As filed with the Securities and Exchange Commission on July 17, 2023
Securities Act File No. 333-272426
Investment Company Act file No. 811-22554
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
UNDER
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THE SECURITIES ACT OF 1933 |
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Pre-Effective Amendment No. 1 |
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Post-Effective Amendment No. |
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and
REGISTRATION
STATEMENT
UNDER
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THE INVESTMENT COMPANY ACT OF 1940 |
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Amendment No. 15 |
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Carlyle Credit Income Fund
(Exact name of registrant as specified in its charter)
One
Vanderbilt Avenue, Suite 3400
New York, NY 10017
(212) 813-4900
(Address and telephone number, including area code, of principal executive offices)
Joshua Lefkowitz, Esq.
Carlyle Credit Income Fund
One Vanderbilt Avenue, Suite 3400
New York, NY 10017
(Name
and address of agent for service)
WITH COPIES TO:
Rajib Chanda, Esq.
Christopher P. Healey, Esq.
Jonathan H. Pacheco, Esq.
Simpson Thacher & Bartlett, LLP
900 G Street, N.W.
Washington, DC 20001
(202) 636-5500
Approximate Date of Commencement of Proposed Public Offering: From time to time after the
effective date of this Registration Statement.
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Check box if the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans. |
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Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in
reliance on Rule 415 under the Securities Act of 1933 (Securities Act), other than securities offered in connection with a dividend reinvestment plan. |
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Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective
amendment thereto. |
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Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective
amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act. |
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Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act. |
It is proposed that this filing will become effective (check appropriate box):
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when declared effective pursuant to Section 8(c) of the Securities Act. |
If appropriate, check the following box:
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment
registration statement. |
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This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: . |
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This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the
Securities Act registration statement number of the earlier effective registration statement for the same offering is: . |
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This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the
Securities Act registration statement number of the earlier effective registration statement for the same offering is: . |
Check each box that appropriately characterizes the Registrant:
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Registered Closed-End Fund
(closed-end company that is registered under the Investment Company Act of 1940 (Investment Company Act)). |
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Business Development Company (closed-end company that intends or has
elected to be regulated as a business development company under the Investment Company Act). |
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Interval Fund (Registered Closed-End Fund or a Business Development
Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act). |
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A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).
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Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act). |
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Emerging Growth Company (as defined by Rule 12b-2 under the Securities
Exchange Act of 1934 (Exchange Act)). |
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If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. |
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New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months
preceding this filing). |
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933
or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in
any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Preliminary Prospectus Dated July 17, 2023
PRELIMINARY PROSPECTUS
$500,000,000
Carlyle
Credit Income Fund
Common Shares
Preferred Shares
Subscription Rights
Debt
Securities
Carlyle Credit Income Fund (the Fund) is a non-diversified,
closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act.
Investment Objective. The Funds primary investment objective is to generate current income, with a secondary objective to generate capital
appreciation.
Principal Investment Strategies. We seek to achieve our investment objectives by investing primarily in equity and junior debt
tranches of collateralized loan obligations, or CLOs, that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across
various industry sectors. We may also invest in other related securities and instruments or other securities and instruments that the Adviser believes are consistent with our investment objectives, including senior debt tranches of CLOs, loan
accumulation facilities (LAFs) and securities issued by other securitization vehicles, such as collateralized bond obligations, or CBOs. LAFs are short- to medium-term facilities often provided by the bank that
will serve as the placement agent or arranger on a CLO transaction. LAFs typically incur leverage between four and six times prior to a CLOs pricing. The CLO securities in which we primarily seek to invest are unrated or rated below investment
grade and are considered speculative with respect to timely payment of interest and repayment of principal. Unrated and below investment grade securities are also sometimes referred to as junk securities. In addition, the CLO equity and
junior debt securities in which we invest are highly leveraged (with CLO equity securities typically being leveraged ten times), which magnifies our risk of loss on such investments. See Risk Factors Risks Related to Our
Investments We may leverage our portfolio, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.
Under normal circumstances, we invest at least 80% of the aggregate of the Funds net assets and borrowings for investment purposes in credit and
credit-related instruments. For purposes of this policy, the Fund is expected to consider credit and credit-related instruments to include, without limitation: (i) equity and debt tranches of CLOs, LAFs and securities issued by other
securitization vehicles, such as CBOs; (ii) secured and unsecured floating rate and fixed rate loans; (iii) investments in corporate debt obligations, including bonds, notes, debentures, commercial paper and other obligations of
corporations to pay interest and repay principal; (iv) debt issued by governments, their agencies, instrumentalities, and central banks; (v) commercial paper and short-term notes; (vi) convertible debt securities;
(vii) certificates of deposit, bankers acceptances and time deposits; and (viii) other credit-related instruments. The Funds investments in derivatives, other investment companies, and other instruments designed to obtain
indirect exposure to credit and credit-related instruments will be counted towards its 80% investment policy to the extent such instruments have similar economic characteristics to the investments included within that policy.
Our 80% policy with respect to investments in credit and credit-related instruments is not fundamental and may be changed by our board of directors without
stockholder approval. Stockholders will be provided with sixty (60) days notice in the manner prescribed by the SEC before making any change to this policy.
Investment Adviser. The investment adviser to the Fund is Carlyle Global Credit Investment Management
L.L.C. (CGCIM or the Adviser). CGCIM is registered as an investment adviser with the U.S. Securities and Exchange Commission (the SEC) under the Investment Advisers Act of 1940, as amended
(the Advisers Act). CGCIM is a majority-owned subsidiary of Carlyle Investment Management L.L.C. (CIM and together with CGCIM, Carlyle).
Securities Offered. Our shares of beneficial interest (the common shares), preferred shares of beneficial interest
(preferred shares), debt securities or subscription rights to purchase our securities (collectively, the securities) may be offered at prices and on terms to be disclosed in one or more supplements to this
prospectus. You should read this prospectus and the applicable prospectus supplement carefully before you invest in our securities. The securities may be offered directly to one or more purchasers, or through agents designated from time to time by
us, or to or through underwriters or dealers. Each prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of the securities, and will disclose any applicable purchase price, fee, discount or
commissions arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See Plan of Distribution in this prospectus. We may not sell any of the
securities pursuant to this registration statement through agents, underwriters or dealers without delivery of this prospectus and a prospectus supplement describing the method and terms of the offering of such securities.
Our common shares are traded on the New York Stock Exchange (NYSE) under the symbol VCIF. We expect that on or about
July 27, 2023 our common shares will begin trading on NYSE under the symbol CCIF. As of July 14, 2023, the last reported sales price of our common shares on the NYSE was $7.91 per share. The net asset value per common share at July
10, 2023 (the last date prior to the date of this prospectus for which we reported net asset value) was $8.27.
Common shares of closed-end management investment companies that are listed on an exchange frequently trade at a discount to their net asset value (NAV). If our common shares trade at a discount to our NAV, it will
likely increase the risk of loss for purchasers of our securities.
Investing in our securities
involves a high degree of risk, including the risk of a substantial loss of investment. Before purchasing any securities, you should read the discussion of the principal risks of investing in our securities, which are summarized in Risk
Factors beginning on page 20 of this prospectus.
This prospectus contains important information you should know before
investing in our securities. Please read this prospectus and retain it for future reference. We file annual and semi-annual shareholder reports, proxy statements and other information with the Securities and Exchange Commission, or the
SEC. To obtain this information free of charge or make other inquiries pertaining to us, please visit our website (www.carlylecreditincomefund.com) or call (866) 277-8243 (toll-free). You may also obtain a copy of any information
regarding us filed with the SEC from the SECs website (www.sec.gov). Information on our website and the SECs website is not incorporated into or a part of this prospectus.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined that this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this
prospectus is , 2023
TABLE OF CONTENTS
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We
have not authorized any person to provide you with different information from that contained in or incorporated by reference in this prospectus. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition and results of operations may have changed since that date. We
will notify security holders promptly of any material change to this prospectus during the period in which we are required to deliver the prospectus.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with the SEC using the shelf registration process. Under the shelf
registration process, we may offer from time to time up to $500,000,000 of our securities on the terms to be determined at the time of the offering. We may sell our securities through underwriters or dealers, at-the-market to or through a market maker, into an existing trading market or otherwise directly to one or more purchasers or through agents or through a combination of methods of sale. The
identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms described in one or more supplements to this
prospectus. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the
terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus, and the prospectus and prospectus supplement will together serve as the prospectus. Please carefully read this prospectus and
any prospectus supplement, together with any exhibits, before you make an investment decision.
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PROSPECTUS SUMMARY
The following summary highlights some of the information contained in this prospectus. It is not complete and may not contain all the information that is
important to a decision to invest in our securities. You should read carefully the more detailed information set forth under Risk Factors and the other information included in this prospectus and any applicable prospectus
supplement. Except where the context suggests otherwise, the terms:
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The Fund, we,
us, and our refer to Carlyle Credit Income Fund, a Delaware statutory trust; and is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as a diversified, closed-end management investment company. |
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The Adviser refers to Carlyle Global Credit Investment Management L.L.C.
(CGCIM); and is an SEC-registered investment adviser. |
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The Administrator refers to SS&C Technologies, Inc and ALPS Fund
Services, Inc. |
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Risk-adjusted returns refers to the profile of expected asset returns across
a range of potential macroeconomic scenarios, and does not imply that a particular strategy or investment should be considered low-risk. |
Carlyle Credit Income Fund
The
Fund is a non-diversified, closed-end management investment company that has registered as an investment company under 1940 Act. We have elected to be treated, and
intend to qualify annually, as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.
On January 12, 2023, the Fund announced that it had entered into a definitive agreement (the Transaction Agreement) with CGCIM
pursuant to which, among other things, CGCIM would become the investment adviser to the Fund (the Transaction). Pursuant to the Transaction Agreement, the investment advisory agreement between the Fund and Oakline Advisors, LLC
(Oakline) terminated at or prior to the closing of the Transaction (the Closing). As a result, the holders of the Funds common shares (Shareholders) were asked to approve a new
investment advisory agreement between the Fund and CGCIM (the Investment Advisory Agreement) and to approve certain other proposals upon which the Closing was conditioned. The Shareholders approved the new Investment Advisory
Agreement and the other proposals at a shareholder meeting on June 15, 2023 and Closing occurred on July 14, 2023. In connection with Closing, (i) the Fund sold existing investments with a gross asset value equal to approximately 97%
of the total gross asset value of such investments as of August 31, 2022, subject to certain exclusions; (ii) CGCIM replaced Oakline as the Funds new investment adviser; (iii) the Funds investment strategy was changed to
invest primarily in debt and equity tranches issued by collateralized loan obligations; (iv) each of the Funds trustees and officers were replaced; (v) the Fund changed its name to Carlyle Credit Income Fund; and (vi) the Fund
expects that on or about July 27, 2023 its common shares will begin trading on NYSE under the symbol CCIF. In addition, (i) Shareholders of the Fund received a special one-time payment of
$10,000,000 from CGCIM (or one of its affiliates), or approximately $0.96 per common share, (ii) following the Closing, CGCIM (or one of its affiliates), will commence a tender offer to purchase up to $25,000,000 of outstanding Fund common
shares at the then-current net asset value per common share (the Tender Offer), and (iii) following the close of the tender offer, CGCIM or one of its affiliates will invest at least $15,000,000 into the Fund through the
purchase of newly issued Fund common shares at a price equal to the greater of the then-current net asset value per common share and the net asset value per common share that represents the tender offer purchase price (the New
Issuance), and through acquiring
common shares in private purchases (the Private Purchase). Additionally, following the
completion of the
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Tender Offer, New Issuance and Private Purchase, and assuming the tender offer is fully subscribed, Carlyle is expected to hold approximately 35% of the Funds voting securities. See
Control Persons and Principal Holders of Securities.
In connection with the Transaction, the Adviser and the Fund have
entered into an agreement under which the Adviser has agreed contractually to waive its Management Fee and/or reimburse the Funds operating expenses on a monthly basis to the extent that the Funds monthly total annualized fund operating
expenses (excluding (i) expenses directly related to the costs of making investments, including interest and structuring costs for borrowings and line(s) of credit, taxes, brokerage costs, the Funds proportionate share of expenses related
to co-investments, litigation and extraordinary expenses, (ii) Incentive Fees, (iii) expenses related to equity or debt offerings, and (iv) expenses associated with the Transaction Agreement,
including expenses related to the liquidation as defined therein) not to exceed 2.50% of the Funds average daily net assets (the Expense Limitation Agreement).
This Expense Limitation Agreement will remain in effect until ending on the earlier of (i) four quarters after the date of the Agreement or (ii) the
date on which at least 75% of the Funds gross assets are invested in collateralized loan obligation equity and debt investments, unless and until the Board approves its modification or termination.
CGCIM has also agreed to irrevocably waive the portion of its management and incentive fees on Fund managed assets invested in exchange traded funds through
January 12, 2024, (the Fee Waiver Agreement) as the Funds portfolio transitions to the new investment strategy. CGCIM is not entitled to recoup any waived fees under the Fee Waiver Agreement.
The Funds primary investment objective is to generate current income, with a secondary objective to generate capital appreciation. We seek to achieve
our investment objectives by investing primarily in equity and junior debt tranches of collateralized loan obligations, or CLOs, that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior
secured loans with a large number of distinct underlying borrowers across various industry sectors. We may also invest in other related securities and instruments or other securities and instruments that the Adviser believes are consistent with our
investment objectives, including senior debt tranches of CLOs, loan accumulation facilities (LAFs), securities issued by other securitization vehicles, such as collateralized bond obligations, or CBOs. We may also
acquire securities issued by exchange-traded funds (ETFs), and may otherwise invest indirectly in securities consistent with our investment objectives, including through a joint venture vehicle. The amount that we will invest in
other securities and instruments, which may include investments in debt and other securities issued by CLOs collateralized by non-U.S. loans or securities of other collective investment vehicles, will vary
from time to time and, as such, may constitute a material part of our portfolio on any given date, all as based on the Advisers assessment of prevailing market conditions. From time to time, in connection with the acquisition of CLO equity, we
may receive fee rebates from the CLO issuer.
The CLO securities in which we primarily seek to invest are rated below investment grade or, in the case of
CLO equity securities, are unrated, and are considered speculative with respect to timely payment of interest and repayment of principal. Unrated and below investment grade securities are also sometimes referred to as junk securities. In
addition, the CLO equity and junior debt securities in which we invest are highly leveraged (with CLO equity securities typically being leveraged ten times), which magnifies our risk of loss on such investments. LAFs are short- to medium-term
facilities often provided by the bank that will serve as the placement agent or arranger on a CLO transaction. LAFs typically incur leverage between four and six times prior to a CLOs pricing.
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These investment objectives and strategies are not fundamental policies of ours and may be changed by our
board of trustees (the Board) without prior approval of our Shareholders. See Regulation as a Closed-End Management Investment Company.
The Adviser pursues a differentiated strategy within the CLO market focused on:
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proactive sourcing and identification of investment opportunities; |
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utilization of the Advisers methodical investment analysis and due diligence process;
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active involvement at the CLO structuring and formation stage; and |
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taking, in many instances, significant stakes in CLO equity and junior debt tranches. |
In conducting its investment activities, the Fund believes that it will benefit from the significant scale and resources of Carlyle and its affiliates.
The Fund will seek to source opportunities through Carlyles extensive global relationships and proprietary network and through the deep infrastructure
Carlyle has developed in each of the Funds credit strategies, including:
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Carlyles well-established sponsor, bank and lending relationships cultivated over 30+ years, including
~1,000 lending relationships across the firm. |
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Scale of capital with over $146 billion under management in Carlyles Global Credit group and 230+
dedicated credit investment professionals. |
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A broad network of dealer, investor, and manager relationships that Carlyle has developed during its 20+-year
track record managing CLOs. |
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Integrated efforts with cross-platform sourcing capabilities and referrals from both internal and external
Carlyle networks. |
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Ability to leverage OneCarlyle platform with nearly 700 origination and underwriting resources and global
knowledge base across Global Credit and Private Equity. |
We believe that the Advisers (1) direct and often longstanding
relationships with CLO collateral managers, CLO primary desks of investment banks, and CLO secondary trading desks of investment banks and broker-dealers, (2) CLO structural expertise and (3) relative scale in the CLO market will enable us
to source and execute investments with attractive economics and terms relative to other CLO opportunities.
When we make a significant primary market
investment in a particular CLO tranche, we generally expect to be able to influence the CLOs key terms and conditions. We may acquire a majority position in a CLO tranche directly, or we may benefit from the advantages of a majority position
where both we and other accounts managed by the Adviser collectively hold a majority position, subject to any restrictions on our ability to invest alongside such other accounts. See Conflicts of Interest.
We seek to construct a portfolio of CLO securities that provides varied exposure across a number of key categories, including:
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number of borrowers underlying each CLO; |
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industry type of a CLOs underlying borrowers; |
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number and investment style of CLO collateral managers; and |
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The Adviser has a long-term investment horizon and invests primarily with a
buy-and-hold mentality. However, on an ongoing basis, the Adviser actively monitors each investment and may sell positions if circumstances change from the time of
investment or if the Adviser believes it is in our best interest to do so.
Names Rule Policy
In accordance with the requirements of the 1940 Act, we have adopted a policy to invest at least 80% of our assets in the particular type of investments
suggested by our name. Accordingly, under normal circumstances, we invest at least 80% of the aggregate of its net assets and borrowings for investment purposes in credit and credit-related instruments. For purposes of this policy, the Fund is
expected to consider credit and credit-related instruments to include, without limitation: (i) equity and debt tranches of CLOs, LAFs and securities issued by other securitization vehicles, such as CBOs; (ii) secured and unsecured floating
rate and fixed rate loans; (iii) investments in corporate debt obligations, including bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal; (iv) debt issued by governments,
their agencies, instrumentalities, and central banks; (v) commercial paper and short-term notes; (vi) convertible debt securities; (vii) certificates of deposit, bankers acceptances and time deposits; and (viii) other
credit-related instruments. The Funds investments in derivatives, other investment companies, and other instruments designed to obtain indirect exposure to credit and credit-related instruments will be counted towards its 80% investment policy
to the extent such instruments have similar economic characteristics to the investments included within that policy.
Our 80% policy with respect to
investments in credit and credit-related instruments is not fundamental and may be changed by the Board without prior approval of our Shareholders. Shareholders will be provided with sixty (60) days notice in the manner prescribed by the
SEC before making any change to this policy.
Carlyle Global Credit Investment Management L.L.C.
CGCIM serves as the Funds investment adviser. CGCIM is registered as an investment adviser with the SEC under the Advisers Act. CGCIM is a
majority-owned subsidiary of CIM.
Carlyle is a global investment firm with more than $373 billion of assets under management as of December 31,
2022 across 543 active investment vehicles. The firm also has a large and diversified investor base with more than 2,900 active carry fund investors located in 88 countries.
Carlyle combines global vision with local insight, relying on a team of nearly 700 investment professionals operating out of 29 offices in 17 countries to
uncover superior opportunities in Africa, Asia, Australia, Europe, Latin America, the Middle East and North America.
CLO Overview
Our investment portfolio is comprised primarily of investments in the equity and junior debt tranches of CLOs that are collateralized by a portfolio
consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. CLOs are generally backed by an asset or a pool of assets that serve as collateral. Most
CLOs are issued in multiple tranches, offering investors various maturity and credit risk characteristics, often categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant
collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over those of junior tranches which are the focus of our investment strategy, and scheduled payments to junior tranches have a priority in
right of payment to subordinated/equity tranches. While the vast majority of the portfolio of most
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CLOs consists of senior secured loans, many CLOs enable the CLO collateral manager to invest up to 10% of the portfolio in assets that are not first lien senior secured loans, including second
lien loans, unsecured loans, senior secured bonds and senior unsecured bonds.
CLOs are generally required to hold a portfolio of assets that is highly
diversified by underlying borrower and industry and that is subject to a variety of asset concentration limitations. Most CLOs are non-static, revolving structures that generally allow for reinvestment over a
specific period of time (the reinvestment period) which is typically up to five years. The terms and covenants of a typical CLO structure are, with certain exceptions, based primarily on the cash flow generated by, and the par
value (as opposed to the market price or fair value) of, the collateral. These covenants include collateral coverage tests, interest coverage tests and collateral quality tests.
A CLO funds the purchase of a portfolio of primarily senior secured loans via the issuance of CLO equity and debt securities in the form of multiple,
primarily floating rate, debt tranches. The CLO debt tranches typically are rated AAA (or its equivalent) at the most senior level down to BB or B (or its equivalent), which is below investment grade, at the
junior level by Moodys Investors Service, Inc., or Moodys, S&P Global Ratings, or S&P, and/or Fitch Ratings, Inc., or Fitch. The interest rate on the CLO debt tranches is the lowest at the AAA-level and generally increases at each level down the rating scale. The CLO equity tranche is unrated and typically represents approximately 8% to 11% of a CLOs capital structure. Below investment grade and
unrated securities are sometimes referred to as junk securities. The diagram below is for illustrative purposes only and highlights a hypothetical structure intended to depict a typical CLO. A minority of CLOs also include a B-rated debt tranche (in which we may invest), and the structure of CLOs in which we invest may otherwise vary from this example. The left column represents the CLOs assets, which support the liabilities and
equity in the right column. The right column shows the various classes of debt and equity issued by the hypothetical CLO in order of seniority as to rights in payments from the assets. The percentage ranges appearing below the rating of each class
represents the percent such class comprises of the overall capital stack (i.e., total debt and equity issued by the CLO).
CLOs have two priority-of-payment schedules
(commonly called waterfalls), which are detailed in a CLOs indenture and govern how cash generated from a CLOs underlying collateral is distributed to the CLOs equity and debt investors. The interest waterfall applies
to interest payments received on a CLOs underlying collateral.
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The principal waterfall applies to cash generated from principal on the underlying collateral, primarily through loan repayments and the proceeds from loan sales. Through the interest waterfall,
any excess interest-related cash flow available after the required quarterly interest payments to CLO debt investors are made and certain CLO expenses (such as administration and collateral management fees) are paid is then distributed to the
CLOs equity investors each quarter, subject to compliance with certain tests.
A CLOs indenture typically requires that the maturity dates of
a CLOs assets, typically five to eight years from the date of issuance of a senior secured loan, be shorter than the maturity date of the CLOs liabilities, typically 12 to 13 years from the date of issuance. However, CLO investors do
face reinvestment risk with respect to a CLOs underlying portfolio. In addition, in most CLO transactions, CLO debt investors are subject to prepayment risk in that the holders of a majority of the equity tranche can direct a call or
refinancing of a CLO, which would cause the CLOs outstanding CLO debt securities to be repaid at par. See Risk Factors Risks Related to Our Investments We and our investments are subject to reinvestment
risk.
Financing and Hedging Strategy
Leverage by the Fund. Subject to prevailing market conditions, the Fund may add financial leverage if, immediately after such borrowing, it
would have asset coverage (as defined in the 1940 Act) of 300% or more (for leverage obtained through debt) or 200% or more (for leverage obtained through preferred shares). For example, if the Fund has $100 in Net Assets (as defined below), it may
utilize leverage through obtaining debt of up to $50, resulting in $150 in total assets (or 300% asset coverage). In addition, if the Fund has $100 in Net Assets, it may issue $100 in preferred shares, resulting in $200 in total assets (or 200%
asset coverage). Net Assets means the total assets of the Fund minus the Funds liabilities. The Fund 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 Funds assessment of market conditions and the investment environment. Over the long term, we expect to operate under normal market conditions generally with leverage within a
range of 25% to 40% of total assets, although the actual amount of our leverage will vary over time. Certain instruments that create leverage are considered to be senior securities under the 1940 Act.
In the event we fail to meet our applicable asset coverage ratio requirements, we may not be able to incur additional debt and/or issue preferred shares, and
could be required by law or otherwise to sell a portion of our investments to repay some debt or redeem preferred shares (if any) when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be
able to make certain distributions or pay dividends of an amount necessary to continue to qualify for treatment as a RIC for U.S. federal income tax purposes.
We expect that we will, or that we may need to, raise additional capital in the future to fund our continued growth, and we may do so by entering into a
credit facility, issuing preferred shares or debt securities or through other leveraging instruments. Subject to the limitations under the 1940 Act, we may incur additional leverage opportunistically and may choose to increase or decrease our
leverage. In addition, we may borrow for temporary, emergency or other purposes as permitted under the 1940 Act, which indebtedness would be in addition to the asset coverage requirements described above. By leveraging our investment portfolio, we
may create an opportunity for increased net income and capital appreciation. However, the use of leverage also involves significant risks and expenses, which will be borne entirely by our Shareholders, and our leverage strategy may not be
successful. For example, the more leverage is employed, the more likely a substantial change will occur in our NAV. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent leverage is utilized. See
Risk Factors Risks Related to Our Investments We may leverage our portfolio, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.
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Derivative Transactions. We may engage in Derivative Transactions, as
described below, from time to time. To the extent we engage in Derivative Transactions, we expect to do so to hedge against interest rate, credit, currency and/or other risks, or for other investment or risk management purposes. We may use
Derivative Transactions for investment purposes to the extent consistent with our investment objectives if the Adviser deems it appropriate to do so. We may purchase and sell a variety of derivative instruments, including exchange-listed and over-the-counter, or OTC, options, futures, options on futures, swaps and similar instruments, various interest rate transactions, such as swaps, caps, floors or
collars, and credit transactions and credit default swaps. We also may purchase and sell derivative instruments that combine features of these instruments. Collectively, we refer to these financial management techniques as Derivative
Transactions. Our use of Derivative Transactions, if any, will generally be deemed to create leverage for us and involves significant risks. No assurance can be given that our strategy and use of derivatives will be successful, and our
investment performance could diminish compared with what it would have been if Derivative Transactions were not used. See Risk Factors Risks Related to Our Investments We are subject to risks associated with any hedging or
Derivative Transactions in which we participate.
Temporary Defensive Position. We may take a temporary defensive
position and invest all or a substantial portion of our total assets in cash or cash equivalents, government securities or short-term fixed income securities during periods in which we believe that adverse market, economic, political or other
conditions make it advisable to maintain a temporary defensive position. As the CLOs and LAFs in which we invest are generally illiquid in nature, we may not be able to dispose of such investments and take a defensive position. To the extent that we
invest defensively, we likely will not achieve our investment objectives.
Operating and Regulatory Structure
We are a non-diversified closed-end management investment company that has
registered as an investment company under the 1940 Act. As a registered closed-end management investment company, we are required to meet certain regulatory tests. See Regulation as a Closed-End Management Investment Company. In addition, we have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code.
Pursuant to the Investment Advisory Agreement, by and between the Fund and the Adviser, and in consideration of the advisory services provided by the Adviser
to the Fund, the Adviser is entitled to a fee consisting of two componentsa base management fee (the Management Fee) and an incentive fee (the Incentive Fee).
The Management Fee is calculated and payable monthly in arrears at the annual rate of 1.75% of the month-end value of
the Funds Managed Assets. Managed Assets means the total assets of the Fund (including any assets attributable to any preferred shares or to indebtedness) minus the Funds liabilities other than liabilities relating to
indebtedness.
The Incentive Fee is calculated and payable quarterly in arrears based upon the Funds
pre-incentive fee net investment income for the immediately preceding quarter, and is subject to a hurdle rate, expressed as a rate of return on the Funds Net Assets equal to 2.00% per
quarter (or an annualized hurdle rate of 8.00%), subject to a catch-up feature. For this purpose, pre-incentive fee net investment income means
interest income, dividend income, income generated from original issue discounts, payment-in-kind income, and any other income earned or accrued during the calendar
quarter, minus the Funds operating expenses (which, for this purpose shall not include any distribution and/or shareholder servicing fees, litigation, any extraordinary expenses or Incentive Fee) for the quarter. For purposes of computing the
Funds pre-incentive fee net investment income, the calculation methodology will look through total return swaps as if the Fund owned the referenced assets directly. As a result, the Funds pre-incentive fee net investment income includes net interest, if any, associated with a derivative or swap (Net Interest), which is the difference between (a) the interest income and
transaction fees
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related to the reference assets and (b) all interest and other expenses paid by the Fund to the derivative or swap counterparty. For purposes of the Incentive Fee, Net Assets are calculated
for the relevant quarter as the weighted average of the NAV of the Fund as of the first business day of each month therein. The weighted average NAV shall be calculated for each month by multiplying the NAV as of the beginning of the first business
day of the month times the number of days in that month, divided by the number of days in the applicable calendar quarter.
The catch-up provision is intended to provide the Adviser with an incentive fee of 17.5% on all of the Funds pre-incentive fee net investment income when the
Funds pre-incentive fee net investment income reaches 2.424% of Net Assets in any calendar quarter.
Thus,
each calendar quarter the Fund will compare its pre-incentive fee net investment income, expressed as a percentage of the Funds Net Assets in respect of the relevant calendar quarter, to a hurdle rate of
2.00%. If the Funds pre-incentive fee net investment income is less than the hurdle rate, then the Adviser will not be paid the Incentive Fee in respect of that quarter. If the Funds pre-incentive fee net investment income is between 2.00% and 2.424% (the Catch-up Range), then the Adviser will be paid the Incentive Fee in respect of that
quarter in an amount equal to 100% of the Funds pre-incentive fee net investment income within the Catch-up Range (the
Catch-up Amount). If the Funds pre-incentive fee net investment income exceeds 2.424%, then the Adviser will be paid the Incentive Fee in
respect of that quarter in an amount equal to the Catch-up Amount plus 17.5% of net investment income above 2.424%. See Management and Incentive Fees.
The Adviser and the Fund have entered into an Expense Limitation Agreement under which the Adviser has agreed contractually to waive its Management Fee and/or
reimburse the Funds operating expenses on a monthly basis to the extent that the Funds monthly total annualized fund operating expenses (excluding (i) expenses directly related to the costs of making investments, including interest
and structuring costs for borrowings and line(s) of credit, taxes, brokerage costs, the Funds proportionate share of expenses related to co-investments, litigation and extraordinary expenses,
(ii) Incentive Fees, (iii) expenses related to equity or debt offerings, and (iv) expenses associated with the Transaction Agreement, including expenses related to the liquidation as defined therein) not to exceed 2.50% of the
Funds average daily net assets.
This Expense Limitation Agreement will remain in effect until ending on the earlier of (i) four quarters after
the date of the Agreement or (ii) the date on which at least 75% of the Funds gross assets are invested in collateralized loan obligation equity and debt investments, unless and until the Board approves its modification or termination.
CGCIM also has a Fee Waiver Agreement under which it has agreed to irrevocably waive the portion of its management and incentive fees on Fund managed
assets invested in exchange traded funds through January 12, 2024, as the Funds portfolio transitions to the new investment strategy. CGCIM is not entitled to recoup any waived fees under the Fee Waiver Agreement.
The Adviser is obligated to pay expenses associated with providing the investment services stated in the Investment Advisory Agreement, including compensation
of and office space for its officers and employees connected with investment and economic research, trading and investment management of the Fund.
Conflicts of Interest
An affiliated
investment fund, account or other similar arrangement currently formed or formed in the future and managed by the Funds Adviser or its affiliates may have overlapping investment objectives and strategies with the Funds own and,
accordingly, may invest in asset classes similar to those targeted by the Fund. This creates potential conflicts in allocating investment opportunities among the Fund and such other investment funds,
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accounts and similar arrangements, particularly in circumstances where the availability or liquidity of such investment opportunities is limited or where
co-investments by the Fund and other funds, accounts or arrangements are not permitted under applicable law, as discussed below.
For example, Carlyle sponsors several investment funds, accounts and other similar arrangements, including, without limitation, structured credit funds as
well as closed-end registered investment companies, business development funds (BDCs), carry funds, managed accounts and structured credit funds it may sponsor in the future. The SEC has
granted exemptive relief that permits the Fund and certain of its affiliates to co-invest in suitable negotiated investments (the Exemptive Relief). If Carlyle is presented with investment
opportunities that generally fall within the Funds investment objective and other board-established criteria and those of other Carlyle funds, accounts or other similar arrangements (including existing and future affiliated BDCs and registered
closed-end funds) whether focused on a credit strategy or otherwise, Carlyle allocates such opportunities among the Fund and such other Carlyle funds, accounts or other similar arrangements in a manner
consistent with the Exemptive Relief, the Advisers allocation policies and procedures and Carlyles other allocation policies and procedures, where applicable, as discussed below.
More specifically, investment opportunities in suitable negotiated investments for investment funds, accounts and other similar arrangements (including
proprietary accounts) managed by the Adviser, and other funds, accounts or similar arrangements managed by affiliated investment advisers that seek to co-invest with the Fund or other Carlyle BDCs or
registered closed-end funds, are allocated in accordance with the Exemptive Relief, the Advisers allocation policies and procedures and Carlyles other allocation policies and procedures, where
applicable. Investment opportunities for all other investment funds, accounts and other similar arrangements not managed by the Adviser are allocated in accordance with their respective investment advisers and Carlyles other allocation
policies and procedures. Such policies and procedures may result in certain investment opportunities that are attractive to the Fund being allocated to other funds that are not managed by the Adviser. Carlyles, including the Advisers,
allocation policies and procedures are designed to allocate investment opportunities fairly and equitably among its clients over time, taking into account a variety of factors which may include the sourcing of the transaction, the nature of the
investment focus of each such other Carlyle fund, account or other similar arrangement, each funds, accounts or similar arrangements desired level of investment, the relative amounts of capital available for investment, the nature
and extent of involvement in the transaction on the part of the respective teams of investment professionals, any requirements contained in the limited partnership agreements and other governing agreements of the Carlyle funds, accounts or other
similar arrangements and other considerations deemed relevant by Carlyle in good faith, including suitability considerations and reputational matters. The application of these considerations may cause differences in the performance of different
Carlyle funds, accounts and similar arrangements that have similar strategies.
The Funds executive officers and trustees, other current and future
principals of the Adviser and certain members of the Advisers investment committee may serve as officers, trustees or principals of other entities and affiliates of the Adviser and funds managed by the Funds affiliates that operate in
the same or a related line of business as the Fund does. Currently, the Funds executive officers, as well as the other principals of the Adviser, manage other funds affiliated with Carlyle, including other existing and future affiliated BDCs
and registered closed-end funds, including Carlyle Secured Lending, Inc., Carlyle Credit Solutions, Inc. and Carlyle Tactical Private Credit Fund. In addition, the Advisers investment team has
responsibilities for sourcing and managing private debt investments for certain other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or
may be adverse to the interests of, the Fund and its Shareholders. Although the professional staff of the Adviser will devote as much time to management of the Fund as appropriate to enable the Adviser to perform its duties in accordance with the
Investment Advisory Agreement, the investment professionals of the Adviser may have conflicts in allocating their time and services among the Fund, on the one hand, and investment vehicles managed by Carlyle or one or more of its affiliates on the
other hand.
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Although the Adviser will endeavor to allocate investment opportunities in a fair and equitable manner in
accordance with its allocation policies and procedures, it is possible that, in the future, the Fund may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or an investment manager affiliated
with the Adviser, including Carlyle.
In the course of the Funds investing activities, it pays management and incentive fees to the Adviser and
reimburses the Adviser for certain expenses it incurs in accordance with the Investment Advisory Agreement. As a result, investors in the Funds common shares invest on a gross basis and receive distributions on a net
basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the senior management team of the Adviser has interests that differ from those of the
Shareholders, giving rise to a conflict.
During periods of unusual market conditions, the Adviser may deviate from its normal trade allocation practices.
For example, this may occur with respect to the management of unlevered and/or long-only investment funds, accounts or similar arrangements that are typically managed on a
side-by-side basis with levered and/or long-short investment funds, accounts or similar arrangements.
Summary Risk Factors
The value of our
assets, as well as the market price of our securities, will fluctuate. Our investments should be considered risky, and you may lose all or part of your investment in us. Investors should consider their financial situation and needs, other
investments, investment goals, investment experience, time horizons, liquidity needs and risk tolerance before investing in our securities. An investment in our securities may be speculative in that it involves a high degree of risk and should not
be considered a complete investment program. We are designed primarily as a long-term investment vehicle, and our securities are not an appropriate investment for a short-term trading strategy. We can offer no assurance that returns, if any, on our
investments will be commensurate with the risk of investment in us, nor can we provide any assurance that enough appropriate investments that meet our investment criteria will be available.
The following is a summary of certain principal risks of an investment in us. See Risk Factors for a more complete discussion of the
risks of investing in our securities, including certain risks not summarized below.
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CLO-Specific Risks. Investments in CLO securities involve certain
risks. CLOs are generally backed by an asset or a pool of assets that serve as collateral. The Fund and other investors in CLO securities ultimately bear the credit risk of the underlying collateral. Most CLOs are issued in multiple tranches,
offering investors various maturity and credit risk characteristics, often categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant collateral otherwise underperforms,
scheduled payments to senior tranches of such securities take precedence over those of junior tranches which are the focus of our investment strategy, and scheduled payments to junior tranches have a priority in right of payment to
subordinated/equity tranches. CLOs may present risks similar to those of the other types of debt obligations and, in fact, such risks may be of greater significance in the case of CLOs. For example, investments in junior debt and equity securities
issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. In addition to the general risks associated with investing in debt securities, CLO
securities carry additional risks, including: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality of the collateral may decline in value or default;
(3) investments in CLO junior debt and equity tranches will likely be subordinate in right of payment to other senior classes of CLO debt; and (4) the complex structure of a particular security may not be fully understood at the
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time of investment and may produce disputes with the issuer or unexpected investment results. Changes in the collateral held by a CLO may cause payments on the instruments the Fund holds to be
reduced, either temporarily or permanently. |
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General Risks of Investing in CLOs and Other Structured Debt Securities. CLOs and other structured finance
securities are generally backed by a pool of credit-related assets that serve as collateral. Accordingly, CLO and structured finance securities present risks similar to those of other types of credit investments, including default (credit), interest
rate and prepayment risks. In addition, CLOs and other structured finance securities are often governed by a complex series of legal documents and contracts, which increases the risk of dispute over the interpretation and enforceability of such
documents relative to other types of investments. |
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Subordinated Securities. CLO equity and junior debt securities are subordinated to more senior tranches of
CLO debt. CLO equity and junior debt securities are subject to increased risks of default relative to the holders of superior priority interests in the same CLO. In addition, at the time of issuance, CLO equity securities are under-collateralized in
that the face amount of the CLO debt and CLO equity of a CLO at inception exceed its total assets. The Fund will typically be in a subordinated or first loss position with respect to realized losses on the underlying assets held by the CLOs in which
we are invested. |
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High Yield Investment Risk. The CLO equity and junior debt securities are typically rated below investment
grade, or in the case of CLO equity securities unrated, and are therefore considered higher yield or junk securities and are considered speculative with respect to timely payment of interest and repayment of principal. The
senior secured loans and other credit-related assets underlying CLOs are also typically higher yield investments. Investing in CLO equity and junior debt securities and other high yield investments involves greater credit and liquidity risk than
investment grade obligations, which may adversely impact the Funds performance. |
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Default Risk. The Fund will be subject to risks associated with defaults on an underlying asset held by a
CLO. |
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A default and any resulting loss as well as other losses on an underlying asset held by a CLO may reduce the fair
value of our corresponding CLO investment. A wide range of factors could adversely affect the ability of the borrower of an underlying asset to make interest or other payments on that asset. To the extent that actual defaults and losses on the
collateral of an investment exceed the level of defaults and losses factored into its purchase price, the value of the anticipated return from the investment will be reduced. The more deeply subordinated the tranche of securities in which we invest,
the greater the risk of loss upon a default. For example, CLO equity is the most subordinated tranche within a CLO and is therefore subject to the greatest risk of loss resulting from defaults on the CLOs collateral, whether due to bankruptcy
or otherwise. Any defaults and losses in excess of expected default rates and loss model inputs will have a negative impact on the fair value of our investments, will reduce the cash flows that the Fund receives from its investments, adversely
affect the fair value of the Funds assets and could adversely impact the Funds ability to pay dividends. Furthermore, the holders of the junior equity and debt tranches typically have limited rights with respect to decisions made with
respect to collateral following an event of default on a CLO. In some cases, the senior most class of notes can elect to liquidate the collateral even if the expected proceeds are not expected to be able to pay in full all classes of notes. The Fund
could experience a complete loss of its investment in such a scenario. |
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In addition, the collateral of CLOs may require substantial workout negotiations or restructuring in the event of
a default or liquidation. Any such workout or restructuring is likely to lead to a substantial reduction in the interest rate of such asset and/or a substantial write-down or write-off
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of all or a portion the principal of such asset. Any such reduction in interest rates or principal will negatively affect the fair value of the Funds portfolio. |
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Prepayment Risk. The assets underlying the CLO securities are subject to prepayment by the underlying
corporate borrowers. In addition, the CLO securities and related investments are subject to prepayment risk. If the Fund or a CLO collateral manager is unable to reinvest prepaid amounts in a new investment with an expected rate of return at least
equal to that of the investment repaid, the Funds investment performance will be adversely impacted. |
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Non-Diversification Risk. The Fund is a non-diversified investment company under the 1940 Act and expects to hold a narrower range of investments than a diversified fund under the 1940 Act. |
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Leverage Risk. The use of leverage, whether directly or indirectly through investments such as CLO equity
or junior debt securities that inherently involve leverage, may magnify our risk of loss. CLO equity or junior debt securities are very highly leveraged (with CLO equity securities typically being leveraged ten times), and therefore the CLO
securities in which we invest are subject to a higher degree of loss since the use of leverage magnifies losses. |
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Credit Risk. If (1) a CLO in which we invest, (2) an underlying asset of any such CLO or
(3) any other type of credit investment in our portfolio declines in price or fails to pay interest or principal when due because the issuer or debtor, as the case may be, experiences a decline in its financial status, our income, NAV and/or
market price would be adversely impacted. |
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Senior Management Personnel of the Adviser. Since the Fund has no employees, it depends on the investment
expertise, skill and network of business contacts of the Adviser. The Adviser evaluates, negotiates, structures, executes, monitors and services the Funds investments. The Funds future success depends to a significant extent on the
continued service and coordination of the Adviser and its senior management team. The departure of any members of the Advisers senior management team could have a material adverse effect on the Funds ability to achieve its investment
objective. |
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Conflicts of Interest Risk. The Funds executive officers and trustees, other current and future
principals of the Adviser and certain members of the Advisers investment committee may serve as officers, trustees or principals of other entities and affiliates of the Adviser and funds managed by the Funds affiliates that operate in
the same or a related line of business as the Fund does. Currently, the Funds executive officers, as well as the other principals of the Adviser, manage other funds affiliated with Carlyle, including other existing and future affiliated BDCs
and registered closed-end funds, including Carlyle Secured Lending, Inc., Carlyle Credit Solutions, Inc. and Carlyle Tactical Private Credit Fund. In addition, the Advisers investment team has
responsibilities for sourcing and managing private debt investments for certain other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or
may be adverse to the interests of, the Fund and its Shareholders. Although the professional staff of the Adviser will devote as much time to management of the Fund as appropriate to enable the Adviser to perform its duties in accordance with the
Investment Advisory Agreement, the investment professionals of the Adviser may have conflicts in allocating their time and services among the Fund, on the one hand, and investment vehicles managed by Carlyle or one or more of its affiliates on the
other hand. |
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Liquidity Risk. Generally, there is no public market for the CLO investments we target. As such, we may
not be able to sell such investments quickly, or at all. If we are able to sell such investments, the prices we receive may not reflect the Advisers assessment of their fair value or the amount paid for such investments by us.
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The Advisers Incentive Fee Risk. The Investment Advisory Agreement entitles the Adviser to receive
incentive compensation on income regardless of any capital losses. In such case, the Fund may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the
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value of the Funds portfolio or if the Fund incurs a net loss for that quarter. Any Incentive Fee payable by the Fund that relates to its net investment income may be computed and paid on
income that may include interest that has been accrued but not yet received. If an investment defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the
Incentive Fee will become uncollectible. The Adviser is not under any obligation to reimburse the Fund for any part of the Incentive Fee it received that was based on accrued income that the Fund never received as a result of a default by an entity
on the obligation that resulted in the accrual of such income, and such circumstances would result in the Funds paying an Incentive Fee on income it never received. The Incentive Fee payable by the Fund to the Adviser may create an incentive
for it to make investments on the Funds behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the Incentive Fee payable to the Adviser is determined may encourage it
to use leverage to increase the return on the Funds investments. In addition, the fact that the Management Fee is payable based upon the Funds Managed Assets, which would include any borrowings for investment purposes, may encourage the
Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor Shareholders. Such a practice could result in the Funds investing in more
speculative securities than would otherwise be in its best interests, which could result in higher investment losses, particularly during cyclical economic downturns. |
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Portfolio Fair Value Risk. Under the 1940 Act, the Fund is required to carry its portfolio investments at
market value or, if there is no readily available market value, at fair value. There is not a public market for the CLO investments we target. As a result, the Adviser values these securities at least quarterly, or more frequently as may be required
from time to time, at fair value. The Adviser, as valuation designee, is responsible for the valuation of the Funds portfolio investments and implementing the portfolio. See Determination of Net Asset Value.
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Limited Investment Opportunities Risk. The market for CLO securities is more limited than the market for
other credit related investments. We can offer no assurances that sufficient investment opportunities for our capital will be available. See Determination of Net Asset Value. |
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Market Risk. The success of the Funds activities will be affected by general economic and market
conditions, such as interest rates, availability of credit, credit defaults, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation of the Funds investments), trade barriers, currency exchange controls,
disease outbreaks, pandemics, and national and international political, environmental and socioeconomic circumstances (including wars, terrorist acts or security operations). In addition, the current U.S. political environment and the resulting
uncertainties regarding actual and potential shifts in U.S. foreign investment, trade, taxation, economic, environmental and other policies under the current Administration, as well as the impact of geopolitical tension, such as a deterioration in
the bilateral relationship between the U.S. and China, an escalation in conflict between Russia and Ukraine or other systemic issuer or industry-specific economic disruptions, could lead to disruption, instability and volatility in the global
markets. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. |
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LAFs Risk. We may invest in LAFs, which are short to medium term facilities often provided by the bank
that will serve as placement agent or arranger on a CLO transaction and which acquire loans on an interim basis which are expected to form part of the portfolio of a future CLO. Investments in LAFs have risks similar to those applicable to
investments in CLOs. Leverage is typically utilized in such a facility and as such the potential risk of loss will be increased for such facilities employing leverage. In the event a planned CLO is not consummated, or the loans are not eligible for
purchase by the CLO, the Fund may be responsible for either holding or disposing of the loans. This could expose the Fund primarily to credit and/or mark-to-market
losses, and other risks. |
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Hedging Risk. Hedging transactions seeking to reduce risks may result in poorer overall performance than
if we had not engaged in such hedging transactions, and they may also not properly hedge our risks. |
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Foreign Currency Risk. A portion of the Funds investments (and the income and gains received by the
Fund in respect of such investments) may be denominated in currencies other than the U.S. dollar. However, the books of the Fund will be maintained, and contributions to and distributions from the Fund will generally be made, in U.S. dollars.
Accordingly, changes in foreign currency exchange rates and exchange controls may materially adversely affect the value of the investments and the other assets of the Fund. |
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Reinvestment Risk. CLOs will typically generate cash from asset repayments and sales that may be
reinvested in substitute assets, subject to compliance with applicable investment tests. If the CLO collateral manager causes the CLO to purchase substitute assets at a lower yield than those initially acquired or sale proceeds are maintained
temporarily in cash, it would reduce the excess interest-related cash flow, thereby having a negative effect on the fair value of our assets and the market value of our securities. In addition, the reinvestment period for a CLO may terminate early,
which would cause the holders of the CLOs securities to receive principal payments earlier than anticipated. There can be no assurance that we will be able to reinvest such amounts in an alternative investment that provides a comparable return
relative to the credit risk assumed. |
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Interest Rate Risk. General interest rate fluctuations and changes in credit spreads may have a
substantial negative impact on the Funds investments and investment opportunities and, accordingly, may have a material adverse effect on the Funds rate of return on invested capital, the Funds net investment income and the
Funds NAV. |
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Refinancing Risk. If we incur debt financing and subsequently refinance such debt, the replacement debt
may be at a higher cost and on less favorable terms and conditions. If we fail to extend, refinance or replace such debt financings prior to their maturity on commercially reasonable terms, our liquidity will be lower than it would have been with
the benefit of such financings, which would limit our ability to grow, and holders of our common shares would not benefit from the potential for increased returns on equity that incurring leverage creates. |
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Risks Relating to Funds RIC Status. Although the Fund intends to qualify to be treated as a RIC
under Subchapter M of the Code, no assurance can be given that the Fund will be able to qualify for and maintain RIC status. If the Fund qualifies as a RIC under the Code, the Fund generally will not be subject to corporate-level federal income
taxes on its income and capital gains that are timely distributed (or deemed distributed) as dividends for U.S. federal income tax purposes to its shareholders. To qualify as a RIC under the Code and to be relieved of federal taxes on income and
gains distributed as dividends for U.S. federal income tax purposes to the Funds shareholders, the Fund must, among other things, meet certain source-of-income,
asset diversification and distribution requirements. The distribution requirement for a RIC is satisfied if the Fund distributes dividends each tax year for U.S. federal income tax purposes to the Funds shareholders of an amount generally at
least equal to 90% of the sum of its net ordinary income, net tax-exempt interest income, if any, and net short-term capital gains in excess of net long-term capital losses, if any. |
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Derivatives Risk. Derivative instruments in which we may invest may be volatile and involve various risks
different from, and in certain cases greater than, the risks presented by other instruments. The primary risks related to Derivative Transactions include counterparty, correlation, liquidity, leverage, volatility, OTC trading, operational and legal
risks. In addition, a small investment in derivatives could have a large potential impact on our performance, effecting a form of investment leverage on our portfolio. In certain types of Derivative Transactions, we could lose the entire amount of
our investment; in other types of Derivative Transactions the potential loss is theoretically unlimited. |
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Counterparty Risk. We may be exposed to counterparty risk, which could make it difficult for us or the
CLOs in which we invest to collect on obligations, thereby resulting in potentially significant losses. |
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Global Economy Risk. Global economies and financial markets are highly interconnected, and conditions and
events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. |
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Price Risk. Investors who buy common shares at different times will likely pay different prices.
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Market Disruptions Risk. The U.S. capital markets have experienced extreme volatility and disruption
following the spread of COVID-19 in the United States and the conflict between Russia and Ukraine. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and
higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on the Funds business, financial condition, results of
operations and cash flows. Unfavorable economic conditions also would be expected to increase the Funds funding costs, limit the Funds access to the capital markets or result in a decision by lenders not to extend credit to the Fund.
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U.S. and global markets recently have experienced increased volatility, including as a result of the recent failures of
certain U.S. and non-U.S. banks, which could be harmful to the Fund and issuer in it invests. For example, if a bank in which the Fund or issuer has an account fails, any cash or other assets in bank accounts
may be temporarily inaccessible or permanently lost by the Fund or issuer. If a bank that provides a subscription line credit facility, asset-based facility, other credit facility and/or other services to the Fund or an issuer fails, the Fund or the
issuer could be unable to draw funds under its credit facilities or obtain replacement credit facilities or other services from other lending institutions with similar terms. Even if banks used by the Fund and issuers in which the Fund invests
remain solvent, continued volatility in the banking sector could cause or intensify an economic recession, increase the costs of banking services or result in the issuers being unable to obtain or refinance indebtedness at all or on as favorable
terms as could otherwise have been obtained. Conditions in the banking sector are evolving, and the scope of any potential impacts to the Fund and issuers, both from market conditions and also potential legislative or regulatory responses, are
uncertain. Continued market volatility and uncertainty and/or a downturn in market and economic and financial conditions, as a result of developments in the banking industry or otherwise (including as a result of delayed access to cash or credit
facilities), could have an adverse impact on the Fund and issuers in which it invests.
15
Our Corporate Information
The principal office of the Fund is located at One Vanderbilt Avenue, Suite 3400, New York, NY 10017 and its telephone number is (866) 277-8243.
16
SUMMARY OF FEES AND EXPENSES
The following table is intended to assist you in understanding the costs and expenses that an investor in our common shares will bear, directly or indirectly,
based on the assumptions set forth below. The expenses shown in the table under Annual Expenses are estimated amounts based on annualizing estimates for the three-month period ending December 31, 2023. We caution you that some of
the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this table contains a reference to our fees or expenses, we will pay such fees and expenses out of our net assets and,
consequently, shareholders will indirectly bear such fees or expenses as investors in the Fund.
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SHAREHOLDER TRANSACTION FEES |
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|
Sales load |
|
%(1) |
Offering expenses borne by the Fund |
|
%(2) |
Dividend reinvestment plan expenses |
|
0%(3) |
Total shareholder transaction fees |
|
%(4) |
|
|
ANNUAL FUND EXPENSES
(as a percentage of net assets attributable to common shares) |
|
|
Management Fee |
|
2.35%(5) |
Incentive Fee payable under Investment Advisory Agreement (17.5%) |
|
2.70%(6) |
Interest payments and fees on borrowed funds |
|
0.00%(7) |
Other Expenses |
|
3.38%(8) |
Total annual fund expenses (9) |
|
8.43%(10) |
(1) |
In the event that the Fund sells its securities publicly through underwriters or agents the related prospectus
supplement will disclose the applicable sales load. |
(2) |
In the event that the Fund sells its securities publicly through underwriters or agents the related prospectus
supplement will disclose the estimated amount of total offering expenses (which may include offering expenses borne by third parties on the Funds behalf), the offering price and the offering expenses borne by the Fund as a percentage of the
offering price. |
(3) |
The expenses of administering the dividend reinvestment plan (the DRP) are included in Other
Expenses. You will pay brokerage charges if you direct your broker or the DRIP Plan agent to sell your Common Shares that you acquired pursuant to the DRP. You may also pay a pro rata share of brokerage commissions incurred in connection with
open-market purchases pursuant to the DRP. See Dividend Reinvestment Plan. |
(4) |
The related prospectus supplement will disclose the offering price and the total stockholder transaction
expenses as a percentage of the offering price. |
(5) |
The Management Fee is calculated and payable monthly in arrears at the annual rate of 1.75% of the month-end value of the Funds Managed Assets. Managed Assets means the total assets of the Fund (including any assets attributable to any preferred shares or to indebtedness) minus the Funds
liabilities other than liabilities relating to indebtedness. |
(6) |
The Fund shall pay CGCIM an Incentive Fee calculated and payable quarterly in arrears based upon the
Funds pre-incentive fee net investment income for the immediately preceding quarter, and is subject to a hurdle rate, expressed as a rate of return on the Funds net assets, equal to
2.00% per quarter (or an annualized hurdle rate of 8.00%), subject to a catch-up feature. For this purpose, pre-incentive fee net investment
income means interest income, dividend income, income generated from original issue discounts, payment-in-kind income, and any other income earned or accrued
during the calendar quarter, minus the Funds operating expenses (which, for this purpose shall not include any distribution and/or shareholder servicing fees, litigation, any extraordinary expenses or Incentive Fee) for the quarter. For
purposes of computing the Funds pre-incentive fee net investment income, the calculation methodology will look through total return swaps as if the Fund owned the referenced assets directly. As a result,
the Funds pre-incentive fee net investment income includes net interest, if any, associated with a derivative or swap, which is the difference between (a) the interest income and transaction fees
related to the reference |
17
|
assets and (b) all interest and other expenses paid by the Fund to the derivative or swap counterparty. Net assets means the total assets of the Fund minus the Funds liabilities. For
purposes of the Incentive Fee, net assets are calculated for the relevant quarter as the weighted average of the net asset value of the Fund as of the first business day of each month therein. The weighted average net asset value shall be calculated
for each month by multiplying the net asset value as of the beginning of the first business day of the month times the number of days in that month, divided by the number of days in the applicable calendar quarter. |
The calculation of the Incentive Fee for each calendar quarter is as follows:
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|
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No Incentive Fee is payable to CGCIM if the Funds pre-incentive fee
net investment income, expressed as a percentage of the Funds net assets in respect of the relevant calendar quarter, does not exceed the quarterly hurdle rate of 2.00%; |
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100% of the portion of the Funds pre-incentive fee net investment
income that exceeds the hurdle rate but is less than or equal to 2.4242% (the catch-up) is payable to CGCIM if the Funds pre-incentive fee net
investment income, expressed as a percentage of the Funds net assets in respect of the relevant calendar quarter, exceeds the hurdle rate but is less than or equal to 2.4242% (9.6968% annualized). The
catch-up provision is intended to provide CGCIM. |
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with an incentive fee of 17.5% on all of the Funds pre-incentive
fee net investment income when the Funds pre-incentive fee net investment income reaches 2.4242% of net assets; and |
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|
|
17.5% of the portion of the Funds pre-incentive fee net investment
income that exceeds the catch-up is payable to CGCIM if the Funds pre-incentive fee net investment income, expressed as a percentage of the Funds
net assets in respect of the relevant calendar quarter, exceeds 2.4242% (9.6968 annualized). As a result, once the hurdle rate is reached and the catch-up is achieved, 17.5% of all the Funds pre-incentive fee net investment income thereafter is allocated to CGCIM. |
(7) |
The Fund may issue preferred shares or debt securities. In the event that the Fund were to issue preferred
shares or debt securities, the Funds borrowing costs, and correspondingly its total annual expenses, including, in the case of such preferred shares, the base management fee as a percentage of the Funds net assets attributable to common
shares, would increase. |
(8) |
Other expenses includes the Funds overhead expenses, including payments under the
Administration Agreement based on the Funds allocable portion of overhead and other expenses incurred by Administrator, and payment of fees in connection with outsourced administrative functions, and are based on estimated amounts for the
current fiscal year. Other expenses also includes the ongoing administrative expenses to the independent accountants and legal counsel of the Fund, compensation of independent directors, and cost and expenses relating to rating agencies.
|
(9) |
The fee table assumes CGCIM and the Fund have no expense limitation and reimbursement agreement. CGCIM and the
Fund have entered into an Expense Limitation Agreement and a Fee Waiver Agreement. Because these agreements are not required to remain in force for at least one year, their effect is excluded from the fee table. |
The following examples illustrate the hypothetical expenses that you would pay on a $1,000 investment assuming annual expenses attributable to common shares
remain unchanged and common shares earn a 5% annual return:
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|
|
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Example - |
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return |
|
$ |
86 |
|
|
$ |
250 |
|
|
$ |
402 |
|
|
$ |
735 |
|
The example and the expenses in the tables above should not be considered a representation of the Funds future expenses,
and actual expenses may be greater or less than those shown. While the example assumes a 5.0% annual return, as required by the SEC, the Funds performance will vary and may result in a return greater or less than 5.0%. For a more complete
description of the various fees and expenses borne directly and indirectly by the Fund, see Fund Expenses and Management and Incentive Fees.
18
FINANCIAL HIGHLIGHTS
Information about the Funds financial highlights may be found in the Financial Highlights sections the Funds most recent Annual
Report on Form N-CSR for the fiscal year ended September 30, 2022, filed with the SEC on December
13, 2022 and the Semi-Annual Report on Form N-CSRS for the period ended March 31, 2023, filed with the SEC
on May 30, 2023 which are incorporated by reference herein.
The Funds historical financial highlights relate to the Funds previous
investment strategy under a different adviser and do not represent the Funds current investment strategy, as described in this prospectus. See Investment Objective, Opportunities and Strategies and Risk
Factors Risks Related to Our Investments Substantially all of the Funds assets are currently invested in cash or cash equivalents.
19
RISK FACTORS
Investors should carefully consider the risk factors described below, before deciding on whether to make an investment in the Fund. The risks set out below
are not the only risks the Fund faces. Additional risks and uncertainties not currently known to the Fund or that the Fund currently deems to be immaterial also may materially adversely affect the Funds business, financial condition and/or
operating results. If any of the following events occur, the Funds business, financial condition and results of operations could be materially adversely affected. In such case, the NAV of the Funds common shares could decline, and
investors may lose all or part of their investment.
Investors should be aware that in light of the current uncertainty, volatility and distress in
economies, financial markets, and labor and health conditions over the world, the risks below are heightened significantly compared to normal conditions. The fact that a particular risk below is not specifically identified as being heightened under
current conditions does not mean that the risk is not greater than under normal conditions.
Risks Related to Our Investments
Substantially all of the Funds assets are currently invested in cash or cash equivalents.
On January 12, 2023, the Fund announced that it had entered into a definitive agreement with CGCIM pursuant to which, among other things, CGCIM became the
investment adviser to the Fund. In connection with the Closing, the Fund sold approximately 97% of its investment portfolio (based on the Funds total gross asset value of the portfolio as of August 31, 2022, subject to certain
exclusions). As a result, substantially all of the Funds assets are currently cash or cash equivalents. Although the Adviser intends to invest such assets promptly pursuant to the Funds new investment strategy, there is no guarantee that
the Adviser will be successful in investing the cash in the time period planned.
Our investments in CLO securities and other structured finance
securities involve certain risks.
Investments in CLO securities involve certain risks. CLOs and other structured finance securities are generally
backed by an asset or a pool of credit-related assets that serve as collateral. The Fund and other investors in CLO securities ultimately bear the credit risk of the underlying collateral. Most CLOs are issued in multiple tranches, offering
investors various maturity and credit risk characteristics, often categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant collateral otherwise underperforms, scheduled
payments to senior tranches of such securities take precedence over those of junior tranches which are the focus of our investment strategy, and scheduled payments to junior tranches have a priority in right of payment to subordinated/equity
tranches. CLOs may present risks similar to those of the other types of credit investments, including default (credit), interest rate and prepayment risks and, in fact, such risks may be of greater significance in the case of CLOs. For example,
investments in junior debt and equity securities issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. In addition to the general risks associated
with investing in debt securities, CLO securities carry additional risks, including: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality of the collateral
may decline in value or default; (3) investments in CLO junior debt and equity tranches will likely be subordinate in right of payment to other senior classes of CLO debt; and (4) the complex structure of a particular security may not be
fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Changes in the collateral held by a CLO may cause payments on the instruments the Fund holds to be reduced, either temporarily or
permanently.
In addition, CLOs and other structured finance securities are often governed by a complex series of legal documents and contracts, which
increases the risk of dispute over the interpretation and enforceability of such documents relative to other types of investments.
20
Investing in senior secured loans indirectly through CLO securities involves particular risks.
We obtain exposure to underlying senior secured loans through our investments in CLOs, but may obtain such exposure directly or indirectly through other means
from time to time. Such loans may become nonperforming or impaired for a variety of reasons. Nonperforming or impaired loans may require substantial workout negotiations or restructuring that may entail a substantial reduction in the interest rate
and/or a substantial write-down of the principal of the loan. In addition, because of the unique and customized nature of a loan agreement and the private syndication of a loan, certain loans may not be purchased or sold as easily as publicly traded
securities, and, historically, the trading volume in the loan market has been small relative to other markets. Loans may encounter trading delays due to their unique and customized nature, and transfers may require the consent of an agent bank
and/or borrower. Risks associated with senior secured loans include the fact that prepayments generally may occur at any time without premium or penalty.
In addition, the portfolios of certain CLOs in which we invest may contain middle market loans. Loans to middle market companies may carry more inherent risks
than loans to larger, publicly traded entities. These companies generally have more limited access to capital and higher funding costs, may be in a weaker financial position, may need more capital to expand or compete, and may be unable to obtain
financing from public capital markets or from traditional sources, such as commercial banks. Middle market companies typically have narrower product lines and smaller market shares than large companies. Therefore, they tend to be more vulnerable to
competitors actions and market conditions, as well as general economic downturns. These companies may also experience substantial variations in operating results. The success of a middle market business may also depend on the management
talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on the obligor. Accordingly, loans made to middle market companies may
involve higher risks than loans made to companies that have greater financial resources or are otherwise able to access traditional credit sources. Middle market loans are less liquid and have a smaller trading market than the market for broadly
syndicated loans and may have default rates or recovery rates that differ (and may be better or worse) than has been the case for broadly syndicated loans or investment grade securities. There can be no assurance as to the levels of defaults and/or
recoveries that may be experienced with respect to middle market loans in any CLO in which we may invest. As a consequence of the forgoing factors, the securities issued by CLOs that primarily invest in middle market loans (or hold significant
portions thereof) are generally considered to be a riskier investment than securities issued by CLOs that primarily invest in broadly syndicated loans.
Covenant-lite loans may comprise a significant portion of the senior secured loans underlying the CLOs in which we invest. Over the past decade, the senior
secured loan market has evolved from one in which covenant-lite loans represented a minority of the market to one in which such loans represent a significant majority of the market. Generally, covenant-lite loans provide borrower companies more
freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrowers
financial condition. Accordingly, to the extent that the CLOs that we invest in hold covenant-lite loans, our CLOs may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or
exposure to loans with financial maintenance covenants.
Our investments in the primary CLO market involve certain additional risks.
Between the pricing date and the effective date of a CLO, the CLO collateral manager will generally expect to purchase additional collateral obligations for
the CLO. During this period, the price and availability of these collateral obligations may be adversely affected by a number of market factors, including price volatility and availability of investments suitable for the CLO, which could hamper the
ability of the collateral manager to acquire a portfolio of collateral obligations that will satisfy specified concentration limitations and allow the CLO to reach the target initial par amount of collateral prior to the effective date. An inability
or delay in reaching the target initial par amount of collateral may adversely affect the timing and amount of interest or
21
principal payments received by the holders of the CLO debt securities and distributions on the CLO equity securities and could result in early redemptions which may cause CLO equity and debt
investors to receive less than face value of their investment.
Our portfolio of investments may lack diversification among CLO securities which may
subject us to a risk of significant loss if one or more of these CLO securities experience a high level of defaults on collateral.
Our portfolio
may hold investments in a limited number of CLO securities. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification, we do not have any limitations
on the ability to invest in any one CLO, and our investments may be concentrated in relatively few CLO securities. As our portfolio may be less diversified than the portfolios of some larger funds, we are more susceptible to risk of loss if one or
more of the CLOs in which we are invested experiences a high level of defaults on its collateral. Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to
write down the value of any one investment. We may also invest in multiple CLOs managed by the same CLO collateral manager, thereby increasing our risk of loss in the event the CLO collateral manager were to fail, experience the loss of key
portfolio management employees or sell its business.
Failure to maintain a broad range of underlying obligors across the CLOs in which we invest
would make us more vulnerable to defaults.
We may be subject to concentration risk since CLO portfolios tend to have a certain amount of overlap
across underlying obligors. This trend is generally exacerbated when demand for bank loans by CLO issuers outpaces supply. Market analysts have noted that the overlap of obligor names among CLO issuers has increased recently and is particularly
evident across CLOs of the same year of origination, as well as with CLOs managed by the same asset manager. To the extent we invest in CLOs which have a high percentage of overlap, this may increase the likelihood of defaults on our CLO investments
occurring together.
Our portfolio is focused on CLO securities, and the CLO securities in which we invest may hold loans that are concentrated in a
limited number of industries.
Our portfolio is focused on securities issued by CLOs and related investments, and the CLOs in which we invest may
hold loans that are concentrated in a limited number of industries. As a result, a downturn in the CLO industry or in any particular industry that the CLOs in which we invest are concentrated could significantly impact the aggregate returns we
realize.
Failure by a CLO in which we are invested to satisfy certain tests will harm our operating results.
The failure by a CLO in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests,
would lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of CLO senior debt would be entitled to additional payments that would, in turn, reduce the payments we, as holder of junior debt or equity
tranches, would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting CLO
or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.
Negative
loan ratings migration may also place pressure on the performance of certain of our investments.
Per the terms of a CLOs indenture, assets
rated CCC+ or lower or their equivalent in excess of applicable limits typically do not receive full par credit for purposes of calculation of the CLOs overcollateralization tests. As a result, negative rating migration could cause
a CLO to be out of compliance with its overcollateralization
22
tests. This could cause a diversion of cash flows away from the CLO equity and junior debt tranches in favor of the more senior CLO debt tranches until the relevant overcollateralization test
breaches are cured. This could have a negative impact on our NAV and cash flows.
Our investments in CLOs and other investment vehicles result in
additional expenses to us.
We invest in CLO securities and may invest, to the extent permitted by law, in the securities and other instruments of
other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of a CLOs or any such investment vehicles expenses, including management and performance fees. In addition to the
management and performance fees borne by our investments in CLOs we also remain obligated to pay management and incentive fees to the Adviser with respect to the assets invested in the securities and other instruments of other investment vehicles,
including CLOs. With respect to each of these investments, each holder of our common shares bears his or her share of the management and incentive fee of the Adviser as well as indirectly bearing the management and performance fees charged by the
underlying advisor and other expenses of any investment vehicles in which we invest.
In the course of our investing activities, we pay management and
incentive fees to the Adviser and reimburse the Adviser for certain expenses it incurs. As a result, investors in our securities invest on a gross basis and receive distributions on a net basis after expenses, potentially
resulting in a lower rate of return than an investor might achieve through direct investments.
Our investments in CLO securities may be less
transparent to us and our Shareholders than direct investments in the collateral.
We invest primarily in equity and junior debt tranches of CLOs
and other related investments. Generally, there may be less information available to us regarding the collateral held by such CLOs than if we had invested directly in the debt of the underlying obligors. As a result, our Shareholders do not know the
details of the collateral of the CLOs in which we invest or receive the reports issued with respect to such CLO. In addition, none of the information contained in certain monthly reports nor any other financial information furnished to us as a
noteholder in a CLO is audited and reported upon, nor is an opinion expressed, by an independent public accountant. Our CLO investments are also subject to the risk of leverage associated with the debt issued by such CLOs and the repayment priority
of senior debt holders in such CLOs.
CLO investments involve complex documentation and accounting considerations.
CLOs and other structured finance securities in which we invest are often governed by a complex series of legal documents and contracts. As a result, the risk
of dispute over interpretation or enforceability of the documentation may be higher relative to other types of investments.
The accounting and tax
implications of the CLO investments that we make are complicated. In particular, reported earnings from CLO equity securities are recorded under U.S. generally accepted accounting principles, or GAAP, based upon an effective yield
calculation. Current taxable earnings on certain of these investments, however, will generally not be determinable until after the end of the fiscal year of each individual CLO that ends within our fiscal year, even though the investments are
generating cash flow throughout the fiscal year. The tax treatment of certain of these investments may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows
are reflected in a constant yield to maturity.
We are dependent on the collateral managers of the CLOs in which we invest, and those CLOs are
generally not registered under the 1940 Act.
We rely on CLO collateral managers to administer and review the portfolios of collateral they manage.
The actions of the CLO collateral managers may significantly affect the return on our investments; however, we, as
23
investors of the CLO, typically do not have any direct contractual relationship with the collateral managers of the CLOs in which we invest. The ability of each CLO collateral manager to identify
and report on issues affecting its securitization portfolio on a timely basis could also affect the return on our investments, as we may not be provided with information on a timely basis in order to take appropriate measures to manage our risks. We
will also rely on CLO collateral managers to act in the best interests of a CLO it manages; however, such CLO collateral managers are subject to fiduciary duties owed to other classes of notes besides those in which we invest; therefore, there can
be no assurance that the collateral managers will always act in the best interest of the class or classes of notes in which we are invested. If any CLO collateral manager were to act in a manner that was not in the best interest of the CLOs (e.g.,
gross negligence, with reckless disregard or in bad faith), this could adversely impact the overall performance of our investments. Furthermore, since the underlying CLO issuer often provides an indemnity to its CLO collateral manager, we may not be
incentivized to pursue actions against the collateral manager since any such action, if successful, may ultimately be borne by the underlying CLO issuer and payable from its assets, which could create losses to us as investors in the CLO. In
addition, to the extent we invest in CLO equity, liabilities incurred by the CLO manger to third parties may be borne by us to the extent the CLO is required to indemnify its collateral manager for such liabilities.
In addition, the CLOs in which we invest are generally not registered as investment companies under the 1940 Act. As investors in these CLOs, we are not
afforded the protections that shareholders in an investment company registered under the 1940 Act would have.
The collateral managers of the CLOs
in which we invest may not continue to manage such CLOs.
Given that we invest in CLO securities issued by CLOs which are managed by unaffiliated
collateral managers, we are dependent on the skill and expertise of such managers. We believe our Advisers ability to analyze and diligence potential CLO managers differentiates our approach to investing in CLO securities. However, we cannot
assure you that, for any CLO we invest in, the collateral manager in place when we invest in such CLO securities will continue to manage such CLO through the life of our investment. Collateral managers are subject to removal or replacement by other
holders of CLO securities without our consent, and may also voluntarily resign as collateral manager or assign their role as collateral manager to another entity. There can be no assurance that any removal, replacement, resignation or assignment of
any particular CLO managers role will not adversely affect the returns on the CLO securities in which we invest.
