THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document, you should consult immediately a person authorised for the purposes of the Financial Services and Markets Act 2000, as amended ( FSMA ) who specialises in advising on the acquisition of shares and other securities. A copy of this document, which comprises a prospectus (the Prospectus ) relating to Sequoia Economic Infrastructure Income Fund Limited (the Company ) in connection with the issue of ordinary shares in the Company (the Shares ), prepared in accordance with the Prospectus Rules of the Financial Conduct Authority ( FCA ) made pursuant to section 85 of FSMA, has been delivered to the FCA and has been made available to the public in accordance with Rule 3.2 of the Prospectus Rules. Application will be made to the UK Listing Authority for all of the Shares to be issued pursuant to the Issue to be admitted to the Premium Listing segment of the Official List and for all such Shares to be admitted to trading on the London Stock Exchange s main market for listed securities. It is expected that such admission will become effective and that dealings in such Shares will commence at 8.00 a.m. on or around 3 March 2015. The Shares are not dealt in on any other recognised investment exchanges and no applications for the Shares to be traded on any such other exchanges have been made or are currently expected to be made. The Directors, whose names and functions appear in the Directors, Agents and Advisers section of this Prospectus, and the Company itself, accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and of the Company (who have taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. International Fund Management Limited (the Investment Manager ) accepts responsibility for the information contained in this document attributed or pertaining to it. To the best of the knowledge of the Investment Manager, who has taken all reasonable care to ensure that such is the case, the information contained in this document attributed or pertaining to it is in accordance with the facts and contains no omission likely to affect its import. Sequoia Investment Management Company Limited (the Investment Adviser ) accepts responsibility for the information contained in this document attributed or pertaining to it. To the best of the knowledge of the Investment Adviser, which has taken all reasonable care to ensure that such is the case, the information contained in this document attributed or pertaining to it is in accordance with the facts and contains no omission likely to affect its import. Although the whole text of this document should be read, the attention of persons receiving this document and of potential investors in the Company are drawn to the section headed Risk Factors contained on pages 16 to 35 of this document. The latest time and date for applications under the Offer for Subscription is 1.00 p.m. on 24 February 2015. For more information about the Issue, please refer to the section entitled The Issue in Part 6 of this Prospectus. Sequoia Economic Infrastructure Income Fund Limited (a company incorporated in Guernsey under the Companies (Guernsey) Law, 2008, as amended) with registered no. 59596) Applications for listing on the Premium Listing segment of the Official List and admission to trading on the London Stock Exchange s main market for listed securities Placing and Offer for Subscription of up to 150 million Shares at an Issue Price of 100 pence per Share Oriel Securities Limited Sponsor and Sole Bookrunner Oriel Securities Limited ( Oriel ) is authorised and regulated in the United Kingdom by the FCA and is acting for the Company and no-one else in connection with the Issue and the contents of this document and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Issue and the contents of this document or any matters referred to herein. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Oriel may have under FSMA or the regulatory regime established thereunder. Oriel takes no responsibility for any part of the contents of this document pursuant to sections 79(3) or 90 of FSMA and does not accept any responsibility for, or authorise, any part of the contents of this document under rule 5.5 of the Prospectus Rules of the FCA. The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ) or with any securities regulatory authority of any state or other jurisdiction of the United States and the Shares may not be offered, sold, resold, transferred or delivered, directly or indirectly, within the United States or to, or for the account or benefit of a U.S. person (as defined in Regulation S under the U.S. Securities Act ( Regulation S ) (a U.S. Person ). There will be no offer of the Shares in the United States. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended (the U.S. Investment Company Act ) nor will either the Investment Manager or the Investment Adviser be registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the U.S. Investment Advisers Act ). Consequently, investors will not be entitled to the benefits and protections of the U.S. Investment Company Act or the U.S. Investment Advisers Act. Except with the express written consent of the Company given in respect of an investment in the Company, the Shares may not be acquired by: (i) investors using assets of: (A) an employee benefit plan that is subject to Part 4 of Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ( ERISA ); (B) a plan to which Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the U.S. Tax Code ), applies; or (C) an entity whose underlying assets are considered to include plan assets by reason of investment by an employee benefit plan or plan described in the preceding clauses (A) or (B) in such entity; or (ii) a governmental plan (as defined in Section 3(32) of ERISA), a church plan (as defined in Section 3(33) of ERISA) that has not made an election under Section 410(d) of the U.S. Tax Code, or a non-u.s. plan that is subject to any federal, state, local or non-u.s. law that regulates its investments (a Similar Law ), unless such governmental, church or non-u.s. plan s purchase, holding, and disposition of the Shares will not constitute or result in a violation of any Similar Law that prohibits or imposes an excise or penalty tax on the purchase of the Shares. The distribution of this Prospectus and the offer of the Shares in certain jurisdictions may be restricted by law. Other than in the United Kingdom, no action has been or will be taken to permit the possession, issue or distribution of this Prospectus (or any other offering or publicity material relating to the Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither this Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. None of the Company, Oriel, the Investment Adviser, the Investment Manager or any of their respective affiliates or advisers accepts any legal responsibility to any person, whether or not such person is a potential investor, in respect of any such restrictions. This document is dated 28 January 2015.
