Income Strategies in the Global Loan Market -...
Transcript of Income Strategies in the Global Loan Market -...
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Income Strategies in the Global Loan Market
MODERATOR: Dan McGee
Managing Director, Head of U.S. Retail
SPEAKER: Tom McDonnell
Managing Director, High Yield Portfolio Manager
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Overview Senior secured loans Considerations for expanding into global loans Potential benefits of senior secured loans Risks associated with senior secured loans Todays market environment Question and answers
Income Strategies in the Global Loan Market
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Issued by corporations Rated below investment grade (high yield) Typically secured in capital structure Floating rate coupon Predominantly U.S. issuers but opportunistic issuers
in Western Europe
What is a Senior Secured Loan
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Who Are High Yield Issuers
Some of the most recognizable brands and leaders within their respective industries have high yield bond and loan facilities outstanding
The above is for illustrative purposes only and is not intended to be taken by any person as investment advice, or a recommendation to buy, hold or sell any security or other investment, or an offer to sell or a solicitation of offers to purchase any security.
24 Hour Fitness Worldwide Cengage Learning Hanesbrands Michaels
Ace Hardware Charter Communications Harbor Freight Tools Netflix
American Airlines Chesapeake Energy HCA Neiman Marcus
Aramark Cole Haan Heinz Pilot Travel Center
Avis Budget Group Dave & Busters The Hertz Corp. Raycom Media
Bass Pro Group Davids Bridal Hilton Worldwide Revlon Consumer Products
Booz Allen Hamilton Dell Hudsons Bay Company Rite Aid
Brand Energy Del Monte Foods J. Crew Toys R Us
Burger King Dollar Tree Level 3 Communications Travelodge
California Pizza Kitchen Four Seasons Hotels Lionsgate The Weather Channel
CBRE Group Getty Images McGraw-Hill Education Wendys
Cedar Fair Goodyear Tire & Rubber MGM Records Wynn Resorts
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Where to Invest in High Yield Companies
Source: Barings. For illustrative purposes only.
Senior Secured Loans1 50%
ASSETS
BANK LOANS 40%-50%
Cash Assets Cash Accounts Receivable Property Plant Equipment Intangibles Subsidiary Stock
HIGH YIELD BONDS
15%-25%
EQUITY 25%-50%
PLEDGED TO
SENIOR
SUBORDINATE
Representative Capital Structure
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Issuers Below Investment grade/high yield companies
Asset Type Privately held loan; not a security, not exchange traded
Seniority Senior secured, senior to high yield bonds and equity
Security Secured by tangible assets, PP&E, inventory, accounts receivable
Rating Most are rated by at least one of the major rating agencies
Coupon Floating rate, adjusts based upon the duration of the underlying
LIBOR contracts Quarterly interest payments
Covenants/Tests
Restricted payments, including dividends Incurrence: The incurrence of additional debt Maintenance: Performance based debt to EBITDA ratios1
Required cash sweep to reduce loan principal outstanding
Call Period Callable at par at any time May include call protection through a call premium
Senior Secured Loan Characteristics
1. The absence of which is generally defined as Covenant-Lite.
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Floating Rate Coupon
Libor 50bps
Issuer Spread 400bps
Effective Coupon 450bps
Declining Rates
Libor 100bps
Effective Coupon 500bps
Issuer Spread 400bps
Current State
Libor 50bps
Effective Coupon 550bps
Issuer Spread 400bps
Rising Rates
This illustration assumes no Libor Floor and current 3-month Libor is 100bps. For illustrative purposes only.
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Why Global Loans
Global portfolios increase the opportunity-set Ability to take advantage of price discrepancies
between issuers offering debt in different currencies without adding any additional credit risk (we hedge all currency)
Flexibility to adjust geographic weights to reflect the changing dynamics of the global markets
