UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(RULE
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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KKR INCOME OPPORTUNITIES FUND
555 California Street
50th Floor
San Francisco, CA 94104
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on January 10, 2025
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of shareholders of KKR Income Opportunities Fund will be held at the offices of Dechert LLP, 1095 Avenue of the Americas, 28
th
Floor, New York, New York 10036, on January 10, 2025, at 10:00 a.m. Eastern Time.
The purpose of the Special Meeting is to consider and act upon the following proposal (the “Proposal”), and to consider and act upon such other matters as may properly come before the Special Meeting or any adjournments or postponements thereof.
To approve the issuance of additional common shares of beneficial interest (the “New Shares”) of KKR Income Opportunities Fund (the “Acquiring Fund”) in connection with the transfer at net asset value of all of the assets and certain liabilities of the Insight Select Income Fund (the “Acquired Fund” and together with the Acquiring Fund, the “Funds”) to the Acquiring Fund (the “Reorganization”).
The Proposal is discussed in greater detail in the enclosed Proxy Statement. You are entitled to notice of, and to vote at, the Special Meeting if you owned shares of the Acquiring Fund at the close of business on December 1, 2024 (the “Record Date”). If you attend the Special Meeting in person, you may vote your shares at that time. Even if you expect to attend the Special Meeting, please complete, date, sign and return the enclosed proxy card in the enclosed postage-paid envelope or authorize your proxy by telephone or through the Internet.
This notice and related proxy materials are first being mailed to shareholders on or about December 23, 2024.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE ACQUIRING FUND. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE ASK THAT YOU PLEASE VOTE BY PROXY OVER THE INTERNET, BY TELEPHONE, OR BY COMPLETING AND SIGNING THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
| By Order of the Board of Trustees of: |
| KKR Income Opportunities Fund |
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/s/ Lori Hoffman
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| Lori Hoffman |
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Secretary and Vice President
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QUESTIONS & ANSWERS
The following is a summary of more complete information appearing in the enclosed Proxy Statement or incorporated by reference into the Proxy Statement. You should carefully read the entire Proxy Statement, including the Agreement and Plan of Reorganization (the “Reorganization Agreement”), a form of which is attached as Appendix A thereto, because it contains details that are not in the Questions and Answers.
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Q:
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Why is a shareholder meeting being held?
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A:
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You are being asked to approve the issuance of additional common shares of beneficial interest (the “New Shares”) of KKR Income Opportunities Fund (the “Acquiring Fund”) in connection with the transfer at net asset value of all of the assets and certain liabilities of the Insight Select Income Fund (the “Acquired Fund” and together with the Acquiring Fund, the “Funds”) to the Acquiring Fund (the “Reorganization”). The purpose of this proposal is to enable the Acquiring Fund to have a sufficient number of common shares to issue to the Acquired Fund to effect the Reorganization, which is expected to occur in the first quarter of 2025.
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Although the Acquiring Fund will continue its legal existence and operations after the Reorganization, the rules of the New York Stock Exchange (on which the Acquiring Fund’s common shares are listed) require the Acquiring Fund’s shareholders to approve the issuance of the New Shares in connection with the Reorganization.
As described more fully in the Proxy Statement, each Fund is a
closed-end
management investment company with similar investment objectives, but different principal investment strategies and principal risks. Please see “Comparison of the Funds” in the Proxy Statement for additional information. It is anticipated that the Acquiring Fund would be the accounting and performance survivor of the Reorganization. The Acquiring Fund as it would exist after the Reorganization is referred to as the “Combined Fund.” NO CHANGES TO THE INVESTMENT OBJECTIVE, STRATEGIES, RISKS, ADVISER, PORTFOLIO MANAGEMENT TEAM, STRUCTURE OR POLICIES OF THE ACQUIRING FUND ARE BEING MADE IN CONNECTION WITH THE REORGANIZATION.
Separately, the shareholders of the Acquired Fund are being asked to approve the Reorganization Agreement providing for the Reorganization.
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Q:
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Why is the Reorganization being proposed?
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A:
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The Reorganization is proposed to increase the assets under management of the Acquiring Fund, which KKR Credit Advisors (US) LLC, the investment adviser of the Acquiring Fund (the “Acquiring Fund Manager”), anticipates will create potential economies of scale, which has the potential to lower the annual fund operating expenses, and improve secondary market trading. Because advisory fees payable by the Combined Fund to the Acquiring Fund Manager are based on a percentage of Managed Assets (as defined below) of the Combined Fund, the Reorganization will result in an increase in total advisory fees payable by the Combined Fund to the Acquiring Fund Manager; however, the contractual advisory fee rate of the Combined Fund will be the same as the contractual advisory fee rate of the Acquiring Fund. In connection with the Reorganization, the Acquiring Fund Manager has contractually agreed to temporarily reduce its management fee to an annual rate of 0.99% of the average daily value of the Combined Fund’s Managed Assets for a period of twelve months, effective as of the Closing Date of the Reorganization. After this twelve-month period, this management fee waiver agreement (the “Management Fee Waiver Agreement”) shall terminate unless otherwise agreed to in writing by the Acquiring Fund Manager and the Combined Fund.
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On October 8, 2024, the Acquiring Fund Manager and Insight North America LLC, the investment adviser to the Acquired Fund (the “Acquired Fund Manager”), entered into a separate agreement (the “Purchase
i
Agreement”) pursuant to which, if the Reorganization is approved and upon satisfaction or waiver of certain other conditions, the Acquiring Fund Manager will acquire, subject to certain exceptions, all right, title and interest of the Acquired Fund Manager in and to the goodwill and books and records (the “Asset Transfer”) relating to the Acquired Fund Manager’s business of providing investment management services with respect to the assets of the Acquired Fund for a cash payment at the closing of the Asset Transfer.
The Funds are not a party to the Purchase Agreement; however, the completion of the Asset Transfer is subject to certain conditions, including shareholder approval of the Reorganization described in the Proxy Statement/Prospectus for the Reorganization to proceed. Therefore, if Acquired Fund shareholders do not approve the Reorganization or if the other conditions in the Purchase Agreement are not satisfied or waived, then the Asset Transfer may not be completed, and the Purchase Agreement may be terminated.
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Q:
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What happens if the proposal to approve the issuance of the New Shares in connection with the Reorganization (the “Proposal”) is not approved by the Acquiring Fund shareholders?
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A:
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Completion of the Reorganization requires both the approval of the Reorganization Agreement by the Acquired Fund shareholders and approval of the Proposal by the Acquiring Fund shareholders. If either the approval of the Reorganization Agreement or the Proposal is not approved by shareholders of the Acquired Fund or Acquiring Fund, respectively, then the Reorganization will not be effected, and the New Shares will not be issued.
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Q:
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How will the fees and expenses of the Combined Fund compare to those of the Acquiring Fund?
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A:
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The contractual advisory fee (the “Management Fee”) of the Combined Fund will be 1.10% of the average daily value of the Combined Fund’s Managed Assets. “Managed Assets,” for these purposes, means the total assets of the Combined Fund (including any assets attributable to borrowings for investment purposes) minus the sum of the Combined Fund’s accrued liabilities (other than liabilities representing borrowings for investment purposes).
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The Combined Fund’s Management Fee will be calculated based on Managed Assets. On a net asset basis, the
forma Management Fee for the Combined Fund will be 1.70%, based on information as of August 30, 2024.
pro
In connection with the Reorganization, the Acquiring Fund Manager has contractually agreed to temporarily reduce its Management Fee to an annual rate of 0.99% of the average daily value of the Combined Fund’s Managed Assets for a period of twelve months, effective as of the Closing Date of the Reorganization.
The total annual operating expense ratio, including interest expense, of the Acquiring Fund, and, following the consummation of the Reorganization, the gross total annual operating expense ratio, including interest expense, of the Combined Fund and the net total annual operating expense ratio, including interest expense and after the Management Fee waiver, of the Combined Fund, is expected to be as follows:
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Acquiring Fund Total Annual
Operating Expense Ratio* |
Pro Forma
Gross Total Annual Operating Expense Ratio** |
Pro Forma
Net Total Annual Operating Expense Ratio** |
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| 5.53% | 5.04% | 4.87% |
The total operating expense ratio of the Acquiring Fund are higher than the median and average of a peer group of funds reviewed by the Board of Trustees of the Acquiring Fund (the “Board”).
| * |
Information for the Acquiring Fund is as of the semi-annual period ended April 30, 2024, based on average daily net assets.
|
ii
| ** |
The
pro forma
Pro forma
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Please see “Fees and Expenses” and “Management of the Funds” in the Proxy Statement/Prospectus for additional information.
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Q:
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How will the Reorganization affect the Acquiring Fund and its shareholders?
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A:
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The Board believes that the Reorganization may benefit the Acquiring Fund and its shareholders, including through potential economies of scale, which has the potential to lower the annual fund operating expenses, and improved secondary market trading.
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There can be no guarantee that any anticipated benefits will occur as a result of the Reorganization. To the extent the Acquired Fund is trading at a discount to its net asset value and the Acquiring Fund is trading at a premium to its net asset value at the time of the Reorganization, Acquired Fund shareholders, if the Reorganization is approved, would have the potential for an economic benefit. There can be no assurance that, after the Reorganization, common shares of the Combined Fund will trade at, above or below net asset value. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of the Acquiring Fund prior to the Reorganization. Additionally, among other potential consequences of the Reorganization, portfolio transitioning due to the Reorganization may result in capital gains or losses, which may have federal income tax consequences for shareholders of the Acquired Fund and the Combined Fund. Please see “Board Considerations” in the Proxy Statement for additional information.
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Q:
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Will my rights as a shareholder change as a result of the Reorganization?
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A:
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No. Your rights as a shareholder will not change as a result of the Reorganization.
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Q:
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How will the Reorganization be effected?
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A:
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In connection with the Reorganization, the Acquired Fund will transfer at net asset value all of its assets to the Acquiring Fund in exchange for common shares of the Acquiring Fund (although shareholders may receive cash for fractional shares of the Acquiring Fund) and any Cash Consideration as defined below.
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Acquired Fund shareholders will be entitled to receive in exchange for each of their outstanding shares of Acquired Fund common stock either (i) shares of Acquiring Fund common stock, which shall be based on the relative per share NAVs of the Acquired Fund and the Acquiring Fund (
, the value received shall be equal to 100% of the NAV per share of the Acquired Fund common stock) (“Stock Consideration”), or (ii) an amount of cash equal to 98% of the NAV per share of the Acquired Fund common stock (“Cash Consideration”). Acquired Fund shareholders’ right to elect to receive Cash Consideration is subject to the adjustment and proration procedures set forth in the Reorganization Agreement to ensure that the total number of shares of Acquired Fund common stock converted into the right to receive Cash Consideration will not exceed 535,736 shares (representing five percent (5%) of the outstanding shares of Acquired Fund common stock immediately prior to the closing of the Reorganization).
i.e.
Following the Reorganization, Acquired Fund shareholders who receive Stock Consideration will become shareholders of the Combined Fund and will receive the New Shares, the aggregate net asset value (“NAV”) (not the market value) of which will equal the aggregate NAV (not the market value) of the common shares of the Acquired Fund that the Acquired Fund shareholders held immediately prior to the Reorganization (except for any Cash Consideration received and cash received for fractional shares of the Acquiring Fund held).
iii
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Q:
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Will the Reorganization impact Fund distributions to shareholders?
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A:
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The Acquiring Fund currently pays a monthly distribution. The Combined Fund intends to make its first distribution to shareholders in the month immediately following the Reorganization. In addition, the Combined Fund expects to follow the same frequency of payments as the Acquiring Fund and make monthly distributions to shareholders.
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Prior to the closing of the Reorganization, the Acquired Fund expects to declare a distribution to its shareholders that, together with all previous distributions, will have the effect of distributing to its shareholders all of its investment company taxable income (computed without regard to the deduction for dividends paid) and net realized capital gains, if any, through the date of the Reorganization’s closing. All or a portion of such distribution may be taxable to the Acquired Fund’s shareholders for U.S. federal income tax purposes.
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Q:
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Who will manage the Combined Fund’s portfolio?
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A:
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The Combined Fund will be advised by KKR Credit Advisors (US) LLC, the Acquiring Fund’s current adviser. Furthermore, the Acquiring Fund’s current portfolio management team will be primarily responsible for the
day-to-day
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Q:
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Will there be any significant portfolio transitioning in connection with the Reorganization that impacts Fund shareholders?
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A:
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Following the Reorganization, the Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and policies, which will be the same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested consistent with its investment strategies or the Acquiring Fund Manager’s investment approach while such realignment occurs. The realignment is anticipated to take up to two months following the closing of the Reorganization, based on current market conditions and assuming that the Acquired Fund’s holdings are the same as of August 30, 2024. Sales and purchases of less liquid securities could take longer. Based on the Acquired Fund’s holdings as of August 30, 2024, the Combined Fund expects to sell approximately 100% of the Acquired Fund’s portfolio following the closing of the Reorganization. If the Reorganization was completed on August 30, 2024, the expected cost (including any transaction costs) to sell 100% of the Acquired Fund’s holdings following the closing of the Reorganization, which is estimated to equal 23% of the Combined Fund’s portfolio, would be approximately $466,000 (or 0.09% of the estimated NAV of the Combined Fund as of August 30, 2024) or $0.011 per share of the Combined Fund. To the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio securities made in connection with the Reorganization, these will be borne by (i) the Acquired Fund with respect to the sales and purchases conducted before the close of regular trading on the New York Stock Exchange on the Closing Date (the “Effective Time”) and (ii) the Combined Fund with respect to sales and purchases conducted at or after the Effective Time. The portfolio transitioning may result in capital gains or losses, which may have federal income tax consequences for shareholders of the Combined Fund.
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Q:
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Who will pay for the costs associated with the Meeting and the Reorganization?
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A:
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Except as otherwise set forth in the Reorganization Agreement or unless otherwise agreed in writing, each of the Acquiring Fund Manager and the Acquired Fund Manager shall pay its own direct and indirect expenses incurred by it in connection with the preparation and negotiation of the Reorganization Agreement and the consummation of the transactions contemplated by the Reorganization Agreement, including all fees and expenses of its advisors and representatives. To the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of
|
iv
| portfolio securities made in connection with the Reorganization, these will be borne by (i) the Acquired Fund with respect to sales and purchases conducted before the Effective Time and (ii) the Combined Fund with respect to sales and purchases conducted at or after the Effective Time. |
In addition, the Acquiring Fund is expected to bear a portion of the costs and expenses associated with the Reorganization. The Acquiring Fund will bear up to $250,000 of such costs and expenses. The Acquiring Fund and the Acquiring Fund Manager will bear equally all costs and expenses incurred (i) with respect to the registration of the shares of the Acquiring Fund to be issued in connection with the Reorganization and the filing of any proxy solicitation materials as may be necessary in connection with the issuance of the New Shares and (ii) the preparation, printing and distribution of any proxy and proxy solicitation materials in connection with the issuance of the New Shares; however, the Acquiring Fund Manager has agreed to bear or reimburse the Acquiring Fund for all such expenses in excess of $250,000.
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Q:
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Is the Reorganization expected to be taxable to the respective shareholders of the Acquiring Fund?
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A:
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No. The Reorganization is not expected to be a taxable event for shareholders of the Acquiring Fund. The Reorganization is intended to be treated as a
tax-free
reorganization for U.S. federal income tax purposes.
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As a condition to the Acquired Fund’s obligation to consummate the Reorganization, the Acquired Fund and the Acquiring Fund will receive an opinion from legal counsel to the effect that, on the basis of the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current administrative rules and court decisions, the transactions contemplated by the Reorganization Agreement constitute a
tax-free
reorganization for federal income tax purposes. Despite this opinion, there can be no assurances that the U.S. Internal Revenue Service will deem the exchanges to be
tax-free.
