Angel Oak Strategic Credit Fund
Notes to the Consolidated Financial Statements - (continued)
July 31, 2025 (Unaudited)
NOTE 4. DERIVATIVE TRANSACTIONS – (continued)
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) on Derivatives
in Income |
|
Change in Unrealized
Appreciation/Depreciation
on Derivatives |
| Futures Contracts |
|
Interest Rate |
|
Net change in unrealized appreciation/depreciation on futures contracts |
|
$256,240 |
| Swaps |
|
Credit |
|
Net change in unrealized appreciation/depreciation on swaps |
|
($236,160) |
The average monthly notional value of long futures contracts during the period ended July 31, 2025, was $21,876,144. The average monthly notional value of long swap contracts during the period ended July 31, 2025, was $28,571,429.
Balance Sheet Offsetting Information
During the ordinary course of business, the Fund may enter into transactions subject to enforceable netting agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset any exposure to a specific counterparty with any collateral received or delivered to that counterparty based on the terms of the agreement. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis. As of July 31, 2025, the Fund was not subject to any netting agreements.
The following table provides a summary of offsetting financial liabilities and derivatives and the effect of derivative instruments on the Consolidated Statement of Assets and Liabilities as of July 31, 2025.
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|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
in Consolidated Statement of Assets
and Liabilities |
| |
|
Gross Amounts
of Recognized
Assets/Liabilities |
|
Gross Amounts Offset in
Consolidated Statement
of Assets and Liabilities |
|
Net Amounts of
Assets/Liabilities Presented in
Consolidated Statement of
Assets and Liabilities |
|
|
|
|
|
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Futures Contracts |
|
$257,988 |
|
$– |
|
$257,988** |
|
$– |
|
$– |
|
$257,988 |
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Reverse Repurchase Agreements |
|
($6,811,000) |
|
$– |
|
($6,811,000) |
|
($6,811,000) |
|
$– |
|
$– |
| Swaps |
|
($286,876) |
|
$– |
|
($286,876)*** |
|
$– |
|
$286,876
|
|
$– |
| * |
The amount is limited to the net amounts of financial assets and liabilities and accordingly does not include excess collateral pledged. |
| ** |
Represents the value of unrealized appreciation (depreciation) as presented in the Consolidated Schedule of Open Futures Contracts, which is included in deposit at broker for futures on the Consolidated Statement of Assets and Liabilities. |
| *** |
Represents the value of unrealized appreciation (depreciation) as presented in the Consolidated Schedule of Centrally Cleared Credit Default Swaps - Buy Protection, which is included in depreciation for swaps on the Consolidated Statement of Assets and Liabilities. |
NOTE 5. FEES AND OTHER RELATED PARTY TRANSACTIONS
Under the terms of the investment advisory agreement, on behalf of the Fund (the “Agreement”), the Adviser manages the Fund’s investments subject to oversight of the Trustees. As compensation for its management services, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.25% of the average daily net assets of the Fund. This fee is included in the Investment Advisory line item that is reflected in the Consolidated Statement of Operations.
From April 1, 2020, through December 31, 2022, the Adviser contractually agreed to waive its fees and/or reimburse certain expenses (exclusive of any
front-end
sales loads, taxes, interest on borrowings, dividends on securities sold short, brokerage
24
Angel Oak Strategic Credit Fund
Notes to the Consolidated Financial Statements - (continued)
July 31, 2025 (Unaudited)
NOTE 5. FEES AND OTHER RELATED PARTY TRANSACTIONS – (continued)
commissions,
12b-1
fees, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization and extraordinary expenses) to limit the Total Annual Fund Operating Expenses after fee waiver/expense reimbursement to 0.75% (“Expense Limit”) of the Fund’s average daily net assets. Effective January 1, 2023, the Expense Limit was terminated. Prior to January 1, 2023, the Expense Limit excluded certain expenses and consequently, the total annual fund operating expenses after fee waiver/expense reimbursement may have been higher than the Expense Limit.
The Adviser may recoup from the Fund any waived amount or reimbursed expenses with respect to the Fund pursuant to the prior agreement if such recoupment does not cause the Fund to exceed the Expense Limit in place at the time of the waiver and the recoupment is made within three years after the end of the month in which the Adviser incurred the expenses. During the period ended July 31, 2025, the Adviser had $264,007 of previously waived expenses expire. The amounts subject to repayment by the Fund, pursuant to the aforementioned conditions at July 31, 2025, are included in the table below.