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What Global Means for Loans
1. Credit Suisse Western European Leveraged Loan Index, Non-$US-Denominated Loans. As January 31, 2017.
U.S. and Western Europe are the only developed markets for institutional loan issuance
Not a homogenous market: jurisdictional issues exist which require large, experienced research teams
Occasionally, peripheral countries tend to be debtor friendly
Western European Leveraged Loan Index Country Breakdown (%)1
= Creditor Friendly = Debtor Friendly
0
5
10
15
20
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Global Relative Value Different Currencies ( vs $)
1. U.S. Machinery Manufacturer Provider price. As of January 31, 2017. The current price is the average of the bid/ask spread. For illustrative purposes only. This analysis is intended to demonstrate only the specific elements discussed, particularly the disparity that exists in transactions at a specific point in time, may no longer exist or be significant at the time, may no longer exist or be significantly changed since the dates referenced above. This analysis does not represent all the elements and variables that would factor into the total costs of such a transaction. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument and is being provided merely to illustrate a particular investment strategy. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Exploiting Relative Value on the Same Issuer Across Loans and $ Loans1 (3-Year Discount Margin)
Stated Coupon Spread (bps) Libor Floor (%) Original Issue Price Current Price1
European Term Loan (B) 375 1.00 99.5 99.77
U.S. Term Loan (B) 325 1.00 99.5 98.78
3.75%
4.75%
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
European Term Loan U.S. Term Loan
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Potential Benefits of Loans
Senior secured loans should be considered as part of the asset allocation in an overall portfolio because they offer the potential for: Return consistency Low correlation Income generation Low duration / interest rate risk
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Consistent Returns
SOURCE: Credit Suisse Leveraged Loan Index (U.S.); Credit Suisse Western European Leveraged Loan Index (Europe). As of December 31, 2016.
~ ~
U.S and European Loan Market Returns
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CS Leveraged
Loan Index
CS WE Leveraged
Loan Index1
Barclays U.S.
Treasury
Barclays U.S.
Aggregate
Barclays Pan-Euro
Aggregate1
Barclays U.S. Corp. High Yield
BAML Euro Currency High
Yield1 S&P 500
STOXX Europe
6001 CS Leveraged Loan Index 1.00
CS WE Leveraged Loan Index 0.89 1.00
Barclays U.S. Treasury -0.15 -0.20 1.00
Barclays U.S. Aggregate 0.08 0.01 0.94 1.00
Barclays Pan-Euro Aggregate 0.02 -0.02 0.74 0.79 1.00
Barclays U.S. Corp. High Yield 0.83 0.70 0.03 0.28 0.19 1.00
BAML Euro Currency High Yield 0.71 0.73 -0.09 0.18 0.28 0.82 1.00
S&P 500 0.55 0.50 -0.33 -0.12 0.01 0.65 0.63 1.00
STOXX 600 0.56 0.58 -0.15 0.06 0.19 0.66 0.77 0.77 1.00
Correlations 5 Years (1/2012 1/2017)
Loans had low or negative correlations with U.S. treasuries and the Aggregate indices over the past 5 years
Historically Lower Correlation to Other Fixed Income Assets
Source: Barclays, Credit Suisse, Bank of America Merrill Lynch, Bloomberg, from February 1, 2012 January 31, 2017. 1. For this comparison, hedged to USD returns are used for European indices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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Income Generation
SOURCE: Credit Suisse. As of December 31, 2016.
0 bps
200 bps
400 bps
600 bps
800 bps
100 0 bps
1200 bps
1400 bps
1600 bps
1800 bps
20 00 bps
'92 '94 '96 '98 '0 0 '02 '04 '06 '08 '10 '12 '14 '160bps
500bps
1000bps
1500bps
2000bps
2500bps
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16
U.S. EUROPE
AVERAGE= 518 BPSAVERAGE= 463 BPS
U.S. and European Loan Spreads
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Reduced Interest Rate Sensitivity
1. Source: Credit Suisse; non-U.S. indices are hedged to USD. 2. Global Leveraged Loan Index is the weighted average of the Credit Suisse Leveraged Loan Index and the Credit Suisse Western European
Leveraged Loan Index. 3. Source: Barclays; non-U.S. indices are hedged to USD. 4. Source: Bank of America / Merrill Lynch; non-U.S. indices are hedged to USD. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Feb. 1994- Feb. 1995
Jun. 1999-May 2000
Jun. 2004-Jun. 2006
CS Global Leveraged Loan1,2 n/a +4.40% +13.58%
CS Leveraged Loan1 +10.38% +3.93% +12.64%
Barclays U.S. Aggregate3 +0.01% +2.11% +6.54%
Barclays U.S. Corp. IG3 -0.99% -0.04% +6.22%
Barclays U.S. Corp High Yield3 +1.55% +3.21% +17.85%
Oct. 1999 Oct. 2000
Nov. 2005 Jun. 2007
CS Global Leveraged Loan1,2 +5.62% +12.88%
CS Western European Leveraged Loan1 +8.56% +14.28%
Barclays Pan-Euro Aggregate3 +6.86% +2.41%
Barclays Pan-Euro Corp. IG3 +6.33% +3.20%
BAML Euro Currency High Yield4 -3.95% +17.21%
Cumulative Market Returns During Periods of Rising Rates in the U.S.