In addition, following the Reorganization, the Combined Fund may generate net capital gains or losses as a result of the portfolio realignment discussed above.
The actual tax consequences as a result of portfolio repositioning after the closing of the Reorganization are dependent on the portfolio composition of the Acquired Fund at the time of closing and market conditions. Net capital gain (
, gains in excess of capital loss carryforwards), if any, resulting from the realignment coupled with the results of the Acquiring Fund’s normal operations during the tax year following the close of the Reorganization would be distributed to the shareholders of the Combined Fund post-Reorganization in connection with the annual distribution requirements under U.S. federal tax laws.
i.e.
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Q:
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How does the Board suggest that I vote?
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A:
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The Board unanimously recommends that you vote “FOR” the Proposal.
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Q:
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How do I vote my proxy?
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A:
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All shareholders are requested to vote by proxy over the Internet, by telephone or by completing, dating and signing the enclosed proxy card and returning it promptly.
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Q:
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Who do I contact for further information?
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A:
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If you need any assistance or have any questions regarding the Proposal or how to vote your shares, p
leas
e call (833) 868-3374.
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Please complete, sign and return the enclosed proxy card in the enclosed envelope. You may proxy vote by internet or telephone in accordance with the instructions set forth on the enclosed proxy card. No postage is required if mailed in the United States.
v
KKR INCOME OPPORTUNITIES FUND
555 California Street
50th Floor
San Francisco, CA 94104
PROXY STATEMENT
For the Special Meeting of Shareholders
to be held on January 10, 2025
This Proxy Statement is furnished in connection with the solicitation of proxies by the KKR Income Opportunities Fund Board of Trustees (the “Board,” with members of the Board being referred to as “Trustees”) to be voted at the Special Meeting of Shareholders of KKR Income Opportunities Fund (the “Meeting”) to be held at the offices of Dechert LLP, 1095 Avenue of the Americas, 28
th
Floor, New York, New York 10036, on January 10, 2025, and at any adjournments or postponements thereof. A Notice of Special Meeting of Shareholders and a proxy card accompany this Proxy Statement. This Proxy Statement is first being mailed to shareholders on or about December 23, 2024.
The purpose of the Meeting is to consider and act upon the following proposal (the “Proposal”) and to consider and act upon such other matters as may properly come before the Meeting or any adjournments or postponements thereof:
To approve the issuance of additional common shares of beneficial interest (the “New Shares”) of KKR Income Opportunities Fund (the “Acquiring Fund”) in connection with the transfer at net asset value of all of the assets and certain liabilities of the Insight Select Income Fund (the “Acquired Fund” and together with the Acquiring Fund, the “Funds”) to the Acquiring Fund (the “Reorganization”)
All properly executed proxies received prior to the Meeting will be voted at the Meeting, or at any adjournments or postponements thereof, in accordance with the instructions marked on the proxy card. Unless instructions to the contrary are marked on the proxy card, proxies received will be voted “FOR” the Proposal. The persons named as proxy holders on the proxy card will vote in their discretion on any other matters that may properly come before the Meeting or any adjournments or postponements thereof. Any proxy card may be revoked at any time prior to its exercise by submitting a properly executed, subsequently dated proxy card, giving written notice to the Secretary of the Acquiring Fund at 555 California Street, 50th Floor, San Francisco, California 94104, or by attending the Meeting and voting in person. Shareholders may authorize proxy voting by using the enclosed proxy card along with the enclosed envelope with
pre-paid
postage. Shareholders may also authorize proxy voting by telephone or through the internet by following the instructions contained on their proxy card.
We will admit to the Special Meeting (1) all shareholders of record at the close of business on December 1, 2024 (the “Record Date”), (2) persons holding proof of beneficial ownership on the Record Date, such as a letter or account statement from the person’s broker, (3) persons who have been granted proxies, and (4) such other persons that we, in our sole discretion, may elect to admit. All persons wishing to be admitted to the Special Meeting must present photo identification.
The Board has fixed the close of business on December 1, 2024, as the Record Date for the determination of shareholders entitled to notice of, and to vote at, the Meeting and at any adjournment or postponement thereof. Shareholders of the Acquiring Fund as of the Record Date will be entitled at the Meeting to one vote for each share held and a proportionate share of one vote for each fractional share held.
The common shares of the Acquiring Fund are listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “KIO” and will continue to be so listed following the Reorganization. The common shares of the
1
Acquired Fund are listed on the NYSE under the ticker symbol “INSI” for the Insight Select Income Fund and would be delisted from the NYSE following the Reorganization. Shareholder reports, proxy statements and other information concerning the Funds can be inspected at the NYSE.
After careful consideration, the Board of Trustees of the Acquiring Fund unanimously recommends that you vote “FOR” the Proposal.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Shareholders to Be Held on January 10, 2025. The proxy materials are available on the Internet at www.proxyvote.com.
The Acquiring Fund’s annual report for the fiscal year ended October 31, 2023, and the Acquired Fund’s annual reports for the fiscal year ended March 31, 2024, and any more recent reports for the Acquiring Fund and the Acquired Fund filed after the date hereof, may be obtained without charge:
for the Acquiring Fund:
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By Phone:
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(855) 862-6092 | |
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By Mail:
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KKR Income Opportunities Fund | |
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c/o KKR Credit Advisors (US) LLC
555 California Street, 50
th
Floor
San Francisco, California 94104
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By Internet:
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https://www.kkrfunds.com/kio |
for the Acquired Fund:
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By Phone:
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(866)
333-6685
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By Mail:
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Insight Select Income Fund | |
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200 Park Avenue, 7
th
Floor
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| New York, New York 10166 | ||
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By Internet:
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https://www.insightinvestment.com/united-states/capabilities/multi-sector-fi/select-income/insight-select-income-fund/
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The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and, in accordance therewith, file reports, proxy statements, proxy materials and other information with the Securities and Exchange Commission (“SEC”). You also may view or obtain the foregoing documents from the SEC:
|
By
e-mail:
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publicinfo@sec.gov (duplicating fee required) | |
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By Internet:
|
www.sec.gov |
This Proxy Statement sets forth concisely the information that shareholders of the Acquiring Fund should know before voting on the Proposal. Please read it carefully and retain it for future reference. No person has been authorized to give any information or make any representation not contained in this Proxy Statement and, if so given or made, such information or representation must not be relied upon as having been authorized.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE ACQUIRING FUND’S SHARES TO BE ISSUED IN THE REORGANIZATION OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
PROPOSAL
To approve the issuance of additional common shares of beneficial interest (the “New Shares”) of KKR Income Opportunities Fund (the “Acquiring Fund”) in connection with the transfer at net asset value of all of the assets and certain liabilities of the Insight Select Income Fund (the “Acquired Fund” and together with the Acquiring Fund, the “Funds”) to the Acquiring Fund (the “Reorganization”)
General
The Reorganization would occur pursuant to an Agreement and Plan of Reorganization between the Acquiring Fund and the Acquired Fund (the “Reorganization Agreement”) that is subject to the approval of the Acquired Fund’s shareholders. The Reorganization has been approved by the Board of Trustees of the Acquiring Fund (the “Board”), but does not require approval by the Acquiring Fund’s shareholders. Shareholders of the Acquiring Fund, however, are being asked to approve the Proposal to enable the Acquiring Fund to issue the shares necessary to complete the Reorganization. Although the Acquiring Fund will continue its legal existence and operations after the Reorganization, the rules of the NYSE (on which the Acquiring Fund’s common shares are listed) require the Acquiring Fund’s shareholders to approve the issuance of the New Shares in connection with the Reorganization.
The Board believes that the Reorganization may benefit the Acquiring Fund and its shareholders, including through potential economies of scale and improved secondary market trading.
The Acquiring Fund as it would exist after the Reorganization is referred to as the “Combined Fund.” NO CHANGES TO THE INVESTMENT OBJECTIVE, STRATEGIES, RISKS, ADVISER, PORTFOLIO MANAGEMENT TEAM, STRUCTURE OR POLICIES OF THE ACQUIRING FUND ARE BEING MADE IN CONNECTION WITH THE REORGANIZATION.
Subject to shareholder approval of the Reorganization Agreement by the shareholders of the Acquired Fund and shareholder approval of the issuance the New Shares by the shareholders of the Acquiring Fund, the Reorganization Agreement provides for:
| • |
the transfer at net asset value of all of the assets and certain liabilities of the Acquired Fund to the Acquiring Fund;
|
| • |
the distribution of the New Shares to the shareholders of the Acquired Fund; and
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| • |
the complete liquidation of the Acquired Fund.
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It is expected that the Reorganization will occur in the first quarter of 2025.
At the closing of the Reorganization, the Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance with the Acquired Fund’s valuation procedures as approved by the Board of Trustees of the Acquired Fund (the “Acquired Fund Board”). Upon the consummation of the Reorganization, the assets transferred to the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures as approved by the Board. The Reorganization will be accounted for as an asset acquisition in accordance with the asset acquisition method of accounting as detailed in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Subtopic
805-50.
The Acquired Fund will use commercially reasonable efforts to discharge, or make provisions for, all of its known liabilities and obligations prior to the closing of the Reorganization. To the extent the Acquired Fund is unable to discharge or make provisions for any such liability or obligation prior to the Reorganization, the Acquiring Fund will assume all remaining liabilities and obligations of the Acquired Fund other than (a) any obligation of the Acquired Fund to make the distributions contemplated by the Reorganization Agreement or to
3
perform other obligations under the Reorganization Agreement and (b) any expenses required to be borne by the Acquired Fund or the Acquired Fund Manager after the Reorganization.
Following the Reorganization, the Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and policies, which will be the same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested consistent with its investment strategies or KKR Credit Advisors (US) LLC’s (the “Acquiring Fund Manager”) investment approach while such realignment occurs. Based on the Acquired Fund’s holdings as of August 30, 2024, the Combined Fund expects to sell approximately 100% of the Acquired Fund’s portfolio following the closing of the Reorganization. To the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio securities made in connection with the Reorganization, these will be borne by (i) the Acquired Fund with respect to sales and purchases conducted before the close of regular trading on the New York Stock Exchange on the Closing Date, (the “Effective Time”) and (ii) the Combined Fund with respect to sales and purchases conducted at or after the Effective Time. Portfolio transitioning may result in capital gains or losses, which may have federal income tax consequences for shareholders of the Acquired Fund and the Combined Fund.
The actual tax consequences as a result of portfolio repositioning after the closing of the Reorganization are dependent on the portfolio composition of the Acquired Fund at the time of closing and market conditions. Net capital gain (
, gains in excess of capital loss carryforwards), if any, resulting from the realignment coupled with the results of the Acquiring Fund’s normal operations during the tax year following the close of the Reorganization would be distributed to the shareholders of the Combined Fund post-Reorganization in connection with the annual distribution requirements under U.S. federal tax laws.
i.e.
The Reorganization is not expected to be a taxable event for shareholders of the Acquiring Fund.
Board Considerations
At a special meeting of the Board held on September 17, 2024, the Board, including a majority of the Trustees who are not “interested persons” of the Acquiring Fund as that term is defined in the Investment Company Act of 1940, approved the Reorganization Agreement and the issuance of the New Shares in connection with the Reorganization.
In making this determination, the Board considered a number of factors, including, but not limited to:
| • |
There will be no changes to the investment objective, strategies, risks, adviser, portfolio management team, structure or policies of the Acquiring Fund in connection with the Reorganization.
|
| • |
The potential for improved secondary market trading for the Acquiring Fund as a result of the Reorganization.
|
| • |
The Reorganization has the potential to improve economies of scale for the Acquiring Fund, which has the potential to lower the annual fund operating expenses.
|
| • |
The Acquiring Fund is expected to bear a portion of the costs and expenses associated with the Reorganization. The Acquiring Fund and the Acquiring Fund Manager will bear equally all costs and expenses incurred (i) with respect to the registration of the shares of the Acquiring Fund to be issued in connection with the Reorganization and the filing of any proxy solicitation materials as may be necessary in connection with the issuance of the New Shares and (ii) the preparation, printing and distribution of any proxy and proxy solicitation materials in connection with the issuance of the New Shares; however, the Acquiring Fund Manager has agreed to bear or reimburse the Acquiring Fund for all such expenses in excess of $250,000. Additionally, to the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio securities made in connection with the Reorganization, these will be borne by (i) the Acquired Fund with respect to sales and purchases conducted before the Effective Time and
|
4
|
(ii) the Combined Fund with respect to the sales and purchases conducted at or after the Effective Time. The Board noted that following the closing of the Reorganization the Combined Fund expects to sell approximately 100% of the Acquired Fund’s portfolio.
|
| • |
The potential effect of the Reorganization on the total annual operating expense ratio of the Combined Fund following the Reorganization. The Board noted that, following the consummation of the Reorganization, the gross total annual operating expense ratio and the net total annual operating expense ratio (after the Management Fee waiver) of the Combined Fund is expected to be lower than the current total annual operating expense ratio of the Acquiring Fund. The total operating expense ratio of the Acquiring Fund is higher than the median and average of a peer group of closed-end funds with comparable investment strategies and objectives as determined by the Acquiring Fund Manager and/or a third-party data provider and reviewed by the Board.
|
| • |
Due to an increase in Managed Assets as a result of the Reorganization, there will be a corresponding increase in the total management fees payable by the Combined Fund to the Acquiring Fund Manager, which are based on a percentage of Combined Fund Managed Assets. In connection with the Reorganization, the Acquiring Fund Manager has contractually agreed to temporarily reduce its Management Fee to an annual rate of 0.99% of the average daily value of the Combined Fund’s Managed Assets for a period of twelve months, effective as of the Closing Date of the Reorganization.
|
| • |
It is anticipated that the Acquiring Fund would be the accounting and performance survivor of the Reorganization.
|
| • |
Potential alternatives to the Reorganization, including the Acquiring Fund conducting additional offerings of Acquiring Fund shares.
|
| • |
The existence of a separate agreement (the “Purchase Agreement”) between Insight North America LLC, the investment adviser to the Acquired Fund (the “Acquired Fund Manager”) and the Acquiring Fund Manager pursuant to which, if the Reorganization is approved and upon satisfaction or waiver of certain other conditions, the Acquiring Fund Manager will acquire, subject to certain exceptions, all right, title and interest of the Acquired Fund Manager in and to the goodwill and books and records (the “Asset Transfer”) relating to the Acquired Fund Manager’s business of providing investment management services with respect to the assets of the Acquired Fund for a cash payment at the closing of the Asset Transfer.
|
The Board’s determination to approve the Reorganization Agreement and the issuance of the New Shares was made on the basis of each Trustee’s business judgment after consideration of all of the factors taken as a whole with respect to the Acquiring Fund and its shareholders, although individual Trustees may have placed different weight and assigned different degrees of materiality to various factors.
Information about the Reorganization
Pursuant to the Reorganization Agreement (a form of which is attached as Appendix A to this Proxy Statement), the Acquired Fund will transfer at net asset value all of its assets to the Acquiring Fund in exchange for common shares of the Acquiring Fund (although shareholders may receive cash for fractional shares of the Acquiring Fund) and any Cash Consideration as defined below.