Our investments in CLO
securities may be subject to special anti-deferral provisions that could result in us incurring tax or recognizing income prior to receiving cash distributions related to such income.
Some of the CLOs in which we invest may constitute passive foreign investment companies, or PFICs. If we acquire interests in
PFICs that are treated as equity for U.S. federal income tax purposes (including equity tranche investments and certain debt tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any excess
distribution or gain from the disposition of such investments even if such income is distributed as a taxable dividend by us to our Shareholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions or
gains, but such elections (if available) may require us to recognize income in any year in excess of our distributions from PFICs and our proceeds from dispositions of our investments in PFICs, and such income would nevertheless be subject to the
distribution requirement necessary to maintain our tax treatment as a RIC. For instance, if we were to invest in a PFIC and elected to treat the PFIC as a qualified electing fund, or a QEF, under the Code, we would be required to include
in income each year our share of the PFICs ordinary earnings and net capital gains for such year regardless of whether we receive any distributions from the PFIC. Treasury Regulations generally treat our income inclusion with respect to a PFIC
with respect to which we have made a QEF election as qualifying income for purposes of determining our ability to be subject to tax as a RIC if either (i) there is a current distribution out of the earnings and profits of the PFIC that are
attributable to such income inclusion or (ii) such inclusion is derived with respect to our business of investing in stock, securities, or currencies. As such, we may be restricted in our ability to make QEF elections with respect to our
holdings in issuers that could be treated as PFICs in order to ensure our continued tax
24
treatment as a RIC and/or maximize our after-tax return from these investments. As an alternative to a QEF election, we may be able to elect mark-to-market treatment for any equity investments in a PFIC. See U.S. Federal Income Tax Matters Taxation of the Fund.
If we hold 10% or more (by vote or value) of the interests treated as equity for U.S. federal income tax purposes in a foreign corporation that is treated as
a controlled foreign corporation, or CFC (including equity tranche investments and certain debt tranche investments in a CLO treated as a CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each tax
year from such foreign corporation in an amount equal to our pro rata share of the corporations subpart F income for the tax year (including both ordinary earnings and capital gains). If we are required to include such deemed
distributions from a CFC in our income, such income will be subject to the distribution requirement necessary to maintain our tax treatment as a RIC regardless of whether or not the CFC makes an actual distribution during such tax year. Treasury
Regulations generally treat our income inclusion with respect to a CFC as qualifying income for purposes of determining our ability to be subject to tax as a RIC if either (i) there is a current distribution out of the earnings and profits of
the CFC that are attributable to such income inclusion or (ii) such inclusion is derived with respect to our business of investing in stock, securities, or currencies. As such, we may limit and/or manage our holdings in issuers that could be
treated as CFCs in order to ensure our continued tax treatment as a RIC and/or maximize our after-tax return from these investments.
Because income from CLO securities will be subject to the distribution requirement necessary to maintain our tax treatment as a RIC, if we are required to
include amounts from CLO securities in income prior to receiving the cash distributions representing such income, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or
equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
If a CLO in which we invest is treated as engaged in a U.S. trade or business for U.S. federal income tax purposes, such CLO could be subject to U.S.
federal income tax on a net basis, which could affect our operating results and cash flows.
Each CLO in which we invest will generally operate
pursuant to investment guidelines intended to ensure the CLO is not treated as engaged in a U.S. trade or business for U.S. federal income tax purposes. Each CLO will generally receive an opinion of counsel, subject to certain assumptions (including
compliance with the investment guidelines) and limitations, that the CLO will not be engaged in a U.S. trade or business for U.S. federal income tax purposes. If a CLO fails to comply with the investment guidelines or the Internal Revenue Service,
or the IRS, otherwise successfully asserts that the CLO should be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes, such CLO could be subject to U.S. federal income tax on a net basis, which could
reduce the amount available to distribute to junior debt and equity holders in such CLO, including the Fund.
If a CLO in which we invest fails to
comply with certain U.S. tax reporting requirements, such CLO may be subject to withholding requirements that could materially and adversely affect our operating results and cash flows.
The U.S. Foreign Account Tax Compliance Act provisions of the Code (commonly referred to as FATCA) impose a withholding tax of 30% on
certain U.S. source periodic payments, including interest and dividends, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment
funds, unless such non-U.S. entity complies with certain reporting requirements regarding its U.S. account holders and its U.S. owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these
reporting requirements, certain payments to such CLO may
25
be subject to the 30% withholding tax, which could reduce the amount available to distribute to equity and junior debt holders in such CLO, and therefore materially and adversely affect the fair
value of the CLOs securities and our operating results and cash flows.
Increased competition in the market or a decrease in new CLO issuances
may result in increased price volatility or a shortage of investment opportunities.
In recent years there has been a marked increase in the number
of, and flow of capital into, investment vehicles established to pursue investments in CLO securities whereas the size of this market is relatively limited. While we cannot determine the precise effect of such competition, such increase may result
in greater competition for investment opportunities, which may result in an increase in the price of such investments relative to the risk taken on by holders of such investments. Such competition may also result under certain circumstances in
increased price volatility or decreased liquidity with respect to certain positions.
In addition, the volume of new CLO issuances and CLO refinancings
varies over time as a result of a variety of factors including new regulations, changes in interest rates, and other market forces. As a result of increased competition and uncertainty regarding the volume of new CLO issuances and CLO refinancings,
we can offer no assurances that we will deploy all of our capital in a timely manner or at all. Prospective investors should understand that we may compete with other investment vehicles, as well as investment and commercial banking firms, which
have substantially greater resources, in terms of financial wherewithal and research staffs, than may be available to us.
We and our investments
are subject to interest rate risk.
Since we may incur leverage (including through issuance of preferred shares and/or debt securities) to make
investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds.
Because of inflationary pressure, the U.S. government has recently increased interest rates. In a rising interest rate environment, any additional leverage
that we incur may bear a higher interest rate than our current leverage. There may not, however, be a corresponding increase in our investment income. Any reduction in the level of rate of return on new investments relative to the rate of return on
our current investments, and any reduction in the rate of return on our current investments, could adversely impact our net investment income, reducing our ability to service the interest obligations on, and to repay the principal of, our
indebtedness, as well as our capacity to pay distributions to our Shareholders. See Benchmark Floor Risk.
The fair value
of certain of our investments may be significantly affected by changes in interest rates. Although senior secured loans are generally floating rate instruments, our investments in senior secured loans through investments in junior equity and debt
tranches of CLOs are sensitive to interest rate levels and volatility. For example, because CLO debt securities are floating rate securities, a reduction in interest rates would generally result in a reduction in the coupon payment and cash flow we
receive on our CLO debt investments. Further, there may be some difference between the timing of interest rate resets on the assets and liabilities of a CLO. Such a mismatch in timing could have a negative effect on the amount of funds distributed
to CLO equity investors. In addition, CLOs may not be able to enter into hedge agreements, even if it may otherwise be in the best interests of the CLO to hedge such interest rate risk. Furthermore, in the event of a significant rising interest rate
environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect our cash flow, fair value of our assets and operating results. In the event that our interest expense were to increase relative to
income, or sufficient financing became unavailable, our return on investments and cash available for distribution to Shareholders or to make other payments on our securities would be reduced. In addition, future investments in different types of
instruments may carry a greater exposure to interest rate risk.
26
Benchmark Floor Risk. Because CLOs generally issue debt on a floating rate basis, an increase in the
relevant Benchmark will increase the financing costs of CLOs. Many of the senior secured loans held by these CLOs have Benchmark floors such that, when the relevant Benchmark is below the stated Benchmark floor, the stated Benchmark floor (rather
than the Benchmark itself) is used to determine the interest payable under the loans. Therefore, if the relevant Benchmark increases but stays below the average Benchmark floor rate of the senior secured loans held by a CLO, there would not be a
corresponding increase in the investment income of such CLOs. The combination of increased financing costs without a corresponding increase in investment income in such a scenario could result in the CLO not having adequate cash to make interest or
other payments on the securities which we hold.
Transition from LIBOR Risk. Although The London Interbank Offered Rate (LIBOR)
is no longer published as of June 30, 2023, certain CLO securities in which we invest may continue to earn interest at (or, from the perspective of the Fund as CLO equity investor, obtain financing at) a floating rate based on LIBOR. LIBOR and
other inter-bank lending rates and indices (together with LIBOR, the IBORs) are the subject of ongoing national and international regulatory reform. Most, but not all, LIBOR settings are now transitioned to alternative near risk-free
rates (RFRs).
It is expected that many new financing arrangements entered into by the Fund will therefore likely reference an RFR as
the applicable interest rate. The RFRs are conceptually and operationally different from LIBOR. For example, overnight rate RFRs may only be determinable on a backward looking basis and therefore are only known at the end of an interest
period, whereas LIBOR is a forward looking rate. Moreover, certain RFRs (such as Secured Overnight Financing Rate or SOFR for U.S. dollar debt) are not well established in the market, and all RFRs remain novel in comparison
to LIBOR. There consequently remains some uncertainty as to what the economic, accounting, commercial, tax and legal implications of the use of RFRs will be and how they will perform over significant time periods, particularly as market participants
are still becoming accustomed to the use of such benchmarks. As a result, it is possible that the use of RFRs may have an adverse effect on the Fund and therefore investors. For example, the efficacy of new financing arrangements entered into by the
Fund may be less than expected or desired, which could reduce the returns available to investors.
Additionally, there may be difficulties with
transitioning an existing financing arrangement from LIBOR to the applicable RFR. Such difficulties could adversely impact the Fund and therefore investors. For example, there may be delays or failures in meeting the conditions to amend such a
financing arrangement and there may be mismatches if the reference rate cannot be remediated or if a hedge related to such financing arrangement and the financing arrangement itself cannot be transitioned to the same RFR at the same time. The
potential impact of wider conceptual and operational differences between LIBOR and RFRs would also likely apply to remediation of these contracts in due course. In addition, higher borrowing costs may apply to the Funds financing arrangements.
Therefore, prospective investors should be aware that the Fund is likely to bear additional costs and expenses in relation to LIBOR discontinuation and
the use of RFRs. Given the relative novelty of the use of RFRs in financial markets (as discussed in further detail above), the exact impact of the use of the RFRs remains to be seen. If the Fund does enter into a LIBOR-linked financing arrangement,
there may be further costs or other adverse effects incurred by the Fund in relation to remediation of these to RFRs in due course.
Interest Rate
Environment. The senior secured loans underlying the CLOs in which we invest typically have floating interest rates. A rising interest rate environment may increase loan defaults, resulting in losses for the CLOs in which we invest. In addition,
increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating interest payments or refinance floating rate loans. See Risks Related to Our Investments Our investments are
subject to prepayment risk. Further, a general rise in interest rates will increase the financing costs of the CLOs. However, since many of the senior secured loans within these CLOs have Benchmark floors, if the
Benchmark is below the applicable Benchmark floor, there may not be corresponding increases in investment income which could result in the CLO not having adequate cash to make interest or other payments on the securities which we hold.
27
For detailed discussions of the risks associated with a rising interest rate environment, see
Risks Related to Our Investments We and our investments are subject to interest rate risk and Risks Related to Our Investments We and our investments are subject
to risks associated with investing in high-yield and unrated, or junk, securities.
Our investments are subject to credit
risk.
If (1) a CLO in which we invest, (2) an underlying asset of any such CLO or (3) any other type of credit investment in our
portfolio declines in price or fails to pay interest or principal when due because the issuer or debtor, as the case may be, experiences a decline in its financial status either or both our income and NAV may be adversely impacted. Non-payment would result in a reduction of our income, a reduction in the value of the applicable CLO security or other credit investment experiencing non-payment and,
potentially, a decrease in our NAV. With respect to our investments in CLO securities and credit investments that are secured, there can be no assurance that liquidation of collateral would satisfy the issuers obligation in the event of non-payment of scheduled dividend, interest or principal or that such collateral could be readily liquidated. In the event of bankruptcy of an issuer, we could experience delays or limitations with respect to its
ability to realize the benefits of any collateral securing a CLO security or credit investment. To the extent that the credit rating assigned to a security in our portfolio is downgraded, the market price and liquidity of such security may be
adversely affected. In addition, if a CLO in which we invest triggers an event of default as a result of failing to make payments when due or for other reasons, the CLO would be subject to the possibility of liquidation, which could result in full
loss of value to the CLO equity and junior debt investors. CLO equity tranches are the most likely tranche to suffer a loss of all of their value in these circumstances. Heightened inflationary pressures could increase the risk of default by the
Funds underlying obligors.
Our investments are subject to prepayment risk.
The assets underlying the CLO securities are subject to prepayment by the underlying corporate borrowers. In addition, the CLO securities and related
investments are subject to prepayment risk. If the Fund or a CLO collateral manager is unable to reinvest prepaid amounts in a new investment with an expected rate of return at least equal to that of the investment repaid, the Funds investment
performance will be adversely impacted.
Although the Advisers valuations and projections take into account certain expected levels of prepayments,
the collateral of a CLO may be prepaid more quickly than expected. Prepayment rates are influenced by changes in interest rates and a variety of factors beyond our control and consequently cannot be accurately predicted. Early prepayments give rise
to increased reinvestment risk, as a CLO collateral manager might realize excess cash from prepayments earlier than expected. If a CLO collateral manager is unable to reinvest such cash in a new investment with an expected rate of return at least
equal to that of the investment repaid, this may reduce our net income and the fair value of that asset.
In addition, in most CLO transactions, CLO debt
investors, such as us, are subject to prepayment risk in that the holders of a majority of the equity tranche can direct a call or refinancing of a CLO, which would cause such CLOs outstanding CLO debt securities to be repaid at par. Such
prepayments of CLO debt securities held by us also give rise to reinvestment risk if we are unable to reinvest such cash in a new investment with an expected rate of return at least equal to that of the investment repaid.
We may leverage our portfolio, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.
The use of leverage, whether directly or indirectly through investments such as CLO equity or junior debt securities that inherently involve
leverage, may magnify our risk of loss. CLO equity or junior debt securities are very highly leveraged (with CLO equity securities typically being leveraged ten times), and therefore the CLO securities in which we invest are subject to a higher
degree of loss since the use of leverage magnifies losses.
28
We may incur leverage, directly or indirectly, through one or more special purpose vehicles, indebtedness for
borrowed money, as well as leverage in the form of Derivative Transactions, preferred shares, debt securities and other structures and instruments, in significant amounts and on terms that the Adviser and the Board deem appropriate, subject to
applicable limitations under the 1940 Act. Such leverage may be used for the acquisition and financing of our investments, to pay fees and expenses and for other purposes. Such leverage may be secured and/or unsecured. Any such leverage does not
include leverage embedded or inherent in the CLO structures in which we invest or in derivative instruments in which we may invest. Accordingly, there is a layering of leverage in our overall structure.
The more leverage we employ, the more likely a substantial change will occur in our NAV. Accordingly, any event that adversely affects the value of an
investment would be magnified to the extent leverage is utilized. For instance, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability
to make distributions and other payments to our security holders. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject
to prevailing economic conditions and competitive pressures. The cumulative effect of the use of leverage with respect to any investments in a market that moves adversely to such investments could result in a substantial loss that would be greater
than if our investments were not leveraged.
As a registered closed-end management investment company, we are
required to meet certain asset coverage requirements, as defined under the 1940 Act, with respect to any senior securities. With respect to senior securities representing indebtedness (i.e., borrowings or deemed borrowings, including any notes),
other than temporary borrowings as defined under the 1940 Act, we are required under current law to have an asset coverage of at least 300%, as measured at the time of borrowing and calculated as the ratio of our total assets (less all liabilities
and indebtedness not represented by senior securities) over the aggregate amount of our outstanding senior securities representing indebtedness. With respect to senior securities that are stock (i.e., our preferred shares), we are required under
current law to have an asset coverage of at least 200%, as measured at the time of the issuance of any such preferred shares and calculated as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities)
over the aggregate amount of our outstanding senior securities representing indebtedness plus the aggregate liquidation preference of any outstanding preferred shares. If legislation were passed that modifies this section of the 1940 Act and
increases the amount of senior securities that we may incur, we may increase our leverage to the extent then permitted by the 1940 Act and the risks associated with an investment in us may increase.
If our asset coverage declines below 300% (or 200%, as applicable), we would not be able to incur additional debt or issue additional preferred shares, and
could be required by law to sell a portion of our investments to repay some debt or redeem preferred shares when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make certain
distributions or pay dividends of an amount necessary to continue to be subject to tax as a RIC. The amount of leverage that we employ will depend on the Advisers and the Boards assessment of market and other factors at the time of any
proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.
In addition, any debt facility into
which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to
maintain our ability to be subject to tax as a RIC under Subchapter M of the Code.
The following table is furnished in response to requirements of the
SEC. It is designed to illustrate the effects of the Funds leverage due to senior securities on corresponding share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in
the Funds portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the
investment portfolio returns expected to be experienced by the Fund. Your actual
29
returns may be greater or less than those appearing below. The table further assumes that we incur leverage representing 25% of our total assets and a projected annual rate of interest on the
borrowings of 8%.
|
|
|
|
|
|
|
|
|
|
|
Assumed Return on Portfolio (Net of Expenses) |
|
(10.00)% |
|
(5.00)% |
|
0.00% |
|
5.00% |
|
10.00% |
Corresponding Share Total Return |
|
(16.00)% |
|
(9.33)% |
|
(2.67)% |
|
4.00% |
|
10.67% |
Our investments may be highly subordinated and subject to leveraged securities risk.
Our portfolio includes equity and junior debt investments in CLOs, which involve a number of significant risks. CLO equity and junior debt securities are
subordinated to more senior tranches of CLO debt. CLO equity and junior debt securities are subject to increased risks of default relative to the holders of superior priority interests in the same CLO. In addition, at the time of issuance, CLO
equity securities are under-collateralized in that the face amount of the CLO debt and CLO equity of a CLO at inception exceed its total assets. The Fund will typically be in a subordinated or first loss position with respect to realized losses on
the underlying assets held by the CLOs in which we are invested.
We and our investments are subject to risks associated with investing in risky and
unrated, or junk, securities.
The CLO equity and junior debt securities in which we invest are typically rated below investment grade,
or in the case of CLO equity securities unrated, and are therefore considered higher yield or junk securities and are considered speculative with respect to timely payment of interest and repayment of principal. The senior
secured loans and other credit-related assets underlying CLOs are also typically higher yield investments. Investing in CLO equity and junior debt securities and other high yield investments involves greater credit and liquidity risk than investment
grade obligations, which may adversely impact the Funds performance.
We invest primarily in securities that are rated below investment grade or, in
the case of CLO equity securities, are not rated by a nationally recognized statistical rating organization. The primary assets underlying our CLO security investments are senior secured loans, although these transactions may allow for limited
exposure to other asset classes including unsecured loans, risky bonds, emerging market loans or bonds and structured finance securities with underlying exposure to CBO and CDO tranches, residential mortgage-backed securities, commercial
mortgage-backed securities, trust preferred securities and other types of securitizations. CLOs generally invest in lower-rated debt securities that are typically rated below Baa/BBB by Moodys, S&P or Fitch. In addition, we may obtain
direct exposure to such financial assets/instruments. Securities that are not rated or are rated lower than Baa by Moodys or lower than BBB by S&P or Fitch are sometimes referred to as high yield or junk. Junk debt
securities have greater credit and liquidity risk than investment grade obligations. Junk debt securities are generally unsecured and may be subordinated to certain other obligations of the issuer thereof. The lower rating of junk debt securities
and below investment grade loans reflects a greater possibility that adverse changes in the financial condition of an issuer or in general economic conditions or both may impair the ability of the issuer thereof to make payments of principal or
interest.
Risks of junk debt securities may include:
|
(1) |
limited liquidity and secondary market support; |
|
(2) |
substantial marketplace volatility resulting from changes in prevailing interest rates; |
|
(3) |
subordination to the prior claims of banks and other senior lenders; |
|
(4) |
the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest
rates that could cause the CLO issuer to reinvest premature redemption proceeds in lower-yielding debt obligations; |
|
(5) |
the possibility that earnings of the junk debt security issuer may be insufficient to meet its debt service;
|
30
|
(6) |
the declining creditworthiness and potential for insolvency of the issuer of such junk debt securities during
periods of rising interest rates and/or economic downturn; and |
|
(7) |
greater susceptibility to losses and real or perceived adverse economic and competitive industry conditions
than higher grade securities. |
An economic downturn or an increase in interest rates could severely disrupt the market for high-yield
debt securities and adversely affect the value of outstanding junk debt securities and the ability of the issuers thereof to repay principal and interest.
Issuers of junk debt securities may be highly leveraged and may not have available to them more traditional methods of financing. The risk associated with
acquiring (directly or indirectly) the securities of such issuers generally is greater than is the case with highly rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of junk debt
securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During such periods, timely service of debt obligations also may be adversely affected by specific issuer developments, or the
issuers inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by the issuer is significantly greater for the holders of junk debt securities because such
securities may be unsecured and may be subordinated to obligations owed to other creditors of the issuer of such securities. In addition, the CLO issuer may incur additional expenses to the extent it (or any investment manager) is required to seek
recovery upon a default on a high yield bond (or any other debt obligation) or participate in the restructuring of such obligation.
A portion of the
loans held by CLOs in which we invest may consist of second lien loans. Second lien loans are secured by liens on the collateral securing the loan that are subordinated to the liens of at least one other class of obligations of the related obligor,
and thus, the ability of the CLO issuer to exercise remedies after a second lien loan becomes a defaulted obligation is subordinated to, and limited by, the rights of the senior creditors holding such other classes of obligations. In many
circumstances, the CLO issuer may be prevented from foreclosing on the collateral securing a second lien loan until the related first lien loan is paid in full. Moreover, any amounts that might be realized as a result of collection efforts or in
connection with a bankruptcy or insolvency proceeding involving a second lien loan must generally be turned over to the first lien secured lender until the first lien secured lender has realized the full value of its own claims. In addition, certain
of the second lien loans contain provisions requiring the CLO issuers interest in the collateral to be released in certain circumstances. These lien and payment obligation subordination provisions may materially and adversely affect the
ability of the CLO issuer to realize value from second lien loans and adversely affect the fair value of and income from our investment in the CLOs securities.
We are subject to risks associated with loan assignments and participations.
We, or the CLOs in which we invest, may acquire interests in loans either directly (by way of assignment, or Assignments) or indirectly (by way of
participation, or Participations). The purchaser by an Assignment of a loan obligation typically succeeds to all the rights and obligations of the selling institution and becomes a lender under the loan or credit agreement with respect
to the debt obligation. In contrast, Participations acquired by us or the CLOs in which we invest in a portion of a debt obligation held by a selling institution, or the Selling Institution, typically result in a contractual relationship
only with such Selling Institution, not with the obligor. We or the CLOs in which we invest would have the right to receive payments of principal, interest and any fees to which we (or the CLOs in which we invest) are entitled under the
Participation only from the Selling Institution and only upon receipt by the Selling Institution of such payments from the obligor. In purchasing a Participation, we or the CLOs in which we invest generally will have no right to enforce compliance
by the obligor with the terms of the loan or credit agreement or other instrument evidencing such debt obligation, nor any rights of setoff against the obligor, and we or the CLOs in which we invest may not directly benefit from the collateral
supporting the debt obligation in which it has purchased the Participation. As a result, we or the CLOs in which we invest would assume the credit risk of both the obligor and the Selling Institution. In the event of the
31
insolvency of the Selling Institution, we or the CLOs in which we invest will be treated as a general creditor of the Selling Institution in respect of the Participation and may not benefit from
any setoff between the Selling Institution and the obligor.
The holder of a Participation in a debt obligation may not have the right to vote to waive
enforcement of any default by an obligor. Selling Institutions commonly reserve the right to administer the debt obligations sold by them as they see fit and to amend the documentation evidencing such debt obligations in all respects. However, most
participation agreements with respect to senior secured loans provide that the Selling Institution may not vote in favor of any amendment, modification or waiver that (1) forgives principal, interest or fees, (2) reduces principal,
interest or fees that are payable, (3) postpones any payment of principal (whether a scheduled payment or a mandatory prepayment), interest or fees or (4) releases any material guarantee or security without the consent of the participant
(at least to the extent the participant would be affected by any such amendment, modification or waiver).
A Selling Institution voting in connection with
a potential waiver of a default by an obligor may have interests different from ours, and the Selling Institution might not consider our interests in connection with its vote. In addition, many participation agreements with respect to senior secured
loans that provide voting rights to the participant further provide that, if the participant does not vote in favor of amendments, modifications or waivers, the Selling Institution may repurchase such Participation at par.
The lack of liquidity in our investments may adversely affect our business.
Generally, there is no public market for the CLO investments we target. As such, we may not be able to sell such investments quickly, or at all. If we are able
to sell such investments, the prices we receive may not reflect the Advisers assessment of their fair value or the amount paid for such investments by us.
Prices of risky investments have at times experienced significant and rapid decline when a substantial number of holders (or a few holders of a significantly
large block of the securities) decided to sell. In addition, we (or the CLOs in which we invest) may have difficulty disposing of certain risky investments because there may be a thin trading market for such securities. To the extent
that a secondary trading market for non-investment grade risky investments does exist, it would not be as liquid as the secondary market for highly rated investments. Reduced secondary market liquidity would
have an adverse impact on the fair value of the securities and on our direct or indirect ability to dispose of particular securities in response to a specific economic event such as deterioration in the creditworthiness of the issuer of such
securities.
As secondary market trading volumes increase, new loans frequently contain standardized documentation to facilitate loan trading that may
improve market liquidity. There can be no assurance, however, that future levels of supply and demand in loan trading will provide an adequate degree of liquidity or that the current level of liquidity will continue. Because holders of such loans
are offered confidential information relating to the borrower, the unique and customized nature of the loan agreement, and the private syndication of the loan, loans are not purchased or sold as easily as publicly traded securities are purchased or
sold. Although a secondary market may exist, risks similar to those described above in connection with an investment in risky debt investments are also applicable to investments in lower rated loans.
The securities issued by CLOs generally offer less liquidity than other investment grade or risky corporate debt, and are subject to certain transfer
restrictions that impose certain financial and other eligibility requirements on prospective transferees. Other investments that we may purchase in privately negotiated transactions may also be illiquid or subject to legal restrictions on their
transfer. As a result of this illiquidity, our ability to sell certain investments quickly, or at all, in response to changes in economic and other conditions and to receive a fair price when selling such investments may be limited, which could
prevent us from making sales to mitigate losses on such investments. In addition, CLOs are subject to the possibility of liquidation upon an event of default, which
32
could result in full loss of value to the CLO equity and junior debt investors. CLO equity tranches are the most likely tranche to suffer a loss of all of their value in these circumstances.
We may be exposed to counterparty risk.
We may be
exposed to counterparty risk, which could make it difficult for us or the CLOs in which we invest to collect on the obligations represented by investments and result in significant losses.
We may hold investments that would expose us to the credit risk of our counterparties or the counterparties of the CLOs in which it invests. In the event of a
bankruptcy or insolvency of such a counterparty, we or a CLO in which such an investment is held could suffer significant losses, including the loss of that part of our or the CLOs portfolio financed through such a transaction, declines in the
value of our investment, including declines that may occur during an applicable stay period, the inability to realize any gains on our investment during such period and fees and expenses incurred in enforcing our rights.
In addition, with respect to certain swaps, neither a CLO nor we usually has a contractual relationship with the entities, referred to as Reference
Entities whose payment obligations are the subject of the relevant swap agreement or security. Therefore, neither the CLOs nor we generally have a right to directly enforce compliance by the Reference Entity with the terms of this kind of
underlying obligation, any rights of set-off against the Reference Entity or any voting rights with respect to the underlying obligation. Neither the CLOs nor we will directly benefit from the collateral
supporting the underlying obligation and will not have the benefit of the remedies that would normally be available to a holder of such underlying obligation.
We are subject to risks associated with defaults on an underlying asset held by a CLO.
Fund will be subject to risks associated with defaults on an underlying asset held by a CLO. A default and any resulting loss as well as other losses on an
underlying asset held by a CLO may reduce the fair value of our corresponding CLO investment. A wide range of factors could adversely affect the ability of the borrower of an underlying asset to make interest or other payments on that asset. To the
extent that actual defaults and losses on the collateral of an investment exceed the level of defaults and losses factored into its purchase price, the value of the anticipated return from the investment will be reduced. The more deeply subordinated
the tranche of securities in which we invest, the greater the risk of loss upon a default. For example, CLO equity is the most subordinated tranche within a CLO and is therefore subject to the greatest risk of loss resulting from defaults on the
CLOs collateral, whether due to bankruptcy or otherwise. Any defaults and losses in excess of expected default rates and loss model inputs will have a negative impact on the fair value of our investments, will reduce the cash flows that the
Fund receives from its investments, adversely affect the fair value of the Funds assets and could adversely impact the Funds ability to pay dividends. Furthermore, the holders of the junior equity and debt tranches typically have limited
rights with respect to decisions made with respect to collateral following an event of default on a CLO. In some cases, the senior most class of notes can elect to liquidate the collateral even if the expected proceeds are not expected to be able to
pay in full all classes of notes. The Fund could experience a complete loss of its investment in such a scenario.
In addition, the collateral of CLOs may
require substantial workout negotiations or restructuring in the event of a default or liquidation. Any such workout or restructuring is likely to lead to a substantial reduction in the interest rate of such asset and/or a substantial write-down or write-off of all or a portion the principal of such asset. Any such reduction in interest rates or principal will negatively affect the fair value of our portfolio.
We are subject to risks associated with loan accumulation facilities.
We may invest capital in LAFs, which are short- to medium-term facilities often provided by the bank that will serve as placement agent or arranger on a CLO
transaction and which acquire loans on an interim basis which are expected to form part of the portfolio of a future CLO. Investments in LAFs have risks similar to those applicable
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to investments in CLOs. Leverage is typically utilized in such a facility and as such the potential risk of loss will be increased for such facilities employing leverage. In the event a planned
CLO is not consummated, or the loans are not eligible for purchase by the CLO, the Fund may be responsible for either holding or disposing of the loans. This could expose the Fund primarily to credit and/or mark-to-market losses, and other risks.
Furthermore, we likely will have no consent rights in respect of the
loans to be acquired in such a facility and in the event we do have any consent rights, they will be limited. In the event a planned CLO is not consummated, or the loans are not eligible for purchase by the CLO, we may be responsible for either
holding or disposing of the loans. This could expose us primarily to credit and/or mark-to-market losses, and other risks. LAFs typically incur leverage from four to six
times prior to a CLOs closing and as such the potential risk of loss will be increased for such facilities that employ leverage.
We are
subject to risks associated with the bankruptcy or insolvency of an issuer or borrower of a loan that we hold or of an underlying asset held by a CLO in which we invest.
In the event of a bankruptcy or insolvency of an issuer or borrower of a loan that we hold or of an underlying asset held by a CLO or other vehicle in which we
invest, a court or other governmental entity may determine that our claims or those of the relevant CLO are not valid or not entitled to the treatment we expected when making our initial investment decision.
Various laws enacted for the protection of debtors may apply to the underlying assets in our investment portfolio. The information in this and the following
paragraph represents a brief summary of certain points only, is not intended to be an extensive summary of the relevant issues and is applicable with respect to U.S. issuers and borrowers only. The following is not intended to be a summary of all
relevant risks. Similar avoidance provisions to those described below are sometimes available with respect to non-U.S. issuers or borrowers, and there is no assurance that this will be the case which may
result in a much greater risk of partial or total loss of value in that underlying asset.
If a court in a lawsuit brought by an unpaid creditor or
representative of creditors of an issuer or borrower of underlying assets, such as a trustee in bankruptcy, were to find that such issuer or borrower did not receive fair consideration or reasonably equivalent value for incurring the indebtedness
constituting such underlying assets and, after giving effect to such indebtedness, the issuer or borrower (1) was insolvent; (2) was engaged in a business for which the remaining assets of such issuer or borrower constituted unreasonably
small capital; or (3) intended to incur, or believed that it would incur, debts beyond our ability to pay such debts as they mature, such court could decide to invalidate, in whole or in part, the indebtedness constituting the underlying assets
as a fraudulent conveyance, to subordinate such indebtedness to existing or future creditors of the issuer or borrower or to recover amounts previously paid by the issuer or borrower in satisfaction of such indebtedness. In addition, in the event of
the insolvency of an issuer or borrower of underlying assets, payments made on such underlying assets could be subject to avoidance as a preference if made within a certain period of time (which may be as long as one year under U.S.
Federal bankruptcy law or even longer under state laws) before insolvency.
Our underlying assets may be subject to various laws for the protection of
debtors in other jurisdictions, including the jurisdiction of incorporation of the issuer or borrower of such underlying assets and, if different, the jurisdiction from which it conducts business and in which it holds assets, any of which may
adversely affect such issuers or borrowers ability to make, or a creditors ability to enforce, payment in full, on a timely basis or at all. These insolvency considerations will differ depending on the jurisdiction in which an
issuer or borrower or the related underlying assets are located and may differ depending on the legal status of the issuer or borrower.
We are
subject to risks associated with any hedging or Derivative Transactions in which we participate.
We may in the future purchase and sell a variety
of derivative instruments. To the extent we engage in Derivative Transactions, we expect to do so to hedge against interest rate, credit, currency and/or other risks or for other
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investment or risk management purposes. We may use Derivative Transactions for investment purposes to the extent consistent with our investment objectives if the Adviser deems it appropriate to
do so. Derivative Transactions may be volatile and involve various risks different from, and in certain cases, greater than the risks presented by other instruments. The primary risks related to Derivative Transactions include counterparty,
correlation, illiquidity, leverage, volatility and over-the-counter, or OTC, trading, operational and legal risks. A small investment in derivatives could
have a large potential impact on our performance, effecting a form of investment leverage on our portfolio. In certain types of Derivative Transactions we could lose the entire amount of our investment. In other types of Derivative Transactions, the
potential loss is theoretically unlimited.
The following is a more detailed discussion of primary risk considerations related to the use of Derivative
Transactions that investors should understand before investing in our securities.
Counterparty risk. Counterparty risk is the risk that a
counterparty in a Derivative Transaction will be unable to honor its financial obligation to us, or the risk that the reference entity in a credit default swap or similar derivative will not be able to honor its financial obligations. Certain
participants in the derivatives market, including larger financial institutions, have experienced significant financial hardship and deteriorating credit conditions. If our counterparty to a Derivative Transaction experiences a loss of capital, or
is perceived to lack adequate capital or access to capital, it may experience margin calls or other regulatory requirements to increase equity. Under such circumstances, the risk that a counterparty will be unable to honor its obligations may
increase substantially. If a counterparty becomes bankrupt, we may experience significant delays in obtaining recovery (if at all) under the derivative contract in bankruptcy or other reorganization proceeding; if our claim is unsecured, we will be
treated as a general creditor of such prime broker or counterparty and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in such circumstances. The counterparty risk for
cleared derivatives is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivative and, in effect, guarantees the parties performance under the
contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to us.
Correlation risk. When used for hedging purposes, an imperfect or variable degree of correlation between price movements of the derivative instrument
and the underlying investment sought to be hedged may prevent us from achieving the intended hedging effect or expose us to the risk of loss. The imperfect correlation between the value of a derivative and our underlying assets may result in losses
on the Derivative Transaction that are greater than the gain in the value of the underlying assets in our portfolio.
The Adviser may not hedge against a
particular risk because it does not regard the probability of the risk occurring to be sufficiently high as to justify the cost of the hedge, or because it does not foresee the occurrence of the risk. These factors may have a significant negative
effect on the fair value of our assets and the market value of our securities.
Liquidity risk. Derivative Transactions, especially when traded in
large amounts, may not be liquid in all circumstances, so that in volatile markets we would not be able to close out a position without incurring a loss. Although both OTC and exchange-traded derivatives markets may experience a lack of liquidity,
OTC non-standardized derivative transactions are generally less liquid than exchange-traded instruments. The illiquidity of the derivatives markets may be due to various factors, including congestion,
disorderly markets, limitations on deliverable supplies, the participation of speculators, government regulation and intervention, and technical and operational or system failures. In addition, daily limits on price fluctuations and speculative
position limits on exchanges on which we may conduct transactions in derivative instruments may prevent prompt liquidation of positions, subjecting us to the potential of greater losses. As a result, we may need to liquidate other investments to
meet margin and settlement payment obligations.
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Leverage risk. Trading in Derivative Transactions can result in significant leverage and risk of loss.
Thus, the leverage offered by trading in derivative instruments will magnify the gains and losses we experience and could cause our NAV to be subject to wider fluctuations than would be the case if we did not use the leverage feature in derivative
instruments.
Volatility risk. The prices of many derivative instruments, including many options and swaps, are highly volatile. Price movements of
options contracts and payments pursuant to swap agreements are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and
national and international political and economic events and policies. The value of options and swap agreements also depends upon the price of the securities or currencies underlying them.
OTC trading. Derivative Transactions that may be purchased or sold may include instruments not traded on an organized market. The risk of non-performance by the counterparty to such Derivative Transaction may be greater and the ease with which we can dispose of or enter into closing transactions with respect to such an instrument may be less than in
the case of an exchange traded instrument. In addition, significant disparities may exist between bid and ask prices for certain derivative instruments that are not traded on an exchange. Such instruments are often valued
subjectively and may result in mispricings or improper valuations. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value, or both. In contrast, cleared derivative transactions benefit from daily mark-to-market pricing and settlement, and segregation and minimum capital requirements applicable to intermediaries. Derivatives are also subject to operational and legal
risks. Operational risk generally refers to risk related to potential operational issues, including documentation issues, settlement issues, system failures, inadequate controls, and human errors. Legal risk generally refers to insufficient
documentation, insufficient capacity or authority of counterparty, or legality or enforceability of a contract. Transactions entered into directly between two counterparties generally do not benefit from such protections; however, certain uncleared
derivative transactions are subject to minimum margin requirements which may require us and our counterparties to exchange collateral based on daily marked-to-market
pricing. OTC trading generally exposes us to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit
or liquidity problem, thus causing us to suffer a loss. Such counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where we have concentrated our transactions with a
single or small group of counterparties.
We may be subject to risks associated with investments in ETFs.
We may invest in securities of ETFs, and may otherwise invest indirectly in securities consistent with our investment objectives, including through a joint
venture vehicle, subject to statutory limitations prescribed by the 1940 Act. These limitations include in certain circumstances a prohibition on us acquiring more than 3% of the voting shares of any other investment company, and a prohibition on
investing more than 5% of our total assets in securities of any one investment company or more than 10% of our total assets in securities of all investment companies. Subject to applicable law and/or pursuant to an exemptive order obtained from the
SEC or under an exemptive rule adopted by the SEC, we may invest in certain other investment companies (including ETFs and money market funds) and business development companies beyond these statutory limits or otherwise provided that certain
conditions are met. We will indirectly bear our proportionate share of any management fees and other expenses paid by such other investment companies, in addition to the fees and expenses that we regularly bear. We may only invest in other
investment companies to the extent that the asset class exposure in such investment companies is consistent with the permissible asset class exposure for us had we invested directly in securities, and the portfolios of such investment companies are
subject to similar risks as we are.
Investors will bear indirectly the fees and expenses of the CLO equity securities in which we invest.
Investors will bear indirectly the fees and expenses (including management fees and other operating expenses) of the CLO equity securities in
which we invest. CLO collateral manager fees are charged on the total assets of a
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CLO but are assumed to be paid from the residual cash flows after interest payments to the CLO senior debt tranches. Therefore, these CLO collateral manager fees (which generally range from 0.30%
to 0.50% of a CLOs total assets) are effectively much higher when allocated only to the CLO equity tranche. The calculation does not include any other operating expense ratios of the CLOs, as these amounts are not routinely reported to
Shareholders on a basis consistent with this methodology; however, it is estimated that additional operating expenses of 0.30% to 0.70% could be incurred. In addition, CLO collateral managers may earn fees based on a percentage of the CLOs
equity cash flows after the CLO equity has earned a cash-on-cash return of its capital and achieved a specified hurdle rate.
We and our investments are subject to reinvestment risk.
As part of the ordinary management of its portfolio, a CLO will typically generate cash from asset repayments and sales and reinvest those proceeds in
substitute assets, subject to compliance with its investment tests and certain other conditions. The earnings with respect to such substitute assets will depend on the quality of reinvestment opportunities available at the time. If the CLO
collateral manager causes the CLO to purchase substitute assets at a lower yield than those initially acquired (for example, during periods of loan compression or need to satisfy the CLOs covenants) or sale proceeds are maintained temporarily
in cash, it would reduce the excess interest-related cash flow that the CLO collateral manager is able to achieve. The investment tests may incentivize a CLO collateral manager to cause the CLO to buy riskier assets than it otherwise would, which
could result in additional losses. These factors could reduce our return on investment and may have a negative effect on the fair value of our assets and the market value of our securities. In addition, the reinvestment period for a CLO may
terminate early, which would cause the holders of the CLOs securities to receive principal payments earlier than anticipated. In addition, in most CLO transactions, CLO debt investors are subject to the risk that the holders of a majority of
the equity tranche, who can direct a call or refinancing of a CLO, causing such CLOs outstanding CLO debt securities to be repaid at par earlier than expected. There can be no assurance that we will be able to reinvest such amounts in an
alternative investment that provides a comparable return relative to the credit risk assumed.
We and our investments are subject to risks
associated with non-U.S. investing.
While we invest primarily in CLOs that hold underlying U.S. assets,
these CLOs may be organized outside the United States. We may also invest in CLOs that hold collateral that are non-U.S. assets or otherwise invest in securities of
non-U.S. issuers to the extent consistent with our investment strategies and objectives.
Investing in foreign
entities may expose us to additional risks not typically associated with investing in U.S. issuers. These risks include changes in exchange control regulations, political and social instability, restrictions on the types or amounts of investment,
expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy
laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards, currency fluctuations and greater price volatility. Further, we, and the CLOs in which we invest, may have difficulty enforcing creditors
rights in foreign jurisdictions.
In addition, international trade tensions may arise from time to time which could result in trade tariffs, embargoes or
other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, supply chain disruptions, an oversupply of certain manufactured goods, substantial price reductions of
goods and possible failure of individual companies or industries, which could have a negative impact on the value of the CLO securities that we hold.
Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have failed to keep
pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in periods when our assets are uninvested. Our
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inability to make intended investments due to settlement problems or the risk of intermediary counterparty failures could cause it to miss investment opportunities. The inability to dispose of an
investment due to settlement problems could result either in losses to the funds due to subsequent declines in the value of such investment or, if we have entered into a contract to sell the security, could result in possible liability to the
purchaser. Transaction costs of buying and selling foreign securities also are generally higher than those involved in domestic transactions. Furthermore, foreign financial markets have, for the most part, substantially less volume than U.S.
markets, and securities of many foreign companies are less liquid and their prices more volatile than securities of comparable domestic companies.
The
economies of individual non-U.S. countries may also differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, volatility of currency
exchange rates, depreciation, capital reinvestment, resources self-sufficiency and balance of payments position.
A portion of our investments may
be denominated in foreign currencies.
A portion of the Funds investments (and the income and gains received by the Fund in respect of such
investments) may be denominated in currencies other than the U.S. dollar. However, the books of the Fund will be maintained, and contributions to and distributions from the Fund will generally be made, in U.S. dollars. Accordingly, changes in
foreign currency exchange rates and exchange controls may materially adversely affect the value of the investments and the other assets of the Fund.
Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for
distribution or to make payments on our other obligations.
As a registered closed-end management
investment company, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by the Adviser. Decreases in the market values or fair values of our investments are
recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of an issuers inability to meet its repayment obligations to us with respect to the affected investments. This could result in realized losses
in the future and ultimately in reductions of our income available for distribution or to make payments on our other obligations in future periods.
If our distributions exceed our taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the same
taxable year may be recharacterized as a return of capital.
If our distributions exceed our taxable income and capital gains realized during a
taxable year, all or a portion of the distributions made in the same taxable year may be recharacterized as a return of capital to our Shareholders. A return of capital distribution will generally not be taxable to our Shareholders. However, a
return of capital distribution will reduce a Shareholders cost basis in our common shares on which the distribution was received, thereby potentially resulting in a higher reported capital gain or lower reported capital loss when those common
shares are sold or otherwise disposed of.
A portion of our income and fees may not be qualifying income for purposes of the income source
requirement.
Some of the income and fees that we may recognize will not be qualifying income for purposes of the income source requirement
applicable to RICs. In order to ensure that such income and fees do not disqualify us as a RIC for a failure to satisfy such requirement, we may need to recognize such income and fees indirectly through one or more entities classified as
corporations for U.S. federal income tax purposes. Such corporations will be subject to U.S. corporate income tax on their earnings, which ultimately will reduce our return on such income and fees.
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Risks Relating to an Investment in Our Securities
Common shares of closed-end management investment companies frequently trade at discounts to their respective
NAVs, and we cannot assure you that the market price of our common shares will not decline below our NAV per common share.
Common shares of closed-end management investment companies frequently trade at discounts to their respective NAVs and our common shares may also be discounted in the market. This characteristic of
closed-end management investment companies is separate and distinct from the risk that our NAV per common share may decline. We cannot predict whether our common shares will trade above, at or below our NAV
per common share. The risk of loss associated with this characteristic of closed-end management investment companies may be greater for investors expecting to sell common shares purchased in an offering soon
after such offering. In addition, if our common shares trades below our NAV per common share, we will generally not be able to sell additional common shares to the public at market price except (1) in connection with a rights offering to our
existing Shareholders, (2) with the consent of the majority of the holders of our common shares, (3) upon the conversion of a convertible security in accordance with its terms or (4) under such circumstances as the SEC may permit.
The price of our common shares may be volatile and may decrease substantially.
The trading price of our common shares may fluctuate substantially. The price of our common shares that will prevail in the market may be higher or lower than
the price you paid to purchase our common shares, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:
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price and volume fluctuations in the overall stock market from time to time; |
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investor demand for our common shares; |
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significant volatility in the market price and trading volume of securities of registered closed-end management investment companies or other companies in our sector, which are not necessarily related to the operating performance of these companies; |
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changes in regulatory policies or tax guidelines with respect to RICs or registered closed-end management investment companies; |
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failure to qualify as a RIC, or the loss of RIC status; |
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any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities
analysts; |
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changes, or perceived changes, in the value of our portfolio investments; |
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departures of any members of the Senior Investment Team; |
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operating performance of companies comparable to us; or |
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general economic conditions and trends and other external factors. |
We and the Adviser could be the target of litigation.
We or the Adviser could become the target of securities class action litigation or other similar claims if our common share price fluctuates significantly or
for other reasons. The outcome of any such proceedings could materially adversely affect our business, financial condition, and/or operating results and could continue without resolution for long periods of time. Any litigation or other similar
claims could consume substantial amounts of our managements time and attention, and that time and attention and the devotion of associated resources could, at times, be disproportionate to the amounts at stake. Litigation and other claims are
subject to inherent uncertainties, and a material adverse impact on our financial statements could occur for the period in which the
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effect of an unfavorable final outcome in litigation or other similar claims becomes probable and reasonably estimable. In addition, we could incur expenses associated with defending ourselves
against litigation and other similar claims, and these expenses could be material to our earnings in future periods.
Sales in the public market of
substantial amounts of our common shares may have an adverse effect on the market price of our common shares.
Sales of substantial amounts of our
common shares or the availability of such common shares for sale, whether or not actually sold, could adversely affect the prevailing market price of our common shares. If this occurs and continues, it could impair our ability to raise additional
capital through the sale of equity securities should we desire to do so. For a discussion of the adverse effect that the concentration of beneficial ownership may have on the market price of our common shares, see Risks Related to
Our Business and Structure Significant Shareholders may control the outcome of matters submitted to our Shareholders or adversely impact the market price of our securities.
Our Shareholders will experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan.
All distributions declared in cash payable to Shareholders that are participants in our dividend reinvestment plan are automatically reinvested in our common
shares. As a result, our Shareholders that do not participate in our dividend reinvestment plan will experience dilution in their ownership percentage of our common shares over time.
Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.
In the event we issue subscription rights to purchase our common shares to existing Shareholders, Shareholders who do not fully exercise their rights should
expect that they will, at the completion of the offer, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in common share
ownership because we do not know at this time what proportion of the common shares will be purchased as a result of the offer.
In addition, if the
subscription price is less than our net asset value per common share, then our Shareholders would experience an immediate dilution of the aggregate net asset value of their common shares as a result of the offer. The amount of any decrease in net
asset value is not predictable because it is not known at this time what the subscription price and net asset value per common share will be on the expiration date of the rights offering or what proportion of the common shares will be purchased as a
result of the offer. Such dilution could be substantial.
The impact of tax law changes on us, our securityholders and our investments is uncertain.
Changes in tax laws, regulations or administrative interpretations thereof could adversely affect us, our securityholders and the entities in
which we invest. You are urged to consult with your tax advisor with respect to the impact of any such legislation or other regulatory or administrative developments and proposals and their potential effect on your investment in us.
Future issuances of preferred shares or debt securities may cause the NAV and market value of our common shares to be more volatile.
Any future issuances of preferred shares or debt securities or other indebtedness, may cause the NAV and market value of our common shares
to become more volatile. If the dividend rate on the preferred shares or interest rate payable on our indebtedness were to approach the net rate of return on our investment portfolio, the benefit of leverage to the common
Shareholders would be reduced. If the dividend rate on the preferred shares or interest
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rate payable on our indebtedness were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the common Shareholders than if we had not issued
preferred shares or incurred any indebtedness. Any decline in the NAV of our investments would be borne entirely by the common Shareholders. Therefore, if the market value of our portfolio were to decline, the leverage would result in a
greater decrease in NAV to the common Shareholders than if we were not leveraged through the issuance of preferred shares and debt securities. This greater NAV decrease would also tend to cause a greater decline in the market price for our
common shares. We might be in danger of failing to maintain the required asset coverage of the preferred shares or indebtedness or of losing our ratings, if any, on the preferred shares or indebtedness or, in an extreme case, our
current investment income might not be sufficient to meet the dividend requirements on the preferred shares or interest payments on our indebtedness. In order to counteract such an event, we might need to liquidate investments in order to fund a
redemption of some or all of the preferred shares or debt. In addition, we would pay (and the common Shareholders would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred shares or
indebtedness, including higher advisory fees if our total return exceeds the dividend rate on the preferred shares.
Increases in market yields
would result in a decline in the price of any future issuances of preferred shares or debt securities.
The prices of fixed income investments vary
inversely with changes in market yields. If the market yields on securities comparable to any future issuance by the Fund of preferred shares or debt securities increase, it would result in a decline in the secondary market price of the Funds
preferred shares or debt securities.
Future issuances of debt securities may be unsecured and therefore effectively subordinated to any secured
indebtedness we may incur in the future.
Future issuances of debt securities may not secured by any of our assets or any of the assets of our
subsidiaries. As a result, those debt securities will be subordinated to any secured indebtedness we or our subsidiaries may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent
of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights
against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of our debt securities.
An active trading market for future issuances of debt securities may not exist, which could adversely affect the market price of those debt securities
or a holders ability to sell them.
Future debt securities may be listed on the NYSE. However, we cannot provide any assurances that an
active trading market for those debt securities will exist in the future or that you will be able to sell our debt securities. Even if an active trading market does exist, our debt securities may trade at a discount from their initial offering price
depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not
exist, the liquidity and trading price for our debt securities may be harmed. Accordingly, holders may be required to bear the financial risk of an investment in our debt securities for an indefinite period of time.
A downgrade, suspension or withdrawal of any future credit rating assigned by a rating agency to us or any future issuances of preferred shares or debt
securities, if any, or change in the debt markets could cause the liquidity or market value of our preferred shares or debt securities to decline significantly.
Any credit rating is an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in any credit ratings
will generally affect the market value of any issuances of preferred
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shares or debt securities. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of our preferred shares and debt securities. Credit ratings
are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligations to obtain or maintain any credit
ratings or to advise holders of our preferred shares or debt securities of any changes in any credit ratings. There can be no assurance that any credit ratings will be assigned to us or remain for any given period of time or that such credit ratings
will not be lowered or withdrawn entirely by the rating agencies if, in their judgment, future circumstances relating to the basis of the credit rating, such as adverse changes in the Fund, so warrant. The conditions of the financial markets and
prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of our preferred shares and debt securities.
The indenture that will govern our debt securities will contain limited protection for holders of our debt securities.
The indenture that will govern future issuances of our debt securities will offer limited protection to holders of our debt securities. The terms of the
indenture do not restrict our or any of our subsidiaries ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in our debt
securities. In particular, the terms of the indenture do not place any restrictions on our or our subsidiaries ability to:
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issue securities or otherwise incur additional indebtedness or other obligations, including (1) any
indebtedness or other obligations that would be equal in right of payment to our debt securities, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to our debt securities
to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore would rank structurally senior to our debt securities and (4) securities,
indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to our debt securities with respect to the assets of our subsidiaries, in each
case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the 1940 Act or any successor provisions; |
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pay distributions or dividends on, or purchase or redeem or make any payments in respect of, capital stock or
other securities ranking junior in right of payment to our debt securities, other than a distribution, dividend or purchase that would cause a violation of Section 18(a)(1)(B) of the 1940 Act or any successor provisions; |
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sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or
substantially all of our assets); |
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enter into transactions with affiliates; |
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create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
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create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
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Furthermore, the terms of the indenture do not protect holders of our debt securities in the event that we experience changes
(including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues,
income, cash flow or liquidity, except as required under the 1940 Act.
Our ability to recapitalize, incur additional debt and take a number of other
actions that are not limited by the terms of our debt securities may have important consequences for you as a holder of our debt securities, including making it more difficult for us to satisfy our obligations with respect to our debt securities or
negatively affecting the trading value of our debt securities.
42
Other debt we issue or incur in the future could contain more protections for its holders than the indenture and
our debt securities, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of our debt securities.
Any optional redemption provision may materially adversely affect the return on our debt securities.
Our debt securities may be redeemable in whole or in part at any time or from time to time at our sole option as set forth in the applicable indenture or
otherwise. We may choose to redeem any of our debt securities at times when prevailing interest rates are lower than the interest rate paid on the applicable debt securities. In this circumstance, holders may not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as that of the debt securities being redeemed.
If we default on our
obligations to pay our other indebtedness, we may not be able to make payments on our debt securities.
Any future indebtedness or under other
indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our debt securities
and substantially decrease the market value of our debt securities. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our
indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing any future indebtedness, we could be in default under the terms of the agreements governing such
indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders of the debt we may incur in the
future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the
future need to seek to obtain waivers from the required lenders or holders of any debt that we may incur in the future to avoid being in default. If we breach our covenants under our debt and seek a waiver, we may not be able to obtain a waiver from
the required lenders or holders of the debt. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay
debt, lenders having secured obligations could proceed against the collateral securing the debt. Because any future debt will likely have customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is
accelerated, we may be unable to repay or finance the amounts due. See Description of Our Debt Securities
FATCA
withholding may apply to payments to certain foreign entities.
Payments made under our securities to a foreign financial institution, or
FFI, or non-financial foreign entity, or NFFE (including such an institution or entity acting as an intermediary), may be subject to a U.S. withholding tax of 30% under FATCA. This
withholding tax may apply to certain payments of interest on our debt securities or dividends on our shares unless the FFI or NFFE complies with certain information reporting, withholding, identification, certification and related requirements
imposed by FATCA. Depending upon the status of a holder and the status of an intermediary through which any of our debt securities or shares are held, the holder could be subject to this 30% withholding tax in respect of any interest paid on our
debt securities or dividends on our shares. You should consult your own tax advisors regarding FATCA and how it may affect your investment in our securities.
Risks Relating to Our Business and Structure
The
Adviser has not previously operated an exchange-listed fund with this investment strategy.
While the Adviser has managed private CLO equity funds,
it has not previously operated an exchange-listed fund with this investment strategy and as a result there is no track record or history on which prospective investors can
43
base their investment decision. We are subject to the business risks and uncertainties associated with implementation of a new investment strategy for an exchange-listed fund, including the risks
associated with being a public reporting company, the risks that we will not achieve our investment objective, and the value of a Shareholders investment could decline substantially or become worthless. While we believe that the past
professional experiences of CGCIMs investment team managing similar investment strategies for private and registered funds will increase the likelihood that CGCIM will be able to manage the Fund successfully, there can be no assurance that
this will be the case.
Our investment portfolio is recorded at fair value in accordance with the 1940 Act. As a result, there will be uncertainty
as to the value of our portfolio investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there
is no readily available market value, at fair value as determined by the Adviser in accordance with written valuation policies and procedures, subject to oversight by the Board, in accordance with Rule 2a-5
under the 1940 Act. Typically, there is no public market for the type of investments we target. As a result, we value these securities at least quarterly based on relevant information compiled by the Adviser and third-party pricing services (when
available), and with the oversight of the Board.
The determination of fair value and, consequently, the amount of unrealized gains and losses in our
portfolio, are to a certain degree subjective and dependent on a valuation process approved and overseen by the Board. Certain factors that may be considered in determining the fair value of our investments include
non-binding indicative bids and the number of trades (and the size and timing of each trade) in an investment. Valuation of certain investments is also based, in part, upon third party valuation models which
take into account various market inputs. Investors should be aware that the models, information and/or underlying assumptions utilized by the Adviser or such models will not always correctly capture the fair value of an asset. Because such
valuations, and particularly valuations of securities that are not publicly traded like those we hold, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The Advisers determinations of fair
value may differ materially from the values that would have been used if an active public market for these securities existed. The Advisers determinations of the fair value of our investments have a material impact on our net earnings through
the recording of unrealized appreciation or depreciation of investments and may cause our NAV on a given date to understate or overstate, possibly materially, the value that we may ultimately realize on one or more of our investments. See
Determination of Net Asset Value.
Our financial condition and results of operations depend on the Advisers ability
to effectively manage and deploy capital.
Our ability to achieve our investment objectives depends on the Advisers ability to effectively
manage and deploy capital, which depends, in turn, on the Advisers ability to identify, evaluate and monitor, and our ability to acquire, investments that meet our investment criteria.
Accomplishing our investment objectives on a cost-effective basis is largely a function of the Advisers handling of the investment process, its ability
to provide competent, attentive and efficient services and our access to investments offering acceptable terms, either in the primary or secondary markets. Even if we are able to grow and build upon our investment operations, any failure to manage
our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for
investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described in
this prospectus, it could adversely impact our ability to pay dividends or make distributions. In addition, because the trading methods employed by the Adviser on our behalf are proprietary, Shareholders will not be able to determine details of such
methods or whether they are being followed.
44
We are reliant on CGCIM continuing to serve as the Adviser.
Since the Fund has no employees, it depends on the investment expertise, skill and network of business contacts of the Adviser. The Adviser evaluates,
negotiates, structures, executes, monitors and services the Funds investments. The Funds future success depends to a significant extent on the continued service and coordination of the Adviser and its senior management team. The
departure of any members of the Advisers senior management team could have a material adverse effect on the Funds ability to achieve its investment objective.
The Funds ability to achieve its investment objective depends on the Advisers ability to identify, analyze, invest in, finance and monitor
companies that meet the Funds investment criteria. The Advisers capabilities in managing the investment process, providing competent, attentive and efficient services to the Fund, and facilitating access to financing on acceptable terms
depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve the Funds investment objective, the Adviser may need to hire, train,
supervise and manage new investment professionals to participate in the Funds investment selection and monitoring process. The Adviser may not be able to find investment professionals in a timely manner or at all. Failure to support the
Funds investment process could have a material adverse effect on the Funds business, financial condition and results of operations.
In
addition, the Investment Advisory Agreement has termination provisions that allow the parties to terminate the agreements without penalty. The Investment Advisory Agreement may be terminated at any time, without penalty, by the Adviser upon 60
days notice to the Fund. If the Investment Advisory Agreement is terminated, it may adversely affect the quality of the Funds investment opportunities. In addition, in the event the Investment Advisory Agreement is terminated, it may be
difficult for the Fund to replace the Adviser. Furthermore, the termination of the Investment Advisory Agreement may adversely impact the terms of the Funds or its subsidiaries financing facilities or any financing facility into which
the Fund or its subsidiaries may enter in the future, which could have a material adverse effect on the Funds business and financial condition.
We are reliant on key personnel at CGCIM.
The
Adviser depends on the diligence, skill and network of business contacts of certain professionals. The Adviser also depends, to a significant extent, on access to other investment professionals and the information and deal flow generated by these
investment professionals in the course of their investment and portfolio management activities. The Funds success depends on the continued service of such personnel. The investment professionals associated with the Adviser are actively
involved in other investment activities not concerning the Fund and will not be able to devote all of their time to the Funds business and affairs. The departure of any of the senior managers of the Adviser, or of a significant number of the
investment professionals or partners of the Advisers affiliates, could have a material adverse effect on the Funds ability to achieve its investment objective. Individuals not currently associated with the Adviser may become associated
with the Fund and the performance of the Fund may also depend on the experience and expertise of such individuals. In addition, there is no assurance that the Adviser will remain the Funds investment adviser or that the Adviser will continue
to have access to the investment professionals and partners of its affiliates and the information and deal flow generated by the investment professionals of its affiliates.
We expect to rely to on Carlyles existing relationships to a significant extent.
The Fund expects that Carlyle will depend on its existing relationships with private equity sponsors, investment banks and commercial banks, and the Fund
expects to rely to a significant extent upon these relationships for purposes of potential investment opportunities. If Carlyle fails to maintain its existing relationships or develop new relationships with other sources or sponsors of investment
opportunities, the Fund may not be able to expand its investment portfolio. In addition, individuals with whom Carlyle has relationships are not obligated to provide the Fund with investment opportunities and, therefore, there is no assurance that
such relationships will generate investment opportunities for the Fund.
45
The highly competitive market in which we operate may limit our investment opportunities.
The market for CLO securities is more limited than the market for other credit related investments. We can offer no assurances that sufficient investment
opportunities for our capital be available.
The Fund competes for investments with other closed-end funds and
investment funds, as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not
traditionally invested. As a result of these new entrants, competition for investment opportunities may intensify. Many of the Funds competitors are substantially larger and may have considerably greater financial, technical and marketing
resources than the Fund. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to the Fund. In addition, some of the Funds competitors may have higher risk tolerances or different
risk assessments than it has. These characteristics could allow the Funds competitors to consider a wider variety of investments, establish more relationships and pay more competitive prices for investments than it is able to do. The Fund may
lose investment opportunities if it does not match its competitors pricing. If the Fund is forced to match its competitors pricing, it may not be able to achieve acceptable returns on its investments or may bear substantial risk of
capital loss. A significant increase in the number and/or the size of the Funds competitors could force it to accept less attractive investment terms. Furthermore, many of the Funds competitors have greater experience operating under, or
are not subject to, the regulatory restrictions that the 1940 Act imposes on it as a closed-end fund.
The
risk of our investments may not be commensurate with the returns.
No assurance can be given that the returns on the Funds investments will
be commensurate with the risk of investment in the Fund.
The Adviser, senior management and employees have certain conflicts of interest.
The Adviser is an entity in which the Funds Interested Trustees, officers and members of the investment committee of the Adviser may have
indirect ownership and economic interests. Certain of the Funds Trustees and officers and members of the investment committee of the Adviser also serve as officers or principals of other investment managers affiliated with the Adviser that
currently, and may in the future, manage investment funds with investment objectives similar to the Funds investment objective. In addition, certain of the Funds officers and Trustees and the members of the investment committee of the
Adviser serve or may serve as officers, trustees or principals of entities that operate in the same or related line of business as the Fund does or of investment funds managed by the Funds affiliates. Accordingly, the Fund may not be made
aware of and/or given the opportunity to participate in certain investments made by investment funds managed by advisers affiliated with the Adviser. However, the Adviser intends to allocate investment opportunities in a fair and equitable manner in
accordance with the Advisers investment allocation policy, consistent with each funds or separate accounts investment objective and strategies and legal and regulatory requirements.
There may be conflicts of interest related to obligations that the Adviser has with respect to the allocation of investment opportunities.
The Adviser has adopted allocation procedures that are intended to treat each fund they advise in a manner that, over a period of time, is fair and equitable.
The Adviser and its affiliates currently provide investment advisory and administration services and may provide in the future similar services to other entities (collectively, Advised Funds). Certain existing Advised Funds have,
and future Advised Funds may have, investment objectives similar to those of the Fund, and such Advised Funds will invest in asset classes similar to those targeted by the Fund. Certain other existing Advised Funds do not, and future Advised Funds
may not, have similar investment objectives, but such funds may from time to time invest in asset classes similar to those targeted by the Fund. The Adviser will endeavor to allocate investment opportunities in a fair and equitable
46
manner, and in any event consistent with any fiduciary duties owed to the Fund and other clients and in an effort to avoid favoring one client over another and taking into account all relevant
facts and circumstances, including (without limitation): (i) differences with respect to available capital, size of client, and remaining life of a client; (ii) differences with respect to investment objectives or current investment strategies,
including regarding: (a) current and total return requirements, (b) emphasizing or limiting exposure to the security or type of security in question, (c) diversification, including industry or company exposure, currency and
jurisdiction, or (d) rating agency ratings; (iii) differences in risk profile at the time an opportunity becomes available; (iv) the potential transaction and other costs of allocating an opportunity among various clients;
(v) potential conflicts of interest, including whether a client has an existing investment in the security in question or the issuer of such security; (vi) the nature of the security or the transaction, including minimum investment amounts
and the source of the opportunity; (vii) current and anticipated market and general economic conditions; (viii) existing positions in a borrower/loan/security; and (ix) prior positions in a borrower/loan/security. Nevertheless, it is
possible that the Fund may not be given the opportunity to participate in certain investments made by investment funds managed by investment managers affiliated with the Adviser.
In the event investment opportunities are allocated among the Fund and the other Advised Funds, the Fund may not be able to structure its investment portfolio
in the manner desired. Furthermore, the Fund and the other Advised Funds may make investments in securities where the prevailing trading activity may make impossible the receipt of the same price or execution on the entire volume of securities
purchased or sold by the Fund and the other Advised Funds. When this occurs, the various prices may be averaged, and the Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to
the disadvantage of the Fund. In addition, under certain circumstances, the Fund may not be charged the same commission or commission equivalent rates in connection with a bunched or aggregated order.
It is likely that the other Advised Funds may make investments in the same or similar securities at different times and on different terms than the Fund. The
Fund and the other Advised Funds may make investments at different levels of a borrowers capital structure or otherwise in different classes of a borrowers securities, to the extent permitted by applicable law. Such investments may
inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities that may be held by such entities. Conflicts may also arise because portfolio decisions regarding the Fund may
benefit the other Advised Funds. For example, the sale of a long position or establishment of a short position by the Fund may impair the price of the same security sold short by (and therefore benefit) one or more Advised Funds, and the purchase of
a security or covering of a short position in a security by the Fund may increase the price of the same security held by (and therefore benefit) one or more Advised Funds.
Applicable law, including the 1940 Act, may at times prevent the Fund from being able to participate in investments that it otherwise would participate in,
and may require the Fund to dispose of investments at a time when it otherwise would not dispose of such investment, in each case, in order to comply with applicable law.
The 1940 Act contains prohibitions and restrictions relating to certain transactions between registered investment companies and certain affiliates (including
any investment advisers or sub-advisers), principal underwriters and certain affiliates of those affiliates or underwriters. Because the Fund is a registered investment company, the Fund is not generally
permitted to make loans to companies controlled by the Adviser or other funds managed by the Adviser or its affiliates, including Carlyle. The Fund is also not permitted to make any co-investments with Carlyle
or its affiliates (including any fund managed by Carlyle or its affiliates) without exemptive relief from the SEC, subject to certain exceptions. The SEC has granted exemptive relief that permits the Fund and certain present and future funds advised
by Carlyle-controlled investment advisers to co-invest in suitable negotiated investments. Co-investments made under the exemptive relief are subject to compliance with
the conditions and other requirements contained in the exemptive relief, which could limit the Funds ability to participate in a co-investment transaction.
The Adviser, its affiliates and their clients may pursue or enforce rights with respect to a borrower in which the Fund has invested, and those activities may
have an adverse effect on the Fund. As a result, prices, availability,
47
liquidity and terms of the Funds investments may be negatively impacted by the activities of the Adviser and its affiliates or their clients, and transactions for the Fund may be impaired
or effected at prices or terms that may be less favorable than would otherwise have been the case.
The Adviser may have a conflict of interest in
deciding whether to cause the Fund to incur leverage or to invest in more speculative investments or financial instruments, thereby potentially increasing the management and incentive fee payable by the Fund and, accordingly, the fees received by
the Adviser. Certain other Advised Funds pay the Adviser or its affiliates greater performance-based compensation, which could create an incentive for the Adviser or an affiliate to favor such investment fund or account over the Fund.
Certain personnel of the Adviser and their management may face conflicts in their time management and commitments.
The Funds executive officers and trustees, other current and future principals of the Adviser and certain members of the Advisers investment
committee may serve as officers, trustees or principals of other entities and affiliates of the Adviser and funds managed by the Funds affiliates that operate in the same or a related line of business as the Fund does. Currently, the
Funds executive officers, as well as the other principals of the Adviser, manage other funds affiliated with Carlyle, including other existing and future affiliated BDCs and registered closed-end funds,
including Carlyle Secured Lending, Inc., Carlyle Credit Solutions, Inc. and Carlyle Tactical Private Credit Fund. In addition, the Advisers investment team has responsibilities for sourcing and managing private debt investments for certain
other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, the Fund and its Shareholders. Although the
professional staff of the Adviser will devote as much time to management of the Fund as appropriate to enable the Adviser to perform its duties in accordance with the Investment Advisory Agreement, the investment professionals of the Adviser may
have conflicts in allocating their time and services among the Fund, on the one hand, and investment vehicles managed by Carlyle or one or more of its affiliates on the other hand.
The Adviser and the Administrator each has the right to resign on 60 days notice, and we may not be able to find a suitable replacement within
that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
The Adviser has the right, under the Investment Advisory Agreement, and the Administrator has the right under the Administration Agreement, to resign at any
time upon 60 days written notice, whether we have found a replacement or not. If the Adviser or the Administrator resigns, we may not be able to find a new investment adviser or hire internal management, or find a new administrator, as the
case may be, with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial
condition, business and results of operations, as well as our ability to make distributions to our Shareholders and other payments to securityholders, are likely to be adversely affected and the market price of our securities may decline. In
addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser
and the Administrator and their affiliates. Even if we are able to retain comparable management and administration, whether internal or external, the integration of such management and their lack of familiarity with our investment objectives and
operations would likely result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.
Our success will depend on the ability of the Adviser to attract and retain qualified personnel in a competitive environment.
Our growth will require that the Adviser attract and retain new investment and administrative personnel in a competitive market. The Advisers ability to
attract and retain personnel with the requisite credentials, experience
48
and skills will depend on several factors including its ability to offer competitive compensation, benefits and professional growth opportunities. Many of the entities, including investment funds
(such as private equity funds, mezzanine funds and business development companies) and traditional financial services companies, with which the Adviser will compete for experienced personnel have greater resources than the Adviser has.
Our incentive fee structure may incentivize the Adviser to pursue speculative investments, use leverage when it may be unwise to do so, or refrain from de-levering when it would otherwise be appropriate to do so.
The Investment Advisory Agreement entitles the
Adviser to receive incentive compensation on income regardless of any capital losses. In such case, the Fund may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of the Funds
portfolio or if the Fund incurs a net loss for that quarter. Any Incentive Fee payable by the Fund that relates to its net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If
an investment defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the Incentive Fee will become uncollectible.
The Adviser is not under any obligation to reimburse the Fund for any part of the Incentive Fee it received that was based on accrued income that the Fund
never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in the Funds paying an Incentive Fee on income it never received. The Incentive Fee payable
by the Fund to the Adviser may create an incentive for it to make investments on the Funds behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the Incentive Fee
payable to the Adviser is determined may encourage it to use leverage to increase the return on the Funds investments. In addition, the fact that the Management Fee is payable based upon the Funds Managed Assets, which would include any
borrowings for investment purposes, may encourage the Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor Shareholders. Such a practice
could result in the Funds investing in more speculative securities than would otherwise be in its best interests, which could result in higher investment losses, particularly during cyclical economic downturns.
Additionally, the incentive fee payable by us to the Adviser may create an incentive for the Adviser to pursue investments on our behalf that are riskier or
more speculative than would be the case in the absence of such compensation arrangement. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses,
particularly during economic downturns. The incentive fee payable to the Adviser is based on our Pre-Incentive Fee Net Investment Income, as calculated in accordance with our Investment Advisory Agreement.
This may encourage the Adviser to use leverage to increase the return on our investments, even when it may not be appropriate to do so, and to refrain from de-levering when it would otherwise be appropriate to
do so. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our securities. See Risks Related to Our Investments We may leverage our portfolio, which would
magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.