TABLE OF CONTENTS page SUMMARY 3 RISK FACTORS 16 IMPORTANT INFORMATION 36 DIRECTORS, AGENTS AND ADVISERS 42 EXPECTED TIMETABLE 44 ISSUE STATISTICS 45 PART 1 INVESTMENT OBJECTIVE AND POLICY 46 PART 2 THE GROUP 48 PART 3 MANAGEMENT AND ADMINISTRATION 64 PART 4 BACKGROUND TO ECONOMIC INFRASTRUCTURE AND ASSOCIATED DEBT INVESTMENT OPPORTUNITIES 72 PART 5 TARGET PORTFOLIO 78 PART 6 THE ISSUE 84 PART 7 TERMS AND CONDITIONS OF THE PLACING 89 PART 8 TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION 101 PART 9 TAXATION 108 PART 10 ADDITIONAL INFORMATION ON THE COMPANY 112 DEFINITIONS 139 2
SUMMARY Summaries are made up of disclosure requirements known as Elements. These elements are numbered in Sections A E (A.1 E.7). This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. Section A Introduction and warnings A.1 This summary should be read as an introduction to the Prospectus; any decision to invest in the securities should be based on a consideration of the Prospectus as a whole by the investor; where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of any sovereign state which is a member of the European Union, have to bear the costs of translating the Prospectus before the legal proceedings are initiated; and civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Subsequent resale of securities or final placement of securities through financial Not applicable. Sequoia Economic Infrastructure Income Fund Limited (the Company ) is not engaging any financial intermediaries for any resale of securities or final placement of securities after the publication of this document. intermediaries Section B The Company B.1 The legal and commercial Sequoia Economic Infrastructure Income Fund Limited. name of the Company B.2 Domicile and legal form of the Company The Company is a Guernsey-domiciled, non-cellular company limited by shares with an unlimited life, incorporated under the Companies (Guernsey) Law, 2008, as amended (the Guernsey Companies Law ) on 30 December 2014 with registered number 59596. Its registered office is situated at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR. 3
B.5 Details of any group of The Company holds 100 per cent. of the issued share capital in which the Company Sequoia IDF Asset Holdings S.A. (the Subsidiary, and, together forms part with the Company, the Group ). B.6 Notifiable interests Not applicable. Other than IASL Nominees Limited, the sole Shareholder of the Company as at the date of this Prospectus, as at the date of this Prospectus, insofar as is known to the Company, there are no parties known to have a notifiable interest in the Company s capital or voting rights. All shareholders have the same voting rights in respect of the share capital of the Company. B.7 Selected historical key financial information and Not applicable. The Company has been newly incorporated and has no historical financial information. significant change to the Company s financial condition and operating results B.8 Selected key pro forma Not applicable. No pro forma financial information is included in financial information this document. B.9 Profit forecast or estimate Not applicable. No profit forecast or estimate is made in this document. B.10 Qualifications in the audit Not applicable. The Company is newly incorporated and has no report historical financial information. B.11 Insufficiency of working capital Not applicable. The Company is of the opinion that, on the basis that the Minimum Net Proceeds are raised, the working capital available to the Group is sufficient for its present requirements, that is, for at least the next 12 months following the date of this document. For these purposes, Minimum Net Proceeds are net proceeds of 73,500,000 (or such other amount as the Company and Oriel may determine and notify to potential investors via publication of a Regulated Information Service notice and, provided such amount is less than 73,500,000, a supplementary prospectus). B.34 Description of investment Company Investment Objective and Policy objective, policy and Investment Objective investment restrictions The Company s investment objective is to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. This objective is subject to the Group having a sufficient level of investment capital from time to time and the ability of the Group to invest its cash in suitable investments and is subject to the Investment Criteria. Asset Allocation The Company s objective is to maintain its portfolio so that not more than 10 per cent. by value of the Group s investments (at the time of the investment) consists of securities or loans relating to any one individual infrastructure asset. In addition, the Company intends to invest directly or indirectly only in debt exposures that 4
satisfy the following criteria, such investments to make up a minimum of 80 per cent. by value of Group s investments at the time of investment ( Investment Criteria ): where all or substantially all of the associated underlying revenues are from Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the Netherlands, the UK or the U.S., provided that any such jurisdiction is rated (in respect of its local currency sovereign ceiling) at the time of investment at least BBB- by S&P or Baa3 by Moody s (each, an Eligible Jurisdiction ); where all or substantially all of the associated underlying revenues are from business activities in the sectors below. In addition to the sub-sectors mentioned below, the Group may invest in other sub-sectors within the sectors listed below where considered appropriate. Sector Transport Example of typical sub-sectors Roads* Rail* Airports* Ports* Transportation equipment Aircraft Rolling stock Shipping Utilities Water and waste* Electricity distribution and transmission* Gas distribution and transmission* Pipelines* Power Renewable energy Electricity generation Solar Wind Biomass Telecommunications infrastructure Mobile phone towers Fixed line networks Infrastructure accommodation Student accommodation Elderly care facilities * Each sub-sector marked with a * is a Major Sub-Sector. predominantly operational projects, since the Investment Adviser believes that once an infrastructure asset has been constructed and the contracted cash flows relating to the project have commenced, many of the risks associated with investments in such assets are significantly reduced; 5
