Triloma Energy Perpetual Fund

Triloma EIG Energy Income Fund

Continuous Offering & 20% Annual Liquidity3

Triloma EIG Energy Income Fund

Investing in the Triloma EIG Energy Income Fund (the “Perpetual Fund”) involves risks, including the risk that a shareholder may receive little or no return on its investment or that shareholder may lose part or all of its investment. The following is a list of some of the important risks factors that prospective investors should consider prior to making a decision to invest in the Perpetual Fund. The list is not intended to be comprehensive or exhaustive. Various other risks also apply; therefore, current and prospective shareholders should read and fully understand the prospectus, which is available here.

Liquidity Risks

  • An investment in the Perpetual Fund is not suitable for an investor who needs access to the money they invest;
  • A shareholder should consider that they may not have access to the money they invest for an indefinite period of time;
  • Unlike most closed-end funds, the shares are not listed on any securities exchange, and shareholders should not expect to be able to sell their shares regardless of how the Perpetual Fund performs;
  • If a shareholder is able to sell their shares, the shareholder may receive less than their purchase price and the then-current net asset value per share;
  • Although the Perpetual Fund has implemented a share repurchase program, it may be discontinued at any time and only 5 percent of outstanding shares will be eligible for repurchase per quarter;

Energy Sector Risks

  • The Perpetual Fund’s investments in energy companies expose the Perpetual Fund to risks associated with adverse economic, environmental or regulatory occurrences affecting the energy sector, and a downturn in the energy sector could have a larger impact on the Perpetual Fund than on funds that are broadly diversified across many sectors and industries;
  • Energy companies are subject to significant foreign, federal, state and local regulation in virtually every aspect of their operations, and their profitability could be adversely affected by changes in the regulatory environment;
  • There is an inherent risk that energy companies may incur environmental costs and liabilities due to the nature of their businesses and the substances they handle, and the possibility exists that stricter laws, regulations or enforcement policies could significantly increase the compliance costs of energy companies and the cost of any remediation that may become necessary;
  • Some energy companies may be subject to construction risk, development risk, acquisition risk or other risks arising from their strategies to expand operations through new construction or development activities, expanding operations through acquisitions, or securing additional long-term contracts;

Investment Risks

  • The Perpetual Fund’s investments in various types of debt securities and instruments may be secured, unsecured, rated or unrated, are subject to non-payment risk, and may be speculative in nature;
  • Increases in interest rates may cause the Perpetual Fund’s investments in fixed-rate debt securities to decline in value;
  • Generally, investments in debt securities with longer-term maturities are subject to greater volatility than investments in shorter-term obligations;
  • Subordinated investments in debt have lower priority in right of payment to any higher-ranking obligations of the borrower, and the cash flows and assets of the borrower may be insufficient to meet scheduled payments after giving effect to any higher-ranking obligations of the borrower;
  • During periods of declining interest rates, borrowers or issuers may exercise their option to prepay principal earlier than scheduled, which could reduce income and returns;
  • Below investment grade instruments (commonly referred to as “high-yield” securities or “junk bonds”) may be particularly susceptible to economic downturns, which could cause losses. Most investments in which the Perpetual Fund invests will not be rated by any rating agency and, if they were rated, they would be rated as below investment grade quality. Investments rated below investment grade quality are generally regarded as having predominantly speculative characteristics and may carry a greater risk with respect to a borrower’s capacity to pay interest and repay principal;
  • The Perpetual Fund’s investments in securities and other obligations of companies that are experiencing distress involve a substantial degree of risk, require a high level of analytical sophistication for successful investment and require active monitoring;
  • The Perpetual Fund’s investments in expectation of a specific event or catalyst can result in losses if the event or catalyst fails to occur or it does not have the expected effect or does not occur in the expected timeframe;
  • The Perpetual Fund may invest in illiquid and restricted securities that may be difficult to dispose of at a fair price;
  • The valuation of securities or instruments that lack a central trading place (such as fixed-income securities or instruments) may carry greater risk than those which trade on an exchange;
  • The value of convertible securities may be adversely affected by changes in interest rates, as well as the market price and volatility of the underlying security;
  • The value of equity securities may fluctuate in response to factors affecting the particular company in which the Perpetual Fund invests, as well as broader market and economic conditions;
  • The Perpetual Fund’s investments in derivatives have risks, including the imperfect correlation between the value of such instruments and the underlying assets of the Perpetual Fund;
  • Leverage could create the opportunity for higher income and returns for shareholders, but can magnify the effect of any losses;
  • Triloma, EIG and certain of their affiliates have conflicts of interest in connection with the management of the Perpetual Fund;
  • The Perpetual Fund is a recently organized, non-diversified, closed-end investment company with no operating history;

Non-U.S. Investment Risks

  • The Perpetual Fund may be materially adversely affected by market, economic and political conditions globally and in the jurisdictions and sectors in which the Perpetual Fund invests;
  • Investments in certain securities or other instruments of non-U.S. issuers or borrowers (“Non-U.S. Securities”) may involve factors not typically associated with investing in the U.S. or other developed countries;
  • Non-U.S. Securities may be traded in undeveloped, inefficient and less liquid markets and may experience greater price volatility, illiquidity and changes in value than U.S. securities;
  • Changes in foreign currency exchange rates may adversely affect the U.S. dollar value of and returns on foreign denominated investments;
  • Credit intermediation involving entities and activities outside the regular banking system (e.g., the “shadow banking system”) could result in increased regulatory and operating costs, which could adversely affect the implementation of the Perpetual Fund’s investment strategies and its income and returns;

Legal and Regulatory Risks

  • To qualify and remain eligible for the special tax treatment accorded to regulated investment companies (“RIC”) and their shareholders under the Internal Revenue Code, the Perpetual Fund must meet certain source-of-income, asset diversification and annual distribution requirements, and failure to do so could result in the loss of RIC status;
  • The Perpetual Fund’s distributions will be funded from unlimited amounts of offering proceeds or borrowings, which could constitute a return of capital and reduce the amount of capital available to the Perpetual Fund for investment. Any capital returned to shareholders through distributions will be distributed after payment of fees and expenses. Distributions may also be funded in significant part from the waiver of certain expenses that will be subject to future repayment by the Perpetual Fund, thus reducing the amounts available for distribution to future shareholders; and
  • Legal and regulatory changes, such as those implemented in connection with The Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (the “Dodd-Frank Act”), could occur, which may materially adversely affect the Perpetual Fund.

Accordingly, the Perpetual Fund should be considered a speculative investment that entails substantial risks, and a prospective investor should invest in the Perpetual Fund only if they can sustain a complete loss of their investment.

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1The public offering price is effective as of the weekly close beginning June 21, 2017. Pursuant to the terms of the prospectus, the public offering price is subject to change based on fluctuations in net asset value (NAV). Please refer to the Perpetual Fund’s current prospectus as amended and supplemented for disclosures related to the public offering price.

2Beginning June 27, 2017. The current annualized distribution rate is calculated by dividing the annualized distributions by the current public offering price. The Perpetual Fund’s distributions will be funded from unlimited amounts of offering proceeds or borrowings, which could constitute a return of capital and reduce the amount of capital available to the Perpetual Fund for investment. There is no assurance that distributions will be sustained at current levels.

3For illustrative purposes only. The objectives are not guarantees, predictions or projections of future performance and there is no assurance they will be met.