during the current year. On 9 March 2021, a new Guernsey limited partnership was established called Wollemi Investments I LP (Wollemi”) also investing in CLOs. At 31 December 2024, the Master Fund II had direct holdings of 76.94% (31 December 2023: 89.43%) and Master Fund III had direct holdings of 14.82% (31 December 2023: 10.57%) in Wollemi. FINANCIAL STATEMENTS 60 Notes to the Financial Statements For the year ended 31 December 2024 1. GENERAL INFORMATION (continued) Founder Partners Fair Oaks Founder II LP, a Guernsey limited partnership, has been established to act as the Founder Limited Partner of Master Fund II. Fair Oaks Founder VI LP, a Guernsey limited partnership, has been established to act as the Founder Limited Partner of Master Fund III. General Partner The General Partner of the Master Funds and Wollemi is Fair Oaks Income Fund (GP) Limited (the “General Partner” or “GP”). The Master Funds’ invest in portfolios consisting primarily of CLOs. 2. MATERIAL ACCOUNTING POLICIES Statement of Compliance The Financial Statements, which give a true and fair view, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and are in compliance with the Companies (Guernsey) Law, 2008 and, Disclosure Guidance and Transparency Rules of the UK’s Financial Conduct Authority. Basis of Preparation The Company’s Financial Statements have been prepared on a historical cost convention, except for financial assets measured at fair value through profit or loss. The preparation of Financial Statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and judgements are discussed in Note 3. The principal accounting policies adopted are set out below. The Directors believe that the Annual Report and Financial Statements contain all of the information required to enable shareholders and potential investors to make an informed appraisal of the investment activities and profit or loss of the Company for the period to which it relates and does not omit any matter or development of significance. As explained below, the Company qualifies as an investment entity and is therefore not required to prepare consolidated Financial Statements under IFRS. Going Concern The Directors have assessed the financial position of the Company as at 31 December 2024 and the factors that may impact its performance (including the potential impact on markets and supply chains of changes in US trade policy) in the forthcoming year. Changes in US trade policy The imposition of import tariffs by the new US administration is likely to have a negative impact on the profitability of some US loan issuers, which will face higher input costs, and some European loan issuers, who may experience lower export sales to the US. The precise impacts are difficult to assess given the uncertainty over US policy and the complexity of international supply chains. The Company’s Investment Adviser is closely monitoring the situation and its early assessment is that the Master Funds’ portfolios’ exposure to the imposition of US tariffs is relatively limited and thus the impact on the Company’s performance will not be significant. FINANCIAL STATEMENTS 61 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) Changes in US trade policy (continued) Following due consideration and after a review of the Company’s holdings in cash and cash equivalents, investments and a consideration of the income deriving from, and the viability of, the investment in the Master Funds the Directors believe that it is appropriate to adopt the going concern basis in preparing the Financial Statements, as the Company has adequate financial resources to meet its liabilities as they fall due. New Accounting Standards and interpretations adopted in the reporting period The following standards and interpretations have been applied where relevant in these Financial Statements: • Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Noncurrent, effective for periods commencing on or after 1 January 2024. • Amendments to IFRS 16 Leases: Liability in a Sale and Leaseback, effective for periods commencing on or after 1 January 2024. • Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants, effective for periods commencing on or after 1 January 2024. • Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements, effective for periods commencing on or after 1 January 2024. The adoption of these standards has not had a material impact on the Financial Statements of the Company. New Accounting Standards and interpretations applicable to future reporting periods • Amendments to IFRS 7 Financial Instruments: Disclosures: Amendments to the Classification and Measurement of Financial Instruments, Annual Improvements to IFRS Accounting Standards - Volume 11 - Gain or loss on derecognition and Contracts Referencing Nature-dependent Electricity, effective for periods commencing 1 January 2026. • Amendments to IFRS 9 Financial Instruments: Amendments to the Classification and Measurement of Financial Instruments, Annual Improvements to IFRS Accounting Standards - Volume 11 (Derecognition of lease liabilities and Transaction price) and Contracts Referencing Nature-dependent Electricity, effective for periods commencing 1 January 2026. • IFRS 10 Consolidated Financial Statements: Annual Improvements to IFRS Accounting Standards - Volume 11 - Determination of a ‘de facto agent’, effective for periods commencing 1 January 2026. • IFRS 18 Presentation and Disclosure in Financial Statements: This Standard replaces IAS 1 Presentation of Financial Statements. It carries forward many requirements from IAS 1 unchanged, effective for periods commencing 1 January 2027. The new accounting standard introduces the following key new requirements: - Entities are required to classify all income and expenses into five categories in the statement of profit and loss, namely operating, investing, financing, discontinued operations and income tax categories. Entities are also required to present a newly-defined operating profit subtotal. Entities net profit will not change as a result of applying IFRS 18. - Management-defined performance measures (MPMs) are disclosed in a single note in the financial statements. - Enhanced guidance is provided on how to group information in the financial statements. - All entities are required to use the operating profit subtotal as the starting point for the statement of cash flows when presenting operating cash flows under the indirect method. - The Company is still in the process of assessing the impact of the new accounting standard, particularly with respect to the structure of the Company’s statement of profit or loss, the statement of cash flows and the additional disclosures required for MPMs. FINANCIAL STATEMENTS 62 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) New Accounting Standards and interpretations applicable to future reporting periods (continued) • IAS 7 Statement of Cash Flows: Annual Improvements to IFRS Accounting Standards - Volume 11 - Cost method, effective for periods commencing 1 January 2026. • IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability, effective for periods commencing 1 January 2025. These standards, amendments or interpretations, except for IFRS18, are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions. Interest income Interest income comprises interest income from cash and cash equivalents. Interest income is recognised on a time proportionate basis using the effective interest method. Net gains on Financial Assets at Fair Value through Profit or Loss Net gains on financial assets at fair value through profit or loss includes all realised and unrealised fair value changes, foreign exchange gains/(losses) and income and capital distributions received. Net realised (losses)/gains from financial assets at fair value through profit or loss are calculated using the average cost method. Expenses Expenses of the Company are charged through profit or loss in the Statement of Comprehensive Income on an accruals basis. 2021 Shares, Realisation Shares and C Shares The 2021 Shares, Realisation Shares and C Shares (when in issue) of the Company are classified as equity based on the substance of the contractual arrangements and in accordance with the definition of equity instruments under IAS 32. The proceeds from the issue of participating shares are recognised in the Statement of Changes in Shareholders’ Equity, net of incremental issuance costs. Financial Instruments Financial assets – Classification The Company classifies its financial assets and financial liabilities into categories in accordance with IFRS 9. On initial recognition, the Company classifies financial assets as measured at amortised cost or at fair value through profit or loss (“FVTPL”). A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”). FINANCIAL STATEMENTS 63 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets – Classification (continued) All other financial assets of the Company are measured at FVTPL. In making an assessment of the objective of the business model in which a financial asset is held, the Company considers all of the relevant information about how the business is managed. The Company has determined that it has two business models. • Held-to-collect business model: this includes cash and cash equivalents, prepayments and distributions receivable. These financial assets are held to collect contractual cash flow. • Other business model: this includes investments in the Master Funds and derivatives. These financial assets are managed and their performance is evaluated, on a fair value basis, with frequent sales taking place. The Investment entities exception to consolidation (“Investment entities exception”) in IFRS 10 ‘Consolidated Financial Statements’ (“IFRS 10”) requires subsidiaries of an investment entity to be accounted for at fair value through profit or loss in accordance with IFRS 9 ‘Financial Instruments’ (“IFRS 9”). Cash comprises current deposits with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investments or other purposes. Financial liabilities – Classification Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability at amortised cost includes trade and other payables and distributions received in advance. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Financial assets and liabilities - Recognition, measurement and gains and losses Recognition and initial measurement Financial assets and financial liabilities are measured initially at fair value, being the transaction price, including transaction costs for items that will subsequently be measured at amortised cost, on the trade date. Transaction costs on financial assets at fair value through profit or loss are expensed immediately. Subsequent measurement After initial measurement, the Company measures financial instruments classified at fair value through profit or loss at their fair values. Changes in fair value are recognised in “Net gains on financial assets at fair value through profit or loss” in the Statement of Comprehensive Income. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. FINANCIAL STATEMENTS 64 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets and liabilities - Recognition, measurement and gains and losses (continued) Derecognition A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with IFRS 9. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on derecognition is also recognised in profit or loss. Investments in the Master Funds The Board of Directors (the “Board”) has determined that the Company has all the elements of control as prescribed by IFRS 10 in relation to the Master Fund III, and then indirectly the Master Fund II, as the Company is the main limited partner in the Master Fund III and indirectly (via its investment in the Master Fund III) is the main limited partner in the Master Fund II, is exposed to and has rights to the returns of the Master Fund III (and indirectly in the Master Fund II) and has the ability either directly, or through the Investment Adviser, to affect the amount of its returns from the Master Fund III (and indirectly in the Master Fund II). The Investment entities exemption requires that an investment entity that has determined that it is a parent under IFRS 10 shall not consolidate certain of its subsidiaries; instead it is required to measure its investment in these subsidiaries at fair value through profit or loss in accordance with IFRS 9. The criteria which defines an investment entity are as follows: • An entity has obtained funds from one or more investors for the purpose of providing those investors with investment management services; • An entity has committed to its investors that its business purpose is to invest funds solely for the returns from capital appreciation, investment income or both; and • An entity measures and evaluates the performance of substantially all of its investments on a fair value basis. The Company provides investment management services and has a number of investors who pool their funds to gain access to these services and investment opportunities that they might not have had access to individually. The Company, being listed on the SFS of the London Stock Exchange, obtains funding from a diverse group of external shareholders. Consideration is also given to the time frame of an investment. An investment entity should not hold its investments indefinitely but should have an exit strategy for their realisation. As the Master Funds’ investments have documented maturity/redemption dates or will be sold if other investments with better risk/reward profile are identified, the Board consider that this demonstrates a clear exit strategy. The Master Funds measure and evaluate the performance of substantially all of their investments on a fair value basis. The fair value method is used to represent the Company’s performance in its communication to the market, including investor presentations. In addition, the Company reports fair value information internally to the Board of Directors, who use fair value as a significant measurement attribute to evaluate the performance of its investments and to make investment decisions for mature investments. FINANCIAL STATEMENTS 65 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) Investments in the Master Funds (continued) The Company has determined that the fair value of the Master Fund III is the Master Fund III’s Net Asset Value (“NAV”), and incorporated into the Master Fund III’s NAV is the Master Fund II NAV. The Company also determined that the fair value of the Master Fund II is the Master Fund II’s NAV. The Company, via its investments in the Master Funds, is also invested into Wollemi. The Company has determined that the fair value of Wollemi is Wollemi’s Net Asset Value (NAV”). The Company has concluded that the Master Fund III, and then indirectly the Master Fund II, for which the Company’s commitment is detailed further in Note 14, meet the definition of unconsolidated subsidiaries under IFRS 12 ‘Disclosure of Interests in Other Entities’ (“IFRS 12”) and have made the necessary disclosures in Notes 5 and 6 of these Financial Statements. Foreign Currency Functional and presentation currency The Board has determined that the functional currency of the Company is US Dollar. In doing so, they have considered the following factors: that US Dollar is the currency of the primary economic environment of the Company, the currency in which the original finance was raised and distributions will be made, the currency that would be returned if the Company was wound up, and the currency to which the majority of the underlying investments are exposed. The Financial Statements of the Company are presented in US Dollars, which has been selected as the presentation currency of the Company. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the reporting date when fair value was determined. Dividends Dividends payable to the holders of 2021 Shares and Realisation Shares are recorded through the Statement of Changes in Shareholders’ Equity when they are declared to the respective shareholders. The payment of any dividend by the Company is subject to the satisfaction of a solvency test as required by the Companies (Guernsey) Law, 2008. Segmental Reporting The Board has considered the requirements of IFRS 8 – “Operating Segments”. The Company has entered into an Investment Advisory Agreement with the Investment Adviser under which the Investment Adviser is responsible for the management of the Company’s investment portfolio, subject to the overall supervision of the Board. Subject to its terms and conditions, the Investment Advisory Agreement requires the Investment Adviser to manage the Company’s investment portfolio in accordance with the Company’s investment guidelines as in effect from time to time, including the authority to purchase and sell securities and other investments and to carry out other actions as appropriate to give effect thereto. FINANCIAL STATEMENTS 66 Notes to the Financial Statements For the year ended 31 December 2024 2. MATERIAL ACCOUNTING POLICIES (continued) Segmental Reporting (continued) However, the Board retains full responsibility to ensure that the Investment Adviser adheres to its mandate. Moreover, the Board is fully responsible for the appointment and/or removal of the Investment Adviser. Accordingly, the Board is deemed to be the “Chief Operating Decision Maker” of the Company. In the Board`s opinion, the Company is engaged in a single segment of business, being investments into the Master Funds, which are Guernsey registered limited partnerships. Segment information is measured on the same basis as that used in the preparation of the Company’s Financial Statements. The Company receives no revenue from external customers, nor holds any non-current assets, in any geographical area other than Guernsey. 3. USE OF JUDGEMENTS AND ESTIMATES The preparation of Financial Statements in accordance with IFRS requires the Board to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses, disclosure of contingent assets and liabilities at the date of the Financial Statements and income and expenses during the year. The estimates and associated assumptions are based on various factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Fair value hierarchy The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The principal estimates and judgements made by the Board are as follows: Judgements Investment Entity In accordance with the Investment Entities exemption contained in IFRS 10, the Board has determined that the Company satisfies the criteria to be regarded as an investment entity and as a result measures its investments in the Master Funds at fair value. This determination involves a degree of judgement (see Note 2). The judgement is also applied to the underlying investments that are treated as subsidiaries. For Level 2 and Level 3 financial assets, the determination of what inputs are "observable" requires judgement by the directors. Information about assumptions is included in Note 6 to the Financial Statements. Estimates Fair Value The Company records its investments in the Master Funds at fair value. Fair value is determined as the Company’s share of the NAV of the investment. This share is net of any notional carried interest due to Fair Oaks Founder VI LP (the “Founder Partner VI”), the Founder Partner of Master Fund III and Fair Oaks Founder II LP (the “Founder Partner II”), the Founder Partner of Master Fund II. The Investment Adviser has reviewed the NAV of the investment and determined that no adjustments regarding liquidity discounts were required. FINANCIAL STATEMENTS 67 Notes to the Financial Statements For the year ended 31 December 2024 4. DIVIDENDS The Company’s policy is to declare dividends to 2021 and Realisation shareholders as follows: 2021 Shares 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. Realisation Shares The Company intends to pay 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 a proportionate share of the expenses of the Company. The Company declared the following dividends per 2021 Share during the year ended 31 December 2024: Dividend rate per 2021 Share Net dividend payable Period to Payment date cents US$ Record date Ex-dividend date 29 December 2023 2 March 2024 2.0 7,669,874 1 March 2024 29 February 2024 28 March 2024 28 June 2024 2.0 7,646,547 31 May 2024 30 May 2024 28 June 2024 9 September 2024 2.0 7,638,517 16 August 2024 15 August 2024 30 September 2024 13 December 2024 2.0 7,545,707 22 November 2024 21 November 2024 30,500,645 The Company declared the following dividends per Realisation Share during the year ended 31 December 2024: Dividend rate per Realisation Share Net dividend payable Period to Payment date cents US$ Record date Ex-dividend date 29 December 2023 2 March 2024 2.0 998,127 1 March 2024 29 February 2024 28 March 2024 28 June 2024 2.0 998,127 31 May 2024 30 May 2024 28 June 2024 9 September 2024 2.0 998,127 16 August 2024 15 August 2024 30 September 2024 13 December 2024 2.0 896,482 22 November 2024 21 November 2024 3,890,863 FINANCIAL STATEMENTS 68 Notes to the Financial Statements For the year ended 31 December 2024 4. DIVIDENDS (continued) The Company declared the following dividends per 2021 Share during the year ended 31 December 2023: Dividend rate per 2021 Share Net dividend payable Period to Payment date cents US$ Record date Ex-dividend date 31 December 2022 31 March 2023 2.0 7,999,885 3 March 2023 2 March 2023 31 March 2023 30 June 2023 2.0 7,841,901 2 June 2023 1 June 2023 30 June 2023 21 September 2023 2.0 7,767,875 25 August 2023 24 August 2023 30 September 2023 15 December 2023 