Cumulative Market Returns During Periods of Rising Rates in Europe
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Risks of Loans
While senior secured loans offer many potential advantages, there are also associated risks: Credit risk risk of a borrower not repaying a loan Liquidity risk risk of not being able to buy or sell
quickly enough to prevent or minimize a loss
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Todays Market Environment
We believe the global loan market remains attractive relative to other fixed income asset classes Historically low interest rates and Fed Fund rates Economic growth is stable Corporate balance sheets are stronger than pre-crisis Corporate default rates continue to remain low Strong loan market technicals including fund flows
and new issue volume
The above represents Barings views as of March 7, 2017 and are subject to change at any time without notice.
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Low Interest Rate Environment
1. Source: FactSet.
1
U.S. Fed and ECB Policy Rates1
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Interest Coverage1 Debt/LTM EBITDA1
Revenue and EBITDA Y/Y Growth (%)1 Revenue and EBITDA Y/Y Growth Ex-Commodities (%)1
Stable U.S. High Yield Credit Fundamentals
1. Source: J.P. Morgan data. As of September 30, 2016.
4.2x4.1x
4.0x4.0x
3.9x3.9x3.9x3.9x3.9x3.9x
4.0x4.1x4.0x4.1x
4.1x4.2x4.1x4.0x
4.1x4.1x4.1x
4.2x4.3x
4.4x4.3x
3.5x
4.0x
4.5x
5.0x
5.5x
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
4.5x
5.0x
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
EBITDA-Capex/Int Exp EBITDA/Int Exp
10
4
9
2 26
25 6 6
89 10
6
-2 -3-4 -3
-1 -1
2
13
1
9
3
-11
21
5
14
9 8 9
22
17
74 5
-5
0
-4-1
-20
0
20
40
3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
Revenues
EBITDA
8
7
32 2
23
4
6
13 12
11 11
14
1211
6 6
0
20
3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Revenues Ex-Commodities
EBITDA Ex-Commodities
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-45.0%
-35.0%
-25.0%
-15.0%
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
55.0% Revenue Growth EBITDA Growth
European High Yield Interest Coverage1 Issuer Net Leverage1
Revenue and EBITDA Y/Y Growth(%)1
Stable Eurozone High Yield Corporate Fundamentals
1. Source: J.P. Morgan data. As of September 30, 2016.
0
1
2
3
4
5
6
0
1
2
3
4
5
6
7
8
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1.1
2.3
0.8
1.6
0.1
2.2
6.8
4.6
1.0
7.7
3.3 3.4
0.6 0.5
0.0
2.0
4.0
6.0
8.0
10.0
CS Western European Leveraged Loan Index Default Rate
Stable Fundamentals Low Default Rates
1. Credit Suisse Leveraged Finance Strategy Update. As of December 31, 2016 (trailing 12 months). Defaulted loans defined as missed coupon, chapter 11 filing, distressed exchange, or cross-defaults.
2. Moodys Corporate Default & Recovery Rates. As of February 2016.
U.S. Loan Default History (%)1 European Loan Default History (%)1
Global Avg. Corporate Debt Recovery Rates Measured by Ultimate Recoveries (%)2
Market Average = 3.1%
Market Average = 2.6%
5.3
6.8
8.1
3.8
1.01.6
0.4 0.2
2.9
9.6
2.5
0.7
1.91.5
3.0
1.61.3
0.0
2.0
4.0
6.0
8.0
10.0
Credit Suisse Leveraged Loan Index Default Rate
80.4
63.3
48.8
28.2
0.0
20.0
40.0
60.0
80.0
100.0
Loans Sr. Secured Bonds Sr. Unsecured Bonds Subordinated Bonds
1987 - 2015
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Strong Technicals Modest New Issuance
1. Source: Credit Suisse, Leveraged Finance Strategy Monthly. As of December 31, 2016. 2. S&P Global Interactive Volume Report. As of December 31, 2016.