Acquired Fund shareholders will be entitled to receive in exchange for each of their outstanding shares of Acquired Fund common stock either (i) shares of Acquiring Fund common stock, which shall be based on the relative per share NAVs of the Acquired Fund and the Acquiring Fund (
, the value received shall be equal to 100% of the NAV per share of the Acquired Fund common stock) (“Stock Consideration”), or (ii) an amount of cash equal to 98% of the NAV per share of the Acquired Fund common stock (“Cash Consideration”). Acquired Fund shareholders’ right to elect to receive Cash Consideration is subject to the adjustment and proration procedures set forth in the Reorganization Agreement to ensure that the total number of shares of Acquired Fund
i.e.
5
common stock converted into the right to receive Cash Consideration will not exceed 535,736 shares (representing five percent (5%) of the outstanding shares of Acquired Fund common stock immediately prior to the closing of the Reorganization).
Following the Reorganization, Acquired Fund shareholders who receive Stock Consideration will become shareholders of the Combined Fund and will receive the New Shares, the aggregate net asset value (“NAV”) (not the market value) of which will equal the aggregate NAV (not the market value) of the common shares of the Acquired Fund that the Acquired Fund shareholders held immediately prior to the Reorganization (except for any Cash Consideration received and cash received for fractional shares of the Acquiring Fund held).
Outstanding Shares
As of the Record Date, the Acquiring Fund had 27,151,702 common shares and 2,000,000 Series A Mandatory Redeemable Preferred Shares outstanding.
Board Recommendation
The Board recommends that shareholders of the Acquiring Fund vote “FOR” the Proposal.
TERMS OF THE REORGANIZATION AGREEMENT
Pursuant to the Reorganization Agreement (a form of which is attached as Appendix A to this Proxy Statement), the Acquired Fund will transfer at net asset value all of its assets to the Acquiring Fund in exchange for common shares of the Acquiring Fund (although shareholders may receive cash for fractional shares of the Acquiring Fund) and any Cash Consideration as defined below.
The NAV per Acquiring Fund share shall be computed as of the time at which the Acquired Fund and the Acquiring Fund calculate their NAVs as set forth in their respective prospectuses (normally the close of regular trading on the NYSE) on the business day immediately prior to the Closing Date (the “Valuation Time”). At the closing of the Reorganization, the Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance with the Acquired Fund’s valuation procedures as approved by the Acquired Fund Board. Upon the consummation of the Reorganization, the assets transferred to the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures as approved by the Board.
Acquired Fund shareholders will be entitled to receive in exchange for each of their outstanding shares of Acquired Fund common stock either (i) shares of Acquiring Fund common stock, which shall be based on the relative per share NAVs of the Acquired Fund and the Acquiring Fund (
, the value received shall be equal to 100% of the NAV per share of the Acquired Fund common stock) (“Stock Consideration”), or (ii) an amount of cash equal to 98% of the NAV per share of the Acquired Fund common stock (“Cash Consideration”). Acquired Fund shareholders’ right to elect to receive Cash Consideration is subject to the adjustment and proration procedures set forth in the Reorganization Agreement to ensure that the total number of shares of Acquired Fund common stock converted into the right to receive Cash Consideration will not exceed 535,736 shares (representing five percent (5%) of the outstanding shares of Acquired Fund common stock immediately prior to the closing of the Reorganization). In the event that the Acquired Fund stockholders elect to receive Cash Consideration for an aggregate number of shares of the Acquiring Fund common stock, which are referred to as cash election shares, in excess of 535,736 shares (representing five percent (5%) of the outstanding shares of the Acquired Fund common stock immediately prior to the closing of the Reorganization), such Acquired Fund stockholders will receive Stock Consideration or Cash Consideration as follows:
i.e.
| • |
The maximum number of shares of the Acquired Fund for which Cash Consideration will be received shall not exceed 535,736 shares (representing five percent (5%) of the outstanding Acquired Fund
|
6
|
shares immediately prior to the Closing). Each record holder of the Acquired Fund having made a cash election will be entitled to receive the Cash Consideration in respect of approximately their pro rata portion of the aggregate shares of the Acquired Fund common stock for which Cash Consideration will be received. In some cases, due to rounding, an Acquired Fund stockholder’s pro rata portion may be zero, such that the Acquired Fund stockholder will receive no Cash Consideration with respect to Acquired Fund shares held.
|
| • |
With respect to the remainder of each such holder’s cash election shares, the holder will receive Stock Consideration, including cash in lieu of any fractional share, if applicable.
|
At the Effective Time, the Acquiring Fund shall issue Acquiring Fund shares to the Acquired Fund for transfer to the Acquired Fund shareholders. Within three business days after the Effective Time, the Acquiring Fund shall deliver to the Acquired Fund the Cash Consideration for distribution to those Acquired Fund shareholders electing to receive Cash Consideration.
Under the terms of the Reorganization Agreement, the Reorganization is conditioned upon, among other things, approval of the Proposal by the shareholders of the Acquired Fund, Acquiring Fund shareholder approval of the issuance of the New Shares and each Fund’s receipt of certain routine certificates and legal opinions.
The Reorganization Agreement may be terminated (i) by mutual agreement of the parties at any time prior to the Effective Time, if circumstances should develop that, in the opinion of the Board and the Acquired Fund Board, make proceeding with the Reorganization Agreement inadvisable; (ii) if one party breaches any representation, warranty or agreement contained in the Reorganization to be performed at or before the Closing Date, which breach would give rise to the failure of a condition precedent to the obligation of a party as set forth in the Reorganization Agreement and it is not cured within 30 days after being provided notice by the
non-breaching
party; (iii) if the Purchase Agreement above is validly terminated; (iv) if the Closing does not occur on or prior to March 31, 2025; or (v) any Governmental Authority has enacted, issued, promulgated or entered any Law or
non-appealable
final Judgment or taken any other
non-appealable
final action, in each case having the effect of permanently restraining, enjoining, making illegal or otherwise prohibiting the transactions contemplated by this Agreement; provided that the right to terminate the Reorganization Agreement shall not be available to a party that has materially breached any of its representations, warranties, covenants or other agreements so as to have caused the relevant Governmental Authority to enact, issue, promulgate or enter any such Law or Judgment or other
non-appealable
action, including any breach by the any party of its obligations unless such breach was primarily or principally caused by the other party’s breach of any of its representatives, warranties or covenants contained in the Reorganization Agreement.
COMPARISON OF THE ACQUIRING FUND AND THE COMBINED FUND
Investment Objectives
The Acquiring Fund’s primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation.
The Acquiring Fund’s investment objective is not fundamental and may be changed without shareholder approval. There can be no assurance that a Fund will achieve its objective.
Principal Investment Strategies
The Acquiring Fund, under normal market conditions, invests at least 80% of its Managed Assets (as defined below) in loans and fixed-income instruments or other instruments, including derivative instruments, with similar economic characteristics. The Acquiring Fund invests primarily in first- and second-lien secured loans, unsecured loans and high-yield corporate debt instruments of varying maturities. Such higher-yield debt
7
securities will often be unrated or below investment grade. During temporary defensive periods, the Acquiring Fund may invest all or a portion of its assets in certain short-term and medium-term debt securities, such as U.S. government bonds, bank deposits and obligations, short-term corporate debt, repurchase agreements, and shares of money market funds. “Managed Assets” means the total assets of the Acquiring Fund (including any assets attributable to borrowings for investment purposes) minus the sum of the Acquiring Fund’s accrued liabilities (other than liabilities representing borrowings for investment purposes).
Please see “Leverage” below for additional information regarding the Acquiring Fund’s strategies with respect to use of leverage.
Distribution Information
The Acquiring Fund currently pays a monthly distribution. The Combined Fund intends to make its first distribution to shareholders in the month immediately following the Reorganization. In addition, the Combined Fund expects to follow the same frequency of payments as the Acquiring Fund and make monthly distributions to shareholders.
Please see “Description of Common Shares to be Issued by the Acquiring Fund” below for additional information.
Leverage
As of August 30, 2024, the Acquiring Fund uses leverage through a credit facility and mandatory redeemable preferred stock representing 35% of the Acquiring Fund’s Managed Assets. The Combined Fund expects to use leverage in the same amount and types as the Acquiring Fund. However, there can be no guarantee that the Combined Fund will leverage its assets or, to the extent the Combined Fund utilizes leverage, what percentage of its assets such leverage will represent.
The Acquiring Fund is and the Combined Fund will be permitted to obtain leverage using any form or combination of financial leverage instruments, including through funds borrowed from banks or other financial institutions (
, a credit facility), margin facilities, the issuance of preferred shares or notes and leverage attributable to reverse repurchase agreements, dollar rolls or similar transactions. The Acquiring Fund and Combined Fund each may use leverage opportunistically and may choose to increase or decrease its leverage, or use different types or combinations of leveraging instruments, at any time based on the Acquiring or Combined Fund’s assessment of market conditions and the investment environment. There can be no assurance that the Acquiring Fund or Combined Fund will use leverage or that its leveraging strategy will be successful during any period in which it is employed.
i.e.
Portfolio Transitioning
Following the Reorganization, the Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and policies, which will be the same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested consistent with its investment strategies or the Acquiring Fund Manager’s investment approach while such realignment occurs. The realignment is anticipated to take up to two months following the closing of the Reorganization, based on current market conditions and assuming that the Acquired Fund’s holdings are the same as of August 30, 2024. Sales and purchases of less liquid securities could take longer. Based on the Acquired Fund’s holdings as of August 30, 2024, the Combined Fund expects to sell approximately 100% of the Acquired Fund’s portfolio following the closing of the Reorganization. If the Reorganization was completed on August 30, 2024, the expected cost (including any transaction costs) to sell 100% of the Acquired Fund’s holdings following the closing of the Reorganization, which is estimated to equal 23% of the Combined Fund’s portfolio, would be approximately $466,000 (or 0.09% of the estimated NAV of the Combined Fund as of August 30, 2024) or $0.011 per share of the Combined Fund. To the extent there are
8
any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio securities made in connection with the Reorganization, these will be borne by (i) the Acquired Fund with respect to sales and purchases conducted before the close of regular trading on the New York Stock Exchange on the Closing Date, (the “Effective Time”) and (ii) the Combined Fund with respect to sales and purchases conducted at or after the Effective Time. The portfolio transitioning may result in capital gains or losses, which may have federal income tax consequences for shareholders of the Combined Fund.
Fees and Expenses
Below is a comparison of the fees and expenses of the Acquiring Fund before and after the Reorganization based on the expenses for fiscal period ended April 30, 2024. The
information for the Combined Fund is as of August 30, 2024.
combined fees and expenses assume the maximum aggregate amount of Cash Consideration is elected and are estimated in good faith and are hypothetical.
pro forma
Pro forma
It is important to note that following the Reorganization, shareholders of the Acquired Fund would be subject to the actual fees and expenses of the Acquiring Fund, which may not be the same as the
combined fees and expenses. Future fees and expenses may be greater or lesser than those indicated below.
pro forma
|
Acquiring
Fund |
Pro Forma
Combined
Fund |
|||||||
|
Common Shareholder Transaction Expenses
|
||||||||
|
Sales load (
(1)
|
|
|
||||||
|
Offering expenses (as a percentage of offering price)
(1)
|
|
|
||||||
|
Dividend Reinvestment plan fees (per open market purchase transaction fee)
|
$ |
|
(2)
|
$ |
|
(2)
|
||
|
Dividend Reinvestment plan fees (per sale transaction fee)
|
$ |
31.95
|
(2)
|
$ |
31.95
|
(2)
|
||
|
Annual expenses
(
attributable to Common Shares)
|
||||||||
|
Management fee
(3)
|
|
% |
|
%
(4)
|
||||
|
Interest expenses and payments on borrowing
|
|
%
(5)
|
|
%
(5)
|
||||
|
Other expenses
(6)
|
|
% |
|
% | ||||
|
Total annual expenses
|
|
% |
|
% | ||||
|
Less: management fee waiver
|
|
% |
-
|
%
(4)
|
||||
|
Total annual expenses management fee waiver
|
|
% |
|
%
(4)
|
||||
|
(1)
|
|
|
(2)
|
Shareholders will pay a fee of $30.00, which includes any applicable brokerage commissions, in connection with purchases by the DRIP Administrator of common shares on the open market. Shareholders will also pay a fee of $31.95 and any applicable brokerage commissions if you direct the DRIP Administrator to sell your common shares held in a dividend reinvestment account.
|
|
(3)
|
|
|
(4)
|
In connection with the Reorganization, the Acquiring Fund Manager has contractually agreed to temporarily reduce its Management Fee to an annual rate of 0.99% of the average daily value of the Combined Fund’s Managed Assets for a period of twelve months, effective as of the Closing Date of the Reorganization. After
|
9
| this twelve-month period, this management fee waiver agreement (the “Management Fee Waiver Agreement”) shall terminate unless otherwise agreed to in writing by the Acquiring Fund Manager and the Combined Fund. The Management Fee Waiver Agreement can be terminated by the Acquiring Fund Board upon providing thirty days written notice to the Acquiring Fund Manager. In addition, the Management Fee Waiver Agreement shall terminate upon termination of the investment advisory agreement between the Acquiring Fund Manager and the Combined Fund. The Acquiring Fund Manager may not seek reimbursement from the Combined Fund with respect to the Management Fee waived. |
|
(5)
|
For the Acquiring Fund, assumes the use of leverage through a credit facility and MRPS representing 35% of Managed Assets at an annual interest rate expense to the Acquiring Fund of 5.7%, which is based on the weighted average interest rate currently applicable under the Acquiring Fund’s existing credit facility and the dividends payable on the MRPS at an annual dividend rate equal to 3.81%.
|
For the Combined Fund, assumes the use of leverage through a credit facility and MRPS representing 33% of Managed Assets at an annual interest rate expense to the Combined Fund of 5.7%, which is based on the weighted average interest rate currently applicable under the Combined Fund’s existing credit facility and the dividends payable on the MRPS at an annual dividend rate equal to 3.81%.
The actual amount of interest expense borne by the Acquiring Fund or Combined Fund will vary over time in accordance with the level and form of Acquiring or Combined Fund’s use of leverage and variations in market interest rates.
|
(6)
|
pro forma
|
Expense Example
The following example illustrates the expenses that a shareholder would pay on a $1,000 investment that is held for the time periods provided in the table. The example set forth below assumes shares of each Fund were owned as of the completion of the Reorganization (assuming the maximum aggregate amount of Cash Consideration is elected) and uses a 5% annual rate of return as mandated by SEC regulations.*
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Acquiring Fund
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Pro Forma
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
| * |
The example should not be considered a representation of future expenses. Actual expenses may be greater or less than those shown. The example assumes that the “Total annual expenses” above are accurate and remain the same in the years shown, that all dividends and distributions are reinvested at NAV and the management fee waiver for the Combined Fund is only in effect until twelve months from the Closing Date of the Reorganization, as described in note (6) above. Actual expenses may be greater or less than those assumed. Moreover, a Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
|
ADDITIONAL INFORMATION ABOUT THE COMMON SHARES OF THE ACQUIRING FUND
Description of Common Shares to be Issued by the Acquiring Fund
Shareholders of the Combined Fund will have the same rights as they did as shareholders to the Acquiring Fund. The Acquiring Fund’s Agreement and Declaration of Trust authorizes an unlimited number of shares, par value $0.001 per share.
The Acquiring Fund’s common shares, when issued, will be fully paid and
non-assessable
and have no preemptive, conversion or exchange rights or rights to cumulative voting and will have equal rights as other Acquiring Fund common shares with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.