2.0 7,690,936 17 November 2023 16 November 2023 31,300,597 The Company declared the following dividends per Realisation Share during the year ended 31 December 2023: Dividend rate per Realisation Share Net dividend payable Period to Payment date cents US$ Record date Ex-dividend date 31 December 2022 31 March 2023 2.0 1,111,656 3 March 2023 2 March 2023 31 March 2023 30 June 2023 2.0 1,111,569 2 June 2023 1 June 2023 30 June 2023 21 September 2023 2.0 1,071,618 25 August 2023 24 August 2023 30 September 2023 15 December 2023 2.0 1,071,618 17 November 2023 16 November 2023 4,366,461 At 31 December 2024, the Company’s retained earnings include unrealised losses on financial assets of US$200,878,401 (31 December 2023: US$192,233,945) (see Note 6). Gross income from investments excludes these unrealised losses which are capital in nature. The default currency payment for dividends is US Dollars. However, shareholders can elect to receive their dividends in British Pounds Sterling (“Sterling”) by registering under the Company’s Dividend Currency Election. The rate per 2021 Share and Realisation Share to be used to pay shareholders who elected to receive their dividend in Sterling will be announced on the London Stock Exchange each month prior to the payment date. Under Guernsey law, companies can pay dividends in excess of accounting profit provided they satisfy the solvency test prescribed by the Companies (Guernsey) Law, 2008. The solvency test considers whether a company is able to pay its debts when they fall due, and whether the value of a company’s assets is greater than its liabilities. The Company passed the solvency test for each dividend paid. Total dividends payable as at 31 December 2024 were US$nil (31 December 2023: US$nil). FINANCIAL STATEMENTS 69 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT The Board has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Company’s activities. Below is a non-exhaustive summary of the risks that the Company is exposed to as a result of its use of financial instruments: Market Risk Market risk is the risk of changes in market prices, such as foreign exchange rates, interest rates and equity prices, affecting the Company’s income and/or the value of its holdings in financial instruments. The Company’s exposure to market risk comes mainly from movements in the value of its investments in the Master Funds and on a look-through basis to the underlying loans in each CLO. Changes in credit spreads may further affect the Company’s net equity or net income directly through their impact on unrealised gains or losses on investments within the Master Funds and on a look-through basis to the underlying loans in each CLO. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on investments. The Company’s strategy for the management of market risk mirrors the strategy of the Master Funds, driven by their investment objective to generate attractive, risk-adjusted returns, principally through income distributions, by seeking exposure to 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. The Company’s market risk is managed on a daily basis by the Investment Adviser in accordance with policies and procedures in place. The Company intends to mitigate market risk generally by not making investments that would cause it to have exposure to a single corporate issuer exceeding 5% of the Master Funds’ aggregate gross assets at the time of investment. Special Purpose Vehicles such as CLOs are not considered corporate issuers. The Company’s market positions are monitored on a quarterly basis by the Board. Interest Rate Risk Through its investment in the Master Funds, the Company is exposed to interest rate risk via the positions held by the Master Funds and on a look-through basis to the underlying assets in the CLOs. Interest receivable by the Company on bank deposits or payable on bank overdraft positions will be affected by fluctuations in interest rates, however, the underlying cash positions will not be affected. A majority of the Company’s financial assets comprise investments in the Master Funds, which invest in Subordinated ("equity") and Mezzanine notes of CLOs, both directly and through their investments in Wollemi. The Mezzanine tranches pay floating-rate interest, at a spread over USD SOFR or Euribor. The Subordinated CLO notes generate income based on the differential between the interest on the CLOs' floating-rate loan assets and the CLOs' floating-rate liabilities, so have partial exposure to USD or Euro floating interest rates. Because the Master Funds do not hold fixed-rate assets, they do not have significant exposure to the risk of asset price movements due to changing interest rates expectations but the floating-rate nature of their assets exposes the Master Funds to potential variations in income over time due to changes in actual interest rates. FINANCIAL STATEMENTS 70 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Market Risk (continued) Interest Rate Risk (continued) The following table shows the portfolio profile of the Master Funds at 31 December 2024 and 31 December 2023: 31 December 2024 31 December 2023 Master Fund III 1 Master Fund II 2 Master Fund III 1 Master Fund II 2 US$ US$ US$ US$ Investments with exposure to a floating interest rate 164,561,437 18,278,538 185,709,674 27,512,041 Financial assets at fair value through profit or loss 164,561,437 18,278,538 185,709,674 27,512,041 1 Shows the Company’s proportionate direct share in the Master Fund III at 95.61% (31 December 2023: 95.43%) through 2021 Shares investment only on a whole look-through portfolio basis. 2 Shows the Company’s proportionate direct share in the Master Fund II at 9.59% (31 December 2023: 9.59%) through Realisation Shares investment only on a whole look-through portfolio basis. The following table shows the Board’s best estimate of the Company’s share of the sensitivity of the portfolio of the Master Funds to stressed changes in interest rates, with all other variables held constant. The table assumes parallel shifts in the respective forward yield curves. 31 December 2024 31 December 2023 Possible reasonable change in rate Effect on net assets and profit or loss Possible reasonable change in rate Effect on net assets and profit or loss US$ US$ -1% (2,041,883) -1% (706,011) 1% 2,041,883 1% 706,115 Currency Risk The Company is exposed to very limited currency risk, as the majority of its assets and liabilities are denominated in US Dollars. The Company is exposed indirectly to currency risk through its investments into the Master Funds. The Master Funds’ portfolios are denominated in US Dollar and Euro. Accordingly, the value of such assets maybe affected, favourably or unfavourably, by fluctuations in currency rates which, if unhedged, could potentially have a significant effect on returns. To reduce the impact of currency fluctuations and the volatility of returns which may result from currency exposure, the Investment Adviser hedges any significant currency exposure of the assets of the Master Funds. FINANCIAL STATEMENTS 71 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Market Risk (continued) Currency Risk (continued) The Company’s share of the Master Funds’ total net foreign currency exposure at the year end was as follows: 31 December 2024 31 December 2023 Master Fund III Master Fund II Master Fund III Master Fund II US$ US$ US$ US$ EUR Exposure Cash and cash equivalents 153,005 124,273 49,899 7,131 Other receivables 765,922 418,282 - - Derivatives at fair value through profit or loss (18,354,859) (9,180,387) (74,537,298) (12,044,451) Financial assets at fair value through profit and loss 18,579,451 9,155,065 87,889,988 11,872,110 Net EUR Exposure 1,143,519 517,233 13,402,589 (165,210) 31 December 2024 31 December 2023 Master Fund III Master Fund II Master Fund III Master Fund II US$ US$ US$ US$ GBP Exposure Cash and cash equivalents 324 85,958 676,139 109,256 Trade and other payables (70,901) (8,356) (154,302) (10,601) Net GBP Exposure (70,577) 77,602 521,837 98,655 NET EXPOSURE 1,072,942 594,835 13,924,426 (66,555) Possible change in exchange rate 31 December 2024 net exposure 31 December 2024 effect on net assets and profit or loss (if unhedged) US$ US$ EUR / US Dollar +/-10% 1,660,753 (-/+) 166,075 GBP / US Dollar +/-10% 7,026 (-/+) 703 Possible change in exchange rate 31 December 2023 net exposure 31 December 2023 effect on net assets and profit or loss (if unhedged) US$ US$ EUR / US Dollar +/-10% 13,237,379 (-/+) 1,323,738 GBP / US Dollar +/-10% 620,492 (-/+) 62,049 The sensitivity rate of 10% (31 December 2023: 10%) is regarded as reasonable due to the actual volatility over the last year of US Dollar against both Euro and Sterling. FINANCIAL STATEMENTS 72 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Market Risk (continued) Other Price Risks There is a risk that the fair value of future cash flows, on a look-through basis to the underlying CLOs, will fluctuate due to changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Board does not believe that the returns on investments are correlated to any specific index or other price variable. If the value of the Company’s investment in the Master Fund III were to increase or decrease by 25% (31 December 2023: 25%), the impact on the NAV of the Company would be +/- US$48,376,321 (31 December 2023: US$48,117,048). If the value of the Company’s investment in the Master Fund II were to increase or decrease by 25% (31 December 2023: 25%), the impact on the NAV of the Company would be +/- US$5,737,971 (31 December 2023: US$6,737,592). At 31 December 2024, the sensitivity rate of 25% (31 December 2023: 25%) is regarded as reasonable due to the actual market price volatility experienced on the Master Funds’ CLO investments during the year. Credit and Counterparty Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company, the Master Funds or a vehicle in which the Master Funds invest, resulting in a financial loss to the Company. Credit risk arises principally from debt securities held, and also from derivative financial assets and cash and cash equivalents. For risk management reporting purposes, the Company considers and aggregates all elements of credit risk exposure (such as individual obligation default risk, country risk and sector risk). The Company’s policy on credit risk mirrors that of the Master Funds, which is to minimise its exposure to counterparties with perceived higher risk of default by dealing only with counterparties that meet the credit standards set out in the Company’s prospectus. The table below analyses the Company’s maximum exposure to credit risk in relation to the components of the Statement of Financial Position. 