in excess of 50 per cent. of its portfolio to be floating rate or inflation-linked debt (although investments will be a combination of floating rate, fixed rate and inflation linked instruments); and structured as loans, notes and bonds. Risk Diversification The following concentration limits on investments have been set by the directors of the Company ( Directors ) (the Investment Concentration Limits ): Maximum individual exposure No more than 10% of total assets in any one exposure Diversification by sector (e.g. transport, utility, renewable etc.) No single sector will represent more than 40% of total assets Diversification by sub-sector (e.g. road, airport etc.) No single subsector will represent more than 15% of total assets, other than for the Major Sub- Sectors which may represent up to 25% of total assets Jurisdictional diversification No more than: 50% in the United States; 50% in Western Europe (ex-uk); 40% in the UK; and 20% in Australia and New Zealand combined Construction Risk Construction projects will not represent more than 20% of the total assets Gearing and Maximum Exposures The Company may, from time to time, utilise borrowings for share buybacks and short term liquidity or short term investment purposes, but such borrowings will not, in any event, exceed 20 per cent. of the value of the assets of the Company less its liabilities ( Net Asset Value ) immediately following drawdown. Material Change In accordance with its obligations under the listing rules made by the FCA (acting in its capacity as the competent authority for the purposes of Part VI of FSMA) under section 73A of FSMA, the Company will obtain the prior approval of its Shareholders to any material change to its published investment policy. B.35 Borrowing and/or leverage limits The Company may, from time to time, utilise borrowings for share buybacks and short term liquidity or short term investment purposes, but such borrowings will not, in any event, exceed 20 per cent. of the Company s Net Asset Value immediately following any drawdown. B.36 Regulatory status of the The principal legislation under which the Company operates is the Group Guernsey Companies Law. The Company is a non-cellular company limited by shares incorporated in Guernsey and has been registered by the Guernsey Financial Services Commission (the GFSC ) as a registered closed-ended collective investment scheme. The Company is not regulated by any other regulator. 6
The principal legislation under which the Subsidiary operates is the Luxembourg Securitisation Law of 2004. The Subsidiary is a Luxembourg securitisation company incorporated on 12 December 2011 with company registration number B165989. The Company has been advised that its ordinary shares of no par value in the capital of the Company ( Shares ) can be considered as excluded securities for the purposes of the Financial Conduct Authority ( FCA ) rules regarding the definition and promotion of non-mainstream pooled investments ( NMPIs ) because the Company would qualify for approval as an investment trust if it were based in the United Kingdom. As such, the Directors believe that the Shares will be excluded securities under the FCA s rules on NMPIs and are therefore excluded from the FCA s restrictions which apply to NMPIs. It is the intention of the Company to meet the required criteria and accordingly it will seek to distribute at least 85 per cent. of its income. B.37 Profile of typical investors Typical investors in the Company are expected to be institutional and sophisticated investors and private client brokers acting on behalf of private wealth clients. B.38 Investment in excess of 20 per cent. of the Not applicable. The Group is not permitted to invest more than 10 per cent. of its assets in a single underlying asset or issuer. Company s gross assets in another collective investment undertaking B.39 Investment in excess of 40 per cent. of the Not applicable. The Group is not permitted to invest more than 10 per cent. of its assets in a single underlying asset or issuer. Company s gross assets in another collective investment undertaking B.40 The Investment Manager and the Company s other service providers International Fund Management Limited (the Investment Manager ) is the investment manager of the Company. The Investment Manager provides investment management services to the Company in accordance with the terms of an investment management agreement with the Company (the Investment Management Agreement ). Under the terms of the Investment Management Agreement, the Investment Manager is entitled to receive a management fee for AIFM services which shall be calculated and accrue monthly at a rate equivalent to 0.064 per cent. of the Net Asset Value per annum for the period ending 1 May 2016 and 0.075 per cent. of the Net Asset Value per annum thereafter, in each case subject to an annualised minimum of 80,000 applied on a monthly basis. The management fees are calculated without regard to VAT. If there is any VAT payable on the fees then this shall be added to the fee amount. The minimum investment management fee will be subject to an annual review on 1 May of each year, the first review commencing in 2016. The investment management fees are payable monthly in arrears. The Investment Manager will also 7
