GCP Asset Backed Income Fund : Notice of EGM

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, solicitor, accountant or other independent financial adviser, duly authorised under the Financial Services and Markets Act 2000 ("FSMA") if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

If you sell or have sold or otherwise transferred all of your Ordinary Shares please send this document, together with the accompanying Form of Proxy, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer is or was effected, for delivery to the purchaser or transferee. If you have sold only part of your holding of Ordinary Shares you should retain these documents and consult the stockbroker, bank or other agent through whom the sale was effected.

The Company is a closed ended collective investment fund incorporated as a public company limited by shares in Jersey on 7 September 2015 with an unlimited life and is established in Jersey as a listed fund pursuant to the Jersey Listed Fund Guide published by the Jersey Financial Services Commission ("JFSC"), as amended from time to time, and the Collective Investment Funds (Jersey) Law 1988, as amended. The Company is regulated by the JFSC. The JFSC has not reviewed or approved this document.

The definitions used in this document are set out in the section headed "Definitions" on pages 28 to 31 of this document.

GCP ASSET BACKED INCOME FUND LIMITED

(a company incorporated in Jersey under the Companies (Jersey) Law 1991

(as amended) with registered number 119412)

Recommended Proposals for the Orderly Realisation of the Company,

with associated

Adoption of a Revised Investment Objective and Policy,

Adoption of Revised Articles,

Approval of amendments to the Existing Investment Management Agreement

and

Notice of Extraordinary General Meeting

Notice of an Extraordinary General Meeting of the Company to be held at IFC 5, St Helier, Jersey JE1 1ST at 10.15 a.m. (BST) on 20 May 2024, is set out at the end of this document.

All Shareholders are encouraged to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting and, if their Shares are not held directly, to arrange for their nominee to vote on their behalf. Shareholders are requested to return the Form of Proxy accompanying this document. To be valid, the Form of Proxy must be completed and signed in accordance with the instructions thereon and returned so as to be received by Link Market Services (Jersey) Limited, IFC 5, St Helier, Jersey JE1 1ST as soon as possible but in any event so as to arrive not later than

10.15 a.m. (BST) on 16 May 2024. Alternatively, you can submit a proxy vote electronically at https://www.signalshares.com.

If you are a member of CREST, you may be able to make a proxy appointment or instruction using CREST, such instruction to be received by no later than 10.15 a.m. (BST) on 16 May 2024. Further details can be found in the notes to the Notice of Extraordinary General Meeting.

If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io.

The appointment of a proxy will not prevent you from attending and voting at the Extraordinary General Meeting in person if you wish (and are so entitled).

This document should be read as a whole. Your attention is drawn to the letter from the Chairman of the Company on pages 5 to 16 of this document, which includes a recommendation from the Board that you vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting.

This document contains forward-looking statements, which can be identified by the use of conditional or forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology. The forward- looking information contained herein is based upon certain assumptions about future events or conditions and is intended only to illustrate hypothetical results under those assumptions (not all of which will be specified herein). Not all relevant events or conditions may have been considered in developing such assumptions. The success or achievement of various results and objectives is dependent upon a multitude of factors, many of which are beyond the control of the Company. No representations are made as to the accuracy of such estimates or projections or that such projections will be realised. Actual events or conditions are unlikely to be consistent with, and may differ materially from, those assumed.

Dated 2 May 2024

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	CONTENTS
SECTION	PAGE
Expected Timetable	4
Part 1 - Letter from the Chairman	5
Part 2	- Risk Factors	17
Part 3	- Change of Investment Policy	20
Part 4	- Compulsory Redemption of Ordinary Shares and related
changes to the Articles	23
Part 5	- Taxation	26
Definitions	28
Notice of Extraordinary General Meeting	32

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EXPECTED TIMETABLE

	2024
Publication of this document	2	May
Latest time and date for receipt of Forms of Proxy, CREST	10.15 a.m. on 16 May
voting instructions and Proxymity proxy instructions from
Shareholders for the Extraordinary General Meeting
Extraordinary General Meeting	10.15 a.m. on 20 May
Announcement of results of the Extraordinary General Meeting	20	May
Effective date of adoption of Revised Investment Objective and	20	May
Policy

Notes:

All references to time in this document are to British Summer Time. Each of the times and dates in the above expected timetable (other than in relation to the Extraordinary General Meeting) may be extended or brought forward. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service.