U.S. Institutional Loan Market Size ($B)1 Western European Institutional Loan Market Size (B)1
European Institutional Loan New-Issue Volume (B)2 U.S. Institutional Loan New-Issue Volume ($B)2
7 1116 21
2639
81
138
207223
213
189
168
147 144 144162 168
0
50
100
150
200
250
5 16 23 3453
88126145141141
188
307
408
617
841856
779
642613628
751
906960964
0
100
200
300
400
500
600
700
800
900
1000
8 811 11
22
56
82
109
28
3
1322
14
38
49
40
57
0
20
40
60
80
100
120
45 3558
91
154184
323
384
7139
158
231
295
455
377
257
337
0
50
100
150
200
250
300
350
400
450
500
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European CLO Issuance ($B)1 U.S. CLO Issuance ($B)1
Strong Technicals - Global Loan Market Capital Flows
1. J.P. Morgan. As of January 31, 2016.
U.S. Leveraged Loan Retail Fund Flows ($B)1
3.6 2.85.1
8.3
13.8
41.9 40.9
20.5
3.4 1.8 0.0 0.0
10.3
19.215.4
22.5
1.9
0
10
20
30
40
50
3.6 6.918.1 21.5
16.619.013.518.7
29.1
52.0
94.190.0
21.4
1.3 3.813.6
55.7
87.1
131.4
109.6111.8
8.7
0
20
40
60
80
100
120
140
1.05.8 2.3 4.4
-0.8-5.6
4.9
17.9 13.9 12.2
62.8
-23.1 -21.7
6.9 3.3
-30-20-10010203040506070
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Global loans can add diversification and at times better relative value than U.S. only portfolios
Some benefits of senior secured loans include the potential for:
Return consistency Low correlation Income generation Low duration / interest rate risk
Some risks associated with investing in senior secured loans:
Credit risk Liquidity risk
Income Strategies in the Global Loan Market
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Biographies
Managing Director Daniel McGee is a member of Barings Global Business Development Group and Head of U.S. Retail. Dan is responsible for U.S. wealth distribution and managing some of the firms key distribution relationships. Dan worked in the industry since 1992. Prior to joining the firm in 2013, he spent 20 years at Principal Financial Group in a variety of sales and sales management roles, most recently managing Principals Alliance Management Group. Dan holds a B.B.A. in Marketing from the University of Iowa.
Managing Director Thomas McDonnell is a member of Barings U.S. High Yield Investments Group and the U.S. High Yield Investment Committee. His responsibilities include portfolio management for a number of high yield total return portfolios, including global loan and global multi- strategy portfolios. He is also a portfolio manager for the firms high yield 1940 act retail funds. Thomas has worked in the industry since 1996 and his experience has encompassed leveraged loans, distressed credit and management of total return focused strategies. Prior to joining the firm in 2005, he was a Managing Director at Patriarch Partners, LLC, where he had active involvement with portfolio company management teams, crisis managers and attorneys to effectuate turn around and recovery plans. Before Patriarch, he worked at Bank of America in the Corporate Finance Group and at Bank One in various risk management and corporate finance positions, specializing in credit risk management and structuring of off balance sheet special purpose entities. Thomas holds a B.S. in Business Management, an M.B.A. in Accounting from the State University of New York at Buffalo, and is a Certified Public Accountant (inactive).
Daniel McGee
Thomas McDonnell
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Important Information IMPORTANT INFORMATION For Professional Investors / Institutional Investors only. This document should not be distributed to or relied on by Retail / Individual Investors. Barings LLC, Barings Securities LLC, Barings (U.K.) Limited, Barings Global Advisers Limited, Barings Australia Pty Ltd, Barings Advisers (Japan) KK, Barings Investment Advisers (Hong Kong) Ltd., Barings Real Estate Advisers Europe Finance LLP, Baring Real Estate Advisers Japan KK, BREAE AIFM LLP, Baring North America LLC, Baring Asset Management Limited, Baring International Investment Limited, Baring Asset Management (Asia) Limited, Baring SICE (Taiwan) Limited, Baring Asset Management (Japan) Limited, and Baring Asset Management Korea Limited each are affiliated financial service companies (each, individually, an Affiliate), together known as Barings. Some Affiliates may act as an introducer or distributor of the products and services of some others and may be paid a fee for doing so. NO OFFER: The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, an investment recommendation, or investment research. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate. Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information. Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance is no indication of current or future performance. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Any investment results, portfolio compositions and or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments. Prospective investors should read the offering documents for the details and specific risk factors of any Fund discussed in this document. OTHER RESTRICTIONS: The distribution of this document is restricted by law. No action has been or will be taken by Barings to permit the possession or distribution of the document in any jurisdiction, where action for that purpose may be required. Accordingly, the document may not be used in any jurisdiction except under circumstances that will result in compliance with all applicable laws and regulations. Any service, security, investment or product outlined in this document may not be suitable for a prospective investor or available in their jurisdiction. INFORMATION: Barings is the brand name for the asset management or associated businesses of Barings affiliates worldwide. This document is issued by one or more of the following entities:
Barings LLC, which is a registered investment adviser with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940, as amended, as well as a Commodity Trading Advisor (CTA) and Commodity Pool Operator (CPO) registered with the Commodity Futures Trading Commission under the Commodity Exchange Act, as amended, Barings Securities LLC, which is a registered limited purpose broker-dealer with the Financial Industry Regulatory Authority; Baring North America LLC, which is an Exempt Market Dealer and Investment Fund Manager registered with the Ontario Securities Commission (Baring North America LLC relies on Section 4 (permitted clients) of MI 32-102 (Investment Fund Manager registration exemption) and has filed the Form 32-102F1 and Form 32-102F2 with the AMF in Quebec and is registered under MI 11-102 (Passport System) in the category of Exempt Market Dealer in Quebec); Barings (U.K.) Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 194662) and is a Company registered in England and Wales (No. 03005774) whose registered address is 61 Aldwych, London, WC2B 4AE, Barings Global Advisers Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 552931) and is a Company registered in England and Wales (No. 07622519) whose registered address is 61 Aldwych, London, WC2B 4AE and is a registered investment adviser with the SEC, Baring Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 170601) and is a Company registered in England and Wales (No. 02915887) whose registered address is 155 Bishopsgate, London EC2M 3XY, Baring International Investment Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 122628), and is a Company registered in England and Wales (No. 01426546) whose registered address is 155 Bishopsgate, London EC2M 3XY, is a registered investment adviser with the SEC and is registered with the Ontario Securities Commission as a Portfolio Manager (Baring International Investment Limited also relies on section 8.26 of NI 31-103 (international adviser exemption) and has filed the Form 31-103F2 in Quebec, Manitoba, British Columbia and Alberta), Barings Real Estate Advisers Europe Finance LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 401543), or BREAE AIFM LLP, which is authorized and regulated by the Financial Conduct Authority in the United Kingdom (Ref No. 709904); Barings Australia Pty Ltd (ACN 140 045 656), which is authorized to offer financial services in Australia under its Australian Financial Services License (No: 342787) issued by the Australian Securities and Investments Commission; Barings Investment Advisers (Hong Kong) Ltd, which is licensed with the Securities and Futures Commission of Hong Kong to carry on regulated activities Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) in Hong Kong in accordance with the requirements set out in the Securities and Futures Ordinance (Cap 571), or Baring Asset Management (Asia) Limited, which is licensed by the Securities and Futures Commission of Hong Kong to carry on regulated activities Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts) and Type 9 (asset management) in Hong Kong in accordance with the requirements set out in the Securities and Futures Ordinance (Cap 571); Barings Advisers (Japan) KK, which is registered as a Financial Instruments Business Operator (Registration No. 961-KLFB) for Type II Financial Instruments Business and Investment Advisory and Agency Business with the Financial Services Agency in Japan under the Financial Instruments and Exchange Act (Act No. 25 of 1948), Baring Real Estate Advisers Japan KK which is registered as a Financial Instruments Business Operator (Registration No. 2840-KLFB) for Type II Financial Instruments Business and Investment Advisory Business with the Financial Services Agency in Japan under the Financial Instruments and Exchange Act (Act No. 25 of 1948), or Baring Asset Management (Japan) Limited, which is registered as a Financial Business Operator (Registration No. 396-KLFB) for Type II Financial Instruments Business, Investment Advisory Business and Investment Management Business with the Financial Services Agency in Japan under the Financial Instruments and Exchange Act (Act No. 25 of 1948);
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Important Information Baring SICE (Taiwan) Limited, an independently operated business (Business license number: 2008 FSC- SICE- Xin- 030; Address: 21 F, No.333, Sec. 1 Keelung Road, Taipei 11012; Taiwan Contact telephone number: 0800 062 068); or Baring Asset Management Korea Limited, which is authorized by the Korean Financial Services Commission to engage in collective investment business and is registered with the Korean Financial Services Commission to engage in privately placed collective investment business for professional investors, discretionary investment business and advisory business. Copyright Copyright in this document is owned by Barings. Information in this document may be used for your own personal use, but may not be altered, reproduced or distributed without Barings consent. FOR PERSONS DOMICILED IN THE US: This document is not an offer to sell, nor a solicitation of offers to buy, limited partnership interests, shares or any other security, nor does it purport to be a description of the terms of or the risks inherent in an investment in the private investment fund (Fund) described therein. The offer and sale of interests in the Fund is restricted by law, and is not intended to be conducted except in accordance with those restrictions. In particular, no interest in or security of any of the Fund has been or will be registered under the Securities Act of 1933 (the Act). All offers and sales thereof are intended to