31 December 2024 31 December 2023 US$ US$ Cash and cash equivalents 18,520,562 25,170,093 Other receivables (excluding prepayments) - 572,922 Financial assets at fair value through profit or loss 217,473,364 220,466,340 235,993,926 246,209,355 At 31 December 2024, there were no financial assets past due or impaired (31 December 2023: none). At 31 December 2024, the cash and cash equivalents and other assets of the Company, excluding its investments into the Master Funds, and substantially all of the assets of the Master Fund II are held by BNP Paribas Securities Services S.C.A. (the “Custodian”). FINANCIAL STATEMENTS 73 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Credit and Counterparty Risk (continued) The cash and substantially all of the assets of the Master Fund III are held by U.S. Bank Global Corporate Trust Services, UK Branch (the “US Bank”). Bankruptcy or insolvency of the Custodian or US Bank may cause the Company’s rights with respect to securities held by the Custodian or US Bank to be delayed or limited. This risk is managed by monitoring the credit quality and financial positions of the Custodian and US Bank. The long-term rating of the Custodian as at 31 December 2024 was A1 as rated by Moody’s (31 December 2023: A2) and A+ by Standard & Poor’s (31 December 2023: A+). The long-term rating of US Bank as at 31 December 2024 was A2 (31 December 2023: A2) as rated by Moody’s and A+ (31 December 2023: A+) by Standard & Poor’s. Credit risk is assessed from time to time by the Investment Adviser on a look-through basis to the underlying loans in each CLO. The Investment Adviser seeks to manage this risk by providing diversification in terms of underlying assets, issuer section, geography and maturity profile. The Master Funds concentration of credit risk by industry for the CLO investments, on a look-through basis, as at 31 December 2024 and 31 December 2023 are summarised in the table below. The Company’s credit risk is monitored on a quarterly basis by the Board. The Master Funds have diversified their exposure to industry sectors. The top 10 are as follows: 31 December 2024 31 December 2023 Industry 48 % % Healthcare & Pharmaceuticals 13.0 12.3 High Tech Industries 10.7 9.2 Services: Business 9.7 8.9 Banking, Finance, Insurance & Real Estate 6.6 7.0 Telecommunications 6.0 5.5 Services: Consumer 5.6 5.0 Construction & Building 5.2 4.7 Chemicals, Plastics & Rubber 4.9 4.6 Beverage, Food & Tobacco 4.7 4.4 Hotel, Gaming & Leisure 3.5 3.8 69.9 65.4 The Master Funds’ exposure to credit risk relating to the underlying CLO investments based on the country of registration (not necessarily asset class exposure) as at 31 December 2024 and 31 December 2023 is summarised below. The Master Funds’ exposure to credit risk, also summarised below, relates to its directly held CLO investments as well as Wollemi held CLO investments based on the country of exposure of the CLO investments and the Limited Partnerships as at 31 December 2024 and 31 December 2023. 48 Shows the Company’s exposure in the underlying CLO investments through its investments in the Master Funds. Source: CLO trustee reports. Based on the Master Funds’ exposure and weighted by CLO size and Master Funds’ equity ownership percentage. FINANCIAL STATEMENTS 74 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Credit and Counterparty Risk (continued) The geographical breakdown of the underlying CLO investments is as follows: 31 December 2024 31 December 2023 Master Fund III Master Fund II Master Fund III Master Fund II US$ US$ US$ US$ United States of America 60,428,813 9,558,158 105,173,410 16,594,561 Europe 77,705,913 9,436,927 84,854,252 11,448,838 Financial assets at fair value through profit or loss 138,134,726 18,995,085 190,027,662 28,043,399 31 December 2024 31 December 2023 Master Funds Master Funds Country 49 % % United States of America 54.2 65.7 France 12.8 8.7 United Kingdom 9.4 6.2 Netherlands 5.6 4.1 Germany 4.4 3.3 Spain 3.4 2.3 Canada 2.6 4.1 Italy 2.2 1.2 Luxembourg 1.9 1.5 Sweden 1.5 - Switzerland 1.2 1.6 Canada 0.8 1.3 Total 100 100 The table below summarises the Master Funds’ underlying portfolio concentrations as of 31 December 2024 and 31 December 2023: Maximum portfolio holdings of a single asset % of total portfolio Average portfolio holdings % of total portfolio 31 December 2024 12.40% 2.71% 31 December 2023 8.63% 2.32% 49 Shows the Company’s exposure in the underlying CLO investments through its investments in the Master Funds. Source: CLO trustee reports. Based on the Master Funds’ exposure and weighted by CLO size and Master Funds’ equity ownership percentage. FINANCIAL STATEMENTS 75 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Credit and Counterparty Risk (continued) The table below summarises the Master Funds’ portfolio by assets class and portfolio ratings as at 31 December 2024 and 31 December 2023: 31 December 2024 31 December 2023 Master Fund III Master Fund II Master Fund III Master Fund II US$ US$ US$ US$ By asset class Equity Subordinated CLO notes 116,917,033 16,135,441 156,452,272 23,344,681 Mezzanine CLO notes 21,217,693 2,859,644 30,497,949 4,280,957 Limited Partnerships - - 3,077,441 417,761 138,134,726 18,995,085 190,027,662 28,043,399 The breakdown of the underlying CLO portfolios by rating is as follows: 31 December 2024 31 December 2023 Rating 50 % % B 37.0 30.4 B- 21.3 23.7 B+ 14.3 17.3 BB- 8.2 9.9 CCC+ 5.1 4.5 NA 3.6 0.8 BB 4.4 7.0 CCC 1.7 1.5 Other 1.5 0.5 CCC- 1.3 0.3 BB+ 1.0 2.4 CC 0.4 0.6 BBB- 0.2 1.1 Total 100 100 Activities undertaken by the Company and the Master Funds may give rise to settlement risk. Settlement risk is the risk of loss due to the failure of a counterparty to honour its obligations to deliver cash, securities or other assets as contractually agreed. For the majority of transactions, settlement risk is mitigated by conducting settlements through a broker to ensure that a trade is settled only when both parties have fulfilled their contractual settlement obligations. Settlement limits form part of the credit approval and limit monitoring processes. Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. 50 Shows the Company’s exposure in the underlying CLO investments through its investments in the Master Funds. Source: CLO trustee reports. Based on the Master Funds’ exposure and weighted by CLO size and Master Funds’ equity ownership percentage. FINANCIAL STATEMENTS 76 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Liquidity Risk (continued) The Company’s policy and the Investment Adviser’s approach to managing liquidity is to ensure, as far as possible, that the Company will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions, including estimated redemptions of shares, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company’s liquidity risk is managed on a daily basis by the Investment Adviser on a look-through basis to the underlying loans in each CLO. The Investment Adviser monitors and considers the Company’s and the Master Funds’ cash balances, projected expenses and projected income from investments when making any new investment recommendations. Given the Company’s permanent capital structure as a closed-ended fund, it is not exposed to redemption risk. However, the Company’s financial instruments include indirect investments in CLOs, and may include over-the-counter derivative contracts, which are not traded in an organised public market and which may be illiquid. The Company’s overall liquidity risk is monitored on a quarterly basis by the Board. Shareholders have no right of redemption and must rely, in part, on the existence of a liquid market in order to realise their investment. All liabilities of the Company are due within one financial year. Operational Risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company’s activities relating to financial instruments, either internally or on the part of service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risk is managed so as to balance the limiting of financial losses and damage to its reputation with achieving its investment objective of generating returns to investors. The primary responsibility for the development and implementation of controls over operational risk rests with the Board. This responsibility is supported by the development of overall standards for the management of operational risk, which encompasses the controls and processes at the service providers and the establishment of service levels with the service providers. The Board’s assessment of the adequacy of the controls and processes in place at the service providers with respect to operational risk is carried out via regular discussions with the service providers and a review of the service providers’ Service Organisation Controls (“SOC”) 1 reports on internal controls, if available. Substantially all of the assets of the Company and Master Fund II are held by BNP Paribas Securities Services S.C.A., Guernsey Branch, in its capacity as the Custodian. Master Fund III assets are held in custody by U.S. Bank Global Corporate Trust Services, UK Branch (together the “Custodians”). FINANCIAL STATEMENTS 77 Notes to the Financial Statements For the year ended 31 December 2024 5. FINANCIAL RISK MANAGEMENT (continued) Operational Risk (continued) The bankruptcy or insolvency of the Custodians may cause the Company’s rights with respect to the securities held by the Custodians to be limited. The Investment Adviser monitors the credit ratings and capital adequacy of the Custodians on a quarterly basis, and reviews the findings documented in the SOC 1 report on the internal controls annually. Capital Management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Company. The Company’s capital is represented by the 2021 Shares and Realisation Shares. Capital is managed in accordance with the investment policy, in pursuit of the Company’s investment objectives. FINANCIAL STATEMENTS 78 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 1 January 2024 to 31 December 2024 2021 Shares Realisation Shares Total Company US$ US$ US$ Cost of financial assets at fair value through profit or loss at the start of the year 358,467,789 54,232,496 412,700,285 Capital distributions received from Master Fund III / Master Fund II - (3,096,786) (3,096,786) Drawdowns paid to Master Fund III / Master Fund II 8,748,266 - 8,748,266 Cost of financial assets at fair value through profit or loss at the end of the year 367,216,055 51,135,710 418,351,765 Net unrealised losses on financial assets at the end of the year (173,704,593) (27,173,808) (200,878,401) Financial assets at fair value through profit or loss at the end of the year 193,511,462 23,961,902 217,473,364 Movement in net unrealised loss during the year (7,704,993) (939,463) (8,644,456) Income distributions declared by Master Fund II - 5,328,887 5,328,887 Income distributions declared by Master Fund III 37,304,841 - 37,304,841 Net gains on financial assets at fair