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PART 1 - LETTER FROM THE CHAIRMAN

GCP ASSET BACKED INCOME FUND LIMITED (the "Company")

(a company incorporated in Jersey under the Companies (Jersey) Law 1991 (as amended)

with registered number 119412)

Directors:	Registered Office:
Alex Ohlsson (Chair)	IFC 5
Colin Huelin	St. Helier
Joanna Dentskevich	Jersey
Marykay Fuller	JE1 1ST
	Channel Islands
	2 May 2024

Dear Shareholders

Recommended proposals for (i) the adoption of a Revised Investment Objective and Policy;

1. the adoption of Revised Articles; and (iii) the approval of amendments to the Existing Investment Management Agreement

1 INTRODUCTION

On 14 March 2024, the Board announced that, following a strategic review to consider how the Board may best deliver value to shareholders (the "Strategic Review"), the Board had reached the conclusion that Shareholder value would be best served by a managed wind- down of the Company with an orderly realisation of the Company's assets and returns of capital over time.

In order to effect these changes, and conditional on the approval by Shareholders of the Discontinuation Resolution at the Annual General Meeting (referred to in paragraph 3 of this Part 1), the Board is proposing to (i) change the Existing Investment Objective and Policy of the Company, to adopt the Revised Investment Objective and Policy, which will provide for an orderly realisation of the Company's assets over time; and (ii) adopt Revised Articles which will provide for a Compulsory Redemption mechanism to allow the Company to return capital to Shareholders over time on a pro rata basis.

In addition, the Company and Gravis have agreed, subject to and conditional on the approval of Shareholders at the Extraordinary General Meeting, to make certain amendments to the Existing Investment Management Agreement by way of the Side Letter. These amendments seek to align the interests of Gravis with the Company and its Shareholders in pursuing the Revised Investment Objective and Policy (the adoption of the Revised Investment Objective and Policy, the adoption of Revised Articles and the approval of the Side Letter, together constituting the "Proposals").

The Proposals are conditional upon the approval of the Discontinuation Resolution to be proposed at the Annual General Meeting and approval of the Resolutions by Shareholders at the Extraordinary General Meeting. The purpose of this document is to explain the Proposals and to convene the Extraordinary General Meeting, notice of which is set out at the end of this document. Further details of the Resolutions to be proposed at the Extraordinary General Meeting are set out below. The expected timetable associated with the Proposals is provided on page 4 of this document.

Shareholders are advised to read carefully all the information in this document.

The Board considers the Proposals to be in the best interests of Shareholders as a whole and recommends that Shareholders vote in favour of the Resolutions required to implement the Proposals at the Extraordinary General Meeting.