We may be obligated to pay
the Adviser incentive compensation even if we incur a loss or with respect to investment income that we have accrued but not received.
The Adviser
is entitled to incentive compensation for each fiscal quarter based, in part, on our Pre-Incentive Fee Net Investment Income, if any, for the immediately preceding calendar quarter above a performance
threshold for that quarter. Accordingly, since the performance threshold is based on a percentage of our NAV, decreases in our NAV make it easier to achieve the performance threshold. Our Pre-Incentive Fee Net
Investment Income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of
operations for that quarter. Thus, we may be required to pay the Adviser incentive compensation for a fiscal
49
quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter. In addition, we accrue an incentive fee on accrued income that we have not yet received
in cash. However, the portion of the incentive fee that is attributable to such income will be paid to the Adviser, without interest, only if and to the extent we actually receive such income in cash.
The Advisers liability is limited under the Investment Advisory Agreement, and we have agreed to indemnify the Adviser against certain
liabilities, which may lead the Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
Under the
Investment Advisory Agreement, the Adviser does not assume any responsibility to us other `than to render the services called for under the agreement, and it is not responsible for any action of the Board in following or declining to follow the
Advisers advice or recommendations. The Adviser maintains a contractual and fiduciary relationship with us. Under the terms of the Investment Advisory Agreement, the Adviser, its officers, managers, members, agents, employees and other
affiliates are not liable to us for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting willful misfeasance, bad faith, gross negligence or reckless
disregard of the Advisers duties under the Investment Advisory Agreement. In addition, we have agreed to indemnify the Adviser and each of its officers, managers, members, agents, employees and other affiliates from and against all damages,
liabilities, costs and expenses (including reasonable legal fees and other amounts reasonably paid in settlement) incurred by such persons arising out of or based on performance by the Adviser of its obligations under the Investment Advisory
Agreement, except where attributable to willful misfeasance, bad faith, gross negligence or reckless disregard of the Advisers duties under the Investment Advisory Agreement. These protections may lead the Adviser to act in a riskier manner
when acting on our behalf than it would when acting for its own account.
The Adviser may not be able to achieve the same or similar returns as
those achieved by other portfolios managed by the Senior Investment Team.
Although the Senior Investment Team manages other investment portfolios,
including accounts using investment objectives, investment strategies and investment policies similar to ours, we cannot assure you that we will be able to achieve the results realized by such portfolios.
We may experience fluctuations in our NAV and quarterly operating results.
We could experience fluctuations in our NAV from month to month and in our quarterly operating results due to a number of factors, including the timing of
distributions to our Shareholders, fluctuations in the value of the CLO securities that we hold, our ability or inability to make investments that meet our investment criteria, the interest and other income earned on our investments, the level of
our expenses (including the interest or dividend rate payable on the debt securities or preferred shares we issue), variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter
competition in our markets and general economic conditions. As a result of these factors, our NAV and results for any period should not be relied upon as being indicative of our NAV and results in future periods.
The Board may change our operating policies and strategies without Shareholder approval, the effects of which may be adverse.
The Board has the authority to modify or waive our current operating policies, investment criteria and strategies, other than those that we have deemed to be
fundamental, without prior Shareholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our securities. However,
the effects of any such changes could adversely impact our ability to pay dividends and cause you to lose all or part of your investment.
50
Our managements estimates of certain metrics relating to our financial performance for a period are
subject to revision based on our actual results for such period.
Our management makes and publishes unaudited estimates of certain metrics
indicative of our financial performance, including the NAV per common share and the range of NAV per common share on a monthly basis, and the range of the net investment income and realized gain/loss per common share on a quarterly basis. While any
such estimate will be made in good faith based on our most recently available records as of the date of the estimate, such estimates are subject to financial closing procedures, the Advisers final determination of the fair value of our
applicable investments as of the end of the applicable quarter and other developments arising between the time such estimate is made and the time that we finalize our quarterly financial results and may differ materially from the results reported in
the audited financial statements and/or the unaudited financial statements included in filings we make with the SEC. As a result, investors are cautioned not to place undue reliance on any management estimates presented in this prospectus or any
related amendment to this prospectus or related prospectus supplement and should view such information in the context of our full quarterly or annual results when such results are available.
We will be subject to corporate-level income tax if we are unable to maintain our RIC status for U.S. federal income tax purposes.
We can offer no assurance that we will be able to maintain our RIC status. To obtain and maintain RIC tax treatment under the Code, we must meet certain annual
distribution, income source and asset diversification requirements.
The annual distribution requirement for a RIC will be satisfied if we distribute
dividends to our shareholders each tax year of an amount generally at least equal to 90% of the sum of our net ordinary income, net tax-exempt interest income, if any, and realized net short-term capital gains
in excess of realized net long-term capital losses, if any. Because we use debt financing, we are subject to certain asset coverage requirements under the 1940 Act and may be subject to financial covenants that could, under certain circumstances,
restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
The income source requirement will be satisfied if we obtain at least 90% of our income for each tax year from dividends, interest, gains from the sale of our
securities or similar sources.
The asset diversification requirement will be satisfied if we meet certain asset composition requirements at the end of
each quarter of our tax year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments are expected to be in CLO securities for
which there will likely be no active public market, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
If we fail to qualify for RIC tax treatment for any reason and remain or become subject to corporate income tax, the resulting corporate taxes could
substantially reduce our net assets and the amount of income available for distributions, and the amount of any such distributions, to our Shareholders and the holders of our other securities.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as original issue discount , or
OID, or market discount, which may arise if we acquire a debt security at a significant discount to par, or payment-in-kind interest, which represents
contractual interest added to the principal amount of a debt security and due at the maturity of the debt security. We also may be required to
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include in income certain other amounts that we have not yet, and may not ever, receive in cash. Our investments in debt securities that pay payment-in-kind interest may represent a higher credit risk than debt securities for which interest must be paid in full in cash on a regular basis. For example, even if the accounting conditions for income
accrual are met, the issuer of the security could still default when our actual collection is scheduled to occur upon maturity of the obligation.
Since,
in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. In addition, since our
incentive fee is payable on our income recognized, rather than cash received, we may be required to pay advisory fees on income before or without receiving cash representing such income. Accordingly, we may have to sell some of our investments at
times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax
treatment and thus become subject to corporate-level income tax.
Our cash distributions to Shareholders may change and a portion of our
distributions to Shareholders may be a return of capital.
The amount of our cash distributions may increase or decrease at the discretion of the
Board, based upon its assessment of the amount of cash available to us for this purpose and other factors. Unless we are able to generate sufficient cash through the successful implementation of our investment strategy, we may not be able to sustain
a given level of distributions and may need to reduce the level of our cash distributions in the future. Further, to the extent that the portion of the cash generated from our investments that is recorded as interest income for financial reporting
purposes is less than the amount of our distributions, all or a portion of one or more of our future distributions, if declared, may comprise a return of capital. Accordingly, Shareholders should not assume that the sole source of any of our
distributions is net investment income. Any reduction in the amount of our distributions would reduce the amount of cash received by our Shareholders and could have a material adverse effect on the market price of our common shares. See
Risks Related to Our Investments Our investments are subject to prepayment risk and Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which
could reduce our income available for distribution or to make payments on our other obligations.
Our Shareholders may receive our
common shares as distributions, which could result in adverse tax consequences to them.
In order to satisfy certain annual distribution
requirements to maintain RIC tax treatment under Subchapter M of the Code, we may declare a large portion of a distribution in our common shares instead of in cash even if a Shareholder has opted out of participation in the DRP. We do not intend to
declare any portion of our distributions in our common shares. If, however, we do make such a declaration, as long as at least 20% of such distribution is paid in cash and certain requirements are met, the entire distribution will be treated as a
dividend for U.S. federal income tax purposes. As a result, a Shareholder generally would be subject to tax on the distribution in the same manner as a cash distribution, even though most of the distribution was paid in our common shares.
We incur significant costs as a result of being a publicly traded company.
As a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to
a company whose securities are registered under the Exchange Act as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC.
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Because we expect to distribute substantially all of our ordinary income and net realized capital gains to
our shareholders, we may need additional capital to finance the acquisition of new investments and such capital may not be available on favorable terms, or at all.
In order to maintain our RIC tax treatment, we are required to distribute at least 90% of the sum of our net ordinary income, net tax-exempt interest income, if any, and realized net short-term capital gains in excess of realized net long-term capital losses, if any. As a result, these earnings will not be available to fund new investments,
and we will need additional capital to fund growth in our investment portfolio. If we fail to obtain additional capital, we could be forced to curtail or cease new investment activities, which could adversely affect our business, operations and
results. Even if available, if we are not able to obtain such capital on favorable terms, it could adversely affect our net investment income.
A
disruption or downturn in the capital markets and the credit markets could impair our ability to raise capital and negatively affect our business.
We may be materially affected by market, economic and political conditions globally and in the jurisdictions and sectors in which we invest or operate,
including conditions affecting interest rates and the availability of credit. Unexpected volatility, illiquidity, governmental action, currency devaluation or other events in the global markets in which we directly or indirectly hold positions could
impair our ability to carry out our business and could cause us to incur substantial losses. These factors are outside our control and could adversely affect the liquidity and value of our investments, and may reduce our ability to make attractive
new investments.
In particular, economic and financial market conditions significantly deteriorated for a significant part of the past decade as compared
to prior periods. Global financial markets experienced considerable declines in the valuations of equity and debt securities, an acute contraction in the availability of credit and the failure of a number of leading financial institutions. As a
result, certain government bodies and central banks worldwide, including the U.S. Treasury Department and the U.S. Federal Reserve, undertook unprecedented intervention programs, the effects of which remain uncertain. Although certain financial
markets have improved, to the extent economic conditions experienced during the past decade recur, they may adversely impact our investments. Signs of deteriorating sovereign debt conditions in Europe and elsewhere and uncertainty regarding the U.S.
economy more generally could lead to further disruption in the global markets. Trends and historical events do not imply, forecast or predict future events, and past performance is not necessarily indicative of future results. There can be no
assurance that the assumptions made or the beliefs and expectations currently held by the Adviser will prove correct, and actual events and circumstances may vary significantly.
We may be subject to risk arising from a default by one of several large institutions that are dependent on one another to meet their liquidity or operational
needs, so that a default by one institution may cause a series of defaults by the other institutions. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries with which we interact in the conduct
of our business.
We also may be subject to risk arising from a broad sell off or other shift in the credit markets, which may adversely impact our income
and NAV. In addition, if the value of our assets declines substantially, we may fail to maintain the minimum asset coverage imposed upon us by the 1940 Act. Any such failure would affect our ability to issue preferred shares, debt securities and
other senior securities, including borrowings, and may affect our ability to pay distributions on our capital stock, which could materially impair our business operations. Our liquidity could be impaired further by an inability to access the capital
markets or to obtain additional debt financing. For example, we cannot be certain that we would be able to obtain debt financing on commercially reasonable terms, if at all. In previous market cycles, many lenders and institutional investors have
previously reduced or ceased lending to borrowers. In the event of such type of market turmoil and tightening of credit, increased market volatility and widespread reduction of business activity could occur, thereby limiting our investment
opportunities. Moreover, we are unable to predict when economic and market conditions may be favorable in future periods. Even if market conditions are broadly favorable over the long term, adverse conditions in particular sectors of the financial
markets could adversely impact our business.
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If we are unable to refinance and/or obtain debt capital or issue preferred shares, the Funds
operations could be materially adversely affected.
We may obtain debt financing or issue preferred shares in order to obtain funds to make
additional investments and grow our portfolio of investments. Such debt capital may take the form of a term credit facility with a fixed maturity date or other fixed term instruments, and we may be unable to extend, refinance or replace such debt
financings prior to their maturity. If we are unable to issue preferred shares or refinance and/or obtain additional debt capital on commercially reasonable terms, our liquidity will be lower than it would have been with the benefit of such
financings, which would limit our ability to grow our business. Any such limitations on our ability to grow and take advantage of leverage may decrease our earnings, if any, and distributions to Shareholders, which in turn may lower the trading
price of our securities. In addition, in such event, we may need to liquidate certain of our investments, which may be difficult to sell if required, meaning that we may realize significantly less than the value at which we have recorded our
investments. Furthermore, to the extent we are not able to raise capital and are at or near our targeted leverage ratios, we may receive smaller allocations, if any, on new investment opportunities under the Advisers allocation policy.
Debt capital that is available to us in the future, if any, including upon the refinancing of then-existing debt prior to its maturity, may be at a higher
cost and on less favorable terms and conditions than costs and other terms and conditions at which we can currently obtain debt capital. In addition, if we are unable to repay amounts outstanding under any such debt financings and are declared in
default or are unable to renew or refinance these debt financings, we may not be able to make new investments or operate our business in the normal course. These situations may arise due to circumstances that we may be unable to control, such as
lack of access to the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or an operational problem that affects third parties or us, and could materially damage our business.
We may be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence.
The Fund is a non-diversified investment company under the 1940 Act and expects to hold a narrower range
of investments than a diversified fund under the 1940 Act. Since the Fund will only participate in a limited number of investments, and since the Funds investments generally will involve a high degree of risk, poor performance by a few
investments could severely affect the total returns to investors, which may be exacerbated by the use of leverage. See Risks Related to Our Investments We may leverage our portfolio, which would magnify the potential
for gain or loss on amounts invested and will increase the risk of investing in us.
In addition, the Fund cannot provide
assurance as to the degree of diversification of the Funds investments. To the extent the Fund concentrates investments in a particular asset, investors will be subject to concentration levels higher than currently targeted for the Fund, which
concentration would result in the Fund being more susceptible to fluctuations in value resulting from adverse economic, business or market conditions. In particular, because our portfolio of investments may lack diversification among CLO securities
and related investments, we are susceptible to a risk of significant loss if one or more of these CLO securities and related investments experience a high level of defaults on the collateral that they hold. Moreover, there is no guarantee that all
of the Funds investments will perform well or provide a return capital. Therefore, if certain Investments perform unfavorably, for the Fund to achieve above-average returns, one or a few of its Investments must perform exceptionally well.
There are no assurances that this will be the case.
Regulations governing our operation as a registered
closed-end management investment company affect our ability to raise additional capital and the way in which we do so. The raising of debt capital or issuance of preferred shares may expose us to risks,
including the typical risks associated with leverage.
Under the provisions of the 1940 Act, we are permitted, as a registered closed-end management investment company, to issue senior securities (including debt securities, preferred shares and/or borrowings from banks or
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other financial institutions); provided we meet certain asset coverage requirements (i.e., 300% for senior securities representing indebtedness and 200% in the case of the issuance of preferred
shares under current law). See Risks Related to Our Investments We may leverage our portfolio, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in
us for details concerning how asset coverage is calculated. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the
nature of our leverage, repay a portion of our indebtedness (including by redeeming a portion of any series of preferred shares or debt that may be outstanding) at a time when such sales or redemptions may be disadvantageous. Also, any amounts that
we use to service or repay our indebtedness would not be available for distributions to our Shareholders.
We are not generally able to issue and sell our
common shares at a price below the then current NAV per common share (exclusive of any distributing commission or discount). We may, however, sell our common shares at a price below the then current NAV per share (1) in connection with a rights
offering to our existing Shareholders, (2) with the consent of the majority of our Shareholders, (3) upon the conversion of a convertible security in accordance with its terms or (4) under such circumstances as the SEC may permit.
Significant Shareholders may control the outcome of matters submitted to our Shareholders or adversely impact the market price or liquidity of our
securities.
To the extent any Shareholder, individually or acting together with other Shareholders, controls a significant number of our voting
securities (as defined in the 1940 Act) or any class of voting securities, they may have the ability to control the outcome of matters submitted to our Shareholders for approval, including the election of trustees and any merger, consolidation or
sale of all or substantially all of our assets, and may cause actions to be taken that you may not agree with or that are not in your interests or those of other investors.
This concentration of beneficial ownership also might harm the market price of our securities by:
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delaying, deferring or preventing a change in corporate control; |
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impeding a merger, consolidation, takeover or other business combination involving us; or |
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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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We are subject to the risk of legislative and regulatory changes impacting our business or the markets in which
we invest. |
Legal and regulatory changes. Legal and regulatory changes could occur and may adversely affect us and our ability to
pursue our investment strategies and/or increase the costs of implementing such strategies. New or revised laws or regulations may be imposed by the Commodity Futures Trading Commission, or the CFTC, the SEC, the U.S. Federal Reserve,
other banking regulators, other governmental regulatory authorities or self-regulatory organizations that supervise the financial markets that could adversely affect us. In particular, these agencies are empowered to promulgate a variety of new
rules pursuant to recently enacted financial reform legislation in the United States. We also may be adversely affected by changes in the enforcement or interpretation of existing statutes and rules by these governmental regulatory authorities or
self-regulatory organizations. Such changes, or uncertainty regarding any such changes, could adversely affect the strategies and plans set forth in this prospectus and may result in our investment focus shifting from the areas of expertise of the
Senior Investment Team to other types of investments in which the investment team may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the
value of your investment.
Derivative Investments. The derivative investments in which we may invest are subject to comprehensive statutes,
regulations and margin requirements. In particular, certain provisions of the Dodd-Frank Wall Street
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Reform and Consumer Protection Act, or the Dodd-Frank Act, requires certain standardized derivatives to be executed on a regulated market and cleared through a central counterparty,
which may result in increased margin requirements and costs for us. The Dodd-Frank Act also established minimum margin requirements on certain uncleared derivatives which may result in us and our counterparties posting higher margin amounts for
uncleared derivatives. In addition, we have claimed an exclusion from the definition of the term commodity pool operator pursuant to CFTC No-Action Letter
12-38 issued by the staff of the CFTC Division of Swap Dealer and Intermediary Oversight. For us to continue to qualify for this exclusion, (i) the aggregate initial margin and premiums required to
establish our positions in derivative instruments subject to the jurisdiction of the U.S. Commodity Exchange Act, as amended, or the CEA, and (other than positions entered into for hedging purposes) may not exceed five percent of our
liquidation value, (ii) the net notional value of our aggregate investments in CEA-regulated derivative instruments (other than positions entered into for hedging purposes) may not exceed 100% of our
liquidation value, or (iii) we must meet an alternative test appropriate for a fund of funds as set forth in CFTC No-Action Letter 12-38. In the event
we fail to qualify for the exclusion and the Adviser is required to register as a commodity pool operator in connection with serving as our investment adviser and becomes subject to additional disclosure, recordkeeping and reporting
requirements, our expenses may increase. The Adviser has claimed an exclusion from the definition of the term commodity pool operator under the CEA pursuant to CFTC Regulation 4.5 under the CEA promulgated by the CFTC with respect to us,
and we currently intend to operate in a manner that would permit the Adviser to continue to claim such exclusion.
Under SEC Rule 18f-4, related to the use of derivatives, short sales, reverse repurchase agreements and certain other transactions by registered investment companies, we are permitted to enter into derivatives and other
transactions that create future payment or delivery obligations, including short sales, notwithstanding the senior security provisions of the 1940 Act if we comply with certain
value-at-risk leverage limits and derivatives risk management program and board oversight and reporting requirements or comply with a limited derivatives
users exception. We have elected to rely on the limited derivatives users exception. We may change this election and comply with the other provisions of Rule 18f-4 related to derivatives transactions at
any time and without notice. To satisfy the limited derivatives users exception, we have adopted and implemented written policies and procedures reasonably designed to manage our derivatives risk and limit our derivatives exposure in accordance with
Rule 18f-4. Rule 18f-4 also permits us to enter into reverse repurchase agreements or similar financing transactions notwithstanding the senior security provisions of
the 1940 Act if we aggregate the amount of indebtedness associated with our reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating our asset
coverage ratios as discussed above or treat all such transactions as derivatives transactions for all purposes under Rule 18f-4. In addition, we are permitted to invest in a security on a when-issued or
forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security under the 1940 Act, provided that (i) we intend to physically settle
the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). We may otherwise engage in such transactions that do not meet the conditions of the
Delayed-Settlement Securities Provision so long as we treat any such transaction as a derivatives transaction for purposes of compliance with the rule. Furthermore, we are permitted to enter into an unfunded commitment agreement, and
such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if we reasonably believe, at the time we enter into such agreement, that we will have sufficient cash and cash equivalents to meet our
obligations with respect to all such agreements as they come due. We cannot predict the effects of these requirements. The Adviser intends to monitor developments and seek to manage our assets in a manner consistent with achieving our investment
objective, but there can be no assurance that it will be successful in doing so.
Loan Securitizations. Section 619 of the Dodd-Frank Act,
commonly referred to as the Volcker Rule, generally prohibits, subject to certain exemptions, covered banking entities from engaging in proprietary trading or sponsoring, or acquiring or retaining an ownership interest in, a hedge fund
or private equity fund, or covered funds, (which have been broadly defined in a way which could include many CLOs). Given the limitations on banking entities investing in CLOs that are covered funds, the Volcker Rule may adversely affect
the market
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value or liquidity of any or all of the investments held by us. Although the Volcker Rule and the implementing rules exempt loan securitizations from the definition of covered fund,
not all CLOs will qualify for this exemption.
In June 2020, the five federal agencies responsible for implementing the Volcker Rule adopted amendments to
the Volcker Rules implementing regulations, including changes relevant to the treatment of securitizations (the Volcker Changes). Among other things, the Volcker Changes ease certain aspects of the loan
securitization exclusion, and create additional exclusions from the covered fund definition, and narrow the definition of ownership interest to exclude certain senior debt interests. Also, under the Volcker
Changes, a debt interest would no longer be considered an ownership interest solely because the holder has the right to remove or replace the manager following a cause-related default. The Volcker Changes were effective October 1,
2020. It is currently unclear how, or if, the Volcker Changes will affect the CLO securities in which the Fund invests.
U.S. Risk Retention. In
October 2014, six federal agencies (the Federal Deposit Insurance Corporation, or the FDIC, the Comptroller of the Currency, the Federal Reserve Board, the SEC, the Department of Housing and Urban Development and the Federal Housing
Finance Agency) adopted joint final rules implementing certain credit risk retention requirements contemplated in Section 941 of the Dodd-Frank Act, or the Final U.S. Risk Retention Rules. These rules were published in the Federal
Register on December 24, 2014. With respect to the regulation of CLOs, the Final U.S. Risk Retention Rules require that the sponsor or a majority owned affiliate thereof (in each case as defined in the rules), will
retain an eligible vertical interest or an eligible horizontal interest (in each case as defined therein) or any combination thereof in the CLO in the manner required by the Final U.S. Risk Retention Rules.
The Final U.S. Risk Retention Rules became fully effective on December 24, 2016, or the Final U.S. Risk Retention Effective Date, and to the
extent applicable to CLOs, the Final U.S. Risk Retention Rules contain provisions that may adversely affect the return of our investments. On February 9, 2018, a three judge panel of the United States Court of Appeals for the District of
Columbia Circuit, or the DC Circuit Court, rendered a decision in The Loan Syndications and Trading Association v. Securities and Exchange Commission and Board of Governors of the Federal Reserve System, No. 1:16-cv-0065, in which the DC Circuit Court held that open market CLO collateral managers are not securitizers subject to the requirements of the Final U.S. Risk
Retention Rules, or the DC Circuit Ruling. Thus, collateral managers of open market CLOs are no longer required to comply with the Final U.S. Risk Retention Rules at this time. As such, it is possible that some collateral managers of
open market CLOs will decide to dispose of the notes (or cause their majority owned affiliates to dispose of the notes) constituting the eligible vertical interest or eligible horizontal interest they were previously required
to retain, or decide to take other action with respect to such notes that is not otherwise prohibited by the Final U.S. Risk Retention Rules. To the extent either the underlying collateral manager or its majority-owned affiliate divests itself of
such notes, this will reduce the degree to which the relevant collateral managers incentives are aligned with those of the noteholders of the CLO (which may include us as a CLO noteholder), and could influence the way in which the relevant
collateral manager manages the CLO assets and/or makes other decisions under the transaction documents related to the CLO in a manner that is adverse to us.
There can be no assurance or representation that any of the transactions, structures or arrangements currently under consideration by or currently used by CLO
market participants will comply with the Final U.S. Risk Retention Rules to the extent such rules are reinstated or otherwise become applicable to open market CLOs. The ultimate impact of the Final U.S. Risk Retention Rules on the loan
securitization market and the leveraged loan market generally remains uncertain, and any negative impact on secondary market liquidity for securities comprising a CLO may be experienced due to the effects of the Final U.S. Risk Retention Rules on
market expectations or uncertainty, the relative appeal of other investments not impacted by the Final U.S. Risk Retention Rules and other factors.
EU/UK Risk Retention. The securitization industry in both European Union (EU) and the United Kingdom (UK) has
also undergone a number of significant changes in the past few years. Regulation (EU) 2017/2402
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relating to a European framework for simple, transparent and standardized securitization (as amended by Regulation (EU) 2021/557 and as further amended from time to time, the EU
Securitization Regulation) applies to certain specified EU investors, and Regulation (EU) 2017/2402 relating to a European framework for simple, transparent and standardised securitization in the form in effect on 31 December 2020 (which
forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, the EUWA)) (as amended by the Securitization (Amendment) (EU Exit) Regulations 2019 and as further amended from time to time, the UK
Securitization Regulation and, together with the EU Securitization Regulation, the Securitization Regulations) applies to certain specified UK investors, in each case, who are investing in a securitisation (as such term
is defined under each Securitization Regulation).
The due diligence requirements of Article 5 of the EU Securitization Regulation (the EU Due
Diligence Requirements) apply to each investor that is an institutional investor (as such term is defined in the EU Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking
as defined in Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast)
(Solvency II); (b) a reinsurance undertaking as defined in Solvency II; (c) subject to certain conditions and exceptions, an institution for occupational retirement provision falling within the scope of Directive (EU)
2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (the IORP Directive), or an investment manager or an
authorised entity appointed by an institution for occupational retirement provision pursuant to the IORP Directive; (d) an alternative investment fund manager (AIFM) as defined in Directive 2011/61/EU of the European
Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers that manages and/or markets alternative investment funds in the EU; (e) an undertaking for the collective investment in transferable securities
(UCITS) management company, as defined in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for
collective investment in transferable securities (UCITS) (the UCITS Directive); (f) an internally managed UCITS, which is an investment company authorised in accordance with the UCITS Directive and which has not designated a
management company authorised under the UCITS Directive for its management; or (g) a credit institution as defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for
credit institutions and investment firms (the CRR) for the purposes of the CRR, or an investment firm as defined in the CRR, in each case, such investor an EU Institutional Investor.
The due diligence requirements of Article 5 of the UK Securitization Regulation (the UK Due Diligence Requirements and, together with the
EU Due Diligence Requirements, the Due Diligence Requirements) apply to each investor that is an institutional investor (as such term is defined in the UK Securitization Regulation), being an investor which is one of
the following: (a) an insurance undertaking as defined in the Financial Services and Markets Act 2000 (as amended, the FSMA); (b) a reinsurance undertaking as defined in the FSMA; (c) an occupational pension scheme as
defined in the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorised under
the FSMA; (d) an AIFM (as defined in the Alternative Investment Fund Managers Regulations 2013 (the AIFM Regulations)) which markets or manages AIFs (as defined in the AIFM Regulations) in the UK; (e) a management
company as defined in the FSMA; (f) a UCITS as defined by the FSMA, which is an authorised open ended investment company as defined in the FSMA; (g) a FCA investment firm as defined by the CRR as it forms part of UK domestic law by virtue
of EUWA (the UK CRR); or (h) a CRR investment firm as defined in the UK CRR, in each case, such investor a UK Institutional Investor and, such investors together with EU Institutional Investors,
Institutional Investors.
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Among other things, the applicable Due Diligence Requirements require that prior to holding a
securitisation position (as defined in each Securitization Regulation) an Institutional Investor (other than the originator, sponsor or original lender) has verified that:
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the originator, sponsor or original lender will retain on an ongoing basis a material net economic interest
which, in any event, shall be not less than five per cent. in the securitization, determined in accordance with Article 6 of the applicable Securitization Regulation, and has disclosed the risk retention to such Institutional Investor;
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(in the case of each EU Institutional Investor only) the originator, sponsor or securitization special purpose
entity (SSPE) has, where applicable, made available the information required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for thereunder; |
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(in the case of each UK Institutional Investor only) the originator, sponsor or SSPE: |
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if established in the UK has, where applicable, made available the information required by Article 7 of the UK
Securitization Regulation (the UK Transparency Requirements) in accordance with the frequency and modalities provided for thereunder; or |
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if established in a country other than the UK, where applicable, made available information which is
substantially the same as that which it would have made available under the UK Transparency Requirements if it had been established in the UK, and has done so with such frequency and modalities as are substantially the same as those with which it
would have made information available under the UK Transparency Requirements if it had been established in the UK; and |
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in the case of each Institutional Investor, where the originator or original lender either (i) is not a
credit institution or an investment firm (each as defined in the applicable Securitization Regulation) or (ii) is established in a third country (being (x) in respect of the EU Securitization Regulation, a country other than an EU member
state, or (y) in respect of the UK Securitization Regulation, a country other than the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and
clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in order to ensure that credit-granting is based on a thorough assessment of the
obligors creditworthiness. |
The Due Diligence Requirements further require that prior to holding a securitisation position, an
Institutional Investor, other than the originator, sponsor or original lender, carry out a due diligence assessment which enables it to assess the risks involved, including but not limited to (a) the risk characteristics of the individual
securitisation position and the underlying exposures; and (b) all the structural features of the securitization that can materially impact the performance of the securitisation position, including the contractual priorities of payment and
priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction-specific definitions of default.
In addition, pursuant to the applicable Due Diligence Requirements, while holding a securitization position, an Institutional Investor, other than the
originator, sponsor or original lender, is subject to various ongoing monitoring obligations, including but not limited to: (a) establishing appropriate written procedures to monitor compliance with the Due Diligence Requirements and the
performance of the securitisation position and of the underlying exposures; (b) performing stress tests on the cash flows and collateral values supporting the underlying exposures or, in the absence of sufficient data on cash flows and
collateral values, stress tests on loss assumptions, having regard to the nature, scale and complexity of the risk of the securitisation position; (c) ensuring internal reporting to its management body so that the management body is aware of
the material risks arising from the securitisation position and so that those risks are adequately managed; and (d) being able to demonstrate to its competent authorities, upon request, that it has a comprehensive and thorough understanding of
the securitisation position and underlying exposures and that it has implemented written policies and
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procedures for the risk management of the securitisation position and for maintaining records of (i) the verifications and due diligence in accordance with the applicable Due Diligence
Requirements and (ii) any other relevant information.
Any Institutional Investor that fails to comply with the applicable Due Diligence Requirements
in respect of a securitization position which it holds may become subject to a range of regulatory sanctions including, in the case of a credit institution, investment firm, insurer or reinsurer, a punitive regulatory capital charge with respect to
such securitization position, or, in certain other cases, a requirement to take corrective action.
CLOs issued in Europe are generally structured in
compliance with the Securitization Regulations so that prospective investors subject to the Securitization Regulations can invest in compliance with such requirements. To the extent a CLO is structured in compliance with the Securitization
Regulations, our ability to invest in the residual tranches of such CLOs could be limited, or we could be required to hold our investment for the life of the CLO. If a CLO has not been structured to comply with the Securitization Regulations, it
will limit the ability of Institutional Investors to purchase CLO securities, which may adversely affect the price and liquidity of the securities (including the residual tranche) in the secondary market. Additionally, the Securitization Regulations
and any regulatory uncertainty in relation thereto may reduce the issuance of new CLOs and reduce the liquidity provided by CLOs to the leveraged loan market generally. Reduced liquidity in the loan market could reduce investment opportunities for
collateral managers, which could negatively affect the return of our investments. Any reduction in the volume and liquidity provided by CLOs to the leveraged loan market could also reduce opportunities to redeem or refinance the securities
comprising a CLO in an optional redemption or refinancing and could negatively affect the ability of obligors to refinance of their collateral obligations, either of which developments could increase defaulted obligations above historic levels.
Japanese Risk Retention. The Japanese Financial Services Agency (the JFSA) published a risk retention rule as part of the regulatory
capital regulation of certain categories of Japanese investors seeking to invest in securitization transactions (the JRR Rule). The JRR Rule mandates an indirect compliance requirement, meaning that certain categories
of Japanese investors will be required to apply higher risk weighting to securitization exposures they hold unless the relevant originator commits to hold a retention interest equal to at least 5% of the exposure of the total underlying assets in
the transaction (the Japanese Retention Requirement) or such investors determine that the underlying assets were not inappropriately originated. The Japanese investors to which the JRR Rule applies include banks, bank
holding companies, credit unions (shinyo kinko), credit cooperatives (shinyo kumiai), labor credit unions (rodo kinko), agricultural credit cooperatives (nogyo kyodo kumiai), ultimate parent companies of large securities companies and certain other
financial institutions regulated in Japan (such investors, Japanese Affected Investors). Such Japanese Affected Investors may be subject to punitive capital requirements and/or other regulatory penalties with respect to
investments in securitizations that fail to comply with the Japanese Retention Requirement.
The JRR Rule became effective on March 31, 2019. At this
time, there are a number of unresolved questions and no established line of authority, precedent or market practice that provides definitive guidance with respect to the JRR Rule, and no assurances can be made as to the content, impact or
interpretation of the JRR Rule. In particular, the basis for the determination of whether an asset is inappropriately originated remains unclear and, therefore, unless the JFSA provides further specific clarification, it is possible that
CLO securities we have purchased may contain assets deemed to be inappropriately originated and, as a result, may not be exempt from the Japanese Retention Requirement. The JRR Rule or other similar requirements may deter Japanese
Affected Investors from purchasing CLO securities, which may limit the liquidity of CLO securities and, in turn, adversely affect the price of such CLO securities in the secondary market. Whether and to what extent the JFSA may provide further
clarification or interpretation as to the JRR Rule is unknown.
Private Funds Rule. On February 9, 2022, the SEC proposed certain rules and
amendments under the Investment Advisers Act of 1940, as amended, to enhance the regulations applicable to private fund advisers (the Proposed Private Fund Rules) that, if adopted in their current form, would affect investment
advisers such as the CLO
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collateral managers, by, among other things, (i) requiring such managers to comply with additional reporting and compliance obligations, (ii) prohibiting certain types of preferential
treatment, including, among other things, the provision of information regarding portfolio holdings of the private fund, and (iii) prohibiting or imposing requirements on certain business practices, including prohibiting certain types of
indemnification (which could include indemnification provided for in the CLOs management agreement) and requiring fairness opinions for adviser-led secondary transactions. Because most CLOs in which we
invest rely on Section 3(c)(7) of the 1940 Act, each such CLO will be considered a private fund within the meaning of the Proposed Private Fund Rules. The costs in complying with certain of the reporting and compliance obligations
under the Proposed Private Fund Rules could be substantial, and it is unclear if the costs of preparing such reports would be borne by the CLO or the CLOs collateral manager. If the CLOs in which we invest are responsible for such expenses, it
could affect the return on our investments in CLO securities. In addition, if any CLO collateral manager were prohibited from discussing the underlying portfolio of CLO assets with investors, entirely or absent highly specific disclosure, it could
result in a reduction or elimination of any CLO collateral managers ability to provide information to us relating to such CLOs assets other than the reporting required by the CLOs transaction documents. In addition, the Proposed
Private Fund Rules could adversely affect a CLOs ability to consummate a refinancing or other optional redemption. As a result, adoption of the Proposed Private Fund Rules could have a material and adverse effect on the market value and/or
liquidity of the CLO securities in which we invest.
The SEC staff could modify its position on certain
non-traditional investments, including investments in CLO securities.
The staff of the SEC from time to
time has undertaken a broad review of the potential risks associated with different asset management activities, focusing on, among other things, liquidity risk and leverage risk. The staff of the Division of Investment Management of the SEC has, in
correspondence with registered management investment companies, previously raised questions about the level of, and special risks associated with, investments in CLO securities. While it is not possible to predict what conclusions, if any, the staff
may reach in these areas, or what recommendations, if any, the staff might make to the SEC, the imposition of limitations on investments by registered management investment companies in CLO securities could adversely impact our ability to implement
our investment strategy and/or our ability to raise capital through public offerings, or could cause us to take certain actions that may result in an adverse impact on our Shareholders, our financial condition and/or our results of operations. We
are unable at this time to assess the likelihood or timing of any such regulatory development.
General Risk Factors
Market disruptions may negatively impact the Funds operations and performance.
The U.S. capital markets have experienced extreme volatility and disruption following the spread of COVID-19 in the
United States and the conflict between Russia and Ukraine. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets.
These and future market disruptions and/or illiquidity would be expected to have an adverse effect on the Funds business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to
increase the Funds funding costs, limit the Funds access to the capital markets or result in a decision by lenders not to extend credit to the Fund.
U.S. and global markets recently have experienced increased volatility, including as a result of the recent failures of certain U.S. and non-U.S. banks, which could be harmful to the Fund and issuer in it invests. For example, if a bank in which the Fund or issuer has an account fails, any cash or other assets in bank accounts may be temporarily
inaccessible or permanently lost by the Fund or issuer. If a bank that provides a subscription line credit facility, asset-based facility, other credit facility and/or other services to the Fund or an issuer fails, the Fund or the issuer could be
unable to draw funds under its credit facilities or obtain replacement credit facilities or other services from other lending institutions with similar terms. Even if banks used by the Fund and issuers in
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which the Fund invests remain solvent, continued volatility in the banking sector could cause or intensify an economic recession, increase the costs of banking services or result in the issuers
being unable to obtain or refinance indebtedness at all or on as favorable terms as could otherwise have been obtained. Conditions in the banking sector are evolving, and the scope of any potential impacts to the Fund and issuers, both from market
conditions and also potential legislative or regulatory responses, are uncertain. Continued market volatility and uncertainty and/or a downturn in market and economic and financial conditions, as a result of developments in the banking industry or
otherwise (including as a result of delayed access to cash or credit facilities), could have an adverse impact on the Fund and issuers in which it invests.
Uncertainty around Brexit may create risks for the Fund.
On June 23, 2016, the UK held a referendum on whether to remain a member state of the EU, in which voters favored the UKs withdrawal from the EU, an
event widely referred to as Brexit. The UK ceased to be a member state of the EU on January 31, 2020, and the transition period provided for in the withdrawal agreement entered by the UK and the EU ended on December 31, 2020.
In December 2020, the UK and the EU agreed on a trade and cooperation agreement, which was subsequently ratified by the parties. The trade and cooperation agreement covers the general objectives and framework of the relationship between the UK and
the EU. The impact of Brexit on the UK and EU and the broader global economy is unknown but could be significant and could result in increased volatility and illiquidity and potentially lower economic growth.
At this time, it is difficult to predict precisely the effects of the UKs withdrawal from the EU and what the economic, tax, fiscal, legal, regulatory
and other implications will be for the private investment funds industry and the broader European and global financial and real estate markets generally and for the Fund and its investments specifically. Given the size and importance of the
UKs economy, uncertainty or unpredictability about its legal, political and/or economic relationships with Europe is now, and may continue to be for the foreseeable future, a source of instability, significant currency fluctuations and/or
other adverse effects on international markets, international trade agreements and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise). In addition, the UKs withdrawal from
the EU could have a destabilizing effect in which other member states may consider withdrawing from the EU. The decision for any other member state to withdraw from the EU could exacerbate such uncertainty and instability and may present similar
and/or additional potential risks and consequences for the Fund, its investments and its ability to fulfill its investment objective.
We are
subject to risks associated with terrorism.
Terrorist attacks have caused instability in the world financial markets and may generate global
economic instability. The continued threat of terrorism and the impact of military or other action could affect the Funds financial results.
Social unrest may adversely impact the Fund.
Events concerning discrimination, race relations and inequality have in the recent past led to protests, demonstrations, marches and other forms of political
and social unrest on a local, regional, national and international level as well as rioting in some instances. Such unrest, which has ranged from peaceful to in some instances, violent, has resulted in curfews, the deployment of the national guard
and other local and national interference, and social unrest could lead to increased political and social volatility and uncertainty. While the overall effect of such unrest remains unknown, investors should note that this type of volatility and
uncertainty could materially and adversely impact the securities and other assets in which the Fund invests.
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We are subject to risks related to changes in law.
Government counterparties or agencies may have the discretion to change or increase regulation of an investments operations or implement laws or
regulations affecting the investments operations, separate from any contractual rights it may have. An investment also could be materially and adversely affected as a result of statutory or regulatory changes or judicial or administrative
interpretations of existing laws and regulations that impose more comprehensive or stringent requirements. Governments have considerable discretion in implementing regulations and tax reform, including, for example, the possible imposition or
increase of taxes on income earned by an investment or gains recognized by the Fund on its investment, that could impact the Funds return on investment with respect to such investment.
We are subject to risks related to force majeure events.
Our investments may be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, including, without
limitation, acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, trade war, cyber security breaches, terrorism and labor strikes). Some force majeure events may
adversely affect the ability of a party, such as a CLO manager or a service provider to the Fund, to perform its obligations until it is able to remedy the force majeure event. In addition, the cost to a the Fund of repairing or replacing damaged
assets resulting from such force majeure event could be considerable. Certain force majeure events, such as war or an outbreak of an infectious disease, could have a broader negative impact on the world economy and international business activity
generally.
We are subject to risks related to cybersecurity and other disruptions to information systems.
Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in
the future. The Adviser faces various security threats on a regular basis, including ongoing cyber security threats to and attacks on its information technology infrastructure that are intended to gain access to its proprietary information, destroy
data or disable, degrade or sabotage its systems. These security threats could originate from a wide variety of sources, including unknown third parties outside of the Adviser. Although the Adviser is not currently aware that it has been subject to
cyber-attacks or other cyber incidents which, individually or in the aggregate, have materially affected its operations or financial condition, there can be no assurance that the various procedures and controls utilized to mitigate these threats
will be sufficient to prevent disruptions to its systems.
The Advisers and issuers information and technology systems may be vulnerable to
damage or interruption from computer viruses, network failures, computer and telecommunication failures, infiltration by unauthorized persons and security breaches, usage errors by their respective professionals, power outages and catastrophic
events such as fires, tornadoes, floods, hurricanes and earthquakes.
In addition, the Fund will heavily rely on the Advisers and third
parties financial, accounting, information and other data processing systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third- party service providers, could cause delays or
other problems in its activities. If any of these systems do not operate properly or are disabled for any reason or if there is any unauthorized disclosure of data, whether as a result of tampering, a breach of its network security systems, a
cyber-incident or attack or otherwise, the Fund and/or the Adviser could suffer substantial financial loss, increased costs, a disruption of its businesses, liability to its investors, regulatory intervention or reputational damage. In addition, the
Adviser operates in a business that is highly dependent on information systems and technology. The information systems and technology that the Adviser relies on may not continue to be able to accommodate their growth, and the cost of maintaining
such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on the Fund and/or the Adviser.
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A cybersecurity incident could have numerous material adverse effects, including on the operations, liquidity and
financial condition of the Fund. Cyber threats and/or incidents could cause financial costs from the theft of Fund assets (including proprietary information and intellectual property) as well as numerous unforeseen costs including, but not limited
to: litigation costs, preventative and protective costs, remediation costs and costs associated with reputational damage, any one of which, could be materially adverse to the Fund. There can be no guarantee that the Fund will be able to prevent or
mitigate such incidents. If systems and measures to manage risks relating to these types of events, are compromised, become inoperable for extended periods of time or cease to function properly, the Adviser, the Fund and/or an issuer may have to
make a significant investment to fix or replace them. The failure of these systems and/or of disaster recovery plans for any reason could cause significant interruptions in the Advisers, the Funds and/or an issuers operations and
result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to investors (and the beneficial owners of investors).
In addition, the Fund or the Adviser may not be in a position to verify the risks or reliability of third parties with which the Funds and the
Advisers operations interface with and/or depend on third parties, including the Funds administrator and other service providers. The Fund may suffer adverse consequences from actions, errors or failure to act by such third parties, and
will have obligations, including indemnity obligations, and limited recourse against them.
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USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we intend to use the proceeds from the sale of our securities pursuant to this prospectus
to acquire investments in accordance with our investment objectives and strategies described in this prospectus, to make distributions to our Shareholders and for general working capital purposes.
We currently anticipate that it will generally take approximately three to six months after the completion of any offering of securities to invest
substantially all of the net proceeds of the offering in our targeted investments, although such period may vary and depends on the size of the offering and the availability of appropriate investment opportunities consistent with our investment
objectives and market conditions. We cannot assure you we will achieve our targeted investment pace, which may negatively impact our returns. Until appropriate investments or other uses can be found, we will invest in temporary investments, such as
cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less, which we expect will have returns substantially lower than the returns that we anticipate earning from investments in CLO
securities and related investments. Investors should expect, therefore, that before we have fully invested the proceeds of the offering in accordance with our investment objectives and strategies, assets invested in these instruments would earn
interest income at a modest rate, which may not exceed our expenses during this period. To the extent that the net proceeds from an offering have not been fully invested in accordance with our investment objectives and strategies prior to the next
payment of a distribution to our Shareholders, a portion of the proceeds may be used to pay such distribution and may represent a return of capital.
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THE FUND
The Fund is a non-diversified, closed-end management investment company that
is registered under the 1940 Act. Our common shares began trading on May 29, 2019 and are currently traded on the NYSE under the symbol VCIF. We expect that on or about July 27, 2023 our common shares will begin trading on NYSE
under the symbol CCIF. The Fund was organized as a Delaware statutory trust on April 8, 2011. The principal office of the Fund is located at One Vanderbilt Avenue, Suite 3400, New York, NY 10017 and its telephone number is (866)
277-8243.
The Funds primary investment objective is to generate current income, with a secondary objective to generate capital appreciation. The
Fund seeks to achieve its investment objective by investing primarily in equity and junior debt tranches of collateralized loan obligations, that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior secured
loans with a large number of distinct underlying borrowers across various industry sectors.
For a further discussion of the Funds principal
investment strategies, see Investment Objective, Opportunities and Strategies. There can be no assurance that the Fund will achieve its investment objective.
The Funds investment adviser is CGCIM. See The Adviser. Responsibility for monitoring and overseeing the Funds
investment program, management and operation is vested in the individuals who serve on the Board.
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INVESTMENT OBJECTIVE, OPPORTUNITIES AND STRATEGIES
Investment Objective
The Funds primary investment
objective is to generate current income, with a secondary objective to generate capital appreciation.
Investment Opportunities and Strategies
Names Rule Policy
In accordance with
the requirements of the 1940 Act, we have adopted a policy to invest at least 80% of our assets in the particular type of investments suggested by our name. Under normal circumstances, we invest at least 80% of the aggregate of its net assets and
borrowings for investment purposes in credit and credit-related instruments. For purposes of this policy, the Fund is expected to consider credit and credit-related instruments to include, without limitation: (i) equity and debt tranches of
CLOs, LAFs and securities issued by other securitization vehicles, such as CBOs; (ii) secured and unsecured floating rate and fixed rate loans; (iii) investments in corporate debt obligations, including bonds, notes, debentures, commercial
paper and other obligations of corporations to pay interest and repay principal; (iv) debt issued by governments, their agencies, instrumentalities, and central banks; (v) commercial paper and short-term notes; (vi) convertible debt
securities; (vii) certificates of deposit, bankers acceptances and time deposits; and (viii) other credit-related instruments. The Funds investments in derivatives, other investment companies, and other instruments designed to
obtain indirect exposure to credit and credit-related instruments will be counted towards its 80% investment policy to the extent such instruments have similar economic characteristics to the investments included within that policy.
Additional Information on the Structural Advantages of CLOs
CLOs are generally required to hold a portfolio of assets that is highly diversified by underlying borrower and industry and that is subject to a variety of
asset concentration limitations. The terms and covenants of a typical CLO structure are, with certain exceptions, based primarily on the cash flow generated by, and the par value (as opposed to the market price or fair value) of, the collateral.
These covenants include collateral coverage tests, interest coverage tests and collateral quality tests.
CLOs have two priority-of-payment schedules (commonly called waterfalls), which are detailed in a CLOs indenture and govern how cash generated from a CLOs underlying collateral is distributed to the
CLOs equity and debt investors. The interest waterfall applies to interest payments received on a CLOs underlying collateral. The principal waterfall applies to cash generated from principal on the underlying collateral, primarily
through loan repayments and the proceeds from loan sales. Through the interest waterfall, any excess interest-related cash flow available after the required quarterly interest payments to CLO debt investors are made and certain CLO expenses (such as
administration and management fees) are paid is then distributed to the CLOs equity investors each quarter, subject to compliance with certain tests.
The Adviser believes that excess interest-related cash flow is an important driver of CLO equity returns. In addition, relative to certain other high-yielding
credit investments such as mezzanine or subordinated debt, CLO equity is expected to have a shorter payback period with higher front-end loaded quarterly cash flows during the early years of a CLOs life
if there is no disruption in the interest waterfall due to a failure to remain in compliance with certain tests.
Most CLOs are non-static, revolving structures that generally allow for reinvestment over a reinvestment period, which is typically up to five years. Specifically, a CLOs collateral manager normally has broad
latitude, within a specified set of asset eligibility and diversity criteria, to manage and modify a CLOs portfolio over time. We believe that skilled CLO collateral managers can add significant value to both CLO equity and debt
investors through a combination of their credit expertise and a strong understanding of how to manage effectively within the rules-based structure of a CLO.
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After the CLOs reinvestment period has ended, in accordance with the CLOs principal waterfall, cash
generated from principal payments or other proceeds are generally distributed to repay CLO debt investors in order of seniority. That is, the AAA tranche investors are repaid first, the AA tranche investors second and so on, with any remaining
principal being distributed to the equity tranche investors. In certain instances, principal may be reinvested after the end of the reinvestment period.
CLOs contain a variety of structural features and covenants that are designed to enhance the credit protection of CLO debt investors, including
overcollateralization tests and interest coverage tests. The overcollateralization tests and interest coverage tests require CLOs to maintain certain levels of overcollateralization (measured as par value of assets to liabilities subject to certain
adjustments) and interest coverage, respectively. If a CLO breaches an overcollateralization test or interest coverage test, excess interest-related cash flow that would otherwise be available for distribution to the CLO equity tranche investors is
diverted to prepay CLO debt investors in order of seniority until such time as the covenant breach is cured. If the covenant breach is not or cannot be cured, the CLO equity investors (and potentially other debt tranche investors) may
experience a deferral of cash flow, a partial or total loss of their investment and/or the CLO may eventually experience an event of default. For this reason, CLO equity investors are often referred to as being in a first loss position. The Adviser
will have no control over whether or not the CLO is able to satisfy its relevant interest coverage tests or overcollateralization tests.
CLOs also
typically have interest diversion tests, which also act to ensure that CLOs maintain adequate overcollateralization. If a CLO breaches an interest diversion test, excess interest-related cash flow that would otherwise be available for distribution
to the CLO equity tranche investors is diverted to acquire new loan collateral until the test is satisfied. Such diversion would lead to payments to the equity investors being delayed and/or reduced.
Cash flow CLOs do not have mark-to-market triggers and, with limited
exceptions (such as the proportion of assets rated CCC+ or lower (or their equivalent) by which such assets exceed a specified concentration limit, discounted purchases and defaulted assets), CLO covenants are generally calculated using
the par value of collateral, not the market value or purchase price. As a result, a decrease in the market price of a CLOs performing collateral portfolio does not generally result in a requirement for the CLO collateral manager to sell assets
(i.e., no forced sales) or for CLO equity investors to contribute additional capital (i.e., no margin calls).
Overview of Senior Secured Loans
Senior secured loans have the most senior position in a borrowers capital structure or share the senior position with other senior debt
securities of the borrower. This capital structure position generally gives holders of senior secured loans a priority claim on some or all of the borrowers assets in the event of default and therefore the lenders will be paid before certain
other creditors of the borrower. Broadly syndicated senior secured loans are typically originated and structured by banks on behalf of corporate borrowers with proceeds often used for leveraged buyout transactions, mergers and acquisitions, stock
repurchases, recapitalizations, refinancings, financing capital expenditures, and internal growth. Broadly syndicated senior secured loans are typically acquired through both primary bank syndications and in the secondary market, and distributed by
the arranging bank to a diverse group of investors primarily consisting of CLOs, loan and high-yield bond registered funds, loan separate accounts, banks, insurance companies, finance companies and hedge funds. Senior secured loans are floating rate
instruments, typically making quarterly interest payments based on a spread over SOFR. We believe that senior secured loans represent an attractive and stable base of collateral for CLOs. In most cases, a senior secured loan will be secured by
specific collateral of the issuer. Historically, many of these investments have traded at or near par (i.e., 100% of face value), although they more recently have traded at greater discounts on the current market environment,
Senior secured loans generally are negotiated between a borrower and several financial institution lenders represented by one or more lenders acting as agent
of all the lenders. The agent is responsible for negotiating the
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loan agreement that establishes the terms and conditions of the senior secured loan and the rights of the borrower and the lenders. The agent is responsible for negotiating the loan agreement
that establishes the terms and conditions of the senior secured loan and the rights of the borrower and the lenders. Senior secured loans also have contractual terms designed to protect lenders. Senior secured loans also have contractual terms
designed to protect lenders. These covenants may include mandatory prepayment out of excess cash flows, restrictions on dividend payments, the maintenance of minimum financial ratios, limits on indebtedness and financial tests. Breach of these
covenants generally is an event of default and, if not waived by the lenders, may give lenders the right to accelerate principal and interest payments. Other senior secured loans may be issued with less restrictive covenants which are often referred
to as covenant-lite transactions. In a covenant-lite loan, the covenants that require the borrower to maintain certain financial ratios are eliminated altogether, and the lenders are left to rely only on covenants
that restrict a company from incurring or actively engaging certain action. But a covenant that only restricts a company from incurring new debt cannot be violated simply by a deteriorating financial condition, the company has to take
affirmative action to breach it. The impact of these covenant-lite transactions may be to retard the speed with which lenders will be able to take control over troubled deals. We generally acquire senior secured loans of borrowers that, among other
things, in the Advisers judgment, can make timely payments on their senior secured loans and that satisfy other credit standards established by the Adviser.
When we purchase first and second lien senior floating rate loans and other floating rate debt securities, coupon rates are floating, not fixed and are tied
to a benchmark lending rate. The interest rates of these floating rate debt securities vary periodically based upon a benchmark indicator of prevailing interest rates.
When we purchase an Assignment, we succeed to all the rights and obligations under the loan agreement of the assigning lender and becomes a lender under the
loan agreement with the same rights and obligations as the assigning lender. These rights include the ability to vote along with the other lenders on such matters as enforcing the terms of the loan agreement (e.g., declaring defaults, initiating
collection action, etc.). Taking such actions typically requires a vote of the lenders holding at least a majority of the investment in the loan, and may require a vote by lenders holding two-thirds or more of
the investment in the loan. Because we typically do not hold a majority of the investment in any loan, we will not be able by ourselves to control decisions that require a vote by the lenders.
While we believe that senior secured loans and CLO securities have certain attractive fundamental attributes, such securities are subject to a number of risks
as discussed in the Risk Factors section of this prospectus. Among our primary targeted investments, the risks associated with CLO equity are generally greater than those associated with CLO debt. In addition, many of the statistics and
data noted in this prospectus relate to historical periods when market conditions were, in some cases, materially different than they are as of the date of this prospectus. As with other asset classes, market conditions and dynamics for senior
secured loans and CLO securities evolve over time. For example, over the past decade, the senior secured loan market has evolved from one in which covenant-lite loans represented a minority of the market to one in which such loans represent a
significant majority of the market.
Access to Carlyles Transaction Flow and Expertise
In conducting its investment activities, the Fund believes that it will benefit from the significant scale and resources of Carlyle and its affiliates. The
Fund is served by an origination, capital markets, underwriting and portfolio management team comprised of experienced investment professionals. The Funds investment team utilizes a rigorous, systematic, and consistent investment process,
refined over Carlyles history investing in private markets across multiple cycles, designed to achieve enhanced risk-adjusted returns.
The
Funds investment team will leverage Carlyles industry-dedicated research analysts to assess the relative attractiveness of investment opportunities across industries. The investment team will develop proprietary screening tools that seek
to identify potential credit instruments.
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The Fund will seek to source opportunities through Carlyles extensive global relationships and proprietary
network and through the deep infrastructure Carlyle has developed in each of the Funds credit strategies, including:
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Carlyles well-established sponsor, bank and lending relationships cultivated over 30+ years, including
~1,000 lending relationships across the firm. |
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Scale of capital with over $146 billion under management in Global Credit and 230+ dedicated credit
investment professionals. |
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A broad network of dealer, investor, and manager relationships that Carlyle has developed during its 20+-year
track record managing CLOs. |
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Carlyles ongoing active dialogue with corporate private equity professionals for access to highly
structured preferred or convertible securities that have an expected shorter duration than traditional private equity. |
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Integrated efforts with cross-platform sourcing capabilities and referrals from both internal and external
Carlyle networks. |
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Ability to leverage OneCarlyle platform with nearly 700 origination and underwriting resources and global
knowledge base across Global Credit and Private Equity. |
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The Fund may also benefit from opportunities sourced by Carlyle investment vehicles that fall outside the scope
of their respective investment mandates. |
Portfolio Composition
The Funds portfolio will consist of some combination of the following types of investments:
Collateralized Loan Obligations.
Our investment
portfolio is comprised primarily of investments in the equity and junior debt tranches of CLOs that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying
borrowers across various industry sectors. CLOs are generally backed by an asset or a pool of assets that serve as collateral. Most CLOs are issued in multiple tranches, offering investors various maturity and credit risk characteristics, often
categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over those
of junior tranches which are the focus of our investment strategy, and scheduled payments to junior tranches have a priority in right of payment to subordinated/equity tranches. While the vast majority of the portfolio of most CLOs consists of
senior secured loans, many CLOs enable the CLO collateral manager to invest up to 10% of the portfolio in assets that are not first lien senior secured loans, including second lien loans, unsecured loans, senior secured bonds and senior unsecured
bonds.
CLOs are generally required to hold a portfolio of assets that is highly diversified by underlying borrower and industry and that is subject to a
variety of asset concentration limitations. Most CLOs are non-static, revolving structures that generally allow for reinvestment over a specific period of time which is typically up to five years. The terms
and covenants of a typical CLO structure are, with certain exceptions, based primarily on the cash flow generated by, and the par value (as opposed to the market price or fair value) of, the collateral. These covenants include collateral coverage
tests, interest coverage tests and collateral quality tests.
A CLO funds the purchase of a portfolio of primarily senior secured loans via the issuance
of CLO equity and debt securities in the form of multiple, primarily floating rate, debt tranches. The CLO debt tranches typically are rated AAA (or its equivalent) at the most senior level down to BB or B (or its
equivalent), which is below investment grade, at the junior level by Moodys Investors Service, Inc., or Moodys, S&P Global Ratings, or
70
S&P, and/or Fitch Ratings, Inc., or Fitch. The interest rate on the CLO debt tranches is the lowest at the AAA-level and
generally increases at each level down the rating scale. The CLO equity tranche is unrated and typically represents approximately 8% to 11% of a CLOs capital structure. Below investment grade and unrated securities are sometimes referred to as
junk securities. The diagram below is for illustrative purposes only and highlights a hypothetical structure intended to depict a typical CLO. A minority of CLOs also include a B-rated debt tranche
(in which we may invest), and the structure of CLOs in which we invest may otherwise vary from this example. The left column represents the CLOs assets, which support the liabilities and equity in the right column. The right column shows the
various classes of debt and equity issued by the hypothetical CLO in order of seniority as to rights in payments from the assets. The percentage ranges appearing below the rating of each class represents the percent such class comprises of the
overall capital stack (i.e., total debt and equity issued by the CLO).
CLOs have two priority-of-payment schedules
(commonly called waterfalls), which are detailed in a CLOs indenture and govern how cash generated from a CLOs underlying collateral is distributed to the CLOs equity and debt investors. The interest waterfall applies
to interest payments received on a CLOs underlying collateral. The principal waterfall applies to cash generated from principal on the underlying collateral, primarily through loan repayments and the proceeds from loan sales. Through the
interest waterfall, any excess interest-related cash flow available after the required quarterly interest payments to CLO debt investors are made and certain CLO expenses (such as administration and collateral management fees) are paid is then
distributed to the CLOs equity investors each quarter, subject to compliance with certain tests.
A CLOs indenture typically requires that the
maturity dates of a CLOs assets, typically five to eight years from the date of issuance of a senior secured loan, be shorter than the maturity date of the CLOs liabilities, typically 12 to 13 years from the date of issuance. However,
CLO investors do face reinvestment risk with respect to a CLOs underlying portfolio. In addition, in most CLO transactions, CLO debt investors are subject to prepayment risk in that the holders of a majority of the equity tranche can direct a
call or refinancing of a CLO, which would cause the CLOs outstanding CLO debt securities to be repaid at par.
Loan Accumulation Facilities.
LAFs are short- to medium-term facilities often provided by the bank that will serve as the placement agent or arranger on a CLO transaction. LAFs typically incur leverage between four and six times prior to a CLOs pricing.
71
Collateralized Bond Obligations. A CBO is a trust which is often backed by a diversified pool of high
risk, below investment grade fixed income securities. The collateral can be from many different types of fixed income securities, such as high yield debt, residential privately issued mortgage-related securities, commercial privately issued mortgage
related securities, trust preferred securities and emerging market debt. The pool of high yield securities underlying CBOs is typically separated into tranches representing different degrees of credit quality. The higher quality tranches have
greater degrees of protection and pay lower interest rates, whereas the lower tranches, with greater risk, pay higher interest rates.
Investment
Process
Carlyle uses a multi-faceted investment strategy incorporates a fundamental value, bottom-up research
approach to investing in CLOs. The Funds primary investment objective is to generate current income, with a secondary objective to generate capital appreciation.
The investment team will employ an investment approach focused on capital preservation and will seek to minimize downside risk by investing in CLO structures
with high cash flow visibility with current income generated through scheduled quarterly payments.
The teams investment process relies on bottom-up fundamental analysis to drive investment decisions. The investment process comprises four key steps: 1) sourcing & trading, 2) manager diligence, 3) collateral review, and 4) structure and
documentation review.
Investment purchases and sales require the unanimous approval by the Funds investment committee, including the Funds
portfolio managers, Lauren Basmadjian and Nishil Mehta. The investment committee is comprised of Justin Plouffe, Sebstiano Riva, Ms. Basmadjian and Mr. Mehta.
Figure 1: Carlyles Consistent and Differentiated CLO Investment Process
72
Sourcing & Trading
As a prominent player in the CLO market (both as an investor in CLOs and one of the largest CLO managers
globally)2, Carlyles market presence facilitates access to a wide range of market opportunities. The investment team intends to source investment opportunities from the broad network of
dealer, investor, and manager relationships that it has developed during its 24-year history in the CLO market. Carlyles extensive global network and industry relationships with banks, sponsors, and CLO
managers as well as robust trading activities lead to early looks and improved deal flow and allocations. The investment team may also invest in new issue transactions where it can generate preferred economics by being an early and large investor,
and where its own relationships and position in the CLO market can have a positive impact on deal execution. In some situations, it may be beneficial to participate in a loan accumulation facility to source certain transactions. Carlyle will seek
opportunities from a diversified set of CLO managers, deal vintages, and underlying loan portfolios. Carlyle intends to source investments specifically in CLOs where it has a strong understanding of the underlying collateral, the historical
performance of the CLO manager, and the key structural considerations that may drive economic outcomes.
Manager Diligence
The investment team conducts in-depth diligence on each CLO manager before investing in a CLO through a thorough
diligence process that creates a comprehensive understanding of each CLO managers track record and investment style.
Carlyle typically ranks CLO
managers through a quantitative ranking system based on numerous factors. The proprietary system ranks managers across all transactions and individual vintage cohorts. Key factors in the ranking system include: historical cashflows to the equity
tranche, average overcollateralization cushions, CLO equity net asset value, par build across different vintage cohorts, senior secured loan portfolio composition by rating, senior secured loan composition by trading price, and unlevered total
returns.
The investment team also conducts regular manager update calls to review managers current trading strategies, market outlook, and
positioning. Other contributing factors include the managers ability to source collateral and dedicate the requisite resources to ongoing management of the CLO in various market conditions, the competitive landscape, and regulatory
constraints. The investment team will then evaluate managers based on style and risk to determine the appropriate pricing for each investment.
Additionally, the analytics team produces regular custom reporting on a manager level including industry over- and under-concentrations across each CLO
portfolio by vintage cohort, overlap with other managers in the broader portfolio and manager style tiering. As part of the diligence of the underlying portfolios, the investment team reviews reports of each CLO managers recent trading history
to ascertain the managers activity level. Carlyles proprietary manager screening allows it to evaluate manager style, historical performance, and relative performance in real-time.
Another facet of the manager diligence process includes review of the CLO managers ability to generate consistent cashflow to their equity investors.
The investment team analyzes historical deal cashflows, projecting future cashflows across various potential economic scenarios. This analysis stresses key factors such as defaults, recoveries, prepayment rates, performance of troubled credits, and
optional redemptions. The investment team will seek to invest in opportunities where projected cashflows indicate principal protection in downside scenarios combined with returns in upside scenarios that exceed the target range.
The investment team will review key deal metrics in the context of other CLOs, other managers, and the loan market holistically. Key metrics may include
overcollateralization ratios, average portfolio rating, average asset spread, liability costs, and portfolio diversity, among other factors. Carlyles proprietary research capabilities provide insights and analytics into various CLO manager
styles and performance.
2 |
Source: Creditflux as of March 31, 2023 inclusive of middle market CLOs.
|
73
Collateral Review
Carlyle believes its ability to leverage its own industry-dedicated research team to deconstruct and evaluate the senior secured loan portfolios with a CLO
provides a compelling competitive advantage. At the onset of the collateral review process, the investment team performs an initial screen of the underlying credits based on the views of its industry analysts. The investment team will rely on
Carlyles extensive team of industry credit analysts for valuation of key underlying credits and industry areas, including the riskiest credits in each portfolio. This information will inform assumptions about underlying collateral performance
that impact the projected cash flow modelling of investment opportunities. As the second largest CLO manager globally, led by a seasoned investment team with established credit selection expertise, Carlyle has a proven track record to underwrite and
invest through complexity and seeks to deliver attractive returns.3 With a dedicated global credit investment team of over 30 analysts and coverage of over 700+ liquid credits, Carlyle possesses
the ability to gain in-depth, holistic, real-time market insights into the underlying collateral of each CLO position that it evaluates.
Factors included in the initial collateral review include focus on the portfolios riskier assets such as CCC loans and second lien loans as well as
overall industry concentration. The investment team overlays the research teams loan watchlists onto the portfolios of our CLO equity investments to monitor risk dynamically through a proprietary system called the Carlyle Global Credit Portal.
The investment team also considers collateral statistics compared to the deals vintage cohort. The credit analysts employ a custom Carlyle ten category risk rating system for all loans with a default watch scoring of Low,
Medium, and High. Based on the scores assigned to the underlying credits, each underlying portfolio is categorized according to its risk profile. The investment team compares this profile both to the entire universe of deals
to which the methodology has been applied, as well as to the subset of deals in which Carlyle invested. This analysis appears in the credit memo for each asset and is used to inform relative risk for modeling and yield targeting.
Figure 2: Collateral Review
3 |
Source: Creditflux as of March 31, 2023 inclusive of middle market CLOs.
|
74
CLO Structure & Documentation
As both a CLO manager and CLO investor, Carlyle is well positioned with the expertise to analyze complex CLO structures and documentation. Before investing in
each deal, the investment team conducts a thorough review of each CLO structure. All deals undergo proprietary stress testing that incorporates Carlyle Global Credits individual credit views and deal-level assumptions developed in conjunction
with Carlyles loan portfolio managers. These assumptions are updated regularly to reflect current market conditions and Carlyles latest views on macroeconomic trends. Each deal will be evaluated on its projected IRR, projected MOIC, and
potential cash flow diversions. The investment team will also review the cash flow waterfall, test triggers, reinvestment conditions, and optional redemption mechanics.
The investment team will also assess the legal structure of each investment, focusing on factors that could drive economic outcomes. Led by Carlyles
Head of CLO Documentation, the investment team seeks to understand and evaluate restrictions on manager behavior as well as document integrity. Important factors include the ability to reinvest after the end of the reinvestment period, equity
control of the portfolio liquidation process, voting rights related to amending key terms, tests or asset eligibility, flexibility to restructure assets that are distressed, optimization of interest proceeds flowing to equity investors, portfolio
concentration limitations, and distribution waterfalls. The legal assessment includes documentation review across more than 50 topics identified through 20+ years of reviewing and negotiating CLO documents across CLO investments and issuance. The
investment team drives the new issue documentation process at the onset by incorporating structural protections and flexibility to enhance returns. Focal points include ensuring CLO managers interests are aligned with the equity holders and
allowing managers sufficient flexibility to maximize value. The investment team will then score each document for reference. These scores are codified, so we can compare historical scores to new documents as they come to market.
Figure 3: CLO Structure and Documentation Review
75
Monitoring & Exit
Following an investment, the investment team will monitor the performance of each investment with a focus on the same key elements that drove the original
investment decision. The investment team will provide portfolio-wide and investment-specific reporting to the internal investment committee on a regular basis, including reports on the credit quality and market value of underlying collateral, recent
trading activity, and tranche distributions compared to projections made at the time of investment. Investments will be valued quarterly. Investments may be exited due to changes in market value, deterioration of collateral quality, manager
performance, change in view, or the availability of more attractive investment opportunities. Investment purchases and sales requires the unanimous approval by the Funds investment committee including the Funds portfolio managers, Lauren
Basmadjian and Nishil Mehta.
76
THE ADVISER
CGCIM serves as the Funds investment adviser. CGCIM is registered as an investment adviser with the SEC under the Advisers Act. CGCIM is a
majority-owned subsidiary of CIM.
Carlyle is a global investment firm with more than $373 billion of assets under management as of December 31,
2022 across 543 active investment vehicles. The firm also has a large and diversified investor base with more than 2,900 active carry fund investors located in 88 countries.
Carlyle combines global vision with local insight, relying on a team of nearly 700 investment professionals operating out of 29 offices in 17 countries to
uncover superior opportunities in Africa, Asia, Australia, Europe, Latin America, the Middle East and North America.
77
MANAGEMENT AND INCENTIVE FEES
Pursuant to the investment advisory agreement, and in consideration of the advisory services provided by the Adviser to the Fund, the Adviser is entitled to a
fee consisting of two componentsthe Management Fee and the Incentive Fee.
Management Fee
The Management Fee is calculated and payable monthly in arrears at the annual rate of 1.75% of the month-end value of
the Funds Managed Assets (such amount not to exceed, in any case, 1.50% of Net Assets). Managed Assets means the total assets of the Fund (including any assets attributable to any preferred shares or to indebtedness) minus
the Funds liabilities other than liabilities relating to indebtedness.
Incentive Fee
The Incentive Fee is calculated and payable quarterly in arrears based upon the Funds pre-incentive fee net
investment income for the immediately preceding quarter, and is subject to a hurdle rate, expressed as a rate of return on the Funds net assets, equal to 2.00% per quarter (or an annualized hurdle rate of 8.00%), subject to a catch-up feature. For this purpose, pre-incentive fee net investment income means interest income, dividend income, income generated from original
issue discounts, payment-in-kind income, and any other income earned or accrued during the calendar quarter, minus the Funds operating expenses (which, for this
purpose shall not include any distribution and/or shareholder servicing fees, litigation, any extraordinary expenses or Incentive Fee) for the quarter. For purposes of computing the Funds pre-incentive
fee net investment income, the calculation methodology will look through total return swaps as if the Fund owned the referenced assets directly. As a result, the Funds pre-incentive fee net investment
income includes net interest, if any, associated with a derivative or swap, which is the difference between (a) the interest income and transaction fees related to the reference assets and (b) all interest and other expenses paid by the
Fund to the derivative or swap counterparty. Net assets means the total assets of the Fund minus the Funds liabilities. For purposes of the Incentive Fee, net assets are calculated for the relevant quarter as the weighted average of the net
asset value of the Fund as of the first business day of each month therein. The weighted average net asset value shall be calculated for each month by multiplying the net asset value as of the beginning of the first business day of the month times
the number of days in that month, divided by the number of days in the applicable calendar quarter.