be non-public, such that interests in and securities of the Fund will be and remain exempt from having to be so registered. By accepting delivery of this document, the person to whom it is delivered (a) agrees to keep the information contained in the attached document confidential and (b) represents that they are an accredited investor as defined in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933. FOR PERSONS DOMICILED IN THE EUROPEAN UNION and the EUROPEAN ECONOMIC AREA (EEA): This information is only made available to Professional Investors, as defined by the Markets in Financial Instruments Directive. FOR PERSONS DOMICILED IN AUSTRALIA: This publication is only made available to persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001. This publication is supplied on the condition that it is not passed on to any person who is a retail client within the meaning of section 761G of the Corporations Act 2001. FOR PERSONS DOMICILED IN CANADA: This confidential marketing brochure pertains to the offering of a product only in those jurisdictions and to those persons in Canada where and to whom they may be lawfully offered for sale, and only by persons permitted to sell such interests. This material is not, and under no circumstances is to be construed as, an advertisement or a public offering of a product. No securities commission or similar authority in Canada has reviewed or in any way passed upon this document or the merits of the product or its marketing materials, and any representation to the contrary is an offence. FOR PERSONS DOMICILED IN SWITZERLAND: This material is aimed at Qualified Investors, as defined in article 10, paragraph 3 of the Collective Investment Schemes Act, based in Switzerland. This material is not aimed at any other persons. For UCITS The Swiss representative and paying agent for the Funds where the investment manager is Barings (UK) Limited is UBS Fund Management (Switzerland) AG, Aeschenplatz 6, CH-4052 Basel. For QIFs The Swiss representative and paying agent for the Funds where the investment manager is Barings Global Advisers Limited is UBS Fund Management (Switzerland) AG, Aeschenplatz 6, CH-4052 Basel. The Swiss representative and paying agent for Funds where the investment manager is Baring Asset Management Limited is BNP Paribas Securities Services, Paris, succursdale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland.
FOR PERSONS DOMICILED IN HONG KONG: The Fund is a collective investment scheme but is not authorised under Section 104 of the Securities and Futures Ordinance of Hong Kong by the Securities and Futures Commission of Hong Kong. Accordingly, the distribution of this document, and the placement of shares in Hong Kong, is restricted. This document may only be distributed, circulated or issued to persons who are professional investors under the Securities and Futures Ordinance and any rules made under that Ordinance or as otherwise permitted by the Securities and Futures Ordinance. The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. FOR PERSONS DOMICILED IN SOUTH KOREA: Neither this document nor Barings is making any representation with respect to the eligibility of any recipients of this document to acquire interests in the Fund under the laws of Korea, including but without limitation the Foreign Exchange Transaction Act and Regulations thereunder. The Fund may only be offered to Qualified Professional Investors, as such term is defined under the Financial Investment Services and Capital Markets Act, and this Fund may not be offered, sold or delivered, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to applicable laws and regulations of Korea. FOR PERSONS DOMICILED IN SINGAPORE: This document has been prepared for informational purposes only, and should not be considered to be an advertisement or an offer for the sale or purchase or invitation for subscription or purchase of interests in the Fund. This document has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. This document or any other material in connection with the offer or sale, or invitation for subscription or purchase of interests in the Fund, may not be circulated or distributed to persons in Singapore other than (i) to an institutional investor pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 305 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. FOR PERSONS DOMICILED IN TAIWAN: The Shares are being made available in the R.O.C. on a private placement basis only to banks, bills houses, trust enterprises, financial holding companies and other qualified entities or institutions (collectively, Qualified Institutions) pursuant to the private placement provisions of the R.O.C. Rules Governing Offshore Funds. No other offer or sale of the Shares in the R.O.C. is permitted. R.O.C. purchasers of the Shares may not sell or otherwise dispose of their holdings except by redemption, transfer to a Qualified Institution, transfer by operation of law or other means approved by the R.O.C. Financial Supervisory Commission. FOR PERSONS DOMICILED IN JAPAN: This material is being provided for information purposes only. It is not an offer to buy or sell any Fund interest or any other security. The Fund has not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948) and, accordingly, it may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit, of any Japanese person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese person except under circumstances which will result in compliance with all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in effect at the relevant time. For this purpose, a Japanese person means any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
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