receive ongoing fees in relation to services offered for the provision of AIFM services, corporate services and company secretarial services. These fees are expected to be approximately 95,000 in the first year following the Company s formation and 110,000 subsequently. Praxis Fund Services Limited (the Administrator ) has been appointed by the Company to provide administrative and compliance services to the Company in accordance with the terms of an administration agreement with the Company (the Administration Agreement ). Under the terms of the Administration Agreement, the Administrator will receive an annual fee which will initially be charged at 0.07 per cent. of NAV (discounted to 0.06 per cent. of NAV for the one year period from the date of the Company s inaugural board meeting). The administration fee may be varied by agreement between the parties and will be subject to a minimum annual fee of 65,000 and a fee for company secretarial services based on time-costs. Under the terms of an investment advisory agreement (the Investment Advisory Agreement ), the Investment Manager has appointed Sequoia Investment Management Company ( Investment Adviser ) as its investment adviser. The Investment Manager will delegate portfolio management functions to the Investment Adviser under the terms of the Investment Advisory Agreement but will remain responsible for general oversight and management of the Investment Adviser s activities and for risk management. Under the Investment Advisory Agreement, the Investment Adviser will be entitled to receive from the Company a base fee of (a) 0.5 per cent. per annum of the market value of listed bonds owned by the Group plus (b) 0.9 per cent. per annum of the market value of the Group s other investments (other than cash holdings, in relation to which no fees are payable to the Investment Adviser), payable quarterly. One quarter of the Investment Adviser s fee will be applied in subscribing for Shares which will be held subject to a three-year rolling lock-up. If the Company raises further capital or otherwise grows its Net Asset Value, the Investment Adviser will receive a reduced percentage fee. Computershare Investor Services (Guernsey) Limited (the Registrar ) is the registrar of the Company and is party to a share registration services agreement with the Company (the Share Registration Services Agreement ). Under the Share Registration Services Agreement, the Registrar is entitled to receive a minimum agreed fee of 6,000 per annum in respect of basic registration, together with any additional registrar activity not included in such basic registration services. Computershare Investor Services PLC (the Receiving Agent ) is the receiving agent of the Company. The Receiving Agent is paid fees including, (1) for the Offer for Subscription: (a) management fee of 5,500; and (b) out of pocket expenses including overtime for work outside business hours at a rate of 120 per person per hour on weekdays and 160 per person per hour on weekends and bank holidays; (2) with regard to the tender offers: (a) a 8
project fee of 4,500 for the initial tender offer and 3,250; and (b) various other fees for services concerning Shareholder administration. Prior to Admission the Group intends to appoint Bank of New York Mellon, London Branch (the Custodian ) (or such other institution of similar standing) as the custodian of the Subsidiary. The Custodian will be paid a fee of approximately 35,000 for services provided relating to portfolio administration and cash management during the first year of the Company s operations. B.41 Identity and regulatory status of the Investment Manager and the Investment Adviser The Investment Manager is licensed by the Guernsey Financial Services Commission under the provisions of the POI Law to conduct certain restricted activities in relation to collective investment schemes. The Investment Adviser understands that the Company is an alternative investment fund (within the meaning of the Alternative Investment Fund Managers Directive 2011/61/EU as implemented in the UK ( AIFMD )). The Investment Manager acts as the alternative investment fund manager (within the meaning of AIFMD) of the Company. The Investment Adviser is authorised and regulated in the UK by the FCA. B.42 Valuation and publication of the Company s net asset value Mazars LLP (the Valuation Agent ) is responsible for carrying out a fair market valuation of the Company s investments on a monthly basis. The Net Asset Value of the Company and of the Shares is calculated monthly by the Administrator. The monthly Net Asset Value of the Shares will be announced through a regulated information service and published on the Investment Adviser s website. The Valuation Agent will be paid a fee of approximately 55,000 where there are 150,000,000 of assets under management ( 30,000 based on 75,000,000 of assets under management) for the first year of services provided. B.43 Cross liability Not applicable. The Company is not an umbrella collective investment undertaking and as such there is no cross liability between investments in another collective investment undertaking. B.44 Statement confirming no As at the date of this Prospectus, the Company has not financial statements are in commenced operations and no financial statements have been existence made up. B.45 Description of the portfolio Not applicable. The Company has not commenced operations and so has no investments as at the date of this Prospectus. B.46 Net asset value per Shares Not applicable. The Company has not commenced operations and so has no Net Asset Value as at the date of this Prospectus. Section C Securities C.1 Type and class of securities The Shares, which are being offered pursuant to a placing and offer for subscription (the Issue ) are ordinary shares of no par value in the capital of the Company. being offered and admitted to trading and identification number Application will be made for the Shares to be admitted to listing on the Premium Listing segment of the Official List and to trading on the Main Market of the London Stock Exchange 9