Quasar Distributors, LLC, a wholly-owned subsidiary of Foreside Financial Group, LLC (doing business as ACA Group) (“the Distributor”), acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares.
U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Fund’s Administrator (“Administrator”) and, in that capacity, performs various administrative and accounting services for the Fund. Fund Services also serves as the Fund’s fund accountant and transfer agent. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian; coordinates the preparation and payment of the Fund’s expenses and reviews the Fund’s expense accruals. As compensation for its services, the Administrator is entitled to a monthly fee at an annual rate based upon the average daily net assets of the Fund. U.S. Bank, N.A. (the “Custodian”) serves as custodian to the Fund. These fees are included in the Administration, Fund accounting, Transfer agent, and Custodian line items that are reflected in the Consolidated Statement of Operations.
The Fund makes reimbursement payments to the Adviser for the salary associated with the Chief Compliance Officer. The compliance fees expensed by the Fund during the period ended July 31, 2025, are included in the Compliance line item that is reflected in the Consolidated Statement of Operations.
Certain officers, Trustees and shareholders of the Fund are also owners or employees of the Adviser. Each Trustee who is not an “interested person” as defined in the 1940 Act (i.e., an “Independent Trustee”) of the “Fund Complex” (which includes the Fund, as well as each series of Angel Oak Funds Trust, Angel Oak Financial Strategies Income Term Trust, and Angel Oak Credit Opportunities Term Trust, affiliated registrants not disclosed in this report) receives an annual retainer of $75,000 (pro-rated for any periods less than one year) paid quarterly as well as $12,000 for attending each regularly scheduled meeting in connection with his or her service on the Board of the Fund Complex. In addition, each Committee Chair receives additional annual compensation of $12,000
(pro-rated
for any periods less than one year), and the Chair of the Board receives an additional $17,000. Independent Trustees are eligible for reimbursement of out-of-pocket expenses incurred in connection with attendance at meetings. For the period ended July 31, 2025, the aggregate compensation paid to the Independent Trustees by the Fund Complex was $278,500. The Fund’s allocated portion of the trustee compensation is included in the Trustee line item that is reflected in the Consolidated Statement of Operations, as applicable. The Fund’s Statement of Additional Information includes additional information about the Trustees and is available upon request by calling toll-free (855) 751-4324.
25
Angel Oak Strategic Credit Fund
Notes to the Consolidated Financial Statements - (continued)
July 31, 2025 (Unaudited)
NOTE 6. INVESTMENT TRANSACTIONS
For the period ended July 31, 2025, purchases and sales of investment securities, other than short-term investments and short- term U.S. Government securities, were as follows:
For the period ended July 31, 2025, there were $1,000,000 of long-term purchases and $2,145,313 of long-term sales of U.S. Government securities for the Fund. These amounts are included in the aggregate purchases and sales of the investment securities displayed in the table above.
NOTE 7. REPURCHASE OFFERS
Shares repurchased during the period ended July 31, 2025, were as follows (See Note 1):
|
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|
|
|
|
|
|
|
|
| |
|
Repurchase
Request Deadline |
|
NAV on
Repurchase
Pricing Date |
|
Percentage of
Outstanding Shares the
Fund Offered to
Repurchase |
|
Number of
Shares the Fund
Offered to
Repurchase |
|
Percentage of
Shares Repurchased to |
|
Number of
Shares
Repurchased |
| February 28, 2025 |
|
March 21, 2025 |
|
$21.22 |
|
5.0% |
|
241,912 |
|
7.0% |
|
338,692 |
| May 30, 2025 |
|
June 20, 2025 |
|
$21.05 |
|
10.0% |
|
460,996 |
|
12.0% |
|
553,275 |
NOTE 8. BENEFICIAL OWNERSHIP
The beneficial ownership, either directly or indirectly, of 25% or more of the voting securities of a fund creates a presumption of control of a fund, under Section 2(a)(9) of the 1940 Act. At July 31, 2025, Charles Schwab & Co., Inc. owned, as record shareholder, 66.14% of the outstanding shares of the Fund.