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1. BACKGROUND TO AND RATIONALE FOR THE PROPOSALS
   On 13 December 2023, the Company announced that the Board would be commencing the Strategic Review to consider how it may best deliver value to Shareholders. Following a further announcement on 29 January 2024, the Board engaged extensively with Shareholders in seeking feedback to inform its decision-making process.
   As part of this process, the Board specifically sought Shareholders' views in respect of (i) the potential continuation of the Company in its present form in accordance with its Existing Investment Objective and Policy delivered by Gravis, the Company's investment manager, paired with a partial capital return; (ii) a wind-down of the Company with an orderly realisation of its assets; and (iii) a potential sale of the entire issued share capital of the Company and/or its assets. The Board thanks Shareholders for the constructive feedback provided as part of the Shareholder engagement process. The extensive feedback has been invaluable in informing the Board's decision-making process and in formulating proposals for a managed wind-down of the Company with an orderly realisation of its assets.
   Feedback on the future strategic direction of the Company had been provided to the Board by Shareholders representing a majority of the total voting rights in the Company (the "Consulted Shareholders"). Whilst differing views were expressed by the Consulted Shareholders on the
   future of the Company, a majority of the Consulted Shareholders indicated a preference for an orderly realisation of the Company's portfolio or a sale of the Company. Further, whilst a minority of the Consulted Shareholders indicated a preference for continuation, the Board believes that the likely scale and take-up of returns of capital that would be necessary to
   provide an exit for Shareholders would be substantial and that, as a result, the Company would no longer be of a viable size to provide sufficient liquidity and scale.
   Alongside Shareholder feedback, the Board had also considered the prevailing and persistent discount to Net Asset Value at which the Company's Ordinary Shares have traded over the course of the past 18 months, the liquidity of trading in its Ordinary Shares, and the limited prospects for achieving greater scale in the foreseeable future and wider market conditions.
   Accordingly, the Board reached the conclusion that Shareholder value will be best served by the proposed managed wind-down of the Company with an orderly realisation of the Company's assets (the "Orderly Realisation") and returns of capital over time.
2. ANNUAL GENERAL MEETING
   The Company's Annual General Meeting will be held immediately before the Extraordinary General Meeting at 10.00 a.m. on 20 May 2024. On 18 September 2023, the Board announced a commitment to propose a vote on the continuation of the Company in its current form at the Annual General Meeting. Shareholders will be given the opportunity to vote on a discontinuation of the Company at the Annual General Meeting, which will be presented as an
   ordinary resolution requiring a majority of those voting to vote in favour of discontinuation in order for the resolution to pass (the "Discontinuation Resolution"). The Board has recommended that Shareholders vote in favour of the Discontinuation Resolution and are setting out the Proposals for the future of the Company as described in this document on the basis that the Discontinuation Resolution is passed.
3. PORTFOLIO REPAYMENT PROFILE AND ORDERLY REALISATION
   As at 31 March 2024, the Company was invested in a portfolio of 39 asset backed loans with a weighted average loan duration of 4.56 years. At that date, the principal value of the Company's portfolio and the Net Asset Value of the Company were £341.5 million and £388.4 million, respectively.

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The current contracted cash repayment profile of the Company's portfolio from 1 January 2024, including the repayment of historic and future forecast capitalised interest but excluding cash pay interest due, and after provisions for certain "Problem" or "Watchlist" loans as advised by the Investment Manager, is shown below.

						Repayments of
					% of total	Watchlist or
				Repayments in	repayments	Problem loans in
Years to maturity	period (£m)	(cumulative)	period (£m)
0	to 1	years	187.9*	48.5%	39.1
1	to 2	years	12.2	51.7%	0.7
2	to 4	years	67.1	69.0%	1.6
4	to 10 years	52.9	82.6%	14.1
10 to 20 years	61.2	98.4%	17.4
20+ years	6.2	100%	0

*Includes £35.4 million of repayments received in the first three months of the year and additionally the assumed receipt of £52.3 million of repayments that were due on or prior to 31 March 2024, of which £5.9 million has now been received by the Company and the remainder of which includes 3 "Problem" or "Watchlist" loans (as further described below) and reflects the Board's current expectation, as advised by the Investment Manager, of the timing and quantum of the repayment of such loans.

All figures relating to the Company's portfolio and/or valuations are as at 31 March 2024.