C.2a Currency denomination of Shares ( Admission ). It is expected that Admission will occur, and that dealings in the Shares will commence, at 8.00 a.m. on or around 3 March 2015. ISIN: GG00BV54HY67 SEDOL: BV54HY6 The Shares will be denominated in the lawful currency of the United Kingdom. C.3 Details of share capital Assuming that the maximum number of Shares are subscribed for in the Issue, the issued share capital of the Company immediately following the Issue will consist of 150,000,000 Shares (all of which will be fully paid). C.4 Rights attaching to the The holders of the Shares shall only be entitled to receive, and to Shares participate in, any dividends declared in relation to the Shares that they hold. On a winding-up or a return of capital by the Company, the net assets of the Company shall be divided pro rata among the holders of the Shares. The Shares shall carry the right to receive notice of, attend and vote at general meetings of the Company. The consent of the Shareholders will be required for the variation of any rights attached to such Shares. While there are no provisions under the Guernsey Companies Law equivalent to section 561 of the Companies Act 2006 which confer pre-emption rights on existing shareholders in connection with the allotment of equity securities for cash or otherwise, similar pre-emption rights (with certain exemptions) are contained within the Company s Articles of Incorporation and as such pre-emption rights are covered under the Company s Articles of Incorporation. These pre-emption rights have been dis-applied in relation to an amount equalling up to 10 per cent. of the issued shares on Admission until the first annual general meeting of the Company so as to assist the Company in managing market demand for Shares by the issue of further Shares. Unless otherwise approved by Shareholders, the Directors shall only allot and issue Shares to investors at prices not less than the latest published Net Asset Value per Share at that time. C.5 Restrictions on the transferability of Shares The Directors may only decline to register a transfer of an uncertificated Share in the circumstances set out in the regulations applicable to Euroclear and/or the CREST relevant system from time to time in force or such as may otherwise from time to time be adopted by the Directors on behalf of the Company or the rules of any relevant system, where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated Share is to be transferred exceeds four. In addition, the Directors may decline to transfer, convert or register a transfer of any Share in certificated form or (to the extent permitted by CREST Rule 8 and/or such other of the rules and 10
requirements of Euroclear UK and Ireland Limited as may be applicable to issuers as from time to time specified in the CREST Reference Manual, the CREST Central Counterparty Duty Service Manual, the CREST International Manual, CREST Rules, CCSS Operations Manual and CREST Glossary of Terms) ( Regulations ) uncertificated form: (a) if it is in favour of more than four joint transferees; (b) if applicable, if it is delivered for registration to the registered office of the Company or such other place as the Directors may decide, not accompanied by the certificate for the Shares to which it relates or such other evidence of title as the Directors may reasonably require; or (c) the transfer is in favour of any Non-Qualified Holder. For these purposes a Non-Qualified Holder means any person: (a) whose ownership of Shares may cause the Company s assets to be deemed plan assets for the purposes of the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and the applicable regulations thereunder or the U.S. Internal Revenue Code of 1986, as amended; (b) whose ownership of the Shares may cause the Company to be required to register as an investment company under the U.S. Investment Company Act (including because the holder of the Shares is not a qualified purchaser as defined in the U.S. Investment Company Act); (c) whose ownership of Shares may cause the Company to register under the U.S. Exchange Act or any similar legislation; (d) whose ownership of Shares may cause the Company not being considered a Foreign Private Issuer as such term is defined in rule 3b-4(c) under the U.S. Exchange Act; (e) whose ownership may result in a person holding Shares in violation of the transfer restrictions put forth in any offering memorandum or prospectus published by the Company, from time to time. C.6 Application for admission Application will be made for the Shares to be admitted to the to trading on a regulated Premium Listing segment of the Official List and to trading on the market Main Market of the London Stock Exchange. C.7 Dividend policy Subject to sufficient profits being available for distribution and taking into account the working capital and liquidity requirements of the Group, the Company currently intends to target an ongoing dividend for holders of Shares of five per cent. per annum in its first year of operations and six per cent. per annum subsequently (in both cases by reference to 100 pence per Share (the Issue Price ). In addition, the Company will target a long-term growth in its Net Asset Value of between one per cent. and two per cent. per annum. The Company currently intends to pay dividends on a quarterly basis with the first dividend payable in respect of the quarter ended 30 June 2015. Section D Risks D.1 Key information on the The key risk factors relating to the Company or its industry are: key risks that are specific the availability of investments in assets of the type that the to the Company or its Group intends to invest in is not guaranteed. Where industry availability of appropriate assets is lower than expected, the Group will likely take longer to identify appropriate assets. During this time, a greater proportion of the Company s 11