value through profit or loss 29,599,848 4,389,424 33,989,272 1 January 2023 to 31 December 2023 2021 Shares Realisation Shares Total Company US$ US$ US$ Cost of financial assets at fair value through profit or loss at the start of the year 353,769,725 54,602,765 408,372,490 Capital distributions received from Master Fund III / Master Fund II - (370,269) (370,269) Drawdowns paid to Master Fund III / Master Fund II 4,698,064 - 4,698,064 Cost of financial assets at fair value through profit or loss at the end of the year 358,467,789 54,232,496 412,700,285 Net unrealised losses on financial assets at the end of the year (165,999,600) (26,234,345) (192,233,945) Financial assets at fair value through profit or loss at the end of the year 192,468,189 27,998,151 220,466,340 Movement in net unrealised loss during the year (15,867,814) (2,978,096) (18,845,910) Income distributions declared by Master Fund II - 7,280,882 7,280,882 Income distributions declared by Master Fund III 42,552,686 - 42,552,686 Net gains on financial assets at fair value through profit or loss 26,684,872 4,302,786 30,987,658 FINANCIAL STATEMENTS 79 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) As at 31 December 2024, the Company had a 95.61% (31 December 2023: 95.43%) holding of the limited partnership interests in the Master Fund III on behalf of the 2021 Shares, which in turn had a holding of 62.21% in the Master Fund II (31 December 2023:62.21%) and 14.82% in Wollemi (31 December 2023: 10.57%). The Company also retained a direct holding of 9.59% (31 December 2023: 9.59%) in the Master Fund II on behalf of the Realisation Shares. Look-through financial information: Master Funds’ Financial Position The following tables reconcile the Company’s proportionate share of the Master Funds’ financial assets at fair value through profit or loss to the Company’s financial assets at fair value through profit or loss: 31 December 2024 Master Fund III Master Fund II Total Company US$ US$ US$ By asset class Financial assets at fair value through profit or loss 168,902,188 19,007,239 187,909,427 Add: Other net current assets 24,609,274 4,954,663 29,563,937 Total financial assets at fair value through profit or loss 193,511,462 23,961,902 217,473,364 31 December 2023 Master Fund III Master Fund II Total Company US$ US$ US$ By asset class Financial assets at fair value through profit or loss 189,698,427 28,053,512 217,751,939 Add: Other net current assets / (liabilities) 2,769,762 (55,361) 2,714,401 Total financial assets at fair value through profit or loss 192,468,189 27,998,151 220,466,340 FINANCIAL STATEMENTS 80 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) Look-through financial information: Master Funds’ profit or loss movements The Company’s proportionate share of the unrealised losses on investments in the year comprises the following movements within the underlying investments: 1 January 2024 to 31 December 2024 Master Fund III Master Fund II Total Company US$ US$ US$ Net unrealised losses on investments at the beginning of the year (165,999,600) (26,234,345) (192,233,945) Investment income 497,436 (2,347,106) (1,849,670) Income distributions declared by Master Fund II 35,164,802 - 35,164,802 Unrealised (losses) / gains on financial assets at fair value through profit or loss (6,472,735) 6,861,097 388,362 Net gains on derivative financial instruments and foreign exchange 578,889 781,832 1,360,721 Net realised gains / (losses) on financial assets at fair value through profit or loss 199,355 (717,007) (517,652) Other income 8,055 33,901 41,956 Expenses (379,545) (242,903) (622,448) Income distributions declared during the year (37,301,250) (5,309,277) (42,610,527) Net unrealised losses on investments at the end of the year (173,704,593) (27,173,808) (200,878,401) 1 January 2023 to 31 December 2023 Master Fund III Master Fund II Total Company US$ US$ US$ Net unrealised losses on investments at the beginning of the year (150,131,786) (23,256,249) (173,388,035) Investment income 366,665 3,291,631 3,658,296 Income distributions declared by Master Fund II 45,125,393 - 45,125,393 Unrealised gains on financial assets at fair value through profit or loss (18,455,519) 1,386,003 (17,069,516) Net gains on derivative financial instruments and foreign exchange (30,137) (208,153) (238,290) Other income 5,736 77,939 83,675 Expenses (283,659) (271,879) (555,538) Income distributions declared during the year (42,596,293) (7,253,637) (49,849,930) Net unrealised losses on investments at the end of the year (165,999,600) (26,234,345) (192,233,945) IFRS 13 requires that a fair value hierarchy be established that prioritises the inputs to valuation techniques used to measure fair value. FINANCIAL STATEMENTS 81 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 13 are set as follows: • Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments; • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data. • Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ requires significant judgement. Observable data is considered to be that market data that is readily available, regularly distributed or updated, reliable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following table analyses within the fair value hierarchy the Company’s financial assets (by class, excluding cash and cash equivalents, prepayments, distributions receivable, dividends payable and other payables) measured at fair value: 31 December 2024 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Financial assets at fair value through profit or loss - - 217,473,364 217,473,364 Total - - 217,473,364 217,473,365 31 December 2023 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Financial assets at fair value through profit or loss - - 220,466,340 220,466,340 Total - - 220,466,340 220,466,340 The investments in the Master Funds, which are fair valued at each reporting date, have been classified within Level 3 as they are not traded and contain unobservable inputs. FINANCIAL STATEMENTS 82 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) The following table presents the movement in Level 3 instruments: 1 January 2024 to 31 December 2024 1 January 2023 to 31 December 2023 US$ US$ Opening Balance 220,466,340 234,984,455 Return of capital from Master Funds (3,096,786) (370,269) Drawdown paid to Master Funds 8,748,266 4,698,064 Movement in net unrealised loss during the year (8,644,456) (18,845,910) Closing Balance 217,473,364 220,466,340 Transfers between Level 1, 2 and 3 There have been no transfers between levels during the year ended 31 December 2024 or for the year ended 31 December 2023. Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change has occurred. Look-through financial information: Master Funds fair value hierarchy information On a look-through basis, the following table analyses within the fair value hierarchy the Company’s proportionate share of the Master Funds’ financial assets and derivatives (by class, excluding cash and cash equivalents, other receivables and prepayments, distributions payable, carried interest payable and trade and other payables) measured at fair value: 31 December 2024 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Master Fund III Financial assets at fair value through profit or loss, excluding derivatives - 1,532,954 166,823,262 168,356,216 Derivatives at fair value through profit or loss - 545,972 - 545,972 Total - 2,078,926 166,823,262 168,902,188 31 December 2023 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Master Fund III Financial assets at fair value through profit or loss - 3,446,225 186,252,202 189,698,427 Total - 3,446,225 186,252,202 189,698,427 FINANCIAL STATEMENTS 83 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) Look-through financial information: Master Funds fair value hierarchy information (continued) 31 December 2024 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Master Fund II Financial assets at fair value through profit or loss, excluding derivatives - 249,357 18,463,867 18,713,224 Derivatives at fair value through profit or loss - 294,015 - 294,015 Total - 543,372 18,463,867 19,007,239 31 December 2023 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Master Fund II Financial assets at fair value through profit or loss - 612,985 27,440,527 28,053,512 Derivatives at fair value through profit or loss - (346,858) - (346,858) Total - 266,127 27,440,527 27,706,654 The following table summarises the valuation methodologies used for the Company’s investments categorised in Level 3 as at 31 December 2024: Fair Value Methodology Unobservable inputs Ranges Security US$ Master Fund III 193,511,462 NAV Zero % discount N/A Master Fund II 23,961,902 NAV Zero % discount N/A 217,473,364 The following table summarises the valuation methodologies used for the Company’s investments categorised in Level 3 as at 31 December 2023: Fair Value Methodology Unobservable inputs Ranges Security US$ Master Fund III 192,468,189 NAV Zero % discount N/A Master Fund II 27,998,151 NAV Zero % discount N/A 220,466,340 FINANCIAL STATEMENTS 84 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) Look-through financial information: Master Funds’ Level 3 information The following table summarises the Master Funds’ sensitivity to changes in significant unobservable inputs used in the valuation of the Master Fund's investments categorised in Level 3 as at 31 December 2024. The Master Fund II has engaged an independent third party to provide valuations for their CLO investments. Accordingly, prices provided by a third party agent are considered as significant unobservable inputs for the purposes of sensitivity analysis. NAV is considered to be a significant unobservable input for Limited Partnerships. Asset Class Fair Value US$ Unobservable inputs Ranges Average Sensitivity to changes in significant unobservable inputs Master Fund III Limited Partnerships Master Fund II 149,719,192 Zero % discount to NAV N/A N/A 25% increase / decrease will have a fair value impact of + / - US$37,429,798 Wollemi 17,104,070 Zero % discount to NAV N/A N/A 25% increase / decrease will have a fair value impact of + / -US$4,276,018 166,823,262 Asset Class Fair Value US$ Unobservable inputs Ranges Average Sensitivity to changes in significant unobservable inputs Master Fund II CLOs United States of America 9,558,158 Prices provided by a third party agent US$0.066 - US$0.979 US$0.374 25% increase / decrease will have a fair value impact of + / - US$2,389,540 Limited Partnerships Wollemi 8,905,709 Zero % discount to NAV N/A N/A 25% increase/decrease will have a fair value impact of +/- US$ 2,226,427 18,463,867 FINANCIAL STATEMENTS 85 Notes to the Financial Statements For the year ended 31 December 2024 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) Look-through financial information: Master Funds’ Level 3 information