10
Capitalization
The table below sets forth the capitalization of the Acquired Fund and the Acquiring Fund as of October 31, 2024, and the
capitalization of the Combined Fund as if the Reorganization had occurred on that date, assuming the maximum aggregate amount of Cash Consideration is elected. The data in this table is unaudited.
pro forma
|
Acquired
Fund |
Acquiring Fund
|
Adjustments
|
Pro Forma
Combined Fund
|
|||||||||||||
|
Net Assets
|
$ | 189,756,431 | $ | 369,129,490 | $ | (9,487,822 |
)
(a)
|
$ | 549,398,099 | |||||||
|
Common Shares
Outstanding
(b)
|
10,714,723 | 27,145,669 | 13,256,898 |
(c)
|
40,402,567 | |||||||||||
|
Net Asset Value Per Common Share
|
$ | 17.71 | $ | 13.60 | $ | 13.60 |
(c)
|
$ | 13.60 | |||||||
|
Preferred Shares
Outstanding
|
None | 2,000,000 | — | 2,000,000 | ||||||||||||
|
Liquidation Preference per Preferred Share
|
N/A | $ | 25.00 | — | $ | 25.00 | ||||||||||
|
(a)
|
Reflects the effects of the Cash Consideration (assuming the maximum aggregate amount of Cash Consideration is elected and that the Cash Consideration is funded from sales of securities).
|
|
(b)
|
Based on the number of outstanding common shares as of October 31, 2024.
|
|
(c)
|
Reflects the exchange of Acquired Fund shares for Acquiring Fund shares as a result of the Reorganization.
|
THE ACQUIRING FUND’S BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE PROPOSAL.
VOTING INFORMATION AND REQUIREMENTS
Quorum
A quorum of shareholders is constituted by the presence at the Meeting, in person or by proxy, of
one-third
of the shares entitled to vote.
Broker
Non-Votes
and Abstentions
Broker
non-votes
occur when a beneficial owner of shares held in “street name” does not give instructions to the broker holding the shares as to how to vote on matters deemed
“non-routine.”
Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker holding the shares. If the beneficial owner does not provide voting instructions, the broker can still vote the shares with respect to matters that are considered to be “routine,” but cannot vote the shares with respect to
“non-routine”
matters. The Proposal is considered
“non-routine,”
so brokers will not have discretionary voting power with respect to the Proposal, and the Acquiring Fund does not expect to receive any broker
non-votes.
Abstentions will be considered as votes cast and, accordingly, will have the same effect as votes “AGAINST” the Proposal.
Adjournments
If a quorum is not present at the Meeting, or if a quorum is present at the Meeting, but sufficient votes to approve any of the proposed items are not received, the Chairman of the Meeting may propose one or more adjournments of the Meeting to permit further solicitation of proxies.
Appraisal Rights
Shareholders do not have dissenters’ rights of appraisal in connection with the Proposal.
11
Vote Required for the Proposal
The Proposal requires the affirmative vote of a majority of common and preferred shares, voting together as a single class, present in person or by proxy and entitled to vote.
INVESTMENT ADVISER AND ADMINISTRATOR
KKR Credit Advisors (US) LLC, registered address 555 California Street, 50th Floor, San Francisco, California 94104, serves as the investment adviser for the Acquiring Fund. U.S. Bancorp Fund Services, LLC, located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as administrator to the Acquiring Fund.
AGREEMENT BETWEEN INSIGHT NORTH AMERICA LLC AND KKR CREDIT ADVISORS (US) LLC
On October 8, 2024, the Acquiring Fund Manager and the Acquired Fund Manager, entered into a separate agreement (the “Purchase Agreement”) pursuant to which, if the Reorganization is approved and upon satisfaction or waiver of certain other conditions, the Acquiring Fund Manager will acquire, subject to certain exceptions, all right, title and interest of the Acquired Fund Manager in and to the goodwill and books and records (the “Asset Transfer”) relating to the Acquired Fund Manager’s business of providing investment management services with respect to the assets of the Acquired Fund for a cash payment at the closing of the Asset Transfer.
The Funds are not a party to the Purchase Agreement; however, the completion of the Asset Transfer is subject to certain conditions, including shareholder approval of the Reorganization described in the Proxy Statement/Prospectus for the Reorganization to proceed. Therefore, if Acquired Fund shareholders do not approve the Reorganization or if the other conditions in the Purchase Agreement are not satisfied or waived, then the Asset Transfer may not be completed, and the Purchase Agreement may be terminated.
SHAREHOLDER INFORMATION
As of October 29, 2024, to the Acquiring Fund’s knowledge, no single shareholder or “group” (as that term is used in Section 13(d) of the 1934 Act) beneficially owned more than 5% of the Acquiring Fund’s outstanding common shares, except as described in the following tables. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of the Acquiring Fund or acknowledges the existence of control. A party that controls the Acquiring Fund may be able to significantly affect the outcome of any item presented to shareholders for approval. Information as to beneficial ownership of common shares, including percentage of common shares beneficially owned, is based on, among other things, reports filed with the SEC by such holders.
|
Shareholder Name and Address
|
Class of Shares /
Beneficial or Record Owner |
Share
Holdings |
Percentage
Owned |
Estimated
Pro
Forma
Percentage
of Ownership of Combined Fund
(1)
|
||||||||||
|
Brighthouse Life Insurance Company
11225 N. Community House
Rd. Charlotte, NC 28277
|
Preferred
Shares/Beneficial Owner |
184,000 | 9.20 | % | 9.20 | % | ||||||||
|
Metlife Insurance KK
1-3 Kioicho Chiyoda-Ku
Tokyo 102-8525
Japan
|
Preferred
Shares/Beneficial Owner |
244,000 | 12.20 | % | 12.20 | % | ||||||||
|
Metropolitan Life Insurance Company
200 Park Avenue
New York, NY 10166
|
Preferred
Shares/Beneficial Owner |
492,000 | 24.60 | % | 24.60 | % | ||||||||
12
|
Shareholder Name and Address
|
Class of Shares /
Beneficial or Record Owner |
Share
Holdings |
Percentage
Owned |
Estimated
Pro
Forma
Percentage
of Ownership of Combined Fund
(1)
|
||||||||||
|
Minnesota Life Insurance Company
400 Robert Street North
St. Paul, MN 55101-2098
|
Preferred
Shares/Beneficial Owner |
280,000 | 14.00 | % | 14.00 | % | ||||||||
|
Voya Financial, Inc.
230 Park Avenue
New York NY 10169
|
Preferred
Shares/Beneficial Owner |
680,000 | 34.00 | % | 34.00 | % | ||||||||
|
(1)
|
Assumes the maximum aggregate amount of Cash Consideration is elected.
|
Security Ownership of Management
As of November 27, 2024, the officers and Trustees of the Acquiring Fund, in the aggregate, owned less than 1% of the outstanding shares of the Acquiring Fund.
ADDITIONAL INFORMATION
Solicitation and Voting of Proxies
Broadridge Financial Solutions, Inc. (the “Proxy Solicitor”) has been retained to assist in the solicitation of proxies and will receive an estimated fee of $60,914.62.
Solicitation of proxies is being made primarily by the mailing of this Proxy Statement with its enclosures. As the date of the Meeting approaches, certain shareholders of the Acquiring Fund may receive a call from a representative of the Proxy Solicitor, if the Acquiring Fund has not yet received their vote. Authorization to execute proxies may be obtained by telephonic or electronically transmitted instructions from shareholders of the Acquiring Fund.
Independent Registered Public Accounting Firm
Deloitte & Touche LLP (“Deloitte”) acts as the independent registered public accounting firm for the Acquiring Fund for the current fiscal year and the fiscal year ended October 31, 2023. It is not expected that a representative of Deloitte will attend the Meeting.
Shareholder Proposal
Any shareholder desiring to present a proposal for inclusion in the Acquiring Fund’s proxy materials for the 2025 annual meeting of shareholders of the Acquiring Fund must submit the proposal in writing, so that it is received by the Acquiring Fund no later than November 8, 2024. Any shareholder desiring to present a proposal for consideration at the 2025 annual meeting of shareholders, but not for inclusion in the Acquiring Fund’s proxy materials, must submit the proposal in writing no earlier than December 13, 2024, nor later than December 27, 2024, in the manner and form required by the Acquiring Fund’s
By-Laws.
The Acquiring Fund will provide a copy of its
By-Laws
to any shareholder upon request in writing at the address stated on the first page of this Proxy Statement.
Trustees Attendance at Annual Meetings of Shareholders
The Acquiring Fund does not require Trustees to attend its annual meeting of shareholders.
13
Communications with the Board of Trustees
Shareholders may send communications to the Board. Shareholders should send communications intended for the Board by addressing the communication directly to the Board (or individual Trustees) and/or otherwise clearly indicating in the salutation that the communication is for the Board (or individual Trustees) and by sending the communication to either the Acquiring Fund’s office or directly to such Trustee(s) at the address specified for such Trustee above. Other shareholder communications received by the Acquiring Fund not directly addressed and sent to the Board will be reviewed and generally responded to by management, and will be forwarded to the Board only at management’s discretion based on the matters contained therein.
Incorporation by reference
The documents listed below are incorporated by reference into this Proxy Statement and deemed to be part of this Proxy Statement:
| • |
the
Semi-Annual Report to shareholders of the Acquiring Fund for the fiscal period ended April
30, 2024
(Investment Company Act File
No. 811-22543;
Accession
No. 0001515940-24-000005);
|
| • |
the
Annual Report to shareholders of the Acquiring Fund for the fiscal period ended October
31, 2023
(Investment Company Act File
No. 811-22543;
Accession
No. 0001515940-23-000014).
|
Additionally, copies of the foregoing and any more recent reports filed after the date hereof may be obtained without charge:
|
By Phone:
|
(855) 862-6092
|
|
|
By Mail:
|
KKR Income Opportunities Fund | |
|
c/o KKR Credit Advisors (US) LLC
555 California Street, 50
th
Floor
|
||
| San Francisco, California 94104 | ||
|
By Internet:
|
https://www.kkrfunds.com/kio/ |
Other Business
The Trustees of the Acquiring Fund do not intend to present any other business at the Meeting, nor are they aware that any shareholder intends to do so. If, however, any other matters, including adjournments, are properly brought before the Meeting, the persons named in the accompanying form of proxy will vote thereon in accordance with their judgment.
IF VOTING BY PAPER PROXIES, IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND A MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Trustees of:
KKR Income Opportunities Fund
/s/ Lori Hoffman
Lori Hoffman
Secretary and Vice President
14
APPENDIX A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
Agreement
th
Floor, San Francisco, California 94104 (the “
Acquiring Fund
th
Floor, New York, New York 10166 (the “
Acquired Fund
Funds
Acquiring Fund Manager
Acquired Fund Manager
WHEREAS
Acquiring Fund Shares
Reorganization
WHEREAS
closed-end
management investment companies registered as such under the Investment Company Act of 1940, as amended (the “
1940 Act
WHEREAS
WHEREAS
Acquiring Fund Board
Acquired Fund Board
WHEREAS
Purchase Agreement
WHEREAS
Code
NOW, THEREFORE
|
1.
|
THE REORGANIZATION AND FUND TRANSACTIONS
|
1.1.
The Reorganization
A-1
transfer the Assets (as defined in Section 1.2) to the Acquiring Fund in exchange for the Stock Consideration and the Cash Consideration. At the Effective Time, the Acquiring Fund shall issue Acquiring Fund Shares to the Acquired Fund for transfer to the Acquired Fund Shareholders as hereinafter provided. Promptly thereafter, and in any event, no more than three (3) Business Days after the Effective Time, the Acquiring Fund shall deliver to the Acquired Fund or its designee the Cash Consideration for distribution to those Acquired Fund Shareholders electing to receive Cash Consideration. The number of Acquiring Fund Shares and the amount of the Cash Consideration shall be determined as set forth in Section 2.3. No fractional Acquiring Fund Shares shall be issued and Acquired Fund Shareholders otherwise entitled to receive fractional Acquiring Fund Shares shall be paid cash in lieu thereof, as provided in Section 2.4.
1.2.
Assets of the Acquired Fund
31a-3
under the 1940 Act), and any other property owned by the Acquired Fund at the Effective Time (collectively, the “
Assets
1.3.
Liabilities of the Acquired Fund
Assumed Liabilities
1.4.
Distribution of Acquiring Fund Shares and Cash Consideration to Acquired Fund Shareholders
Acquired Fund Shareholders
Acquired Fund Shares
A-2
1.5.
Recorded Ownership of Acquiring Fund Shares
1.6.
Filing Responsibilities of Acquired Fund
Commission
1.7.
Transfer Taxes
1.8.
Termination
|
2.
|
VALUATION
|
2.1.
Net Asset Value per Acquired Fund Share
2.2.
Net Asset Value per Acquiring Fund Share
2.3.
Calculation of Number of Acquiring Fund Shares and Amount of Cash Consideration
.
Stock Consideration
Cash Consideration
Maximum Cash Shares
2.4.
Fractional Shares
.
pro rata
A-3
transfer the cash proceeds from the sale of such Acquiring Fund Shares, net of brokerage commissions, if any, directly to the Acquired Fund for further distribution to Acquired Fund Shareholders entitled to receive the fractional shares (without interest and subject to withholding taxes);
the amount of cash proceeds from the sale of any fractional Acquired Fund Shares shall not be counted as Cash Consideration or toward the Maximum Cash Shares for the purposes of Section 2.3.
provided that
2.5.
Effective Time
NYSE
Effective Time
2.6.
Valuation Time
Valuation Time
Business Day
|
3.
|
CLOSING
|
3.1.
Closing
Closing
Closing Date
3.2.
Transfer and Delivery of Assets
BNY
US Bank
17f-4
under the 1940 Act, in which the Assets are deposited, the Assets deposited with such depositories. The Cash Consideration to be transferred by or on behalf of the Acquiring Fund shall be delivered by wire transfer of federal funds or by such other manner as BNY, as custodian of the Acquired Fund, deems appropriate as soon as reasonably practicable following the receipt by the Acquiring Fund of the Acquired Fund’s portfolio securities.
3.3.
Share Records
Transfer Agent
A-4
Acquired Fund as of the Effective Time, or provide other evidence reasonably satisfactory to the Acquired Fund as of the Effective Time that such Acquiring Fund Shares will be credited to the Acquired Fund’s accounts on the books of the Acquiring Fund (or credited to the accounts of the Acquired Fund Shareholders that receive any amount of Stock Consideration, which for the avoidance of doubt shall not include
any Acquired Fund Shareholder that does not receive Stock Consideration and only receives Cash Consideration).
3.4.
Postponement of Valuation Time
Market
3.5.
Failure To Deliver Assets
|
4.
|
REPRESENTATIONS AND WARRANTIES
|
4.1.
Representations and Warranties of the Acquired Fund
Acquired Fund Disclosures
(a) The Acquired Fund is a statutory trust duly organized, validly existing, and in good standing under the laws of the State of Delaware with power under its Declaration of Trust and Amended and Restated
to own all of its properties and assets and to carry on its business as it is presently conducted. The Acquired Fund is duly qualified or licensed to do business and is in good standing in every jurisdiction where its business so requires, except for such failures to be so qualified or licensed as would not, individually or in the aggregate, reasonably be expected to be material to the Acquired Fund.
By-Laws,
each as amended from
time-to-time,
(b) The Acquired Fund is, and at all times since its inception has been, duly registered with the Commission as a
”).
closed-end
management investment company under the 1940 Act, and the Acquired Fund Shares have been registered under and sold in compliance with the Securities Act of 1933, as amended (the “
1933 Act
A-5
(c) Subject in each case to obtaining the Acquired Fund Shareholder Approval (as defined below):
(i) the Acquired Fund has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement;
(ii) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the Acquired Fund have been duly authorized by all necessary action on the part of the Acquired Fund; and
(iii) the Acquired Fund has duly and validly approved, executed and delivered this Agreement.