assets will be held in cash, which will typically generate a lower return for shareholders than currently envisaged. In particular, while the Group has identified investments to which the Net Issue Proceeds will be applied, no legally binding documentation has been entered into for the acquisition of these investments and there is no guarantee that these investments will be available for purchase after the Issue on acceptable terms or at all. borrowers in respect of loans or bonds in which the Group has invested may default on their obligations. Such default may adversely affect the income received by the Company and the value of the Company s assets. the Group may be unable to realise value from its investments in the event of insolvency of a borrower. The applicable insolvency regimes in force may also adversely affect the Group s ability to recover value and/or cause delays to any recovery. the investment strategy employed by the Group is speculative and involves substantial risk of loss in the event of a failure or deterioration in the infrastructure debt sector. the value of investments intended to be made by the Group will change from time to time dependent on factors outside the control of the Group. valuations of the Group s assets will be estimates, and not a precise measure of the realisable value of the relevant assets. infrastructure debt investments in loan form are not likely to be publicly traded or freely marketable, whilst those in bond form may have limited or no secondary market liquidity. They may therefore be difficult to value or sell. the Group will not have control over decisions taken by borrowers. Borrowers could therefore make decisions that are not in the best interests of the Group. Where the Group invests in a loan or bond, it may only hold a small percentage of the loans or bonds and therefore may not have the ability to block certain decisions made collectively by the lending group. This may result in the lending group making decisions that are not in the best interests of the Group. there is no assurance that an investment s actual cash flow will equal or exceed those predicted by the Group or that the targeted return on the investments by the Group will be achieved. changes to interest rates may affect the value or profitability of the assets of the Group. Interest rates are highly sensitive to many factors outside the Group s control. changes to currency exchange rates may affect the Net Asset Value of the Company, which is denominated in Sterling as investments are intended to be made across a range of currencies. Borrowers may also be exposed to changes in currency exchange rates. 12
D.2 Key information on the The key risk factors relating to the Company are: key risks that are specific to the Company the Company is newly formed with no operating history. As such, investors have no basis to evaluate the Company s ability to achieve its investment objectives. The Company will be a speculative investment, of a long term nature, and will involve a high degree of risk. Shareholders could lose all or a substantial portion of their investment in the Company. the Company s target return and target dividend yield are targets only and based on estimates and assumptions which are subject to numerous inherently unpredictable factors beyond the control of the Company. The actual return and dividend yield may therefore be materially lower than the targets set out in this Prospectus or may result in a loss. A slower deployment of proceeds than expected will negatively affect the Company s targets. this is the first listed fund that the Investment Adviser has been involved with. The Investment Adviser therefore has no performance history relating to a listed economic infrastructure debt fund for an investor to consider. the ability of the Group to achieve its investment objectives significantly depends on the expertise of key personnel at the Investment Adviser and the ability of the Investment Adviser to retain or replace these personnel. changes to the law and practice and accountancy regulations and practice in Guernsey could reduce the post-tax returns to Shareholders. Changes to the treatment of tax residence of the Company could affect the performance of the Company and returns to Shareholders. D.3 Key information on the The key risk factors relating to the Shares are: key risks that are specific to the Shares an active and liquid trading market for the Shares may not develop or be maintained. the market price of the Shares may fluctuate significantly and investors may not be able to sell their Shares at or above the price at which they purchased them, meaning that they could lose all or part of their investment. the Shares could trade at a discount to their respective Net Asset Value per share. There is no guarantee that any attempts by the Company to mitigate such a discount will be successful, nor that the use of discount control mechanisms will be possible or advisable. no Shareholder has the right, option or entitlement to have their Shares repurchased or redeemed. The Discretionary Tender facility is entirely discretionary and, along with any other ad hoc purchases of Shares, requires prior Shareholder approval. Where this is not available, an investor will have to sell their Shares on the open market and would therefore be dependent on the existence of a liquid market to realise their investment. 13