The calculation of the Incentive Fee for each
calendar quarter is as follows:
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No Incentive Fee is payable to CGCIM if the Funds pre-incentive fee
net investment income, expressed as a percentage of the Funds net assets in respect of the relevant calendar quarter, does not exceed the quarterly hurdle rate of 2.00%; |
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100% of the portion of the Funds pre-incentive fee net investment
income that exceeds the hurdle rate but is less than or equal to 2.4242% (the catch-up) is payable to CGCIM if the Funds pre-incentive fee net
investment income, expressed as a percentage of the Funds net assets in respect of the relevant calendar quarter, exceeds the hurdle rate but is less than or equal to 2.4242% (9.6968% annualized). The
catch-up provision is intended to provide CGCIM with an incentive fee of 17.5% on all of the Funds pre-incentive fee net investment income when the
Funds pre-incentive fee net investment income reaches 2.4242% of net assets; and |
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17.5% of the portion of the Funds pre-incentive fee net investment
income that exceeds the catch-up is payable to CGCIM if the Funds pre-incentive fee net investment income, expressed as a percentage of the Funds
net assets in respect of the relevant calendar quarter, exceeds 2.4242% (9.6968% annualized). As a result, once the hurdle rate is reached and the catch-up is achieved, 17.5% of all the Funds pre-incentive fee net investment income thereafter is allocated to CGCIM. |
78
The following is a graphical representation of the calculation of the Incentive Fee:
These calculations will be appropriately prorated for any period of less than three months.
Example of the Incentive Fee:
Example
Incentive Fee on pre-incentive fee net investment income for each calendar quarter
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Scenarios expressed as a percentage of
average Net Assets |
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Scenario 1 |
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Scenario 2 |
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Scenario 3 |
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Pre-incentive fee net investment income |
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0.550 |
% |
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2.350 |
% |
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3.000 |
% |
Catch up incentive fee (maximum of 0.424%) |
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(0.350 |
%) |
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(0.424 |
%) |
Split incentive fee (17.5% above 2.424%) |
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(0.101 |
%) |
Net Investment income |
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0.550 |
% |
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|
2.000 |
% |
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|
2.475 |
% |
Scenario 1 Incentive Fee on Income
Pre-incentive fee net investment income does not exceed the 2.00% hurdle rate; therefore there is no catch up or split
incentive fee on pre-incentive fee net investment income.
Scenario 2 Incentive Fee on Income
Pre-incentive fee net investment income falls between the 2.00% hurdle rate and the catch up of 2.424%;
therefore the incentive fee on pre-incentive fee net investment income is 100% of the pre-incentive fee above the 2.00% hurdle return.
Scenario 3 Incentive Fee on Income
Pre-incentive fee net investment income exceeds the 2.00% hurdle and the 2.424% catch up provision. Therefore the catch up provision is fully satisfied by the 0.424% of
pre-incentive fee net investment income above the 2.00% hurdle rate and there is a 17.5% incentive fee on pre-incentive fee net investment income above the 2.424%
catch up. This provides a 0.525% incentive fee, which represents 17.5% of pre-incentive fee net investment income.
79
Approval of the Investment Advisory Agreement
On November 28, 2022, the Board, including a majority of the Trustees who are not interested persons as that term is defined in the 1940 Act,
as amended, approved the Investment Advisory Agreement, subject to Shareholder approval. The Board weighed a number of factors in reaching its decision to approve the Investment Advisory Agreement, including, without limitation, the history,
reputation, and resources of CGCIM, prior performance results achieved by CGCIM, and quality of services to be provided by CGCIM. The Board considered CGCIMs expertise in managing collateralized loan obligation securities. A discussion
regarding the basis for the Boards approval of the Investment Advisory Agreement is available in the Funds Semi-Annual Report on Form N-CSRS for the period ended March 31, 2023, which is incorporated herein by reference.
The Shareholders
approved the Investment Advisory Agreement on June 15, 2023 and it became effective on July 14, 2023.
Fund Expenses
The Adviser bears all of its own costs incurred in providing investment advisory services to the Fund. As described below, however, the Fund bears all other
expenses incurred in the business and operation of the Fund.
Expenses borne directly by the Fund include:
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corporate, organizational and offering costs relating to offerings of the Funds securities;
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the cost of calculating the NAV of shares, including the cost of any third-party pricing or valuation services;
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the cost of effecting sales and repurchases of shares and other securities; |
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the Management Fee and Incentive Fee; |
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distribution and/or shareholder servicing fees; |
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investment related expenses (e.g., expenses that, in the Advisers discretion, are related to the investment
of the Funds assets, whether or not such investments are consummated), including, as applicable, brokerage commissions, borrowing charges on securities sold short, clearing and settlement charges, recordkeeping, interest expense, line of
credit fees, dividends on securities sold but not yet purchased, margin fees, investment related travel and lodging expenses and research-related expenses; |
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professional fees relating to investments, including expenses of consultants, investment bankers, attorneys,
accountants and other experts; |
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transfer agent, sub-transfer agent and custodial fees;
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fees and expenses associated with marketing and distribution efforts; |
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federal and any state registration or notification fees; |
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federal, state and local taxes; |
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fees and expenses incident to qualifying and listing of the Funds common shares on any exchange;
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fees and expenses of Trustees not also serving in an executive officer capacity for the Fund or the Adviser;
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the costs of preparing, printing and mailing reports and other communications, including repurchase offer
correspondence or similar materials, to Shareholders; |
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fidelity bond, Trustees and officers errors and omissions liability insurance and other insurance premiums;
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legal expenses (including those expenses associated with preparing the Funds public filings, attending and
preparing for Board meetings, as applicable, and generally serving as counsel to the Fund or the Independent Trustees of the Fund); |
80
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external accounting expenses (including fees and disbursements and expenses related to the annual audit of the
Fund and the preparation of the Funds tax information); |
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any costs and expenses associated with or related to due diligence performed with respect to the Funds
offering of its shares, including but not limited to, costs associated with or related to due diligence activities performed by, on behalf of, or for the benefit of broker-dealers, registered investment advisors and third-party due diligence
providers; |
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any and all fees, costs and expenses incurred in implementing or maintaining third-party or proprietary software
tools, programs or technology for the benefit of the Fund; |
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costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state
securities laws, including compliance with The Sarbanes-Oxley Act of 2002; |
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the compensation of the Funds Chief Compliance Officer and the salary of any compliance personnel of the
Adviser and its affiliates who provide compliance-related services to the Fund, provided such salary expenses are properly allocated between the Fund and other affiliates, as applicable, and any costs associated with the monitoring, testing and
revision of the Funds compliance policies and procedures required by Rule 38a-1 under the 1940 Act; |
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all other expenses incurred by the Fund in connection with administering the Funds business, including
expenses by State Street for performing administrative services for the Fund, subject to the terms of the Administration Agreement; and |
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any expenses incurred outside of the ordinary course of business, including, without limitation, costs incurred
in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding and indemnification expenses as provided for in the Funds organizational documents. |
Except as otherwise described in this prospectus, the Adviser will be reimbursed by the Fund, as applicable, for any of the above expenses that it pays on
behalf of the Fund.
Expense Limitation Agreement
The Adviser and the Fund have entered into the Expense Limitation Agreement under which the Adviser has agreed contractually to waive its Management Fee and/or
reimburse the Funds operating expenses on a monthly basis to the extent that the Funds monthly total annualized fund operating expenses (excluding (i) expenses directly related to the costs of making investments, including interest
and structuring costs for borrowings and line(s) of credit, taxes, brokerage costs, the Funds proportionate share of expenses related to co-investments, litigation and extraordinary expenses,
(ii) Incentive Fees, (iii) expenses related to equity or debt offerings, and (iv) expenses associated with the Transaction Agreement, including expenses related to the liquidation as defined therein) not to exceed 2.50% of the
Funds average daily net assets.
The Expense Limitation Agreement will remain in effect until ending on the earlier of (i) four quarters after
the date of the Agreement or (ii) the date on which at least 75% of the Funds gross assets are invested in collateralized loan obligation equity and debt investments, unless and until the Board approves its modification or termination.
Fee Waiver Agreement
CGCIM has agreed to a Fee
Waiver Arrangement where CGCIM will irrevocably waive the portion of its management and incentive fees on Fund managed assets invested in exchange traded funds through January 12, 2024, as the Funds portfolio transitions to the new
investment strategy. CGCIM is not entitled to recoup any waived fees under the Fee Waiver Agreement.
81
MANAGEMENT OF THE FUND
Trustees
Pursuant to the Declaration of Trust and By-laws, the Funds business and affairs are managed under the direction of the Board, which has overall responsibility for monitoring and overseeing the Funds management and operations. The Board
consists of five members, three of whom are considered Independent Trustees. The Trustees are subject to removal or replacement in accordance with Delaware law and the Declaration of Trust. The Trustees serving on the Board were elected by the
Shareholders of the Fund.
The Board, including a majority of the Independent Trustees, oversees and monitors the Funds management and operations.
The Board reviews on an annual basis the Investment Advisory Agreement to determine, among other things, whether the fees payable under such agreement are reasonable in light of the services provided.
Board of Trustees and Officers
Information regarding the
members of the Board is set forth below. The Trustees have been divided into two groupsInterested Trustees and Independent Trustees. As set forth in the Funds declaration of trust, each Trustees term of office shall continue until
his or her death, resignation or removal.
Independent Trustees
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Name, address(1)
and year of birth |
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Position
to be Held with the
Fund |
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Term of
Office and Length
of Time Served |
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Principal
Occupation(s)
During Past 5
Years |
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Number of
Portfolios in Fund
Complex(2)
to be Overseen
by Trustee |
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Other Directorships
Held by Nominee Trustee in Past Five Years |
Mark Garbin (1951) |
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Trustee |
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Class I Board member until 2025 annual shareholder meeting since July 2023 |
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Managing Principal, Coherent Capital Management LLC (since 2008) |
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2 |
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Independent Trustee of Two Roads Shared Trust (since 2012), Forethought Variable Insurance Trust (since 2013), Northern Lights Fund Trust (since 2013), Northern Lights Variable Trust (since 2013), iCapital KKR Private Markets Fund
(since 2014), Independent Director of Oak Hill Advisors Mortgage Strategies Fund (offshore), Ltd. (2015-2017), Independent Director of OHA CLO Enhanced Equity II Genpar LLP (since 2021), and Independent Trustee, Carlyle Tactical Private Credit Fund
(since 2018). |
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Name, address(1)
and year of birth |
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Position
to be Held with the
Fund |
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Term of
Office and Length
of Time Served |
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Principal
Occupation(s)
During Past 5
Years |
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Number of
Portfolios in Fund
Complex(2)
to be Overseen
by Trustee |
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Other Directorships
Held by Nominee Trustee in Past Five Years |
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Sanjeev Handa (1961) |
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Trustee |
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Class III Board member until 2024 annual shareholder meeting since July 2023 |
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Managing Member, Old Orchard Lane, LLC (since 2014); Adjunct Professor, Fairfield University (since 2020) |
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2 |
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Advisory Board Member of White Oak Partners (since 2021) and Independent Director of OHA CLO Enhanced Equity II Genpar LLP (since 2021), Independent Trustee, Carlyle Tactical Private Credit Fund (since March 2018); Board of Trustees
Investment Committee Member for the Cooper Union for Advancement of Science and Art (since 2016); Board of Directors Member for the Mutual Fund Directors Forum (Since 2022); Independent Director of Fitch Ratings, Inc. (2015-2020). |
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Joan McCabe (1955) |
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Trustee |
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Class II Board member until 2023 annual shareholder meeting. since July 2023 |
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Managing Member, JMYME, LLC (since 2020); CEO/Founder, Lipotriad LLC (2015-2019) |
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2 |
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Elevation Brands (since 2017 to 11/2022); Sensible Organics (2017-2021); Goodwill International, Inc. (2015-2021); Gulfstream Goodwill, Inc. (since 2017; Board Chair since 2021); Gulfstream Goodwill Academy, Inc. (since 2017),
Goodwill International (2015-2021) Independent Trustee Carlyle Tactical Private Credit Fund (since 2018). |
(1) |
Address is c/o Carlyle Global Credit Investment Management L.L.C., One Vanderbilt Avenue, Suite 3400, New York,
NY 10017. |
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Interested Trustees
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Name, address(1)
and year of birth |
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Position
to be Held with
the Fund |
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Term of Office and Length of Time Served(2) |
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Principal
Occupation(s) During Past
5 Years |
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Number of Portfolios in Fund Complex to be Overseen by Trustee |
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Other Directorships
Held by Nominee Trustee in Past Five Years |
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Brian Marcus (1983) |
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Trustee |
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Class I Board member until 2025 annual shareholder meeting. since July 2023 |
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Managing Director, The Carlyle Group, Inc. (Since 2021); Principal, Carlyle Group (2018 2020); Vice President, The Carlyle Group, Inc. (2015 2017) |
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1 |
|
None |
|
|
|
|
|
|
Lauren Basmadjian (1979) |
|
Trustee |
|
Class III Board member until 2024 annual shareholder meeting. since July 2023 |
|
Managing Director, The Carlyle Group, Inc. (Since 2020); Senior Portfolio Manager, Octagon Credit Investors, LLC (2001 to 2020) |
|
1 |
|
None |
(1) |
Address is c/o Carlyle Global Credit Investment Management L.L.C., One Vanderbilt Avenue, Suite 3400, New York,
NY 10017. |
(2) |
Interested person, as defined in the 1940 Act, of the Fund. Mr. Marcus and Ms. Basmadjian are
interested persons of the Fund due to their affiliation with the Adviser. |
Officers
|
|
|
|
|
|
|
Name, address(1)
and year of birth |
|
Position
to be Held with the
Fund |
|
Term of Office |
|
Principal Occupation(s) During Past 5 Years |
|
|
|
|
Lauren Basmadjian (1979) |
|
President, Principal Executive Officer |
|
Indefinite Length since July 2023 |
|
Managing Director, The Carlyle Group, Inc. (Since 2020); Senior Portfolio Manager, Octagon Credit Investors, LLC (2001 to 2020) |
|
|
|
|
Nelson Joseph (1979) |
|
Principal Financial Officer, Principal Accounting Officer |
|
Indefinite Length since July 2023 |
|
Principal, Carlyle Group (Since 2023); Director, Apollo Global Management LLC (2016 2022) |
|
|
|
|
Joshua Lefkowitz (1974) |
|
Secretary; Chief Legal Officer; Chief Compliance Officer |
|
Indefinite Length since July 2023 |
|
Managing Director and Chief Legal Officer (Global Credit), Carlyle Group (Since 2018); Principal and Associate General Counsel, Ares Management, Ltd. (2017 2018); Vice
President |
84
|
|
|
|
|
|
|
Name, address(1)
and year of birth |
|
Position
to be Held with the
Fund |
|
Term of Office |
|
Principal Occupation(s) During Past 5 Years |
|
|
|
|
|
|
and Associate General Counsel, American Capital, Ltd. (2006 2017) |
(1) |
Address is c/o Carlyle Global Credit Investment Management L.L.C., One Vanderbilt Avenue, Suite 3400, New York,
NY 10017. |
Biographical Information and Discussion of Experience and Qualifications
Trustees
The following is a summary of the
experience, qualifications, attributes and skills of each Trustee that support the conclusion, as of the date of this registration statement, that each Trustee should serve as a Trustee of the Fund.
Independent Trustees
Mark Garbin. Mark Garbin has
over 30 years of experience in corporate balance sheet and income statement risk management for large asset managers. Mr. Garbin has extensive derivatives experience and has provided consulting services to alternative asset managers.
Mr. Garbin holds the CFA and Professional Risk Manager (PRM) Charters and has advanced degrees in international business, negotiation and derivatives. He also has extensive experience with respect to investments and also to compliance and
corporate governance matters as a result of, among other things, his service as a board member to other investment companies.
Sanjeev Handa.
Sanjeev Handa has over 30 years of experience in the financial industry sector, including global experience in the financial, real estate and securitization markets. Mr. Handa is also an advisory board member of White Oak Partners (since 2021),
and a member of the Investment Committee of the Board of Trustees of The Cooper Union for Advancement of Science and Art. He also formerly served as an independent director of Fitch Ratings, Inc. and Fitch Ratings, Ltd. (2015-2020). Mr. Handa
also serves as an independent director of OHA CLO Enhanced Equity II Genpar LLP (since 2021). Mr. Handa has extensive experience with respect to investments and also to compliance and corporate governance matters as a result of, among other
things, his service as a board member to another investment company. He also serves as an audit committee chairman and audit committee financial expert for another investment company.
Joan McCabe. Joan McCabe has over 30 years of financial and corporate experience, including investing in private equity along with debt financings for
those private equity investments. Ms. McCabe is also a board member of Gulfstream Goodwill, Inc. (since 2017 and current Board Chair), Gulfstream Goodwill Academy, Inc. (since 2018) and Elevation Brands (since 2017). She formerly served as a
board member of Goodwill International, Inc. (2015-2021) and Sensible Organics (2017-2021). Ms. McCabe has served as a board member to a variety of companies, including another investment company, and her diverse experience and financial
background, among other things, qualifies her to serve as a Trustee.
Interested Trustees
Brian Marcus. Brian Marcus has over 15 years of experience in highly regulated financial markets. Additionally, he is a Managing Director of Carlyle
Global Credit Investment Management L.L.C. He also focuses on strategic growth opportunities for the Global Credit platform of The Carlyle Group, Inc. (the ultimate parent company of CGCIM). He also helped develop TCG Capital Markets L.L.C., an SEC-registered broker/dealer affiliate of The Carlyle Group, Inc. and has been involved in acquisitions of credit management platforms.
Prior to coming to Carlyle, Mr. Marcus was with Morgan Stanley in the Principal Investments area, which used the firms capital in a diverse array
of investments including private equity, distressed debt, and mezzanine. In
85
this role, Mr. Marcus served as a director on a number of Boards. Previously, Mr. Marcus worked at Lehman Brothers in the mergers and acquisitions group. He received a B.S. in Economics
from the Wharton School of the University of Pennsylvania and currently holds Series 7, 55 and 63 licenses. His service as an officer for another investment company contributes to his qualifications to serve as a Trustee of the Fund.
Lauren Basmadjian. Lauren Basmadjian has over 20 years of experience in financial and corporate markets. She is a Managing Director, Co-Head of Liquid Credit and Head of US Loans & Structured Credit within The Carlyle Group, Inc.s Global Credit platform, overseeing over $48 billion of AUM. She is based in New York and sits on
the Investment Committees for all of The Carlyle Group, Inc.s US Loan, CLO and Liquid and Illiquid Credit investing activities. Ms. Basmadjian joined The Carlyle Group, Inc. in 2020 after 19 years at Octagon Credit Investors, LLC, where
she was a Senior Portfolio Manager, member of the Investment Committee and managed XAI Octagon Floating Rate & Alternative Income Term Trust, a public 1940 Act fund invested in CLO tranches and leveraged loans. Prior to becoming a Portfolio
Manager, Ms. Basmadjian managed Octagons workout efforts and also oversaw the leisure & entertainment, retail, consumer products, business services, food & beverage and technology industries. Before joining Octagon,
Ms. Basmadjian worked in the Acquisition Finance Group at Chase Securities, Inc. She graduated Cum Laude from the Stern School of Business at New York University with a B.S. in Finance and Economics. Her diverse experience and financial
background, among other things, qualifies her to serve as a Trustee.
Board Structure and Role of the Board in Risk Oversight
The 1940 Act requires that at least 40% of the trustees be independent trustees. Certain exemptive rules promulgated under the 1940 Act require that at least
50% of the trustees be independent trustees. Currently, three of the five Trustees (60%) are Independent Trustees. The Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman of
the Board, regardless of whether the trustee happens to be independent or a member of management. Lauren Basmadjian, an Interested Trustee, serves as the Chairman of the Board of Trustees.
The Board expects to perform its risk oversight function primarily through (a) its three standing committees, which report to the entire Board and are
comprised solely of Independent Trustees and (b) monitoring by the Funds Chief Compliance Officer in accordance with the Funds compliance policies and procedures.
Committees of the Board
The Board has established an
audit committee, a nominating and governance committee and an independent trustees committee. The Fund does not have a compensation committee because its officers do not receive any direct compensation from the Fund.
Audit Committee. The members of the audit committee are Mark Garbin, Sanjeev Handa and Joan McCabe, each of whom is independent for
purposes of the 1940 Act. Sanjeev Handa serves as chairman of the audit committee. The audit committee is responsible for approving the Funds independent accountants, reviewing with the Funds independent accountants the plans and results
of the audit engagement, approving professional services provided by the Funds independent accountants, reviewing the independence of the Funds independent accountants and reviewing the adequacy of the Funds internal accounting
controls.
Nominating and Governance Committee. The members of the nominating and governance committee are Mark Garbin, Sanjeev Handa
and Joan McCabe, each of whom is independent for purposes of the 1940 Act. Joan McCabe serves as chairman of the nominating and governance committee. The nominating and governance committee is responsible for selecting, researching and nominating
trustees for election by the Funds Shareholders, selecting nominees to fill vacancies on the Board or a committee of the Board Trustees, developing and recommending to the Board a set of corporate governance principles and overseeing the
evaluation of the Board and its committees.
86
The nominating and governance committee may consider recommendations for nomination of individuals for election
as trustees from Shareholders.
Independent Trustees Committee. The members of the independent trustees committee are Mark
Garbin, Sanjeev Handa and Joan McCabe, each of whom is independent for purposes of the 1940 Act. Mark Garbin serves as chairman of the independent trustees committee. The independent trustees committee is responsible for reviewing and
making certain findings in respect of co-investment transactions pursuant to exemptive relief received from the SEC.
Trustee Beneficial Ownership of Shares
The
following table indicates the dollar range of equity securities that any Trustee or executive officer beneficially owned in the Fund as of July 14, 2023, based on net asset value per common share.
|
|
|
|
|
|
|
|
|
Name of Trustee or Officer |
|
Dollar Range of Equity Securities in the Fund |
|
|
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment
Companies(1) |
|
Mark Gabin |
|
|
None |
|
|
|
None |
|
Sanjeev Handa |
|
|
None |
|
|
|
None |
|
Joan McCabe |
|
|
None |
|
|
|
None |
|
Brian Marcus. |
|
|
None |
|
|
|
None |
|
Lauren Basmadjian |
|
|
None |
|
|
|
None |
|
(1) |
Dollar ranges are as follows: None, $1$10,000, $10,001$50,000, $50,001$100,000,
$100,001$500,000, $500,001$1,000,000 or Over $1,000,000. |
Compensation of Trustees
For information relating to compensation of the Funds Trustees with respect to the Funds most recent fiscal year, see its most recent Annual
Report on Form N-CSR for the fiscal year ended September 30, 2022, which is incorporated by reference herein.
The following table shows information regarding the compensation to be earned by the Trustees, none of whom is an employee of the Fund, for services as a
Trustee for the current fiscal year to end on September 30, 2023. The Trustees who are interested persons, as defined in the 1940 Act, of the Fund and the Funds officers do not receive compensation from the Fund.
|
|
|
|
|
Name of Trustee |
|
Aggregate Compensation from the Fund(1) |
|
Interested Trustees |
|
|
|
|
Brian Marcus |
|
|
None |
|
Lauren Basmadjian |
|
|
None |
|
Independent Trustees |
|
|
|
|
Mark Garbin |
|
|
$40,000 |
|
Sanjeev Handa |
|
|
$45,000 |
|
Joan McCabe |
|
|
$40,000 |
|
(1) |
Amounts shown reflect annual compensation of such Trustee, which will be prorated for the present fiscal year.
|
87
Portfolio Managers
Investment sourcing and investment decisions are primarily the responsibility of two portfolio managers, Lauren Basmadjian and Nishil Mehta. In addition, the
Fund is also supported by the investment committee. See Investment Objective, Opportunities and StrategiesInvestment Process.
Below is biographical information relating to Ms. Basmadjian and Mr. Mehta and the other members of the investment committee:
Lauren Basmadjian
Lauren Basmadjian has over 20
years of experience in financial and corporate markets. She is a Managing Director, Co-Head of Liquid Credit and Head of US Loans & Structured Credit within The Carlyle Group, Inc.s Global
Credit platform, overseeing over $48 billion of AUM. She is based in New York and sits on the Investment Committees for all of The Carlyle Group, Inc.s US Loan, CLO and Liquid and Illiquid Credit investing activities. Ms. Basmadjian
joined The Carlyle Group, Inc. in 2020 after 19 years at Octagon Credit Investors, LLC, where she was a Senior Portfolio Manager, member of the Investment Committee and managed XAI Octagon Floating Rate & Alternative Income Term Trust, a
public 1940 Act fund invested in CLO tranches and leveraged loans. Prior to becoming a Portfolio Manager, Ms. Basmadjian managed Octagons workout efforts and also oversaw the leisure & entertainment, retail, consumer products,
business services, food & beverage and technology industries. Before joining Octagon, Ms. Basmadjian worked in the Acquisition Finance Group at Chase Securities, Inc. She graduated Cum Laude from the Stern School of Business at New
York University with a B.S. in Finance and Economics.
Nishil Mehta
Nishil Mehta is a Managing Director leading the firms structured credit investments. He is based in New York. Prior to joining Carlyle, Nishil was a
Managing Director at First Eagle where he was the co-portfolio manager for the firms structured credit investments. Prior to joining First Eagle, Nishil was a Managing Director at Prospect Capital where
he was responsible for the firms $2.5 billion of investments in CLO mezzanine debt and CLO equity and served as portfolio manager to Priority Income Fund, Inc., a closed-ended management investment company that primarily invests in the
equity tranche of CLOs. He was also the Head of Capital Markets spearheading over $8 billion of debt and equity capital raised for the firms 1940 Act funds. Earlier in his career, Nishil worked at CIT Asset Management and Wachovia
Securities. Mr. Mehta received his BBA from Goizueta Business School at Emory University with Honors.
Justin Plouffe
Justin Plouffe is a Managing Director and the Deputy Chief Investment Officer of Carlyle Global Credit and serves on the investment committee. Mr. Plouffe
focuses on investing in Carlyles structured credit and opportunistic credit strategies, as well as capital formation and management of the overall credit platform. Since joining Carlyle in 2007, he has overseen CLO new issuance, led
acquisitions of corporate credit management platforms, served as a portfolio manager for structured credit investments, developed proprietary portfolio management analytics and negotiated a wide variety of financing facilities. Prior to joining
Carlyle, Mr. Plouffe was an attorney at Ropes & Gray LLP. He has also served as a clerk on the U.S. Court of Appeals for the First Circuit and as a legislative assistant to a U.S. Congressman. Mr. Plouffe received his
undergraduate degree from Princeton University and his J.D. from Columbia Law School, where he was an editor of The Columbia Law Review. He is a CFA charterholder, holds Series 7, 24, 57, 63, 79 and 99 licenses, and is associated with TCG Capital
Markets L.L.C., the SEC-registered broker/dealer affiliate of The Carlyle Group.
Sebastiano Riva
Sebastiano Riva is a Managing Director and Head of Liability Management for Carlyle Global Credit and serves on the investment committee.
Mr. Riva is responsible for fund financing as well as Carlyle Structured Credit
88
and Carlyle Direct Lending CLO formation and execution. He is also a member of various Investment Committees including for Carlyle Structured Credit Fund and Carlyle Structured Solutions. Prior
to joining Carlyle, Mr. Riva was at Wells Fargo Securities in charge of global marketing of new issue CLO. Mr. Riva started his structured finance career at Bankers Trust in the late 1990s and has also held positions at DLJ, TD Securities,
and Lehman Brothers. Mr. Riva received his B.S. in Economics from the Wharton School of the University of Pennsylvania.
Other Accounts Managed
by Portfolio Managers
Lauren Basmadjian, the portfolio manager primarily responsible for the day-to-day management of the Fund also manage other registered investment companies, other pooled investment vehicles and other accounts, as indicated below. The following table identifies, as
of June 27, 2023: (i) the number of other registered investment companies, other pooled investment vehicles and other accounts managed by each portfolio manager; (ii) the total assets of such companies, vehicles and accounts; and
(iii) the number and total assets of such companies, vehicles and accounts that are subject to an advisory fee based on performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Accounts |
|
|
Assets of Accounts (in billions) |
|
|
Number of Accounts Subject to a Performance Fee |
|
|
Assets Subject to a Performance Fee (in billions) |
|
Lauren Basmadjian |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies |
|
|
0 |
|
|
$ |
0.00 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Pooled Investment Vehicles |
|
|
73 |
|
|
$ |
37.23 |
|
|
|
67 |
|
|
$ |
36.74 |
|
Other Accounts |
|
|
1 |
|
|
$ |
0.05 |
|
|
|
0 |
|
|
$ |
0 |
|
As of July 14, 2023, Mr. Mehta is responsible for the management of no other accounts in addition to the Fund.
Compensation of Portfolio Managers
The investment
professionals are paid out of the total revenues of the Adviser and certain of its affiliates, including the advisory fees earned with respect to providing advisory services to us. Professional compensation at the Adviser is structured so that key
professionals benefit from strong investment performance generated on the accounts that the Adviser and such affiliates manage and from their longevity with the Adviser. Each member of the Senior Investment Team has indirect equity ownership
interests in the Adviser and related long-term incentives. Members of the Senior Investment Team also receive a fixed base salary and an annual market and performance-based cash bonus. The bonus is determined by the Advisers Board of Managers,
and is based on both quantitative and qualitative analysis of several factors, including the profitability of the Adviser and the contribution of the individual employee. Many of the factors considered by management in reaching its compensation
determinations will be impacted by our long-term performance and the value of our assets as well as the portfolios managed for the Advisers and such affiliates other clients.
Securities Owned in the Fund by Portfolio Managers
The
table below sets forth the dollar range of the value of our common shares that are owned beneficially by each portfolio manager as of July 14, 2023. For purposes of this table, beneficial ownership is defined to mean a direct or indirect
pecuniary interest.
|
|
|
Name of Portfolio Manager |
|
Dollar Range of Equity Securities in the Fund(1) |
Lauren Basmadjian |
|
None |
Nishil Mehta |
|
None |
89
(1) |
Dollar ranges are as follows: None, $1 $10,000, $10,001 $50,000, $50,001 $100,000,
$100,001 $500,000, $500,001 $1,000,000 and over $1,000,000. |
Administrative Services
, which has its
principal office at , serves as custodian for the Fund. Pursuant to the Administration Agreement with
,
, furnishes the Fund with clerical, bookkeeping and record keeping services.
, also performs, or oversees the performance of, certain of the Funds required administrative
services, which include, among other things, providing assistance in accounting, legal, compliance, operations, being responsible for the financial records that the Fund is required to maintain and preparing reports to the Funds Shareholders
and reports filed with the SEC. In addition, , generally oversees the payment of the Funds expenses
and the performance of administrative and professional services rendered to the Fund by others. The Administration Agreement may be terminated by either party without penalty upon 90 days written notice to the other party prior to the initial
term or renewal date.
Indemnification
The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the
reckless disregard of its duties and obligations, the Adviser, its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with any of them are entitled to
indemnification from the Fund for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement) arising out of or otherwise based upon the performance of any of the Advisers
duties or obligations under the Investment Advisory Agreement or otherwise as an investment adviser of the Fund.
Custodians, Distribution Paying
Agent, Transfer Agent and Registrar
, which has its
principal office at , serves as custodian for the Fund.
, which has
its principal office at , serves as the Funds distribution paying agent, registrar and transfer agent (the Transfer Agent). Under the Transfer Agency Agreement, the Fund pays the Transfer Agent an
annual fee in monthly installments.
90
DETERMINATION OF NET ASSET VALUE
The Funds NAV per common share will be determined by the Adviser on a monthly basis, or at such other times as the Board may determine. In accordance
with the procedures adopted by the Board, the NAV per common share of the Funds outstanding common shares is determined by dividing the value of total assets minus liabilities by the total number of common shares outstanding.
The Adviser conducts the valuation of the Funds assets, pursuant to which net asset value shall be determined, at all times consistent with US GAAP
and the 1940 Act. The Adviser, as the valuation designee, determines the fair value of the Funds assets on at least a quarterly basis, in accordance with the terms of FASB Accounting Standards Codification Topic 820, Fair Value Measurement
(ASC 820). The valuation procedures are set forth in more detail below.
ASC 820 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and
liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement
in both cases is the sameto estimate the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit
price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
ASC 820 establishes a hierarchal
disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instrument, the characteristic
specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices, or for which fair value can be
measured from quoted prices in active markets, will generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
The three-level hierarchy for fair value measurement is defined as follows:
Level 1 inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the
reporting date. The types of financial instruments included in Level 1 generally include unrestricted securities, including equities and derivatives, listed in active markets. The Adviser does not adjust the quoted price for these investments,
even in situations where we hold a large position and a sale could reasonably impact the quoted price.
Level 2 inputs to the
valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. The type of financial instruments in this category generally includes less liquid and restricted
securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the
fair value is based on observable inputs.
Level 3 inputs to the valuation methodology are unobservable and significant to
overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include investments in privately held entities,
non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter
derivatives where the fair value is based on unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into different levels
of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Advisers assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.
91
The Adviser values securities/instruments traded in active markets on the measurement date by multiplying the
closing price of such traded securities/instruments by the quantity of common shares or amount of the instrument held. The Adviser values liquid securities/instruments that are not traded in an active market using a
bid-price determined by an approved independent pricing vendor.
The Fund expects that it will hold a high
proportion of Level 3 investments relative to its total investments, which is directly related to the Funds investment philosophy and target portfolio. The Adviser has engaged an independent valuation firm to fair value the Funds
Level 3 investments on a monthly basis. A retained independent valuation firm will have expertise in complex valuations associated with alternative investments and utilize a variety of techniques to calculate a securitys/instruments
valuation. The valuation approach may vary by security/instrument but may include comparable public market valuations, comparable transaction valuations and discounted cash flow analyses. All factors that might materially impact the value of an
investment (e.g., operating results, financial condition, achievement of milestones, economic and/or market events and recent sales prices) may be considered. The factors and methodologies used for the valuation of such securities are not
necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can realize the fair value assigned to a security if it were to sell the security. Because such valuations are inherently
uncertain, they often reflect only periodic information received by the Adviser about such companies financial condition and/or business operations, which may be on a lagged basis and therefore fluctuate over time and can be based on
estimates. Determinations of fair value may differ materially from the values that would have been used if an exchange-traded market for these securities existed.
If the Adviser reasonably believes a valuation from an independent valuation firm or pricing vendor is inaccurate or unreliable, the Advisers Valuation
Committee will consider an override of the particular valuation. The Valuation Committee will consider all available information at its disposal prior to making a valuation determination. The Valuation Committee is made up of individuals
affiliated with Carlyle.
The Fund calculates the NAV of its common shares on a monthly basis. For information on the Funds NAV, please call the
Fund toll-free at (866) 277-8243. The Adviser, subject to the Boards oversight, is responsible for the determination, in good faith, of the fair value of the Funds portfolio investments. As the Funds valuation designee, the
Adviser, subject to the Boards oversight, is responsible for the accuracy, reliability or completeness of any market or fair market valuation determinations made with respect to the Funds assets.
92
CONFLICTS OF INTEREST
An affiliated investment fund, account or other similar arrangement currently formed or formed in the future and managed by the Funds Adviser or its
affiliates may have overlapping investment objectives and strategies with the Funds own and, accordingly, may invest in asset classes similar to those targeted by the Fund. This creates potential conflicts in allocating investment
opportunities among the Fund and such other investment funds, accounts and similar arrangements, particularly in circumstances where the availability or liquidity of such investment opportunities is limited or where
co-investments by the Fund and other funds, accounts or arrangements are not permitted under applicable law, as discussed below.
For example, Carlyle sponsors several investment funds, accounts and other similar arrangements, including, without limitation, structured credit funds as
well as closed-end registered investment companies, business BDCs, carry funds, managed accounts and structured credit funds it may sponsor in the future. The SEC has granted exemptive relief that permits the
Fund and certain of its affiliates to co-invest in suitable negotiated investments (the Exemptive Relief). If Carlyle is presented with investment opportunities that generally fall within
the Funds investment objective and other board-established criteria and those of other Carlyle funds, accounts or other similar arrangements (including existing and future affiliated BDCs and registered
closed-end funds) whether focused on a credit strategy or otherwise, Carlyle allocates such opportunities among the Fund and such other Carlyle funds, accounts or other similar arrangements in a manner
consistent with the Exemptive Relief, the Advisers allocation policies and procedures and Carlyles other allocation policies and procedures, where applicable, as discussed below.
More specifically, investment opportunities in suitable negotiated investments for investment funds, accounts and other similar arrangements managed by the
Adviser, and other funds, accounts or similar arrangements managed by affiliated investment advisers that seek to co-invest with the Fund or other Carlyle BDCs or registered
closed-end funds, are allocated in accordance with the Exemptive Relief, the Advisers allocation policies and procedures and Carlyles other allocation policies and procedures, where applicable.
Investment opportunities for all other investment funds, accounts and other similar arrangements not managed by the Adviser are allocated in accordance with their respective investment advisers and Carlyles other allocation policies and
procedures. Such policies and procedures may result in certain investment opportunities that are attractive to the Fund being allocated to other funds that are not managed by the Adviser. Carlyles, including the Advisers, allocation
policies and procedures are designed to allocate investment opportunities fairly and equitably among its clients over time, taking into account a variety of factors which may include the sourcing of the transaction, the nature of the investment
focus of each such other Carlyle fund, account or other similar arrangement, each funds, accounts or similar arrangements desired level of investment, the relative amounts of capital available for investment, the nature and extent
of involvement in the transaction on the part of the respective teams of investment professionals, any requirements contained in the limited partnership agreements and other governing agreements of the Carlyle funds, accounts or other similar
arrangements and other considerations deemed relevant by Carlyle in good faith, including suitability considerations and reputational matters. The application of these considerations may cause differences in the performance of different Carlyle
funds, accounts and similar arrangements that have similar strategies.
The Funds executive officers and directors, other current and future
principals of the Adviser and certain members of the Advisers investment committee may serve as officers, directors or principals of other entities and affiliates of the Adviser and funds managed by the Funds affiliates that operate in
the same or a related line of business as the Fund does. Currently, the Funds executive officers, as well as the other principals of the Adviser, manage other funds affiliated with Carlyle, including other existing and future affiliated BDCs
and registered closed-end funds, including Carlyle Secured Lending, Inc., Carlyle Credit Solutions, Inc. and Carlyle Tactical Private Credit Fund. In addition, the Advisers investment team has
responsibilities for sourcing and managing private debt investments for certain other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or
may be adverse to the interests of, the Fund and its Shareholders. Although the professional staff of the Adviser will
93
devote as much time to management of the Fund as appropriate to enable the Adviser to perform its duties in accordance with the Investment Advisory Agreement, the investment professionals of the
Adviser may have conflicts in allocating their time and services among the Fund, on the one hand, and investment vehicles managed by Carlyle or one or more of its affiliates on the other hand.
Although the Adviser will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and
procedures, it is possible that, in the future, the Fund may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or an investment manager affiliated with the Adviser, including Carlyle.
As a result of the expansion of Carlyles platform into various lines of business in the alternative asset management industry, Carlyle is subject to a
number of actual and potential conflicts of interest and subject to greater regulatory oversight than that to which it would otherwise be subject if it had just one line of business. In addition, as Carlyle expands its platform, the allocation of
investment opportunities among its investment funds, including the Fund, is expected to become more complex. In addressing these conflicts and regulatory requirements across Carlyles various businesses, Carlyle has and may continue to
implement certain policies and procedures (for example, information barriers). In addition, the Fund may come into possession of material non-public information with respect to issuers in which it may be
considering making an investment. As a consequence, the Fund may be precluded from providing such information or other ideas to other funds affiliated with Carlyle that benefit from such information or the Fund may be precluded from otherwise
consummating a contemplated investment. To the extent the Fund or any other funds affiliated with Carlyle fail to appropriately deal with any such conflicts, it could negatively impact the Funds reputation or Carlyles reputation and the
Funds ability to raise additional funds and the willingness of counterparties to do business with the Fund or result in potential litigation against the Fund.
In the ordinary course of business, the Fund may enter into transactions with affiliates that may be considered related party transactions. The Fund has
implemented certain policies and procedures to screen transactions for any possible affiliations between the proposed portfolio investment, the Fund and other affiliated persons, including the Adviser, Shareholders that own more than 5% of the Fund,
employees, officers and directors of the Fund and the Adviser and certain persons directly or indirectly controlling, controlled by or under common control with the foregoing persons. The Fund will not enter into any agreements unless and until it
is satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, the Fund has taken appropriate actions to seek Board review and approval or SEC exemptive relief for such transaction.
In the course of the Funds investing activities, it pays management and incentive fees to the Adviser and reimburses the Adviser for certain expenses it
incurs in accordance with the Investment Advisory Agreement. As a result, investors in the Funds common shares invest on a gross basis and receive distributions on a net basis after expenses, resulting in a lower rate
of return than an investor might achieve through direct investments. Accordingly, there may be times when the senior management team of the Adviser has interests that differ from those of the Funds Shareholders, giving rise to a conflict.
During periods of unusual market conditions, the Adviser may deviate from its normal trade allocation practices. For example, this may occur with respect to
the management of unlevered and/or long-only investment funds, accounts or similar arrangements that are typically managed on a side-by-side basis with levered and/or
long-short investment funds, accounts or similar arrangements.
Additionally, following the completion of the Tender Offer, New Issuance and Private
Purchase, and assuming the tender offer is fully subscribed, Carlyle is expected to hold approximately 35% of the Funds voting securities.
94
Code of Ethics
The Fund and the Adviser have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes
procedures for personal investments and restrict certain personal securities transactions. Personnel subject to these codes may invest in securities for their personal investment accounts, including securities that may be purchased or held by the
Fund, so long as such investments are made in accordance with the applicable codes requirements. The codes of ethics are included as exhibits to the registration statement of which this Statement of Additional Information forms a part. The
codes of ethics are available on the EDGAR database on the SECs website at http://www.sec.gov.
95
PRICE RANGE OF COMMON SHARES
Our common shares began trading on May 29, 2019 and are currently traded on the NYSE under the symbol VCIF. We expect that on or about
July 27, 2023 our common shares will begin trading on NYSE under the symbol CCIF. The following table lists the high and low closing sale price for our common shares, the high and low closing sale price as a percentage of NAV and
distributions declared per common share for each quarter since October 1, 2020.
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Closing Sales Price |
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Premium (Discount) of High Sales Price to
NAV(2) |
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Premium (Discount) of Low Sales Price to
NAV(2) |
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Distributions Declared(3) |
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Period |
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NAV(1) |
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High |
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|
Low |
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Fiscal year ending September 30, 2021 |
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First quarter |
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12.01 |
|
|
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10.215 |
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|
|
9.64 |
|
|
|
(14.90 |
)% |
|
|
(19.70 |
)% |
|
|
0.3950 |
|
Second quarter |
|
|
11.70 |
|
|
|
10.49 |
|
|
|
9.84 |
|
|
|
(10.30 |
)% |
|
|
(15.90 |
)% |
|
|
0.2395 |
|
Third quarter |
|
|
11.85 |
|
|
|
10.90 |
|
|
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10.18 |
|
|
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(8.00 |
)% |
|
|
(14.10 |
)% |
|
|
0.2360 |
|
Fourth quarter |
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11.69 |
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|
|
10.84 |
|
|
|
10.28 |
|
|
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(7.30 |
)% |
|
|
(12.10 |
)% |
|
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0.2367 |
|
Fiscal year ending September 30,
2022(4) |
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First quarter |
|
|
11.32 |
|
|
|
10.69 |
|
|
|
9.98 |
|
|
|
(5.60 |
)% |
|
|
(11.80 |
)% |
|
|
0.3381 |
|
Second quarter |
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10.97 |
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|
|
10.33 |
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|
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9.77 |
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|
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(5.80 |
)% |
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|
(10.90 |
)% |
|
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0.2271 |
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Third quarter |
|
|
10.65 |
|
|
|
10.00 |
|
|
|
9.07 |
|
|
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(6.10 |
)% |
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(14.80 |
)% |
|
|
0.2194 |
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Fourth quarter |
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|
10.17 |
|
|
|
9.75 |
|
|
|
8.90 |
|
|
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(4.10 |
)% |
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(12.50 |
)% |
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0.2139 |
|
Fiscal year ending September 30,
2023(5) |
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First quarter |
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|
10.26 |
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9.528 |
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|
|
8.465 |
|
|
|
(7.10 |
)% |
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|
(17.50 |
)% |
|
|
0.2068 |
|
Second quarter |
|
|
10.15 |
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|
|
10.10 |
|
|
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8.61 |
|
|
|
(0.49 |
)% |
|
|
(15.17 |
)% |
|
|
0.2050 |
|
Third quarter |
|
|
9.96 |
|
|
|
10.03 |
|
|
|
9.70 |
|
|
|
0.70 |
% |
|
|
(2.61 |
)% |
|
|
0.2022 |
|
Fourth quarter |
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(1) |
NAV per common share is determined as of the last day in the relevant quarter and therefore may not reflect the
NAV per common share on the date of the high and low sales prices. The NAVs shown are based on outstanding common shares at the end of each period. |
(2) |
Calculated as of the respective high or low closing sales price divided by the quarter end NAV.
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(3) |
Represents the cash distributions (including dividends, dividends reinvested and returns of capital, if any)
per common share that we have declared on our common shares in the specified quarter. Tax characteristics of distributions will vary. |
(4) |
For the fiscal year ending September 30, 2022, distributions made by us were comprised, in part, of a
return of capital, as calculated on a per common share basis, of $0.088 per common share. |
(5) |
For the fiscal quarter ending December 31, 2022, distributions made by us were comprised, in part, of an
estimated return of capital, as calculated on a per common share basis, of $0.1253 per common share. For the fiscal quarter ending March 31, 2023, distributions made by us were comprised, in part, of an estimated return of capital, as
calculated on a per common share basis, of $0.0699 per common share. For the fiscal quarter ending June 30, 2023, distributions made by us were comprised, in part, of an estimated return of capital, as calculated on a per common share basis, of
$0.1021 per common share. |
Common shares of closed-end management investment companies may trade
at a market price that is less than the NAV that is attributable to those common shares. The possibility that our common shares of will trade at a discount to NAV or at a premium that is unsustainable over the long term is separate and distinct from
the risk that our NAV will decrease. It is not possible to predict whether our common shares will trade at, above or below NAV in the future. Our NAV per common share was $9.96 as of June 30, 2023. The closing sales price for common shares on
the NYSE on June 30, 2023 was $9.94, which represented a 0.20% discount to NAV per common share.
96
DESCRIPTION OF OUR SECURITIES
This prospectus contains a summary of our common shares, preferred shares, subscription rights and debt securities. These summaries are not meant to be a
complete description of each security. However, this prospectus and the accompanying prospectus supplement will contain the material terms and conditions for each security being offered thereby.
The following are our authorized and outstanding classes of securities as of July 10, 2023:
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Title of Class |
|
Amount Authorized |
|
Amount Held By Fund |
|
Amount Outstanding |
Shares of Beneficial Interest |
|
120,918,984 shares* |
|
None |
|
10,387,864 shares |
* |
Prior to the Closing, the Fund was authorized to issue an unlimited number of common shares, subject to a
$1 billion limit on the Fund, which would represent 120,918,984 shares assuming $8.27 NAV. Under the Declaration of Trust, the Fund is authorized to issue an unlimited number of common shares and is not subject to a dollar limit on the size of
the Fund. |
Anti-Takeover Provisions in the Declaration of Trust
The Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or
to change the composition of the Board. These provisions may have the effect of discouraging attempts to acquire control of the Fund, which attempts could have the effect of increasing the expenses of the Fund and interfering with the normal
operation of the Fund. The terms for which the Trustees hold office are organized into three classes, and trustees are elected to hold office for a term expiring at the annual meeting of Shareholders held in the third year following the year of
their election. A Trustee may be removed from office with cause only by action taken by a majority of the remaining Trustees (or, in the case of an Independent Trustee, only by action taken by a majority of the remaining Independent
Trustees). The Declaration of Trust does not contain any other specific inhibiting provisions that would operate only with respect to an extraordinary transaction such as a merger, reorganization, tender offer, sale or transfer of substantially
all of the Funds asset, or liquidation. Reference should be made to the Declaration of Trust on file with the SEC for the full text of these provisions.
Summary of Certain Aspects of the Delaware Control Share Statute
Because the Fund is organized as a Delaware statutory trust, it is subject to the control share acquisition provisions (the Control Share
Statute) contained in Subchapter III of the Delaware Statutory Trust Act (the DSTA). The Control Share Statute became automatically applicable to listed closed-end funds organized
as Delaware statutory trusts, such as the Fund, upon its effective date of August 1, 2022.
The Control Share Statute provides for a series of voting
power thresholds above which shares are considered control beneficial interests (referred to here as control shares). These voting power thresholds are as follows:
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10% or more, but less than 15% of all voting power; |
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15% or more, but less than 20% of all voting power; |
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20% or more, but less than 25% of all voting power; |
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25% or more, but less than 30% of all voting power; |
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30% or more, but less than a majority of all voting power; or |
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a majority or more of all voting power. |
97
Voting power is defined by the Control Share Statute as the power to directly or indirectly exercise or direct
the exercise of the voting power of fund shares in the election of trustees. Whether a voting power threshold is met is determined by aggregating the holdings of the acquirer as well as those of its associates, which is broadly defined
by the Control Share Statute.
Once a threshold is reached, an acquirer has no voting rights under the DSTA or the governing documents of the Fund with
respect to shares acquired in excess of that threshold (i.e., the control shares) unless approved by shareholders of the Fund or exempted by the Board. Approval by the shareholders requires the affirmative vote of two-thirds of all votes entitled to be cast on the matter, excluding shares held by the acquirer and its associates as well as shares held by certain insiders of the Fund. The Control Share Statute provides
procedures for an acquirer to request a shareholder meeting for the purpose of considering whether voting rights shall be accorded to control shares. Further approval by the Funds shareholders would be required with respect to additional
acquisitions of control shares above the next applicable threshold level. The Board is permitted, but not obligated to, exempt specific acquisitions or classes of acquisitions of control shares, either in advance or retroactively. However,
Section 1.9 of the Funds Proposed Amended and Restated By-Laws, provides that the voting restrictions under the Control Share Statute shall not apply to (i) any acquisition of preferred shares
that may be issued by the Fund and (ii) any acquisition or proposed acquisition of shares by any company that, in accordance with the 1940 Act or SEC exemptive order or other regulatory relief or guidance, votes the shares held by it in the
same proportion as the vote of all other holders of such security or all securities.
The Control Share Statute does not retroactively apply to
acquisitions of shares that occurred prior to August 1, 2022. However, such shares will be aggregated with any shares acquired after August 1, 2022 for purposes of determining whether a voting power threshold is exceeded, resulting in the
newly acquired shares constituting control shares.
The Control Share Statute requires shareholders to disclose to the Fund any control share acquisition
within 10 days of such acquisition and, upon request, to provide any information that the Board reasonably believes is necessary or desirable to determine whether a control share acquisition has occurred.
The Control Share Statute may protect the long-term interests of Fund shareholders by limiting the ability of certain investors to use their ownership to
attempt to disrupt the Funds long-term strategy such as by forcing a liquidity event. However, the Control Share Statute may also serve to entrench the Board and make it less responsive to shareholder requests. The totality of positive or
negative affects is difficult to predict as the Control Share Statute has been in effect for a relatively short period of time.
The foregoing is only a
summary of certain aspects of the Control Share Statute. Shareholders should consult their own legal counsel to determine the application of the Control Share Statute with respect to their shares of the Fund and any subsequent acquisitions of
shares.
98
DESCRIPTION OF OUR COMMON SHARES
The following description is based on relevant portions of the Delaware Statutory Trust Statute and our Amended and Restated Declaration of Trust
(Declaration of Trust) and Amended and Restated By-laws (the By-laws). This summary is not necessarily complete, and we refer you
to the Delaware Statutory Trust Statute, Declaration of Trust and By-laws for a more detailed description of the provisions summarized below.
General
The Fund is an unincorporated statutory trust
established under the laws of the State of Delaware upon the filing of a Certificate of Trust with the Secretary of State of Delaware on April 8, 2011. The Funds Declaration of Trust was amended and restated in connection at Closing. The
Declaration of Trust provides that the Trustees of the Fund may authorize separate classes of common shares of beneficial interest. The Trustees have authorized an unlimited number of common shares. The Fund holds annual meetings of its
Shareholders. As of July 10, 2023, 10,387,864 common shares were outstanding, of which none were owned by the Fund.
The Declaration of Trust, which
has been filed with the SEC, permits the Fund to issue an unlimited number of full and fractional common shares of beneficial interest, no par value, as well as the other securities described in this Prospectus. Each common share of beneficial
interest of the Fund represents an equal proportionate interest in the assets of the Fund with each other common share of beneficial interest in the Fund. Holders of common shares of beneficial interest will be entitled to the payment of dividends
when, as and if declared by the Board. The Fund currently intends to make dividend distributions to its Shareholders of common shares of beneficial interest after payment of Fund operating expenses including interest on outstanding borrowings, if
any, monthly and no less frequently than annually. Dividends declared on common shares will be automatically reinvested in additional common shares of the Fund, unless a common shareholder elects to opt-out.
See Dividend Reinvestment Plan. The 1940 Act may limit the payment of dividends to the holders of common shares. Each whole and partial common share of beneficial interest shall be entitled to one vote as to matters on
which it is entitled to vote pursuant to the terms of the Declaration of Trust on file with the SEC. Upon liquidation of the Fund, after paying or adequately providing for the payment of all liabilities of the Fund, and upon receipt of such
releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining assets of the Fund among its Shareholders. The common shares of beneficial interest as well as the other securities
described in this Prospectus are not liable to further calls or to assessment by the Fund. There are no pre-emptive rights associated with the common shares of beneficial interest or other securities described
in this Prospectus. The Declaration of Trust provides that the Funds common shareholders are not liable for any liabilities of the Fund. Although common shareholders of an unincorporated statutory trust established under Delaware law, in
certain limited circumstances, may be held personally liable for the obligations of the Fund as though they were general partners, the provisions of the Declaration of Trust described in the foregoing sentence make the likelihood of such personal
liability remote.
The Fund generally will not issue share certificates. However, a share certificate may be issued at the Funds discretion for any
or all of the full common shares credited to an investors account. Share certificates that have been issued to an investor may be returned at any time. The Transfer Agent will maintain an account for each Shareholder upon which the
registration of common shares are recorded, and transfers, permitted only in rare circumstances, such as death, will be reflected by bookkeeping entry, without physical delivery. The Transfer Agent will require that a Shareholder provide requests in
writing, accompanied by a valid signature guarantee form, when changing certain information in an account such as wiring instructions or telephone privileges.
99
DESCRIPTION OF OUR PREFERRED SHARES
In addition to common shares, our Declaration of Trust authorizes the issuance of preferred shares. As of July 14, 2023, we did not have any preferred
shares outstanding. If we offer preferred shares under this prospectus, we will provide an appropriate prospectus supplement. We may issue preferred shares from time to time in one or more classes or series, without Shareholder approval. Prior to
issuance of shares of each class or series, our Board is required by Delaware law and by our Declaration of Trust to set, subject to the express terms of any of our then outstanding classes or series of shares, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Any such issuance must adhere to the requirements of the 1940 Act, Delaware law
and any other limitations imposed by law.
The 1940 Act limits our flexibility as to certain rights and preferences of the preferred shares. In
particular, every share issued by the Fund must be voting shares and have equal voting rights with every other outstanding class of voting shares, except to the extent that the shares satisfies the requirements for being treated as a senior
security, which requires, among other things, that:
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immediately after issuance and before any distribution is made with respect to shares, we must meet a coverage
ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred shares, of at least 200%; and |
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the holders of preferred shares must be entitled as a class to elect two trustees at all times and to elect a
majority of the trustees if and for so long as dividends on the preferred shares are unpaid in an amount equal to two full years of dividends on the preferred shares. |
The features of the preferred shares are further limited by the requirements applicable to RICs under the Code.
For any class or series of preferred shares that we may issue, our Board will determine and the prospectus supplement relating to such class or series will
describe:
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the designation and number of shares of such class or series; |
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|
|
the rate and time at which, and the preferences and conditions under which, any dividends will be paid on shares
of such class or series, as well as whether such dividends are participating or non-participating; |
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any provisions relating to convertibility or exchangeability of the shares of such class or series, including
adjustments to the conversion price of such class or series; |
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the rights and preferences, if any, of holders of shares of such class or series upon our liquidation,
dissolution or winding up of our affairs; |
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the voting powers, if any, of the holders of shares of such class or series; |
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any provisions relating to the redemption of the shares of such class or series; |
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any limitations on our ability to pay dividends or make distributions on, or acquire or redeem, other securities
while shares of such class or series are outstanding; |
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any conditions or restrictions on our ability to issue additional shares of such class or series or other
securities; |
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if applicable, a discussion of certain U.S. federal income tax considerations; and |
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any other relative powers, preferences and participating, optional or special rights of shares of such class or
series, and the qualifications, limitations or restrictions thereof. |
All preferred shares that we may issue will be identical and of
equal rank except as to the particular terms thereof that may be fixed by our Board, and all shares of each class or series of preferred shares will be identical and of equal rank except as to the dates from which dividends, if any, thereon will be
cumulative.
100
DESCRIPTION OF OUR SUBSCRIPTION RIGHTS
We may issue subscription rights to our Shareholders to purchase common stock. Subscription rights may be issued independently or together with any other
offered security and may or may not be transferable by the person purchasing or receiving the subscription rights. In connection with a subscription rights offering to our Shareholders, we would distribute certificates evidencing the subscription
rights and a prospectus supplement to our Shareholders on the record date that we set for receiving subscription rights in such subscription rights offering.
The applicable prospectus supplement would describe the following terms of subscription rights in respect of which this prospectus is being delivered:
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the period of time the offering would remain open (which shall be open a minimum number of days such that all
record holders would be eligible to participate in the offering and shall not be open longer than 120 days); |
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the title of such subscription rights; |
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the exercise price for such subscription rights (or method of calculation thereof); |
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the ratio of the offering (which, in the case of transferable rights, will require a minimum of three shares to
be held of record before a person is entitled to purchase an additional share); |
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the number of such subscription rights issued to each Shareholder; |
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the extent to which such subscription rights are transferable and the market on which they may be traded if they
are transferable; |
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if applicable, a discussion of certain U.S. federal income tax considerations applicable to the issuance or
exercise of such subscription rights; |
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the date on which the right to exercise such subscription rights shall commence, and the date on which such right
shall expire (subject to any extension); |
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the extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed
securities and the terms of such over-subscription privilege; |
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any termination right we may have in connection with such subscription rights offering; and
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any other terms of such subscription rights, including exercise, settlement and other procedures and limitations
relating to the transfer and exercise of such subscription rights. |
Additionally, any transferrable rights for common stock will comply
with the following conditions:
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the offering fully protects shareholders preemptive rights and does not discriminate among shareholders;
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management uses its best efforts to ensure an adequate trading market in the rights for use by shareholders who
do not exercise such rights; |
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ratio of offering does not exceed one new share for each three rights held; and |
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the Board makes good faith determination that the offering would result in a net benefit to existing
shareholders. |
Exercise of Subscription Rights
Each subscription right would entitle the holder of the subscription right to purchase for cash such amount of common shares at such exercise price as shall in
each case be set forth in, or be determinable as set forth in, the
101
prospectus supplement relating to the subscription rights offered thereby. Subscription rights may be exercised at any time up to the close of business on the expiration date for such
subscription rights set forth in the prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights would become void.
Subscription rights may be exercised as set forth in the prospectus supplement relating to the subscription rights offered thereby. Upon receipt of payment
and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement we will forward, as soon as practicable, the
common shares purchasable upon such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed offered securities directly to persons other than Shareholders, to or through agents, underwriters or dealers or
through a combination of such methods, as set forth in the applicable prospectus supplement.
Dilutive Effects
Any Shareholder who chooses not to participate in a rights offering should expect to own a smaller interest in us upon completion of such rights offering. Any
rights offering will dilute the ownership interest and voting power of Shareholders who do not fully exercise their subscription rights. Further, because the net proceeds per common share from any rights offering may be lower than our then current
net asset value per common share, the rights offering may reduce our net asset value per common share. The amount of dilution that a Shareholder will experience could be substantial, particularly to the extent we engage in multiple rights offerings
within a limited time period. In addition, the market price of our common shares could be adversely affected while a rights offering is ongoing as a result of the possibility that a significant number of additional common shares may be issued upon
completion of such rights offering. All of our Shareholders will also indirectly bear the expenses associated with any rights offering we may conduct, regardless of whether they elect to exercise any rights.
102
DESCRIPTION OF OUR DEBT SECURITIES
We may issue debt securities in one or more series. The specific terms of each series of debt securities will be described in the particular prospectus
supplement relating to that series. The prospectus supplement may or may not modify the general terms found in this prospectus and will be filed with the SEC. For a complete description of the terms of a particular series of debt securities, you
should read both this prospectus and the prospectus supplement relating to that particular series.
As required by federal law for all bonds and notes of
companies that are publicly offered, the debt securities we may issue are governed by a document called an indenture. An indenture is a contract between us and the financial institution acting as trustee on your behalf, and is subject to
and governed by the Trust Indenture Act of 1939, as amended. The trustee has two main roles. First, the trustee can enforce your rights against us if we default. There are some limitations on the extent to which the trustee acts on your behalf,
described in the second paragraph under Events of Default Remedies if an Event of Default Occurs. Second, the trustee performs certain administrative duties for us with respect to our debt securities.
This section includes a description of the material provisions of the indenture. Any accompanying prospectus supplement will describe any other material
terms of the debt securities being offered thereunder. Because this section is a summary, however, it does not describe every aspect of the debt securities and the indenture. We urge you to read the indenture because it, and not this description,
defines your rights as a holder of debt securities. We will file the indenture with the SEC. In addition, we will file a supplemental indenture with the SEC in connection with any debt offering, at which time the supplemental indenture would be
publicly available. See Additional Information for information on how to obtain a copy of the indenture once available.
The
prospectus supplement, which will accompany this prospectus, will describe the particular series of debt securities being offered, including among other things:
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the designation or title of the series of debt securities; |
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the total principal amount of the series of debt securities; |
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the percentage of the principal amount at which the series of debt securities will be offered;
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the date or dates on which principal will be payable; |
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the rate or rates (which may be either fixed or variable) and/or the method of determining such rate or rates of
interest, if any; |
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the date or dates from which any interest will accrue, or the method of determining such date or dates, and the
date or dates on which any interest will be payable; |
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the terms for redemption, extension or early repayment, if any; |
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the currencies in which the series of debt securities are issued and payable; |
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whether the amount of payments of principal, premium or interest, if any, on a series of debt securities will be
determined with reference to an index, formula or other method (which could be based on one or more currencies, commodities, equity indices or other indices) and how these amounts will be determined; |
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the place or places, if any, other than or in addition to the City of New York, of payment, transfer, conversion
and/or exchange of the debt securities; |
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the denominations in which the offered debt securities will be issued ; |
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the provision for any sinking fund; |
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any restrictive covenants; |
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any Events of Default (as described below); |
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whether the series of debt securities are issuable in certificated form; |
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any provisions for defeasance or covenant defeasance; |
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if applicable, a discussion of certain U.S. federal income tax considerations; |
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whether and under what circumstances we will pay additional amounts in respect of any tax, assessment or
governmental charge and, if so, whether we will have the option to redeem the debt securities rather than pay the additional amounts (and the terms of this option); |
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any provisions for convertibility or exchangeability of the debt securities into or for any other securities;
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the listing, if any, on a securities exchange; and |
Unless the prospectus supplement states otherwise, principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds.
For purposes of this prospectus, any reference to the payment of principal of or premium or interest, if any, on debt securities will include additional
amounts if required by the terms of the debt securities.
While any indebtedness and other senior securities remain outstanding, we must make provisions
to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of
our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see Risk Factors Risks Relating to Our Business and Structure
Regulations governing our operation as a registered closed-end management investment company affect our ability to raise additional capital and the way in which we do so. The raising of debt capital may expose
us to risks, including the typical risks associated with leverage.
General
The indenture provides that any debt securities proposed to be sold under this prospectus and an accompanying prospectus supplement, or the offered debt
securities, and any debt securities issuable upon conversion or exchange of other offered securities, or the underlying debt securities, may be issued under the indenture in one or more series.
The indenture does not limit the amount of debt securities that may be issued thereunder from time to time. Debt securities issued under the indenture, when a
single trustee is acting for all debt securities issued under the indenture, are called the indenture securities. The indenture also provides that there may be more than one trustee thereunder, each with respect to one or more different
series of indenture securities. See Resignation of Trustee below. At a time when two or more trustees are acting under the indenture, each with respect to only certain series, the term indenture
securities means the one or more series of debt securities with respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee
described in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then the indenture securities for which each trustee is acting would be
treated as if issued under separate indentures.
Except as described under Events of Default and
Merger or Consolidation below, the indenture does not contain any provisions that give you protection in the event we issue a large amount of debt or we are acquired by another entity.
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We refer you to the applicable prospectus supplement for information with respect to any deletions from,
modifications of or additions to the Events of Default or our covenants, as applicable, that are described below, including any addition of a covenant or other provision providing event risk or similar protection.
Pursuant to the indenture, we have the ability to issue indenture securities with terms different from those of indenture securities previously issued and,
without the consent of the holders thereof, to reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.
Conversion and Exchange
If any debt securities are
convertible into or exchangeable for other securities, the prospectus supplement will explain the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio (or the calculation method), the conversion or
exchange period (or how the period will be determined), if conversion or exchange will be mandatory or at the option of the holder or us, provisions for adjusting the conversion price or the exchange ratio, and provisions affecting conversion or
exchange in the event of the redemption of the underlying debt securities. These terms may also include provisions under which the number or amount of other securities to be received by the holders of the debt securities upon conversion or exchange
would be calculated according to the market price of the other securities as of a time stated in the prospectus supplement.
Issuance of Securities in
Registered Form
We may issue the debt securities in registered form, in which case we may issue them either in book-entry form only or in
certificated form. Debt securities issued in book-entry form will be represented by global securities. We expect that we will usually issue debt securities in book-entry only form represented by global securities.
Book-Entry Holders
We will issue registered debt
securities in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. This means debt securities will be represented by one or more global securities registered in the name of a depositary that will hold them on
behalf of financial institutions that participate in the depositarys book-entry system. These participating institutions, in turn, hold beneficial interests in the debt securities held by the depositary or its nominee. These institutions may
hold these interests on behalf of themselves or customers.
Under the indenture, only the person in whose name a debt security is registered is recognized
as the holder of that debt security. Consequently, for debt securities issued in book-entry form, we will recognize only the depositary as the holder of the debt securities and we will make all payments on the debt securities to the depositary. The
depositary will then pass along the payments it receives to its participants, which in turn will pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with
one another or with their customers; they are not obligated to do so under the terms of the debt securities.
As a result, investors will not own debt
securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositarys book-entry system or holds an interest through a participant. As
long as the debt securities are represented by one or more global securities, investors will be indirect holders, and not holders, of the debt securities.
Street Name Holders
In the future, we may issue
debt securities in certificated form or terminate a global security. In these cases, investors may choose to hold their debt securities in their own names or in street name. Debt securities held in
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street name are registered in the name of a bank, broker or other financial institution chosen by the investor, and the investor would hold a beneficial interest in those debt securities through
the account he or she maintains at that institution.
For debt securities held in street name, we will recognize only the intermediary banks, brokers and
other financial institutions in whose names the debt securities are registered as the holders of those debt securities, and we will make all payments on those debt securities to them. These institutions will pass along the payments they receive to
their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold debt securities in street name will be indirect holders, and not
holders, of the debt securities.
Legal Holders
Our obligations, as well as the obligations of the applicable trustee and those of any third parties employed by us or the applicable trustee, run only to the
legal holders of the debt securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect
holder of a debt security or has no choice because we are issuing the debt securities only in book-entry form.
For example, once we make a payment or
give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but does not do
so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend an indenture or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture), we
would seek the approval only from the holders, and not the indirect holders, of the debt securities. Whether and how the holders contact the indirect holders is up to the holders.
When we refer to you in this Description of Our Debt Securities, we mean those who invest in the debt securities being offered by this prospectus, whether
they are the holders or only indirect holders of those debt securities. When we refer to your debt securities, we mean the debt securities in which you hold a direct or indirect interest.
Special Considerations for Indirect Holders
If
you hold debt securities through a bank, broker or other financial institution, either in book-entry form or in street name, we urge you to check with that institution to find out:
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how it handles securities payments and notices; |
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whether it imposes fees or charges; |
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how it would handle a request for the holders consent, if ever required; |
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whether and how you can instruct it to send you debt securities registered in your own name so you can be a
holder, if that is permitted in the future for a particular series of debt securities; |
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how it would exercise rights under the debt securities if there were a default or other event triggering the need
for holders to act to protect their interests; and |
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if the debt securities are in book-entry form, how the depositarys rules and procedures will affect these
matters. |
Global Securities
As
noted above, we usually will issue debt securities as registered securities in book-entry form only. A global security represents one or any other number of individual debt securities. Generally, all debt securities represented by the same global
securities will have the same terms.
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Each debt security issued in book-entry form will be represented by a global security that we deposit with and
register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository
Trust Company, New York, New York, known as DTC, will be the depositary for all debt securities issued in book-entry form.
A global security may not be
transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under Termination of a Global Security. As a result of
these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all debt securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security.
Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that has an account with the depositary. Thus, an investor whose
security is represented by a global security will not be a holder of the debt security, but only an indirect holder of a beneficial interest in the global security.
Special Considerations for Global Securities
As
an indirect holder, an investors rights relating to a global security will be governed by the account rules of the investors financial institution and of the depositary, as well as general laws relating to securities transfers. The
depositary that holds the global security will be considered the holder of the debt securities represented by the global security.
If debt securities are
issued only in the form of a global security, an investor should be aware of the following:
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an investor cannot cause the debt securities to be registered in his, her or its name and cannot obtain
certificates for his, her or its interest in the debt securities, except in the special situations we describe below; |
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an investor will be an indirect holder and must look to his, her or its own bank or broker for payments on the
debt securities and protection of his, her or its legal rights relating to the debt securities, as we describe under Issuance of Securities in Registered Form above; |
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an investor may not be able to sell interests in the debt securities to some insurance companies and other
institutions that are required by law to own their securities in non-book-entry form; |
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an investor may not be able to pledge his, her or its interest in a global security in circumstances where
certificates representing the debt securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective; |
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the depositarys policies, which may change from time to time, will govern payments, transfers, exchanges
and other matters relating to an investors interest in a global security. We and the trustee have no responsibility for any aspect of the depositarys actions or for its records of ownership interests in a global security. We and the
trustee also do not supervise the depositary in any way; |
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if we redeem less than all the debt securities of a particular series being redeemed, DTCs practice is to
determine by lot the amount to be redeemed from each of its participants holding that series; |
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an investor is required to give notice of exercise of any option to elect repayment of its debt securities,
through its participant, to the applicable trustee and to deliver the related debt securities by causing its participant to transfer its interest in those debt securities, on DTCs records, to the applicable trustee; |
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DTC requires that those who purchase and sell interests in a global security deposited in its book-entry system
use immediately available funds; your broker or bank may also require you to use immediately available funds when purchasing or selling interests in a global security; and |
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financial institutions that participate in the depositarys book-entry system, and through which an investor
holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt securities; there may be more than one financial intermediary in the chain of ownership for an investor; we
do not monitor, nor are we responsible for the actions of, any of those intermediaries. |
Termination of a Global Security
If a global security is terminated for any reason, interests in it will be exchanged for certificates in
non-book-entry form (certificated securities). After that exchange, the choice of whether to hold the certificated debt securities directly or in street name will be up to the investor. Investors must consult
their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described the rights of legal holders and street name investors under
Issuance of Securities in Registered Form above.
A prospectus supplement may list situations for terminating a global security that
would apply only to the particular series of debt securities covered by the prospectus supplement. If a global security is terminated, only the depositary, and not us or the applicable trustee, is responsible for deciding the investors in whose
names the debt securities represented by the global security will be registered and, therefore, who will be the holders of those debt securities.
Payment and Paying Agents
Unless the prospectus
supplement relating to such debt security states otherwise, we will pay interest to the person listed in the applicable trustees records as the owner of the debt security at the close of business on a particular day in advance of each due date
for interest, even if that person no longer owns the debt security on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the record date. Since we will pay all the interest for an
interest period to the holders on the record date, holders buying and selling debt securities must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the debt securities to prorate
interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called accrued interest.
Payments on Global Securities
We will make
payments on a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who
own beneficial interests in the global security. An indirect holders right to those payments will be governed by the rules and practices of the depositary and its participants, as described under Special Considerations for
Global Securities.