The following table summarises the Master Funds’ sensitivity to changes in significant unobservable inputs used in the valuation of the Master Funds’ investments categorised in Level 3 as at 31 December 2023. The Master Fund II has engaged an independent third party to provide valuations for their CLO investments. Accordingly, prices provided by a third party agent is considered as significant unobservable input for the purposes of sensitivity analysis. NAV is considered to be a significant unobservable input for Limited Partnerships. Asset Class Fair Value US$ Unobservable inputs Ranges Average Sensitivity to changes in significant unobservable inputs Master Fund III Limited Partnerships Master Fund II 151,252,145 Zero % discount to NAV N/A N/A 25% increase/decrease will have a fair value impact of +/- US$43,316,397 Wollemi 17,104,071 Zero % discount to NAV N/A N/A 25% increase/decrease will have a fair value impact of +/- of US$3,246,654 168,356,216 Asset Class Fair Value US$ Unobservable inputs Ranges Average Sensitivity to changes in significant unobservable inputs Master Fund II CLOs United States of America 16,181,402 Prices provided by a third party agent US$0.0100- US$0.8967 US$0.4718 25% increase/decrease will have a fair value impact of +/- of US$4,045,351 Europe 214,869 Prices provided by a third party agent US$0.8092- US$0.8092 EUR0.8092 25% increase/decrease will have a fair value impact of +/- US$53,717 Limited Partnerships Wollemi 11,044,256 Zero % discount N/A N/A 10% increase/decrease will have a fair value impact of +/- US$1,104,426 27,440,527 FINANCIAL STATEMENTS 86 Notes to the Financial Statements For the year ended 31 December 2024 7. INTEREST INCOME For the year ended 31 December 2024 For the year ended 31 December 2023 US$ US$ Interest income on financial assets carried at amortised cost: Cash and cash equivalents 732,373 1,117,468 Total 732,373 1,117,468 8. RELATED PARTIES AND OTHER KEY CONTACTS Transactions with Investment Adviser and Investment Portfolio Investor Investment Adviser Fair Oaks Capital Limited (the “Investment Adviser”) is entitled to receive an investment advisory fee from the Company of 1% per annum of the NAV of the Company, in accordance with the Amended and Restated Investment Advisory Agreement dated 9 March 2017 (the “Investment Advisory Agreement”). The investment advisory fee is calculated and payable on the last business day of each month or on the date of termination of the Investment Advisory Agreement. The base investment advisory fee will be reduced to take into account any fees received by the Investment Adviser incurred by the Company in respect of its investments in the Master Funds (taking into account any rebates of such management fees to the Company) in respect of the same relevant period. The net investment advisory fee during the period is as follows: For the year ended 31 December 2024 For the year ended 31 December 2023 US$ US$ Company investment advisory fee 1,720,090 1,832,652 Less: Master Fund II rebate (1,374,342) (1,490,896) Less: Master Fund III rebate (193,815) (130,318) Net investment advisory fee 151,933 211,438 In circumstances where, as at the date the Net Asset Value per share of the 2021 Shares with respect to the last calendar month of a calendar quarter (the “Quarter End 2021 NAV”) is published, the price of the 2021 Shares, adjusted for any dividends declared if required, traded at close in the secondary market below their then-prevailing Quarter End 2021 NAV, the Investment Adviser agrees to reinvest and/or procure the reinvestment by an Associate of it of: (a) 25 percent of the fees which it shall receive with respect to that quarter from the Company pursuant to the agreement which is attributable to the Net Asset Value of the 2021 Shares and (b) 25 percent of the management fee which the General Partner shall receive with respect to that quarter from the Master Funds which is attributable to the Net Asset Value of the 2021 Shares by, in each case, using its best endeavours to purchase or procure the purchase of 2021 Shares in the Company in the secondary market. The obligation to purchase or procure the purchase of such 2021 Shares shall be fulfilled by the Investment Adviser by no later than one month after the end of such calendar quarter. FINANCIAL STATEMENTS 87 Notes to the Financial Statements For the year ended 31 December 2024 8. RELATED PARTIES AND OTHER KEY CONTACTS (CONTINUED) Transactions with Investment Adviser and Investment Portfolio Investor (continued) The Investment Adviser will have no obligation to reinvest and/ or procure the reinvestment of fees it receives with respect to a calendar quarter in circumstances where: (i) the 2021 Shares did not trade at close in the secondary market at a discount to their then-prevailing Quarter End 2021 NAV; or (ii) where the 2021 Shares did trade at close in the secondary market at a discount to their then-prevailing Quarter End 2021 NAV and it is unable to purchase or procure the purchase of 2021 Shares in the secondary market at a discount to their then-prevailing Quarter End 2021 NAV despite having used its best endeavours to do so; or (iii) the Master Fund III Commitment Period has already expired, and, in each case, the Investment Adviser shall retain all fees it receives for such quarter. In circumstances where, as at the date of the Net Asset Value per share of the Realisation Shares with respect to the last calendar month of a calendar quarter (the “Quarter End Realisation NAV”) is published, the price of the Realisation Shares, adjusted for any dividends declared if required, traded at close in the secondary market below their then-prevailing Quarter End Realisation NAV, the Investment Adviser agrees to reinvest and/or procure the reinvestment by an Associate of it of: (a) 25 percent of the fees which is received with respect to that quarter from the Company pursuant to the agreement which is attributable to the Net Asset Value of the Realisation Shares and (b) 25 percent of the Master Fund II Management Fee which the General Partner shall receive in respect to that quarter from Master Fund II which is attributable to the Net Asset Value of the Realisation Shares by, in each case, using its best endeavours to purchase or procure the purchase of Realisation Shares in the secondary market. The obligation to purchase or procure the purchase of Realisation Shares shall be fulfilled by the Investment Adviser by no later than one month after the end of such calendar quarter. The Investment Adviser will have no obligation to reinvest and/or procure the reinvestment of fees it receives with respect to a calendar quarter in circumstances where either: (i) the Realisation Shares did not trade at close in the secondary market at a discount to their then-prevailing Quarter End Realisation NAV; or (ii) where the Realisation Shares did trade at close in the secondary market at a discount to their then- prevailing Quarter End Realisation NAV and it is unable to purchase or procure the purchase of Realisation Shares in the secondary market at a discount to their then-prevailing Quarter End Realisation NAV despite having used its best endeavours to do so and, in either case, the Investment Adviser shall retain all fees it receives for such quarter. The Investment Advisory Agreement can be terminated by either party giving not less than 6 months written notice. FINANCIAL STATEMENTS 88 Notes to the Financial Statements For the year ended 31 December 2024 8. RELATED PARTIES AND OTHER KEY CONTACTS (CONTINUED) Transactions with Investment Adviser and Investment Portfolio Investor (continued) Fair Oaks CLOs At 31 December 2024, Wollemi had the following investments in Fair Oaks CLOs: Fair Oaks CLOs 31 December 2024 31 December 2023 EUR EUR FOAKS 1 CLO 22,972,086 20,783,972 FOAKS 2 CLO 22,882,540 24,035,934 FOAKS 3 CLO 26,472,856 23,901,852 FOAKS 4 CLO 26,896,026 30,126,945 FOAKS 5 CLO 22,408,372 - FOLF V - 13,000,000 FOLF VI was set up before year-end but no drawdowns had been made. The Investment Adviser to the Company also acts as collateral manager to the Fair Oaks CLOs. Founder Partners The Master Fund III and Master Fund II also pay the Founder Partner VI and Founder Partner II respectively a carried interest equal to 20 percent of cash available to be distributed (after payment of expenses and management fees) after Limited Partners have received a Preferred Return. The threshold calculation of the Preferred Return will be based solely on distributions and not on NAV calculations so the Master Funds will not pay any carried interest until their investors have realised the amounts drawn down for investments and met their Preferred Returns. At 31 December 2024, US$Nil (31 December 2023: US$Nil) carried interest was due at Master Funds’ level in respect of the Company’s limited partnership interests. Administrator Apex Fund and Corporate Services (Guernsey) Limited (formerly Sanne Fund Services (Guernsey) Limited (the “Administrator”)) is entitled to receive a time-based fee quarterly in arrears for all Company Secretarial services. The Administrator is also entitled to an annual fee of US$38,429 (31 December 2023: US$36,599), payable quarterly in arrears for Administration and Accounting services. The Administrator is also entitled to an annual fee of £629 (31 December 2023: £629) in relation to FATCA reporting and acting as Responsible Officer. Master Funds The Company paid audit fees to KPMG on behalf of the Master Funds. At 31 December 2024 US$nil (31 December 2023: US$ 120,488) was receivable from the Master Funds. The amount due to KPMG on behalf of the Company is US$122,502 (31 December 2023: US$45,795) (Note 13). Custodian BNP Paribas Securities Services S.C.A., Guernsey Branch (the “Custodian”) waived all fees on the basis that assets are invested into the Master Fund II. Directors’ Fees The Company’s Board of Directors are entitled to a fee in remuneration for their services as Directors at a rate payable of £45,000 each per annum (31 December 2023: £45,000). An additional £3,000 per annum (2023: £nil) is payable to the Chair of the Audit Committee. FINANCIAL STATEMENTS 89 Notes to the Financial Statements For the year ended 31 December 2024 8. RELATED PARTIES AND OTHER KEY CONTACTS (CONTINUED) Other Material Contracts (continued) Directors’ Fees (continued) The overall charge for the above-mentioned fees for the Company and the amounts due are as follows: For the year ended 31 December 2024 For the year ended 31 December 2023 US$ US$ CHARGE FOR THE PERIOD Investment Adviser fee 151,933 211,438 Administration fee 81,991 123,061 Directors’ fees and expenses 218,843 218,274 OUTSTANDING FEES Investment Adviser fee 15,853 18,633 Administration fee 45,993 37,942 Shares held by related parties The shareholdings of the Directors’ in the Company were as follows: 31 December 2024 31 December 2023 No. of 2021 No. of 2021 Shares Percentage Shares Percentage Name Jon Bridel 40,000 0.01% 40,000 0.01% A person closely associated with Mr. Bridel is the registered holder of these shares. Mr. Bridel resigned on 31 December 2024. As at 31 December 2024, the Investment Adviser, the General Partner and principals of the Investment Adviser and General Partner held an aggregate of 5,317,659 2021 Shares (31 December 2023: 5,331,980 2021 Shares) and 110,902 Realisation Shares (31 December 2023: 92,086 Realisation Shares), which is 0.54% (31 December 2023: 0.91%) of the issued 2021 Share capital and 0.10% (31 December 2023: 0.20%) of the issued Realisation Share capital respectively. 