Section E Issue E.1 The total net proceeds and On the basis that 150,000,000 Shares are issued under the Issue, the Gross Issue Proceeds (as defined below) less the costs and expenses associated with the Issue ( Net Issue Proceeds ) are expected to be not less than 147,000,000. an estimate of the total expenses of the issue/offer, including estimated expenses charged to the investor by the issuer or the offeror The initial expenses of the Company are those which are necessary for the Issue. The costs of the Issue borne by the Company are not expected to exceed two per cent. of the aggregate value of the Shares issued under the Issue at the Issue Price ( Gross Issue Proceeds ). These expenses will be paid on or around Admission (unless stated otherwise) and will include fees payable under the placing and offer agreement dated 28 January 2015 ( Placing and Offer Agreement ), the fees and expenses of any sub-placing agents, registration, listing and admission fees, settlement arrangements, printing, advertising and distribution costs, legal fees and any other application expenses. All such expenses will be netted against the share capital raised. E.2a Reasons for the offer and use of proceeds The Company will invest the Net Issue Proceeds in accordance with the Company s investment policy. E.3 Terms and conditions of Up to a maximum of 150,000,000 Shares are being offered under the offer the Issue. Shares will be issued pursuant to the Issue at a price of 100 pence per Share. The Issue is not being underwritten. The Issue will be conditional upon: Admission occurring by 8 a.m. on or around 3 March 2015 (or such later time or date, not being later than 8:30 a.m. on 1 April 2015, as the Company and Oriel Securities Limited ( Oriel ) may agree); the Placing and Offer Agreement becoming otherwise unconditional in all respects, and not being terminated in accordance with its terms before Admission occurs; and the Minimum Net Proceeds having been raised. No fractions of Shares will be issued. The Directors and Oriel reserve the right as to whether or not to proceed with the Issue if the Net Issue Proceeds are less than the Minimum Net Proceeds. If the Issue does not proceed, subscription monies received will be returned without interest at the risk of the applicant. The Issue will not be revoked after Admission has become effective. 14
E.4 Material interests Not applicable. No interest is material to the Issue. E.5 Name of person or entity Not applicable. No person is selling securities. offering to sell securities E.6 Dilution Not applicable. No dilution will result from the Issue. E.7 Estimated expenses Not applicable. No expenses will be charged to investors by the charged to the investor by Company in connection with the Issue. the issuer or the offeror 15
RISK FACTORS An investment in the Company involves significant risks and is only suitable for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses (which may be equal to the whole amount invested) which may result from such an investment. Accordingly, potential investors should review carefully and evaluate the risks and the other information contained in this document before making a decision to invest in the Company. If in any doubt, potential investors should immediately seek their own personal financial advice from an independent professional adviser authorised under FSMA who specialises in advising on the acquisition of shares and other securities or other advisers such as legal advisers and accountants. If any of the following risks actually occur, the business, financial condition, capital resources, results and/or future operations of the Company could be materially and adversely affected. In such circumstances, the trading price of the Shares could decline and investors may lose all or part of their investment. Additional risks and uncertainties not currently known may also have an adverse effect on the Company. The Directors believe that the risks described below are the material risks relating to the Shares, the Company and its industry at the date of this document. Additional risks and uncertainties not currently known to the Directors, or that the Directors deem to be immaterial at the date of this document, may also have an adverse effect on the performance of the Company and the value of the Shares. Potential investors should review this document carefully and in its entirety and consult with their professional advisers before making an application to invest in the Shares. A. Risks relating to the Group The Company is a newly formed company with no operating history and no revenues The Company is a newly formed company with no operating history, and it will not commence operations until it has obtained funding through the Issue. Because the Company lacks an operating history, investors have no basis on which to evaluate the Company s ability to achieve its investment objective and provide a satisfactory investment return. Any investment in the Company will be speculative in nature and will involve a high degree of risk. A Shareholder could lose all or a substantial portion of their investment in the Company. Shareholders should have the financial ability, sophistication, experience and willingness to bear the risks of an investment in the Company. Changes in laws or regulations may adversely affect the Group s business, investments and the results of its operations The Group, the Investment Manager and the Investment Adviser are subject to laws and regulations enacted by national, regional and local governments and institutions. These laws and regulations and their respective interpretation and application may change from time to time and those changes could have a material adverse effect on the Group s investments and the results of its operations. The Directors, the Investment Manager, the Investment Adviser and the Administrator may have conflicts of interest in the course of their duties The Directors, the Investment Manager, the Investment Adviser and the Administrator may, from time to time, provide services to, or be otherwise involved with, other investment programmes established by parties other than the Company, which may have similar objectives to those of the Company. It is therefore possible that any of these investment programmes may, in the course of business, have potential conflicts of interest with the Company, which may be to the detriment of the Company. The Directors are, however, subject to the provisions of Guernsey law, which impose a range of duties upon directors, including in relation to avoiding conflicts of interest in certain circumstances. In addition, the Investment Manager has undertaken to the Company and the Investment Adviser has undertaken to the Investment Manager, among other things, to seek to ensure that conflicts of interest that it may be faced with are resolved fairly. 16