Shareholders should also note the following in relation to the information set out above:

• There can be no guarantee that loans will be repaid in accordance with contracted terms or that loans that were scheduled for repayment in 2023 will be repaid within the period assumed above. Borrowers may not repay on time (or at all) and their ability to service debts may be impaired from time to time;

•

•

•

Borrowers may elect to repay loans before contractual maturity (in full or in part) and may exercise permitted loan extensions, and in order to maximise Shareholder value the Company may extend the term of a loan, at the Board's discretion;

There can be no assurance that the current valuation of the loans by Mazars, the Company's independent valuation agent (the "Valuation Agent"), to which the Company is exposed can be achieved;

Loans made by the Company to 8 borrowers and representing 13.6% by value of the Net Asset Value (£52.9 million) as at 31 March 2024 have been categorised by the Investment Manager as "Problem" or "Watchlist" loans, based on meeting at least one of the following tests: (i) a likelihood that future interest and principal payments will not be serviced; (ii) debt service is outstanding for more than 6 months; and/or (iii) a persistent covenant breach. The circumstances around such loans have been considered by the Board and the Valuation Agent in the valuation of such loans in the quarterly valuation process and associated Net Asset Value;

• The Company is permitted to make investments in projects or assets in which the Investment Manager or its directors and/or officers and/or shareholders have been directly or indirectly interested (for example by way of an equity interest) (the "Manager Conflicted Loans"). As at 31 March 2024, the Company's investment portfolio included 6 Manager Conflicted Loans with an aggregate principal value (including capitalised interest) and accrued interest of £76.7 million. The valuation of the Manager Conflicted
  Loans at that date was £71.3 million, representing 22.2 per cent. of the fair value of the Company's investment portfolio. Three Manager Conflicted Loans, with an aggregate principal value (including capitalised interest) and accrued interest of £40.5 million and with a valuation of £37.3 million (11.6 per cent. of the Company's investments) were categorised by the Investment Manager as "Problem" or "Watchlist" loans at 31 March 2024. Missed interest payments on two of these loans first occurred in Q2 2023 and in respect of the third loan in Q4 2023. Additionally, two other loans missed interest and/or

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•

•

•

principal payments in December 2023 with interest payments in relation to one of the facilities received post period end but capital still outstanding. The Investment Manager remains confident in the recoverability of such payments and in the value of the asset level security of the Manager Conflicted Loans, including those categorised by it as being "Problem" or "Watchlist" loans;

Across the Company's portfolio, the Company has exposure to real estate markets. Approximately 88% of the Company's loans by portfolio value are exposed to property, including loans exposed to property in social infrastructure sectors such as student accommodation, social housing and care homes. The Company's portfolio includes exposure to 6 assets that are considered either in development or under construction. These assets represent c.19.8% of the portfolio value. In some instances, these assets are part of a broader portfolio that includes operational assets. The portfolio's exposure extends indirectly to construction projects through one land development project and two borrowers that offer bridging and development finance. Further information on the portfolio sector allocations and the loan-to-value of the portfolio can be found in the portfolio report as at 31 December 2023 that has been made available on the Company's website at https://www.graviscapital.com/funds/gabi-strategic-review/literature;

The Company's portfolio includes loans that are subordinate to the borrowers' senior debt, representing 35% of the portfolio value. Additionally, the portfolio contains senior loans that are used by borrowers to lend into structures where they become effectively subordinated to other debts. In such cases, the independent valuation agent fair values the Company's loans, taking this into account for the possible additional risk; and

Should the Proposals be approved by Shareholders, it is the Board's current intention to maintain the Company's existing level of dividend of 6.325 pence per annum whilst the Company remains substantially invested, for as long as practicable. This is a target only and does not constitute a profit forecast.

By way of illustration, and assuming all loans repay in accordance with their contractual terms, and that loans scheduled for repayment in 2023 are repaid by no later than 31 December 2024, in the event of a managed wind down of the Company, c.67.9% of the principal outstanding at 31 March 2024 is scheduled to be repaid by the end of the financial year ended 31 December 2027.

Amounts realised are expected to come from contractual repayments by borrowers as the Company's loans mature in accordance with their contractual terms and from the sale of portfolio assets, including longer dated loans. In this context, the Board reminds Shareholders that there can be no guarantee that the Company's loans will be repaid in accordance with contractual terms. Borrowers may not fully repay the principal amounts contractually owed, may not repay on time (or at all) and their ability to service debts may be impaired from time to time. Further, proceeds from the sale of any assets may not be achieved at their carrying value. This is a target only and does not constitute a profit forecast.