9. TAX STATUS The Company is exempt from Guernsey income tax and is charged an annual exemption fee of £1,200 under The Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989. 10. SHARE CAPITAL The Company’s 2021 Shares and Realisation Shares are classified as equity. Incremental costs directly attributable to the issue of shares are recognised as a deduction in equity and are charged to the share capital account, including the initial set up costs. On 17 September 2024 and 6 December 2024 the Company returned US$2,850,050 and US$2,100,000 by way of partial redemptions of Realisation Shares, being the “Fourth Redemption” and “Fifth Redemption” respectively. The Fourth Redemption was effected at 56.08 US cents per share, being the NAV per Realisation Share as at 31 July 2024 of 58.08 US cents per share less the dividend of the period to 28 June 2024 of 2.00 US cents per share. FINANCIAL STATEMENTS 90 Notes to the Financial Statements For the year ended 31 December 2024 10. SHARE CAPITAL (continued) The Fifth Redemption was effect at 56.20 US cents per share, being the NAV per Realisation Share as at 31 October 2024 of 58.20 US cents per share less the dividend for the period to 30 September 2024 of 2.00 US cents per share. (31 December 2023: The Company returned a total of US$3,255,010 by way of partial redemptions of Realised Shares, being the Second and Third Redemptions). Following the Distribution Policy announcement on 20 September 2022 and the general authority granted by shareholders of the Company on 14 June 2024 to make market purchases of its own Ordinary Shares, the Company repurchased 5,603,189 2021 Shares during the period to 31 December 2024 (31 December 2023 20,699,431 2021 Shares), to be held in Treasury, at average cost of US$0.5384 (31 December 2023 US$0.5057) per 2021 Share. At 31 December 2024, the Company held 28,560,207 (31 December 2023 23,805,408) 2021 Shares in Treasury. The Company issued 848,660 2021 Shares from Treasury during the year at an average price of US$0.5775 (31 December 2023: Nil). The authorised share capital of the Company is represented by an unlimited number of ordinary shares of nil par value and have the following rights: (a) Dividends: Shareholders of a particular class or tranche are entitled to receive, and participate in, any dividends or other distributions relating to the assets attributable to the relevant class or tranche which are resolved to be distributed in respect of any accounting period or other period, provided that no calls or other sums due by them to the Company are outstanding. (b) Winding Up: On a winding up, the shareholders of a particular class or tranche shall be entitled to the surplus assets attributable to that class or tranche remaining after payment of all the creditors of the Company. (c) Voting: Subject to any rights or restrictions attached to any class or tranche of shares, at a general meeting of the Company, on a show of hands, every holder of voting shares present in person or by proxy and entitled to vote shall have one vote, and on a poll every holder of voting shares present in person or by proxy shall have one vote for each share held by him, but this entitlement shall be subject to the conditions with respect to any special voting powers or restrictions for the time being attached to any class or tranche of shares which may be subject to special conditions. Refer to the Memorandum and Articles of Incorporation for further details. (d) Buyback: The Company may acquire its own shares (including any redeemable shares). Any shares acquired by the Company may be cancelled or held as treasury shares provided that the number of shares of any class held as treasury shares must not at any time exceed ten per cent. (or such other percentage as may be prescribed from time to time by the States of Guernsey Committee for Economic Development) of the total number of issued shares of that class. Any shares acquired in excess of this limit shall be treated as cancelled. 31 December 2024 31 December 2023 Shares US$ Shares US$ Issued share capital 2021 Shares Share capital at the beginning of the year 382,010,069 372,680,688 402,709,500 383,148,853 Treasury share issue 848,660 490,101 - - Share buy backs (5,603,189) (3,016,924) (20,699,431) (10,468,165) Share capital at the end of the year 377,255,540 370,153,865 382,010,069 372,680,688 FINANCIAL STATEMENTS 91 Notes to the Financial Statements For the year ended 31 December 2024 10. SHARE CAPITAL (continued) 31 December 2024 31 December 2023 Shares US$ Shares US$ Issued share capital Realisation Shares Share capital at the beginning of the year 49,906,358 51,996,697 55,578,441 55,251,707 Share redemptions (8,820,338) (4,950,050) (5,672,083) (3,255,010) Share capital at the end of the year 41,086,020 47,046,647 49,906,358 51,996,697 The total number of 2021 Shares in issue, as at 31 December 2024 was 405,815,477 (31 December 2023: 405,815,477 shares), of which 28,560,207 2021 Shares were held in Treasury (31 December 2023: 23,805,408 2021 Shares), and the total number of 2021 Shares in issue excluding treasury shares were 377,255,540 (31 December 2023: 382,010,069 shares). The total number of Realisation Shares in issue, as at 31 December 2024 was 41,086,020 (31 December 2023: 49,906,358), of which no shares were held in Treasury (31 December 2023: none). At 31 December 2024, the Company has 418,341,290 (31 December 2023: 431,916,427) Shares (excluding treasury shares). 11. EARNINGS PER SHARE 31 December 2024 31 December 2023 2021 Shares Realisation Shares 2021 Shares Realisation Shares US$ US$ US$ US$ Weighted average number of shares 381,215,076 48,193,055 391,034,588 54,488,077 Profit for the year 29,387,034 4,278,530 26,794,126 4,190,991 Basic and diluted earnings per share 0.0771 0.0888 0.0685 0.0769 For the year ended 31 December 2024, profits for the year have been allocated 88.2% to 2021 Shares and 11.8% to Realisation Shares (31 December 2023 86.47% to 2021 Shares and 13.53% Realisation Shares). The weighted average number of shares as at 31 December 2024 and 31 December 2023 is based on the number of 2021 Shares and Realisation Shares in issue during the year. 12. OTHER RECEIVABLES AND PREPAYMENTS 31 December 2024 31 December 2023 US$ US$ Receivable from related parties (Note 8) - 120,488 Income distribution receivable - 452,434 Prepayments 14,350 20,524 14,350 593,446 FINANCIAL STATEMENTS 92 Notes to the Financial Statements For the year ended 31 December 2024 13. TRADE AND OTHER PAYABLES 31 December 2024 31 December 2023 US$ US$ Investment advisory fees payable 15,853 18,633 Audit fees payable 122,502 45,795 Registrar's fees payable 13,763 33,144 Sundry expenses payable 72,809 13,554 Administration fees payable 45,993 37,942 FOIL Realisation - share redemption – service fee payable - 6,651 FOIL 2021 - share buyback payable - 33,997 FOIL Realisation - share redemption accrual - 2,099,990 270,920 2,289,706 14. CONTINGENT LIABILITIES AND COMMITMENTS The Company entered into a Subscription Agreement with Master Fund III to become a Limited Partner with a total commitment of US$289,500,000 (31 December 2023: total commitment of US$289,500,000) of which US$277,321,949 (31 December 2023: US$268,573,683) had been called. The Company entered into a Subscription Agreement with Master Fund II to become a Limited Partner with a total commitment of US$452,346,532 (31 December 2023: US$452,346,532) of which US$432,982,362 (31 December 2023: US$432,982,362) had been called. With effect from 22 April 2021, the Company’s 2021 Shares commitment to Master Fund II is on an indirect basis through the Master Fund III. The Master Fund II commitment period ended on 12 June 2021. At 31 December 2024 and 31 December 2023, the Company had no other outstanding commitments. 15. SUBSEQUENT EVENTS On 22 January 2025, the Company announced it repurchased 25,419 2021 Shares at a price of USD 0.5502 per Share, to be held in Treasury. On 6 February 2025, the Company declared an interim dividend of 2.00 US cents per 2021 Share and 2.00 US cents per Realisation Share in respect of the quarter ended 31 December 2024. The ex-dividend date was 29 February 2024 and the dividend was paid on 7 March 2025. On 14 March 2025, the Company returned US$4,500,000 by way of a compulsory partial redemption of Realisation Shares (the "Sixth Redemption"). On 28 February 2025, the Company issued 750,000 2021 Shares from Treasury. The 2021 Shares were issued at a price of 55.50 cents per 2021 Share. There were no other significant events since the year end which would require revision of the figures or disclosures in the Financial Statements. ADDITIONAL INFORMATION 93 Portfolio Statement (unaudited) At 31 December 2024 CLO Equity Income Notes Security Instrument Par Value 51 Valuation ALLEG 2021-1A SUB Subordinated Notes US$1,912,200 60.00% ALLEG 2017-2X SUB Subordinated Notes US$27,541,663 20.00% ALLEG 2021-1X SUB Subordinated Notes US$18,782,896 60.00% ARES 2015-35R Subordinated Notes US$17,958,200 15.00% AWPT 2017-6X SUB Subordinated Notes US$20,755,535 2.00% FOAKS 1X M Subordinated Fee Notes €673,100 0.00% FOAKS 1X SUB Subordinated Notes €18,846,800 60.18% FOAKS 1X Z Subordinated Fee Notes €576,943 91.91% FOAKS 2X M Subordinated Fee Notes €673,100 0.00% FOAKS 2X SUB Subordinated Notes €31,635,700 42.03% FOAKS 2X Z Subordinated Fee Notes €576,943 107.81% FOAKS 3X M Subordinated Fee Notes €673,100 34.56% FOAKS 3X SUB Subordinated Notes €23,558,500 57.91% FOAKS 3X Z Subordinated Fee Notes €576,943 130.26% FOAKS 4X M Subordinated Fee Notes €673,100 0.00% FOAKS 4X SUB Subordinated Notes €18,846,800 77.13% FOAKS 4X Z Subordinated Fee Notes €576,943 162.21% FOAKS 5X M Subordinated Fee Notes €626,030 1.71% FOAKS 5X SUB Subordinated Notes €17,904,460 82.24% FOAKS 5X Z Subordinated Fee Notes €1,073,195 118.35% HLM 13X-18 SUB Subordinated Fee Notes US$17,923,665 23.00% POST 2018-1X SUB Subordinated Notes US$27,132,423 35.00% ROCKT 2021-2X SUB Subordinated Notes US$16,922,150 61.00% SHACK 2018-12 SUB Subordinated Notes US$20,721,000 27.00% WELF 2018-1X SUB Subordinated Notes US$20,030,300 6.60% WELF 2021-2X SUB Subordinated Notes US$19,943,963 33.00% CLO Mezzanine Notes Security Instrument Par Value Valuation ACLO 12X F Class F Notes €1,393,317 98.75% AVOCA 16X FRR Class F Notes €1,615,440 98.37% AVOCA 18X FR Class F Notes €1,177,925 98.00% DRSLF 2017-49A F Class F Notes US$3,177,220 65.57% DRSLF 2017-53A Class F Notes US$3,453,500 76.19% FOAKS 4X F Class F Notes €3,432,810 101.47% HLM 13X-18 F Class F Notes US$3,962,891 97.93% OHECP 2015-4X FR Class F Notes €1,753,687 98.69% SYMP 2018-19A F Class F Notes US$3,798,850 76.24% TRNTE 8X F Class F Notes €1,346,200 98.34% FOAKS 2X ER Class F Notes €1,434,150 103.01% 51 Shows the Company’s 2021 Shares proportionate share, via the Master Fund III, in the Master Fund II at 62.21% (31 December 2023: 62.21%) and the Company’s direct holding in the Master Fund II at 9.59% (31 December 2023: 9.59%). 