(d) Assuming the due authorization, execution and delivery of this Agreement by the Acquiring Fund, this Agreement constitutes the valid and binding obligation of the Acquired Fund, enforceable against the Acquired Fund in accordance with its terms, subject to (i) Laws of general application relating to bankruptcy, insolvency and the relief of debtors and (ii) as to enforceability, Laws governing specific performance, injunctive relief and other equitable remedies.
(e) At the Effective Time, except as otherwise disclosed in the Acquired Fund Disclosures, (i) the Acquired Fund will have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer and deliver such Assets hereunder free of any liens or other encumbrances except for any (A) encumbrances arising under this Agreement, if any, or (B) encumbrances relating to the transferability of securities arising under applicable securities Laws, if any; (ii) immediately upon delivery and payment for the Assets, the Acquiring Fund will acquire all rights of the Acquired Fund thereto, subject to no restrictions on the full transfer thereof other than such restrictions as might arise under the 1933 Act; and (iii) no person or entity (other than the Acquired Fund) has any rights, title to or interests in the Assets.
(f) No consent, approval, authorization, or order of any court or governmental or similar authority is required for the consummation by the Acquired Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the Securities Exchange Act of 1934, as amended (the “
”), and the 1940 Act, and such as may be required under state securities laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
1934 Act
(g) The shareholder reports, marketing materials of the Acquired Fund and each prospectus, statement of additional information and Form
8-Ks
of the Acquired Fund used for a period of three (3) years prior to the date of this Agreement conform or conformed at the time of their use in all material respects to the applicable requirements of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not or did not at the time of their use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.
(h) Assuming all requisite organizational and regulatory approvals contemplated in Section 5.5 and Section 5.10, to the extent applicable, are obtained and remain in full force and effect, the Acquired Fund is not engaged currently, and, except as otherwise disclosed in the Acquired Fund Disclosures, the execution, delivery and performance of this Agreement will not result, in: (i) a violation of securities laws (including the 1933 Act, the 1940 Act and applicable state blue sky laws) or any federal, state, local, municipal, provincial, territorial, national, foreign or other statute, law (including common law), act, code, order, award, injunction, decree, judgment, verdict, rule, constitution, directive, resolution, or regulation enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any governmental body (“
”) applicable to the Acquired Fund, (ii) a conflict with or violation of its Declaration of Trust and Amended and Restated
”) or provide any notice to, or
Law
By-Laws,
each as amended from time to time, (iii) conflict with any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquired Fund is a party or by which it is bound, (iv) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquired Fund is a party or by which it is bound or (v) the requirement to obtain any governmental authorization or make any filing with or provide any notice to any court, governmental body, arbitral body (public or private) or any entity or body exercising similar authority (a “
Governmental Authority
A-6
obtain any approval, consent or waiver of, any other person, except, solely with respect to clauses (i), (iii) (iv) and (v) where such breach or default or failure to notify or obtain approval, consent or waiver would not reasonably be expected to have a material adverse impact on the Acquired Fund or would not adversely impact its ability to consummate or materially delay the transactions contemplated by this Agreement.
(i) Except as otherwise disclosed in the Acquired Fund Disclosures, all material contracts or other commitments of the Acquired Fund (other than this Agreement) will terminate without liability or obligation to the Acquired Fund on or prior to the Effective Time.
(j) Except as otherwise disclosed in the Acquired Fund Disclosures, no litigation or administrative proceeding or investigation of or before any Governmental Authority with jurisdiction over the Acquired Fund is presently pending or, threatened in writing, or to the actual knowledge of David Leduc, Tom Stabile and Daniel Haff, after due inquiry of those employees immediately reporting to such executive officers (the “
”), threatened orally against the Acquired Fund or any of the Acquired Fund’s properties or assets, that, if adversely determined, is individually or in the aggregate, reasonably likely to be materially adverse to the Acquired Fund’s financial condition or business or would adversely impact its ability to consummate or materially delay the transactions contemplated by this Agreement. To the Acquired Fund’s Knowledge, there are no facts which are reasonably likely to form the basis for the institution of such proceedings, and the Acquired Fund is not a party to or subject to the provisions of any order, decree or judgment of any Governmental Authority that would be material to the Acquired Fund’s business or would adversely impact its ability to consummate or materially delay the transactions herein contemplated. There are no outstanding settlements, orders, judgments, injunctions or decrees against the Acquired Fund or the Acquired Fund Shares.
Acquired Fund’s Knowledge
(k) The financial statements and financial highlights of the Acquired Fund at, as of and for its most recently completed fiscal year ended March 31, 2024, have been audited by Tait, Weller & Baker LLP, independent registered public accounting firm to the Acquired Fund, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“
”) consistently applied, except as otherwise disclosed therein, and such statements (copies of which have been furnished to the Acquiring Fund) present fairly, in all material respects, the financial position, results of operations, and changes in net assets of the Acquired Fund as of such date and for the period then ended, and there are no known contingent liabilities of the Acquired Fund required to be reflected on the statement of assets and liabilities (including the notes thereto) in accordance with GAAP as of such date not disclosed therein. The Acquired Fund maintains standard accounting policies established and administered in accordance with GAAP. The Acquired Fund has established and maintains a system of internal controls over financial reporting sufficient to provide reasonable assurance (i) that its business is operated, in all material respects, in accordance with applicable Laws, (ii) regarding the reliability of the Acquired Fund’s financial reporting and the preparation of financial statements in accordance with GAAP and (iii) that material receipts and expenditures of the Acquired Fund are being made in accordance with the authorization of the officers and directors (or their equivalent) of such entity. To the Acquired Fund’s Knowledge, in the past five (5) years, there has been no fraud, or claim or allegation of fraud, by or against the named executive officers of the Acquired Fund relating to the operation of the Acquired Fund or the preparation of its financial statements.
GAAP
(l) Since March 31, 2024, there has not been any change in the Acquired Fund’s financial condition, assets and liabilities or business that would be, individually or in the aggregate, materially adverse to the Acquired Fund, other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness. For the purposes of this Section 4.1(l), a decline in net asset value per share of Acquired Fund Shares due to declines in market values of securities held by the Acquired Fund, the discharge of the Acquired Fund’s liabilities, or purchase or the redemption of the Acquired Fund’s shares by shareholders of the Acquired Fund shall not, in and of itself, constitute a material adverse change either individually or in the aggregate (
, any change, event, occurrence or fact underlying such decline in market values of the securities may be taken into account in determining where a material adverse change has occurred).
provided
A-7
(m) The Acquired Fund does not have any liabilities or obligations, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due (collectively, the “
”) arising out of or related to its business, other than liabilities or obligations that (i) are expressly reflected or reserved against on the financial statements of the Acquired Fund, (ii) were incurred in the ordinary course of business consistent with past practice that do not arise from a breach of contract, tort, infringement or violation of Law, including the performance of any contract to which the Acquired Fund is a party as of the date hereof, (iii) individually and in the aggregate would not be materially adverse to the Acquired Fund, (iv) arise out of the termination of any contract in connection with the transaction contemplated by this Agreement, or (v) do not and will not materially impair the ability of the Acquired Fund to perform its obligations hereunder, or the ability of the Acquiring Fund to conduct the business from and after the Closing as it is currently or proposed to be conducted. Other than the Assumed Liabilities and any Liabilities of the Acquired Fund required to be paid by the Acquired Fund Manager in accordance with Section 8.1(b), the Acquired Fund will use commercially reasonable efforts to discharge, or make provisions for, all of its known Liabilities before the Effective Time.
Liabilities
(n) At the Effective Time, all material federal, state, local and other tax returns, dividend reporting forms, and other
tax-related
reports of the Acquired Fund required by Law to have been filed by such date (including any extensions, if any) shall have been filed and are or will be correct in all material respects, and all material federal, state, local and other taxes shown as due or required to be shown as due on said returns, forms and reports shall have been paid or provision shall have been made for the payment thereof, and no such return is currently under audit, and no material assessment has been asserted, in writing, with respect to such returns, which assessment has not been resolved.
(o) The Acquired Fund has not taken any action and, to the Acquired Fund’s Knowledge, there is no fact or circumstance that would reasonably be expected to prevent the Reorganization from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(p) The Acquired Fund has elected to be treated as a “regulated investment company” under Subchapter M of the Code. For each taxable year since and including the taxable year ending in 2020 (including the taxable year ending on the Closing Date), the Acquired Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company within the meaning of Section 851 et seq. of the Code and has been eligible to and has computed its federal income tax under Section 852 of the Code and expects to continue to meet such requirements at all times through the Closing Date. The Acquired Fund has not at any time since its inception been liable for, nor is now liable for, any material income or excise tax pursuant to Sections 852 or 4982 of the Code. There is no other material tax liability (including any foreign, state or local tax liability) of the Acquired Fund except as set forth in the Acquired Fund Disclosures. The Acquired Fund has no earnings or profits accumulated with respect to any taxable year in which the provisions of Subchapter M of the Code did not apply. The Acquired Fund will not be subject to corporate-level taxation on the sale of any assets currently held by it as a result of the application of Section 337(d) of the Code and the regulations thereunder.
(q) Except as set forth in the Acquired Fund Disclosures, the Acquired Fund is in compliance with all Laws applicable to its business, properties or assets in all material respects. Without limiting the foregoing, the Acquired Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its shares of beneficial interest. To the Acquired Fund’s Knowledge, the Acquired Fund has complied in all material respects with applicable requirements for collection and maintenance of Forms
W-9
and/or Forms
W-8
and has withheld in respect of dividends and other distributions and paid to the proper taxing authorities all taxes required to be withheld and is not liable for any material penalties which could be imposed thereunder.
(r) All of the issued and outstanding shares of the Acquired Fund will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Transfer Agent, on behalf of the Acquired Fund, as provided in Section 3.3. The Acquired Fund does not have outstanding any options, warrants or
A-8
other rights to subscribe for or purchase any of the Acquired Fund Shares, nor is there outstanding any security convertible into any of the Acquired Fund Shares.
(s) The Proxy Statement/Prospectus (as defined in Section 5.6), insofar as it relates to information provided by the Acquired Fund for the use therein, will, as of the effective time of the Acquiring Fund’s registration statement on
in which it is included and any time prior to the Effective Time: (i) not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which such statements were made, not misleading and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder;
the representations and warranties of this subsection (s) shall not apply to statements in or omissions from the Proxy Statement/Prospectus made in reliance upon and in conformity with information that was furnished by the Acquiring Fund for use therein.
Form N-14
(the “
Registration Statement
”
)
provided, however, that
(t) Except for UBS Securities LLC, there are no brokers or finders entitled to receive any payments from, in connection with this Agreement and the transactions contemplated herein.
(u) The representations and warranties of the Acquired Fund set forth in this Section 4.1 are the only representations and warranties made by the Acquired Fund with respect to Acquired Fund or any other matter relating to the transactions contemplated by this Agreement. Except as specifically set forth in this Section 4.1, (i) the Acquired Fund is selling the Assets to the Acquiring Fund “as is” and “where is” and with all faults, and the Acquired Fund makes no other representation or warranty, express or implied, as to any matter whatsoever relating to the Assets, the Assumed Liabilities, the Acquired Fund or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including as to merchantability or fitness for any particular use or purpose and (ii) except with respect to Fraud or as otherwise agreed in the Purchase Agreement or any other agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquired Fund, any of its affiliates, or any of its or their respective officers, directors, employees, agents, representatives, stockholders or members, will have or will be subject to any liability or indemnification obligation to the Acquiring Fund or any other person resulting from the distribution to the Acquiring Fund or its affiliates or representatives, or the Acquiring Fund’s use, of any information relating to the Assets, the Assumed Liabilities, the Acquired Fund or any of its affiliates, or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including any descriptive memoranda, summary business descriptions or any information, documents or materials made available by the Acquired Fund or any of its affiliates or its or their respective representatives to the Acquiring Fund or any of its affiliates or its or their respective representatives, whether orally or in writing, in expectation of the transactions contemplated by this Agreement or any ancillary agreement.
(v) The Acquired Fund has conducted its own independent investigation, review and analysis of the Acquiring Fund, as it has deemed appropriate, which investigation, review and analysis was done by the Acquired Fund and its representatives. The Acquired Fund acknowledges and agrees that it and its representatives have been provided access to the personnel and records relating to the Acquiring Fund. In entering into this Agreement, the Acquired Fund acknowledges and agrees that it has relied solely upon the aforementioned investigation, review and analysis and not on any factual representations or opinions or representations or warranties of the Acquiring Fund, its representatives or any other person (except the representations and warranties of the Acquiring Fund set forth in Section 4.2 and of the Acquiring Fund Manager set forth in any agreement between the Acquiring Fund Manager and the Acquired Fund Manager). The Acquired Fund hereby acknowledges and agrees that (i) other than the representations and warranties of the Acquiring Fund set forth in Section 4.2, and the representations and warranties of the Acquiring Fund Manager set forth in any agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquiring Fund, Acquiring Fund Manager or any of their respective affiliates, officers, directors, employees, agents, representatives, stockholders or members, make or have made, and the Acquired Fund is not relying on, any representation or warranty, express or implied, at law or in equity, as to any matter whatsoever relating to the Acquiring Fund or any other matter relating to the transactions
A-9
contemplated by this Agreement, and (ii) except as set forth in Section 4.2, or any agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquiring Fund, any of its affiliates, or any of their respective officers, directors, employees, agents, representatives, stockholders or members, will have or will be subject to any liability or indemnification obligation to the Acquired Fund or any other person resulting from the distribution to the Acquired Fund, its affiliates or their respective representatives, or the Acquired Fund’s use, of any information relating to the Acquiring Fund or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including any descriptive memoranda, summary business descriptions or any information, documents or material made available to the Acquired Fund, any of its affiliates or their respective representatives by the Acquiring Fund, the Acquiring Fund Manager, or their respective affiliates or representatives, whether orally or in writing, in any other form in expectation of the transactions contemplated by this Agreement or any ancillary agreement.
4.2.
Representations and Warranties of the Acquiring Fund
Acquiring Fund Disclosures
(a) The Acquiring Fund is a statutory trust duly organized, validly existing, and in good standing under the Laws of the State of Delaware with power under its Amended and Restated Declaration of Trust and Amended and Restated
to own all of its properties and assets and to carry on its business as it is presently conducted. The Acquiring Fund is duly qualified or licensed to do business and is in good standing in every jurisdiction where its business so requires, except for such failures to be so qualified or licensed as would not, individually or in the aggregate, reasonably be expected to be material to the Acquiring Fund.
By-Laws,
each as amended from
time-to-time,
(b) The Acquiring Fund is, and at all times since its inception has been, duly registered with the Commission as a
closed-end
management investment company under the 1940 Act, and the Acquiring Fund Shares have been registered and sold in compliance with the 1933 Act.
(c) Subject in each case to obtaining the Acquiring Fund Shareholder Approval (as defined below):
(i) the Acquiring Fund has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement;
(ii) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the Acquiring Fund have been duly authorized by all necessary action on the part of the Acquiring Fund; and
(iii) the Acquiring Fund has duly and validly approved, executed and delivered this Agreement.
(d) Assuming the due authorization, execution and delivery of this Agreement by the Acquired Fund, this Agreement constitutes the valid and binding obligation of the Acquiring Fund, enforceable against the Acquiring Fund in accordance with its terms, subject to (i) Laws of general application relating to bankruptcy, insolvency and the relief of debtors and (ii) as to enforceability, Laws governing specific performance, injunctive relief and other equitable remedies.