NOTE 9. FEDERAL TAX INFORMATION
The tax characterization of distributions paid for the latest tax year ended January 31, 2025, and January 31, 2024, were as follows:
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Distributions paid from: |
|
|
|
|
|
|
|
|
| Ordinary Income |
|
$ |
8,781,474 |
|
|
$ |
7,392,868 |
|
| Net Long-Term Capital Gain |
|
|
– |
|
|
|
– |
|
As of the latest tax year ended January 31, 2025, the components of distributable earnings (accumulated deficit) on a tax basis were as follows:
|
|
|
| |
|
|
| Tax Cost of Investments |
|
$116,712,726 |
| Unrealized Appreciation* |
|
2,604,643 |
| Unrealized Depreciation* |
|
(4,396,475) |
Net Unrealized Appreciation (Depreciation )* |
|
($1,791,832) |
| Undistributed Ordinary Income |
|
188,427 |
| Undistributed Long-Term Gain (Loss) |
|
– |
| Accumulated Gain (Loss) |
|
$188,427 |
| Other Accumulated Gain (Loss) |
|
(1,125,256) |
| Total Distributable Earnings (Accumulated Deficit) |
|
($2,728,661) |
| * |
Represents aggregated amounts of Fund’s investments, reverse repurchase agreements, futures, and swaps. |
26
Angel Oak Strategic Credit Fund
Notes to the Consolidated Financial Statements - (continued)
July 31, 2025 (Unaudited)
NOTE 9. FEDERAL TAX INFORMATION – (continued)
The temporary differences between book basis and tax basis in the Fund are primarily attributable to wash sales, amortization of callable bonds, and dividends payable.
As of the latest tax year ended January 31, 2025, the Fund had available for federal tax purposes an unused capital loss carryforward of $627,744. For the latest tax year ended January 31, 2025, the Fund utilized $174,458 of capital loss carryforwards.
To the extent these carryforwards are used to offset futures gains, it is probable that the amount offset will not be distributed to shareholders. The carryforward expires as follows:
|
|
|
| |
|
|
| No expiration short-term |
|
$– |
| No expiration long-term |
|
$627,744 |
| Total |
|
$627,744 |
Certain capital losses incurred after October 31 and within the current taxable year, are deemed to arise on the first business day of the Fund’s following taxable year. For the latest tax year ended January 31, 2025, the Fund did not defer any post-October losses.
NOTE 10. ACCOUNTING PRONOUNCEMENTS AND/OR REGULATORY UPDATES
The Fund has one reportable segment. Business activities are managed on a consolidated basis and revenues are derived primarily through the Fund’s investments in accordance with its investment objective. The Fund’s Chief Operating Decision Maker (“CODM”) is the Principal Financial Officer, Chief Investment Officer, Head of Portfolio Management – Public Strategies, and the Risk Committee. The CODM assesses performance based on the Fund’s Total Return as reported in the Financial Highlights, and the same accounting policies are applied as described in the summary of significant accounting policies. The Fund’s Total Return is utilized by the CODM to compare results, including the impact of the Fund’s costs, to the Fund’s competitors and to the Fund’s benchmark index.
NOTE 11. SUBSEQUENT EVENTS
Management of the Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date these financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments other than the following:
Shares repurchased subsequent to July 31, 2025, were as follows (see Note 1):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Repurchase Request
Deadline |
|
NAV on
Repurchase
Pricing Date |
|
Percentage of
Outstanding Shares
the Fund Offered to
Repurchase |
|
Number of
Shares the Fund
Offered to
Repurchase |
|
Percentage of
Shares Repurchased to
Outstanding |
|
Number of
Shares
Repurchased |
| August 29, 2025 |
|
September 19, 2025 |
|
$21.18 |
|
10.0% |
|
428,811 |
|
10.0% |
|
429,007 |
Additionally, effective October 1, 2025, Ward Bortz is expected to replace Adam Langley as President of the Fund.
27
Additional Information (Unaudited)
1. Shareholder Notification of Federal Tax Status
For the latest tax year ended January 31, 2025, certain dividends paid by the Fund may be subject to a maximum tax rate of 23.80% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate the maximum amount allowable as taxed at a maximum rate of 23.80%.
For the latest tax year ended January 31, 2025, the Fund paid qualified dividend income of 0.00%.
For the latest tax year ended January 31, 2025, the percentage of ordinary income dividends paid by the Fund that qualifies for the dividends received deduction available to corporations was 0.00%.
For the latest tax year ended January 31, 2025, the Fund did not pay any ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)2(c).
For the latest tax year ended January 31, 2025, the percentage of taxable ordinary income distributions that are designated as interest related dividends under Internal Revenue 871(k)1(c) was 78.31%.
2. Disclosure of Portfolio Holdings
The Fund will file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Part F of Form
N-PORT.
The Fund’s Part F of Form
N-PORT
is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling
(800) SEC-0230.
3. Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio securities and information regarding how the Fund voted those proxies during the most recent twelve month period ended June 30, is available without charge upon request by (1) calling the Fund at (855)
751-4324
and (2) from Trust documents filed with the SEC on the SEC’s website at www.sec.gov.
4. Statement Regarding the Basis for the Approval of New Investment Advisory Agreement and Interim Investment Advisory Agreement
Pursuant to Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), at a meeting held on April 23, 2025 (the “Special Board Meeting”), the Board of Trustees (the “Board”) of Angel Oak Strategic Credit Fund (the “Fund”) considered the approval of a new investment advisory agreement (the “New Investment Advisory Agreement” or the “Agreement”) between the Fund and Angel Oak Capital Advisors, LLC (the “Adviser” or “Angel Oak”). At the Special Board Meeting, the Board noted that Brookfield Asset Management Ltd. (“Brookfield”) was expected to acquire a majority of Angel Oak Companies, LP, the parent of Angel Oak Asset Management Holdings, LLC, itself the parent of Angel Oak (the “Transaction”) and, in turn, the closing of the Transaction would result in a change of control of Angel Oak (the “Change of Control”). Consistent with applicable requirements under the 1940 Act, the existing investment advisory agreement between Angel Oak and the Fund (the “Existing Investment Advisory Agreement”), contains a provision that the Existing Investment Advisory Agreement will automatically terminate in the event of an “assignment” (as defined in the 1940 Act).
The relevant provisions of the 1940 Act specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow it to properly consider the approval of the New Investment Advisory Agreement, and it is the duty of the Adviser to furnish the Trustees with information that is responsive to their request. Accordingly, in determining whether to approve the New Investment Advisory Agreement between the Adviser and the Fund, the Board requested, and the Adviser and Brookfield provided, information and data relevant to the Board’s consideration. This included materials prepared by the Adviser, Brookfield and an independent third-party data provider (the “Outside Data Provider”) that provided the Board with information regarding the fees and expenses of the Fund, as compared to other similar
closed-end
funds. The Board also considered responses to Trustees’ questions at the Special Board Meeting.
With respect to the Transaction, the Board reviewed materials received from the Adviser and Brookfield, including information relating to the reasons for the Transaction and other information relating to Brookfield’s plans with respect to its majority
28
ownership in the Adviser. The Board also reviewed information regarding Brookfield, including, but not limited to: (a) information regarding the new proposed ownership structure and any possible effect on shareholders; (b) the culture of Brookfield and its alignment with that of the Adviser; (c) the potential distribution arrangements that Brookfield may offer the Adviser and the Fund, particularly with institutional investors; (d) information regarding other similar transactions in which Brookfield has engaged; and (e) potential synergies and collaboration between the Adviser and Brookfield following the completion of the Transaction.
Following their review and consideration, the Trustees determined that the New Investment Advisory Agreement with respect to the Fund would enable shareholders of the Fund to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. Accordingly, the Board, including those Trustees who are not considered to be “interested persons” of the Fund, as that term is defined in the 1940 Act (the “Independent Trustees”), unanimously approved the New Investment Advisory Agreement. In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the New Investment Advisory Agreement. The Trustees also carefully considered the profitability data and comparative fee and expense information prepared by the Adviser. In considering the New Investment Advisory Agreement, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. Before voting on the New Investment Advisory Agreement, the Independent Trustees reviewed the New Investment Advisory Agreement with independent legal counsel to the Independent Trustees and received a memorandum from independent legal counsel to the Independent Trustees discussing the legal standards for their consideration of the New Investment Advisory Agreement. The Trustees also discussed the New Investment Advisory Agreement with independent legal counsel in executive sessions at which no representatives of the Adviser or Brookfield were present. The Trustees based their decision on the following considerations, among others, although they did not identify any single specific consideration or any particular information that was controlling of their decision:
The nature, extent and quality of the advisory services to be provided.
The Trustees concluded that the Adviser is capable of providing high quality services to the Fund, as indicated by the nature and quality of services provided in the past to the Fund and other registered investment companies advised by the Adviser (the “Angel Oak Funds”), the Adviser’s management capabilities demonstrated with respect to the Fund, the professional qualifications and experience of each of the portfolio managers of the Fund, the Adviser’s investment and management oversight processes, and the competitive investment performance of the Fund. The Board noted that there would be no differences between the scope of services required to be provided by the Adviser under the Existing Investment Advisory Agreement and the scope of services required to be provided by the Adviser under the New Investment Advisory Agreement. The Board noted that the key investment and management personnel of the Adviser servicing the Fund are expected to remain with the Adviser following the Transaction. The Trustees also considered Brookfield’s representations to the Board that the Adviser would continue to provide investment and related services that were materially the same quality and quantity as services provided to the Fund in the past, and that these services are appropriate in scope and extent in light of the Fund’s operations, the competitive landscape of the investment company business and investor needs. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services provided by the Adviser, the Trustees concluded that, under the New Investment Advisory Agreement, it was expected that the Adviser would continuing to generate a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The investment performance of the Fund.