5 CHANGE OF INVESTMENT POLICY

The Company's Existing Investment Objective and Policy does not correspond to the strategy required to implement the Orderly Realisation, which is to undertake a staged return of capital

as it progressively realises its remaining assets. A staged return of capital and the realisation of all the Company's remaining assets are not currently specifically contemplated within the scope of the Company's Existing Investment Objective and Policy. The Directors believe that the proposed Revised Investment Objective and Policy will help to facilitate such Orderly

Realisation and returns of capital. Therefore, an Ordinary Resolution approving a formal change of the Existing Investment Objective and Policy to reflect the Board's strategy for the Orderly Realisation and returns of capital will be proposed at the Extraordinary General Meeting.

It is intended that the Company's listing and the capacity to trade in its Ordinary Shares will

be maintained for as long as practicable during the realisation process and subject to any regulatory considerations. Accordingly, once a significant proportion of the Company's assets have been realised, the Board will then consider, in the light of the then prevailing market conditions and Shareholders' views, proposing a resolution for delisting, followed by another

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resolution for a formal voluntary liquidation of the Company, both of which will require additional Shareholder approval at the relevant time.

Further details on the change of the Existing Investment Objective and Policy, including the text of the proposed Revised Investment Objective and Policy, are set out in Part 3 of this document. A summary of certain possible risks associated with the proposed change of the Existing Investment Objective and Policy is set out in Part 2 of this document. The Revised Investment Objective and Policy will only become effective once approved by Shareholders at the Extraordinary General Meeting. The proposed Ordinary Resolution to change the Existing Investment Objective and Policy (Resolution 1) is set out in the Notice of Extraordinary General Meeting at the end of this document.

6 CHANGE OF ARTICLES, STAGED RETURN OF CAPITAL AND COMPULSORY REDEMPTIONS OF SHARES

As part of the Orderly Realisation, the Company proposes to undertake a staged return of capital to Shareholders. The Directors propose to effect the return of capital by way of redemptions of Shares compulsorily (each a "Compulsory Redemption"). Currently the Company's Ordinary Shares are non-redeemable. Accordingly, it will first be necessary to change the Company's Existing Articles to permit the Directors, at their sole discretion, to effect a Compulsory Redemption of Shares on an ongoing basis, and pro rata to a Shareholder's shareholding in the Company, in order to return capital to Shareholders.

As and when proceeds from the realisation of the Company's assets are received, and assuming that the Special Resolution to approve the adoption of the Revised Articles to permit Compulsory Redemptions is passed, the Directors will have the discretion to make

Compulsory Redemptions of Ordinary Shares in volumes and on dates to be determined by the Directors. The proceeds of any realisation of the Company's assets in line with the Revised Investment Objective and Policy will not necessarily be distributed at or soon after the date of any such realisation but may be retained and aggregated with the proceeds of other realisations pending return to Shareholders. The number of Ordinary Shares to be redeemed shall have an aggregate Net Asset Value equivalent to the amount proposed to be returned to Shareholders (net of provisions for the Company's costs and expenses associated with the relevant Compulsory Redemption) and will be redeemed from all Shareholders pro rata to their Shareholdings on the relevant Redemption Date. Details of any Compulsory Redemption approved by the Board will be announced to the market by way of an announcement released on a Regulatory Information Service.

As at 31 March 2024 the Company had a cash balance of c.£60.8 million. It is the Board's expectation that, subject to the adoption of the Proposals and receipt of anticipated cashflows, the Company will make an initial capital distribution of at least £55 million as soon as reasonably practicable following the conclusion of the Extraordinary General Meeting. It is currently envisaged that adoption of the Proposals will enable the Company to return capital to Shareholders by way of a Compulsory Redemption of Ordinary Shares pro rata to their shareholding in the Company at appropriate times. The Board will seek to implement regular staged capital distributions when practicable thereafter, although it is noted that whilst it is the

intention of the Board that the distributions are regular the amount available for distribution each time will vary significantly dependent on the repayment profile of the relevant realised assets. Further, subject to the approval of a resolution authorising the Company to purchase its Ordinary Shares at the forthcoming Annual General Meeting, the Directors may consider repurchasing Ordinary Shares in the market if they believe it to be in Shareholders' interests as a whole and as a means of correcting any imbalance between supply of and demand for the Ordinary Shares. As outlined in paragraph 10 below, it is also the Board's intention to maintain the Company's existing level of dividend of 6.325 pence per annum whilst the