Payments on Certificated Securities
In the event our debt securities become represented by certificates, unless the prospectus supplement relating to such debt security states otherwise, we will
make payments on a certificated debt security as follows. We will pay interest that is due on an interest payment date by a check mailed on the interest payment date to the securityholder at his or her address as shown on the trustees records
as of the close of business on the record date. We will make all payments of principal and premium, if any, by check at the office of the trustee in New York, New York and/or at other offices that may be specified in the Indenture or a notice to
holders against surrender of the debt security.
Alternatively, if the holder asks us to do so, we will pay any amount that becomes due on a debt security
by wire transfer of immediately available funds to an account at a bank in the United States, on the due date. To request
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payment by wire, the holder must give the trustee appropriate transfer instructions at least 15 business days before the requested wire payment is due. In the case of any interest payment due on
an interest payment date, the instructions must be given by the person who is the holder on the relevant regular record date. Any wire instructions, once properly given, will remain in effect unless and until new instructions are given in the manner
described above.
Payment When Offices Are Closed
If any payment is due on a debt security on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on
the next business day in this situation will be treated under the indenture as if they were made on the original due date, except as otherwise indicated in a prospectus supplement. Such payment will not result in a default under any debt security or
the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.
Book-entry and other
indirect holders should consult their banks or brokers for information on how they will receive payments on their debt securities.
Events of Default
You will have rights if an Event of Default occurs in respect of debt securities of your series and is not cured, as described later in this
subsection.
The term Event of Default in respect of the debt securities of your series means any of the following (unless the prospectus
supplement relating to such debt security states otherwise):
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we do not pay the principal of (or premium, if any, on) a debt security of the series when due and payable, and
such default is not cured within five days; |
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we do not pay interest on a debt security of the series when due, and such default is not cured within 30 days;
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we do not deposit any sinking fund payment in respect of debt securities of the series on its due date, and do
not cure this default within five days; |
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we remain in breach of any other covenant with respect to debt securities of the series for 60 days after we
receive a written notice of default stating we are in breach. The notice must be sent by either the trustee or holders of at least 25% of the principal amount of debt securities of the series; |
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we file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization |
occur and in the case of certain orders or decrees entered against us under any bankruptcy law, such order or decree remains undischarged or
unstayed for a period of 90 days;
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on the last business day of each of twenty-four consecutive calendar months, all series of our debt securities
issued under the indenture together have an asset coverage of less than 100% after giving effect to exemptive relief, if any, granted to us by the SEC; or |
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any other Event of Default in respect of debt securities of the series described in the applicable prospectus
supplement occurs. |
An Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default
for any other series of debt securities issued under the same or any other indenture. The trustee may withhold notice to the holders of debt securities of any default, except in the payment of principal, premium, interest, or sinking or purchase
fund installment, if it in good faith considers the withholding of notice to be in the best interests of the holders.
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Remedies if an Event of Default Occurs
If an Event of Default has occurred and is continuing (unless the prospectus supplement relating to such debt security states otherwise), the following
remedies are available. The trustee or the holders of not less than 25% in principal amount of the outstanding debt securities of the affected series may (and the trustee shall at the request of such holders) declare the entire principal amount of
all the outstanding debt securities of that series to be due and immediately payable by a notice in writing to us (and to the trustee if given by such holders). This is called a declaration of acceleration of maturity. In certain circumstances, a
declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the outstanding debt securities of the affected series if (1) we have deposited with the trustee all amounts due and owing with respect
to the debt securities of that series (other than principal that has become due solely by reason of such acceleration) and certain other amounts, and (2) any other Events of Default with respect to that series have been cured or waived.
The trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee protection from expenses
and liability reasonably satisfactory to it (called an indemnity). If indemnity reasonably satisfactory to the trustee is provided, the holders of a majority in principal amount of the outstanding debt securities of the relevant series
may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising
any right or remedy will be treated as a waiver of that right, remedy or Event of Default.
Before you are allowed to bypass the trustee and bring your
own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to the debt securities, the following must occur:
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you must give the applicable trustee written notice that an Event of Default with respect to the relevant series
of debt securities has occurred and remains uncured; |
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the holders of at least 25% in principal amount of all outstanding debt securities of the relevant series must
make a written request that the trustee take action because of the default and must offer the trustee reasonable indemnity, security, or both against the costs, expenses, and other liabilities of taking that action; |
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the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity
and/or security; and |
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the holders of a majority in principal amount of the outstanding debt securities of the relevant series must not
have given the trustee a direction inconsistent with the above notice during that 60-day period. |
However, you are entitled at any time to bring a lawsuit for the payment of money due on your debt securities on or after the due date.
Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the
trustee and how to declare or cancel an acceleration of maturity.
Each year, we will furnish to the trustee a written statement of certain of our
officers certifying that to their knowledge we are in compliance with the Indenture and the debt securities, or else specifying any default.
Waiver
of Default
Holders of a majority in principal amount of the outstanding debt securities of the affected series may waive any past defaults other
than a default:
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in the payment of principal, any premium or interest; or |
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in respect of a covenant that cannot be modified or amended without the consent of each holder.
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Merger or Consolidation
Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or substantially
all of our assets to another entity. However, we may not take any of these actions unless all the following conditions are met:
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where we merge out of existence or convey or transfer substantially all of our assets, the resulting entity or
transferee must agree to be legally responsible for our obligations under the debt securities; |
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immediately after the transaction, no default or Event of Default will have happened and be continuing;
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we must deliver certain certificates and documents to the trustee; and |
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we must satisfy any other requirements specified in the prospectus supplement relating to a particular series of
debt securities. |
Modification or Waiver
There are three types of changes we can make to the indenture and the debt securities issued thereunder.
Changes Requiring Your Approval
First, there are
changes that we cannot make to your debt securities without your specific approval. The following is a list of those types of changes:
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change the stated maturity of the principal of or interest on a debt security or the terms of any sinking fund
with respect to any security; |
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reduce any amounts due on a debt security; |
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reduce the amount of principal payable upon acceleration of the maturity of a debt security following a default;
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adversely affect any right of repayment at the holders option; |
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change the place or currency of payment on a debt security (except as otherwise described in the prospectus or
prospectus supplement); |
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impair your right to sue for payment following the date on which such amount is due and payable;
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adversely affect any right to convert or exchange a debt security in accordance with its terms;
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reduce the percentage in principal amount of holders of debt securities whose consent is needed to modify or
amend the indenture; |
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reduce the percentage in principal amount of holders of debt securities whose consent is needed to waive
compliance with certain provisions of the indenture or to waive certain defaults; and |
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modify any other aspect of the provisions of the indenture dealing with supplemental indentures with the consent
of holders, waiver of past defaults, changes to the quorum or voting requirements or the waiver of certain covenants. |
Changes Not
Requiring Approval
The second type of change does not require any vote by the holders of the debt securities. This type is limited to
clarifications, establishment of the form or terms of new securities of any series as permitted by the indenture and certain other changes that would not materially adversely affect holders of the outstanding debt securities in any material respect.
We also do not need any approval to make any change that affects only debt securities to be issued under the indenture after the change takes effect.
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Changes Requiring Majority Approval
Any other change to the indenture and the debt securities would require the following approval:
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if the change affects only one series of debt securities, it must be approved by the holders of a majority in
principal amount of that series; and |
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if the change affects more than one series of debt securities issued under the same indenture, it must be
approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose. |
In each case, the required approval must be given by written consent.
The holders of a majority in principal amount of a series of debt securities issued under the indenture, voting together as one class for this purpose, may
waive our compliance with some of our covenants applicable to that series of debt securities. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under
Changes Requiring Your Approval.
Further Details Concerning Voting
When taking a vote, we will use the following rules to decide how much principal to attribute to a debt security:
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for original issue discount securities, we will use the principal amount that would be due and payable on the
voting date if the maturity of these debt securities were accelerated to that date because of a default; |
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for debt securities whose principal amount is not known (for example, because it is based on an index), we will
use a special rule for that debt security described in the prospectus supplement; and |
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for debt securities denominated in one or more foreign currencies, we will use the U.S. dollar equivalent.
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Debt securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust
money for their payment or redemption. Debt securities will also not be eligible to vote if they have been fully defeased as described later under DefeasanceFull Defeasance.
We will generally be entitled to set any day as a record date for the purpose of determining the holders of outstanding indenture securities that are entitled
to vote or take other action under the indenture. However, the record date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If we set a record date for a vote or other action to be
taken by holders of one or more series, that vote or action may be taken only by persons who are holders of outstanding indenture securities of those series on the record date and must be taken within 11 months following the record date.
Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the
indenture or the debt securities or request a waiver.
Satisfaction and Discharge; Defeasance
We may satisfy and discharge our obligations under the indenture by delivering to the trustee for cancellation all outstanding debt securities and by
depositing with the trustee after the debt securities have become due and payable, or otherwise, moneys sufficient to pay all of the outstanding debt securities and paying all other sums payable under the indenture by us. Such discharge is subject
to terms contained in the Indenture.
Defeasance
The
following defeasance provisions will be applicable to each series of debt securities (unless the prospectus supplement relating to such debt security states otherwise). Defeasance means that, by depositing with the
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trustee an amount of cash and/or government securities sufficient to pay all principal and interest, if any, on the debt securities when due and satisfying any additional conditions noted below,
we will be deemed to have been discharged from our obligations under the debt securities. In the event of a covenant defeasance, upon depositing such funds and satisfying similar conditions discussed below we would be released from
certain covenants under the indenture relating to the applicable debt securities. The consequences to the holders of such securities would be that, while they would no longer benefit from certain covenants under the indenture, and while such
securities could not be accelerated for any reason, the holders of applicable debt securities nonetheless would be guaranteed to receive the principal and interest owed to them.
Covenant Defeasance
Under current U.S. federal
income tax law and the indenture, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the particular series was issued. This is called covenant defeasance. In that
event, you would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay your debt securities. In order to achieve covenant defeasance, the following must
occur:
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if the debt securities of a particular series are denominated in U.S. dollars, we must deposit in trust for the
benefit of all holders of such series of debt securities a combination of cash and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the debt securities on
their various due dates and any mandatory sinking fund payments or analogous payments; |
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we must deliver to the trustee a legal opinion of our counsel confirming that, under current U.S. federal income
tax law, we may make the above deposit without causing you to be taxed on the debt securities any differently than if such covenant defeasance had not occurred; |
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we must deliver to the trustee a legal opinion and officers certificate stating that all conditions
precedent to covenant defeasance have been complied with; |
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defeasance must not result in a breach or violation of, or result in a default under, the indenture or any of our
other material agreements or instruments; and |
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no default or event of default with respect to such debt securities shall have occurred and be continuing and no
defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days; and |
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satisfy the conditions for covenant defeasance contained in any supplemental indentures. |
If we accomplish covenant defeasance, you can still look to us for repayment of the debt securities if there were a shortfall in the trust deposit or the
trustee is prevented from making payment. For example, if one of the remaining Events of Default occurred (such as our bankruptcy) and the debt securities became immediately due and payable, there might be such a shortfall. However, there is no
assurance that we would have sufficient funds to make payment of the shortfall.
Full Defeasance
If there is a change in U.S. federal income tax law or we obtain or there has been published an IRS ruling, as described in the second bullet below, we can
legally release ourselves from all payment and other obligations on
the debt securities of a particular series (called full defeasance) if we
put in place the following other arrangements for you to be repaid:
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if the debt securities of a particular series are denominated in U.S. dollars, we must deposit in trust for the
benefit of all holders of such securities a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on such securities on their various due
dates; |
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we must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal
income tax law or an IRS ruling that allows us to make the above deposit without causing you to be taxed on the debt securities any differently than if such defeasance had not occurred. Under current U.S. federal income tax law, the deposit and our
legal release from the debt securities would be treated as though we paid you your share of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for your debt securities and you would recognize gain
or loss on the debt securities at the time of the deposit; |
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we must deliver to the trustee a legal opinion and officers certificate stating that all conditions
precedent to defeasance have been complied with; |
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defeasance must not result in a breach or violation of, or constitute a default under, of the indenture or any of
our other material agreements or instruments, as applicable; |
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no default or event of default with respect to such debt securities shall have occurred and be continuing and no
defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days; and |
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satisfy the conditions for full defeasance contained in any supplemental indentures. |
If we ever did accomplish full defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the debt securities. You
could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors, as applicable, if we ever became bankrupt or insolvent. If your
debt securities were effectively subordinated, such subordination would not prevent the trustee under the indenture from applying the funds available to it from the deposit referred to in the first bullet of the preceding paragraph to the payment of
amounts due in respect of such debt securities for the benefit of the subordinated debt holders.
Form, Exchange and Transfer of Certificated
Registered Securities
Holders may exchange their certificated securities, if any, for debt securities of smaller denominations or combined into fewer
debt securities of larger denominations, as long as the total principal amount is not changed and as long as the denomination is greater than the minimum denomination for such securities.
Holders may exchange or transfer their certificated securities at the office of the trustee. We have appointed the trustee to act as our agent for registering
debt securities in the names of holders transferring debt securities. We may appoint another entity to perform these functions or we may choose to perform these functions.
Holders will not be required to pay a service charge to transfer or exchange their certificated securities, but they may be required to pay any tax or other
governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if the Transfer Agent, as applicable, is satisfied with the holders proof of legal ownership.
If we have designated additional transfer agents for your debt security, they will be named in the prospectus supplement. We may appoint additional transfer
agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.
If
any certificated securities of a particular series are redeemable and we redeem less than all the debt securities of that series, we may block the transfer or exchange of those debt securities during the period beginning 15 days before the day we
mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except
that we will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.
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If a registered debt security is issued in book-entry form, only the depositary will be entitled to transfer and
exchange the debt security as described in this subsection, since it will be the sole holder of the debt security.
Resignation of Trustee
Each trustee may resign or be removed with respect to one or more series of indenture securities provided that a successor trustee is appointed to act with
respect to these series and has accepted such appointment. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a trust
separate and apart from the trust administered by any other trustee.
The Trustee under the Indenture
The indenture and applicable prospectus supplement will identify the trustee with respect to any particular series of debt securities.
Certain Considerations Relating To Foreign Currencies
Debt securities denominated or payable in foreign currencies may entail significant risks. These risks include the possibility of significant fluctuations in
the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved and will be more fully described in
the applicable prospectus supplement.
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BOOK-ENTRY DEBT SECURITIES
Unless otherwise indicated in the applicable prospectus supplement, the Depository Trust Company (DTC), New York, NY, will act as
securities depository for the debt securities. The debt securities will be issued as fully registered securities registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may be requested by an authorized
representative of DTC. One fully registered certificate will be issued for the debt securities, in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds
$500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
DTC, the worlds largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking
organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and
money market instruments from over 100 countries that DTCs participants (Direct Participants) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include
both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust &
Clearing Corporation (DTCC).
DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect Participants). DTC has a
Standard & Poors rating of AA+. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com.
Purchases of debt securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the debt securities on
DTCs records. The ownership interest of each actual purchaser of each security (Beneficial Owner) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the debt securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in debt securities, except in the event that use of the book-entry system for the debt securities is discontinued.
To facilitate subsequent transfers, all debt securities deposited by Direct Participants with DTC are registered in the name of DTCs partnership
nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of debt securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the debt securities; DTCs records reflect only the identity of the Direct Participants to whose accounts such debt securities are credited, which may
or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the debt securities within an issue are being redeemed, DTCs practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee)
will consent or vote with respect to the debt securities unless authorized by a Direct Participant in accordance with DTCs Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to us as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.s consenting or voting rights to those Direct Participants to whose accounts the debt securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the debt securities will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTCs practice is to credit Direct Participants accounts upon DTCs receipt of funds and corresponding detail information from us or the trustee on the payment date in accordance with
their respective holdings shown on DTCs records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form
or registered in street name, and will be the responsibility of such Participant and not of DTC or its nominee, the trustee, or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of us or the trustee, but disbursement of such payments to
Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the debt securities at any time by giving reasonable notice to us or the trustee.
Under such circumstances, in the event that a successor depository is not obtained, certificates are required to be printed and delivered. We may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor
securities depository). In that event, certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTCs
book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.
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U.S. FEDERAL INCOME TAX MATTERS
The following is a general summary of certain material U.S. federal income tax considerations applicable to the Fund and an investment in the Funds
common shares. The discussion below provides general tax information related to an investment in the Funds common shares, but does not purport to be a complete description of the U.S. federal income tax consequences of an investment in the
Fund and does not address any state, local, non-U.S. or other tax consequences (such as estate and gift tax consequences). It is based on the Code, U.S. Treasury Regulations thereunder, or Treasury
Regulations, and administrative pronouncements, all as of the date hereof, any of which is subject to change, possibly with retroactive effect. In addition, it does not describe all of the tax consequences that may be relevant in light of a
Shareholders particular circumstances, including (but not limited to) alternative minimum tax consequences and tax consequences applicable to Shareholders subject to special tax rules, such as certain financial institutions; dealers or traders
in securities who use a mark-to-market method of tax accounting; persons holding common shares as part of a hedging transaction, wash sale, conversion transaction,
straddle or integrated transaction or persons entering into a constructive sale with respect to common shares; entities classified as partnerships or other pass-through entities for U.S. federal income tax purposes; insurance companies; U.S.
Shareholders (as defined below) whose functional currency is not the U.S. dollar; or tax-exempt entities, including individual retirement accounts or Roth IRAs. Unless otherwise noted,
the following discussion applies only to a Shareholder that holds common shares as a capital asset and is a U.S. Shareholder. A U.S. Shareholder generally is a beneficial owner of common shares who is for U.S. federal income tax
purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United
States, any state thereof or the District of Columbia; |
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if it (a) is subject to the primary supervision of a court within the United States and one or more
U.S. persons have the authority to control all substantial decisions of the trust or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds common shares, the tax treatment of a partner in
the partnership will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding common shares should consult their tax advisors with respect to the tax treatment to them of the
partnerships ownership and disposition of common shares.
The discussion set forth herein does not constitute tax advice. Tax laws are complex and
often change, and Shareholders should consult their tax advisors about the U.S. federal, state, local or non-U.S. tax consequences of an investment in the Fund.
The following summary does not address U.S. federal income tax considerations applicable to preferred shares, subscription rights or debt securities. If the
Fund issues preferred shares, subscription rights or debt securities, the applicable prospectus supplement will contain a discussion of certain U.S. federal income tax considerations relating to such securities.
Taxation of the Fund
The Fund has elected to be treated
for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, the Fund generally will not be subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains
that it distributes as dividends to shareholders. To qualify as a RIC in any tax year, the Fund must, among other things, satisfy both a source of income test and asset diversification tests. The Fund will generally qualify as a RIC for a tax year
if (i) at least 90% of the Funds gross
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income for such tax year consists of dividends; interest; payments with respect to certain securities loans; gains from the sale or other disposition of shares, securities or foreign currencies;
other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such shares, securities or currencies; and net income derived from interests in qualified
publicly traded partnerships (such income, Qualifying RIC Income); and (ii) the Funds holdings are diversified so that, at the end of each quarter of such tax year, (a) at least 50% of the value of the
Funds total assets is represented by cash and cash equivalents, securities of other RICs, U.S. government securities and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of
the value of the Funds total assets and not greater than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Funds total assets is invested (x) in securities (other than U.S.
government securities or securities of other RICs) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar or related trades or businesses or (y) in the securities of one or more
qualified publicly traded partnerships. The Funds share of income derived from a partnership other than a qualified publicly traded partnership will be treated as Qualifying RIC Income only to the extent that such
income would have constituted Qualifying RIC Income if derived directly by the Fund. A qualified publicly traded partnership is generally defined as an entity that is treated as a partnership for U.S. federal income tax purposes if
(1) interests in such entity are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof and (2) less than 90% of its gross income for the relevant tax year consists of
Qualifying RIC Income (for this purpose, excluding net income derived from interests in qualified publicly traded partnerships). The Code provides that the Treasury Department may by regulation exclude from Qualifying RIC Income foreign currency
gains that are not directly related to the RICs principal business of investing in stock or securities (or options and futures with respect to stock or securities). The Fund anticipates that, in general, its foreign currency gains will be
directly related to its principal business of investing in stock and securities.
In addition, to maintain RIC tax treatment, the Fund must distribute on
a timely basis with respect to each tax year dividends of an amount at least equal to 90% of the sum of its investment company taxable income and its net tax-exempt interest income, determined
without regard to any deduction for dividends paid, to shareholders (the 90% distribution requirement). If the Fund qualifies as a RIC and satisfies the 90% distribution requirement, the Fund generally will not be subject to U.S.
federal income tax on its investment company taxable income and net capital gains (that is, the excess of net long-term capital gains over net short-term capital losses) that it distributes as dividends to shareholders (including amounts
that are reinvested pursuant to the DRP). In general, a RICs investment company taxable income for any tax year is its taxable income, determined without regard to net capital gains and with certain other adjustments. The Fund
intends to distribute all or substantially all of its investment company taxable income, net tax-exempt interest income (if any) and net capital gains on an annual basis. Any taxable income,
including any net capital gains that the Fund does not distribute in a timely manner, will be subject to U.S. federal income tax at regular corporate rates.
If the Fund retains any net capital gains for reinvestment, it may elect to treat such capital gains as having been distributed to its shareholders. If the
Fund makes such an election, each Shareholder will be required to report its share of such undistributed net capital gains attributed to the Fund as long-term capital gain and will be entitled to claim its share of the U.S. federal income taxes paid
by the Fund on such undistributed net capital gains as a credit against its own U.S. federal income tax liability, if any, and to claim a refund on a properly-filed U.S. federal income tax return to the extent that the credit exceeds such liability.
In addition, each Shareholder will be entitled to increase the adjusted tax basis in its common shares by the difference between its share of such undistributed net capital gains and the related credit. There can be no assurance that the Fund will
make this election if it retains all or a portion of its net capital gains for a tax year.
As a RIC, the Fund will be subject to a nondeductible 4% U.S.
federal excise tax on certain undistributed amounts for each calendar year (the 4% excise tax). To avoid the 4% excise tax, the Fund must distribute in respect of each calendar year dividends of an amount at least equal to the sum
of (1) 98% of its ordinary taxable income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of its capital gain net
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income (adjusted for certain ordinary losses) generally for the one-year period ending on October 31 of the calendar year and (3) any ordinary
income and capital gains for previous calendar years that were not distributed during those calendar years. For purposes of determining whether the Fund has met this distribution requirement, the Fund will be deemed to have distributed any income or
gains previously subject to U.S. federal income tax.
Any distribution declared by the Fund in October, November or December of any calendar year, payable
to Shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated for tax purposes as if it had been paid on December 31 of the calendar year in which the distribution
was declared.
If the Fund fails to qualify as a RIC or fails to satisfy the 90% distribution requirement in respect of any tax year, the Fund would be
subject to U.S. federal income tax at regular corporate rates on its taxable income, including its net capital gains, even if such income were distributed, and all distributions out of earnings and profits would be taxed as ordinary dividend income.
Such distributions generally would be eligible for the dividends-received deduction in the case of certain corporate Shareholders and for treatment as qualified dividend income in the case of certain
non-corporate Shareholders. In addition, the Fund could be required to recognize unrealized gains, pay taxes and make distributions (any of which could be subject to interest charges) before re-qualifying for taxation as a RIC. If, however, the Fund fails to satisfy either the income test or asset diversification test described above, in certain cases, the Fund may be able to avoid losing its status as
a RIC by timely providing notice of such failure to the IRS, curing such failure and possibly paying an additional tax or penalty.
Some of the
investments that the Fund is expected to make, such as investments in debt instruments having market discount and/or treated as issued with OID, may cause the Fund to recognize income or gain for U.S. federal income tax purposes prior to the receipt
of any corresponding cash or other property. As a result, the Fund may have difficulty meeting the 90% distribution requirement necessary to maintain RIC tax treatment. Because this income will be included in the Funds investment company
taxable income for the tax year it is accrued, the Fund may be required to make a distribution to Shareholders to meet the distribution requirements described above, even though the Fund will not have received any corresponding cash or property. The
Fund may be required to raise additional debt or equity capital, dispose of other securities or forgo new investment opportunities for this purpose.
There may be uncertainty as to the appropriate treatment of certain of the Funds investments for U.S. federal income tax purposes. In particular, the
Fund expects to invest a portion of its Net Assets in below investment grade instruments. U.S. federal income tax rules with respect to such instruments are not entirely clear about issues such as whether and to what extent the Fund should recognize
interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt
obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Fund, to the extent necessary, in connection with the Funds general intention to distribute sufficient income to qualify for and
maintain its treatment as a RIC for U.S. federal income tax purposes, and to minimize the risk that it becomes subject to U.S. federal income tax or the 4% excise tax.
Income received by the Fund from sources outside the United States may be subject to withholding and other taxes imposed by such countries, thereby reducing
income available to the Fund. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The Fund generally intends to conduct its investment activities to minimize the impact of foreign taxation, but there
is no guarantee that the Fund will be successful in this regard. If more than 50% of the value of the Funds total assets at the close of its tax year consists of stock or securities of foreign corporations, the Fund will be eligible to elect
to pass-through to its Shareholders the foreign source amount of income distributed and the respective amount of foreign taxes paid by the Fund. If the Fund so elects, each Shareholder would be required to include in gross income, even
though not actually received, such Shareholders pro rata share of the foreign taxes paid or deemed paid by the Fund, but would be treated as having paid its pro rata share of such foreign taxes and would therefore be allowed
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to either deduct such amount in computing taxable income or use such amount (subject to various limitations) as a foreign tax credit against federal income tax (but not both).
The Fund may invest in shares of foreign companies that are classified under the Code as passive foreign investment companies (PFICs). For
these purposes, shares would include any interests in a PFIC that are treated as equity for U.S. federal income tax purposes. In general, a foreign company is considered a PFIC in any taxable year if at least 50% of the average value of
its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. In general under the PFIC rules, an excess distribution received with respect to PFIC shares is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. The Fund generally will be subject to tax on the portion, if any, of the excess distribution that is allocated to the Funds holding period in prior tax years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such prior tax years) even if the Fund distributes the corresponding income to Shareholders. Excess distributions include any gain from the sale of PFIC shares as well as
certain distributions from a PFIC. All excess distributions are taxable as ordinary income.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. Under one such election (i.e., a QEF election), the Fund generally would be required to include in its gross income its share of the PFICs ordinary earnings and net capital gains on a current
basis, regardless of whether any distributions are received from the PFIC. If this election is made, the special rules, discussed above, relating to the taxation of excess distributions would not apply. Alternatively, the Fund may be able to elect
to mark its PFIC shares to market, resulting in any unrealized gains at the Funds tax year end being treated as though they were recognized and reported as ordinary income. Any
mark-to-market losses and any loss from an actual disposition of the PFIC shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior tax years with respect to the PFIC shares.
Because the application of the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition
of income, gain or loss with respect to PFIC shares, as well as subject the Fund itself to tax on certain income from PFIC shares, the amount that must be distributed to Shareholders, and which will be recognized by Fund Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC shares. Note that distributions from a PFIC are not eligible for the reduced rate of tax on distributions of
qualified dividend income as discussed below.
Some of the CLOs in which the Fund may invest may be PFICs, which are generally subject to the
tax consequences described above. Investment in certain equity interests (which for these purposes includes certain debt tranches that are treated as equity for U.S. federal income tax purposes) of CLOs that are subject to treatment as PFICs for
U.S. federal income tax purposes may cause the Fund to recognize income in a tax year in excess of the Funds distributions from such CLOs and other PFICs and the Funds proceeds from sales or other dispositions of equity interests in such
CLOs and other PFICs during that tax year. As a result, the Fund generally would be required to distribute such income to satisfy the distribution requirements applicable to RICs.
If the Fund holds 10% or more (by vote or value) of the interests treated as equity for U.S. federal income tax purposes in a foreign corporation that is
treated as a controlled foreign corporation (CFC), including equity tranche investments and certain debt tranche investments in a CLO treated as a CFC, the Fund may be treated as receiving a deemed distribution (taxable as
ordinary income) each tax year from such foreign corporation of an amount equal to the Funds pro rata share of the foreign corporations subpart F income for the tax year (including both ordinary earnings and capital gains),
whether or not the corporation makes an actual distribution to the Fund during such tax year. This deemed distribution is required to be included in the income of certain U.S. shareholders of a CFC, such as the Fund, regardless of whether a U.S.
shareholder has made a QEF election with respect to such CFC. The Fund is generally required to distribute such income in order to satisfy the distribution requirements applicable to RICs, even to the extent the Funds income from a CFC exceeds
the distributions from the CFC and the Funds proceeds from the sales or other dispositions of CFC stock during that
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tax year. In general, a foreign corporation will be treated as a CFC for U.S. federal income tax purposes if more than 50% of the shares of the foreign corporation, measured by reference to
combined voting power or value, is owned (directly, indirectly or by attribution) by U.S. Shareholders. A U.S. Shareholder, for this purpose, is any U.S. person that possesses (actually or constructively) 10% or more of the combined
voting power or value of all classes of shares of a corporation.
The functional currency of the Fund, for U.S. federal income tax purposes, is the U.S.
dollar. Gains or losses attributable to fluctuations in foreign currency exchange rates that occur between the time a Fund accrues interest income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and
the time the Fund actually collects such income or receivables or pays such liabilities generally are respectively characterized as ordinary income or ordinary loss for U.S. federal income tax purposes. Similarly, on the sale of other disposition of
certain investments, including debt securities, certain forward contracts, as well as other derivative financial instruments, denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition also are generally treated as ordinary income or loss. These gains and losses, referred to under the Code as section 988 gains and losses, may increase or
decrease the amount of the Funds investment company taxable income subject to distribution to Fund Shareholders as ordinary income. For example, fluctuations in exchange rates may increase the amount of income that the Fund must distribute to
qualify for tax treatment as a RIC and to prevent application of corporate income tax or the 4% excise tax on undistributed income. Alternatively, fluctuations in exchange rates may decrease or eliminate income available for distribution. If section
988 losses exceed other investment company taxable income during a tax year, any distributions made by the Fund during the tax year before such losses were recognized may be recharacterized as a return of capital to Fund Shareholders for U.S.
federal income tax purposes, the treatment of which is described below, rather than as ordinary dividend income.
If the Fund utilizes leverage through
the issuance of preferred shares or borrowings, it will be prohibited from declaring a distribution or dividend if it would fail the applicable asset coverage test(s) under the 1940 Act after the payment of such distribution or dividend. In
addition, certain covenants in credit facilities or indentures may impose greater restrictions on the Funds ability to declare and pay dividends on common shares. Limits on the Funds ability to pay dividends on common shares may prevent
the Fund from meeting the distribution requirements described above and, as a result, may affect the Funds ability to be subject to tax as a RIC or subject the Fund to corporate income tax or the 4% excise tax. The Fund endeavors to avoid
restrictions on its ability to make distributions to its Shareholders. If the Fund is precluded from making distributions on common shares because of any applicable asset coverage requirements, the terms of preferred shares (if any) may provide that
any amounts so precluded from being distributed, but required to be distributed by the Fund to enable the Fund to satisfy the distribution requirements that would enable the Fund to be subject to tax as a RIC, will be paid to the holders of
preferred shares as a special distribution. This distribution can be expected to decrease the amount that holders of preferred shares would be entitled to receive upon redemption or liquidation of such preferred shares.
Certain of the Funds investments and hedging or derivative transactions are expected to be subject to special U.S. federal income tax provisions that
may, among other things, (1) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (2) convert lower-taxed long-term capital gains into higher-taxed short-term capital gains or ordinary income,
(3) convert an ordinary loss or a deduction into a capital loss, the deductibility of which is more limited, (4) adversely affect when a purchase or sale of shares or securities is deemed to occur, (5) adversely alter the intended
characterization of certain complex financial transactions, (6) cause the Fund to recognize income or gain without a corresponding receipt of cash, (7) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (8) treat dividends that would otherwise be eligible for the corporate dividends received deduction as ineligible for such treatment and (9) produce income that will not
constitute Qualifying RIC Income. The application of these rules could cause the Fund to be subject to U.S. federal income tax or the 4% excise tax and, under certain circumstances, could affect the Funds status as a RIC. The Fund monitors its
investments and may make certain tax elections to mitigate the effect of these provisions.
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The remainder of this discussion assumes that the Fund has qualified for and maintained its treatment as a RIC
for U.S. federal income tax purposes and has satisfied the distribution requirements described above.
Taxation of U.S. Shareholders
Distributions
Distributions of the Funds
ordinary income and net short-term capital gains will, except as described below with respect to distributions of qualified dividend income, generally be taxable to Shareholders as ordinary income to the extent such distributions are
paid out of the Funds current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Distributions (or deemed distributions, as described above), if any, of net capital gains that are properly reported as
capital gain dividends will be taxable as long-term capital gains, regardless of the length of time a Shareholder has owned common shares. The ultimate tax characterization of the Funds distributions made in a tax year cannot be
determined until after the end of the tax year. As a result, the Fund may make total distributions during a tax year in an amount that exceeds the current and accumulated earnings and profits of the Fund. A distribution of an amount in excess of the
Funds current and accumulated earnings and profits will be treated by a Shareholder as a return of capital that will be applied against and reduce the Shareholders tax basis in its common shares. To the extent that the amount of any such
distribution exceeds the Shareholders tax basis in its common shares, the excess will be treated as gain from a sale or exchange of common shares. Distributions will be treated in the manner described above regardless of whether such
distributions are paid in cash or invested in additional common shares.
A return of capital to Shareholders is a return of a portion of their original
investment in the Fund, thereby reducing the tax basis of their investment. As a result from such reduction in tax basis, Shareholders may be subject to tax in connection with the sale of common shares, even if such common shares are sold at a loss
relative to the Shareholders original investment.
It is expected that a substantial portion of the Funds income will consist of ordinary
income. For example, interest and OID derived by the Fund are characterized as ordinary income for U.S. federal income tax purposes. In addition, the Fund has elected to recognize any accured market discount on debt obligations as ordinary income on
a current basis, instead of upon disposition of the applicable debt obligation. Debt obligations will be treated as acquired with market discount if they have a fixed maturity date of more than one year from the date of issuance and are
acquired by the Fund in the secondary market at a price below their stated redemption price at maturity (or, in the case of securities with OID, at a price below their revised issue price), unless the discount is less than a specified de minimis
amount.
Distributions made by the Fund to a corporate Shareholder will qualify for the dividends-received deduction only to the extent that the
distributions consist of qualifying dividends received by the Fund from domestic corporations. In addition, any portion of the Funds dividends otherwise qualifying for the dividends-received deduction will be disallowed or reduced if the
corporate Shareholder fails to satisfy certain requirements, including a holding period requirement, with respect to its common shares. Distributions of qualified dividend income to an individual or other
non-corporate Shareholder will be treated as qualified dividend income to such Shareholder and generally will be taxed at long-term capital gain rates, provided the Shareholder satisfies the
applicable holding period and other requirements. Qualified dividend income generally includes dividends from domestic corporations and dividends from foreign corporations that meet certain specified criteria. Given the Funds
investment strategy, it is not expected that a significant portion of the distributions made by the Fund will be eligible for the dividends-received deduction or the reduced rates applicable to qualified dividend income.
Certain distributions reported by the Fund as Section 163(j) interest dividends may be eligible to be treated as interest income by Shareholders for
purposes of the tax rules applicable to interest expense limitations under Code Section 163(j). Such treatment by the Shareholder is generally subject to holding period requirements and
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other potential limitations. The amount that the Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Funds business
interest income over the sum of the Funds (i) business interest expense and (ii) other deductions properly allocable to the Funds business interest income.
If a person acquires common shares shortly before the record date of a distribution, the price of the shares may include the value of the distribution, and
the person will be subject to tax on the distribution even though economically it may represent a return of the persons investment in such shares.
Distributions paid by the Fund generally will be treated as received by a Shareholder at the time the distribution is made. However, the Fund may, under
certain circumstances, elect to treat a distribution that is paid during the following tax year as if it had been paid during the tax year in which the income or gains supporting the distribution was earned. If the Fund makes such an election, the
Shareholder will still be treated as receiving the distribution in the tax year in which the distribution is received. In this instance, however, any distribution declared by the Fund in October, November or December of any calendar year, payable to
Shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated for tax purposes as if it had been received by Shareholders on December 31 of the calendar year in which
the distribution was declared.
The IRS currently requires that a RIC that has two or more classes of stock allocate to each such class proportionate
amounts of each type of its taxable income (such as ordinary income, capital gains, dividends qualifying for the dividends-received deduction and qualified dividend income) based upon the percentage of total dividends paid out of current or
accumulated earnings and profits to each class for the tax year. Accordingly, if the Fund issues preferred shares, the Fund intends each year to allocate capital gain dividends (and any dividends qualifying for the dividends-received deduction or
dividends treated as qualified dividend income) between its common shares and preferred shares in proportion to the total dividends paid out of current or accumulated earnings and profits to each class with respect to such tax year. Distributions in
excess of the Funds current and accumulated earnings and profits, if any, however, will not be allocated proportionately among the common shares and preferred shares. Since the Funds current and accumulated earnings and profits will
first be used to pay dividends on its preferred shares, distributions in excess of such earnings and profits, if any, will be made disproportionately to holders of common shares.
Shareholders will be notified annually, as promptly as practicable after the end of each calendar year, as to the U.S. federal tax status of distributions,
and Shareholders receiving distributions in the form of additional common shares will receive a report as to the NAV of those common shares.
Sale
or Exchange of Common Shares
Upon the sale or exchange of common shares (except pursuant to a redemption, as described below), a Shareholder
generally will recognize capital gain or loss. The amount of the gain or loss will be equal to the difference between the amount received for the common shares and the Shareholders adjusted tax basis in the relevant shares. Such gain or loss
generally will be a long-term capital gain or loss if the Shareholder has held such common shares as capital assets for more than one year. Otherwise, the gain or loss will be treated as short-term capital gain or loss.
Losses realized by a Shareholder on the sale or exchange of common shares held as capital assets for six months or less will be treated as long-term capital
losses to the extent of any distribution of long-term capital gains received (or deemed received, as discussed above) with respect to such shares. In addition, no loss will be allowed on a sale or exchange of common shares if the Shareholder
acquires (including through reinvestment of distributions or otherwise), or enters into a contract or option to acquire, substantially identical shares within 30 days before or after the sale or exchange of such shares at a loss. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
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In general, U.S. Shareholders currently are generally subject to a maximum U.S. federal income tax rate of either
15% or 20% (depending on whether the Shareholders income exceeds certain threshold amounts) on their net capital gains (i.e., the excess of realized net long-term capital gains over realized net short-term capital losses), including any
long-term capital gain derived from an investment in common shares. Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. Shareholders currently are subject to U.S. federal income tax on net
capital gains at the 21% rate also applied to ordinary income. Non-corporate Shareholders with net capital losses for a tax year (i.e., capital losses in excess of capital gains) generally may deduct up to
$3,000 of such losses against their ordinary income each tax year. Any net capital losses of a non-corporate Shareholder in excess of $3,000 generally may be carried forward and used in subsequent tax years as
provided in the Code. Corporate Shareholders generally may not deduct any net capital losses for a tax year, but may carry back such losses for three tax years or carry forward such losses for five tax years.
If the Fund redeems any common shares held by a Shareholder, the redemption will be treated as a sale or exchange, the treatment of which is described above,
if the redemption (i) is a complete termination of the Shareholders equity interest in the Fund, (ii) is a substantially disproportionate redemption with respect to the Shareholder or (iii) is not
essentially equivalent to a dividend with respect to the Shareholder. In determining whether any of these tests has been met, a Shareholder must take into account not only common shares that are actually owned but also other shares that the
Shareholder constructively owns within the meaning of Section 318 of the Code. If none of these alternative tests are met, the redemption will be treated as a distribution with respect to the common shares, the treatment of which is described
above.
Under Treasury Regulations, if a Shareholder recognizes losses with respect to common shares of $2 million or more for an individual
Shareholder or $10 million or more for a corporate Shareholder, the Shareholder must file with the IRS a disclosure statement on IRS Form 8886. Direct Shareholders of portfolio securities are in many cases excepted from this reporting
requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these
regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual
circumstances.
Reporting of adjusted cost basis information to the IRS and to taxpayers is generally required for covered securities, which generally
include shares of a RIC acquired on or after January 1, 2012. Shareholders should contact their financial intermediaries with respect to reporting of cost basis and available elections for their accounts.
Medicare Tax
An additional 3.8% Medicare tax is imposed
on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of common shares) of U.S. individuals, estates and trusts to the extent
that such persons modified adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an estate or trust) exceeds certain threshold amounts. U.S. persons that are individuals, estates
or trusts are urged to consult their tax advisors regarding the applicability of this tax to their income and gains in respect of their investment in the Fund.
Backup Withholding and Information Reporting
Information
returns will generally be filed with the IRS in connection with payments on common shares and the proceeds from a sale or other disposition of common shares. A Shareholder will generally be subject to backup withholding on all such amounts if it
fails to provide the payor with its correct taxpayer identification number (generally, in the case of a U.S. Shareholder, on an IRS Form W-9) and to make required certifications or
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otherwise establish an exemption from backup withholding. Corporate Shareholders and certain other Shareholders generally are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld as backup withholding may be refunded or credited against the applicable Shareholders U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Taxation of Non-U.S. Shareholders
Whether an investment in the Fund is appropriate for a non-U.S. Shareholder (as defined below) will depend upon that
investors particular circumstances. An investment in the Fund by a non-U.S. Shareholder may have adverse tax consequences. Non-U.S. Shareholders should consult
their tax advisors before investing in common shares.
The U.S. federal income taxation of a Shareholder that is a nonresident alien individual, a foreign
trust or estate or a foreign corporation, as defined for U.S. federal income tax purposes (a non-U.S. Shareholder), depends on whether the income that the Shareholder derives from the Fund
is effectively connected with a U.S. trade or business carried on by the Shareholder.
If the income that a
non-U.S. Shareholder derives from the Fund is not effectively connected with a U.S. trade or business carried on by such non-U.S. Shareholder, distributions
of investment company taxable income will generally be subject to a U.S. federal withholding tax at a 30% rate (or a lower rate provided under an applicable treaty). Alternatively, if the income that a
non-U.S. Shareholder derives from the Fund is effectively connected with a U.S. trade or business of the non-U.S. Shareholder, the Fund will not be required to withhold
U.S. federal tax if the non-U.S. Shareholder complies with applicable certification and disclosure requirements, although such income will be subject to U.S. federal income tax in the manner described below
and at the rates applicable to U.S. residents. Backup withholding will not, however, be applied to payments that have been subject to the respective rate of withholding tax applicable to non-U.S. Shareholders.
A non-U.S. Shareholder whose income from the Fund is not effectively connected with a U.S. trade or
business will generally be exempt from U.S. federal income tax on capital gains distributions, any amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale or exchange of common shares. If,
however, such a non-U.S. Shareholder is a nonresident alien individual and is physically present in the United States for 183 days or more during the tax year and meets certain other requirements, such capital
gains distributions, undistributed capital gains and gains from the sale or exchange of common shares will be subject to tax at a 30% rate (or a lower rate provided under an applicable treaty).
Furthermore, properly reported distributions by the Fund that are received by non-U.S. Shareholders are generally
exempt from U.S. federal withholding tax when they (a) are paid by the Fund in respect of the Funds qualified net interest income (i.e., the Funds U.S. source interest income, subject to certain exceptions, reduced by
expenses that are allocable to such income), or (b) are paid by the Fund in connection with the Funds qualified short-term capital gains (generally, the excess of the Funds net short-term capital gains over the
Funds long-term capital losses for such tax year). To qualify for this exemption from withholding for interest-related dividends, a non-U.S. Shareholder must comply with applicable certification
requirements relating to its non-U.S. tax residency status (including, in general, furnishing an IRS Form W-8BEN, IRS Form W-8BEN-E, IRS Form W-8ECI, IRS Form W-8IMY or IRS Form W-8EXP, or an acceptable
substitute or successor form). However, depending on the circumstances, the Fund may report all, some or none of the Funds potentially eligible distributions as derived from such qualified net interest income or from such qualified short-term
capital gains, and a portion of the Funds distributions (e.g., derived from interest from non-U.S. sources or any foreign currency gains) would be ineligible for this potential exemption from
withholding. Moreover, in the case of common shares held through an intermediary, the intermediary may have withheld amounts even if the Fund reported all or a portion of a distribution as exempt from U.S. federal withholding tax. Thus, an
investment in the common shares by a non-U.S. Shareholder may have adverse tax consequences as compared to a direct investment in the assets in which the Fund will invest.
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If the income from the Fund is effectively connected with a U.S. trade or business carried on by a non-U.S. Shareholder, any distributions of investment company taxable income, capital gains distributions, amounts retained by the Fund that are designated as undistributed capital gains and any gains
realized upon the sale or exchange of common shares will be subject to U.S. federal income tax, on a net income basis, in the same manner as, and at the graduated rates applicable to, U.S. persons. If such a
non-U.S. Shareholder is a corporation, it may also be subject to the U.S. branch profits tax.
A non-U.S. Shareholder other than a corporation may be subject to backup withholding on distributions that are otherwise exempt from withholding tax or on distributions that would otherwise be taxable at a reduced
treaty rate if such Shareholder does not certify its non-U.S. status under penalties of perjury or otherwise establish an exemption.
If the Fund distributes net capital gains in the form of deemed rather than actual distributions, a non-U.S.
Shareholder will be entitled to a U.S. federal income tax credit or tax refund equal to the Shareholders allocable share of the tax the Fund pays on the capital gains deemed to have been distributed. To obtain the refund, the non-U.S. Shareholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even if the non-U.S. Shareholder would not otherwise be
required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return.
Under the FATCA provisions of the Code, the Fund is
required to withhold U.S. tax (at the applicable rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding
requirements in the Code designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Fund to enable the Fund to determine whether
withholding is required.
The tax consequences to a non-U.S. Shareholder entitled to claim the benefits of an
applicable tax treaty may differ from those described herein. Non-U.S. Shareholders are advised to consult their tax advisors with respect to the particular tax consequences to them of an investment in the
Fund, including the potential application of the U.S. estate tax.
Other Taxes
Shareholders may be subject to state, local and non-U.S. taxes applicable to their investment in the Fund. In some
states or localities, entity-level tax treatment and the treatment of distributions made to Shareholders under those jurisdictions tax laws may differ from the treatment under the Code. Accordingly, an investment in common shares may have tax
consequences for Shareholders that are different from those of a direct investment in the Funds portfolio investments. Shareholders are advised to consult their tax advisors with respect to the particular tax consequences to them of an
investment in the Fund.
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PLAN OF DISTRIBUTION
We may offer, from time to time, up to $500,000,000 of our common shares, preferred shares, subscription rights to purchase shares of our shares or debt
securities in one or more underwritten public offerings, at-the-market offerings, negotiated transactions, block trades, best efforts or a combination of these methods.
Any underwriter or agent involved in the offer and sale of the securities will be named in the applicable prospectus supplement. A prospectus supplement or supplements will also describe the terms of the offering of the securities, including: the
purchase price of the securities and the proceeds, if any, we will receive from the sale; any overallotment options under which underwriters may purchase additional securities from us; any agency fees or underwriting discounts and other items
constituting agents or underwriters compensation; the public offering price; any discounts or concessions allowed or re-allowed or paid to dealers; and any securities exchange or market on which
the securities may be listed. Only underwriters named in the prospectus supplement will be underwriters of the securities offered by such prospectus supplement.
The distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at
prevailing market prices at the time of sale, at prices related to such prevailing market prices, or at negotiated prices, provided, however, that the offering price per share of our shares, less any underwriting commissions or discounts, must equal
or exceed the NAV per share of our shares at the time of the offering except (1) in connection with a rights offering to our existing shareholders, (2) with the consent of the majority of our shareholders, (3) the conversion of a
convertible security in accordance with its terms or (4) under such circumstances as the SEC may permit. The price at which securities may be distributed may represent a discount from prevailing market prices.
In connection with the sale of the securities, underwriters or agents may receive compensation from us or from purchasers of the securities, for whom they may
act as agents, in the form of discounts, concessions or commissions. Our common shareholders will indirectly bear such fees and expenses as well as any other fees and expenses incurred by us in connection with any sale of securities. Underwriters
may sell the securities to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters,
dealers and agents that participate in the distribution of the securities may be deemed to be underwriters under the Securities Act, and any discounts and commissions they receive from us and any profit realized by them on the resale of the
securities may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified and any such compensation received from us will be described in the applicable prospectus supplement.
The maximum aggregate commission or discount to be received by any member of the Financial Industry Regulatory Authority or independent broker-dealer will not be greater than 8% of the gross proceeds of the sale of securities offered pursuant to
this prospectus and any applicable prospectus supplement. We may also reimburse the underwriter or agent for certain fees and legal expenses incurred by it.
Any underwriter may engage in overallotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the
Exchange Act. Overallotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum
price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of the overallotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the
securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters
that are qualified market makers on the NYSE may engage in passive market making transactions in our shares on NYSE in accordance with Regulation M under the Exchange Act, during the
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business day prior to the pricing of the offering, before the commencement of offers or sales of our shares. Passive market makers must comply with applicable volume and price limitations and
must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market makers
bid, however, the passive market makers bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open
market and, if commenced, may be discontinued at any time.
We may sell securities directly or through agents we designate from time to time. We will name
any agent involved in the offering and sale of securities and we will describe any commissions we will pay the agent in the applicable prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts
basis for the period of its appointment.
Unless otherwise specified in the applicable prospectus supplement, each series of securities will be a new
issue with no trading market, other than our shares, which is traded on the NYSE. We may elect to list any other series of securities on any exchanges, but we are not obligated to do so. We cannot guarantee the liquidity of the trading markets for
any securities.
Under agreements that we may enter, underwriters, dealers and agents who participate in the distribution of shares of our securities may
be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Underwriters,
dealers and agents may engage in transactions with, or perform services for, us in the ordinary course of business.
If so indicated in the applicable
prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by certain institutions to purchase our securities from us pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be
approved by us.
The obligations of any purchaser under any such contract will be subject to the condition that the purchase of our securities shall not
at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. Such
contracts will be subject only to those conditions set forth in the prospectus supplement, and the prospectus supplement will set forth the commission payable for solicitation of such contracts.
We may enter into Derivative Transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions.
If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out
any related open borrowings of stock. The third parties in such sale transactions will be underwriters and, if not identified in this prospectus, will be identified in the applicable prospectus supplement.
In order to comply with the securities laws of certain states, if applicable, our securities offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers.
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DIVIDEND REINVESTMENT PLAN
The Fund will operate under the Dividend Reinvestment Plan (DRP) administered by Equiniti Trust Company (Equiniti)
Pursuant to the DRP, the Funds Distributions, net of any applicable U.S. withholding tax, are reinvested in the same class of shares of the Fund.
Shareholders automatically participate in the DRP, unless and until an election is made to withdraw from the plan on behalf of such participating Shareholder.
A Shareholder who does not wish to have Distributions automatically reinvested may terminate participation in the DRP by written instructions to that effect to Equiniti. Shareholders who elect not to participate in the DRP will receive all
distributions in cash paid to the Shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee). Such written instructions must be received by Equiniti by within 15 days prior to the applicable dividend
payment date, or the Shareholder will receive such Distribution in shares through the DRP. Under the DRP, the Funds Distributions to Shareholders are automatically reinvested in full and fractional shares as described below.
When the Fund declares a dividend, capital gain or other distribution (each, a Distribution and collectively,
Distributions) Equiniti, on the Shareholders behalf, will receive additional authorized shares from the Fund either newly issued or repurchased from Shareholders by the Fund and held as treasury stock. The number of shares
to be received when Distributions are reinvested will be determined by dividing the amount of the Distribution 95% of the market price per share of the Funds common stock at the close of regular trading on the NYSE. The newly issued shares
would be issued whether our shares are trading at a premium or discount to NAV.
Equiniti will maintain all Shareholder accounts and furnish written
confirmations of all transactions in the accounts, including information needed by Shareholders for personal and tax records. Equiniti will hold shares in the account of the Shareholders in non-certificated
form in the name of the participant, and each Shareholders proxy, if any, will include those shares purchased pursuant to the DRP. Each participant, nevertheless, has the right to request certificates for whole and fractional shares owned. The
Fund will issue certificates in its sole discretion. Equiniti will distribute all proxy solicitation materials, if any, to participating Shareholders.
In
the case of Shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating under the DRP, Equiniti will administer the DRP on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount of shares registered in the Shareholders name and held for the account of beneficial owners participating under the DRP.
Neither Equiniti nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the
DRP, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without
limitation, failure to terminate a participants account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participants account and the terms on which such purchases
and sales are made, subject to applicable provisions of the federal securities laws.
The automatic reinvestment of Distributions will not relieve
participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Distributions. See U.S. Federal Income Tax Matters.
The Fund reserves the right to amend or terminate the DRP upon 60 days notice to Shareholders. There is no direct service charge to participants with
regard to purchases under the DRP; however, the Fund reserves the right to amend the DRP to include a service charge payable by the participants.
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All correspondence concerning the DRP should be directed to Equiniti at 6201 15th Avenue, Brooklyn,
NY 11219. Certain transactions can be performed by calling the toll free number (866) 277-8243.
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REGULATION AS A CLOSED-END
MANAGEMENT INVESTMENT COMPANY
General
As a
registered closed-end management investment company, we are subject to regulation under the 1940 Act. Under the 1940 Act, unless authorized by vote of a majority of our outstanding voting securities, we may
not:
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change our classification to an open-end management investment company;
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alter any of our fundamental policies, which are set forth below in Fundamental Investment
Restrictions; or |
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change the nature of our business so as to cease to be an investment company. |
A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such companys voting
securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy or (b) more than 50% of the outstanding voting securities of such company.
As with other companies regulated by the 1940 Act, a registered closed-end management investment company must adhere
to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons of us, as that term is defined in the 1940 Act. We are required to provide and maintain a bond issued by a
reputable fidelity insurance company to protect the closed-end management investment company. Furthermore, as a registered closed-end management investment company, we
are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such persons
office. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates absent exemptive relief or other prior approval by the SEC.
We will generally not be able to issue and sell shares of our shares at a price below the then current NAV per share (exclusive of any distributing commission
or discount). We may, however, sell our shares at a price below the then current NAV per share if our Board determines that such sale is in our best interests and the best interests of our shareholders, and the holders of a majority of the holders
of our shares, approves such sale. In addition, we may generally issue new shares at a price below NAV in rights offerings to existing shareholders, in payment of dividends and in certain other limited circumstances.
Fundamental Investment Restrictions
The Funds
stated fundamental policies, which may only be changed by the affirmative vote of a majority of the outstanding voting securities of the Fund (the shares), are listed below. For the purposes of this Prospectus, majority of the outstanding
voting securities of the Fund means the vote, at an annual or special meeting of shareholders, duly called, (a) of 67% or more of the shares present at such meeting, if the holders of more than 50% of the outstanding shares are present or
represented by proxy; or (b) of more than 50% of the outstanding shares, whichever is less. The Fund may not:
(1) |
Borrow money, except to the extent permitted by the 1940 Act (which currently limits borrowing to no more than 33-1/3% of the value of the Funds total assets, including the value of the assets purchased with the proceeds of its indebtedness, if any). The Fund may borrow for investment purposes, for temporary liquidity,
or to finance repurchases of its shares. |
(2) |
Issue senior securities, except to the extent permitted by Section 18 of the 1940 Act (which currently
limits the issuance of a class of senior securities that is indebtedness to no more than 33-1/3% of the value of the Funds total assets or, if the class of senior security is stock, to no more than 50%
of the value of the Funds total assets). |
132
(3) |
Underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the
Securities Act of 1933, as amended (the Securities Act) in connection with the disposition of its portfolio securities. The Fund may invest in restricted securities (those that must be registered under the Securities Act before
they may be offered or sold to the public) to the extent permitted by the 1940 Act. |
(4) |
Invest more than 25% of the market value of its assets in the securities of companies, entities or issuers
engaged in any one industry. This limitation does not apply to investment in the securities of the U.S. Government, its agencies or instrumentalities. For purposes of this restriction, an investment in a CLO, collateralized bond obligation, CDO or a
swap or other derivative will be considered to be an investment in the industry (if any) of the underlying or reference security, instrument or asset. |
(5) |
Purchase or sell real estate or interests in real estate. This limitation is not applicable to investments in
securities that are secured by or represent interests in real estate (e.g. mortgage loans evidenced by notes or other writings defined to be a type of security). Additionally, the preceding limitation on real estate or interests in real estate does
not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including real estate investment trusts), nor from
disposing of real estate that may be acquired pursuant to a foreclosure (or equivalent procedure) upon a security interest. |
(6) |
Purchase or sell commodities, commodity contracts, including commodity futures contracts, unless acquired as a
result of ownership of securities or other investments, except that the Fund may invest in securities or other instruments backed by or linked to commodities, and invest in companies that are engaged in a commodities business or have a significant
portion of their assets in commodities, and may invest in commodity pools and other entities that purchase and sell commodities and commodity contracts. |
(7) |
Make loans to others, except (a) through the purchase of debt securities in accordance with its investment
objectives and policies, including notes secured by real estate, which may be considered loans; (b) to the extent the entry into a repurchase agreement is deemed to be a loan; and (c) by loaning portfolio securities. Additionally, the
preceding limitation on loans does not preclude the Fund from modifying note terms. |
The Fund will treat with respect to participation
interests both the financial intermediary and the borrower as issuers for purposes of fundamental investment restriction (5).
The fundamental
investment limitations set forth above restrict the ability of the Fund to engage in certain practices and purchase securities and other instruments other than as permitted by, or consistent with, applicable law, including the 1940 Act. Relevant
limitations of the 1940 Act as they presently exist are described below. These limitations are based either on the 1940 Act itself, the rules or regulations thereunder or applicable orders of the SEC. In addition, interpretations and guidance
provided by the SEC staff may be taken into account to determine if a certain practice or the purchase of securities or other instruments is permitted by the 1940 Act, the rules or regulations thereunder or applicable orders of the SEC. As a result,
the foregoing fundamental investment policies may be interpreted differently over time as the statute, rules, regulations or orders (or, if applicable, interpretations) that relate to the meaning and effect of these policies change, and no vote of
Shareholders, as applicable, will be required or sought.
Non-Fundamental Investment Restrictions
The Fund is also subject to the following non-fundamental restrictions and policies, which may be changed by the Board
without the approval of the holders of a majority of the outstanding voting securities of the Fund. The Fund may not:
(1) |
Change or alter the Funds investment objective or 80% policy; |
(2) |
Purchase securities of other investment companies, except to the extent that such purchases are permitted by
applicable law, including any exemptive orders issued by the SEC; and |
133
(3) |
Purchase any securities on margin except as may be necessary in connection with transactions described in this
prospectus and except that the Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio investments (the deposit or payment by the Fund of initial or variation margin in connection with swaps,
forward contracts and financial futures contracts and options thereon is not considered the purchase of a security on margin). |
Compliance with any policy or limitation of the Fund that is expressed as a percentage of assets is determined at the time of purchase of portfolio
securities. The policy will not be violated if these limitations are exceeded because of changes in the market value or investment rating of the Funds assets or if a borrower distributes equity securities incident to the purchase or ownership
of a portfolio investment or in connection with a reorganization of a borrower. The Fund interprets its policies with respect to borrowing and lending to permit such activities as may be lawful for the Fund, to the full extent permitted by the 1940
Act or by exemption from the provisions therefrom pursuant to an exemptive order of the SEC.
Proxy Voting Policy and Proxy Voting Record
The Fund has delegated its proxy voting responsibility to the Adviser. The proxy voting policies and procedures of the Adviser are set forth below. The
guidelines are reviewed periodically by the Adviser and the Independent Trustees and, accordingly, are subject to change.
It is the policy of the Fund to
delegate the responsibility for voting proxies relating to portfolio securities held by the Fund to the Funds Adviser as a part of the Advisers general management of the Funds portfolio, subject to the continuing oversight of the
Board. The Board has delegated such responsibility to the Adviser, and directs the Adviser to vote proxies relating to portfolio securities held by the Fund consistent with the proxy voting policies and procedures. The Adviser may retain one or more
vendors to review, monitor and recommend how to vote proxies in a manner consistent with the proxy voting policies and procedures, to ensure that such proxies are voted on a timely basis and to provide reporting and/or record retention services in
connection with proxy voting for the Fund.
The right to vote a proxy with respect to portfolio securities held by the Fund is an asset of the Fund. The
Adviser, to which authority to vote on behalf of the Fund is delegated, acts as a fiduciary of the Fund and must vote proxies in a manner consistent with the best interest of the Fund and its Shareholders. In discharging this fiduciary duty, the
Adviser must maintain and adhere to its policies and procedures for addressing conflicts of interest and must vote proxies in a manner substantially consistent with its policies, procedures and guidelines, as presented to the Board.
The Fund shall file an annual report of each proxy voted with respect to portfolio securities of the Fund during the twelve-month period ended June 30 on
Form N-PX not later than August 31 of each year.
Privacy Policy
We are committed to protecting your privacy. This privacy notice explains our privacy policies and those of our affiliated companies. The terms of this notice
apply to both current and former shareholders. We will safeguard all information we receive about you in accordance with reasonable and proportional standards of security and confidentiality under applicable federal law. We have implemented
procedures that are designed to restrict access to your personal information to authorized employees of the Adviser, the Administrator and their affiliates and service providers who need to know your personal information to perform their jobs, and
in connection with servicing your account. Our goal is to limit the collection and use of information about you. While we may share your personal information with our affiliates in connection with servicing your account, our affiliates are not
permitted to share your information with non-affiliated entities, except as permitted or required by law.
When
you purchase our shares and in the course of providing you with products and services, we and certain of our service providers, such as a transfer agent, may collect personal information about you, such as your name,
134
address, social security number or tax identification number. This information may come from sources such as account applications and other forms, from other written, electronic or verbal
correspondence, from your transactions, from your brokerage or financial advisory firm, financial adviser or consultant, and/or information captured on applicable websites.
We do not disclose any personal information provided by you or gathered by us to non-affiliated third parties, except
as permitted or required by law or for our everyday business purposes, such as to process transactions or service your account. For example, we may share your personal information in order to send you annual and semiannual reports, proxy statements
and other information required by law, and to send you information we believe may be of interest to you. We may disclose your personal information to unaffiliated third party financial service providers (which may include a custodian, transfer
agent, accountant or financial printer) who need to know that information in order to provide services to you or to us. These companies are required to protect your information and use it solely for the purpose for which they received it or as
otherwise permitted by law. We may also provide your personal information to your brokerage or financial advisory firm and/or to your financial adviser or consultant, as well as to professional advisors, such as accountants, lawyers and consultants,
or to other third parties as permitted by law.
In addition to disclosing your information to third parties in the context of providing the services you
request, we reserve the right to disclose or report personal or account information to non-affiliated third parties where we believe in good faith that disclosure is required by law, such as in accordance with
a court order or at the request of government regulators or law enforcement authorities or to protect our rights or property. We may also disclose your personal information to a non-affiliated third party at
your request or if you consent in writing to the disclosure.
135
BROKERAGE ALLOCATION
The Fund generally acquires and disposes of its investments in the secondary market through brokers. Brokerage commissions paid for by the investment adviser
are reflected in the trade price.
Subject to policies established by the Funds Board, the Adviser has a duty to seek to obtain the best price
and execution on all security transactions in the Funds portfolio.
In selecting third-party broker-dealers to effect transactions in a
publicly traded security, the Adviser will use their best judgement to choose the service providers most capable of providing best execution on an overall basis. The Adviser will consider the full range of services available from and the
characteristics of each broker. Such services and characteristics may include, but are not limited to: (i) whether the broker-dealer has any special knowledge of the security; (ii) whether the broker-dealer originally underwrote or
sponsored the security; (iii) the ability of the broker-dealer to find a natural buyer or seller for the security; (iv) the operational efficiency with which transactions are effected (such as prompt and accurate confirmation and
delivery), taking into account the size of order and difficulty of execution; (v) the financial strength, integrity and stability of the broker-dealer; (vi) the value of brokerage services over and above trade execution provided; and
(vii) any other factors the investment adviser considers to be in the best interest of the Fund.
136
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
A control person is one who owns, either directly or indirectly more than 25% of the voting securities of a company or acknowledges the existence of control.
A control person may be able to determine the outcome of a matter put to a shareholder vote. As of June 30, 2023 there were no persons known to the Fund with beneficial ownership of Fund shares that owned more than 25% of the voting securities
of the Fund.
Following the completion of the Tender Offer, New Issuance and Private Purchase, and assuming the tender offer is fully subscribed, Carlyle
is expected to hold approximately 35% of the Funds voting securities. Carlyle may continue to be deemed to control the Fund until such time as it owns 25% or less of the outstanding voting securities. This ownership will fluctuate as new
investors buy the Funds common shares. Depending on the size of this ownership interest at any given point in time, it is expected that Carlyle will, for the foreseeable future, either control the Fund or be in a position to exercise a
significant influence on the outcome of any matter put to a vote of Shareholders.
A principal shareholder is any person who owns (either of record or
beneficially) 5% or more of the outstanding shares of a fund. Based on SEC filings, the Fund is aware of shareholder groups that were the beneficial owner of more than 5% of the outstanding shares of the Fund.
As of the dates indicated below, the name, address and percentage of ownership of each entity or person that beneficially owns more than 5% of the outstanding
shares of the Fund were as follows:
|
|
|
|
|
|
|
Title of class |
|
Name of beneficial owner* |
|
Amount and
nature of
beneficial ownership* |
|
Percent
of class |
|
|
|
|
shares of beneficial interest |
|
Almitas Capital LLC 1460 4th Street, Suite
300 Santa Monica, CA 90401(1) |
|
546,229 |
|
5.26% |
|
|
|
|
shares of beneficial interest |
|
Sit Investment Associates, Inc. 3300 IDS
Center 80 South Eighth Street Minneapolis, MN 55402(2) |
|
573,536 |
|
5.53% |
|
|
|
|
shares of beneficial interest |
|
Saba Capital Management, L.P. 405 Lexington
Ave., 58th Floor New York, NY 10174(3) |
|
844,031 |
|
8.13% |
|
|
|
|
shares of beneficial interest |
|
Bulldog Investors, LLC Park 80 West, 250 Pehle
Avenue, Suite 708 Saddle Brook, NJ 07663(4) |
|
848,687 |
|
8.18% |
|
|
|
|
shares of beneficial interest |
|
Relative Value Partners Group, LLC 1033 Skokie
Blvd., Suite 470 Northbrook, Ill 60062(5) |
|
1,709,363 |
|
16.47% |
* |
As promptly as reasonably practicable after the Closing, but in any event within 45 days after the Closing,
CGCIM will commence a tender offer to repurchase outstanding shares of the Fund. Ten business days following the termination of the tender offer, CGCIM or one of its affiliates will purchase newly issued shares and acquire shares in private
purchases. Following these transactions, it is expected that CGCIM, or one of its affiliates, may hold more than 25% of the voting securities of the Fund. |
(1) |
As per February 14, 2023, Schedule 13G/A filing on EDGAR. Beneficial ownership described in filing is
based on sole and shared voting and investment powers. |
137
(2) |
As per February 14, 2023, Schedule 13G filing on EDGAR. Beneficial ownership described in filing is based
on shared voting and investment powers. |
(3) |
As per February 14, 2023, Schedule 13G/A filing on EDGAR. Beneficial ownership described in filing is
based on shared voting and investment powers of reporting persons: Saba Capital Management, L.P.; Saba Capital Management GP, LLC; and Boaz R. Weinstein. |
(4) |
As per January 30, 2023, Schedule 13D/A filing on EDGAR. Beneficial ownership described in filing is based
on sole and shared voting and investment powers of reporting persons: Bulldog Investors, LLC; Phillip Goldstein (individually and as a principal of Bulldog Investors, LLC); and Andrew Dakos (as a principal of Bulldog Investors, LLC).
|
(5) |
As per January 23, 2023 Schedule 13D and February 14, 2022, Schedule 13D/A filing on EDGAR.
Beneficial ownership described in filing is based on sole voting and investment powers. |
As of May 31, 2023, the name, address and
percentage of ownership of each entity or person that owns of record 5% or more of the outstanding shares of the Fund was as follows:
|
|
|
|
|
|
|
Title of class |
|
Name of record owner |
|
Amount of record ownership |
|
Percent
of class |
|
|
|
|
shares of beneficial interest |
|
National Financial Services LLC 499 Washington
Blvd. Jersey City, NJ 07310 |
|
2,974,672 |
|
28.65% |
|
|
|
|
shares of beneficial interest |
|
U.S. Bank National Association 1555 N.
Rivercenter Dr. Suite 3020 Milwaukee, WI 53212 |
|
1,079,723 |
|
10.10% |
|
|
|
|
shares of beneficial interest |
|
Pershing LLC One Pershing Plaza
Jersey City, NJ 07399 |
|
931,767 |
|
8.97% |
|
|
|
|
shares of beneficial interest |
|
Charles Schwab & Co., Inc. 2423 E.
Lincoln Dr. Phoenix, AZ 85016 |
|
908,441 |
|
8.75% |
|
|
|
|
shares of beneficial interest |
|
The Northern Trust Company 50 S LaSalle St.
Chicago, IL 60603 |
|
621,455 |
|
5.99% |
|
|
|
|
shares of beneficial interest |
|
TD Prime Services LLC One Vanderbilt Ave.
New York, NY 10017 |
|
578,961 |
|
5.58% |
None of the securities being registered hereunder will be offered for the account of shareholders.
138
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
An independent registered public accounting firm for the Fund performs an annual audit of the Funds consolidated financial statements. The Board has
engaged , to serve as the Funds independent registered public accounting firm.
Prior to the Closing, , located at principal business address
, served as the Funds independent registered public accounting firm and provided audit services and review of certain documents filed with the SEC.
139
LEGAL COUNSEL
The Board has engaged Dechert LLP, located at 1095 Avenue of the Americas, New York, New York 10036 to serve as the Funds legal counsel. Richards,
Layton & Finger, P.A., One Rodney Square, 920 North King Street, Wilmington, DE 19801, serves as special Delaware counsel to the Fund.
140
ADDITIONAL INFORMATION
We file with or submit to the SEC annual and semi-annual reports, proxy statements and other information meeting the informational requirements of the
Exchange Act or pursuant to Rule 30b2-1 under the 1940 Act. The SEC maintains a website that contains reports, proxy and information statements and other information we file with the SEC at
www.sec.gov. This information is also available free of charge on our website (www.carlylecreditincomefund.com) or by calling (866) 277-8243 (toll-free). Information on our website and the SECs website is not incorporated into or a part of
this prospectus.
Unresolved SEC Staff Comments: None.
141
INCORPORATION BY REFERENCE
This prospectus is part of a registration statement that we have filed with the SEC. We are allowed to incorporate by reference the information
that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information.
We incorporate by reference any future filings (including those made after the
date of the filing of the registration statement of which this prospectus is a part) we will make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act including any filings on or after the date of this prospectus from the date
of filing (excluding any information furnished, rather than filed), until we have sold all of the offered securities to which this prospectus and any accompanying prospectus supplement relates or the offering is otherwise terminated. The information
incorporated by reference is an important part of this prospectus. Any statement in a document incorporated by reference into this prospectus will be deemed to be automatically modified or superseded to the extent a statement contained in
(1) this prospectus or (2) any other subsequently filed document that is incorporated by reference into this prospectus modifies or supersedes such statement. The documents incorporated by reference herein include:
|
|
|
Our Annual Report on Form
N-CSR for the fiscal year ended September 30, 2022, filed with the SEC on December 13, 2022; |
|
|
|
Our definitive proxy statement on Schedule
14A, filed with the SEC on September 1, 2022; |
|
|
|
Our Semi-Annual Report on Form
N-CSRS for the period ended March 31, 2023, filed with the SEC May 30, 2023; and |
The Fund will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, a
copy of any and all of the documents that have been or may be incorporated by reference in this prospectus or the accompanying prospectus supplement.