The Trustees concluded on the basis of information derived from independent third-party data that the Adviser had achieved investment performance that was competitive relative to the Fund’s category, as established by the Outside Data Provider (the “Category”), and a smaller peer group of comparable funds (the “Peer Group”) over short- and longer-term trailing periods. In considering the performance of the Fund, the Trustees reviewed reports comparing the Fund’s performance to: (i) its Peer Group; (ii) its Category; and (iii) its benchmark index.
The Trustees observed that the Fund’s Institutional Class shares (which commenced operations in December 2017) had ranked in the first quartile of the Fund’s Peer Group for the period since the Fund’s inception, in the second quartile over the three-year and five-year periods ended December 31, 2024, and in the third quartile over the
one-year
period ended December 31, 2024. The Trustees further noted that the Fund had outperformed its benchmark index, the Bloomberg U.S. Aggregate Bond Index over the
one-year,
three-year and five-year periods ended December 31, 2024, and for the period since the Fund’s inception.
Based on the representations made by Brookfield at the Special Board Meeting that the Adviser would continue to operate following the closing of the Transaction in much the same manner as it currently operates, the Board concluded that the investment performance of the Adviser was not expected to be affected by the Transaction and the Adviser is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other investment companies.
29
The cost of advisory services provided and the level of profitability.
On the basis of comparative information derived from the expense data provided to the Board, the Trustees observed that the Fund’s management fee was lower than the median management fee in its Peer Group. The Trustees also determined that the net expense ratio of the Fund was lower than the median net expense ratio for funds in its Peer Group. The Board noted that the quality of services provided by the Adviser and the relatively strong performance of the Angel Oak Funds demonstrated that the advisory fee still offered an appropriate value for the Fund and its shareholders.
The Board also reviewed the fees that the Adviser charges its other clients for discretionary portfolio management services, noting that the firm has a variety of account types with different fee arrangements, but none with similar investment objectives and strategies as the Fund. The Board considered the fee rates charged by the Adviser to manage such funds and accounts. The Board took into account the unique management requirements involved in managing a registered investment company as opposed to other types of funds and accounts.
The Board also reviewed detailed profitability information and considered the Adviser’s current level of profitability with respect to the Fund and noted that the Adviser’s profitability was acceptable and not excessive and consistent with applicable industry averages and that the Adviser is committed to using its own resources to help improve the services it provides for the benefit of the Fund. The Trustees also noted that the Adviser has provided information regarding its methodology for attributing profitability to the Fund, as opposed to its other lines of business. The Trustees also took into consideration the nature and extent of expenses that are borne directly by the Adviser from its own financial resources to help to market and promote the Fund. Accordingly, on the basis of the Board’s review of the fees to be charged by the Adviser for investment advisory services, the investment advisory and other services provided to the Fund by the Adviser, and the estimated profitability of the Adviser’s relationship with the Fund, the Board concluded that the level of investment advisory fees and the Adviser’s profitability are appropriate in light of the investment advisory fees, overall expense ratios and investment performance of comparable investment companies and the historical profitability of the relationship between the Fund and the Adviser. The Trustees considered the profitability of the Adviser both before and after the impact of the marketing-related expenses that the Adviser incurs out of its own resources in connection with its management of the Fund.
At the Special Board Meeting, the Trustees considered the fact that the fee rates payable to the Adviser would be the same under the Fund’s New Investment Advisory Agreement as they are under the Fund’s Existing Investment Advisory Agreement. With respect to anticipated profitability, the Trustees noted that it was too early to predict whether and to what extent the Transaction would affect the Adviser’s profitability with respect to the Fund, but noted that this matter would be given further consideration on an ongoing basis. Overall, the Trustees concluded that the fees to be paid under the New Investment Advisory Agreement are reasonable.
The extent to which economies of scale may be realized as the Fund grows and whether the advisory fee reflects possible economies of scale.