Company remains substantially invested, for as long as practicable. This is a target only and does not constitute a profit forecast.

Further details regarding the return of capital and the proposed changes to the Existing Articles are set out in Part 4 of this document. A summary of certain possible risks associated with the return of capital is set out in Part 2 of this document. The proposed Special Resolution to approve the adoption of the Revised Articles to permit Compulsory Redemptions

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of the Ordinary Shares (Resolution 3) is set out in the Notice of Extraordinary General Meeting at the end of this document.

7 AMENDMENTS TO THE EXISTING INVESTMENT MANAGEMENT AGREEMENT

It is the Board's intention that the Investment Manager be retained to provide investment management services in connection with the Orderly Realisation. The Board considers the Investment Manager to be best placed to provide such services taking into account its knowledge and experience of the Company's investment portfolio.

To this effect the Company has entered into a side letter to the Existing Investment Management Agreement (the "Side Letter"), which is conditional upon the adoption of the Revised Investment Objective and Policy and approval of the Side Letter at the Extraordinary General Meeting.

Pursuant to the terms of the Side Letter, Gravis will implement a realisation plan agreed with the Board, which sets out, among other things, the options and base case plan to realise each loan, the delegated authorities under which Gravis shall work to implement the Revised Investment Objective and Policy and the approach to realisation of any residual positions as at 31 December 2027, or such other date that may be agreed between the Company and Gravis from time to time, including the process for such realisation and how Gravis shall assess the merits of such realisation against other options that may be available to the Company at such time.

Subject to the Revised Investment Objective and Policy and the realisation plan in force from

time to time, Gravis shall have delegated approval to make realisation decisions, provided that such delegation shall be subject to the Board retaining the final determination in relation to decisions regarding the following:

• any amendments and/or extensions to Manager Conflicted Loans; and
• any sale or transfer of a loan or loans to a Gravis Related Party.

The Company will pay Gravis:

1. a reduced quarterly investment management fee of 0.75 per cent. of Net Asset Value less the value of the cash holdings of the Company pro rata to the period for which such cash holdings have been held (reduced from 0.90 per cent. pursuant to the terms of the Existing Investment Management Agreement) which shall be payable on or as soon as is practicable after each Quarter Date and on a pro-rata basis in respect of any period which is less than a complete Quarter; and
2. an incentive fee equal to 20 per cent. of the value of any "Excess Proceeds" (the "Incentive Fee"). Gravis' right to an Incentive Fee shall be calculated at each time there is a Realisation. If an Incentive Fee is payable to Gravis, the Company shall pay such Incentive Fee within 5 Business Days of such Realisation.
   Gravis' right to the Incentive Fee shall survive termination of the Amended Investment Management Agreement where the Amended Investment Management Agreement has been terminated by the Company without cause, other than where such termination is related to a sale of the Company and any Incentive Fee due has been paid as a result of the proceeds of such sale being a Realisation.
   The Incentive Fee payable by the Company to Gravis shall not exceed, in aggregate, £14,739,686, being an amount equal to 4.99 per cent. of the market capitalisation of the Company as at close of business on 1 May 2024.

For these purposes:

"Adjusted Portfolio Valuation Amount" means £321,214,023.

"Excess Proceeds" means, in respect of any Realisation, the value of such Realisation (if any) that is in excess of the value that would, on the date of such Realisation, be required to deliver an IRR equal to the Preferred Return, calculated using the XIRR function in Excel, and based on:

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