142
PART C OTHER INFORMATION
ITEM 25. FINANCIAL STATEMENTS AND EXHIBITS
|
|
|
1. Financial Statements |
|
|
Part A |
|
The Financial Highlights of Vertical Capital Income Fund (the Registrant) for the fiscal periods ended September 30, 2022 and March
31, 2023 are included in the Annual Report on Form N-CSR, filed with the SEC on December
13, 2022 and the Semi-Annual Report on Form N-CSRS, filed with the SEC on May 30, 2023,
respectively. |
|
|
Part B |
|
The Financial Statements and the notes thereto for the fiscal periods ended September 30, 2022 and March
31, 2023 are included in the Registrants Annual Report on Form N-CSR, filed electronically with the SEC on
December 13, 2022 and the Semi-Annual Report on Form N-CSRS, filed with the SEC on May 30, 2023,
respectively. |
|
2. Exhibits |
|
|
(2)(a)(1) |
|
Amended and Restated Declaration of Trust* |
|
|
(2)(a)(2) |
|
Certificate of Trust 1 |
|
|
(2)(a)(3) |
|
Certificate of Amendment to Certificate of Trust* |
|
|
(2)(b) |
|
Amended and Restated By-laws* |
|
|
(2)(c) |
|
Not Applicable |
|
|
(2)(d)(1) |
|
Form of indenture between the Fund and the trustee* |
|
|
(2)(d)(2) |
|
Statement of Eligibility of Trustee on Form T-1** |
|
|
(2)(d)(3) |
|
Form of Subscription Certificate** |
|
|
(2)(e) |
|
Dividend reinvestment plan** |
|
|
(2)(f) |
|
Not applicable |
|
|
(2)(g) |
|
Investment Advisory Agreement, dated July 14, 2023, between Carlyle Credit Income Fund and Carlyle Global Credit Investment Management L.L.C.* |
|
|
(2)(h)(1) |
|
Form of Underwriting Agreement for equity securities** |
|
|
(2)(h)(2) |
|
Form of Underwriting Agreement for debt securities** |
|
|
(2)(i) |
|
Not Applicable |
|
|
(2)(j)(1) |
|
Custody Agreement** |
|
|
(2)(k)(1) |
|
Administration Agreement** |
|
|
(2)(k)(2) |
|
Expense Limitation Agreement, dated July 14, 2023, between Carlyle Credit Income Fund and Carlyle Global Credit Investment Management L.L.C.* |
|
|
(2)(k)(3) |
|
Fee Waiver Agreement, dated July 14, 2023, between Carlyle Credit Income Fund and Carlyle Global Credit Investment Management L.L.C.* |
|
|
(2)(k)(4) |
|
Transfer Agent Agreement** |
|
|
(2)(k)(5) |
|
Transaction Agreement, dated January
12, 2023, by and between Vertical Capital Income Fund and Carlyle Global Credit Investment Management L.L.C.5 |
|
|
(2)(l)(1) |
|
Opinion and Consent of Counsel** |
|
|
(2)(l)(2) |
|
Opinion and Consent of Delaware Counsel** |
|
|
(2)(m) |
|
Not Applicable |
|
|
(2)(n)(1) |
|
Consent of Independent Registered Public Accounting Firm** |
1 |
Previously filed on May 3, 2011, as an exhibit to the Registrants Registration Statement on Form N-2, and hereby incorporated by reference. |
2 |
Previously filed on September 30, 2011, as an exhibit to
Pre-Effective Amendment No. 1 to the Registrants Registration Statement on Form N-2, and hereby incorporated by reference. |
3 |
Previously filed on January 28, 2019, as an exhibit to the Registrants Registration Statement on
Form N-2, and hereby incorporated by reference. |
4 |
Previously filed on June 5, 2023, as an exhibit to the Registrants Registration Statement on Form N-2, and hereby incorporated by reference. |
5 |
Previously filed on January 13, 2023, as an exhibit to the Registrants Current Report on Form 8-K, and hereby incorporated by reference. |
** |
To be filed by amendment. |
ITEM 26. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 27. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not Applicable.
ITEM 28. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL
The Registrant is not aware of any person that is directly or indirectly under common control with the Registrant, except that the
Registrant may be deemed to be controlled by CGCIM, the Registrants investment adviser. Information regarding the ownership of CGCIM is set forth in its Form ADV as filed with the Securities and Exchange Commission (the SEC)
(File No. 801-77691).
ITEM 29. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the number of record holders of each class of the Registrants securities as of May 31, 2023:
|
|
|
Title of Class |
|
Number of Record Holders |
Shares of Beneficial Interest |
|
164 |
ITEM 30. INDEMNIFICATION
Reference is made to Article V of Registrants Amended and Restated Declaration of Trust filed as Exhibit (2)(a)(1) to this Registration Statement.
144
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the
Securities Act) may be permitted to the trustees, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that, in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by the trustees,
officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by the trustees, officer or controlling person, Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 31. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
CGCIM serves as the investment adviser to the Registrant. CGCIM is engaged in the investment advisory business. For information as to the business, profession,
vocation or employment of a substantial nature in which CGCIM and its executive officers and directors is or has been, during the last two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or
trustee, reference is made to the information set forth in CGCIMs Form ADV (File No. 801-77691), as filed with the SEC and incorporated herein by reference.
ITEM 32. LOCATION OF ACCOUNTS AND RECORDS
All
accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules thereunder are maintained at the office of the Funds administrator,
.
ITEM 33. MANAGEMENT SERVICES
Not Applicable.
ITEM 34. UNDERTAKINGS
|
3. |
(a) To file, during any period in which offers or sales are being made, a post-effective amendment to the
registration statement: |
|
(i) |
to include any prospectus required by Section 10(a)(3) of the Securities Act; |
|
(ii) |
to reflect in the prospectus any facts or events after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with
the SEC pursuant to Rule 424(b), if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective
registration statement; and |
|
(iii) |
to include any material information with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the registration statement; |
provided, however, that
paragraphs (a)(i), (ii) and (iii) of this section do not apply if the registration statement is filed pursuant to General Instruction A.2 of Form N-2 and the information required to be
145
included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference into the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b), that is part of the registration statement;
(b) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(c) To remove from registration by means of a post-effective amendment any of those securities being registered which remain unsold at the
termination of the offering;
(d) That, for the purpose of determining liability under the Securities Act to any purchaser,
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(i) |
if the Registrant is relying on Rule 430B: |
(A) each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date
the filed prospectus was deemed part of and included in the registration statement; and
(B) each prospectus required to be filed pursuant
to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by
Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date;
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(ii) |
that if the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) under the
Securities Act as part of a registration statement relating to an offering, other than prospectuses relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness, provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; |
(e) That for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of
securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
146
Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
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(i) |
any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be
filed pursuant to Rule 424 under the Securities Act; |
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(ii) |
any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or
used or referred to by the undersigned Registrants; |
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(iii) |
the portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act
relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and |
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(iv) |
any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
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4. |
That for the purposes of determining any liability under the Securities Act: |
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(a) |
the information omitted from the form of prospectus filed as part of a registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 424(b)(1) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective; and |
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(b) |
each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof; |
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5. |
The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrants annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference into the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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6. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue. |
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7. |
The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt
delivery, within two business days of receipt of a written or oral request, any prospectus or Statement of Additional Information. |
147
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment to its Registration Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 17th day of July 2023.
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CARLYLE CREDIT INCOME FUND |
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By: |
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/s/ Lauren Basmadjian |
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Lauren Basmadjian |
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Principal Executive Officer, Trustee and Chair of the Board |
As required by the Securities Act of 1933, this registration statement has been signed below by the following persons in
the capacities and on the dates indicated:
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Signature |
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Title |
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Date |
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/s/ Lauren Basmadjian |
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Principal Executive Officer, Trustee and Chair of the Board |
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July 17, 2023 |
Lauren Basmadjian |
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/s/ Nelson Joseph |
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Principal Financial Officer and Principal Accounting Officer |
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July 17, 2023 |
Nelson Joseph |
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/s/ Mark Garbin* |
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Trustee |
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July 17, 2023 |
Mark Garbin |
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/s/ Sanjeev Handa* |
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Trustee |
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July 17, 2023 |
Sanjeev Handa |
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/s/ Brian Marcus |
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Trustee |
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July 17, 2023 |
Brian Marcus |
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/s/ Joan McCabe* |
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Trustee |
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July 17, 2023 |
Joan McCabe |
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*By: /s/ Joshua Lefkowitz |
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July 17, 2023 |
Joshua Lefkowitz |
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As Agent or Attorney-in-Fact |
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148
Exhibit Index
149
Exhibit (2)(a)(1)
CARLYLE CREDIT INCOME FUND
AMENDED AND RESTATED DECLARATION OF TRUST
Dated as of July 14, 2023
TABLE OF CONTENTS
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Page |
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Article I THE TRUST |
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1.1 |
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Name |
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1 |
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1.2 |
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Trust Purpose |
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1 |
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1.3 |
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Definitions |
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1 |
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Article II TRUSTEES |
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2.1 |
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Number and Qualification |
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3 |
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2.2 |
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Term and Election |
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4 |
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2.3 |
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Resignation and Removal |
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4 |
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2.4 |
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Vacancies |
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4 |
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2.5 |
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Meetings |
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5 |
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2.6 |
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Trustee Action by Written Consent |
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5 |
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2.7 |
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Chair |
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6 |
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2.8 |
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Officers |
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6 |
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Article III POWERS AND DUTIES OF TRUSTEES |
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3.1 |
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General |
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6 |
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3.2 |
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Investments |
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6 |
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3.3 |
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Legal Title |
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6 |
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3.4 |
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Issuance and Repurchase of Shares |
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7 |
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3.5 |
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Borrow Money or Utilize Leverage |
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7 |
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3.6 |
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Delegation; Committees |
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7 |
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3.7 |
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Collection and Payment |
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7 |
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3.8 |
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Expenses |
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7 |
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3.9 |
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By-Laws |
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8 |
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3.10 |
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Miscellaneous Powers |
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8 |
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3.11 |
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Further Powers |
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8 |
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Article IV ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS |
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4.1 |
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Advisory and Management Arrangements |
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8 |
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4.2 |
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Distribution Arrangements |
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9 |
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4.3 |
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Parties to Contract |
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9 |
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Article V LIMITATIONS OF LIABILITY AND INDEMNIFICATION |
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5.1 |
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No Personal Liability of Shareholders, Trustees, etc. |
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9 |
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5.2 |
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Mandatory Indemnification |
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10 |
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5.3 |
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No Bond Required of Trustees |
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11 |
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5.4 |
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No Duty of Investigation; No Notice in Trust Instruments, etc. |
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12 |
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5.5 |
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Reliance on Experts, etc. |
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12 |
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5.6 |
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Derivative Actions |
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12 |
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Article VI SHARES OF BENEFICIAL INTEREST |
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6.1 |
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Beneficial Interest |
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13 |
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6.2 |
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Other Securities |
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14 |
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6.3 |
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Rights of Shareholders |
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14 |
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6.4 |
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Exchange and Conversion Privileges |
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14 |
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6.5 |
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Trust Only |
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15 |
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6.6 |
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Issuance of Shares |
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15 |
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6.7 |
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Register of Shares |
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15 |
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6.8 |
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Transfer Agent and Registrar |
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15 |
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6.9 |
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Transfer of Shares |
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16 |
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6.10 |
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Notices; Waiver of Notice |
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16 |
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6.11 |
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Derivative Actions |
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17 |
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Article VII DETERMINATION OF NET ASSET VALUE |
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7.1 |
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Net Asset Value |
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17 |
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7.2 |
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Power to Modify Foregoing Procedures |
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17 |
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Article VIII CUSTODIANS |
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8.1 |
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Appointment and Duties |
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18 |
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8.2 |
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Central Certificate System |
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18 |
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Article IX REPURCHASES OF SHARES |
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9.1 |
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Repurchase of Shares |
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18 |
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9.2 |
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Disclosure of Holding |
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19 |
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Article X SHAREHOLDERS |
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10.1 |
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Meetings of Shareholders |
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19 |
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10.2 |
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Voting |
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19 |
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10.3 |
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Notice of Meeting and Record Date |
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19 |
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10.4 |
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Quorum and Required Vote |
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20 |
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10.5 |
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Proxies, etc. |
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20 |
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10.6 |
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Reports |
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20 |
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10.7 |
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Inspection of Records |
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21 |
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ii
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10.8 |
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Delivery by Electronic Transmission or Otherwise |
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21 |
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10.9 |
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Shareholder Action by Written Consent |
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21 |
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Article XI DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS; ETC. |
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11.1 |
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Duration |
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21 |
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11.2 |
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Termination |
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21 |
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11.3 |
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Amendment Procedure |
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22 |
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11.4 |
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Merger, Consolidation and Sale of Assets |
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23 |
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11.5 |
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Subsidiaries |
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23 |
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11.6 |
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Certain Transactions |
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23 |
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Article XII MISCELLANEOUS |
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12.1 |
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Filing |
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25 |
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12.2 |
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Resident Agent |
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25 |
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12.3 |
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Governing Law |
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25 |
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12.4 |
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Exclusive Delaware Jurisdiction |
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26 |
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12.5 |
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Agreement to be Bound |
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26 |
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12.6 |
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Counterparts |
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27 |
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12.7 |
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Reliance by Third Parties |
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27 |
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12.8 |
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Provisions in Conflict with Law or Regulation |
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27 |
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12.9 |
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Delivery by Electronic Transmission or Otherwise |
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27 |
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iii
CARLYLE CREDIT INCOME FUND
AMENDED AND RESTATED DECLARATION OF TRUST
AMENDED AND RESTATED DECLARATION OF TRUST made as of the 14th day of July, 2023, by the
Trustees hereunder.
WHEREAS, this Trust (as defined below) has been formed to carry on business as set forth more particularly
hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number of its shares of beneficial interest all in accordance with
the provisions hereinafter set forth;
WHEREAS, this Declaration (as defined below) amends and restates in its entirety that certain
Agreement and Declaration of Trust dated April 8, 2011;
WHEREAS, the Trustees (as defined below) have agreed to manage all property
coming into their hands as Trustees of a Delaware statutory trust in accordance with the provisions hereinafter set forth; and
WHEREAS,
the parties hereto intend that the Trust shall constitute a statutory trust under the DSTA (as defined below) and that this Declaration and the By-Laws (as defined below) shall constitute the governing
instrument of such statutory trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities, and other
assets which they may from time to time acquire in any manner as Trustees hereunder in trust to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest
in this Trust as hereinafter set forth.
ARTICLE I
THE TRUST
1.1
Name. This Trust shall be known as the Carlyle Credit Income Fund and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine. Any name change shall
become effective upon the execution by a majority of the then Trustees of an instrument setting forth the new name and the filing of a certificate of amendment pursuant to Section 3810(b) of the DSTA. Any such instrument shall not require the
approval of the Shareholders (as defined below), but shall have the status of an amendment to this Declaration.
1.2 Trust Purpose.
The purpose of the Trust is to engage in any lawful act or activity and to exercise any powers permitted to a statutory trust organized under the DSTA as now or hereafter in force, including conducting, operating and carrying on the business of an
investment company within the meaning of the 1940 Act (as defined below).
1.3 Definitions. As used in this Declaration, the
following terms shall have the following meanings:
The 1940 Act refers to the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder and exemptions granted therefrom, as amended from time to time.
The terms Affiliated
Person, Assignment, Interested Person and Principal Underwriter shall have the meanings given them in the 1940 Act.
Board of Trustees or Trustees shall mean the Trustees collectively.
By-Laws shall mean the By-Laws of the Trust
as amended from time to time by the Trustees.
Class shall mean a class of Shares the Trust established in accordance
with the provisions hereof.
Code shall mean the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
Commission shall mean the Securities and Exchange Commission.
Contested Election shall mean any election of Trustees in which the number of persons nominated for election as Trustees
exceeds the number of Trustees to be elected, with the determination that any election of Trustees is a Contested Election to be made by the Secretary or other officer of the Trust prior to the time the Trust mails its initial proxy statement in
connection with such election of Trustees. If, prior to the time the Trust mails its initial proxy statement in connection with such election of Trustees, one or more persons nominated for election as a Trustee are withdrawn such that the number of
persons nominated for election as Trustee no longer exceeds the number of Trustees to be elected, such election shall not be considered a Contested Election.
Continuing Trustee shall mean Trustee who either (a) has been a member of the Board of Trustees for a period of at
least thirty-six months (or since the date hereof, if less than thirty-six months) or (b) was nominated to serve as a member of the Board of Trustees by a majority
of the Continuing Trustees then members of the Board of Trustees.
Declaration shall mean this Amended and Restated
Declaration of Trust, as amended, supplemented or amended and restated from time to time.
Delaware General Corporation
Law means the Delaware General Corporation Law, 8 Del. C. § 100, et. seq., as amended from time to time.
DSTA shall mean the provisions of the Delaware Statutory Trust Act, 12 Del. C. § 3801, et.
seq., as such Act may be amended from time to time.
Fiscal Year means each period commencing on January 1
of each year and ending on December 31 of that year (or on the date of a final distribution made in accordance with Section 12.2 of this Declaration), unless the Trustees designate another fiscal year for the Trust. The taxable year of the
Trust will end on December 31 of each year, or on any other date designated
2
by the Trustees that is a permitted taxable year-end for tax purposes, and need not be the same as the Fiscal Year.
Fundamental Policies shall mean the investment policies and restrictions as set forth from time to time in any Registration
Statement on Form N-2 of the Trust filed with the Commission and designated as fundamental policies therein, as they may be amended from time to time in accordance with the requirements of the 1940 Act.
Majority Shareholder Vote shall mean a vote of a majority of the outstanding voting securities (as such term is
defined in the 1940 Act) of the Trust with all classes of Shares voting together as a single class, except as with respect to votes which affect only one or more Classes, as provided for herein, in which case it shall mean a vote of a majority of
outstanding voting securities of such Class or Classes, as applicable.
Person shall mean and include individuals,
corporations, partnerships, trusts, limited liability companies, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof.
Prospectus shall mean the Prospectus and Statement of Additional Information of the Trust, if any, as in effect and as may
be amended from time to time.
Shareholders shall mean as of any particular time the holders of record of outstanding
Shares of the Trust, at such time.
Shares shall mean the transferable units of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares.
Trust shall mean the trust established by this Declaration and the By-Laws, as
amended from time to time, inclusive of each such amendment.
Trust Property shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees in such capacity.
Trustees shall mean the signatories to this Declaration, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who at the time in question have been duly elected or appointed and have qualified as trustees in accordance with the provisions hereof and are then in office.
ARTICLE II
TRUSTEES
2.1 Number and Qualification. As of the date hereof, the number of Trustees shall be five (5) and such Trustees shall be the
signatories hereto. Thereafter, the number of Trustees shall be determined by a written instrument signed by a majority of the Trustees then in office, provided that the number of Trustees shall be no less than one (1) and no more than fifteen
(15). No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his or her term. An individual nominated as a Trustee shall satisfy any applicable requirements of the 1940 Act.
Trustees need not own Shares and may succeed themselves in office.
3
2.2 Term and Election. The Trustees (other than any Trustee elected solely by holders of
one or more classes or series of preferred shares in connection with dividend arrearages) shall be classified, with respect to the terms for which they severally hold office, into three classes, as nearly equal in number as possible as determined by
the Board of Trustees, one class to hold office initially for a term expiring at the next succeeding annual meeting of Shareholders, another class to hold office initially for a term expiring at the second succeeding annual meeting of Shareholders
and another class to hold office initially for a term expiring at the third succeeding annual meeting of Shareholders, with the members of each class to hold office until their successors are duly elected and qualify. At each annual meeting of the
Shareholders, the successors to the class of Trustees whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of Shareholders held in the third year following the year of their election and until
their successors are duly elected and qualify. Subject to the provisions of the 1940 Act, the Trustees at any time may appoint individuals to fill vacancies on the Board of Trustees.
2.3 Resignation and Removal. Any of the Trustees may resign their trust (without need for prior or subsequent accounting) by an
instrument in writing signed by such Trustee and delivered or mailed to the Trustees or the Chair (if any), the Chief Executive Officer or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the
terms of the instrument. Any of the Trustees may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by Section 2.1 hereof) for cause only, and not without cause, and only
by action taken by a majority of the remaining Trustees (or, in the case of an independent trustee (as such term is defined in the Delaware Statutory Trust Act), only by action taken by a majority of the remaining independent trustees). Upon the
resignation or removal of a Trustee, each such resigning or removed Trustee shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning or removed Trustee. Upon the incapacity or death of any Trustee, such Trustees legal representative shall execute and deliver on such Trustees behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in
the event of the removal, declination to serve, resignation, retirement, incompetence or other incapacity to perform the duties of the office, or death. Whenever a vacancy in the Board of Trustees shall occur, the remaining Trustees may fill such
vacancy by appointing any individual as they may determine in their sole discretion by a vote of a majority of the Trustees then in office or may leave such vacancy unfilled or may reduce the number of Trustees; provided the aggregate number of
Trustees after such reduction shall not be less than the minimum number required by Section 2.1 hereof. Any vacancy created by an increase in Trustees may be filled by the appointment of an individual made by a vote of a majority of the
Trustees then in office. The Trustees may appoint a new Trustee as provided above in anticipation of a vacancy expected to occur because of the retirement, resignation or removal of a Trustee, or an increase in the number of Trustees, provided that
such appointment shall become effective only at or after the expected vacancy occurs. No vacancy shall operate to annul this Declaration or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled as provided herein, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by
this Declaration.
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2.5 Meetings. Meetings of the Trustees shall be held from time to time upon the call of
the Chair, if any, or the Chief Executive Officer , the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice, except as may be otherwise required by law, at a time and place fixed by the By-Laws, the Chair or by resolution or consent of the Trustees. Notice of any other meeting shall be given by the Secretary and shall be delivered to the Trustees orally or via electronic transmission not less than
24 hours, or in writing not less than 72 hours, before the meeting, but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except
where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been properly called or convened. Any time there is more than one Trustee, a quorum for all meetings of
the Trustees shall be one-third, but not less than two, of the Trustees. Unless provided otherwise in this Declaration and except as required under the 1940 Act, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent as provided in Section 2.6.
Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any
such committee shall be one-third, but not less than two, of the members thereof. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written consent as provided in Section 2.6.
With respect to
actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum purposes under this Section and shall be entitled to vote to the extent not prohibited by the 1940 Act
or herein.
All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by means of a conference
telephone, video or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in a meeting pursuant to any such communications system shall constitute presence in person at such
meeting.
2.6 Trustee Action by Written Consent. Any action which may be taken by Trustees by vote may be taken without a meeting
if that number of the Trustees, or members of a committee, as the case may be, required for approval of such action at a meeting of the Trustees or of such committee consent to the action in writing and the written consents are filed with the
records of the meetings of Trustees. Such consent shall be treated for all purposes as a vote taken at a meeting of Trustees.
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2.7 Chair. The Trustees may designate a Chair and a Vice Chair of the Board of Trustees,
who shall have such powers and duties as determined by the Board of Trustees from time to time. Any Chair or Vice Chair shall be a Trustee.
2.8 Officers. The Trustees shall elect a Chief Executive Officer , a Secretary and a Treasurer. Officers shall serve at the pleasure of
the Trustees or until their successors are elected. The Trustees may elect or appoint or may authorize the Chair, if any, or Chief Executive Officer to appoint such other officers or agents with such powers as the Trustees may deem to be advisable.
The Chief Executive Officer , Secretary and Treasurer may, but need not, be a Trustee.
ARTICLE III
POWERS AND DUTIES OF TRUSTEES
3.1 General. The Trustees shall owe to the Trust and its Shareholders the same fiduciary duties as owed by directors of corporations to
such corporations and their stockholders under the Delaware General Corporation Law. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the
sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Declaration. The Trustees may perform such acts as in their sole discretion are proper for conducting the business of
the Trust. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court.
3.2 Investments. The Trustees shall have power, subject to the Fundamental Policies in effect from time to time with respect to the
Trust, to: (a) manage, conduct, operate and carry on the business of an investment company; and (b) subscribe for, invest in, reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of any and all sorts of property, tangible or intangible, including but not limited to securities of any type whatsoever, whether equity or non-equity, of any issuer, evidences of
indebtedness of any person and any other rights, interests, instruments or property of any sort and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and
description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons to exercise any of said rights, powers and privileges in respect of any of said investments. The
Trustees shall not be limited by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title
to all the Trust Property shall be vested in the Trust except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of any other Person as nominee,
custodian or pledgee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected.
To the extent any Trust Property is titled in the name of one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a Trustee upon his due election and qualification. Upon the ceasing of any person to be a Trustee for any reason, such person shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
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3.4 Issuance and Repurchase of Shares. The Trustees shall have the power to issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, classify and/or reclassify, dispose of, transfer, and otherwise deal in, Shares, including Shares in fractional denominations, and, subject to the more detailed provisions set forth
in Articles VIII and IX, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property whether capital or surplus or otherwise, to the full extent now or hereafter permitted corporations formed
under the Delaware General Corporation Law.
3.5 Borrow Money or Utilize Leverage. Subject to the Fundamental Policies in effect
from time to time with respect to the Trust, the Trustees shall have the power to borrow money or otherwise obtain credit or utilize leverage to the maximum extent permitted by law or regulation as such may be needed from time to time and to secure
the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee or undertake the performance of any obligation, contract or engagement of any
other person, firm, association or corporation.
3.6 Delegation; Committees. The Trustees shall have the power to appoint from
their own number, and terminate, any one or more committees consisting of one or more Trustees, including an executive committee which may exercise some or all of the power and authority of the Trustees as the Trustees may determine (including but
not limited to the power to determine net asset value and net income and the power to declare a dividend or other distribution on the Shares of any series or class), subject to any limitations contained in the
By-Laws, and in general to delegate from time to time to one or more of their number or to one or more officers, employees or agents of the Trust any or all of their powers, authorities, duties and the doing
of such things and the execution of such instruments, either in the name of the Trust or the names of the Trustees or otherwise, as the Trustees may deem expedient (including but not limited to the power to declare a dividend or other distribution
on the Shares of any series or class).
3.7 Collection and Payment. The Trustees shall have power to collect all property due to
the Trust; to pay all claims, including taxes, against the Trust Property or the Trust, the Trustees or any officer, employee or agent of the Trust; to prosecute, defend, compromise or abandon any claims relating to the Trust Property or the Trust,
or the Trustees or any officer, employee or agent of the Trust; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. Except
to the extent required for a corporation formed under the Delaware General Corporation Law, the Shareholders shall have no power to vote as to whether or not a court action, legal proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders.
3.8 Expenses. The Trustees shall have power to incur
and pay out of the assets or income of the Trust any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration, and the business of the Trust, and to pay reasonable compensation
from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. The Trustees may pay themselves such compensation for special services, including legal, underwriting,
syndicating and brokerage services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by themselves on behalf of the Trust.
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3.9 By-Laws. The Trustees shall have the exclusive
authority, without the vote, approval or consent of the Shareholders, to adopt and from time to time amend or repeal By-Laws for the conduct of the business of the Trust.
3.10 Miscellaneous Powers. Without limiting the general or further powers of the Trustees, the Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) purchase, and
pay for out of Trust Property, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisors, distributors, selected dealers or independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such Person against such liability;
(d) establish pension, profit-sharing, share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (e) make donations, irrespective of benefit to the Trust, for
charitable, religious, educational, scientific, civic or similar purposes; (f) to the extent permitted by law, indemnify any Person with whom the Trust has dealings, including without limitation any advisor, administrator, manager, transfer
agent, custodian, distributor or selected dealer, or any other person as the Trustees may see fit to such extent as the Trustees shall determine; (g) guarantee indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method in which its accounts shall be kept; and (i) adopt a seal for the Trust, even though the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust.
3.11 Further Powers. The Trustees shall have the power to conduct the business of the Trust and carry on its operations in any and all
of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The Trustees will not be required to obtain any court order to deal with the Trust Property.
ARTICLE IV
ADVISORY,
MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
4.1 Advisory and Management Arrangements. Subject to the requirements of applicable
law as in effect from time to time, the Trustees may in their discretion from time to time enter into advisory, administration or management contracts (including, in each case, one or more
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sub-advisory, sub-administration or sub-management contracts) whereby the
other party to any such contract shall undertake to furnish such advisory, administrative and management services with respect to the Trust as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration, the Trustees may authorize any advisor, administrator or manager (subject to such general or specific instructions as the Trustees may from time to time
adopt) to exercise any of the powers of the Trustees, including to effect investment transactions with respect to the assets on behalf of the Trust to the full extent of the power of the Trustees to effect such transactions or may authorize any
officer, employee or Trustee to effect such transactions pursuant to recommendations of any such advisor, administrator or manager (and all without further action by the Trustees). Any such investment transaction shall be deemed to have been
authorized by the Board of Trustees.
4.2 Distribution Arrangements. Subject to compliance with the 1940 Act, the Trustees may
retain underwriters and/or selling agents to sell Shares and other securities of the Trust. The Trustees may in their discretion from time to time enter into one or more contracts, providing for the sale of securities of the Trust, whereby the Trust
may either agree to sell such securities to the other party to the contract or appoint such other party its sales agent for such securities. In either case, the contract shall be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article IV or the By-Laws; and such contract may also provide for the repurchase or sale of securities of the Trust by such other party as principal or as
agent of the Trust and may provide that such other party may enter into selected dealer agreements with registered securities dealers and brokers and servicing and similar agreements with persons who are not registered securities dealers to further
the purposes of the distribution or repurchase of the securities of the Trust.
4.3 Parties to Contract. Any contract of the
character described in Sections 4.1 and 4.2 of this Article IV or in Article Article VIII hereof may be entered into with any Person, although one or more of the Trustees, officers or employees of the Trust may be an officer, director, trustee,
shareholder or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any Person holding such relationship be liable merely by reason
of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. The same Person may be the other party to contracts entered into pursuant to Sections 4.1 and 4.2 above or Article VIII, and any individual
may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.3.
ARTICLE V
LIMITATIONS OF
LIABILITY AND INDEMNIFICATION
5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder of the Trust shall be
subject in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to
stockholders of a private corporation for profit incorporated under the Delaware General Corporation Law. No Trustee or officer of the
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Trust shall be subject in such capacity to any personal liability whatsoever to any Person, save only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the
Trust. No Trustee who has been determined to be an audit committee financial expert (for purposes of Section 407 of the Sarbanes-Oxley Act of 2002 or any successor provision thereto) by the Trustees shall be subject to any greater
liability or duty of care in discharging such Trustees duties and responsibilities by virtue of such determination than is any Trustee who has not been so designated. If any Shareholder, Trustee or officer, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he or she shall not, on account thereof, be held to any personal liability. Neither the repeal or modification of this Section 5.1, nor the
adoption or modification of any other provision of this Declaration or the By-Laws inconsistent with this Article, shall adversely affect any right or protection of a Trustee or officer of the Trust existing
at the time of such adoption, repeal or modification with respect to acts or omissions occurring prior to such adoption, repeal or modification.
5.2 Mandatory Indemnification. (a) The Trust hereby agrees to indemnify, out of Trust Property, to the fullest extent
permitted under applicable law, each person who at any time serves as a Trustee or officer of the Trust (each such person being an indemnitee) against any liabilities and expenses (including amounts paid in satisfaction of judgments, in
compromise or settlements, or as fines and penalties; any expenses of establishing a right to indemnification under this Article; and reasonable counsel fees reasonably incurred by such indemnitee in connection with the defense or disposition of, or
advice in connection with, any action, suit, proceeding or investigation, whether civil or criminal, before or in connection with any court, or administrative or investigative body, in which he or she may be or may have been involved as a party,
witness, participant or otherwise, or with which he or she may be or may have been threatened), incurred in connection with acting in any capacity set forth in this Article V or by reason of his having acted in any such capacity, except with respect
to any matter as to which he or she shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in the case of any criminal proceeding, as to which he or she shall have had reasonable cause
to believe that the conduct was unlawful; provided, however, that no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad
faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as disabling
conduct); and provided further, that the termination of any proceeding by judgment, order, settlement, conviction or plea of nolo contendere or its equivalent shall not of itself create a presumption that the indemnitee did not act in good
faith or that the indemnitee had reasonable cause to believe that his conduct was unlawful. Notwithstanding the foregoing, with respect to any action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee (1) was authorized by a majority of the Trustees or (2) was instituted by the indemnitee to enforce his or her rights to indemnification
hereunder in a case in which the indemnitee is found to be entitled to such indemnification. The rights to indemnification set forth in this Declaration shall continue as to a person who has ceased to be a Trustee or officer of the Trust and shall
inure to the benefit of his or her heirs, executors and personal and legal representatives. No amendment or restatement of this Declaration or repeal of any of its provisions shall limit or eliminate any of the benefits provided to any person who at
any time is or was a Trustee or officer of the Trust or otherwise entitled to indemnification hereunder in respect of any act or omission that occurred prior to such amendment, restatement or repeal.
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(b) Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has
been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification
hereunder or, (ii) in the absence of such a decision, by (1) a majority vote of a quorum of those Trustees who are neither Interested Persons of the Trust nor parties to the proceeding (Disinterested Non-Party Trustees), that the indemnitee is entitled to indemnification hereunder, or (2) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in
a written opinion concludes that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with
the immediately succeeding paragraph (c) below.
(c) The Trust shall make advance payments in connection with the expenses of
defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written affirmation by the indemnitee of the indemnitees good faith belief that the standards of conduct necessary for indemnification
have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that the indemnitee is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct
necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (i) the indemnitee shall provide adequate security for his undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a
written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these provisions shall not exclude any other right which any person may have or hereafter
acquire under this Declaration, the By-Laws of the Trust, any statute, agreement, or vote of Shareholders or Trustees who are not interested persons (as defined in Section 2(a)(19) of the 1940
Act) or any other right to which he or she or she may be lawfully entitled.
(e) Subject to any limitations provided by the 1940 Act and
this Declaration, the Trust shall have the power and authority to indemnify and provide for the advance payment of expenses to employees, agents and other Persons providing services to the Trust or serving in any capacity at the request of the Trust
or provide for the advance payment of expenses for such Persons, provided that such indemnification has been approved by a majority of the Trustees.
5.3 No Bond Required of Trustees. No Trustee shall, as such, be obligated to give any bond or other security for the performance of any
of his duties hereunder.
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5.4 No Duty of Investigation; No Notice in Trust Instruments, etc. No purchaser, lender,
transfer agent or other person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property paid, loaned or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, undertaking, instrument, certificate, Share,
other security of the Trust, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration
or in their capacity as officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability and such other insurance as the Trustees in their sole judgment shall deem advisable or as is required by the 1940 Act
5.5 Reliance on Experts, etc. Each Trustee and officer or employee of the Trust shall, in the performance of its duties, be fully and
completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of the
Trusts officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be a Trustee. No such Trustee or officer shall be liable for any act or omission in accordance with such advice, records and/or reports and no inference concerning liability shall arise from a
failure to follow such advice, records and/or reports.
5.6 Derivative Actions. In addition to the requirements set forth in
Section 3816 of the DSTA, a Shareholder or Shareholders may bring a derivative action on behalf of the Trust only if the following conditions are met:
(a) The Shareholder or Shareholders must make a pre-suit demand upon the Board of Trustees to bring
the subject action unless an effort to cause the Board of Trustees to bring such an action is not likely to succeed. For purposes of this Section 5.6, a demand on the Board of Trustees shall only be deemed not likely to succeed and therefore
excused if a majority of the Board of Trustees, or a majority of any committee established to consider the merits of such action, is composed of Trustees who are not independent trustees (as such term is defined in the DSTA).
(b) Unless a demand is not required under paragraph (a) of this Section 5.6, Shareholders eligible to bring such derivative action
under the DSTA who hold at least 10% of the outstanding Shares of the Trust, or 10% of the outstanding Shares of the Class to which such action relates, shall join in the request for the Board of Trustees to commence such action; and
(c) Unless a demand is not required under paragraph (a) of this Section 5.6, the Board of Trustees must be afforded a reasonable
amount of time to consider such Shareholder request and to investigate the basis of such claim. The Board of Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request and shall require an undertaking by
the Shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Board of Trustees determines not to bring such action.
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(d) For purposes of this Section 5.6, the Board of Trustees may designate a committee of one
Trustee to consider a Shareholder demand if necessary to create a committee with a majority of Trustees who are independent trustees (as such term in defined in the DSTA).
(e) The requirements of paragraphs (b) and (c) of this Section 5.6, shall not apply to claims brought under the federal securities
laws.
ARTICLE VI
SHARES
OF BENEFICIAL INTEREST
6.1 Beneficial Interest. (a) The interest of the beneficiaries shall be divided into an unlimited
number of transferable shares, all without par value. The Trustees may divide Shares into one or more Classes. All Shares issued in accordance with the terms hereof, including, without limitation, Shares issued in connection with a dividend or
distribution in Shares or a split of Shares, shall be fully paid and, except as provided in the last sentence of Section 3.8, nonassessable when the consideration determined by the Trustees (if any) therefor shall have been received by the
Trust.
(b) Subject to the further provisions of this Article VI, any restriction set forth in the
By-Laws and any applicable requirements of the 1940 Act or any applicable exemptive relief issued by the SEC, the Trustees shall have full power and authority, in their sole discretion, and without obtaining
any authorization or vote of the Shareholders of any Class to: (i) divide the beneficial interest in each Class into Shares as the Trustees shall determine; (ii) establish, designate, redesignate, classify, reclassify and change
in any manner any Classand fix such preferences, voting powers, rights, duties and privileges and business purpose of each Class as the Trustees may from time to time determine, which preferences, voting powers, rights, duties and
privileges may be different from any existing Class; provided, however, that the Trustees may not reclassify or change outstanding Shares in a manner materially adverse to Shareholders of such Shares, without obtaining the authorization or vote of
the Class of Shareholders that would be materially adversely affected; (iii) divide or combine the Shares of any Class into a greater or lesser number without thereby materially changing the proportionate beneficial interest of the
Shares of such Class in the assets held with respect to that Class; (iv) change the name of any Class; (v) dissolve and terminate any one or more Classes; and (vi) take such other action with respect to the Classes as the
Trustees may deem desirable.
(c) The establishment and designation of any Class of Shares of the Trust shall be effective upon the
adoption by a majority of the then Trustees of a resolution that sets forth such establishment and designation and the relative rights and preferences of such Class of Shares of the Trust, whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of the Trust, or as otherwise provided in such resolution.
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(d) With respect to any Class of Shares of the Trust, each such Class shall represent
interests in the assets of the Trust and have the same voting, dividend, liquidation and other rights and terms and conditions as each other Class of Shares of the Trust, except that, subject to applicable law, expenses allocated to a
Class may be borne solely by such Class as determined by the Trustees and as provided herein, and a Class may have exclusive voting rights with respect to matters affecting only that Class.
(e) To the fullest extent permitted by Section 3804 of the DSTA and subject to the restrictions of the 1940 Act and any applicable
exemptive relief issued by the SEC, the Trustees may allocate expenses of the Trust to a particular Class or to apportion the same between or among two or more Classes, provided that any expenses incurred by a particular Class shall be
payable solely out of the assets belonging to that Class.
6.2 Other Securities. The Trustees may, subject to the Fundamental
Policies and the requirements of the 1940 Act, authorize and issue such other securities of the Trust as they determine to be necessary, desirable or appropriate, having such terms, rights, preferences, privileges, limitations and restrictions as
the Trustees see fit, including preferred shares, debt securities or other senior securities. To the extent that the Trustees authorize and issue preferred shares of any class or series, they are hereby authorized and empowered to amend or
supplement this Declaration as they deem necessary or appropriate, including to comply with the requirements of the 1940 Act or requirements imposed by the rating agencies or other Persons, all without the approval of Shareholders. Any such
supplement or amendment shall be filed as is necessary. In addition, any such supplement or amendment may set forth the rights, powers, preferences and privileges of such preferred shares and any such supplement or amendment shall operate either as
additions to or modifications of the rights, powers, preferences and privileges of any such preferred shares under this Declaration. To the extent the provisions set forth in such supplement or amendment conflict with the provisions of this
Declaration with respect to any such rights, powers and privileges of the preferred shares, such amendment or supplement shall control. Except as contemplated by the immediately preceding sentence, this Declaration shall control as to the Trust
generally and the rights, powers, preferences and privileges of the other Shareholders of the Trust. The Trustees are also authorized to take such actions and retain such persons as they see fit to offer and sell such securities.
6.3 Rights of Shareholders. The Shares shall be personal property giving only the rights in this Declaration specifically set forth.
The ownership of the Trust Property of every description and the right to conduct any business hereinbefore described are vested exclusively in the Trustees on behalf of the Trust, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to share or assume any losses of the Trust or,
subject to the right of the Trustees to charge certain expenses directly to Shareholders, as provided in the last sentence of Section 3.8, suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall not entitle the
holder to preference, preemptive or appraisal rights.
6.4 Exchange and Conversion Privileges. Subject to the provisions of the
1940 Act and provisions of this Declaration, the Trustees shall have the power and authority to provide that the Shareholders of any Class shall have the right to convert such Shares for Shares of one or more other Classes. Subject to the
provisions of the 1940 Act and provisions of this Declaration, the Trustees shall have the power and authority to provide that the Shareholders of any Class may exchange their Shares for those of another fund.
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6.5 Trust Only. It is the intention of the Trustees to create only the relationship of
Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal
relationship other than a trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.
6.6 Issuance of Shares. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue Shares,
including preferred shares that may have been established pursuant to Section 6.2, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration,
including cash or property, at such time or times, and on such terms as the Trustees may determine, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of, liabilities)
and businesses. The Trustees may from time to time, without a vote of the Shareholders, divide, reclassify or combine the Shares into a greater or lesser number without thereby changing the proportionate beneficial interest in such Shares. Issuances
and redemptions of Shares may be made in whole Shares and/or 1/1,000ths of a Share or multiples thereof as the Trustees may determine.
6.7 Register of Shares. A register shall be kept at the offices of the Trust or any transfer agent duly appointed by the Trustees under
the direction of the Trustees which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Separate registers shall be established and maintained for each
class or series of Shares. Each such register shall be conclusive as to who are the holders of the Shares of the applicable class or series of Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he or she has given his address to a transfer agent or such other officer or
agent of the Trustees as shall keep the register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of share certificates and promulgate
rules and regulations as to their use, including, without limitation, requirements as to transfer and for the purchase of lost certificate insurance.
6.8 Transfer Agent and Registrar. The Trustees shall have power to employ a transfer agent or transfer agents, and a registrar or
registrars, with respect to the Shares. The transfer agent or transfer agents may keep the applicable register and record therein, the original issues and transfers, if any, of the said Shares. Any such transfer agents and/or registrars shall
perform the duties usually performed by transfer agents and registrars of certificates of stock in a corporation, as modified by the Trustees.
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6.9 Transfer of Shares. Except as otherwise provided by the Trustees, Shares shall be
transferable on the records of the Trust only by the record holder thereof or by its agent thereto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of a duly executed instrument of transfer, together with
such evidence of the genuineness of each such execution and authorization and of other matters (including compliance with any securities laws and contractual restrictions) as may reasonably be required. Upon such delivery the transfer shall be
recorded on the applicable register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Each Shareholder will indemnify and hold harmless the Trust, the Trustees, each other Shareholder and any Affiliated Person of the Trust, the Trustees
and each of the other Shareholders against all losses, claims, damages, liabilities, costs and expenses (including legal or other expenses incurred in investigating or defending against any losses, claims, damages, liabilities, costs and expenses or
any judgments, fines and amounts paid in settlement), joint or several, to which these Persons may become subject by reason of or arising from (1) any transfer made by the Shareholder in violation of this Section 6.9 and (2) any
misrepresentation by the transferring Shareholder or substituted Shareholder in connection with the transfer.
Any person becoming
entitled to any Shares in consequence of the death, bankruptcy or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the applicable register of Shares as the holder of such Shares upon production of the proper
evidence thereof to the Trustees or a transfer agent of the Trust, but until such record is made, the Shareholder of record shall be deemed to be the holder of such for all purposes hereof, and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law.
6.10 Notices; Waiver of Notice. (a) Subject to any different provisions of this Declaration, including Section 10.3 hereof,
any and all notices to which any Shareholder hereunder may be entitled and any and all communications shall be deemed duly served or given if presented personally to a Shareholder, left at his or her residence or usual place of business or sent via
United States mail or by electronic transmission to a Shareholder at his or her address as it is registered with the Trust. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the Shareholder at
his or her address as it is registered with the Trust with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the Shareholder by an electronic transmission to any address or number of
the Shareholder at which the Shareholder receives electronic transmissions. The Trust may give a single notice to all Shareholders who share an address, which single notice shall be effective as to any Shareholder at such address, unless such
Shareholder objects to receiving such single notice or revokes a prior consent to receiving such single notice.
(b) Whenever any notice
is required to be given pursuant to this Declaration or the By-Laws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the Person or Persons entitled to such
notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting,
unless specifically required by statute. The attendance of any Person at any meeting, including the attendance of a Trustee at a meeting of the Trustees, shall constitute a waiver of notice of such meeting, except where such Person attends a meeting
for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened.
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6.11 Derivative Actions. (a) No person, other than a Trustee, who is not a
Shareholder shall be entitled to bring any derivative action, suit or other proceeding on behalf of the Trust. No Shareholder may maintain a derivative action on behalf of the Trust unless holders of at least ten percent (10%) of the outstanding
Shares join in the bringing of such action.
(b) In addition to the requirements set forth in Section 3816 of the DSTA, a Shareholder
may bring a derivative action on behalf of the Trust only if the following conditions are met: (i) the Shareholder or Shareholders must make a pre-suit demand upon the Trustees to bring the subject action
unless an effort to cause the Trustees to bring such an action is not likely to succeed; and a demand on the Trustees shall only be deemed not likely to succeed and therefore excused if a majority of the Trustees, or a majority of any committee
established to consider the merits of such action, is composed of Trustees who are not independent trustees (as that term is defined in the DSTA); and (ii) unless a demand is not required under clause (i) of this paragraph, the
Trustees must be afforded a reasonable amount of time to consider such Shareholder request and to investigate the basis of such claim; and the Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request
and may require an undertaking by the Shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. For purposes of this Section 6.11, the
Trustees may designate a committee of one or more Trustees to consider a Shareholder demand.
(c) For purposes of this Section 6.11,
Shareholder or Shareholders shall mean the holder or holders of common Shares.
(d) This Section 6.11 shall
not apply to any claims asserted under the U.S. federal securities laws including, without limitation, the 1940 Act.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE
7.1 Net Asset Value. The net asset value of each outstanding Share of each Class of the Trust shall be determined at such time or
times on such days as the Trustees may determine, in accordance with the 1940 Act. The method of determination of net asset value shall be determined by the Trustees. The power and duty to make the net asset value calculations may be delegated by
the Trustees.
7.2 Power to Modify Foregoing Procedures. Notwithstanding any of the foregoing provisions of this Article VII, the
Trustees may prescribe, in their absolute discretion except as may be required by the 1940 Act, such other bases and times for determining the net asset value of each Class of the Trusts Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable for any reason, including to enable the Trust to comply with any provision of the Code, the 1940 Act, any securities exchange or association registered under the
Securities Exchange Act of 1934 or any order of exemption issued by the Commission, all as in effect now or hereafter amended or modified.
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ARTICLE VIII
CUSTODIANS
8.1
Appointment and Duties. The Trustees shall at all times employ a custodian or custodians, meeting the qualifications for custodians for portfolio securities of investment companies contained in the 1940 Act, as custodian with respect to the
assets of the Trust. Any custodian shall have authority as agent of the Trust as determined by the custodian agreement or agreements, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the By-Laws of the Trust and the 1940 Act, including without limitation authority:
(1) to
hold the securities owned by the Trust and deliver the same upon written order;
(2) to receive any receipt for any moneys
due to the Trust and deposit the same in its own banking department (if a bank) or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the Trust and furnish clerical and accounting services;
and
(5) if authorized to do so by the Trustees, to compute the net income or net asset value of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees and the custodian.
The Trustees may also authorize each custodian to employ one or more sub-custodians from time to time
to perform such of the acts and services of the custodian and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians contained in the 1940 Act.
8.2 Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other Person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust.
ARTICLE IX
REPURCHASES OF
SHARES
9.1 Repurchase of Shares. Holders of Shares of the Trust shall not be entitled to require the Trust to repurchase or
redeem Shares of the Trust.
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9.2 Disclosure of Holding. The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares or other securities of the Trust as the Trustees deem necessary to comply with the provisions of the Code, the 1940 Act or other
applicable laws or regulations, or to comply with the requirements of any other taxing or regulatory authority.
ARTICLE X
SHAREHOLDERS
10.1
Meetings of Shareholders. An annual meeting of the Shareholders for the election of Trustees and the transaction of any business as determined by the Trustees within the powers of the Trust shall be held on the date and at the time set by the
Board of Trustees. Other than annual meetings, the Trust will not hold Shareholder meetings unless required by the 1940 Act, the provisions of this Declaration, the By-Laws or any other applicable law. A
special meeting of Shareholders may be called at any time by a majority of the Trustees or the Chief Executive Officer and shall be called by any Trustee for any proper purpose upon written request of Shareholders holding in the aggregate at least a
majority of the outstanding Shares of the Trust, such request specifying the purpose or purposes for which such meeting is to be called. Any shareholder meeting, including a special meeting, shall be held within or without the State of Delaware (or
may be held virtually) on such day and at such time as the Trustees shall designate.
10.2 Voting. (a) Shareholders shall have
no power to vote on any matter except matters on which a vote of Shareholders is required by applicable law, this Declaration or resolution of the Trustees. There shall be no cumulative voting in the election or removal of Trustees.
(b) Notwithstanding any other provision of this Declaration, on any matters submitted to a vote of the Shareholders, all Shares of the Trust
then-entitled to vote shall be voted in aggregate, except: (i) when required by the 1940 Act and/or other applicable law, Shares shall be voted by individual Class; (ii) when the matter involves any action that the Trustees have determined
will affect only the interests of one or more Classes, then only the Shareholders of such Class or Classes shall be entitled to vote thereon.
10.3 Notice of Meeting and Record Date. Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting,
shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at its registered address, mailed at least 10 days and not more than 90 days before the meeting or otherwise in compliance with applicable law. Only the
business stated in the notice of the meeting shall be considered at such meeting; provided, however, that the foregoing shall in no way limit the ability of one or more adjournments to be considered at a meeting. Any adjourned meeting may be held as
adjourned one or more times without further notice not later than 120 days after the original meeting date. For the purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing
the transfer books, fix a date not more than 90 nor less than 10 days prior to the date of such meeting of Shareholders as a record date for the determination of the Persons to be treated as Shareholders of record for such purposes.
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10.4 Quorum and Required Vote. (a) The holders of
one-third of the Shares entitled to vote on any matter at a meeting present in person or by proxy shall constitute a quorum at such meeting of the Shareholders for purposes of conducting business on such
matter. When any one or more Classes is to vote separately from any other Classes of Shares, holders of one-third of the Shares entitled to vote of each such Class shall constitute a quorum at a
Shareholders meeting of that Class. The absence from any meeting, in person or by proxy, of a quorum of Shareholders for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly
come before the meeting, if there shall be present thereat, in person or by proxy, a quorum of Shareholders in respect of such other matters. Notwithstanding the foregoing, in the absence of a quorum, a Shareholders meeting may be adjourned by
either a vote of a majority of the Shares present and entitled to vote at such meeting, or by the chair of such meeting in his or her sole discretion.
(b) Subject to any provision of applicable law, this Declaration or a resolution of the Trustees specifying a greater or a lesser vote
requirement for the transaction of any item of business at any meeting of Shareholders, (i) with respect to the election of Trustees, other than a Contested Election, the affirmative vote of a plurality of the Shares represented in person or by
proxy at any meeting at which a quorum is present shall be the act of the Shareholders with respect to such matter, (ii) with respect to a Contested Election, the affirmative vote of a majority of the Shares outstanding and entitled to vote
with respect to such matter at such meeting shall be the act of the Shareholders with respect to such matter, (iii) with respect to all other items of business, the affirmative vote of a majority of the Shares present in person or represented
by proxy and entitled to vote on the subject matter shall be the act of the Shareholders with respect to such matter and (iv) where a separate vote of one or more Classes of Shares is required on any matter, the affirmative vote of a majority
of the Shares of such Class present in person or represented by proxy and entitled to vote on the subject matter shall decide that matter insofar as that Class is concerned.
10.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by properly executed proxy,
provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. No proxy shall be valid after the expiration of 11 months
from the date thereof, unless otherwise provided in the proxy. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and fractional Shares shall be entitled to a vote of such fraction. When any Share is
held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such
Share, he or she may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy.
10.6
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10.7 Reports. The Trustees shall cause to be prepared at least annually and
more frequently to the extent and in the form required by law, regulation or any exchange on which Trust Shares are listed a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in
conformity with generally accepted accounting principles and an opinion of an independent public accountant on such financial statements. Copies of such reports shall be mailed to all Shareholders of record within the time required by the 1940 Act.
The Trustees shall, in addition, furnish to the Shareholders at least semi-annually to the extent required by law, interim reports containing an unaudited balance sheet of the Trust as of the end of such period and an unaudited statement of income
and surplus for the period from the beginning of the current fiscal year to the end of such period.
10.8 Inspection of Records.
The records of the Trust shall be open to inspection by Shareholders to the extent permitted by Section 3819 of the DSTA but subject to such reasonable regulation as the Trustees may determine.
10.9 Delivery by Electronic Transmission or Otherwise. Notwithstanding any provision in this Declaration to the contrary, any notice,
proxy, vote, consent, report, instrument or writing of any kind or any signature referenced in, or contemplated by, this Declaration or the By-Laws may, in the sole discretion of the Trustees, be given,
granted or otherwise delivered by electronic transmission (within the meaning of the DSTA), including via the internet, or in any other manner permitted by applicable law.
10.10 Shareholder Action by Written Consent. Any action which may be taken by Shareholders by vote may be taken without a meeting if
the holders, entitled to vote thereon, of the proportion of Shares required for approval of such action at a meeting of Shareholders pursuant to Section 10.4 consent to the action in writing and the written consents are filed with the records
of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE XI
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS; ETC.
11.1 Duration. Subject to possible termination in accordance with the provisions of Section 11.2 hereof, the Trust created hereby
shall have perpetual existence.
11.2 Termination. (a) The Trust may be dissolved, only upon approval of not less than 80% of
the Trustees. Upon the dissolution of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the
Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, merge where the Trust
is not the survivor, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part in cash, securities or other property of
any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, merger in which the Trust is not the survivor, transfer or other disposition of all or
substantially all the Trust Property of the Trust shall require approval of the principal terms of the transaction and the nature and amount of the consideration by Shareholders.
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(iii) After paying or adequately providing for the payment of all liabilities,
and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Shareholders according to
their respective rights.
(b) After the winding up and termination of the Trust and distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and shall execute and file a certificate of cancellation with the Secretary of State of the State of
Delaware. Upon termination of the Trust, the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease.
11.3 Amendment Procedure. (a) Except as provided in subsection (b) of this Section 11.3, this Declaration may be
amended, after a majority of the Trustees (including a majority of the independent Trustees if such a vote is required under the 1940 Act) have approved a resolution therefor, by the affirmative vote required by Section 10.4 of this
Declaration. The Trustees also may amend this Declaration without any vote of Shareholders to change the name of the Trust, to change the U.S. federal income tax classification of the Trust from an association taxable as a corporation to a
partnership if the Trust elects to cease qualifying as a regulated investment company under Subchapter M of the Code, to make any other change that does not adversely affect the relative rights or preferences of any Shares, as they may deem
necessary, or to conform this Declaration to the requirements of the 1940 Act or any other applicable federal or state laws or regulations including pursuant to Section 6.2 or, if applicable, the requirements of the regulated investment company
provisions of the Code, but the Trustees shall not be liable for failing to do so.
(b) No amendment may be made to Section 2.1,
Section 2.2, Section 2.3, Section 11.2(a), this Section 11.3, Section 11.4 or Section 11.6 of this Declaration and no amendment may be made to this Declaration which would change any rights with respect to any Shares of
the Trust by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any voting rights pertaining thereto (except that this provision shall not limit the ability of the Trustees to authorize, and to cause
the Trust to issue, other securities pursuant to Section 6.2), except after a majority of the Trustees have approved a resolution therefor, and such amendment has been approved by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the Shares, unless such amendment has been approved by 80% of the Trustees, in which case approval by a Majority Shareholder Vote shall be required. Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders.
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(c) An amendment duly adopted by the requisite vote of the Board of Trustees and, if required
under the 1940 Act or otherwise under this Declaration, the Shareholders as aforesaid, shall become effective at the time of such adoption or at such other time as may be designated by the Board of Trustees or Shareholders, as the case may be. A
certification in recordable form signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Trustees and, if required, the Shareholders as aforesaid, or a copy of the Declaration, as amended, in
recordable form, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust or at such other time designated by the Board.
11.4 Merger, Consolidation and Sale of Assets. Except as provided in Section 11.6, the Trust may merge or consolidate with any
other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property, including its goodwill, upon such terms and conditions and for such consideration when and as authorized by two-thirds of the Trustees and, to the extent required by the 1940 Act, approved by a Majority Shareholder Vote and any such merger, consolidation, sale, lease or exchange shall be determined for all purposes to
have been accomplished under and pursuant to the statutes of the State of Delaware.
11.5 Subsidiaries. Without approval by
Shareholders, the Trustees may cause to be organized or assist in organizing one or more corporations, trusts, limited liability companies, partnerships, associations or other organizations to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer all or a portion of the Trust Property to any such corporation, trust, limited liability company, association or organization in exchange
for the shares or securities thereof, or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, limited liability company, partnership, association or organization,
or any corporation, partnership, trust, limited liability company, association or organization in which the Trust holds or is about to acquire shares or any other interests.
11.6 Certain Transactions. (a) Notwithstanding any other provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph (c) of this Section shall require the affirmative vote or consent of a majority of the Trustees then in office followed by the affirmative vote of the holders
of not less than seventy-five percent (75%) of the Shares outstanding, excluding the Shares of a Principal Shareholder (as defined in paragraph (b) of this Section) when any such Principal Shareholder is a party to the transaction. Such
affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law. Notwithstanding the preceding sentence, so long as a transaction described in paragraph (c) of this Section is approved
by both a majority of the Trustees then in office and seventy-five percent (75%) of the Continuing Trustees and, so long as all other conditions and requirements, if any, provided for in the By-Laws and under
applicable law have been satisfied, then no Shareholder vote or consent shall be necessary or required to approve such transaction, except to the extent such vote or consent is required by the 1940 Act or other federal law.
(b) The term Principal Shareholder shall mean any corporation, Person or other entity which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of
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the outstanding Shares of any outstanding Class (which, solely for the purposes of this Section, shall not be deemed to include any Class of preferred shares) and shall include any affiliate
or associate, as such terms are defined in clause (ii) below, of a Principal Shareholder. For the purposes of this Section, in addition to the Shares which a corporation, Person or other entity beneficially owns directly, (a) any
corporation, Person or other entity shall be deemed to be the beneficial owner of any Shares (i) which it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise (but excluding share
options granted by the Trust) or (ii) which are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (i) above), by any other corporation, Person or entity with which its
affiliate or associate (as defined below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its affiliate or associate as
those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned through application
of clauses (i) and (ii) above but shall not include any other Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder.
(ii) [Reserved]
(iii) The sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder
(except assets having an aggregate fair market value of less than 2% of the total assets of the Trust, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month
period).
(iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the
Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Trust, aggregating for the purposes of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to (i) any
of the transactions described in paragraph (c) of this Section if 80% of the Trustees shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such
transaction, in which case approval by a Majority Shareholder Vote shall be the only vote of Shareholders required by this Section, or (ii) any such transaction with any entity of which a majority of the outstanding shares of all classes and
series of a stock normally entitled to vote in elections of directors is owned of record or beneficially by the Trust and its subsidiaries.
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(e) The Board of Trustees shall have the power and duty to determine for the purposes of this
Section on the basis of information known to the Trust whether (i) a corporation, Person or entity beneficially owns five percent (5%) or more of the outstanding Shares of any class or series, (ii) a corporation, Person or entity is an
affiliate or associate (as defined above) of another, (iii) the assets being acquired or leased to or by the Trust or any subsidiary thereof constitute a substantial part of the assets of the Trust and have an aggregate
fair market value of less than 2% of the total assets of the Trust, and (iv) the memorandum of understanding referred to in paragraph (d) hereof is substantially consistent with the transaction covered thereby. Any such determination shall
be conclusive and binding for all purposes of this Section.
ARTICLE XII
MISCELLANEOUS
12.1
Filing. (a) This Declaration and any amendment or supplement hereto shall be filed in such places as may be required or as the Trustees deem appropriate. Each amendment or supplement shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner provided herein and shall, upon insertion in the Trusts minute book, be conclusive evidence of all amendments contained therein. A restated Declaration, containing
the original Declaration and all amendments and supplements theretofore made, may be executed from time to time by a majority of the Trustees and shall, upon insertion in the Trusts minute book, be conclusive evidence of all amendments and
supplements contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments and supplements thereto.
12.2 Resident Agent. The Trust shall maintain a resident agent in the State of Delaware, which agent shall initially be The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The Trustees may designate a successor resident agent, provided, however, that such appointment shall not become effective until written notice thereof and any required filing is
delivered to the office of the Secretary of the State.
12.3 Governing Law. The trust set forth in this instrument is made in the
State of Delaware, and the Trust and this Declaration, and the rights and obligations of the Trustees and Shareholders hereunder, are to be governed by and construed and administered according to the DSTA and the laws of said State; provided,
however, that there shall not be applicable to the Trust, the Trustees or this Declaration (a) the provisions of Sections 3540 and 3561 of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or common) of the State
of Delaware (other than the DSTA) pertaining to trusts which relate to or regulate: (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to
post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other
sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust
investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards or responsibilities or limitations on the acts or powers of trustees, which are
inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Declaration. The Trust shall be of the type commonly called a statutory trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be engaged in
by trusts under the Delaware Statutory Trust Statute, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions.
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12.4 Exclusive Delaware Jurisdiction. Each Trustee, each officer and each Person legally
or beneficially owning a Share or an interest in a Share of the Trust (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise), to the fullest extent permitted by law, including
Section 3804(e) of the DSTA, (i) irrevocably agrees that any claims, suits, actions or proceedings asserting a claim governed by the internal affairs (or similar) doctrine or arising out of or relating in any way to the Trust, the DSTA,
this Declaration or the By-Laws (including, without limitation, any claims, suits, actions or proceedings to interpret, apply or enforce (A) the provisions of this Declaration or the By-Laws, or (B) the duties (including fiduciary duties), obligations or liabilities of the Trust to the Shareholders or the Trustees, or of officers or the Trustees or the Delaware Trustee to the Trust, to the
Shareholders or each other, or (C) the rights or powers of, or restrictions on, the Trust, the officers, the Trustees, the Delaware Trustee or the Shareholders, or (D) any provision of the DSTA or other laws of the State of Delaware
pertaining to trusts made applicable to the Trust pursuant to Section 3809 of the DSTA, or (E) any other instrument, document, agreement or certificate contemplated by any provision of the DSTA, the Declaration or the By-Laws relating in any way to the Trust (regardless, in each case, of whether such claims, suits, actions or proceedings (x) sound in contract, tort, fraud or otherwise, (y) are based on common law,
statutory, equitable, legal or other grounds, or (z) are derivative or direct claims)), shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any
other court in the State of Delaware with subject matter jurisdiction, (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding, (iii) irrevocably agrees not to,
and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim,
suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper, (iv) consents to process being served in any such claim, suit, action or proceeding by mailing,
certified mail, return receipt requested, or via electronic transmission a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice
thereof; provided, nothing in clause (iv) hereof shall affect or limit any right to serve process in any other manner permitted by law, and (v) irrevocably waives any and all right to trial by jury in any such claim, suit, action or
proceeding; provided, however, this Section 12.4 shall not apply to any claims asserted under the U.S. federal securities laws including, without limitation, the 1940 Act.
12.5 Agreement to be Bound. EVERY PERSON, BY VIRTUE OF HAVING BECOME A SHAREHOLDER IN ACCORDANCE WITH THE TERMS OF THIS DECLARATION AND
THE BY-LAWS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, SHALL BE DEEMED TO HAVE EXPRESSLY ASSENTED AND AGREED TO THE TERMS OF, AND SHALL BE BOUND BY, THIS DECLARATION AND THE
BY-LAWS.
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12.6 Counterparts. This Declaration may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.
12.7 Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust, or of any
recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to: (a) the number or identity of Trustees or Shareholders, (b) the name of the Trust, (c) the due authorization of the
execution of any instrument or writing, (d) the form of any vote passed at a meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies
the requirements of this Declaration, (f) the form of any By-Laws adopted by or the identity of any officers elected by the Trustees, or (g) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees and their successors.
12.8 Provisions in Conflict with Law or Regulation. (a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, if applicable, with the regulated investment company provisions of the Code, if applicable, or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.
12.9 Delivery by Electronic Transmission or Otherwise. Notwithstanding any provision in this Declaration to the contrary, any
notice, proxy, vote, consent, instrument or writing of any kind referenced in, or contemplated by, this Declaration or the By-Laws may, in the sole discretion of the Trustees, be given, granted or otherwise
delivered by electronic transmission (within the meaning of the DSTA), including via the internet, or in any other manner permitted by applicable law, and may be made using an electronic signature (within the meaning of the DSTA).
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IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and
year first above written.
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By: |
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/s/ Mark Garbin |
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Mark Garbin |
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Trustee |
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By: |
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/s/ Sanjeev Handa |
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Sanjeev Handa |
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Trustee |
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By: |
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/s/ Joan McCabe |
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Joan McCabe |
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Trustee |
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By: |
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/s/ Brian Marcus |
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Brian Marcus |
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Trustee |
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By: |
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/s/ Lauren Basmadjian |
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Lauren Basmadjian |
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Trustee |
[Signature Page to Amended and Restated Declaration of Trust of Carlyle Credit Income Fund]
Exhibit (2)(a)(3)
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF TRUST
OF
VERTICAL
CAPITAL INCOME FUND
THIS Certificate of Amendment to Certificate of Trust of Vertical Capital Income Fund (the Trust) is
being duly executed and filed by the undersigned, as trustee, to amend the Certificate of Trust of a statutory trust formed under the Delaware Statutory Trust Act (12 Del. C. § 3801 et seq.) (the Act).
1. Name. The name of the statutory trust is Vertical Capital Income Fund.
2. Amendment to Certificate. The Certificate of Trust of the Trust is hereby amended by changing the name of the Trust to Carlyle
Credit Income Fund.
3. Effective Date. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment in accordance with Section 3811(a)(2) of the Act.
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/s/ Lauren Basmadjian |
Lauren Basmadjian, not in her individual capacity but solely as trustee |
Exhibit (2)(b)
CARLYLE CREDIT INCOME FUND
AMENDED AND RESTATED BY-LAWS
Dated as of July 14, 2023
TABLE OF CONTENTS
Page
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ARTICLE I SHAREHOLDER MEETINGS |
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1.1 Chair |
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1 |
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1.2 Proxies; Voting |
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1 |
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1.3 Fixing Record Dates |
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1 |
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1.4 Inspectors of Election |
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1 |
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1.5 Records at Shareholder Meetings |
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2 |
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1.6 Annual Meeting |
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2 |
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1.7 Special Meetings |
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2 |
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1.8 Advance Notice of Shareholder Nominees for Trustee and Other Shareholder
Proposals |
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4 |
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1.9 Control Share Acquisition Statute |
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9 |
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ARTICLE II TRUSTEES |
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2.1 Regular Meetings |
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9 |
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2.2 Chair; Records |
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10 |
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ARTICLE III OFFICERS |
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3.1 Officers of the Trust |
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10 |
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3.2 Tenure |
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10 |
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3.3 Removal of Officers |
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10 |
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3.4 Bonds and Surety |
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10 |
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3.5 Chief Executive Officer, President and Vice Presidents |
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10 |
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3.6 Secretary |
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11 |
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3.7 Treasurer |
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11 |
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3.8 Other Officers and Duties |
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11 |
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ARTICLE IV MISCELLANEOUS |
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4.1 Depositories |
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12 |
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4.2 Signatures |
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12 |
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4.3 Seal |
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12 |
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ARTICLE V SHARE Transfers |
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5.1 Transfer Agents, Registrars and the Like |
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12 |
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5.2 Transfer of Shares |
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12 |
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5.3 Registered Shareholders |
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ARTICLE VI AMENDMENT OF
BY-LAWS |
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6.1 Amendment and Repeal of By-Laws |
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13 |
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ii
CARLYLE CREDIT INCOME FUND
BY-LAWS
These Amended and Restated By-Laws (the By-Laws)
are made and adopted pursuant to Section 3.9 of the Amended and Restated Declaration of Trust establishing Carlyle Credit Income Fund (the Trust), dated as July 14, 2023, as from time to time amended (hereinafter called the
Declaration). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE I
SHAREHOLDER MEETINGS
1.1 Chair. The Chair, if any, shall act as chair at all meetings of the Shareholders; in the Chairs absence, the Vice
Chair, if any, shall act as chair; in the absence of both the Chair and Vice Chair, the Trustee or Trustees present at each meeting may elect a temporary chair for the meeting, who may be one of themselves.
1.2 Proxies; Voting. Shareholders may vote either in person or by duly executed proxy and each full share represented at the meeting
shall have one vote, all as provided in Article X of the Declaration.
1.3 Fixing Record Dates. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any meeting, including any adjournment thereof, or who are entitled to participate in any dividends, or for any other proper purpose, the Trustees may from time to time, without closing
the transfer books, fix a record date in the manner provided in Section 10.3 of the Declaration. If the Trustees do not prior to any meeting of Shareholders so fix a record date or close the transfer books, then the date of mailing notice of
the meeting or the date upon which the dividend resolution is adopted, as the case may be, shall be the record date.
1.4 Inspectors of
Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chair, if any, of any meeting of
Shareholders may, and on the request of any Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors of Election shall be either one or three. If appointed at the meeting on the request of one
or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors of Election are to be appointed, but failure to allow such determination by the Shareholders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as Inspector of Election fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at
the meeting by the person acting as chair. The Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive
votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes or consents, determine the results and do such other acts as may be proper
to conduct the election or vote with fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. On request of the
Chair, if any, of the meeting, or of any Shareholder or Shareholder proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by
them.
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1.5 Records at Shareholder Meetings. At each meeting of the Shareholders, there shall be
made available for inspection at a convenient time and place during normal business hours, if requested by Shareholders, the minutes of the last previous meeting of Shareholders of the Trust and a list of the Shareholders of the Trust, as of the
record date of the meeting or the date of closing of transfer books, as the case may be. Such list of Shareholders shall contain the name and the address of each Shareholder in alphabetical order and the number of Shares owned by such Shareholder.
1.6 Annual Meeting. An annual meeting of the Shareholders for the election of Trustees and the transaction of any business within
the powers of the Trust shall be held on the date and at the time set by the Board of Trustees.
1.7 Special Meetings.
(a) General. A special meeting of Shareholders may be called at any time by a majority of the Trustees, the Chief Executive Officer or
the President. Subject to subsection (b) of this Section 1.7, a special meeting of Shareholders also shall be called by any Trustee for any proper purpose upon written request of Shareholders holding in the aggregate at least a majority of
the outstanding Shares of the Trust, such request specifying the purpose or purposes for which such meeting is to be called.
(b)
Shareholder Requested Special Meetings. (1) Any Shareholder of record seeking to have Shareholders request a special meeting shall, by sending written notice to the Secretary (the Record Date Request Notice) by registered mail,
return receipt requested, request the Board of Trustees to fix a record date to determine the Shareholders entitled to request a special meeting (the Request Record Date). The Record Date Request Notice shall set forth the purpose of the
meeting and the matters proposed to be acted on it, shall be signed by one or more Shareholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of
signature of each such Shareholder (or such agent) and shall set forth all information relating to each such Shareholder and each matter proposed to be acted on at the meeting that would be required to be disclosed in connection with the
solicitation of proxies for the election of trustees in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any
successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the Exchange Act). Upon receiving the Record Date Request Notice, the Board of Trustees may fix a Request
Record Date. The Request Record Date shall not precede and shall not be more than 10 days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Trustees. If the Board of Trustees,
within 10 days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the 10th day after the first date on which a
Record Date Request Notice is received by the Secretary.
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(2) In order for any Shareholder to request a special meeting to act on any matter that may
properly be considered at a meeting of Shareholders, one or more written requests for a special meeting (collectively, the Special Meeting Request) signed by Shareholders of record (or their agents duly authorized in a writing
accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the Special Meeting Percentage) shall be delivered to the
Secretary. In addition, the Special Meeting Request shall (a) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice
received by the Secretary), (b) bear the date of signature of each such Shareholder (or such agent) signing the Special Meeting Request, (c) set forth (i) the name and address, as they appear in the Trusts books, of each Shareholder
signing such request (or on whose behalf the Special Meeting Request is signed), (ii) the class, series and number of all Shares which are owned (beneficially or of record) by each such Shareholder and (iii) the nominee holder for, and number
of, Shares owned beneficially but not of record by such Shareholder, (d) be sent to the Secretary by registered mail, return receipt requested, and (e) be received by the Secretary within 60 days after the Request Record Date. Any
requesting Shareholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary.