2021 Shares and Realisation Shares proportionate share together at 69.06% (31 December 2023: 68.89%). Also includes Master Fund III's direct investments, Master Fund II’s 91.76% share in Wollemi. ADDITIONAL INFORMATION 94 Management and Administration Directors Richard Burwood (Independent non-executive Chair) Fionnuala Carvill (Independent non-executive Director) Trina Le Noury (Independent non-executive Director) Registered Office and Business Address Administrator and Secretary 1 Royal Plaza Royal Avenue St Peter Port Guernsey Apex Fund and Corporate Services (Guernsey) Limited (formerly Sanne Fund Services (Guernsey) Limited) 1 Royal Plaza GY1 2HL Royal Avenue St Peter Port Guernsey GY1 2HL Investment Adviser Registrar Fair Oaks Capital Limited 1 Old Queen Street Link Market Services (Guernsey) Limited also trades as MUFG Corporate Markets London Mont Crevelt House SW1H 9JA Bulwer Avenue St Sampson Guernsey GY2 4LH Legal Advisers in Guernsey Legal Advisers in United Kingdom Carey Olsen (Guernsey) LLP Stephenson Harwood LLP Carey House 1 Finsbury Circus Les Banques London St Peter Port EC2M 7SH Guernsey GY1 4BZ Joint Bookrunners, Joint Brokers and Joint Financial Advisers Independent Auditor KPMG Channel Islands Limited Deutsche Numis Securities Limited Glategny Court 10 Paternoster Square Glategny Esplanade London St Peter Port EC4M 7LT Guernsey GY1 1WR Liberum Capital Limited Ropemaker Place, Level 12 Custodian and Principal Bankers Ropemaker Street BNP Paribas Securities Services S.C.A. London BNP Paribas House EC2Y 9LY St Julian’s Avenue St Peter Port Guernsey GY1 1WA ADDITIONAL INFORMATION 95 Appendix (unaudited) Alternative Performance Measures used in the Annual Report Total NAV return Total NAV return is a calculation showing how the NAV per share has performed over a period of time, taking into account dividends paid to shareholders. It is calculated on the assumption that dividends are reinvested, on an accumulative basis from the inception of the Company, at the prevailing NAV on the last day of the month that the shares first trade ex-dividend. The performance is evaluated on an original shareholding of 1,000 shares on inception of the Company (12 June 2014). This provides a useful measure to allow shareholders to compare performances between investment companies where the dividend paid may differ. For the year ended For the year ended 2021 Shares 31 December 2024 31 December 2023 Opening NAV per 2021 Share US$0.5638 US$0.5721 Opening accumulated number of 2021 Shares (a) 3,272.6 shares 2,854.4 shares Opening NAV valuation of shares (b) US$1,845.1 US$1,633.1 Dividends paid during the period US$0.0800 US$0.0800 Dividends converted to shares (c) 504.0 shares 418.1 shares Closing NAV per 2021 Share US$0.5614 US$0.5638 Closing accumulated number of 2021 Shares (d = a + c) 3,776.6 shares 3,272.6 shares Closing NAV valuation of shares (e) US$2,120.2 US$1,845.1 NAV valuation of shares return (f = e – b) US$275.1 US$212.1 Total NAV return (g = (f / b) x 100) 14.91% 12.98% For the year ended For the year ended Realisation Shares 31 December 2024 31 December 2023 Opening NAV per Realisation Share US$0.5715 US$0.5747 Opening accumulated number of Realisation Shares (a) 3,268.3 shares 2,855.3 shares Opening NAV valuation of shares (b) US$1,868.0 US$1,641.0 Dividends paid during the period US$0.0800 US$0.0800 Dividends converted to shares (c) 490.4 shares 412.9 shares Closing NAV per Realisation share US$0.5832 US$0.5715 Closing accumulated number of Realisation Shares (d = a + c) 3,758.7 shares 3,268.3 shares Closing NAV valuation of shares (e) US$2,192.1 US$1,868.0 NAV valuation of shares return (f = e – b) US$324.1 US$227.0 Total NAV return (g = (f / b) x 100) 17.35% 13.82% with dividends reinvested since inception (12 June 2014). converted to 2021 Shares at the prevailing month end NAV ex-dividend for all dividends paid during the period. ADDITIONAL INFORMATION 96 Appendix (unaudited) Alternative Performance Measures used in the Annual Report (continued) Total share price return Total share price return is a calculation showing how the share price per share has performed over a period of time, taking into account dividends paid to shareholders. It is calculated on the assumption that dividends are reinvested, on an accumulative basis, from the inception of the Company, at the prevailing share price on the last day of the month that the shares first trade ex-dividend. The performance is evaluated on an original shareholding of 1,000 shares on inception of the Company (12 June 2014). This provides a useful measure to allow shareholders to compare performances between investment companies where the dividend paid may differ. For the year ended For the year ended 2021 Shares 31 December 2024 31 December 2023 Opening share price per 2021 Share US$0.5500 US$0.4900 Opening accumulated number of 2021 Shares (a) 3,355.6 shares 2,876.6 shares Opening share price valuation of shares (b) US$1,845.6 US$1,409.6 Dividends paid during the period US$0.0800 US$0.0800 Dividends converted to shares (c) 508.6 shares 479.0 shares Closing share price per 2021 Share US$0.5400 US$0.5500 Closing accumulated number of 2021 Shares (d = a + c) 3,864.2 shares 3,355.6 shares Closing share price valuation of shares (e) US$2,086.7 US$1,845.6 Share price valuation of shares return (f = e – b) US$241.1 US$436.0 Total Share price return (g = (f / b) x 100) 13.06% 30.94% For the year ended For the year ended Realisation Shares 31 December 2024 31 December 2023 Opening share price per Realisation Share US$0.5700 US$0.5650 Opening accumulated number of Realisation Shares (a) 3,233.8 shares 2,810.0 shares Opening share price valuation of shares (b) US$1,843.2 US$1,587.7 Dividends paid during the period US$0.0800 US$0.0800 Dividends converted to shares (c) 478.3 shares 423.8 shares Closing share price per Realisation Shares US$0.5710 US$0.5700 Closing accumulated number of Realisation Shares (d = a + c) 3,712.1 shares 3,233.8 shares Closing share price valuation of shares (e) US$2,119.6 US$1,843.2 Share price valuation of shares return (f = e – b) US$276.4 US$255.5 Total Share Price return (g = (f / b) x 100) 14.99% 16.10% with dividends reinvested since inception (12 June 2014). **converted to 2021 Shares at the prevailing month end NAV ex-dividend for all dividends paid during the period. ADDITIONAL INFORMATION 97 Appendix (unaudited) Alternative Performance Measures used in the Annual Report (continued) 2021 and Realisation Share (discount)/premium to NAV 2021 and Realisation Share (discount)/premium to NAV is the amount by which the 2021 and Realisation Share price is lower/ higher than the NAV per 2021 and Realisation Share, expressed as a percentage of the NAV per 2021 and Realisation Share, and provides a measure of the Company’s share price relative to the NAV. Ongoing charges ratio (“OCR”) The ongoing charges ratio of an investment company is the annual percentage reduction in shareholder returns as a result of recurring operational expenditure. Ongoing charges are classified as those expenses which are likely to recur in the foreseeable future, and which relate to the operation of the company, excluding investment transaction costs, gains or losses on investments and performance fees. In accordance with the AIC guidance, the proportionate charges for the period are also incorporated from investments in other funds. As such charges for: 1. 2021 Shares–from the Master Fund III a weighted average percentage for the year of 95.61% (31 December 2023: 99.33%), the Master Fund II at a weighted average percentage for the year of 59.48% (31 December 2023: 59.37%), Wollemi at a weighted average percentage for the year of 59.94% (31 December 2023: 63.18%), and Cycad Investments LP at a weighted average percentage for the period of 0% (31 December 2023: 9.45%) are included. Cycad was liquidated during 2024. 2. Realisation Shares – from the Master Fund II a weighted average percentage for the year of 9.59% (31 December 2023: 9.59%), Wollemi at a weighted average percentage for the year of 7.38% (31 December 2023: 8.58%) and Cycad Investments LP at a weighted average percentage for the year of 0% (31 December 2023: 1.28%) are included. Cycad was liquidated during 2024. Performance fees or carried interest from the underlying funds are not included. The OCR is calculated as the total ongoing charges for a period divided by the average net asset value over that year. 1 January 2024 to 31 December 2024 Master Fund III Master Fund II Total Company US$ US$ US$ 2021 Shares Total expenses 974,080 2,011,686 2,985,766 Non-recurring expenses - - - Total ongoing expenses 974,080 2,011,686 2,985,766 Average NAV 213,940,615 213,940,615 Ongoing charges ratio (using AIC methodology) 0.46% 1.40% 1 January 2024 to 31 December 2024 Master Fund III Master Fund II Total Company US$ US$ US$ Realisation Shares Total expenses 106,150 260,136 366,286 Non-recurring expenses - - - Total ongoing expenses 106,150 260,136 366,286 Average NAV 27,594,692 27,594,692 Ongoing charges ratio (using AIC methodology) 0.38% 1.32% ADDITIONAL INFORMATION 98 Appendix (unaudited) Alternative Performance Measures used in the Annual Report (continued) Ongoing charges ratio (“OCR”) (continued) 1 January 2023 to 31 December 2023 Master Fund III Master Fund II Total Company US$ US$ US$ 2021 Shares Total expenses 1,016,006 2,088,550 3,104,556 Non-recurring expenses - - - Total ongoing expenses 1,016,006 2,088,550 3,104,556 Average NAV 227,421,772 227,421,772 Ongoing charges ratio (using AIC methodology) 0.45% 1.37% 1 January 2023 to 31 December 2023 Master Fund III Master Fund II Total Company US$ US$ US$ Realisation Shares Total expenses 132,711 288,497 421,208 Non-recurring expenses - - - Total ongoing expenses 132,711 288,497 421,208 Average NAV 31,997,670 31,997,670 Ongoing charges ratio (using AIC methodology) 0.41% 1.32%

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