(e) No consent, approval, authorization, or order of any court or governmental or similar authority is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities Laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(f) The shareholder reports, marketing and materials of the Acquiring Fund and each prospectus and statement of additional information and Form
8-Ks
of the Acquiring Fund used for a period of three
A-10
(3) years prior to the date of this Agreement conform or conformed at the time of their use, in each case, in all material respects to the applicable requirements of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not or did not at the time of their use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.
(g) Assuming all requisite filings and approvals contemplated hereby are made or obtained and remain in full force and effect, the execution, delivery and performance of this Agreement will not result, in: (i) a violation of Laws applicable to the Acquiring Fund, (ii) a conflict with or violation of its Amended and Restated Agreement and Declaration of Trust and Amended and Restated
By-Laws,
each as amended from time to time, (iii) conflict with any material agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Fund is a party or by which it is bound, (iii) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquiring Fund is a party or by which it is bound, or (iv) the requirement to obtain any governmental authorization or make any filing with or provide any notice to any Governmental Authority or provide any notice to, or obtain any approval, consent or waiver of, any other person, except, solely with respect to clauses (i), (iii), (iv) and (v) where such breach or default or failure to notify or obtain approval, consent or waiver would not reasonably be expected to have a material adverse impact on the Acquired Fund or would not adversely impact its ability to consummate or materially delay the transactions contemplated by this Agreement.
(h) No litigation or administrative proceeding or investigation of or before any Governmental Authority with jurisdiction over the Acquired Fund is presently pending or threatened in writing or to the actual knowledge of Rudy Pimentel or Michael Nguyen after due inquiry of those employees immediately reporting to such executive officers (the “
”), threatened orally against the Acquiring Fund or any of the Acquiring Fund’s properties or assets, that, if adversely determined, is individually or in the aggregate, reasonably likely to be materially adverse to the Acquiring Fund’s financial condition or business or would adversely impact its ability to consummate or materially delay the transactions contemplated by this Agreement. To the Acquiring Fund’s Knowledge, there are no facts which are reasonably likely to form the basis for the institution of such proceedings, and the Acquiring Fund is not a party to or subject to the provisions of any order, decree or judgment of any Governmental Authority that would be material to the Acquiring Fund’s business or would adversely impact its ability to consummate or materially delay the transactions herein contemplated. There are no outstanding settlements, orders, judgments, injunctions or decrees against the Acquiring Fund or the Acquiring Fund Shares.
Acquiring Fund’s Knowledge
(i) The financial statements and financial highlights of the Acquiring Fund at, as of and for its most recently completed fiscal year ended October 31, 2023, have been audited by [ ], independent registered public accounting firm to the Acquiring Fund, and have been prepared in all material respects in accordance with GAAP consistently applied, and such statements (copies of which have been furnished to the Acquired Fund) present fairly, in all material respects, the financial position, results of operations, and changes in net assets of the Acquiring Fund as of such date and for the period then ended, and there are no known contingent liabilities of the Acquiring Fund required to be reflected on the statement of assets and liabilities (including the notes thereto) in accordance with GAAP as of such date not disclosed therein. The Acquiring Fund has established and maintains a system of internal controls over financial reporting sufficient to provide reasonable assurance (i) that its business is operated, in all material respects, in accordance with applicable Laws, (ii) regarding the reliability of the Acquiring Fund’s financial reporting and the preparation of financial statements in accordance with GAAP and (iii) that material receipts and expenditures of the Acquiring Fund are being made in accordance with the authorization of the officers and directors (or their equivalent) of such entity. To the Acquiring Fund’s Knowledge, in the past five (5) years there has been no fraud, or claim or allegation of fraud, by or against the named executive officers of the Acquiring Fund relating to the operation of the Acquiring Fund or the preparation of its financial statements.
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(j) Since October 31, 2023, there has not been any change in the Acquiring Fund’s financial condition, assets and liabilities (on a consolidated basis) or business that would be, individually or in the aggregate, materially adverse to the Acquiring Fund, other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness. For the purposes of this Section 4.2(j), a decline in net asset value per share of Acquiring Fund Shares due to declines in market values of securities held by the Acquiring Fund, the discharge of the Acquiring Fund’s liabilities, or purchase or the redemption of the Acquiring Fund’s shares by shareholders of the Acquiring Fund shall not, in and of itself, constitute a material adverse change either individually or in the aggregate (
, any change, event, occurrence or fact underlying such decline in market values of the securities may be taken into account in determining where a material adverse change has occurred).
provided
(k) To the Acquiring Fund’s Knowledge, the Acquiring Fund does not have any Liabilities arising out of or related to its business, other than liabilities that (i) are expressly reflected or reserved against on the financial statements of the Acquiring Fund, (ii) were incurred in the ordinary course of business consistent with past practice, that do not arise from a breach of contract, tort, infringement or violation of Law, (iii) individually and in the aggregate would not be materially adverse to the Acquiring Fund, (iv) arise out of the termination of any contract in connection with the transaction contemplated by this Agreement, or (v) do not and will not materially impair the ability of the Acquiring Fund to perform its obligations hereunder, or the ability of the Acquiring Fund to conduct the business from and after the Closing as it is currently or proposed to be conducted.
(l) At the Effective Time, all material federal, state, local and other tax returns, dividend reporting forms, and other
tax-related
reports of the Acquiring Fund required by Law to have been filed by such date (including any extensions, if any) shall have been filed and are or will be correct in all material respects, and all material federal, state, local and other taxes shown as due or required to be shown as due on said returns, forms and reports shall have been paid or provision shall have been made for the payment thereof, and no such return is currently under audit, and no material assessment has been asserted, in writing, with respect to such returns, which assessment has not been resolved.
(m) The Acquiring Fund has not taken any action and, to the Acquiring Fund’s Knowledge, there is no fact or circumstance that would reasonably be expected to prevent the Reorganization from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(n) The Acquiring Fund has elected to be treated as a “regulated investment company” under Subchapter M of the Code. For each taxable year since and including the taxable year ending in 2020 (including the period through the Closing Date), the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company within the meaning of Section 851 et seq. of the Code and has been eligible to and has computed its federal income tax under Section 852 of the Code and expects to continue to meet such requirements at all times through the Closing Date. The Acquiring Fund has not at any time since its inception been liable for, nor is now liable for, any material income or excise tax pursuant to Sections 852 or 4982 of the Code. There is no other material tax liability (including any foreign, state or local tax liability) of the Acquiring Fund except as set forth in the Acquiring Fund Disclosures. The Acquiring Fund has no earnings or profits accumulated with respect to any taxable year in which the provisions of Subchapter M of the Code did not apply. The Acquiring Fund will not be subject to corporate-level taxation on the sale of any assets currently held by it as a result of the application of Section 337(d) of the Code and the regulations thereunder.
(o) The Acquiring Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its common shares of beneficial interest. To the Acquiring Fund’s Knowledge, the Acquiring Fund has complied in all material respects with applicable requirements for collection and maintenance of Forms
W-9
and/or Forms
W-8
and has withheld in respect of dividends and other distributions and paid to the proper taxing authorities all taxes required to be withheld and is not liable for any material penalties which could be imposed thereunder.
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(p) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms of this Agreement, will at the Effective Time have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund Shares, will be fully paid and
non-assessable
by the Acquiring Fund and will have been issued in compliance in all material respects with applicable registration requirements and applicable securities Laws. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Acquiring Fund Shares, nor is there outstanding any security convertible into any of the Acquiring Fund Shares.
(q) The Proxy Statement/Prospectus (as defined in Section 5.6), insofar as it relates to the Acquiring Fund, will, as of the effective time of the Registration Statement in which it is included and any time prior to the Effective Time: (i) not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which such statements were made, not misleading and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder;
the representations and warranties of this subsection (q) shall not apply to statements in or omissions from the Proxy Statement/Prospectus made in reliance upon and in conformity with information that was furnished by the Acquired Fund for use therein.
provided, however, that
(r) There are no brokers or finders entitled to receive any payments from, in connection with this Agreement and the transactions contemplated herein.
(s) The representations and warranties of the Acquiring Fund set forth in this Section 4.2 are the only representations and warranties made by the Acquiring Fund with respect to Acquiring Fund or any other matter relating to the transactions contemplated by this Agreement. Except as specifically set forth in this Section 4.2, (i) the Acquiring Fund makes no other representation or warranty, express or implied, as to any matter whatsoever relating to the Acquiring Fund or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including as to merchantability or fitness for any particular use or purpose and (ii) except with respect to Fraud or as otherwise agreed in the Purchase Agreement or any other agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquiring Fund, any of its affiliates, or any of its or their respective officers, directors, employees, agents, representatives, stockholders or members, will have or will be subject to any liability or indemnification obligation to the Acquired Fund or any other person resulting from the distribution to the Acquired Fund or its affiliates or representatives, or the Acquiring Fund’s use, of any information relating to the Acquiring Fund or any of its affiliates, or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including any descriptive memoranda, summary business descriptions or any information, documents or materials made available by the Acquiring Fund or any of its affiliates or its or their respective representatives to the Acquired Fund or any of its affiliates or its or their respective representatives, whether orally or in writing, in expectation of the transactions contemplated by this Agreement or any ancillary agreement.
(t) The Acquiring Fund has conducted its own independent investigation, review and analysis of the Assets and the Assumed Liabilities, as it has deemed appropriate, which investigation, review and analysis was done by the Acquiring Fund and its representatives. The Acquiring Fund acknowledges and agrees that it and its representatives have been provided access to the personnel, properties, premises and records relating to the Assets and the Assumed Liabilities for such purpose. In entering into this Agreement, the Acquiring Fund acknowledges and agrees that it has relied solely upon the aforementioned investigation, review and analysis and not on any factual representations or opinions or representations or warranties of the Acquired Fund, its representatives or any other person (except the representations and warranties of the Acquired Fund set forth in Section 4.1 and of the Acquired Fund Manager set forth in any agreement between the Acquiring Fund Manager and the Acquired Fund Manager). The Acquiring Fund hereby acknowledges and agrees that (i) other than the representations and warranties of the Acquired Fund set forth in Section 4.1, and the representations and warranties of the Acquired Fund Manager set forth in any agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquired
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Fund, Acquired Fund Manager or any of their respective affiliates, officers, directors, employees, agents, representatives, stockholders or members, make or have made, and the Acquiring Fund is not relying on, any representation or warranty, express or implied, at law or in equity, as to any matter whatsoever relating to the Assets, the Assumed Liabilities, the Acquired Fund or any other matter relating to the transactions contemplated by this Agreement, and (ii) except as set forth in Section 4.1, or any agreement between the Acquiring Fund Manager and the Acquired Fund Manager, none of the Acquired Fund, any of its affiliates, or any of their respective officers, directors, employees, agents, representatives, stockholders or members, will have or will be subject to any liability or indemnification obligation to the Acquiring Fund or any other person resulting from the distribution to the Acquiring Fund, its affiliates or their respective representatives, or the Acquiring Fund’s use, of any information relating to the Assets, the Assumed Liabilities, the Acquired Fund or any other matter relating to the transactions contemplated by this Agreement or any ancillary agreement, including any descriptive memoranda, summary business descriptions or any information, documents or material made available to the Acquiring Fund, any of its affiliates or their respective representatives by the Acquired Fund, the Acquired Fund Manager, or their respective affiliates or representatives, whether orally or in writing, in any other form in expectation of the transactions contemplated by this Agreement or any ancillary agreement.
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5.
|
COVENANTS AND AGREEMENTS
|
5.1.
Conduct of Business
5.2.
No Distribution of Acquiring Fund Shares
5.3.
Information
5.4.
Other Necessary Action
5.5.
Shareholder Meeting
(a) Unless this Agreement has been terminated in accordance with its terms, the Acquired Fund shall call and hold a meeting of its shareholders to consider and act upon this Agreement and to take such other action under applicable federal and state law to obtain approval of the transactions contemplated herein (“
”). Unless this Agreement has been terminated in accordance with its terms, the Acquiring Fund has called or shall call and hold a meeting of its shareholders to consider and act upon and to take such other action under applicable federal and state law to obtain approval of the issuance of Acquiring Fund shares in connection with the Reorganization (“
”). The Acquired Fund and the Acquiring Fund shall use commercially reasonable efforts to hold the respective shareholder meetings as soon as practicable and advisable after the date of the effectiveness of the Registration Statement filing.
Acquired Fund Shareholder Approval
Acquiring Fund Shareholder Approval
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(b) The Acquired Fund, in consultation with the Acquiring Fund, shall (i) use reasonable best efforts to set a record date for persons entitled to notice of, and to vote at, the shareholder meeting of the Acquired Fund, and (ii) use reasonable best efforts to ensure that such record date not be changed or such shareholder meeting be adjourned or otherwise postponed or delayed (unless the Acquiring Fund’s prior written consent has been provided). The Acquiring Fund, in consultation with the Acquired Fund, shall (A) use reasonable best efforts to set a record date for persons entitled to notice of, and to vote at, the shareholder meeting of the Acquiring Fund, and (B) use reasonable best efforts to ensure that such record date not be changed or such shareholder meeting be adjourned or otherwise postponed or delayed (unless the Acquired Fund’s prior written consent has been provided).
5.6.
Registration Statement and Proxy Statement/Prospectus
(a) The Acquired Fund and the Acquiring Fund will mutually cooperate, using reasonable best efforts, to expeditiously prepare the Registration Statement, including the proxy statement/prospectus to be prepared by the Acquiring Fund to be included in the Registration Statement (the “
”), and have it declared effective by the SEC as soon as reasonably practicable. The Acquiring Fund and the Acquired Fund shall reasonably cooperate with any review of financial information and financial statements that is reasonably required in connection with the preparation and filing of the Registration Statement, including the issuance of any consents. The Registration Statement (including the Proxy Statement/Prospectus) shall comply in all material respects with the applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations, respectively, thereunder.
Proxy Statement/Prospectus
(b) To the extent the Acquired Fund has not provided the Acquiring Fund with information regarding the Acquired Fund, and the Acquiring Fund has not provided the Acquired Fund with information regarding the Acquiring Fund, reasonably necessary for the preparation by the Acquiring Fund of the Proxy Statement/Prospectus in compliance with the 1933 Act, the 1934 Act and the 1940 Act, each party shall provide the materials and information necessary to prepare the Registration Statement and the Proxy Statement/Prospectus, for inclusion therein, in connection with the shareholder meeting for the Acquired Fund to consider the approval of the transactions contemplated hereby and of the Acquiring Fund to consider the approval of the issuance of additional Acquiring Fund Shares in connection with the this Agreement, each as described herein.
(c) If at any time prior to the Closing, the Acquired Fund or the Acquiring Fund becomes aware of any untrue statement of material fact or omission to state a material fact required to be stated therein or necessary to make the statements made not misleading in light of the circumstances under which they were made, the party discovering the item will notify the other party and the parties will cooperate in promptly preparing, filing and clearing with the Commission and, if appropriate, distributing to shareholders appropriate disclosure with respect to the item.
(d) The Acquired Fund and the Acquiring Fund agree to reasonably cooperate with each other, and shall or will have furnished the information relating to itself to be set forth in the Registration Statement as required by the 1933 Act, the 1934 Act, the 1940 Act, and the rules and regulations thereunder and the state securities or blue sky laws.
5.7.
Liquidating Distribution
5.8.
Efforts
provided that
5.9.
Other Instruments
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executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action as the other party may reasonably deem necessary or desirable in order to vest in and confirm: (a) to the Acquired Fund, title to and possession of the Acquiring Fund Shares to be delivered hereunder, and (b) to the Acquiring Fund, title to and possession of all the Assets and assumption of the Assumed Liabilities assumed hereunder and otherwise to carry out the intent and purpose of this Agreement.
5.10.
Regulatory Approvals
5.11.
Final Tax Distribution
5.12.