While it was noted that the Fund’s investment advisory fee under the Existing Investment Advisory Agreement and New Investment Advisory Agreement will not decrease as the Fund’s assets grow because the Fund is not subject to investment advisory fee breakpoints, the Trustees concluded that the Fund’s investment advisory fee was appropriate in light of the projected size of the Fund and appropriately reflects the current economic environment for the Adviser and the competitive nature of the
closed-end
interval fund market. The Trustees then noted that they would have the opportunity to periodically
re-examine
whether the Fund had achieved economies of scale and the appropriateness of the investment advisory fee payable to the Adviser with respect to the Fund, in the future, at which time the implementation of fee breakpoints on the Fund could be considered. The Trustees noted the past improvements made to the Adviser’s infrastructure and services provided to the Fund, which had been funded by the advisory fees received by the Adviser. Finally, the Trustees noted the Adviser’s statement that economies of scale could not be predicted in advance of the closing of the Transaction.
Benefits to the Adviser from its relationship with the Fund (and any corresponding benefits to the Fund).
The Trustees concluded that other benefits derived by the Adviser from its relationship with the Fund are reasonable and fair and consistent with industry practice and the best interests of the Fund and its shareholders. The Trustees also considered the terms of the Transaction and the financial benefits that it brings to the current parent company of the Adviser and noted that those financial benefits are available, in part, because of the involvement of the Adviser in the Transaction. The Trustees also noted that the Transaction is expected to place the Adviser on strong financial footing, enhancing its ability to provide continuous services to the Fund and that the Fund could benefit from the potential synergies and collaboration between the Adviser and Brookfield.
Other Considerations.
In approving the New Investment Advisory Agreement, the Trustees determined that the Adviser has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders and that that commitment was expected to remain in place after the Transaction. The Trustees also concluded that the Adviser has made a significant entrepreneurial commitment to the management and success of
30
the Fund, which entails a substantial financial and professional commitment. The Adviser’s financial commitment to the Fund also included the payment of organizational, offering and distribution costs for the Fund when it was launched. The Board also considered matters with respect to the brokerage practices of the Adviser, including its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
Following further discussion and the consideration of questions raised by the Independent Trustees, the Trustees determined that they had received sufficient information relating to the Fund in order to consider the approval of the New Investment Advisory Agreement. It was noted that, in making their determinations, the Trustees had considered and relied upon not only the materials provided to them for use at the Special Board Meeting, but also the information about the Fund and the Adviser that had been provided to them throughout the past year in connection with their regular Board meetings. In reaching their conclusion with respect to the approval of the New Investment Advisory Agreement and the level of fees paid under the New Investment Advisory Agreement, the Trustees did not identify any single factor as controlling, but, rather, the Board took note of a combination of factors that had influenced their decision-making process. They noted the level and quality of investment advisory services provided by the Adviser to the Fund, and they found that these services continued to benefit the Fund and its shareholders and also reflected management’s overall commitment to the continued growth and development of the Fund.
Because the Change of Control would result in the automatic termination of the Existing Investment Advisory Agreement, and in consideration of the possibility that approval of the New Investment Advisory Agreement by the Fund’s shareholders might not be obtained prior to the expiration of the Existing Investment Advisory Agreement, pursuant to Section 15(c) of the 1940 Act and Rule
15a-4
under the 1940 Act, at a meeting held on June
23-24,
2025, the Board considered the approval of an interim investment advisory agreement (the “Interim Investment Advisory Agreement”) between the Fund and the Adviser, which would take effect upon the expiration of the Existing Investment Advisory Agreement, provided that shareholder approval has not been obtained by that date, and which would expire on the earlier of (1) the closing of the Transaction and concurrent effectiveness of the New Investment Advisory Agreement or (2) 150 days following the effectiveness of the Interim Investment Advisory Agreement. In reaching their decision, the Trustees based their decision on the considerations described above in connection with their approval of the New Investment Advisory Agreement at the Special Board Meeting, among others, although they did not identify any single specific consideration or any particular information that controlled their decision. Accordingly, the Board, including the Independent Trustees, unanimously approved the Interim Investment Advisory Agreement.
5. Special Meeting of Shareholders
At the Special Meeting of Shareholders held on June 26, 2025, shareholders approved the election of Clayton Triick as a Trustee to the Board of Trustees to serve an indefinite term based on the following results:
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| To Elect Clayton Triick |
|
3,324,785 |
|
|
0 |
|
|
|
25,474 |
|
Shareholders also approved a new Investment Advisory Agreement between the Fund and the Adviser, based on the following results:
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| To Approve the New Investment Advisory Agreement |
|
3,144,268 |
|
|
0 |
|
|
|
0 |
|
31