Availability of appropriate assets Although the Directors, the Investment Manager and the Investment Adviser believe that there is substantial availability of investments of the type intended to be made by the Group, either through acquiring in the secondary markets debt instruments backed by economic infrastructure assets, or through originating debt instruments to infrastructure projects and companies, there is no guarantee that such availability will continue to result in sufficient investments being made in a timely manner, or at all, to allow the Company to deliver the targeted returns for Shareholders. When the availability of appropriate assets is lower than expected, it is likely that the Company will take longer than expected to identify and make investments in appropriate assets and therefore a greater proportion of the Group s assets will be held in cash which will generate a much lower return for Shareholders than currently envisaged. In particular, the Group has not entered into any legally binding documentation to acquire the assets included in the target portfolio described in Part 5 of this Prospectus. These investments have been identified by the Investment Adviser as being either available for purchase as at 28 January 2015, being the latest practicable date prior to the date of this document, or within six to nine months of the Issue. However there can be no assurance that any of these investments will remain available for purchase after the Issue or, if available, at what price, if a price can be agreed at all, the investments can be acquired by the Group. The acquired portfolio, therefore, may be substantially different to the target portfolio set out in this Prospectus. In these circumstances, whilst the Group will endeavour to source investments with similar characteristics, there can be no assurance that it will be able to do so within a reasonable timeframe, on acceptable terms, or at all. Reinvestment Risk To the extent that any investments prepay or mature or are sold, the Investment Adviser will seek to reinvest the proceeds in pipeline investments which satisfy the Investment Criteria and the Investment Concentration Limits. The yield on such pipeline investments will depend on, among other factors, the reinvestment rates available at the time, the availability of investments which satisfy the Investment Criteria and the Investment Concentration Limits and on market conditions related to economic infrastructure bonds and loans in general. The need to satisfy the Eligibility Criteria and the Investment Concentration Limits and identify investments acceptable to the Investment Adviser may require the purchase of assets with a lower yield than those replaced, with different characteristics to those replaced (including, but not limited to, coupon, maturity, call features and/or credit quality) or require that funds be maintained in cash or Short-Term Investments pending reinvestment in substitute investments, which will further reduce the yield of the Portfolio. Any decrease in the yield of the Portfolio will have the effect of reducing the amount available to pay dividends on the Shares. There can be no assurance that if investments prepay, mature or are sold, yields on investments eligible for purchase will be at the same level as those replaced nor that the characteristics of any pipeline investments will be the same as those replaced nor as to the timing of purchase of any substitute investments. The Company s target return and target dividend yield are based on estimates and assumptions that are inherently subject to significant business and economic uncertainties and contingencies, and the actual return and dividend yield may be materially lower than the targeted return and target dividend yield The Company s target return and target dividend yield set forth in this Prospectus are targets only and are based on estimates and assumptions concerning the performance of the Group which will be subject to a variety of factors including, without limitation, operating expenses, the availability of investment opportunities, asset mix, value, volatility, holding periods, performance of underlying portfolio debt issuers and borrowers, investment liquidity, borrower default, changes in current market conditions, interest rates, government regulations or other policies, the worldwide economic environment, changes in law and taxation, natural disasters, terrorism, social unrest and civil disturbances or the occurrence of risks described elsewhere in this Prospectus, which are inherently subject to significant business, economic and market uncertainties and contingencies, all of which are beyond the control of the Company and which may adversely affect the Company s ability to achieve its target return and target dividend yield. Such targets are based on market conditions and the economic environment at the time of assessing the proposed targets and the assumption that the Company will be able to implement its investment policy and strategy successfully, and are therefore subject to change. There is no guarantee or assurance that the target return and/or target 17