(3) The Secretary shall inform the requesting Shareholders of the reasonably estimated cost of preparing and mailing or delivering the notice
of the meeting (including the Trusts proxy materials). the Secretary shall not be required to call a special meeting upon Shareholder request and such meeting shall not be held unless, in addition to the documents required by paragraph
(2) of this Section 3(b), the Secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.
(4) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the Chair,
the Chief Executive Officer, the President or the Board of Trustees, whoever has called the meeting. In the case of any special meeting called by the Secretary upon the request of Shareholders (a Shareholder-Requested Meeting), such
meeting shall be held at such place, date and time as may be designated by the Board of Trustees; provided, however, that the date of any Shareholder-Requested Meeting shall be not more than 90 days after the record date for such meeting (the
Meeting Record Date); and provided further that if the Board of Trustees fails to designate, within 10 days after the date that a valid Special Meeting Request is actually received by the Secretary (the Delivery Date), a date
and time for a Shareholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., local time, on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day;
and provided further that in the event that the Board of Trustees fails to designate a place for a Shareholder-Requested Meeting within 10 days after the Delivery Date, then such meeting shall be held at the principal executive office of the Trust.
In fixing a date for a Shareholder-Requested Meeting, the Board of Trustees may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any
request for the meeting and any plan of the Board of Trustees to call an annual meeting or a special meeting. In the case of any Shareholder-Requested Meeting, if the Board of Trustees fails to fix a Meeting Record Date that is a date within 30 days
after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Trustees may revoke the notice for any Shareholder-Requested Meeting in the event that the requesting
Shareholders fail to comply with the provisions of paragraph (3) of this Section 3(b).
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(5) If written revocations of the Special Meeting Request have been delivered to the Secretary
and the result is that Shareholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on
the matter to the Secretary: (i) if the notice of meeting has not already been delivered, the Secretary shall refrain from delivering the notice of the meeting and send to all requesting Shareholders who have not revoked such requests written
notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been delivered and if the Secretary first sends to all requesting Shareholders who have not revoked requests for a special meeting
on the matter written notice of any revocation of a request for the special meeting and written notice of the Trusts intention to revoke the notice of the meeting or for the chair of the meeting to adjourn the meeting without action on the
matter, (A) the Secretary may revoke the notice of the meeting at any time before 10 days before the commencement of the meeting or (B) the chair of the meeting may call the meeting to order and adjourn the meeting without acting on the
matter. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.
(6) The Chair, Chief Executive Officer, President or Board of Trustees may appoint regionally or nationally recognized independent inspectors
of elections to act as the agent of the Trust for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the Secretary. For the purpose of permitting the inspectors to perform
such review, no such purported Special Meeting Request shall be deemed to have been delivered to the Secretary until the earlier of (i) five Business Days after receipt by the Secretary of such purported request and (ii) such date as the
independent inspectors certify to the Trust that the valid requests received by the Secretary represent, as of the Request Record Date, Shareholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this
paragraph (6) shall in any way be construed to suggest or imply that the Trust or any Shareholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action
(including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
(7) For purposes of these By-Laws, Business Day shall mean any day other than a Saturday,
a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
1.8 Advance Notice of Shareholder Nominees for Trustee and Other Shareholder Proposals.
(a) Annual Meetings of Shareholders. (1) Nominations of individuals for election to the Board of Trustees and the proposal of other
business to be considered by the Shareholders may be made at an annual meeting of Shareholders (i) pursuant to the Trusts notice of meeting, (ii) by or at the direction of the Board of Trustees or (iii) by any Shareholder of the
Trust who was a Shareholder of record both at the time of giving of notice by the Shareholder as provided for in this Section 1.8(a) and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each
individual so nominated or on any such other business and who has complied with this Section 1.8(a).
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(2) For any nomination or other business to be properly brought before an annual meeting by a
Shareholder pursuant to clause (iii) of paragraph (a)(1) of this Section 1.8, the Shareholder must have given timely notice thereof in writing to the Secretary of the Trust and any such other business must otherwise be a proper matter for
action by the Shareholders. To be timely, a Shareholders notice shall set forth all information required under this Section 1.8 and shall be delivered to the Secretary at the principal executive office of the Trust not earlier than the
150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 1.8(c)(3) of this Article I) for the preceding years annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding years annual meeting (or in the case of the first annual meeting), notice by the
Shareholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting, as originally
convened, or the 10th day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period (or extend any
time period) for the giving of a Shareholders notice as described above. The number of nominees a Shareholder may nominate for election at the annual meeting (or in the case of one or more Shareholders giving the notice on behalf of a
beneficial owner, the number of nominees such Shareholders may collectively nominate for election at the annual meeting on behalf of such beneficial owner) shall not exceed the number of trustees to be elected at such annual meeting.
(3) Such Shareholders notice shall set forth:
(i) as to each individual whom the Shareholder proposes to nominate for election or reelection as a trustee (each, a Proposed
Nominee), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a trustee in an election contest (even if an election
contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act, whether such Shareholder believes any Proposed Nominee is, or
is not, an interested person of the Trust, as defined in the Investment Company Act of 1940, as amended (together with any rules and regulations and any applicable guidance and/or interpretations of the Securities and Exchange Commission
or its staff promulgated thereunder, the Investment Company Act) and information regarding such Proposed Nominee that is sufficient, in the discretion of the Board of Trustees or any committee thereof or any authorized officer of the
Trust, to make such determination and such persons written consent to being named in the Trusts proxy statement and accompanying proxy card and to serving as a trustee if elected;
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(ii) as to any other business that the Shareholder proposes to bring before the meeting, a
description of such business, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed
amendment), the Shareholders reasons for proposing such business at the meeting and any material interest in such business of such Shareholder or any Shareholder Associated Person (as defined below), individually or in the aggregate, including
any anticipated benefit to the Shareholder or the Shareholder Associated Person therefrom;
(iii) as to the Shareholder giving the notice,
any Proposed Nominee and any Shareholder Associated Person, (A) the class, series and number of all Shares of or other securities of the Trust or any affiliate thereof (collectively, the Trust Securities), if any, which are owned
(beneficially or of record) by such Shareholder, Proposed Nominee or Shareholder Associated Person, the date on which each such Trust Security was acquired and the investment intent of such acquisition, and any short interest (including any
opportunity to profit or share in any benefit from any decrease in the price of such Shares or other security) in any Trust Securities of any such person, (B) the nominee holder for, and number of, any Trust Securities owned beneficially but
not of record by such Shareholder, Proposed Nominee or Shareholder Associated Person, (C) whether and the extent to which such Shareholder, Proposed Nominee or Shareholder Associated Person, directly or indirectly (through brokers, nominees or
otherwise), is subject to or during the last 12 months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any
borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (I) manage risk or benefit of changes in the price of (x) Trust Securities or (y) any security of any other closed-end investment company (a Peer Group Company) for such Shareholder, Proposed Nominee or Shareholder Associated Person or (II) increase or decrease the voting power of such Shareholder,
Proposed Nominee or Shareholder Associated Person in the Trust or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such persons economic interest in the Trust Securities (or, as applicable, in any Peer
Group Company); and (D) any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Trust), by security holdings or otherwise, of such
Shareholder, Proposed Nominee or Shareholder Associated Person, in the Trust or any affiliate thereof, other than an interest arising from the ownership of Trust Securities where such Shareholder, Proposed Nominee or Shareholder Associated Person
receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series; (E) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among
such Shareholder and/or any Shareholder Associated Person, including, in the case of a nomination, the nominee, including any agreements, arrangements or understandings relating to any compensation or payments to be paid to any such proposed
nominee(s), pertaining to the nomination(s) or other business proposed to be brought before the meeting of shareholders (which description shall identify the name of each other person who is party to such an agreement, arrangement or understanding);
(F) a representation that the Shareholder is a holder of record of the Trust entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination; (G) a representation whether such
Shareholder or any Shareholder Associated Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Trusts securities required to approve or adopt
the proposal or elect the nominee, (2) otherwise to solicit proxies or votes from shareholders in support of such proposal or nomination, and/or (3) to solicit proxies in support of any proposed nominee in accordance with Rule 14a-19 promulgated under the Exchange Act; (H) a description of any proxy (other than a revocable proxy
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given in response to a public proxy solicitation made pursuant to, and in accordance with, the Exchange Act), agreement, arrangement, understanding or relationship pursuant to which such
Shareholder or Shareholder Associated Person has or shares a right, directly or indirectly, to vote any shares of any class or series of securities of the Trust; (I) a description of any rights to dividends or other distributions on the shares
of any securities of Trust, directly or indirectly, owned beneficially by such Shareholder or Shareholder Associated Person that are separated or separable from the underlying securities of the Trust; and (J) a description of any
performance-related fees (other than an asset based fee) that such Shareholder or any Shareholder Associated Person, directly or indirectly, is entitled to based on any increase or decrease in the value of shares of any securities of the Trust or
any interests described in clause (C);
(iv) as to the Shareholder giving the notice, any Shareholder Associated Person with an interest
or ownership referred to in clauses (ii) or (iii) of this paragraph (3) of this Section 1.8(a) and any Proposed Nominee, (A) the name and address of such Shareholder, as they appear on the Trusts Shares ledger, and the
current name and business address, if different, of each such Shareholder Associated Person and any Proposed Nominee and (B) the investment strategy or objective, if any, of such Shareholder and each such Shareholder Associated Person who is
not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such Shareholder and each such Shareholder Associated Person; and
(v) to the extent known by the Shareholder giving the notice, the name and address of any other Shareholder supporting the nominee for
election or reelection as a Trustee or the proposal of other business on the date of such Shareholders notice.
(4) Such
Shareholders notice shall, with respect to any Proposed Nominee, be accompanied by a certificate executed by the Proposed Nominee (i) certifying that such Proposed Nominee (a) is not, and will not become a party to, any agreement,
arrangement or understanding with any person or entity other than the Trust in connection with service or action as a Trustee that has not been disclosed to the Trust and (b) will serve as a Trustee of the Trust if elected; and
(ii) attaching a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Trust, upon request, to the Shareholder providing the notice and shall include all information relating to the Proposed Nominee that would
be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a Trustee in an election contest (even if an election contest is not involved), or would otherwise be required in connection with
such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the
Trust are listed or over-the-counter market on which any securities of the Trust are traded).
(5) Notwithstanding anything in this subsection (a) of this Section 1.8 to the contrary, in the event that the number of trustees to
be elected to the Board of Trustees is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement (as defined in Section 1.8(c)(3) of this Article II) for
the preceding years annual meeting, a Shareholders notice required by this Section 1.8(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to
the Secretary at the principal executive office of the Trust not later than 5:00 p.m., Eastern Time, on the 10th day following the day on which such public announcement is first made by the Trust.
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(6) For purposes of this Section 1.8, Shareholder Associated Person of any
Shareholder shall mean (i) any person acting in concert with such Shareholder, (ii) any beneficial owner of Shares of the Trust owned of record or beneficially by such Shareholder (other than a Shareholder that is a depositary) and
(iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Shareholder or such Shareholder Associated Person.
(b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of Shareholders as shall have been
brought before the meeting pursuant to the Trusts notice of meeting. Nominations of individuals for election to the Board of Trustees may be made at a special meeting of Shareholders at which trustees are to be elected only (i) by or at
the direction of the Board of Trustees or (ii) provided that the special meeting has been called in accordance with Section 1.7(a) of this Article I for the purpose of electing trustees, by any Shareholder of the Trust who is a Shareholder
of record both at the time of giving of notice provided for in this Section 1.8 and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice
procedures set forth in this Section 1.8. The number of nominees a Shareholder may nominate for election at the special meeting at which trustee are to be elected (or in the case of one or more Shareholders giving the notice on behalf of a
beneficial owner, the number of nominees such Shareholders may collectively nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of trustees to be elected at such special meeting. In the event
the Trust calls a special meeting of Shareholders for the purpose of electing one or more individuals to the Board of Trustees, any Shareholder may nominate an individual or individuals (as the case may be) for election as a Trustee as specified in
the Trusts notice of meeting, if the Shareholders notice, containing the information required by paragraph (a)(4) of this Section 1.8, is delivered to the Secretary at the principal executive office of the Trust not earlier than the
120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special
meeting at which trustees are to be elected. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period (or extend any time period) for the giving of a Shareholders notice as described
above.
(c) General. (1) If information submitted pursuant to this Section 1.8 by any Shareholder proposing a nominee for
election as a Trustee or any proposal for other business at a meeting of Shareholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 1.8. Any such
Shareholder shall notify the Trust of any inaccuracy or change (within two Business Days of becoming aware of such inaccuracy or change) in any such information. Upon written request by the Secretary or the Board of Trustees, any such Shareholder
shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the Board of Trustees or any authorized officer of the
Trust, to demonstrate the accuracy of any information submitted by the Shareholder pursuant to this Section 1.8, and (B) a written update of any information (including, if requested by the
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Trust, written confirmation by such Shareholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the Shareholder pursuant to this
Section 1.8 as of an earlier date. If a Shareholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have
been provided in accordance with this Section 1.8.
(2) Only such individuals who are nominated in accordance with this
Section 1.8 shall be eligible for election by Shareholders as trustees, and only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with this Section 1.8. The chair of
the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 1.8.
(3) For purposes of this Section 1.8, the date of the proxy statement shall have the same meaning as the date of the
companys proxy statement released to shareholders as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission from time to time.
Public announcement shall mean disclosure (A) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (B) in a document publicly
filed by the Trust with the Securities and Exchange Commission pursuant to the Exchange Act or the Investment Company Act.
(4)
Notwithstanding the foregoing provisions of this Section 1.8, a Shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth
in this Section 1.8. Nothing in this Section 1.8 shall be deemed to affect any right of a Shareholder to request inclusion of a proposal in, or the right of the Trust to omit a proposal from, the Trusts proxy statement pursuant to
Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 1.8 shall require disclosure of revocable proxies received by the Shareholder or Shareholder Associated Person
pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such Shareholder or Shareholder Associated Person under Section 14(a) of the Exchange Act.
1.9 Control Share Acquisition Statute. Subchapter III (entitled Control Beneficial Interest Acquisitions) of the Delaware Statutory
Trust Act, 12 Del. C. § 3801, et seq., (the Control Share Acquisition Statute) and the voting restrictions thereunder shall not apply to (i) any acquisition of preferred shares that may be issued by the Trust and (ii) any
acquisition or proposed acquisition of shares by any company that, in accordance with the 1940 Act or Securities and Exchange Commission exemptive order or other regulatory relief or guidance, votes the shares held by it in the same proportion as
the vote of all other holders of such security or all securities.
ARTICLE II
TRUSTEES
2.1 Regular
Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chair, if any, the Chief Executive Officer, the Secretary or any two Trustees.
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Regular meetings of the Trustees may be held without call or notice and shall generally be held quarterly.
Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by written consent,
except as may otherwise be required by law.
2.2 Chair; Records. The Chair, if any, shall act as chairman at all meetings of the
Trustees; in absence of a chair, the Vice Chair, if any, shall act as chair; in the absence of both the Chair and Vice Chair, the Trustees present shall elect a Trustee to act as temporary chair. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the Secretary or the person appointed by the Board of Trustees as the meeting secretary.
ARTICLE III
OFFICERS
3.1 Officers of the Trust. The officers of the Trust shall consist of a Chief Executive Officer, a President, a Secretary, a Treasurer
and such other officers or assistant officers as may be elected or authorized by the Trustees. Any two or more of the offices may be held by the same Person. No officer of the Trust need be a Trustee.
3.2 Tenure. Officers shall serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers at any time.
3.3 Removal of Officers. Any officer may be
removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which
any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the Chair, if any, Chief Executive Officer or Secretary, and
such resignation shall take effect immediately upon receipt by the Chair, if any, Chief Executive Officer or Secretary, or at a later date according to the terms of such notice in writing.
3.4 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of such officers
duties in such amount and with such sureties as the Trustees may determine.
3.5 Chief Executive Officer, President and Vice
Presidents. The Chief Executive Officer shall be the principal executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees
and shall exercise such general powers of management as are usually vested in the office of chief executive officer of a corporation. Subject to direction of the Trustees, the Chief Executive Officer shall have power in the name and on behalf of the
Trust to execute any and all loans, documents, contracts, agreements, deeds, mortgages, registration statements, applications, requests, filings and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the Chief Executive Officer shall
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have full authority and power, on behalf of all of the Trustees, to attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an
interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chief Executive Officer shall have such further authorities and duties as the Trustees shall from time to time determine. In the
absence or disability of the Chief Executive Officer, the President or Vice Presidents in order of their rank as fixed by the Trustees or, in the absence of the President, if more than one Vice President and not ranked, the Vice President designated
by the Trustees, shall perform all of the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all of the restrictions upon the Chief Executive Officer. Subject to the direction of the Trustees,
and of the Chief Executive Officer, the President and each Vice-President shall have the power in the name and on behalf of the Trust to execute any and all instruments in writing, and, in addition, shall have such other duties and powers as shall
be designated from time to time by the Trustees or by the Chief Executive Officer.
3.6 Secretary. The Secretary shall maintain the
minutes of all meetings of, and record all votes of, Shareholders, Trustees and any committee of the Trustees. The Secretary shall be custodian of the seal of the Trust, if any, and the Secretary (and any other person so authorized by the Trustees)
shall affix the seal, or if permitted, facsimile thereof, to any instrument executed by the Trust which would be sealed by a Delaware business corporation executing the same or a similar instrument and shall attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such office in a Delaware business corporation, and shall have such other authorities and
duties as the Trustees shall from time to time determine.
3.7 Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the Chief Executive
Officer all powers and duties normally incident to the office. The Treasurer may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. The Treasurer shall deposit all funds of the Trust in
such depositories as the Trustees shall designate. The Treasurer shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees or the Chief Executive Officer. The Treasurer shall keep accurate account of the
books of the Trusts transactions which shall be the property of the Trust, and which together with all other property of the Trust in the Treasurers possession, shall be subject at all times to the inspection and control of the Trustees.
Unless the Trustees shall otherwise determine, the Treasurer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. The Treasurer shall have such other duties and authorities as the
Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser, administrator, manager or transfer agent to maintain bank accounts and deposit and disburse funds of any
series of the Trust on behalf of such series.
3.8 Other Officers and Duties. The Trustees may elect such other officers and
assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that
officer in the duties of the office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon such person by the Trustees or delegated to such person by the Chief Executive Officer.
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ARTICLE IV
MISCELLANEOUS
4.1
Depositories. In accordance with Section 8.1 of the Declaration, the funds of the Trust shall be deposited in such custodians as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such
officer, officers, agent or agents (including the adviser, administrator or manager), as the Trustees may from time to time authorize.
4.2
Signatures. All contracts and other instruments shall be executed on behalf of the Trust by its properly authorized officers, agent or agents, as provided in the Declaration or By-Laws or as the
Trustees may from time to time by resolution provide.
4.3 Seal. The Trust is not required to have any seal, and the adoption or use
of a seal shall be purely ornamental and be of no legal effect. The seal, if any, of the Trust may be affixed to any instrument, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force
and effect as if it had been imprinted and affixed manually in the same manner and with the same force and effect as if done by a Delaware business corporation. The presence or absence of a seal shall have no effect on the validity, enforceability
or binding nature of any document or instrument that is otherwise duly authorized, executed and delivered.
ARTICLE V
SHARE TRANSFERS
5.1
Transfer Agents, Registrars and the Like. As provided in Section 6.8 of the Declaration, the Trustees shall have authority to employ and compensate such transfer agents and registrars with respect to the Shares of the Trust as the
Trustees shall deem necessary or desirable. In addition, the Trustees shall have power to employ and compensate such dividend disbursing agents, warrant agents and agents for the reinvestment of dividends as they shall deem necessary or desirable.
Any of such agents shall have such power and authority as is delegated to any of them by the Trustees.
5.2 Transfer of Shares. The
Shares of the Trust shall be subject to the limitations on transfer as provided in Section 6.9 of the Declaration. The Trust, or its transfer agents, shall be authorized to refuse any transfer unless and until presentation of proper evidence as
may be reasonably required to show that the requested transfer is proper.
5.3 Registered Shareholders. The Trust may deem and treat
the holder of record of any Shares as the absolute owner thereof for all purposes and shall not be required to take any notice of any right or claim of right of any other person.
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ARTICLE VI
AMENDMENT OF BY-LAWS
6.1 Amendment and Repeal of By-Laws. In accordance with Section 3.9 of the Declaration,
the Trustees shall have the exclusive power to amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees with respect to the By-Laws shall be taken by an affirmative vote of a majority of the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions in the Declaration.
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Exhibit (2)(d)(1)
CARLYLE CREDIT INCOME FUND
(Issuer)
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
(Trustee)
Indenture
Dated as of [], 2023
Providing for the Issuance
of
Debt Securities
TABLE OF CONTENTS
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Page |
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ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION |
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1 |
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Section 1.01. |
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Definitions |
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1 |
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Section 1.02. |
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Compliance Certificates and Opinions |
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8 |
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Section 1.03. |
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Form of Documents Delivered to Trustee |
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8 |
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Section 1.04. |
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Acts of Holders |
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9 |
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Section 1.05. |
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Notices, Etc., to Trustee and Company |
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10 |
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Section 1.06. |
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Notice to Holders; Waiver |
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10 |
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Section 1.07. |
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Effect of Headings and Table of Contents |
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10 |
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Section 1.08. |
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Successors and Assigns |
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11 |
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Section 1.09. |
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Separability Clause |
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11 |
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Section 1.10. |
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Benefits of Indenture |
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11 |
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Section 1.11. |
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Governing Law |
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11 |
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Section 1.12. |
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Legal Holidays |
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11 |
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Section 1.13. |
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Submission to Jurisdiction |
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11 |
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ARTICLE TWO SECURITIES FORMS |
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11 |
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Section 2.01. |
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Forms of Securities |
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11 |
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Section 2.02. |
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Form of Trustees Certificate of Authentication |
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12 |
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Section 2.03. |
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Securities Issuable in Global Form |
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12 |
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ARTICLE THREE THE SECURITIES |
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13 |
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Section 3.01. |
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Amount Unlimited; Issuable in Series |
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13 |
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Section 3.02. |
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Denominations |
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15 |
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Section 3.03. |
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Execution, Authentication, Delivery and Dating |
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16 |
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Section 3.04. |
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Temporary Securities |
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17 |
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Section 3.05. |
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Registration, Registration of Transfer and Exchange |
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17 |
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Section 3.06. |
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Mutilated, Destroyed, Lost and Stolen Securities |
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19 |
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Section 3.07. |
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Payment of Interest; Interest Rights Preserved; Optional Interest Reset |
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19 |
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Section 3.08. |
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Optional Extension of Maturity |
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21 |
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Section 3.09. |
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Persons Deemed Owners |
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21 |
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Section 3.10. |
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Cancellation |
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22 |
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Section 3.11. |
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Computation of Interest |
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22 |
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Section 3.12. |
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Currency and Manner of Payments in Respect of Securities |
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22 |
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Section 3.13. |
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Appointment and Resignation of Successor Exchange Rate Agent |
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25 |
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Section 3.14. |
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CUSIP Numbers |
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25 |
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ARTICLE FOUR SATISFACTION AND DISCHARGE |
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25 |
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Section 4.01. |
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Satisfaction and Discharge of Indenture |
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25 |
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Section 4.02. |
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Application of Trust Funds |
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26 |
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ARTICLE FIVE REMEDIES |
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26 |
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Section 5.01. |
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Events of Default |
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26 |
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Section 5.02. |
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Acceleration of Maturity; Rescission and Annulment |
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28 |
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Section 5.03. |
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Collection of Indebtedness and Suits for Enforcement by Trustee |
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29 |
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Section 5.04. |
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Trustee May File Proofs of Claim |
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29 |
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Section 5.05. |
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Trustee May Enforce Claims Without Possession of Securities |
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30 |
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Section 5.06. |
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Application of Money Collected |
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30 |
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Section 5.07. |
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Limitation on Suits |
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30 |
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Section 5.08. |
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Unconditional Right of Holders to Receive Principal, Premium and Interest |
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31 |
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Section 5.09. |
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Restoration of Rights and Remedies |
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31 |
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-i-
TABLE OF CONTENTS
(continued)
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Page |
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Section 5.10. |
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Rights and Remedies Cumulative |
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31 |
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Section 5.11. |
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Delay or Omission Not Waiver |
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31 |
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Section 5.12. |
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Control by Holders of Securities |
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31 |
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Section 5.13. |
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Waiver of Past Defaults |
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32 |
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Section 5.14. |
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Waiver of Stay or Extension Laws |
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32 |
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ARTICLE SIX THE TRUSTEE |
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32 |
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Section 6.01. |
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Notice of Defaults |
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32 |
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Section 6.02. |
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Certain Rights of Trustee |
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33 |
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Section 6.03. |
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Not Responsible for Recitals or Issuance of Securities |
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34 |
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Section 6.04. |
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May Hold Securities |
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35 |
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Section 6.05. |
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Money Held in Trust |
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35 |
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Section 6.06. |
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Compensation and Reimbursement and Indemnification of Trustee |
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35 |
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Section 6.07. |
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Corporate Trustee Required; Eligibility |
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36 |
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Section 6.08. |
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Disqualification; Conflicting Interests |
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36 |
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Section 6.09. |
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Resignation and Removal; Appointment of Successor |
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36 |
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Section 6.10. |
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Acceptance of Appointment by Successor |
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37 |
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Section 6.11. |
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Merger, Conversion, Consolidation or Succession to Business |
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38 |
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Section 6.12. |
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Appointment of Authenticating Agent |
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38 |
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ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY |
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40 |
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Section 7.01. |
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Disclosure of Names and Addresses of Holders |
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40 |
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Section 7.02. |
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Preservation of Information; Communications to Holders |
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40 |
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Section 7.03. |
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Reports by Trustee |
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40 |
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Section 7.04. |
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Reports by Company |
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41 |
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Section 7.05. |
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Calculation of Original Issue Discount |
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41 |
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ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER |
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41 |
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Section 8.01. |
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Company May Consolidate, Etc., Only on Certain Terms |
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41 |
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Section 8.02. |
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Successor Person Substituted |
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41 |
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ARTICLE NINE SUPPLEMENTAL INDENTURES |
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42 |
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Section 9.01. |
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Supplemental Indentures Without Consent of Holders |
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42 |
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Section 9.02. |
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Supplemental Indentures with Consent of Holders |
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43 |
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Section 9.03. |
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Execution of Supplemental Indentures |
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44 |
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Section 9.04. |
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Effect of Supplemental Indentures |
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44 |
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Section 9.05. |
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Conformity with Trust Indenture Act |
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44 |
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Section 9.06. |
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Reference in Securities to Supplemental Indentures |
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44 |
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ARTICLE TEN COVENANTS |
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44 |
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Section 10.01. |
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Payment of Principal, Premium, if any, and Interest |
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44 |
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Section 10.02. |
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Existence; Maintenance of Office or Agency |
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44 |
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Section 10.03. |
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Money for Securities Payments to Be Held in Trust |
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45 |
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Section 10.04. |
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Additional Amounts |
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45 |
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Section 10.05. |
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Statement as to Compliance |
|
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46 |
|
Section 10.06. |
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Payment of Taxes and Other Claims |
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|
46 |
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Section 10.07. |
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Waiver of Certain Covenants |
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47 |
|
|
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ARTICLE ELEVEN REDEMPTION OF SECURITIES |
|
|
47 |
|
|
|
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Section 11.01. |
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Applicability of Article |
|
|
47 |
|
-ii-
TABLE OF CONTENTS
(continued)
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Page |
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Section 11.02. |
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Election to Redeem; Notice to Trustee |
|
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47 |
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Section 11.03. |
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Selection by Trustee of Securities to Be Redeemed |
|
|
47 |
|
Section 11.04. |
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Notice of Redemption |
|
|
48 |
|
Section 11.05. |
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Deposit of Redemption Price |
|
|
48 |
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Section 11.06. |
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Securities Payable on Redemption Date |
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49 |
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Section 11.07. |
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Securities Redeemed in Part |
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49 |
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|
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ARTICLE TWELVE SINKING FUNDS |
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49 |
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|
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Section 12.01. |
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Applicability of Article |
|
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49 |
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Section 12.02. |
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Satisfaction of Sinking Fund Payments with Securities |
|
|
50 |
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Section 12.03. |
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Redemption of Securities for Sinking Fund |
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|
50 |
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|
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ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS |
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50 |
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Section 13.01. |
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Applicability of Article |
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50 |
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Section 13.02. |
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Repayment of Securities |
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50 |
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Section 13.03. |
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Exercise of Option |
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|
51 |
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Section 13.04. |
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When Securities Presented for Repayment Become Due and Payable |
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51 |
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Section 13.05. |
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Securities Repaid in Part |
|
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51 |
|
|
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ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE |
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52 |
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Section 14.01. |
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Applicability of Article; Companys Option to Effect Defeasance or Covenant
Defeasance |
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52 |
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Section 14.02. |
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Defeasance and Discharge |
|
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52 |
|
Section 14.03. |
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Covenant Defeasance |
|
|
52 |
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Section 14.04. |
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Conditions to Defeasance or Covenant Defeasance |
|
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53 |
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Section 14.05. |
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Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous
Provisions |
|
|
54 |
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|
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ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES |
|
|
55 |
|
|
|
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Section 15.01. |
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Purposes for Which Meetings May Be Called |
|
|
55 |
|
Section 15.02. |
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Call, Notice and Place of Meetings |
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|
55 |
|
Section 15.03. |
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Persons Entitled to Vote at Meetings |
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|
55 |
|
Section 15.04. |
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Quorum; Action |
|
|
55 |
|
Section 15.05. |
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Determination of Voting Rights; Conduct and Adjournment of Meetings |
|
|
56 |
|
Section 15.06. |
|
Counting Votes and Recording Action of Meetings |
|
|
57 |
|
-iii-
CARLYLE CREDIT INCOME FUND
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of [], 2023
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|
|
|
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Trust Indenture Act Section |
|
Indenture Section |
§ 310 |
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(a)(1) |
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6.07 |
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(a)(2) |
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6.07 |
|
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(b) |
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6.08, 6.09 |
§ 312 |
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(c) |
|
7.01 |
§ 314 |
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(a) |
|
7.04 |
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|
(a)(4) |
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10.05 |
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(c)(1) |
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1.02 |
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(c)(2) |
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1.02 |
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|
(e) |
|
1.02 |
§ 315 |
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(b) |
|
6.01 |
§ 316 |
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(a) (last sentence) |
|
1.01 (Outstanding) |
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|
(a)(1)(A) |
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5.02, 5.12 |
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(a)(1)(B) |
|
5.13 |
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|
(b) |
|
5.08 |
§ 317 |
|
(a)(1) |
|
5.03 |
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|
(a)(2) |
|
5.04 |
§ 318 |
|
(a) |
|
1.11 |
|
|
(c) |
|
1.11 |
NOTE: This
reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Indenture.
-iv-
INDENTURE, dated as of [], 2023, between Carlyle Credit Income Fund, a Delaware
statutory trust (the Company), and American Stock Transfer & Trust Company, LLC, trustee (in such capacity and not in its individual capacity, the Trustee).
RECITALS OF THE COMPANY
WHEREAS, the Company deems it necessary to issue from time to time for its lawful purposes debt securities (hereinafter called the
Securities) evidencing its unsecured indebtedness, which may or may not be convertible into or exchangeable for any securities of any Person (including the Company), and has duly authorized the execution and delivery of this Indenture to
provide for the issuance from time to time of the Securities, to be issued in one or more series, unlimited as to principal amount, to bear such rates of interest, to mature at such times and to have such other provisions as shall be fixed as
hereinafter provided;
WHEREAS, this Indenture is subject to the provisions of the Trust Indenture Act that are required to be part
of this Indenture and shall, to the extent applicable, be governed by such provisions; and
WHEREAS, all things necessary to make
this Indenture a valid and legally binding agreement of, and enforceable against, the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, or of a series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular and,
pursuant to Section 3.01, any such item may, with respect to any particular series of Securities, be amended or modified or specified as being inapplicable;
(b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms cash transaction and self-liquidating paper, as used in Section 311 of the Trust Indenture Act, shall have the meanings assigned to them in the rules of the Commission adopted
under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance
with generally accepted accounting principles in the United States;
(d) the words herein, hereof and
hereunder and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(e) or is not exclusive;
(f) including shall be deemed to mean including without limitation;
(g) provisions apply to successive events and transactions; and
1
(h) references to sections of or rules under the Securities Exchange Act of 1934, as amended,
shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time.
Certain
terms, used in other Articles herein, are defined in those Articles.
Act, when used with respect to any Holder of a
Security, has the meaning specified in Section 1.04.
Additional Amounts means any additional amounts that are
required by a Security or by or pursuant to a Board Resolution, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and that are owing to such Holders.
Affiliate of any specified Person means any other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, control when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing.
Authenticating Agent means any authenticating agent appointed by the Trustee pursuant to Section 6.12 to act on behalf
of the Trustee to authenticate Securities of one or more series.
Authorized Newspaper means a newspaper, in the
English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the
term is used or in the financial community of each such place. Where successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different newspapers in the same city meeting
the foregoing requirements and in each case on any Business Day.
Bankruptcy Law has the meaning specified in
Section 5.01.
Board of Directors means the board of directors of the Company or any committee of that board duly
authorized to act hereunder.
Board Resolution means a copy of a resolution certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
Business Day means, when used with respect to any Place of Payment or any other particular location referred to in this
Indenture or in the Securities, unless otherwise specified with respect to any Securities pursuant to Section 3.01, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in that Place of Payment or
particular location are authorized or obligated by law or executive order to close.
Clearstream means Clearstream
International or its successor.
Commission means the Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
Company means the Person named as the Company in the first
paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter Company shall mean such successor Person.
2
Company Request and Company Order mean, respectively, a
written request or order signed in the name of the Company by the Chairman, the Chief Executive Officer or any Vice President, and by the Chief Financial Officer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.
Component Currency has the meaning specified in Section 3.12(h).
Conversion Date has the meaning specified in Section 3.12(d).
Conversion Event means the cessation of use of (i) a Foreign Currency both by the government of the country which
issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the Euro both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Union or (iii) any currency unit (or composite currency) other than the Euro for the purposes for which it was established.
Corporate Trust Office means the office of the Trustee at which, at any particular time, its corporate trust business shall
be principally administered, which office at the date hereof is located at 6201 15th Avenue, Brooklyn, New York 11219; provided, that for purposes of presentment or surrender of securities
for transfer or payment or exchange, such office is located at 6201 15th Avenue, Brooklyn, New York 11219, or such other address as the Trustee may designate from time to time by notice to the
Holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).
corporation includes corporations, associations, companies and business trusts.
Currency means any currency or currencies, composite currency or currency unit or currency units, including, without
limitation, the Euro, issued by the government of one or more countries or by any reorganized confederation or association of such governments.
Default means any event that is, or after notice or passage of time or both would be, an Event of Default.
Defaulted Interest has the meaning specified in Section 3.07(a).
Dollar or $ means a dollar or other equivalent unit in such coin or currency of the United States as at
the time shall be legal tender for the payment of public and private debts.
Euro means the official currency of the
eurozone.
Election Date has the meaning specified in Section 3.12(h).
Euroclear means Euroclear Bank S.A./N.V., as operator of the Euroclear System, or its successor as operator of the
Euroclear System.
European Monetary System means the European Monetary System established by the Resolution of
December 5, 1978 of the Council of the European Union.
Event of Default has the meaning specified in
Section 5.01.
Exchange Rate Agent means, with respect to Securities of or within any series, unless otherwise
specified with respect to any Securities pursuant to Section 3.01, a New York Clearing House bank designated pursuant to Section 3.01 or Section 3.13.
Exchange Rate Officers Certificate means a certificate setting forth (i) the applicable Market Exchange Rate or
the applicable bid quotation and (ii) the Dollar or Foreign Currency amounts of principal (and premium, if any) and interest, if any (on an aggregate basis and on the basis of a Security having the lowest denomination principal amount
determined in accordance with Section 3.02 in the relevant Currency), payable with respect to a Security of any series on the basis of such Market Exchange Rate or the applicable bid quotation signed by the Chief Executive Officer, the Chief
Financial Officer or any Vice President of the Company.
3
Extension Notice has the meaning specified in Section 3.08.
Extension Period has the meaning specified in Section 3.08.
Final Maturity has the meaning specified in Section 3.08.
Foreign Currency means any Currency other than the Dollar, including the Euro.
Government Obligations means securities that are (i) direct obligations of the United States or the government which
issued the Foreign Currency in which the Securities of a particular series are payable, for the payment of which the full faith and credit of the United States or such other government is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States or such government that issued the Foreign Currency in which the Securities of such series are payable, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such depository receipt.
Holder means the Person in
whose name a Security is registered in the Security Register.
Indenture means this instrument as originally executed
or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of particular series of Securities established as
contemplated by Section 3.01; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, Indenture shall mean, with respect to any one or more series of Securities for
which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include
the terms of the or those particular series of Securities for which such Person is Trustee established as contemplated by Section 3.01; exclusive, however, of any provisions or terms that relate solely to other series of Securities for which
such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
Indexed Security means a Security as to which all
or certain interest payments and/or the principal amount payable at Maturity are determined by reference to prices, changes in prices, or differences between prices, of securities, Currencies, intangibles, goods, articles or commodities or by such
other objective price, economic or other measures as are specified in Section 3.01 hereof.
Interest means, when
used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, interest payable after Maturity, and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant
to Section 10.04, includes such Additional Amounts.
Interest Payment Date means, when used with respect to any
Security, the Stated Maturity of an installment of interest on such Security.
Investment Company Act means the
Investment Company Act of 1940, and the rules, regulations and interpretations promulgated by the Commission thereunder and any statute successor thereto, in each case, as amended from time to time.
4
Market Exchange Rate means, unless otherwise specified with respect to any
Securities pursuant to Section 3.01, (i) for any conversion involving a currency unit, on the one hand, and Dollars or any Foreign Currency, on the other, the exchange rate between the relevant currency unit and Dollars or such Foreign Currency
calculated by the method specified pursuant to Section 3.01 for the Securities of the relevant series, (ii) for any conversion of Dollars into any Foreign Currency, the noon buying rate for such Foreign Currency for cable transfers quoted
in The City of New York as certified for customs purposes by the Federal Reserve Bank of New York and (iii) for any conversion of one Foreign Currency into Dollars or another Foreign Currency, the spot rate at noon local time in the relevant
market at which, in accordance with normal banking procedures, the Dollars or Foreign Currency into which conversion is being made could be purchased with the Foreign Currency from which conversion is being made from major banks located in either
The City of New York, London or any other principal market for Dollars or such purchased Foreign Currency, in each case determined by the Exchange Rate Agent. Unless otherwise specified with respect to any Securities pursuant to Section 3.01,
in the event of the unavailability of any of the exchange rates provided for in the foregoing clauses (i), (ii) and (iii), the Exchange Rate Agent shall use, in its sole discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks in The City of New York, London or other principal market for such currency or currency unit in question, or such other quotations as the
Exchange Rate Agent shall deem appropriate. Unless otherwise specified by the Exchange Rate Agent, if there is more than one market for dealing in any currency or currency unit by reason of foreign exchange regulations or otherwise, the market to be
used in respect of such currency or currency unit shall be that upon which a nonresident issuer of securities designated in such currency or currency unit would purchase such currency or currency unit in order to make payments in respect of such
securities as determined by the Exchange Rate Agent, in its sole discretion.
Maturity means, when used with respect to
any Security, the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of
option to elect repayment, notice of exchange or conversion or otherwise.
Notice of Default has the meaning provided
in Section 5.01.
Officers Certificate means a certificate signed on behalf of the Company by an officer of
the Company, who must be the Chairman, the Chief Executive Officer, the Chief Financial Officer, any Vice President or the Secretary and delivered to the Trustee.
Opinion of Counsel means a written opinion of counsel, who may be counsel for the Company or who may be an employee of or
other counsel for the Company, and who shall be acceptable to the Trustee.
Optional Reset Date has the meaning
specified in Section 3.07(b).
Original Issue Discount Security means any Security that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02.
Original Stated Maturity has the meaning specified in Section 3.08.
Outstanding means, when used with respect to Securities or any series of Securities, all Securities or all Securities of
such series, as the case may be, theretofore authenticated and delivered under this Indenture as of the date of determination, except:
(i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the
necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
5
(iii) Securities, except to the extent provided in Sections 14.02 and 14.03, with
respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; and
(iv)
Securities that have been paid pursuant to Section 3.06 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such Securities are held by a protected purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities shall have given any
request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by TIA Section 313, (i) the principal amount of
an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been
declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02, (ii) the principal amount of any Security denominated in a Foreign Currency that may be
counted in making such determination or calculation and that shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined as of the date such Security is originally issued by the Company as set forth in an
Exchange Rate Officers Certificate delivered to the Trustee, of the principal amount (or, in the case of an Original Issue Discount Security or Indexed Security, the Dollar equivalent as of such date of original issuance of the amount
determined as provided in clause (i) above or (iii) below, respectively) of such Security, (iii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed
outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Security pursuant to Section 3.01, and (iv) Securities owned by the
Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding; except that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Securities which a Responsible Officer of the Trustee actually knows to
be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgees right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.
Paying Agent means any Person authorized by the Company to pay the principal of (or premium, if any) or interest, if any,
on any Securities on behalf of the Company.
Person means any natural person or corporation, partnership, joint
venture, association, joint-stock company, limited liability company, business trust, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Place of Payment means, when used with respect to the Securities of or within any series, the place or places where the
principal of (and premium, if any) and interest, if any, on such Securities are payable as specified and as contemplated by Sections 3.01 and 10.02.
Predecessor Security of any particular Security means every previous Security evidencing all or a portion of the same debt
as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security.
Redemption Date means, when used with respect to any Security to be redeemed, in whole or in part, the date fixed for such
redemption by or pursuant to this Indenture.
6
Redemption Price means, when used with respect to any Security to be redeemed,
the price at which it is to be redeemed pursuant to this Indenture.
Registered Security means any Security that is
registered in the Security Register.
Regular Record Date means, for the interest payable on any Interest Payment Date
on the Registered Securities of or within any series, the date specified for that purpose as contemplated by Section 3.01, whether or not a Business Day.
Repayment Date means, when used with respect to any Security to be repaid at the option of the Holder, the date fixed for
such repayment by or pursuant to this Indenture.
Repayment Price means, when used with respect to any Security to be
repaid at the option of the Holder, the price at which it is to be repaid by or pursuant to this Indenture.
Reset
Notice has the meaning specified in Section 3.07(b).
Responsible Officer means, when used with respect
to the Trustee, any officer of the Trustee assigned by the Trustee to administer its corporate trust matters and who shall have direct responsibility for the administration of this Indenture.
Security or Securities has the meaning stated in the first recital of this Indenture and, more
particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time there is more than one Person acting as Trustee under this Indenture, Securities with
respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive,
however, of Securities of any series as to which such Person is not Trustee.
Security Register and
Security Registrar have the respective meanings specified in Section 3.05.
Special Record Date
for the payment of any Defaulted Interest on the Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 3.07.
Specified Amount has the meaning specified in Section 3.12(h).
Stated Maturity means, when used with respect to any Security or any installment of principal thereof or interest thereon,
the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable, as such date may be extended pursuant to the provisions of Section 3.08.
Subsequent Interest Period has the meaning specified in Section 3.07(b).
Trust Indenture Act or TIA means the Trust Indenture Act of 1939, as amended, as in force at the date as
of which this Indenture was executed, except as provided in Section 9.05.
Trustee means the Person named as the
Trustee in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, Trustee shall mean or include each Person who is then
a Trustee hereunder; provided, however, that if at any time there is more than one such Person, Trustee as used with respect to the Securities of any series shall mean only the Trustee with respect to Securities of that
series.
United States means, unless otherwise specified with respect to any Securities pursuant to Section 3.01,
the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
7
United States person means, unless otherwise specified with respect to any
Securities pursuant to Section 3.01, any natural person who is a citizen or resident of the United States or a corporation, partnership, joint venture, association, joint-stock company, limited liability company, unincorporated organization or
other entity created or organized in or under the laws of the United States, any state thereof or the District of Columbia (other than a partnership that is not treated as a United States Person under any applicable Treasury regulations), any estate
the income of which is subject to United States federal income taxation regardless of its source, or any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in the Treasury regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to such date that elect to continue to be treated as United States Persons, will also be United States persons.
Valuation Date has the meaning specified in Section 3.12(c).
Yield to Maturity means the yield to maturity, computed at the time of issuance of a Security (or, if applicable, at the
most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles.
Section 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to
such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect
to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 10.05) shall include:
(a) a
statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that such individual signing the certificate or opinion has made such examination or
investigation as is necessary to enable such individual to express an informed opinion as to whether or not such condition or covenant has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any
certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the opinion, certificate or representations with respect to the matters
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upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations as to such matters are erroneous.
Where any Person is required to make,
give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
Section 1.04. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by
Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in
writing or approved at a meeting of the holders. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record of such meeting or both are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Holders signing such instrument or
instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Company and any agent of the Trustee or the Company if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 15.06.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other manner that the Trustee deems reasonably sufficient.
(c) The
ownership of Registered Securities shall be proved by the Security Register.
(d) If the Company shall solicit from the Holders of
Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled
to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders
for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to
the provisions of this Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
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Section 1.05. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(i) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid or sent via overnight courier guaranteeing next day delivery or same day messenger service to the Trustee at its Corporate Trust Office, Attention: General
Counsel; or
(ii) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, or sent via overnight courier guaranteeing next day delivery or same day messenger service, to the Company, to the attention of its [General Counsel] at
[].
The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: (i) at
the time delivered by hand, if personally delivered; (ii) five Business Days after being deposited in the mail, postage prepaid; and (iii) the next Business Day after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Section 1.06. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, or by overnight courier guaranteeing next day delivery to each such Holder affected by such event, at such Holders address
as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. In any case where notice to Holders of Registered Securities is given by mail or by overnight courier guaranteeing next day delivery, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities. Any notice mailed or sent to a Holder in the manner herein prescribed shall be conclusively deemed to
have been received by such Holder, whether or not such Holder actually receives such notice.
If by reason of the suspension of or
irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee shall
constitute a sufficient notification to such Holders for every purpose hereunder.
Any request, demand, authorization, direction, notice,
consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
Section 1.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
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Section 1.08. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
Section 1.09. Separability Clause.
In case any provision in this Indenture or in any Security shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.10. Benefits of
Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties
hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 1.11. Governing Law.
This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York. This Indenture is
subject to the provisions of the Trust Indenture Act that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.
Section 1.12. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any
Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security other than a provision in the Securities of any series which specifically states that such provision shall
apply in lieu of this Section), payment of principal (or premium, if any) or interest, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity; provided that no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be.
Section 1.13. Submission to Jurisdiction.
The Company hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or
federal court sitting in The City of New York in any action or proceeding arising out of or relating to the Indenture and the Securities of any series, and the Company hereby irrevocably agrees that all claims in respect of such action or proceeding
may be heard and determined in such New York State or federal court. The Company hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding.
ARTICLE TWO
SECURITIES
FORMS
Section 2.01. Forms of Securities.
The Registered Securities of each series, the temporary global Securities of each series, if any, and the permanent global Securities of each
series, if any, to be endorsed thereon shall be in substantially the forms as shall be established in one or more indentures supplemental hereto or approved from time to time by or pursuant to a Board Resolution in accordance with Section 3.01,
shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto (and
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applicable law), and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or
to conform to usage.
The definitive Securities shall be produced in any manner, as determined by the officers executing such Securities,
as evidenced by their execution of such Securities.
Section 2.02. Form of Trustees Certificate of
Authentication.
Subject to Section 6.11, the Trustees certificate of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
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American Stock Transfer & Trust Company, LLC, trustee |
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By: |
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Authorized Officer |
Section 2.03. Securities Issuable in Global Form.
If Securities of or within a series are issuable in global form, as specified as contemplated by Section 3.01, then, notwithstanding
clause (viii) of Section 3.01 and the provisions of Section 3.02, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate
amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any
endorsement of a Security in global form to reflect the amount or any increase or decrease in the amount of Outstanding Securities represented thereby shall be made by the Trustee or the Security Registrar in such manner and upon instructions given
by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 3.03 or 3.04. Subject to the provisions of Section 3.03 and, if applicable, Section 3.04, the Trustee
or the Security Registrar shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to
Section 3.03 or 3.04 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement, delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 1.02 and
need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 3.03 shall apply to any Security
represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee or the Security Registrar the Security in global form together with written instructions (which need not
comply with Section 1.02 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of
Section 3.03.
Notwithstanding the provisions of Section 3.07, unless otherwise specified as contemplated by Section 3.01,
payment of principal of (and premium, if any) and interest, if any, on any Security in permanent global form shall be made to the Person or Persons specified therein.
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Notwithstanding the provisions of Section 3.09 and except as provided in the preceding
paragraph, the Company, the Trustee and any agent of the Company and the Trustee, as applicable, shall treat the Holder of a permanent global Security in registered form as the Holder of such principal amount of Outstanding Securities represented by
such permanent global Security.
ARTICLE THREE
THE SECURITIES
Section 3.01. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be established in one or more Board Resolutions or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 3.03, set forth, or determined in the manner provided, in an Officers Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (i), (ii) and (xv) below), if so provided, may be determined from time to time by the Company with respect to
unissued Securities of the series when issued from time to time):
(i) the title of the Securities of the series including
CUSIP numbers (which shall distinguish the Securities of such series from all other series of Securities);
(ii) any limit
upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 3.04, 3.05, 3.06, 9.06, 11.07 or 13.05, and except for any Securities which, pursuant to Section 3.03, are deemed never to have been authenticated and delivered hereunder);
(iii) the date or dates, or the method by which such date or dates shall be determined or extended, on which the principal of
the Securities of the series shall be payable;
(iv) the rate or rates at which the Securities of the series shall bear
interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest
shall be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, and the basis upon which such interest shall be calculated
if other than that of a 360-day year of twelve 30-day months;
(v) the place or places, if any, other than or in addition to the Borough of Manhattan, The City of New York, where the
principal of (and premium, if any) and interest, if any, on Securities of the series shall be payable, any Registered Securities of the series may be surrendered for registration of transfer, Securities of the series may be surrendered for exchange,
Securities of that series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable, and notices or demands to or upon the Company in respect of the Securities of the series and this Indenture may be served;
(vi) the period or periods within which, or the date or dates on which, the price or prices at which, the Currency or
Currencies in which, and other terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option;
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(vii) the obligation, if any, of the Company to redeem, repay or purchase
Securities of the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which, or the date or dates on which, the price or prices at which, the Currency or Currencies in
which, and other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;
(viii) if other than denominations of $1,000 and any integral multiple thereof, the denomination or denominations in which any
Registered Securities of the series shall be issuable;
(ix) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent;
(x) if other than the principal amount thereof, the portion of the principal amount of
Securities of the series that shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.02, upon redemption of the Securities of the series which are redeemable before their Stated Maturity, upon surrender
for repayment at the option of the Holder, or which the Trustee shall be entitled to claim pursuant to Section 5.04 or the method by which such portion shall be determined;
(xi) if other than Dollars, the Currency or Currencies in which payment of the principal of (or premium, if any) or interest,
if any, on the Securities of the series shall be made or in which the Securities of the series shall be denominated and the particular provisions applicable thereto in accordance with, in addition to or in lieu of any of the provisions of
Section 3.12;
(xii) whether the amount of payments of principal of (or premium, if any) or interest, if any, on the
Securities of the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more Currencies, commodities, equity indices or other indices), and the manner
in which such amounts shall be determined;
(xiii) whether the principal of (or premium, if any) or interest, if any, on
the Securities of the series are to be payable, at the election of the Company or a Holder thereof, in one or more Currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which
(including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of determining the exchange rate between the Currency or Currencies in which such Securities are denominated or stated to be
payable and the Currency or Currencies in which such Securities are to be paid, in each case in accordance with, in addition to or in lieu of any of the provisions of Section 3.12;
(xiv) provisions, if any, granting special rights to the Holders of Securities of the series (solely to the extent permitted
under the Investment Company Act, if then applicable to the Company);
(xv) any deletions from, modifications of or
additions to the Events of Default or covenants (including any deletions from, modifications of or additions to any of the provisions of Section 10.07) of the Company with respect to Securities of the series, whether or not such Events of
Default or covenants are consistent with the Events of Default or covenants set forth herein;
(xvi) whether any Securities
of the series are to be issuable initially in temporary global form and whether any Securities of the series are to be issuable in permanent global form and, if so, whether beneficial owners of interests in any such permanent global Security may
exchange such interests for Securities of such series in certificated form and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in
Section 3.05;
(xvii) the date as of which any temporary global Security representing Outstanding Securities of the
series shall be dated if other than the date of original issuance of the first Security of the series to be issued;
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(xviii) the Person to whom any interest on any Registered Security of the series
shall be payable, if other than the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, and the extent to which, or the manner in which, any
interest payable on a temporary global Security on an Interest Payment Date shall be paid if other than in the manner provided in Section 3.04; and the extent to which, or the manner in which, any interest payable on a permanent global Security
on an Interest Payment Date shall be paid if other than in the manner provided in Section 3.07;
(xix) the
applicability, if any, of Sections 14.02 and/or 14.03 to the Securities of the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen (solely to the extent permitted under the Investment
Company Act, if then applicable to the Company);
(xx) if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents
or conditions;
(xxi) whether, under what circumstances and the Currency in which, the Company shall pay Additional Amounts
as contemplated by Section 10.04 on the Securities of the series to any Holder who is not a United States Person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so,
whether the Company shall have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option);
(xxii) the designation of the initial Exchange Rate Agent, if any;
(xxiii) if the Securities of the series are to be issued upon the exercise of warrants, the time, manner and place for such
Securities to be authenticated and delivered;
(xxiv) if the Securities of the series are to be convertible into or
exchangeable for any securities of any Person (including the Company), the terms and conditions upon which such Securities will be so convertible or exchangeable;
(xxv) if the Securities of the series are to be listed on a securities exchange, the name of such exchange; and
(xxvi) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture or the
requirements of the Investment Company Act (if then applicable to the Company) or the Trust Indenture Act), including secured Securities and guarantees of Securities.
All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the
consent of the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are
established by action taken pursuant to one or more Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers Certificate setting forth the terms of the Securities of such series.
Section 3.02.
Denominations.
The Securities of each series shall be issuable in such denominations as shall be specified as contemplated by
Section 3.01. With respect to Securities of any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities issued
in global form (which may be of any denomination) shall be issuable in denominations of $1,000 and any integral multiple thereof.
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Section 3.03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman, the Chief Executive Officer, the Chief Financial Officer or one of
its Vice Presidents and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals who were at any
time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the
date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and
deliver such Securities. If all the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to
the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as interest rate, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities,
and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to TIA Section 315(a) through 315(d)) shall be fully protected in relying upon,
(a) an Opinion of Counsel stating,
(i) that the form or forms of such Securities have been established in conformity with the provisions of this Indenture;
(ii) that the terms of such Securities have been established in conformity with the provisions of this Indenture; and
(iii) that such Securities, when completed by appropriate insertions and executed and delivered by the Company to the Trustee
for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, shall
constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, receivership, moratorium and other similar laws of
general applicability relating to or affecting the enforcement of creditors rights, to general equitable principles and to such other qualifications as such counsel shall conclude do not materially affect the rights of Holders of such
Securities; and
(b) an Officers Certificate stating, to the best of the knowledge of the signer of such certificate, that no Event
of Default with respect to any of the Securities shall have occurred and be continuing.
Notwithstanding the provisions of
Section 3.01 and of this Section 3.03, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver an Officers Certificate otherwise required pursuant to Section 3.01 or the Company
Order, Opinion of Counsel or Officers Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificates, with appropriate modifications to cover
such future issuances, shall be delivered at or before the time of issuance of the first Security of such series.
If such form or terms
have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustees own rights, duties, obligations or immunities under the Securities
and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the generality of the foregoing, the Trustee will not be required to authenticate Securities denominated in a Foreign Currency if the
Trustee reasonably believes that it would be unable to perform its duties with respect to such Securities.
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Each Registered Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee or an Authenticating Agent by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.10 together with a written statement (which need not comply with Section 1.02 and need
not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.
Section 3.04. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Securities substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form with one or more coupons or without coupons, and with such appropriate
insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities
may be in global form.
If temporary Securities of any series are issued, the Company shall cause definitive Securities of that series to
be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities
of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal amount and like tenor of definitive Securities of the same series of authorized denominations. Until so exchanged, the temporary Securities of any series shall in all
respects be entitled to the same benefits under this Indenture as definitive Securities of such series.
Section 3.05.
Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes
referred to collectively as the Security Register) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered
Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed Security
Registrar for the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided, and for facilitating exchanges of temporary global Securities for permanent global Securities
or definitive Securities, or both, or of permanent global Securities for definitive Securities, or both, as herein provided. In the event that the Trustee shall cease to be Security Registrar, it shall have the right to examine the Security Register
at all reasonable times.
Upon surrender for registration of transfer of any Registered Security of any series at any office or agency of
the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount, bearing a number not contemporaneously outstanding and containing identical terms and provisions.
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At the option of the Holder, Registered Securities of any series may be exchanged for other
Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such
office or agency. Whenever any Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities that the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 3.01, any permanent global Security shall be
exchangeable only as provided in this paragraph. If any beneficial owner of an interest in a permanent global Security is entitled to exchange such interest for Securities of such series and of like tenor and principal amount of another authorized
form and denomination, as specified as contemplated by Section 3.01 and provided that any applicable notice provided in the permanent global Security shall have been given, then without unnecessary delay but in any event not later than the
earliest date on which such interest may be so exchanged, the Company shall deliver to the Trustee definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owners interest in such permanent global
Security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered by the London office of a depositary or common depositary or such other depositary as
shall be specified in the Company Order with respect thereto to the Trustee, as the Companys agent for such purpose, or to the Security Registrar, to be exchanged, in whole or from time to time in part, for definitive Securities of the same
series without charge and the Trustee shall authenticate and deliver, in exchange for each portion of such permanent global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of
like tenor as the portion of such permanent global Security to be exchanged; provided, however, that no such exchanges may occur during a period beginning at the opening of business 15 days before any selection of Securities to be
redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption. If a Registered Security is issued in exchange for any portion of a permanent global Security after the
close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and
before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest or interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may
be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is
payable in accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the
Security Registrar or any transfer agent) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, and duly executed by the Holder thereof or his attorney or any transfer
agent duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the
Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to
Section 3.04, 9.06, 11.07 or 13.05 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the Securities to be redeemed under Section 11.03 and ending at
the close of business on the day of the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered
Security to be redeemed in part, the portion thereof not to be redeemed or (iii) to issue, register the transfer of or exchange any Security that has been surrendered for repayment at the option of the Holder, except the portion, if any, of
such Security not to be so repaid.
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Section 3.06. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be
required by the Company or the Trustee to save each of them or any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding.
If there shall be delivered to
the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them
harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser, the Company shall, subject to the following paragraph, execute and, upon its request, the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding.
Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.
Upon the
issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or
stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.
The provisions of this
Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.07. Payment of Interest; Interest Rights Preserved; Optional Interest Reset.
(a) Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 3.01, interest, if
any, on any Registered Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 10.02; provided, however, that in the event that the Securities become represented by
certificates, the Company shall pay each installment of interest by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 3.09, to the address of such Person as it
appears on the Security Register or (ii) at the option of the Holder as notified to the Company, transfer to an account maintained by the payee located in the United States.
Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 3.01, any interest on
any Registered Security of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called Defaulted Interest) shall forthwith cease to be payable to the registered Holder
thereof on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner: The Company shall notify the Trustee
in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of
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the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money in the
Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and 3.12(e)) equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at his address as it appears
in the Security Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause
(ii).
(ii) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other
lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause (and certification by the Company that the proposed manner of payment complies with the requirements of this clause (ii)), such manner of payment shall be deemed practicable by the Trustee.
(b) The provisions of this Section 3.07(b) may be made applicable to any series of Securities pursuant to Section 3.01 (with such
modifications, additions or substitutions as may be specified pursuant to such Section 3.01). The interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) on any Security of such series may be reset
by the Company on the date or dates specified on the face of such Security (each an Optional Reset Date). The Company may exercise such option with respect to such Security by notifying the Trustee of such exercise at least 45 but
not more than 60 days prior to an Optional Reset Date for such Security. Not later than 40 days prior to each Optional Reset Date, the Trustee shall transmit, in the manner provided for in Section 1.06, to the Holder of any such Security a
notice (the Reset Notice), indicating whether the Company has elected to reset the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable), and if so (i) such new interest rate
(or such new spread or spread multiplier, if applicable) and (ii) the provisions, if any, for redemption during the period from such Optional Reset Date to the next Optional Reset Date, or if there is no such next Optional Reset Date, to the
Stated Maturity of such Security (each such period, a Subsequent Interest Period), including the date or dates on which, or the period or periods during which, and the price or prices at which such redemption may occur during the
Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to the Optional Reset Date (or if 20 days does
not fall on a Business Day, the next succeeding Business Day), the Company may, at its option, revoke the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) provided for in the Reset Notice and
establish a higher interest rate (or a spread or spread multiplier providing for a higher interest rate, if applicable) for the Subsequent Interest Period by causing the Trustee to transmit, in the manner provided for in Section 1.06, notice of
such higher interest rate (or such higher spread or spread multiplier providing for a higher interest rate, if applicable) to the Holder of such Security. Such notice shall be irrevocable. All Securities with respect to which the interest rate (or
the spread or spread multiplier used to calculate such interest rate, if applicable) is reset on an Optional Reset Date, and with respect to which the Holders of such Securities have not tendered such Securities for repayment (or have validly
revoked any such tender) pursuant to the next succeeding paragraph, shall bear such higher interest rate (or such higher spread or spread multiplier providing for a higher interest rate, if applicable).
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The Holder of any such Security will have the option to elect repayment by the Company of the
principal of such Security on each Optional Reset Date at a price equal to the principal amount thereof plus interest accrued to such Optional Reset Date. In order to obtain repayment on an Optional Reset Date, the Holder must follow the procedures
set forth in Article Thirteen for repayment at the option of Holders, except that the period for delivery or notification to the Trustee shall be at least 25 but not more than 35 days prior to such Optional Reset Date and except that, if the Holder
has tendered any Security for repayment pursuant to the Reset Notice, the Holder may, by written notice to the Trustee, revoke such tender or repayment until the close of business on the tenth day before such Optional Reset Date.
Subject to the foregoing provisions of this Section and Section 3.05, each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security.
Section 3.08. Optional Extension of Maturity.
The provisions of this Section 3.08 may be made applicable to any series of Securities pursuant to Section 3.01 (with such
modifications, additions or substitutions as may be specified pursuant to such Section 3.01). The Stated Maturity of any Security of such series may be extended at the option of the Company for the period or periods specified on the face of
such Security (each, an Extension Period) up to, but not beyond, the date (the Final Maturity) set forth on the face of such Security. The Company may exercise such option with respect to any Security by
notifying the Trustee of such exercise at least 45 but not more than 60 days prior to the Stated Maturity of such Security in effect prior to the exercise of such option (the Original Stated Maturity). If the Company exercises
such option, the Trustee shall transmit, in the manner provided for in Section 1.06, to the Holder of such Security not later than 40 days prior to the Original Stated Maturity a notice (the Extension Notice), prepared by the
Company, indicating (i) the election of the Company to extend the Stated Maturity, (ii) the new Stated Maturity, (iii) the interest rate (or spread, spread multiplier or other formula to calculate such interest rate, if applicable),
if any, applicable to the Extension Period and (iv) the provisions, if any, for redemption during such Extension Period. Upon the Trustees transmittal of the Extension Notice, the Stated Maturity of such Security shall be extended
automatically and, except as modified by the Extension Notice and as described in the next paragraph, such Security shall have the same terms as prior to the transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days before the Original Stated Maturity (or if 20 days does not fall on a Business Day, the
next succeeding Business Day) of such Security, the Company may, at its option, revoke the interest rate (or spread, spread multiplier or other formula to calculate such interest rate, if applicable) provided for in the Extension Notice and
establish a higher interest rate (or spread, spread multiplier or other formula to calculate such higher interest rate, if applicable) for the Extension Period by causing the Trustee to transmit, in the manner provided for in Section 1.06,
notice of such higher interest rate (or spread, spread multiplier or other formula to calculate such interest rate, if applicable) to the Holder of such Security. Such notice shall be irrevocable. All Securities with respect to which the Stated
Maturity is extended shall bear such higher interest rate.
If the Company extends the Stated Maturity of any Security, the Holder will
have the option to elect repayment of such Security by the Company on the Original Stated Maturity at a price equal to the principal amount thereof, plus interest accrued to such date. In order to obtain repayment on the Original Stated Maturity
once the Company has extended the Stated Maturity thereof, the Holder must follow the procedures set forth in Article Thirteen for repayment at the option of Holders, except that the period for delivery or notification to the Trustee shall be at
least 25 but not more than 35 days prior to the Original Stated Maturity and except that, if the Holder has tendered any Security for repayment pursuant to an Extension Notice, the Holder may by written notice to the Trustee revoke such tender for
repayment until the close of business on the tenth day before the Original Stated Maturity.
Section 3.09. Persons Deemed
Owners.
Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee, as applicable, may treat the Person in whose name such Registered Security is registered as the owner of such Registered Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to
Sections 3.05 and 3.07) interest, if any, on such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee, as
applicable, shall be affected by notice to the contrary.
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None of the Company, the Trustee, any Paying Agent or the Security Registrar shall have any
responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Notwithstanding the foregoing, with respect to any global temporary or permanent Security, nothing herein shall
prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as
between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security.
Section 3.10. Cancellation.
All Securities surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit
against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities surrendered directly to the Trustee for any such purpose shall be promptly cancelled by the Trustee.
The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person
for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire
any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. Cancelled Securities held by the Trustee shall be destroyed by the Trustee in accordance with its
customary procedures, unless by a Company Order the Company directs the Trustee to deliver a certificate of such destruction to the Company or to return them to the Company.
Section 3.11. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.01 with respect to Securities of any series, interest, if any, on the
Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
Section 3.12. Currency and Manner of Payments in Respect of Securities.
(a) Unless otherwise specified with respect to any Securities pursuant to Section 3.01, with respect to Registered Securities of any
series not permitting the election provided for in paragraph (b) below or the Holders of which have not made the election provided for in paragraph (b) below, payment of the principal of (and premium, if any) and interest, if any, on any
Registered Security of such series shall be made in the Currency in which such Registered Security is payable. The provisions of this Section 3.12 may be modified or superseded with respect to any Securities pursuant to Section 3.01.
(b) It may be provided pursuant to Section 3.01 with respect to Registered Securities of any series that Holders shall have the option,
subject to paragraphs (d) and (e) below, to receive payments of principal of (or premium, if any) or interest, if any, on such Registered Securities in any of the Currencies which may be designated for such election by delivering to the Trustee
for such series of Registered Securities a written election with signature guarantees and in the applicable form established pursuant to Section 3.01, not later than the close of business on the Election Date immediately preceding the
applicable payment date. If a Holder so elects to receive such payments in any such Currency, such election shall remain in effect for such Holder or any transferee of such Holder until changed by such Holder or such transferee by written notice to
the Trustee for such series of Registered
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Securities (but any such change must be made not later than the close of business on the Election Date immediately preceding the next payment date to be effective for the payment to be made on
such payment date, and no such change of election may be made with respect to payments to be made on any Registered Security of such series with respect to which an Event of Default has occurred or with respect to which the Company has deposited
funds pursuant to Article Four or Fourteen or with respect to which a notice of redemption has been given by the Company or a notice of option to elect repayment has been sent by such Holder or such transferee). Any Holder of any such Registered
Security who shall not have delivered any such election to the Trustee of such series of Registered Securities not later than the close of business on the applicable Election Date will be paid the amount due on the applicable payment date in the
relevant Currency as provided in Section 3.12(a). The Trustee for each such series of Registered Securities shall notify the Exchange Rate Agent as soon as practicable after the Election Date of the aggregate principal amount of Registered
Securities for which Holders have made such written election.
(c) Unless otherwise specified pursuant to Section 3.01, if the
election referred to in paragraph (b) above has been provided for pursuant to Section 3.01, then, unless otherwise specified pursuant to Section 3.01, not later than the fourth Business Day after the Election Date for each payment
date for Registered Securities of any series, the Exchange Rate Agent shall deliver to the Company a written notice specifying the Currency in which Registered Securities of such series are payable, the respective aggregate amounts of principal of
(and premium, if any) and interest, if any, on the Registered Securities to be paid on such payment date, specifying the amounts in such Currency so payable in respect of the Registered Securities as to which the Holders of Registered Securities
denominated in any Currency shall have elected to be paid in another Currency as provided in paragraph (b) above. If the election referred to in paragraph (b) above has been provided for pursuant to Section 3.01 and if at least one
Holder has made such election, then, unless otherwise specified pursuant to Section 3.01, on the second Business Day preceding such payment date the Company shall deliver to the Trustee for such series of Registered Securities an Exchange Rate
Officers Certificate in respect of the Dollar or Foreign Currency or Currencies payments to be made on such payment date. Unless otherwise specified pursuant to Section 3.01, the Dollar or Foreign Currency or Currencies amount receivable
by Holders of Registered Securities who have elected payment in a Currency as provided in paragraph (b) above shall be determined by the Company on the basis of the applicable Market Exchange Rate in effect on the second Business Day (the
Valuation Date) immediately preceding each payment date, and such determination shall be conclusive and binding for all purposes, absent manifest error.
(d) If a Conversion Event occurs with respect to a Foreign Currency in which any of the Securities are denominated or payable other than
pursuant to an election provided for pursuant to paragraph (b) above, then with respect to each date for the payment of principal of (and premium, if any) and interest, if any on the applicable Securities denominated or payable in such Foreign
Currency occurring after the last date on which such Foreign Currency was used (the Conversion Date), the Dollar shall be the currency of payment for use on each such payment date. Unless otherwise specified pursuant to
Section 3.01, the Dollar amount to be paid by the Company to the Trustee of each such series of Securities and by such Trustee or any Paying Agent to the Holders of such Securities with respect to such payment date shall be, in the case of a
Foreign Currency other than a currency unit, the Dollar Equivalent of the Foreign Currency or, in the case of a currency unit, the Dollar Equivalent of the Currency Unit, in each case as determined by the Exchange Rate Agent in the manner provided
in paragraph (f) or (g) below.
(e) Unless otherwise specified pursuant to Section 3.01, if the Holder of a Registered Security
denominated in any Currency shall have elected to be paid in another Currency as provided in paragraph (b) above, and a Conversion Event occurs with respect to such elected Currency, such Holder shall receive payment in the Currency in which
payment would have been made in the absence of such election; and if a Conversion Event occurs with respect to the Currency in which payment would have been made in the absence of such election, such Holder shall receive payment in Dollars as
provided in paragraph (d) of this Section 3.12.
(f) The Dollar Equivalent of the Foreign Currency shall be
determined by the Exchange Rate Agent and shall be obtained for each subsequent payment date by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Conversion Date.
(g) The Dollar Equivalent of the Currency Unit shall be determined by the Exchange Rate Agent and subject to the provisions
of paragraph (h) below shall be the sum of each amount obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate for such Component Currency on the Valuation Date with respect to each
payment.
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(h) For purposes of this Section 3.12, the following terms shall have the following
meanings:
A Component Currency shall mean any currency which, on the Conversion Date, was a component currency of the
relevant currency unit.
A Specified Amount of a Component Currency shall mean the number of units of such Component
Currency or fractions thereof which were represented in the relevant currency unit on the Conversion Date. If, after the Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified
Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Conversion Date two or more Component Currencies are consolidated into a single currency, the respective Specified Amounts of such Component
Currencies shall be replaced by an amount in such single currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single currency, and such amount shall thereafter be a Specified
Amount and such single currency shall thereafter be a Component Currency. If after the Conversion Date any Component Currency shall be divided into two or more currencies, the Specified Amount of such Component Currency shall be replaced by amounts
of such two or more currencies, having an aggregate Dollar Equivalent value at the Market Exchange Rate on the date of such replacement equal to the Dollar Equivalent of the Specified Amount of such former Component Currency at the Market Exchange
Rate immediately before such division, and such amounts shall thereafter be Specified Amounts and such currencies shall thereafter be Component Currencies. If, after the Conversion Date of the relevant currency unit, a Conversion Event (other than
any event referred to above in this definition of Specified Amount) occurs with respect to any Component Currency of such currency unit and is continuing on the applicable Valuation Date, the Specified Amount of such Component
Currency shall, for purposes of calculating the Dollar Equivalent of the Currency Unit, be converted into Dollars at the Market Exchange Rate in effect on the Conversion Date of such Component Currency.