Supplemental Listing Application
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6.
|
CONDITIONS PRECEDENT
|
6.1.
Conditions Precedent to Obligations of Acquired Fund
(a) The representations and warranties of the Acquiring Fund (other than representations and warranties in Sections 4.2(a), 4.2(b), 4.2(c) and 4.2(r)) shall be true and correct in all material respects as of the date hereof and as of the Closing Date (other than any such representation or warranty that speaks only as of the date hereof or any other specific date, in which case such representation or warranty must have been true and correct in all
respects as of such date) without giving effect to any “materiality” qualification or exception contained therein. The representations and warranties in Sections 4.2(a), 4.2(b), 4.2(c) and 4.2(r) shall be true and correct in all respects as of the date hereof and as of the Closing Date (other than any such representation and warranty speaks only as of the date hereof or any other specific date, in which case such representation or warranty must have been true and correct in all respects as of such date).
(b) The Acquiring Fund shall have performed in all material respects all of the covenants and complied in all material respects with all of the provisions required by this Agreement to be performed or complied with by the Acquiring Fund, at or before the Closing Date.
(c) The Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the name of the Acquiring Fund by its President or Vice President and its Treasurer dated as of the Closing Date certifying the fulfillment of the conditions set forth in Section 6.1(a) and Section 6.1(b).
(d) Certified copies of the resolutions evidencing the approval of the Agreement and the transactions contemplated herein by the Acquiring Fund Board shall have been delivered to the Acquired Fund.
(e) The Acquired Fund Manager shall provide for a trustees liability insurance policy (“
”) to replace, as of the Effective Time, the Acquired Fund’s existing trustees liability insurance policies with respect to matters existing or occurring at or prior to the Effective Time (“
”), which Supplemental Policy shall (i) name each Trustee of the Acquired Fund Board as a named insured, (ii) provide for a claims reporting or discovery period of six (6) years from and after the Effective Time and have terms and conditions that are not materially less advantageous to the insureds as the Current Policy, and (iii) provide for coverage of not less than $5,000,000.
Supplemental Policy
Current Policy
(f) The Acquired Fund shall have received on the Closing Date the opinion of Dechert LLP, counsel to the Acquiring Fund (which may reasonably rely as to matters governed by the laws of the
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State of Delaware on an opinion of Delaware counsel and/or certificates of officers or Trustees of the Acquiring Fund) dated as of the Closing Date, covering the following points:
(i) the Acquiring Fund is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and to carry on its business including as a registered investment company, and the Acquiring Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted;
(ii) the Agreement has been duly authorized, executed and delivered by the Acquiring Fund and, assuming due authorization, execution and delivery of the Agreement by the Acquired Fund, is a valid and binding obligation of the Acquiring Fund enforceable against the Acquiring Fund in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and to general equity principles;
(iii) the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders as provided by this Agreement are duly authorized, upon such delivery will be validly issued and outstanding, and are fully paid and
non-assessable
by the Acquiring Fund, and no shareholder of the Acquiring Fund has any preemptive rights to subscription or purchase in respect thereof;
(iv) the execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of the Acquiring Fund’s Amended and Restated Agreement and Declaration of Trust or its Amended and Restated
or a material violation of any provision of any agreement (known to such counsel) to which the Acquiring Fund is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement not disclosed to the Acquired Fund, judgment or decree to which the Acquiring Fund is a party or by which it is bound;
By-Laws,
each as amended from
time-to-time,
(v) to the knowledge of such counsel, no consent, approval, authorization or order of any court or Governmental Authority of the United States or the State of Delaware is required to be obtained by the Acquiring Fund in order to consummate the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state securities or blue sky laws (other than those of the State of Delaware);
(vi) the Acquiring Fund is a registered investment company classified as a management company of the
closed-end
type under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect; and
(vii) to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Acquiring Fund or any of its properties or assets and the Acquiring Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business.
6.2.
Conditions Precedent to Obligations of Acquiring Fund
(a) The representations and warranties of the Acquired Fund (other than representations and warranties in Sections 4.1(a), 4.1(b), 4.1(c), 4.1(d) and 4.1(t)) shall be true and correct in all material respects as of the date hereof and as of the Closing Date (other than any such representation or warranty that speaks only as of the date hereof or any other specific date, in which case such representation or warranty must have been true and correct in all
respects as of such date) without
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giving effect to any “materiality” qualification or exception contained therein. The representations and warranties in Sections 4.1(a), 4.1(b), 4.1(c), 4.1(d) and 4.1(t) shall be true and correct in all respects as of the date hereof and as of the Closing Date (other than any such representation and warranty speaks only as of the date hereof or any other specific date, in which case such representation or warranty must have been true and correct in all respects as of such date).
(b) The Acquired Fund shall have performed in all material respects all of the covenants and complied in all material respects with all of the provisions required by this Agreement to be performed or complied with by the Acquired Fund, at or before the Closing Date.
(c) The Acquired Fund shall have delivered to the Acquiring Fund a certificate executed in the name of the Acquired Fund by its President or Vice President and its Treasurer, dated as of the Closing Date certifying the fulfillment of the conditions set forth in Section 6.2(a) and Section 6.2(b).
(d) Certified copies of the resolutions evidencing the approval of the Agreement and the transactions contemplated herein by the Acquired Fund Board shall have been delivered to the Acquiring Fund.
(e) The Acquiring Fund shall have received on the Closing Date the opinion of Troutman Pepper Hamilton Sanders LLP, counsel to the Acquired Fund (which may reasonably rely on certificates of officers of the Acquired Fund) dated as of the Closing Date, covering the following points:
(i) The Acquired Fund is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and to carry on its business as so described in the Proxy Statement/Prospectus, including as a registered investment company, and the Acquired Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted and as so described in the Proxy Statement/Prospectus;
(ii) The Agreement has been duly authorized, executed and delivered by the Acquired Fund and, assuming due authorization, execution and delivery of the Agreement by the Acquiring Fund is a valid and binding obligation of the Acquired Fund enforceable against the Acquired Fund in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and to general equity principles;
(iii) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of the Acquired Fund’s Declaration of Trust or its Amended and Restated
or a material violation of any provision of any agreement (known to such counsel) to which the Acquired Fund is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement not disclosed to the Acquiring Fund, judgment or decree to which the Acquired Fund is a party or by which it is bound;
By-Laws,
each as amended from
time-to-time,
(iv) To the knowledge of such counsel, no consent, approval, authorization or order of any court or Governmental Authority of the United States or the State of Delaware is required to be obtained by the Acquired Fund in order to consummate the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state securities or blue sky laws;
(v) The Acquired Fund is a registered investment company classified as a management company of the
closed-end
type under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(vi) The outstanding shares of the Acquired Fund have been registered under the 1933 Act; and
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(vii) To the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Acquired Fund or any of its properties or assets and the Acquired Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business.
6.3.
Other Conditions Precedent
(a) The Agreement and the transactions contemplated herein shall have been approved by the Acquired Fund Board and shall have received the Acquired Fund Shareholder Approval, and certified copies of the resolutions of the Acquired Fund Board shall have been delivered to the Acquiring Fund.
(b) The issuance of the Acquiring Fund Shares has been approved by shareholders of the Acquiring Fund.
(c) Each of the conditions to Closing (as defined in the Purchase Agreement) set forth in Article 6 of the Purchase Agreement have been satisfied (or validly waived in accordance with the terms thereof) and the transactions contemplated by the Purchase Agreement will close concurrently with the Closing.
(d) The Registration Statement of the Acquiring Fund shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness thereof shall have been issued.
(e) On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act or instituted any proceeding seeking to enjoin the consummation of the Reorganization contemplated by this Agreement under Section 25(c) of the 1940 Act.
(f) At the Effective Time, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or make illegal, this Agreement or the transactions contemplated herein.
(g) All consents, orders and permits of Federal, state and local regulatory authorities or other third parties set forth on Schedule C hereto shall have been obtained.
(h) BNY shall have delivered such certificates or other documents as set forth in Section 3.2.
(i) The Transfer Agent shall have delivered a certificate of its authorized officer as set forth in Section 3.3.
(j) The NYSE shall have authorized the listing of the number of additional Acquiring Fund Shares exchanged in the Reorganization as set forth in Section 1.1.
(k) The parties hereto shall have received the opinion of the law firm of Dechert LLP (based on certain facts, assumptions and representations), as of the Closing Date, addressed to the Acquiring Fund and the Acquired Fund, substantially to the effect that the Reorganization will constitute a “reorganization” within the meaning of Section 368(a)(1) of the Code. In rendering the opinion, Dechert LLP may require and rely upon (and may incorporate by reference) reasonable and customary representations and covenants from the parties. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 6.3(k).
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7.
|
SURVIVAL
|
7.1.
Survival
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forth in this Agreement are contractual in nature only and subject to the sole and exclusive remedies set forth herein. Notwithstanding the foregoing or anything in this Agreement to the contrary, nothing in this Agreement shall limit (a) any rights that may be available to either Acquiring Fund or Acquired Fund in respect of a claim for Fraud, and (b) any rights that may be available to either the Acquiring Fund Manager and the Acquired Fund Manager (whether in contract, in tort or at law or in equity) under any other agreement to which the Acquiring Fund Manager and the Acquired Fund Manager is a party, as it relates to a breach of the terms of this Agreement. For the purposes of this Agreement, “
” means Delaware common law fraud, in the making of a specific representation or warranty expressly set forth in Section 4 and requires (i) an intentional false representation expressly set forth in the representations and warranties set forth in Section 4, (ii) actual knowledge that such representation is false (as opposed to any fraud claim based on constructive knowledge, negligent or reckless misrepresentation or a similar theory), (iii) reasonable detrimental reliance by such party upon such false representation in acting or refraining from acting and (iv) the incurrence of damage by such party by reason of such reliance. For the avoidance of doubt, nothing set forth herein shall limit the rights of the Acquiring Fund Manager and the Acquired Fund Manager in any other agreement between such parties.
Fraud
7.2.
Remedies Exclusive
7.3.
Liability of the Acquired Fund
7.4.
Liability of the Acquiring Fund
|
8.
|
EXPENSES
|
8.1.
Expenses of Reorganization
(a) Except as otherwise set forth in this Agreement or unless otherwise agreed in writing, each of the Acquiring Fund Manager and the Acquired Fund Manager shall pay its own direct and indirect expenses incurred by it, or by the respective Fund managed by each, in connection with the preparation and negotiation of this Agreement and the consummation of the transactions contemplated by this Agreement, including all fees and expenses of its advisors and representatives.
(b) Notwithstanding the foregoing:
(i) to the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio securities made in connection with the Reorganization, these will be borne by (A) the Acquired Fund with respect to the sales and purchases conducted before the Effective Time and (B) by the Acquiring Fund with respect to the sales and purchases conducted at or after the Effective Time;
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(ii) the Acquiring Fund Manager or the Acquiring Fund shall pay all costs and expenses incurred (A) with respect to the registration of the shares of the Acquiring Fund to be issued in connection with the Reorganization on Form
the budget for such proxy and proxy solicitation materials shall be determined by Acquiring Fund after reasonable consultation with Acquired Fund;
N-14
and the filing of any proxy solicitation materials, including any filing fees associated with the filing of the Form
N-14
or any other registration statement or proxy solicitation materials as may be necessary in connection with the transactions contemplated by this Agreement and any ancillary agreement among or between any parties to this Agreement among or between any parties to this Agreement, and (B) all expenses for preparation, printing and distributing (or
re-distributing)
any proxy and proxy solicitation materials in connection with the Reorganization and the transactions contemplated by this Agreement, any ancillary agreement among or between any parties to this Agreement or any amendments or supplements thereto;
provided that
(iii) (A) any and all expenses or losses incurred by any Trustee of the Acquired Fund Board, with respect to a claim covered by the Supplemental Policy, shall be payable or otherwise borne exclusively by the Acquired Fund Manager up to the retention amount under the Supplemental Policy, and (B) the premium of the Supplemental Policy shall be borne equally between the Acquired Fund Manager and the Acquired Fund; and
(iv) any expenses or costs related to the winding up or dissolution of the Acquired Fund after the Effective Time shall be paid by the Acquired Fund Manager.
|
9.
|
AMENDMENTS AND TERMINATION
|
9.1.
Amendments
provided, however, that
provided, further, that
9.2.
Termination
(a) This Agreement may be terminated and the transactions contemplated hereby may be abandoned by mutual written agreement of the parties, at any time prior to the Closing.
(b) Either the Acquiring Fund or the Acquired Fund may at its option terminate this Agreement by written notice to the other party at or before the Closing due to: (i) a breach by the other of any representation, warranty, or agreement contained herein to be performed at or before the Closing (so long as the terminating party is not then in material breach of any of its representations, warranties or covenants contained in this Agreement, unless such breach was primarily or principally caused by the other party’s breach of any of its representatives, warranties or covenants contained in this Agreement), if not cured within 30 days after being provided notice of such breach by the
non-breaching
party, (ii) the failure of a condition set forth in Sections 6.1, 6.2 or 6.3, and such failure is incapable of being cured, or if curable, is not cured by the applicable party within 30 days after being provided written notice of such failure, unless such condition is waived by the applicable party or parties (if applicable); (iii) if the Closing does not occur on or prior to March 31, 2025; or (iv) any Governmental Authority has enacted, issued, promulgated or entered any Law or
non-appealable
final Judgment or taken any
A-21
other
the right to terminate this Agreement under this Section 9.2(b) shall not be available to a party that has materially breached any of its representations, warranties, covenants or other agreements contained herein so as to have caused the relevant Governmental Authority to enact, issue, promulgate or enter any such Law or Judgment or other
non-appealable
final action, in each case having the effect of permanently restraining, enjoining, making illegal or otherwise prohibiting the transactions contemplated by this Agreement;
provided that
non-appealable
action, including any breach by the any party of its obligations under Section 5.6(a) unless such breach was primarily or principally caused by the other party’s breach of any of its representatives, warranties or covenants contained in this Agreement.
(c) Notwithstanding the foregoing, if the Acquiring Fund Manager validly terminates the Purchase Agreement, the Acquiring Fund shall be entitled to terminate this Agreement by providing written notice to the Acquired Fund, and if the Acquired Fund Manager validly terminates the Purchase Agreement, the Acquired Fund shall be entitled to terminate this Agreement by providing written notice to the Acquiring Fund.
(d) In the event of any such termination, in the absence of any Fraud or willful breach of this Agreement, there shall be no liability for damages on the part of any of the Acquiring Fund, the Acquired Fund or their respective Trustees or officers, to the other party or its Trustees or officers.
|
10.
|
NOTICES
|
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by facsimile, electronic delivery (
,
no bounce-back or delivery failure notice is received), personal service or prepaid or certified mail addressed as follows:
i.e.
e-mail)
(
provided that
If to the Acquired Fund:
Insight Select Income Fund
200 Park Avenue, 7
th
Floor
New York, New York 10166
Attention: John Awad and Vivek Nayar
Email:
With copies (which shall not constitute notice) to:
Insight North America LLC
200 Park Avenue
7th Floor
New York NY 10166
Attention:
Email:
Troutman Pepper Hamilton Sanders LLP
3000 Two Logan Square, Eighteenth & Arch Streets
Philadelphia, PA 19103
Attention:
E-mail:
Clifford Chance US LLP
Two Manhattan West
375 9th Avenue
New York, NY 10001
Attention:
A-22
Email:
If to the Acquiring Fund:
KKR Income Opportunities Fund
555 California Street, 50
th
Floor
San Francisco, California 94104
Attention:
E-mail:
With copies (which shall not constitute notice) to:
KKR Credit Advisors (US) LLC
555 California Street, 50
th
Floor
San Francisco, California 94104
Attention:
E-mail:
Dechert LLP
1095 Avenue of the Americas
New York, NY, 10036
Attention:
E-Mail:
|
11.
|
PUBLICITY AND CONFIDENTIALITY
|
11.1.
non-disclosing
party prior to making the disclosure).
11.2.
Protected Persons
non-public,
confidential or proprietary information obtained from the other Protected Persons in connection with the transactions contemplated by this Agreement;
provided, further, that
provided that
A-23
in this Agreement to the contrary, each party (and each employee, agent or other representative of the party) may disclose the U.S. tax treatment and U.S. tax structure of the transactions contemplated by this Agreement and information relating to such U.S. tax treatment and U.S. tax structure, except to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws.
11.3.
non-public,
confidential or proprietary information relating to the other Protected Persons and their affiliates, whether obtained through their due diligence investigation, this Agreement or otherwise, except such information may be disclosed: (a) in connection with any requirement to governmental or regulatory bodies, and, where necessary, to any other person in connection with the obtaining of consents or waivers as contemplated by this Agreement;
provided
non-confidential
basis on the date of receipt,
provided
|
12.
|
MISCELLANEOUS
|
12.1.
Entire Agreement
12.2.
Headings
12.3.
Governing Law; Venue; Waiver of Jury Trial
(a) This Agreement, and any controversy or proceeding arising out of, or with respect to this Agreement or the transactions contemplated herein, shall be construed in accordance with and governed for all purposes by the internal substantive Laws of the State of Delaware applicable to contracts executed and to be wholly performed within Delaware.
(b) Any proceeding against the parties arising out of, or with respect to, this Agreement shall be brought exclusively in the Court of Chancery in the State of Delaware, New Castle County, or, if such court does not have proper jurisdiction, the United States federal district court or any other state court sitting in the State of Delaware, New Castle County (the “
”), and the parties hereto accept the exclusive jurisdiction of the Designated Courts for the purpose of any proceeding. Each party hereto agrees that service of any process, summons, notice, or document by U.S. registered mail addressed to such party in accordance with Section 10 shall be effective service of process for any action, suit, or proceeding brought against such party in any such court. The Acquired Fund hereby
Designated Courts
A-24
designates the individual(s) listed in Section 10 to whom notice may be given on behalf of the Acquired Fund as its true and lawful agent upon whom may be served any lawful process in any proceeding instituted by or on behalf of the Acquiring Fund. The Acquiring Fund hereby designates the individual(s) listed in Section 10 to whom notice may be given on behalf of the Acquiring Fund as its true and lawful agent upon whom may be served any lawful process in any proceeding instituted by or on behalf of the Acquired Fund. Each party hereto agrees that a final,
non-appealable
judgment in any proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law.
(c) In addition, each party hereto hereby irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of any proceeding arising out of or relating to this Agreement in any Designated Court or any judgment entered by any of the Designated Courts and hereby further irrevocably waives any claim that any proceeding brought in the Designated Courts has been brought in an inconvenient forum.
(d) EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF ANY PARTY TO THIS AGREEMENT IN NEGOTIATION, EXECUTION AND DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT.
12.4.
Assignment; No Third Party Beneficiaries
12.5.
Specific Performance
(a) The parties agree that irreparable damage would occur, that no adequate remedy at Law would exist and that damages would be difficult to determine, in the event that any of the provisions of this Agreement were not performed by the parties in accordance with its specific terms or were otherwise breached. The parties accordingly agree that in addition to any other remedy to which they are entitled at Law or in equity, the parties shall be entitled to injunctive relief to prevent breaches of this Agreement and otherwise to enforce specifically the provisions of this Agreement. Each party expressly waives any requirement that the other party obtain any bond or provide any indemnity in connection with any proceeding seeking injunctive relief or specific enforcement of the provisions of this Agreement. The parties further agree that nothing set forth in this Section 12.5 shall (a) require any party to institute any action or proceeding for (or limit any party’s right to institute any action or proceeding for) injunctive relief or specific enforcement under this Section 12.5 before or as a condition to exercising any termination right under Section 9.2 (and pursuing damages after such termination) or (b) restrict or limit any party’s right to terminate this Agreement in accordance with Section 9.2 (and to pursue damages after such termination).
(b) With respect to the specific performance contemplated by subsection (a) above, the parties agree not to raise any objections to the availability of the equitable remedy of specific performance to prevent any such breaches or threatened breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement to prevent any such breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of the parties hereto under this Agreement. Notwithstanding the foregoing, each of the parties hereby agrees that the Acquired Fund shall be entitled to specific performance to cause the Closing to occur if the Closing is required to be consummated in accordance with the terms of this Agreement and (x) the Acquired Fund has
A-25
irrevocably confirmed to the Acquiring Fund in writing that the Acquired Fund is ready, willing and able to consummate the transactions contemplated by this Agreement and (y) the Acquired Fund Manager has irrevocably confirmed to the Acquiring Fund in writing that the Acquired Fund Manager is ready, willing and able to consummate the transactions contemplated by the Purchase Agreement.
12.6.
Severability
12.7.
Counterparts
12.8.
Waiver
provided
that
12.9.
Interpretation
12.10.
No Admission
Fund Disclosures
A-26
12.11.
Exhibits and Schedules
(a) The exhibits and schedules to this Agreement and the Fund Disclosures are incorporated herein by reference and made a part of this Agreement as though completely set forth herein. All references to this Agreement herein or in any part of the exhibits, schedules, and the Fund Disclosures shall be deemed to refer to this entire Agreement, including all exhibits, schedules and Fund Disclosures. Any item disclosed in a Fund Disclosures shall be deemed to have been disclosed not only for purposes of the provision of this Agreement to which such Fund Disclosures directly relates, but also for any other provisions of Section 4.1 or Section 4.2, as applicable, to which the disclosure is relevant to the extent that the relevance of such disclosure to such other provisions is reasonably apparent on the face of such disclosure (it being understood that to be so reasonably apparent it is not required that the other provisions be expressly cross-referenced). Capitalized terms used in the exhibits, schedules and Fund Disclosures and not otherwise defined therein have the meanings given to them in this Agreement. Any contract referred to in the exhibits, schedules and Fund Disclosures shall be deemed to include reference to all exhibits, schedules and other documents or agreements attached thereto,
the same have been made available to the Acquiring Fund or Acquired Fund, as applicable. Neither the specification of any dollar amount in any representation or warranty contained in this Agreement nor the inclusion of any specific item in any exhibit, schedule and Fund Disclosure is intended to imply that such amount, or higher or lower amounts, or the item so included or other items, are or are not material, and the fact of setting forth of any such amount or the inclusion of any such items shall not be an admission or construed as an admission in any dispute or controversy between the parties as to whether any obligation, item or matter not described in this Agreement or included in any exhibit, schedule or Fund Disclosure is or is not material for the purposes of this Agreement.
provided
(b) The parties hereto acknowledge and agree that any disclosure made with reference to a Section of the Fund Disclosures shall be deemed sufficient for purposes of disclosure in any other Section or Sections of the Fund Disclosures that may require disclosure therein to the extent that it is reasonably apparent on the face of such disclosure that such disclosure is applicable to such other Section or Sections. The Fund Disclosures are intended only to qualify and limit the representations, warranties and covenants of Acquired Fund and the Acquiring Fund, respectively, contained in this Agreement and shall not be deemed to expand in any way the scope or effect of any such representations, warranties or covenants. The disclosures in the Fund Disclosures may be over-inclusive, considering the materiality standard contained in the Section of this Agreement relating to the corresponding Section of the Fund Disclosures, and any items or matters disclosed in the Fund Disclosures are not intended to set or establish standards of materiality different from those set forth in the corresponding Section of this Agreement. The disclosure of any item or information in the Fund Disclosures is not an admission that such item or information (or any
non-disclosed
item or information of comparable or greater significance) is material, required to have been disclosed in the Fund Disclosures, or is of a nature that would reasonably be expected to have a material adverse effect. Prior to the Closing, each of the Acquired Fund and the Acquiring Fund shall have the right from time to time to supplement, modify or update the Fund Disclosures by written notice to the other party to reflect events occurring after the date hereof which, if occurring prior to the date hereof, would have been required to be set forth or described on the Fund Disclosures. Neither the Acquired Fund nor the Acquiring Fund shall be deemed to be in breach of any representation or warranty hereunder, and no representation or warranty of the Acquired Fund or the Acquiring Fund, as applicable, shall be deemed to be untrue or inaccurate with respect to the information disclosed in any such supplement, modification or update, except to the extent such update would reasonably be expected to, individually or in the aggregate, result in a material adverse effect.
[
]
Signature Pages Follow
A-27
IN WITNESS WHEREOF
|
INSIGHT SELECT INCOME FUND
|
||
| By: | ||
| Name: | David C. Leduc | |
| Title: | President | |
|
INSIGHT NORTH AMERICA LLC
|
||
| By: | ||
| Name: | David C. Leduc | |
| Title: | Chief Executive Officer | |
|
KKR INCOME OPPORTUNITIES FUND
|
||
| By: |
|
|
| Name: | Rudy Pimentel | |
|
Title:
|
||
|
KKR CREDIT ADVISORS (US) LLC
|
||
| By: |
|
|
| Name: | ||
|
Title:
|
||
SCHEDULE A
ADJUSTMENT AND PRORATION PROCEDURES
The Acquired Fund has appointed or will appoint an exchange agent reasonably acceptable to the Acquiring Fund (the “
”) to process the calculation, delivery and payment of the Stock Consideration and the Cash Consideration. Elections by Acquired Fund Shareholders for Cash Consideration shall be made on a form (the “
”) reasonably acceptable to the Exchange Agent and the parties hereto. The adjustment and proration process for the Stock Consideration and Cash Consideration will occur as follows:
Exchange Agent
Election Form
| 1. |
Subject to adjustment and proration in accordance with the provisions of the Agreement and this Schedule A, each Acquired Fund Shareholder, with respect to each Acquired Fund Share held by that Acquired Fund Shareholder immediately before the Election Deadline (as defined below), shall be entitled to receive Cash Consideration and/or Stock Consideration based on the election made by that Acquired Fund Shareholder on the Election Form. Acquired Fund Shares for which an Acquired Fund Shareholder has elected to receive Cash Consideration are referred to as “
Cash Election Shares
Stock Election Shares
“Cash Electing Shareholders”
“Election Deadline”
|
| 2. |
If the aggregate number of Cash Election Shares (“
Aggregate Cash Election Shares
Over Subscription
Reduced Cash Shares
pro rata
|
|
RCS
|
|
=
|
|
(CES ÷ CES
A
) x MCS
|
Where in relation to any Cash Electing Shareholder:
|
RCS
|
= | the number of Reduced Cash Shares for which such Cash Electing Shareholder shall be entitled to receive Cash Consideration | ||||
|
CES
|
= | the number of Cash Election Shares originally elected by such Cash Electing Shareholder | ||||
|
CES
A
|
= | The aggregate number of Cash Election Shares originally elected by all Cash Electing Shareholders | ||||
|
MCS
|
= | Maximum Cash Shares (as defined in Section 2.3) |
| 3. |
In the event of an Over Subscription, each Acquired Fund Shareholder shall receive (a) Stock Consideration in respect of (i) its Stock Election Shares and (ii) its Cash Election Shares which are not deemed to be Reduced Cash Shares in accordance with the formula set forth in Section 2 above (“
Increased Stock Shares
|
|
ISS
|
|
=
|
|
CES -RCS
|
Where in relation to each Acquired Fund Shareholder:
|
ISS
|
= | the number of Increased Stock Shares for such Acquired Fund Shareholder | ||||
|
CES
|
= | the number of Cash Election Shares originally elected by such Acquired Fund Shareholder | ||||
|
RCS
|
= | the number of Reduced Cash Shares for which such Acquired Fund Shareholder shall be entitled to receive Cash Consideration pursuant to the formula in Section 2 above |
| 4. |
If there is not an Over Subscription, each Acquired Fund Shareholder will receive (a) Cash Consideration with respect to its Cash Election Shares, if any; and (b) Stock Consideration with respect to its Stock Election Shares.
|
| 5. |
The Acquired Fund shall cause the Exchange Agent to pay Cash Consideration to Acquired Fund Shareholders in the amounts calculated as provided in this Schedule A, as soon as reasonably practicable after the Acquired Fund deposits or causes to be deposited with the Exchange Agent the Cash Consideration received from the Acquiring Fund.
|
| 6. |
Stock Consideration shall be issued to Acquired Fund Shareholders in accordance with the provisions of Section 3.3 of the Agreement. All Stock Consideration shall be issued in uncertificated form in accordance with the terms and conditions of the Acquiring Fund’s Amended and Restated Declaration of Trust and Amended and Restated
By-Laws.
|
END PROXY CARD SIGN, DATE AND VOTE ON THE REVERSE SIDE PROXY VOTING OPTIONS YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES 1. MAIL your signed and voted Proxy back in YOU OWN. PLEASE CAST YOUR the postage paid envelope provided PROXY VOTE TODAY! 2. ONLINE at www.proxyvote.com using your Proxy control number found below 3. By PHONE when you dial toll-free (833) 868-3374 to reach an automated touchtone voting line NUMBER 12345678910. KKR INCOME OPPORTUNITIES FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON January 10, 2025 The undersigned hereby revokes all previous proxies for his/her shares of the Fund named above and appoints Michael Nguyen and Thomas Murphy, or any one of them, proxies, each with full power of substitution, to vote and act with respect to all shares which the undersigned is entitled to vote at the special meeting of shareholders of the Fund to be held at the offices of Dechert LLP, located at 1095 Avenue of the Americas, 28th Floor, New York, New York 10036, on January 10, 2025, at a.m. Eastern Time (with any postponements, adjournments or any other meeting called for voting on the same proposals, the “Meeting”) upon the matter set forth on the reverse side (the “Proposal”) and instructs them to vote upon any other matters that may properly be acted upon at the Meeting. Please refer to the Proxy Statement for a discussion of the Proposal. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS: The Notice of Meeting, Proxy Statement and Proxy Card are available at: www. proxyvote.com Please sign, date, and mail your Proxy Card in the envelope provided as soon as possible.
KKR INCOME OPPORTUNITIES FUND YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. The signer(s) arknol~tedges receipt of this Proxy Statement of the Boord of Trustees. Your signaturE-is) should be exottly as your name[s) SIGNATURE [AND TITLE If APPUCABLE) DATE a~ar on t his Proxy [re~seside). If the shares ar e held jointlv, each holder should sign this Proxy. Attome’(‘ .....in-fact, ex:ecutors, administrators, trustees or guardians should inoKate the full tide and cap01:ity in which tb:’( are signing. SIGNATURE [IF HELD JOINTlY) DATE THIS PROXY IS SOLICITED ON BEHALF OFTHE BOARD OF TRUSTEES. THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” iHE PROPOSAL. When prope.rly executed, this proxy will be voted as indicated or “FOR” the Proposal if no choice is indicated. The Proxy will be voted in accordance with the Proxy holders’ discretion as to any other matters that may arise at the Meeting. TO VOTE, MARK CIRCLES BELOW IN BLU E OR BLACK INK AS FOLLOWS. Example: . PROPOSAL FOR AGAINST AB·STAIN L To approve the issuance of additional common shares of beneficial interest of KKR Income Opportunities Fund in connection with the transfer at net asset value 0 0 0 of all of the asset s and certain liabilities of the Insight Select Income Fund to the KKR Income Opportunities Fund. 2. To Transact Such Other Business as M ay Property Come Before the Meeting.
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