An Election Date shall mean the Regular Record Date for the applicable series of Registered Securities or at least 16 days
prior to Maturity, as the case may be, or such other prior date for any series of Registered Securities as specified pursuant to clause (xiii) of Section 3.01 by which the written election referred to in Section 3.12(b) may be made.
All decisions and determinations of the Exchange Rate Agent regarding the Dollar Equivalent of the Foreign Currency, the Dollar
Equivalent of the Currency Unit, the Market Exchange Rate and changes in the Specified Amounts as specified above shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding
upon the Company, the Trustee for the appropriate series of Securities and all Holders of such Securities denominated or payable in the relevant Currency. The Exchange Rate Agent shall promptly give written notice to the Company and the Trustee for
the appropriate series of Securities of any such decision or determination.
In the event that the Company determines in good faith that a
Conversion Event has occurred with respect to a Foreign Currency, the Company shall immediately give written notice thereof and of the applicable Conversion Date to the Trustee of the appropriate series of Securities and to the Exchange Rate Agent
(and such Trustee shall promptly thereafter give notice in the manner provided in Section 1.06 to the affected Holders) specifying the Conversion Date. In the event the Company so determines that a Conversion Event has occurred with respect to
the Euro or any other currency unit in which Securities are denominated or payable, the Company shall immediately give written notice thereof to the Trustee of the appropriate series of Securities and to the Exchange Rate Agent (and such Trustee
shall promptly thereafter give notice in the manner provided in Section 1.06 to the affected Holders) specifying the Conversion Date and the Specified Amount of each Component Currency on the Conversion Date. In the event the Company determines
in good faith that any subsequent change in any Component Currency as set forth in the definition of Specified Amount above has occurred, the Company shall similarly give written notice to the Trustee of the appropriate series of Securities and to
the Exchange Rate Agent.
The Trustee of the appropriate series of Securities shall be fully justified and protected in conclusively
relying and acting upon information received by it from the Company and the Exchange Rate Agent and shall not otherwise have any duty or obligation to determine the accuracy or validity of such information independent of the Company or the Exchange
Rate Agent.
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Section 3.13. Appointment and Resignation of Successor Exchange Rate Agent.
(a) Unless otherwise specified pursuant to Section 3.01, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of this Indenture, then the Company shall maintain with respect to each such series of Securities, or as so required, at
least one Exchange Rate Agent. The Company shall cause the Exchange Rate Agent to make the necessary foreign exchange determinations at the time and in the manner specified pursuant to Section 3.01 for the purpose of determining the applicable
rate of exchange and, if applicable, for the purpose of converting the issued Foreign Currency into the applicable payment Currency for the payment of principal (and premium, if any) and interest, if any, pursuant to Section 3.12.
(b) No resignation of the Exchange Rate Agent and no appointment of a successor Exchange Rate Agent pursuant to this Section shall become
effective until the acceptance of appointment by the successor Exchange Rate Agent as evidenced by a written instrument delivered to the Company and the Trustee of the appropriate series of Securities accepting such appointment executed by the
successor Exchange Rate Agent.
(c) If the Exchange Rate Agent shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of the Exchange Rate Agent for any cause, with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Exchange Rate Agent or Exchange Rate
Agents with respect to the Securities of that or those series (it being understood that any such successor Exchange Rate Agent may be appointed with respect to the Securities of one or more or all of such series and that, unless otherwise specified
pursuant to Section 3.01, at any time there shall only be one Exchange Rate Agent with respect to the Securities of any particular series that are originally issued by the Company on the same date and that are initially denominated and/or
payable in the same Currency).
Section 3.14. CUSIP Numbers.
In issuing the Securities the Company may use CUSIP numbers, and, if so, the Trustee shall indicate the respective CUSIP numbers of the
Securities in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of
redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall advise the Trustee as
promptly as practicable in writing of any change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
Except as set forth below, this Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities
specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series expressly provided for herein or pursuant hereto, any surviving rights of tender for repayment at the option of
the Holders and any right to receive Additional Amounts, as provided in Section 10.04), and the Trustee, upon receipt of a Company Order and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture as to such series when
(a) either
(i) all Securities of such series theretofore authenticated and delivered have been delivered to the Trustee for cancellation;
or
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(ii) all Securities of such series
(1) have become due and payable,
(2) will become due and payable at their Stated Maturity within one year, or
(3) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of
(i) or (ii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose, solely for the benefit of the Holders, an amount in the Currency in which the Securities of such series are
payable, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest, if any, to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has
irrevocably paid or caused to be irrevocably paid all other sums payable hereunder by the Company; and
(c) the Company has delivered to
the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under
Section 6.06, the obligations of the Company to any Authenticating Agent under Section 6.12 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of this Section, the obligations of the
Trustee under Section 4.02 and the last paragraph of Section 10.03 shall survive any termination of this Indenture.
Section 4.02. Application of Trust Funds.
Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 4.01
shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest, if any, for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except
to the extent required by law. Money so held in trust is subject to the Trustees rights under Section 6.06.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default.
Event of Default, wherever used herein with respect to any particular series of Securities, means any one of the following
events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), unless it is either inapplicable to a particular series or is specifically deleted or modified in or pursuant to the supplemental indenture or a Board Resolution establishing such series of Securities or is in
the form of Security for such series:
(i) default in the payment of any interest upon any Security of that series when
such interest becomes due and payable, and continuance of such default for a period of 30 days; or
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(ii) default in the payment of the principal of (or premium, if any, on) any
Security of that series when it becomes due and payable at its Maturity, and continuance of such default for a period of five days; or
(iii) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of that series, and
continuance of such default for a period of five days; or
(iv) default in the performance, or breach, of any covenant or
agreement of the Company in this Indenture with respect to any Security of that series (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or that has expressly been
included in this Indenture solely for the benefit of a series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice
is a Notice of Default hereunder; or
(v) the Company, pursuant to or within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding under any Bankruptcy Law,
(2) consents to the commencement of any bankruptcy or insolvency case or proceeding against it, or files a petition or answer
or consent seeking reorganization or relief against it,
(3) consents to the entry of a decree or order for relief against
it in an involuntary case or proceeding,
(4) consents to the filing of such petition or to the appointment of or taking
possession by a Custodian of the Company or for all or substantially all of its property, or
(5) makes an assignment for
the benefit of creditors, or admits in writing of its inability to pay its debts generally as they become due, or
(6)
takes any corporate action in furtherance of any such action; or
(vi) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company in an involuntary case or proceeding, or
(2) adjudges the Company bankrupt or insolvent, or approves as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company, or
(3) appoints a Custodian of the Company or for all or
substantially all of its property, or
(4) orders the winding up or liquidation of the Company,
and the continuance of any such decree or order for relief or any such other decree or order remains unstayed and in effect for a period of 90
consecutive days; or
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(vii) if, pursuant to Sections 18(a)(1)(c)(ii) of the Investment Company Act, on
the last business day of each of 24 consecutive calendar months, the Securities shall have an asset coverage (as such term is used in the Investment Company Act) of less than 100%, after giving effect to exemptive relief, if any, granted to the
Company by the Commission; or
(viii) any other Event of Default provided with respect to Securities of that series.
The term Bankruptcy Law means title 11, U.S. Code or any applicable federal or state bankruptcy, insolvency, reorganization
or other similar law. The term Custodian means any custodian, receiver, trustee, assignee, liquidator, sequestrator or other similar official under any Bankruptcy Law.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the
principal as may be specified in the terms thereof) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such
principal or specified portion thereof shall become immediately due and payable.
At any time after such a declaration of acceleration
with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum sufficient to pay in the Currency in which the Securities of such
series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and 3.12(e)):
(1) all overdue installments of interest, if any, on all Outstanding Securities of that series,
(2) the principal of (and premium, if any, on) all Outstanding Securities of that series that have become due otherwise than by
such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities,
(3) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates
borne by or provided for in such Securities, and
(4) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and
(ii) all Events of Default
with respect to Securities of that series, other than the nonpayment of the principal of (or premium, if any, on) or interest on Securities of that series that have become due solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
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Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(i) default is made in the payment of any installment of interest on any Security of any series and such default continues for
a period of 30 days, or
(ii) default is made in the payment of the principal of (or premium, if any) any Security of any
series at its Maturity and such default continues for a period of five days,
then the Company shall, upon demand of the Trustee, pay to the Trustee, for
the benefit of the Holders of Securities of such series, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, if any, with interest upon any overdue principal (and premium, if any) and, to the
extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon Securities of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities of such series, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.04. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series
shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any overdue principal, premium or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
principal (or in the case of Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be provided for in the terms thereof) (and premium, if any) and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents (and take such other actions, including serving on a committee of creditors) as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 6.06.
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Subject to Article Eight and Section 9.02 and unless otherwise provided as contemplated by
Section 3.01, nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding.
Section 5.05. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or any of the Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
Section 5.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal (or premium, if any) or interest, if any, upon presentation of the Securities, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully
paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.06;
SECOND: To the payment of the amounts then due and unpaid upon any Securities for principal (and premium, if any) and interest, if any, in
respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities for principal (and premium, if any) and interest,
if any, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or any other Person or Persons entitled thereto.
Section 5.07. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has
previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(ii) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders shall have offered to the Trustee reasonable indemnity, security or both against the costs,
expenses and liabilities to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity shall have failed to institute any such proceeding; and
(v) no direction
inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;
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it being understood and intended that no one or more of such Holders shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.
Section 5.08. Unconditional Right of Holders to Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional,
to receive payment of the principal of (and premium, if any, on) and (subject to Sections 3.05 and 3.07) interest, if any, on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or, in the case of repayment at the option of the Holders on the Repayment Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders of Securities shall, subject to any determination
in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders of Securities, as the case may be.
Section 5.12.
Control by Holders of Securities.
Subject to Section 6.02(v), the Holders of a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the
Securities of such series; provided that
(i) such direction shall not be in conflict with any rule of law or with
this Indenture,
(ii) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such
direction, and
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(iii) the Trustee need not take any action that might involve it in personal
liability or be unjustly prejudicial to the Holders of Securities of such series not consenting.
Section 5.13. Waiver of Past
Defaults.
Subject to Section 5.02, the Holders of not less than a majority in principal amount of the Outstanding Securities
of any series may, on behalf of the Holders of all the Securities of such series waive any past Default hereunder with respect to the Securities of such series and its consequences, except a default
(i) in the payment of the principal of (or premium, if any, on) or interest, if any, on any Security of such series, or
(ii) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of
the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
Section 5.14. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Notice of Defaults.
(a) Within 90 days after the occurrence of any Default hereunder with respect to the Securities of any series, the Trustee shall transmit in
the manner and to the extent provided in TIA Section 313(c), notice of such Default hereunder known to a Responsible Officer of the Trustee, unless such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any, on) or interest, if any, on any Security of such series, or in the payment of any sinking or purchase fund installment with respect to the Securities of such series, the
Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of
such notice is in the interest of the Holders of the Securities of such series; and provided, further, that, in the case of any Default or breach of the character specified in Section 5.01(iv) with respect to the Securities of
such series, no such notice to Holders shall be given until at least 90 days after the occurrence thereof.
(b) Prior to the time when the
occurrence of an Event of Default becomes known to a Responsible Officer of the Trustee and after the curing or waiving of all such Events of Default with respect to a series of Securities that may have occurred:
(i) the duties and obligations of the Trustee shall with respect to the Securities of any series be determined solely by the
express provisions of this Indenture, and the Trustee shall not be liable with respect to the Securities except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this
Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein); and
(iii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible
Officers, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
Section 6.02. Certain
Rights of Trustee.
Subject to the provisions of TIA Section 315(a) through 315(d):
(i) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper
party or parties. The Trustee need not investigate any fact or matter stated in any document.
(ii) Any request or
direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security to the Trustee for authentication and delivery pursuant to Section 3.03, which shall be
sufficiently evidenced as provided therein) and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(iii) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon a Board Resolution, an Opinion of
Counsel or an Officers Certificate.
(iv) The Trustee may consult with counsel and the advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(v) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders of Securities of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities
(including the reasonable fees and expenses of its agents and counsel) which might be incurred by it in compliance with such request or direction.
(vi) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled upon reasonable notice and at reasonable times during normal business hours to examine the books, records and premises
of the Company, personally or by agent or attorney.
(vii) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
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(viii) The Trustee shall not deemed to have notice of any Default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.
(ix) The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder.
(x) The permissive rights of the Trustee enumerated herein shall not be construed as duties.
(xi) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in principal amount of the Outstanding Securities of a series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture with respect to such Securities.
(xii) Before the
Trustee acts or refrains from acting, it may require an Officers Certificate (unless other evidence is specifically prescribed herein). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such
Officers Certificate.
(xiii) The Trustee shall not be liable for any action taken or omitted to be taken by it in
good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.
(xiv) The Trustee may request that the Company deliver an Officers Certificate setting forth the names of individuals
and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers Certificate may be signed by any person authorized to sign an Officers Certificate, including any person specified as
so authorized in any such certificate previously delivered and not superseded.
(xv) Anything in this Indenture
notwithstanding, in no event shall the Trustee be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to loss of profit), even if the Trustee has been advised as to the likelihood
of such loss or damage and regardless of the form of action.
(xvi) The Trustee shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including acts of God; earthquakes; fire; flood; terrorism; wars and other
military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action.
The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
Section 6.03. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustees certificate of authentication, shall be taken as the statements
of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the
Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a
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Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. Neither the Trustee
nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof, and neither the Trustee nor any Authenticating Agent shall be responsible for any statement of the Company in any
document issued in connection with the sale of the Securities.
Section 6.04. May Hold Securities.
The Trustee, any Paying Agent, Security Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating
Agent or such other agent.
Section 6.05. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall
be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.
Section 6.06. Compensation and Reimbursement and Indemnification of Trustee.
The Company agrees:
(i) To pay to the Trustee or any predecessor Trustee from time to time such reasonable compensation for all services rendered
by it hereunder as has been agreed upon from time to time in writing (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust).
(ii) Except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made by the Trustee or any predecessor Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements
of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith.
(iii) To indemnify each of the Trustee or any predecessor Trustee for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its own part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including the reasonable fees and expenses of
its agents and counsel) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities
upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium, if any, on) or interest, if any, on particular Securities.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.01 occurs, the expenses and
compensation for such services are intended to constitute expenses of administration under Title 11, U.S. Code, or any similar Federal, State or analogous foreign law for the relief of debtors.
The provisions of this Section 6.06 shall survive the resignation or removal of the Trustee and the satisfaction, termination or
discharge of this Indenture.
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Section 6.07. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or the District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
Section 6.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
Section 6.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10 and any and all amounts then due and owing to the Trustee hereunder have been paid in full.
(b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company.
(c) The Trustee may be removed at any time with respect to the Securities of any series by (i) the Company, by an Officers
Certificate delivered to the Trustee; provided, that, contemporaneously therewith, (x) the Company immediately appoints a successor Trustee with respect to the Securities of such series meeting the requirements of Section 6.07
hereof and (y) the terms of Section 6.10 hereof are complied with in respect of such appointment (the Trustee being removed hereby agreeing to execute the instrument contemplated by Section 6.10(b) hereof, if applicable, under such
circumstances); and provided, further, that no Default with respect to such Securities shall have occurred and then be continuing at such time, or (ii) Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the
Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or
(ii) the
Trustee shall cease to be eligible under Section 6.07 and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or
(iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
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(e) If an instrument of acceptance by a successor Trustee shall not have been delivered to the
Trustee within 30 days after the giving of a notice of resignation or the delivery of an Act of removal, the Trustee resigning or being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(f) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause
with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent
supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner
hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to Securities of such series.
(g) The Company shall give notice of each resignation and
each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 1.06.
Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
Section 6.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee. However, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee
hereunder, subject nevertheless to its claim, if any, provided for in Section 6.06.
(b) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment and that (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and
(iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts
hereunder administered by any other such Trustee. Upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall
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become effective to the extent provided therein, and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. However, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject nevertheless to its
claim, if any, as provided for in Section 6.06. Whenever there is a successor Trustee with respect to one or more (but less than all) series of securities issued pursuant to this Indenture, the terms Indenture and
Securities shall have the meanings specified in the provisos to the respective definitions of those terms in Section 1.01 which contemplate such situation.
(c) Upon request of any such successor Trustee, the Company shall execute any and all instruments reasonably necessary to more fully and
certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 6.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities. In case any Securities shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities, in either its own name or that of its
predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or
to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
Section 6.12. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents (which may be an
Affiliate or Affiliates of the Company) with respect to one or more series of Securities that shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue or upon exchange, registration of
transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall
be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustees certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on
behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 3.01, shall at all times be a bank or trust company or corporation
organized and doing business and in good standing under the laws of the United States or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than
$50,000 and subject to supervision or examination by Federal or State authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining
authority, then, for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any
time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
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Any corporation into which an Authenticating Agent may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating Agent; provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation
to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall promptly give written notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent shall serve in the manner set forth
in Section 1.06. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this Section, the
Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustees certificate of authentication, an alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
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American Stock Transfer & Trust Company, LLC, Trustee |
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By: |
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as Authenticating Agent |
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If all of the Securities of a series may not be originally issued at one time, and the Trustee does not
have an office capable of authenticating Securities upon original issuance located in a Place of Payment where the Company wishes to have Securities of such series authenticated upon original issuance, the Trustee, if so requested by the Company in
writing (which writing need not comply with Section 1.02 and need not be accompanied by an Opinion of Counsel), shall appoint in accordance with this Section an Authenticating Agent (which, if so requested by the Company, shall be an Affiliate
of the Company) having an office in a Place of Payment designated by the Company with respect to such series of Securities; provided that the terms and conditions of such appointment are reasonably acceptable to the Trustee.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar nor any agent of any of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in
accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).
Section 7.02. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act.
Section 7.03. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities pursuant to this
Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a report dated as of such May 15 which meets the requirements of TIA Section 313(a).
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon
which the Securities are listed, with the Commission and with the Company. The Company shall promptly notify the Trustee of the listing of the Securities on any stock exchange. In the event that, on any such reporting date, no events have occurred
under the applicable sections of the TIA within the 12 months preceding such reporting date, the Trustee shall be under no duty or obligation to provide such reports.
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Section 7.04. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to the Trust Indenture Act; provided that any such information, documents or reports filed electronically with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, shall be deemed filed with and delivered to the Trustee and the Holders at the same time as filed with the Commission.
Delivery of such reports, information, and documents to the Trustee is for informational purposes only and the Trustees receipt of such
shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Companys compliance with any of its covenants hereunder (as to which the Trustee is entitled to
conclusively rely exclusively on Officers Certificates).
Section 7.05. Calculation of Original Issue Discount.
Upon request of the Trustee, the Company shall file with the Trustee promptly at the end of each calendar year a written notice
specifying the amount of original issue discount (including daily rates and accrual periods), if any, accrued on Outstanding Securities as of the end of such year.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
Section 8.01. Company May Consolidate, Etc., Only on Certain Terms.
Unless otherwise provided in the terms of such Securities, the Company shall not consolidate with or merge with or into any
other corporation or convey or transfer all or substantially all of its properties and assets to any Person, unless:
(i)
either the Company shall be the continuing corporation, or the corporation (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer all or substantially all
of the properties and assets of the Company shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction, no Default or Event of Default shall have happened and be continuing;
and
(iii) the Company and the successor Person have delivered to the Trustee an Officers Certificate and an Opinion
of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
Section 8.02. Successor Person Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in
accordance with Section 8.01, the successor corporation formed by such consolidation or into which the Company is merged or the successor Person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein. In the event of any such conveyance or transfer, the Company shall be discharged from all obligations
and covenants under this Indenture and the Securities and may be dissolved and liquidated.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes:
(i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities contained; or
(ii) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any
right or power herein conferred upon the Company; or
(iii) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series);
provided, however, that in respect of any such additional Events of Default such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of that or those
series of Securities to which such additional Events of Default apply to waive such default; or
(iv) to change or
eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture that
is entitled to the benefit of such provision; or
(v) to secure the Securities pursuant to the requirements of
Section 8.01 or otherwise; or
(vi) to establish the form or terms of Securities of any series as permitted by
Sections 2.01 and 3.01, including the provisions and procedures relating to Securities convertible into or exchangeable for any securities of any Person (including the Company); or
(vii) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities
of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or
(viii) to cure any ambiguity, to correct or supplement any provision herein that may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect;
or
(ix) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate
the defeasance and discharge of any series of Securities pursuant to Sections 4.01, 14.02 and 14.03; provided that any such action shall not adversely affect the interests of the Holders of Securities of such series or any other series of
Securities in any material respect.
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Section 9.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate principal amount of all Outstanding Securities affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture that affects such series of Securities or of modifying in any manner the rights of the Holders of such series of Securities under this
Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:
(i) change the Stated Maturity of the principal of (or premium, if any) or any installment of principal of or interest on, any
Security, subject to the provisions of Section 3.08; or the terms of any sinking fund with respect to any Security; or reduce the principal amount thereof or the rate of interest (or change the manner of calculating the rate of interest,
thereon, or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 10.04 (except as contemplated by Section 8.01(i) and permitted by Section 9.01(i)), or
reduce the portion of the principal of an Original Issue Discount Security or Indexed Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02, or upon the redemption thereof or
the amount thereof provable in bankruptcy pursuant to Section 5.04, or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where, or the Currency in which, any Security or any
premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the
Redemption Date or the Repayment Date, as the case may be), or adversely affect any right to convert or exchange any Security as may be provided pursuant to Section 3.01 herein; or
(ii) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or reduce the requirements of Section 15.04 for quorum or voting; or
(iii) modify any
of the provisions of this Section, Section 5.13 or Section 10.07, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder of a Security with respect to changes in the references to the Trustee and concomitant
changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 6.10(b) and 9.01(vii).
It shall
not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely
for the benefit of one or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture
of the Holders of Securities of any other series.
The Company may, but shall not be obligated to, fix a record date for the purpose of
determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental
indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date that is eleven months
after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect.
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Section 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby
of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, in addition to the documents required by Section 1.02 of this Indenture, an Officers Certificate and an
Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to such supplemental indenture have been complied with. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the Trustees own rights, duties or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
Section 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and
shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the
principal of (and premium, if any, on) and interest, if any, on the Securities of that series in accordance with the terms of such series of Securities and this Indenture. Unless otherwise specified with respect to Securities of any series pursuant
to Section 3.01, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security.
Section 10.02. Existence; Maintenance of Office or Agency.
Except as otherwise permitted in Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full
force and effect its existence as a corporation or other Person. The Company shall also maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment,
where Securities of that series may be surrendered for registration of transfer or exchange, where Securities of that series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable, and where notices and
demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency.
If at any time the Company shall fail to maintain any such required office or agency in respect of any series of Securities or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive such respective presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee at its
Corporate Trust Office its agent to receive all such presentations, surrenders, notices and demands.
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The Company may also from time to time designate one or more other offices or agencies where the
Securities of one or more series may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 3.01 with respect to a series of Securities, the Company hereby
designates as a Place of Payment for each series of Securities the office or agency of the Company in the [Borough of Manhattan, The City of New York], and initially appoints the Trustee as Paying Agent with its office at 6201 15th Avenue, Brooklyn, New York 11219, and as its agent to receive all such presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to Section 3.01, if and so long as the Securities of any series
(i) are denominated in a currency other than Dollars or (ii) may be payable in a currency other than Dollars, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such
series of Securities, or as so required, at least one Exchange Rate Agent. The Company will notify the Trustee of the name and address of any Exchange Rate Agent retained by it.
Section 10.03. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect to any series of any Securities, it will, on or before each due date
of the principal of (or premium, if any) or interest, if any, on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the Currency in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and 3.12(e)) sufficient to pay the principal of (and premium, if any, on) and
interest, if any, on Securities of such series so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, on or before each due date of the principal
of (or premium, if any, on) or interest, if any, on any Securities of that series, deposit with a Paying Agent a sum (in the Currency or Currencies described in the preceding paragraph) sufficient to pay the principal (or premium, if any) or
interest, if any, so becoming due, such sum of money to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of
its action or failure so to act.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums of money held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.
Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of (or premium, if any, on) or interest, if any, on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be
paid to the Company upon Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such money held in trust, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
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Section 10.04. Additional Amounts.
If the Securities of a series provide for the payment of Additional Amounts, the Company shall pay to the Holder of any Security of such
series such Additional Amounts as may be specified as contemplated by Section 3.01. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of (or premium, if any, on) or interest, if any, on any Security of
any series or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided for by the terms of such series established pursuant to
Section 3.01 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall
not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made.
Except as otherwise
specified as contemplated by Section 3.01, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of
that series shall not bear interest prior to Maturity, the first day on which a payment of principal premium is made), and at least 10 days prior to each date of payment of principal, premium or interest if there has been any change with respect to
the matters set forth in the below-mentioned Officers Certificate, the Company shall furnish the Trustee and the Companys principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers Certificate instructing
the Trustee and such Paying Agent or Paying Agents whether such payment of principal, premium or interest on the Securities of that series shall be made to Holders of Securities of that series who are not United States persons without withholding
for or on account of any tax, assessment or other governmental charge described in the Securities of that series. If any such withholding shall be required, then such Officers Certificate shall specify by country the amount, if any, required
to be withheld on such payments to such Holders of Securities of that series and the Company shall pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying
Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or
interest with respect to any Securities of a series until it shall have received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of a series without withholding or
deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising
out of or in connection with actions taken or omitted by any of them in reliance on any Officers Certificate furnished pursuant to this Section or in reliance on the Companys not furnishing such an Officers Certificate.
Section 10.05. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof so long as any
Security is Outstanding hereunder, an Officers Certificate stating to the knowledge of the signer thereof whether the Company is in default in the performance of any of the terms, provisions or conditions of this Indenture. For purposes of
this Section 10.05, such default shall be determined without regard to any period of grace or requirement of notice under this Indenture.
Section 10.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or upon the income, profits or property of the Company, and (2) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of the
Company, except where the failure to do so would not be reasonably expected to have a material adverse effect on the business, assets, financial condition or results of operations of the Company; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.
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Section 10.07. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant or condition set forth in Section 10.06, and, as specified
pursuant to Section 3.01(xv) for Securities of any series, in any covenants of the Company added to Article Ten pursuant to Section 3.01(xiv) or Section 3.01(xv) in connection with the Securities of a series, if before or after the
time for such compliance the Holders of at least a majority in aggregate principal amount of all Outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in
respect of any such covenant or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 11.01. Applicability of Article.
Securities of any series that are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.01 for Securities of any series) in accordance with this Article.
Section 11.02. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Company of less than all of the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of Securities of such series to be redeemed, and, if applicable, of the tenor of the Securities to be redeemed, and shall deliver to the Trustee such documentation and records as shall
enable the Trustee to select the Securities to be redeemed pursuant to Section 11.03. In the case of any redemption of Securities of any series prior to the expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers Certificate evidencing compliance with such restriction.
Section 11.03. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate; provided that such method complies with the rules of any national securities exchange or quotation system on which the Securities are listed (which rules shall be certificated to the Trustee by the Company or
such national securities exchange at the Trustees request), and may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the
principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series; provided, however, that no such partial redemption shall reduce the portion of the principal
amount of a Security not redeemed to less than the minimum authorized denomination for Securities of such series.
The Trustee shall
promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
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For all purposes of this Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.
Section 11.04. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 1.06, not less than 30 days nor more than 60 days prior to the
Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 3.01, to each Holder of Securities to be redeemed; provided that failure to give such notice in the manner herein provided
to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof.
Any notice that is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the Holder receives the notice.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price and accrued interest, if any, to the Redemption Date payable as provided in Section 11.06;
(iii) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial
redemption, the principal amount) of the particular Security or Securities to be redeemed;
(iv) in case any Security is to
be redeemed in part only, the notice that relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without a charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed;
(v) that on the Redemption Date, the Redemption Price
and accrued interest, if any, to the Redemption Date payable as provided in Section 11.06 will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to
accrue on and after said date;
(vi) the Place or Places of Payment where such Securities, if any, maturing after the
Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any;
(vii) that the
redemption is for a sinking fund, if such is the case; and
(viii) the CUSIP number of such Security, if any.
A notice of redemption published as contemplated by Section 1.06 need not identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Companys request, by the Trustee in the name and at the expense of the Company.
Section 11.05. Deposit of Redemption Price.
On or prior to 10:00 a.m., New York City time, on the Business Day prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent, in accordance with the terms of this Indenture, segregate and hold in trust as provided in Section 10.03) an amount of money in the Currency in which the Securities of
such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and 3.12(e)) sufficient to pay on the Redemption Date the
Redemption Price of, and (unless otherwise specified pursuant to Section 3.01) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date.
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Section 11.06. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price therein specified in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in
Sections 3.12(b), 3.12(d) and 3.12(e)) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest, if any) such
Securities shall if the same were interest-bearing cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 3.01, installments of interest on Registered Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the Redemption Price shall, until paid,
bear interest from the Redemption Date at the rate of interest set forth in such Security or, in the case of an Original Issue Discount Security, at the Yield to Maturity of such Security.
Section 11.07. Securities Redeemed in Part.
Any Registered Security that is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such
Holders attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series and of like tenor,
of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. If a temporary global Security or permanent global Security
is so surrendered, such new Security so issued shall be a new temporary global Security or permanent global Security, respectively. However, if less than all the Securities of any series with differing issue dates, interest rates and stated
maturities are to be redeemed, the Company in its sole discretion shall select the particular Securities to be redeemed and shall notify the Trustee in writing thereof at least 45 days prior to the relevant redemption date.
ARTICLE TWELVE
SINKING
FUNDS
Section 12.01. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise
specified as contemplated by Section 3.01 for Securities of such series.
The minimum amount of any sinking fund payment provided for
by the terms of Securities of any series is herein referred to as a mandatory sinking fund payment, and any payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an
optional sinking fund payment. If provided for by the terms of any Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 12.02. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
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Section 12.02. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any mandatory sinking fund payment with respect to the Securities of a series,
(i) deliver Outstanding Securities of such series (other than any previously called for redemption) and (ii) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms
of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities; provided that such Securities so delivered or applied as a
credit have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the
amount of such mandatory sinking fund payment shall be reduced accordingly.
Section 12.03. Redemption of Securities for
Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for Securities of any series, the Company shall
deliver to the Trustee an Officers Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of
cash in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and 3.12(e))
and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 12.02, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment,
and shall also deliver to the Trustee any Securities to be so delivered and credited. If such Officers Certificate specifies an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon
be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in
Section 11.03 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 11.04. Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Sections 11.06 and 11.07.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
Section 13.01. Applicability of Article.
Repayment of Securities of any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms
of such Securities and (except as otherwise specified by the terms of such series established pursuant to Section 3.01) in accordance with this Article.
Section 13.02. Repayment of Securities.
Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the
terms of such Securities, be repaid at the Repayment Price thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that on or before 10:00 a.m.,
New York City time, on the Business Day preceding the Repayment Date it shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an
amount of money in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.12(b), 3.12(d) and
3.12(e)) sufficient to pay the Repayment Price of, and (unless otherwise specified pursuant to Section 3.01) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date.
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Section 13.03. Exercise of Option.
Securities of any series subject to repayment at the option of the Holders thereof shall contain an Option to Elect Repayment form
on the reverse of such Securities. To be repaid at the option of the Holder, any Security so providing for such repayment, with the Option to Elect Repayment form on the reverse of such Security duly completed by the Holder (or by the
Holders attorney duly authorized in writing), must be received by the Company at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the
Holders of such Securities) not earlier than 45 days nor later than 30 days prior to the Repayment Date. If less than the entire Repayment Price of such Security is to be repaid in accordance with the terms of such Security, the portion of the
Repayment Price of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of such Security
surrendered that is not to be repaid, must be specified. Any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than
the minimum authorized denomination of Securities of the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of
the repayment option by the Holder shall be irrevocable unless waived by the Company.
Section 13.04. When Securities Presented
for Repayment Become Due and Payable.
If Securities of any series providing for repayment at the option of the Holders thereof
shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the
Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear
interest. Upon surrender of any such Security for repayment in accordance with such provisions , the Repayment Price of such Security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date;
provided, however, that installments of interest on Registered Securities, whose Stated Maturity is prior to (or, if specified pursuant to Section 3.01, on) the Repayment Date shall be payable (but without interest thereon, unless
the Company shall default in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of
Section 3.07.
If any Security surrendered for repayment shall not be so repaid upon surrender thereof, the Repayment Price shall,
until paid, bear interest from the Repayment Date at the rate of interest set forth in such Security or, in the case of an Original Issue Discount Security, at the Yield to Maturity of such Security.
Section 13.05. Securities Repaid in Part.
Upon surrender of any Registered Security that is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, and of like tenor, of any authorized denomination specified by the Holder, in an aggregate
principal amount equal to and in exchange for the portion of the principal of such Security so surrendered that is not to be repaid. If a temporary global Security or permanent global Security is so surrendered, such new Security so issued shall be
a new temporary global Security or a new permanent global Security, respectively.
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ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 14.01. Applicability of Article; Companys Option to Effect Defeasance or Covenant
Defeasance.
If pursuant to Section 3.01 provision is made for either or both of (a) defeasance of the Securities
of or within a series under Section 14.02 or (b) covenant defeasance of the Securities of or within a series under Section 14.03, then the provisions of such Section or Sections, as the case may be, together with the other provisions
of this Article (with such modifications thereto as may be specified pursuant to Section 3.01 with respect to any Securities), shall be applicable to such Securities, and the Company may at its option by Board Resolution, at any time, with
respect to such Securities, elect to have either Section 14.02 (if applicable) or Section 14.03 (if applicable) be applied to such Outstanding Securities upon compliance with the conditions set forth below in this Article.
Section 14.02. Defeasance and Discharge.
Upon the Companys exercise of the above option applicable to this Section with respect to any Securities of or within a series, the
Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities on and after the date the conditions set forth in Section 14.04 are satisfied (hereinafter, defeasance). For
this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities, which shall thereafter be deemed to be Outstanding only for the purposes
of Section 14.05 and the other Sections of this Indenture referred to in clauses (A) and (B) of this Section, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned
(and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such
Outstanding Securities to receive, solely from the trust fund described in Section 14.04 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any, on) and interest, if any, on such Securities
when such payments are due; (B) the Companys obligations with respect to such Securities under Sections 3.05, 3.06, 10.02 and 10.03 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by
Section 10.04; (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, Section 6.06; and (D) this Article. Subject to compliance with this Article Fourteen, the Company may
exercise its option under this Section notwithstanding the prior exercise of its option under Section 14.03 with respect to such Securities. Following a defeasance, payment of such Securities may not be accelerated because of an Event of
Default.
Section 14.03. Covenant Defeasance.
Upon the Companys exercise of the above option applicable to this Section with respect to any Securities of or within a series, the
Company shall be released from its obligations under Section 10.06, and, if specified pursuant to Section 3.01, its obligations under any other covenant with respect to such Outstanding Securities on and after the date the conditions set
forth in Section 14.04 are satisfied (hereinafter, covenant defeasance), and such Securities shall thereafter be deemed to be not Outstanding for the purposes of any direction, waiver, consent or declaration or
Act of Holders (and the consequences of any thereof) in connection with Section 10.06, or such other covenant, but shall continue to be deemed Outstanding for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to such Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 5.01(iv) or 5.01(vii) or otherwise, as the case may be, but except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby.
Following a covenant defeasance, payment of such Securities may not be accelerated because of an Event of Default solely by reference to such Sections specified above in this Section 14.03.
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Section 14.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section 14.02 or Section 14.03 to any Outstanding Securities of or
within a series:
(i) The Company shall have irrevocably deposited or caused to be irrevocably deposited with the Trustee
(or another trustee satisfying the requirements of Section 6.07 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically
pledged as security for the benefit of, and dedicated solely to, the Holders of such Securities, (A) an amount (in such Currency in which such Securities are then specified as payable at Stated Maturity), or (B) Government Obligations
applicable to such Securities (determined on the basis of the Currency in which such Securities are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with
their terms will provide, without reinvestment thereof, not later than one day before the due date of any payment of principal of (and premium, if any, on) and interest, if any, on such Securities, money in an amount, or (C) a combination
thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, (1) the principal of (and premium, if any, on) and interest, if any, on such Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest and
(2) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities.
(ii) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound.
(iii) No
Default or Event of Default with respect to such Securities shall have occurred and be continuing on the date of such deposit or, insofar as Sections 5.01(v) and 5.01(vi) are concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).
(iv) In the case of an election under Section 14.02, the Company shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law,
in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.
(v) In the case of an election under Section 14.03, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Holders of such Outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant defeasance had not occurred.
(vi) The Company
shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent to either the defeasance under Section 14.02 or the covenant defeasance under Section 14.03 (as the
case may be) have been complied with.
(vii) Notwithstanding any other provisions of this Section, such defeasance or
covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 3.01.
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Section 14.05. Deposited Money and Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.03, all money and Government
Obligations (or other property as may be provided pursuant to Section 3.01) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 14.05, the
Trustee) pursuant to Section 14.04 in respect of any Outstanding Securities of any series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and
premium, if any) and interest, if any, but such money need not be segregated from other funds except to the extent required by law.
Unless otherwise specified with respect to any Security pursuant to Section 3.01, if, after a deposit referred to in Section 14.04
has been made, (a) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 3.12(b) or the terms of such Security to receive payment in a Currency other than that in which the
deposit pursuant to Section 14.04 has been made in respect of such Security, or (b) a Conversion Event occurs as contemplated in Section 3.12(d) or 3.12(e) or by the terms of any Security in respect of which the deposit pursuant to
Section 14.04 has been made, the indebtedness represented by such Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest, if any, on such
Security as the same becomes due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the Currency in which such
Security becomes payable as a result of such election or Conversion Event based on the applicable Market Exchange Rate for such Currency in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for
such Currency in effect (as nearly as feasible) at the time of the Conversion Event.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the money or Government Obligations deposited pursuant to Section 14.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of such Outstanding Securities; it being understood that the Trustee shall bear no responsibility for any such tax, fee or other charge that is imposed by law or for the account of Holders. The
foregoing sentence shall survive the termination of this Indenture and the earlier resignation or removal of the Trustee.
Anything in
this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in
Section 14.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article.
If, after the Company has made a
deposit with the Trustee pursuant to Section 14.04, the Trustee is unable to apply any money in accordance with Section 14.05 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the Companys obligations under this Indenture and the applicable Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 14.04
until such time as the Trustee is permitted to apply all such money in accordance with this Article Fourteen; provided, however, that if the Company has made any payment of the principal of or interest on any series of Securities
because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money held by the Trustee.
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ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
Section 15.01. Purposes for Which Meetings May Be Called.
A meeting of Holders of any series of Securities of such series may be called at any time and from time to time pursuant to this Article to
make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.
Section 15.02. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 15.01, to be
held at such time and at such place in the [Borough of Manhattan, The City of New York or in London] as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.06, not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding
Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 15.01, by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have made the first publication or mailing of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the [Borough of Manhattan, The City of New York or in London] for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.
Section 15.03. Persons
Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be
(i) a Holder of one or more Outstanding Securities of such series, or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The
only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 15.04. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting
of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action that this Indenture
expressly provides may be made, given or taken by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the
Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be
dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as
provided in Section 15.02(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly
the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.
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Except as limited by the proviso to Section 9.02, any resolution presented to a meeting or
adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that,
except as limited by the proviso to Section 9.02, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series.
Any
resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series, whether or not present or represented at the
meeting.
Notwithstanding the foregoing provisions of this Section 15.04, if any action is to be taken at a meeting of Holders of
Securities of any series with respect to any consent, waiver, request, demand, notice, authorization, direction or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal
amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series:
(i) there shall be no minimum quorum requirement for such meeting; and
(ii) the principal amount of the Outstanding Securities of such series that vote in favor of such consent, waiver, request,
demand, notice, authorization, direction or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture.
Section 15.05. Determination of Voting Rights; Conduct and Adjournment of Meetings.
(a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities
shall be proved in the manner specified in Section 1.04 and the appointment of any proxy shall be proved in the manner specified in Section 1.04. Such regulations may provide that written instruments appointing proxies, regular on their
face, may be presumed valid and genuine without the proof specified in Section 1.04 or other proof.
(b) The Trustee shall, by an
instrument in writing appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 15.02(b), in which case the Company or the Holders of Securities of
the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the meeting.
(c) At any meeting of Holders, each Holder of a Security
of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by such Holder; provided, however, that no vote shall be cast or counted at any
meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.
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(d) Any meeting of Holders of Securities of any series duly called pursuant to Section 15.02
at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without
further notice.
Section 15.06. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The chairman of the
meeting shall appoint at least one inspector of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting a verified written report of all votes cast at the
meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any Series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspector of
votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 15.02 and, if
applicable, Section 15.04. Each copy shall be signed and verified by the affidavits of the chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
* * * * *
This Indenture may be
executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, as of the
day and year first above written.
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CARLYLE CREDIT INCOME FUND |
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By: |
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/s/ |
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Name: |
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Title: |
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American Stock Transfer & Trust Company, LLC, Trustee |
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By: |
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/s/ |
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Name: |
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Title: |
[Signature Page to
Indenture]
EXHIBIT A
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND
CLEARSTREAM IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY
OR TO OBTAIN INTEREST PAYABLE PRIOR
TO THE EXCHANGE DATE
CERTIFICATE
[Insert title
or sufficient description of Securities to be delivered]
This is to certify that, based solely on written certifications that we have
received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our Member Organizations) substantially
in the form attached hereto, as of the date hereof, [U.S. $] principal amount of the above-captioned Securities (i) is owned by person(s) that are not United States persons (United States Person(s)) within the
meaning of Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as amended (the Code), (ii) is owned by United States Person(s) that are (a) foreign branches of United States financial institutions
(financial institutions, as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)[(iv)], are herein referred to as financial institutions) purchasing for their own account or for
resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either
case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise Carlyle Credit Income Fund or its agent that such financial institution will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Code and the United States Treasury Regulations thereunder), or (iii) is owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as
defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that financial institutions described in clause (iii) above (whether or not also described
in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.
As used herein, United States means the United States of America (including the states and the District of Columbia) and
its possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).
We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion
of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied upon as
of the date hereof.
We understand that this certification is required in connection with certain tax legislation in the United States. If
administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such
proceedings.
Dated:
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[To be dated no earlier than the Exchange Date or the relevant Interest Payment
Date occurring prior to the Exchange Date, as applicable] |
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[
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as Operator of the Euroclear System |
[Signature Page to
Indenture]
Exhibit (2)(g)
CARLYLE CREDIT INCOME FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of July 14, 2023, by and between CARLYLE CREDIT INCOME FUND (the Fund), and CARLYLE GLOBAL CREDIT
INVESTMENT MANAGEMENT L.L.C. (the Adviser).
WHEREAS, the Fund is a closed-end,
management investment company registered as such with the Securities and Exchange Commission (the Commission) pursuant to the Investment Company Act of 1940, as amended (the 1940 Act);
WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the Advisers
Act); and
WHEREAS, the Fund desires to retain the Adviser to serve as investment adviser and the Adviser is willing to do
so.
NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, it is agreed by and between the
parties, as follows:
The Fund hereby employs the Adviser and the Adviser hereby undertakes to act as the investment adviser of the Fund and to perform for the Fund
such other duties and functions as are hereinafter set forth. The Adviser shall, in all matters, give to the Fund and its Board of Trustees (the Board and each trustee of the Fund, a Trustee and collectively, the
Trustees) the benefit of its judgment, effort, advice and recommendations and shall, at all times conform to, and use its best efforts to enable the Fund to conform to: (a) the provisions of the 1940 Act and any rules or regulations
thereunder; (b) any other applicable provisions of state or federal law; (c) the provisions of the declaration of Trust (Declaration of Trust) and by-laws
(By-Laws) of the Fund as amended from time to time; (d) policies and determinations of the Board; (e) the fundamental policies and investment restrictions of the Fund as reflected in its
registration statement under the 1940 Act or as such policies may, from time to time, be amended by the Board, the Trustees, or the Funds shareholders; and (f) the prospectus (Prospectus) and statement of additional
information (Statement of Additional Information) of the Fund in effect from time to time. The appropriate officers and employees of the Adviser shall be available upon reasonable notice for consultation with any of the Trustees and
officers of the Fund with respect to any matters dealing with the business and affairs of the Fund.
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Investment Management. |
(a) The Adviser shall, subject to the oversight of the Board, (i) regularly provide, or arrange for and oversee the provision of,
investment advice and recommendations to the Fund with respect to its investments, investment policies and the purchase and sale of securities and other investments; (ii) supervise the investment program of the Fund and the composition of its
portfolio and determine, or oversee the determination of, what securities and other investments shall be purchased or sold by the Fund; and (iii) arrange, subject to the provisions of paragraph 7 hereof,
for the purchase of securities and other investments for the Fund and the sale of securities and other investments held in the portfolio of the Fund. If it is necessary or advisable for the
Adviser to make investments on behalf of the Fund through a subsidiary or special purpose vehicle, the Adviser shall have authority to create or arrange for the creation of such subsidiary or special purpose vehicle and to make such investments
through such subsidiary or special purpose vehicle (in accordance with the 1940 Act).
(b) Provided that the Fund shall not be required to
pay any compensation other than as provided by the terms of this Agreement and subject to the provisions of subparagraph (c) of paragraph 7 hereof, the Adviser may obtain investment information, research or assistance from
any other person, firm or corporation to supplement, update or otherwise improve its investment management services.
(c) To the extent
permitted by applicable law, the Adviser may, from time to time with Board approval, appoint one or more sub-advisers, including without limitation affiliates of the Adviser, to perform investment advisory
services with respect to the Fund (including without limitation those set forth in subparagraph (a) of this paragraph 2), and may, in its sole discretion, terminate any or all such
sub-advisers at any time to the extent permitted by applicable law.
(d) The Adviser shall have the
authority to (i) enter into, on behalf of the Fund and as its adviser and/or agent in fact, (A) any agreement, and any supporting documentation, with any futures commission merchant registered with the U.S. Commodity Futures Trading
Commission to provide execution and clearing services for exchange-traded commodity futures contracts, options on futures contracts and cleared swaps for the Fund and (B) futures (including security futures) contracts, forward foreign currency
exchange contracts, options on securities (listed and over-the-counter), options on indices (listed and over the- counter),
options on foreign currency and other foreign currency transactions, swap transactions (cleared or un-cleared) (including, without limitation, interest rate, credit default, total return, and related types of
swap and notional rate agreements), options on swap transactions, forward rate agreements, TBA transactions and other transactions involving the forward purchase or sale of securities, repurchase and reverse repurchase transactions, buy/sell back
transactions and other similar types of investment contracts or transactions, and any agreements, instruments or documentation governing any of the foregoing (including, without limitation, brokerage agreements, execution agreements, ISDA master
agreements, master securities forward transactions agreements, master repurchase agreements, master securities lending agreements, security or collateral agreements, control agreements and any other agreements, instruments or documents similar or
incidental to the foregoing that currently are, or in the future become, customary or necessary with respect to the documentation of any of the foregoing, and any schedules and annexes to the aforementioned agreements, instruments and documents, and
any releases, consents, waivers, amendments, elections or confirmations to any of the aforementioned agreements, instruments and documents) (collectively, Investment Instruments), (ii) pledge and deliver cash, securities, commodities or
other assets of the Fund as collateral security in connection with any Investment Instrument, and (iii) otherwise act on behalf of the Fund in connection with the exercise of any rights or the satisfaction of any obligations and liabilities of
the Fund under any Investment Instruments or other agreement or documentation.
2
(e) Provided that nothing herein shall be deemed to protect the Adviser from its willful
misfeasance, lack of good faith or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under this Agreement, the Adviser, each of its affiliates and all respective partners, members, directors,
officers, trustees and employees and each person, if any, who within the meaning of Section 15 of the Securities Act of 1933, as amended, controls, is controlled by or is under common control with the Adviser (Control Persons) shall
not be liable for any error of judgment or mistake of law and shall not be subject to any expenses or liability to the Fund or any of the Funds shareholders, in connection with the matters to which this Agreement relates.
(f) The Adviser shall indemnify and hold harmless the Fund and each of its directors, officers, trustees, employees and agents (each, a
Fund Indemnitee) against any and all losses, claims, damages, liabilities or litigation (including without limitation reasonable attorneys fees and other expenses), to which such persons may become subject under the 1940 Act, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the 1934 Act), the Advisers Act, the Commodity Exchange Act, as amended, or any other statute, law, rule or regulation, arising out of the
Advisers responsibilities as investment manager of the Funds obligations hereunder (i) to the extent of, and as a result of, the willful misconduct, lack of good faith, or gross negligence, or reckless disregard of its duties
hereunder, by the Adviser, any of the Advisers affiliates or Control Persons or any affiliate of or any person acting on behalf of the Adviser, (ii) as a result of any untrue statement or alleged untrue statement of a material fact
contained in the Funds Prospectus, proxy materials, reports, marketing literature, or any other materials pertaining to the Fund, including without limitation any amendment thereof or any supplement thereto, or the omission of or alleged
omission to state a material fact in such materials necessary to make the statements therein not misleading, (iii) to the extent of, and as a result of, a material breach of any representation or warranty by Adviser of this Agreement or
(iv) to the extent of, and as a result of, refusal or failure by the Adviser, any of the Advisers affiliates or Control Persons or any affiliate of or any person acting on behalf of the Adviser; provided, however, that in no case shall
the Advisers indemnity hereunder be deemed to protect a person against any liability to which any such person would otherwise be subject by reason of willful misconduct, lack of good faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under this Agreement. The parties agree that each Fund Indemnitee shall be a third party beneficiary of the terms of this subparagraph (f).
(g) Nothing in this Agreement shall prevent the Adviser or any officer thereof from acting as investment adviser for any other person, firm or
corporation and shall not in any way limit or restrict the Adviser or any of its directors, officers or employees from buying, selling or trading any securities or other instruments for its own account or for the account of others for whom it or
they may be acting, provided that such activities will not adversely affect or otherwise impair the performance by the Adviser of its duties and obligations under this Agreement and under the Advisers Act.
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3. |
Other Duties of the Adviser. |
(a) The Adviser shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance of its obligations under this Agreement. Without limiting the generality of the foregoing, the staff and personnel of the Adviser shall be deemed to include persons
employed or otherwise retained by the Adviser to furnish statistical and other factual data, advice regarding economic factors and trends, information with respect to technical and scientific developments, and such other information, advice and
assistance as the Adviser may desire.
(b) The Adviser shall also furnish such reports, evaluations, information or analyses to the Fund as
the Board may request from time to time or as the Adviser may deem to be desirable. The Adviser shall make recommendations to the Board with respect to Fund policies, and shall carry out such policies as are adopted by the Trustees. The Adviser
shall, subject to review by the Board, furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform its obligations under this Agreement.
(c) The Fund will, from time to time, furnish or otherwise make available to the Adviser such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Adviser may reasonably require in order to discharge its duties and obligations hereunder. The Adviser shall, as agent, for the Fund, maintain the Funds records required in
connection with the performance of its obligations under this Agreement and required to be maintained under the Investment Company Act. All such records so maintained shall be the property of the Fund and, upon request therefore, the Adviser shall
surrender to the Fund such of the records so requested; provided that the Adviser may, at its own expense, make and retain copies of any such records.
(d) The Adviser shall bear the cost of rendering the investment advisory and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and employees, if any, of the Fund who are also directors, officers or employees of the Adviser.
Except as otherwise provided in this Agreement or by law, the Adviser shall not be responsible for the Funds expenses and the Fund
assumes and shall pay or cause to be paid all of its expenses, including without limitation: organizational and offering expenses (including without limitation
out-of-pocket expenses, but not overhead or employee costs of the Adviser); expenses for legal, accounting and auditing services (including expenses of legal counsel to
the Trustees who are not interested persons (as defined in the 1940 Act) of the Fund or the Adviser); taxes (including without limitation securities and commodities issuance and transfer taxes) and governmental fees (including without limitation
fees payable by the Fund to Federal, State or other governmental agencies and associated filing costs); dues and expenses incurred in connection with membership in investment company organizations (including without limitation membership dues of the
Investment Company Institute); costs of printing and distributing shareholder reports, proxy materials, prospectuses, stock certificates and distribution of dividends; charges of the Funds custodians and
sub-custodians, administrators and sub-administrators, registrars, depositories, transfer agents, dividend disbursing agents and dividend reinvestment plan agents
(including under the custody, administration and other agreements); fees and expenses associated with marketing and distribution efforts; fees and expenses paid to agents and intermediaries for sub-transfer
agency, sub-accounting and other shareholder services on behalf of shareholders of the Fund held through omnibus and networked, record shareholder accounts; costs of valuation service providers
4
retained by the Fund or the Adviser; payment for portfolio pricing services to a pricing agent, if any; registration and filing fees of the Commission and various states and other jurisdictions
(including filing fees and legal fees and disbursements of counsel); fees and expenses of registering or qualifying securities of the Fund for sale in the various states; fees and expenses incident to qualifying and listing of the Funds shares
on any exchange; postage, freight and other charges in connection with the shipment of the Funds portfolio securities; fees and expenses of Trustees who are not interested persons (as defined in the 1940 Act) of the Fund or the Adviser and of
any other trustees or members of any advisory board or committee who are not employees of the Adviser or any corporate affiliate of the Adviser; salaries of shareholder relations personnel; costs of shareholders meetings; insurance (including
without limitation insurance premiums on property or personnel (including without limitation officers and Trustees) of the Fund which inure to its benefit); any and all fees, costs and expenses incurred in implementing or maintaining third-party or
proprietary software tools, programs or other technology for the benefit of the Fund (including, without limitation, any and all fees, costs and expenses of any investment, books and records, portfolio compliance and reporting systems, general
ledger or portfolio accounting systems and similar systems and services, including, without limitation, consultant, software licensing, data management and recovery services fees and expenses); interest; brokerage costs (including without limitation
brokers commissions or transactions costs chargeable to the Fund in connection with portfolio securities transactions to which the Fund is a party); the Funds proportionate share of expenses related to
co-investments; all expenses incident to the payment of any dividend, distribution (including any dividend or distribution program), withdrawal or redemption, whether in shares or in cash; the costs associated
with the Funds share repurchase program; the cost of making investments (including third-party fees and expenses with respect to or associated with negotiating any such investments) purchased or sold for the Fund; litigation and other
extraordinary or non-recurring expenses (including without limitation legal claims and liabilities and litigation costs and any indemnification related thereto) (subject, however, to paragraph 2
hereof); the compensation of the Funds Chief Compliance Officer and the salary of any compliance personnel of the Adviser and its affiliates who provide compliance-related services to the Fund, provided such salary expenses are properly
allocated between the Fund and other affiliates, as applicable, and any costs associated with the monitoring, testing and revision of the Funds compliance policies and procedures required by Rule 38a-1
under the 1940 Act; the cost of any valuation service provider engaged on the Funds behalf or with respect to the Funds assets (including engagement of such valuation service provider by the Adviser or its affiliates) and all other
charges and costs of the Funds operations.
The Fund shall reimburse the Adviser or its affiliates for any expenses of the Fund as
may be reasonably incurred as specifically provided for in this Agreement (including, for the avoidance of doubt, any of the above expenses incurred by the Adviser or its affiliates on the Funds behalf) or as specifically agreed to by the
Board. The Adviser shall keep and supply to the Fund reasonable records of all such expenses.
5. |
Compensation of the Adviser. |
The Fund agrees to pay the Adviser and the Adviser agrees to accept as full compensation for the performance of all functions and duties on its
part to be performed pursuant to the provisions hereof, a fee as set forth on Exhibit A. If this Agreement expires or is terminated, the Adviser shall be entitled to receive all amounts (including any accrued by unreimbursed expenses) payable to it
and not yet paid pursuant to this Section.
5
6. |
Use of Names; Non-Exclusivity. |
(a) The Fund agrees and consents that: (i) the name Carlyle is proprietary to the Adviser (or one or more of its affiliates);
(ii) it will only use the name Carlyle as a component of its name and for no other purpose; (iii) it will not purport to grant to any third party the right to use the name for any other purpose; (iv) Carlyle, or one or more of
its affiliates may use or grant to others the right to use the name Carlyle as all or a portion of a corporate or business name or for any commercial purpose, including without limitation a grant of such right to any other investment
company or other pooled vehicle; upon termination of this Agreement, the Fund shall promptly take whatever action may be necessary to change its name and discontinue any further use of the name Carlyle in the name of the Fund or
otherwise.
(b) The services of the Adviser to the Fund under this Agreement are not to be deemed exclusive as to the Adviser and the
Adviser will be free to render similar services to other investment companies and other clients. Except to the extent necessary to perform the Advisers obligations under this Agreement, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the Adviser, to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm, individual or association.
7. |
Portfolio Transactions and Brokerage. |
(a) The Adviser is authorized, subject to the supervision and oversight of the Board, to establish and maintain accounts on behalf of the Fund
with, and place orders for the purchase and sale of the Funds portfolio securities or other investments with or through, such persons, brokers or dealers, futures commission merchants or other counterparties (brokers) as the
Adviser may elect and negotiate commissions to be paid on such transactions; provided, however, that a broker affiliated with the Adviser shall be used only in transactions permissible under applicable laws, rules and regulations, including without
limitation the 1940 Act and the Advisers Act and the rules and regulations promulgated thereunder, as well as permitted by the Policies adopted by the Fund. The Adviser, upon reasonable request of the Board, shall promptly provide the Board with
copies of all agreements regarding brokerage arrangements related to the Fund.
(b) The Adviser shall enter into transactions and place
orders for the purchase and sale of portfolio investments for the Funds account with brokers, dealers and/or other counterparties selected by the Adviser. In the selection of such brokers, dealers and/or other counterparties and the entering
into of such transactions and placing of such orders, the Adviser shall seek to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and
research services, as provided below. In using its reasonable efforts to obtain for the Fund the most favorable price and execution available, the Adviser, bearing in mind the best interests of the Fund at all times, shall consider all factors it
deems relevant, including without limitation price, the size of the transaction, the breadth and nature of the market for the security, the difficulty of the execution, the amount of the
6
commission, if any, the timing of the transaction, market prices and trends, the reputation, experience and financial stability of the broker, dealer or counterparty involved and the quality of
service rendered by the broker or dealer in other transactions. Subject to such policies as the Board may determine, or as may be mutually agreed to by the Adviser and the Board, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services (within the meaning of Section 28(e) of the 1934 Act, and any
Commission guidance issued thereunder) to the Adviser an amount of commission for effecting an investment transaction in the Fund that is in excess of the amount of commission or spread that another broker or dealer would have charged for effecting
that transaction if, but only if, the Adviser determines in good faith that such commission or spread was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that
particular transaction or the overall responsibility of the Adviser with respect to the accounts for which it exercises investment discretion (as such term is defined in Section 3(a)(35) of the 1934 Act). It is recognized that the services
provided by such brokers and dealers may be useful to the Adviser in connection with the Advisers services to other clients. The Adviser is responsible for obtaining a completed Form W-9 from any broker
it selects to place orders for the Fund, and responsible for providing such to the Fund.
(c) On an ongoing basis, but not less often than
annually, the Adviser shall provide a written report summarizing the considerations used for selecting brokers, dealers and other counterparties in the Advisers purchases and sales of portfolio investments and analysis regarding best
execution, taking into account the Advisers best execution policy (provided that the Adviser shall not be required to weigh any particular factor on an equal basis), as well as any soft dollar or similar arrangements that the
Adviser maintains with brokers or dealers that execute transactions for the Fund, and of all research and other services provided to the Adviser by a broker or dealer (whether prepared by such broker or dealer or by a third party) as a result, in
whole or in part, of the direction of transactions for the Fund by the Adviser to the broker or dealer.
(d) On occasions when the Adviser
deems the purchase or sale of a security to be in the best interests of the Fund as well as other clients of the Adviser, the Adviser, to the extent permitted by applicable laws and regulations (including without limitation any applicable exemptive
orders or Commission guidance) and subject to the trade allocation procedures approved by the Board, may, but shall be under no obligation to, aggregate the securities to be sold or purchased in order to obtain the most favorable price or lower
brokerage commissions or spreads and efficient execution. In such event, allocation of securities so sold or purchased, as well as the expenses incurred in the transaction, will be made by the Adviser in accordance with the approved procedures.
(e) The Adviser shall render reports to the Board as requested regarding commissions generated as a result of trades executed by the Adviser
for the Fund, as well as information regarding third-party services, if any, received by the Adviser as a result of trading activity relating to the Fund with brokers and dealers.
7
This Agreement will take effect on the date first set forth above. Unless earlier terminated pursuant to paragraph 9 hereof, this
Agreement shall remain in effect until July 14, 2025, and thereafter will continue in effect from year to year, so long as such continuance shall be approved at least annually by the Board, including without limitation the vote of the majority
of the Trustees who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval (or otherwise, as consistent with
applicable laws, regulations and related guidance and relief), or by the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund and by such a vote of the Board.
This Agreement may be terminated: (a) by the Adviser at any time without penalty upon giving the Fund sixty days written notice
(which notice may be waived by the Fund); (b) by the Fund at any time without penalty upon sixty days written notice to the Adviser (which notice may be waived by the Adviser); or (c) by the Fund upon delivery of written notice from Fund
to the Adviser in the event of a material breach of any provision of this Agreement by the Adviser, provided that, to the extent such material breach is capable of being cured, the Fund shall have first provided the Adviser written notice of the
material breach and the Adviser shall have failed to cure such breach to the reasonable satisfaction of the Fund within 10 days after the delivery of such notice; provided that termination by the Fund under (b) or (c) above shall be directed or
approved by the vote of a majority of all of the Trustees then in office or by the vote of the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund.
10. |
Assignment or Amendment. |
This Agreement may not be amended without the affirmative vote of the Board, including a majority of the Trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting called for the purposes of voting on such approval and, where required by the 1940 Act, by a vote or written consent of a majority of the outstanding voting
securities of the Fund, and shall automatically and immediately terminate in the event of its assignment, as defined in the 1940 Act.
11. |
Disclaimer of Shareholder Liability. |
The Adviser understands that the obligations of the Fund under this Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Funds property. The Adviser represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder liability for acts or obligations of the Fund.
The terms and provisions of this Agreement shall be interpreted and defined in a manner consistent with the provisions and definitions of the
1940 Act.
8
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken
altogether shall constitute one and the same Agreement. Counterparts may be executed in either original or electronically transmitted form (e.g., faxes or emailed portable document format (PDF) form), and the parties hereby adopt as original any
signatures received via electronically transmitted form.
14. |
Governing Law, Jurisdiction, etc. |
This Agreement shall be governed by and construed in accordance with substantive laws of the State of New York without reference to choice of
law principles thereof and in accordance with the 1940 Act. In the case of any conflict, the 1940 Act shall control. The state and federal courts sitting within the State and County of New York shall be the sole and exclusive forums for any action
or proceeding hereunder and the parties hereto consent to the jurisdiction thereof. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
If any provision of this Agreement shall be held or made invalid by a court decision or applicable law, the remainder of the Agreement shall
not be affected adversely and shall remain in full force and effect.
This Agreement contains the entire understanding and agreement of the parties with respect to the subject matter hereof. Each party shall
perform such further actions and execute such further documents as are necessary to effectuate the purpose of this Agreement.
The provisions of Sections 5, 6, 11, 14 and 17 shall survive termination of this Agreement.
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date
above written.
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CARLYLE CREDIT INCOME FUND |
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By: |
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/s/ Lauren Basmadjian |
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Name: |
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Lauren Basmadjian |
Title: |
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Principal Executive Officer |
[Signature Page to Investment Advisory Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date
above written.
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CARLYLE GLOBAL CREDIT INVESTMENT MANAGEMENT L.L.C. |
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By: |
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/s/ Justin Plouffe |
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Name: |
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Justin Plouffe |
Title: |
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Managing Director and Deputy Chief Investment Officer |
[Signature Page to Investment Advisory Agreement]
EXHIBIT A TO
INVESTMENT ADVISORY AGREEMENT
A
management fee calculated and payable monthly in arrears on the month-end value of the Funds managed assets at an annual rate of:
1.75% of the Funds month-end value of the Funds managed assets
For purposes of the management fee, managed assets means the total assets of the Fund (including any assets attributable to any preferred shares that may be
issued or to indebtedness) minus the Funds liabilities other than liabilities relating to indebtedness.
In addition to the asset based fee above,
the Fund shall pay to the Adviser an Incentive Fee calculated and payable quarterly in arrears based upon the Funds pre-incentive fee net investment income for the immediately preceding
quarter, and is subject to a hurdle rate, expressed as a rate of return on the Funds net assets, equal to 2.00% per quarter (or an annualized hurdle rate of 8.00%), subject to a catch-up
feature. For this purpose, pre-incentive fee net investment income means interest income, dividend income, income generated from original issue discounts, payment-in-kind income, and any other income earned or accrued during the calendar quarter, minus the Funds operating expenses (which, for this purpose shall not include any distribution and/or
shareholder servicing fees, litigation, any extraordinary expenses or Incentive Fee) for the quarter. For purposes of computing the Funds pre-incentive fee net investment income, the calculation
methodology will look through total return swaps as if the Fund owned the referenced assets directly. As a result, the Funds pre-incentive fee net investment income includes net interest, if any,
associated with a derivative or swap, which is the difference between (a) the interest income and transaction fees related to the reference assets and (b) all interest and other expenses paid by the Fund to the derivative or swap
counterparty. Net assets means the total assets of the Fund minus the Funds liabilities. For purposes of the Incentive Fee, net assets are calculated for the relevant quarter as the weighted average of the net asset value of the Fund as of the
first business day of each month therein. The weighted average net asset value shall be calculated for each month by multiplying the net asset value as of the beginning of the first business day of the month times the number of days in that month,
divided by the number of days in the applicable calendar quarter.
The calculation of the Incentive Fee for each calendar quarter is as follows:
No Incentive Fee is payable to the Adviser if the Funds pre-incentive fee net investment income,
expressed as a percentage of the Funds net assets in respect of the relevant calendar quarter, does not exceed the quarterly hurdle rate of 2.00%;
100% of the portion of the Funds pre-incentive fee net investment income that exceeds the hurdle
rate but is less than or equal to 2.4242% (the catch-up) is payable to the Adviser if the Funds pre-incentive fee net investment income, expressed as a
percentage of the Funds net assets in respect of the relevant calendar quarter, exceeds the hurdle rate but is less than or equal to 2.4242% (9.6968% annualized). The catch-up provision is
intended to provide the Adviser with an incentive fee of 17.5% on all of the Funds pre-incentive fee net investment income when the Funds pre-incentive fee net investment income reaches 2.4242% of
net assets; and
17.5% of the portion of the Funds pre-incentive fee
net investment income that exceeds the catch-up is payable to the Adviser if the Funds pre-incentive fee net investment income, expressed as a
percentage of the Funds net assets in respect of the relevant calendar quarter, exceeds 2.4242% (9.6968 annualized). As a result, once the hurdle rate is reached and the catch-up is achieved, 17.5% of
all the Funds pre-incentive fee net investment income thereafter is allocated to the Adviser.
2
Exhibit (2)(k)(2)
One Vanderbilt Avenue Suite 3400
New York NY 10017
Tel (212)813-4979
EXPENSE LIMITATION AGREEMENT
July 14, 2023
Carlyle Credit Income Fund
One Vanderbilt Avenue
New York, NY 10017
Dear Ladies and Gentlemen:
Carlyle Global
Credit Investment Management L.L.C. (CGCIM), as investment adviser to Carlyle Credit Income Fund (the Fund) agrees on a monthly basis to irrevocably waive its base management fees and/or reimburse the Funds operating
expenses (each such waiver or reimbursement, an Expense Payment) to the extent that the Funds annualized operating expenses in respect of the relevant month exceed 2.5% of the Funds average daily net assets (the Expense
Limitation). This agreement (Agreement) shall commence on the date first set forth above. This Agreement shall continue in effect until ending on the earlier of (i) four quarters after the date of this Agreement or
(ii) the date on which at least 75% of the Funds gross assets are invested in collateralized loan obligation equity and debt investments.
For purposes of this Agreement, the Funds annualized operating expenses shall not include (i) expenses directly related to the
costs of making investments, including interest and structuring costs for borrowings and line(s) of credit, taxes, brokerage costs, the Funds proportionate share of expenses related to co-investments,
litigation or extraordinary expenses, (ii) incentive fees, (iii) expenses related to equity or debt offerings, and (iv) expenses associated with that certain Transaction Agreement dated January 12, 2023 between CGCIM and the
Fund, including expenses related to the Liquidation as defined therein. Any amounts waived or reimbursed hereunder shall not be subject to recoupment by CGCIM.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, except insofar as the
1940 Act, or other federal laws and regulations may be controlling. Any amendment to this Agreement shall be in writing signed by the parties hereto. Subject to approval by CGCIM, this Agreement may be amended by the Funds Board of Trustees
without the approval of Fund shareholders.
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Very truly yours, |
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Carlyle Global Credit Investment
Management L.L.C. |
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By: |
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/s/ Justin Plouffe |
Name: |
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Justin Plouffe |
Title: |
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Managing Director and Deputy Chief Investment Officer |
[Signature Page to Expense Limitation Agreement]
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Carlyle Credit Income Fund |
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By: |
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/s/ Lauren Basmadjian |
Name: |
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Lauren Basmadjian |
Title: |
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Principal Executive Officer |
[Signature Page to Expense Limitation Agreement]
Exhibit (2)(k)(3)
Carlyle Global Credit Investment Management L.L.C.
One Vanderbilt Avenue, Suite 3400
New York, NY 10017
July 14, 2023
Carlyle Credit Income Fund
One Vanderbilt Avenue, Suite 3400
New York, NY 10017
Re: Fee Waiver
Ladies and Gentlemen:
Carlyle Global Credit Investment Management L.L.C. (the Adviser) and Carlyle Credit Income Fund (the Fund) are parties
to that certain Investment Advisory Agreement, dated as of July 14, 2023 (as may be amended from time to time, the Investment Advisory Agreement), pursuant to which the Fund is obligated to pay to the Adviser, among
other things, a base management fee, calculated at the annualized rate of 1.75% of the Funds managed assets, and an income based incentive fee of 17.5% (together with the base management fee, the Advisory Fees). Capitalized
terms used but not defined herein have the meanings ascribed to them in the Investment Advisory Agreement.
This letter agreement (this
Agreement) confirms the temporary waiver by the Adviser of a portion of the Advisory Fees payable by the Fund for a period of six months from the date hereof (the Termination Date), as follows:
The Adviser hereby agrees to temporarily waive a portion of the Advisory Fees on Fund managed assets that are invested in exchange-traded
funds.
Amounts waived by the Adviser are not subject to recoupment by the Adviser. The Adviser may discontinue its obligation to waive its compensation
under this Agreement at any time prior to the Termination Date only with the written consent of the Board of Trustees of the Fund.
This Agreement shall
be governed by and construed in accordance with the substantive laws of the State of New York which are applicable to contracts made and entirely to be performed therein, without regard to the place of performance hereunder.
The Adviser understands and intends that the Company will rely on this undertaking in preparing and filing a prospectus and other documents for the Company
with the Securities and Exchange Commission, in accruing the Companys expenses for purposes of calculating its net asset value per share, and for other purposes as expressly permitted by the Adviser.
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Carlyle Global Credit Investment Management L.L.C. |
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By: |
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/s/ Justin Plouffe |
Name: Justin Plouffe |
Title: Managing Director and Deputy Chief
Investment Officer |
[Signature Page to Fee Waiver Letter Agreement]
Agreed and Accepted:
Carlyle Credit Income Fund
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By: |
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/s/ Lauren Basmadjian |
Name: |
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Lauren Basmadjian |
Title: |
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Principal Executive Officer |
[Signature Page to Fee Waiver Letter Agreement]
Exhibit (2)(t)
POWER OF ATTORNEY
KNOW ALL PERSONS BY
THESE PRESENTS, that the undersigned, Mark S. Garbin, hereby constitutes and appoints Joshua Lefkowitz, Jennifer Juste and Nelson Joseph and each of them, as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution for such
attorney-in-fact in such attorney-in-facts name, place and stead, in any and all
capacities, to sign the registration statement on Form N-2 (File No. 333-272426) of Carlyle Credit Income Fund, and any amendments or supplements thereto and all
instruments necessary or incidental in connection therewith, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes, may lawfully do or cause to be done by
virtue hereof. This Power of Attorney will be governed by and construed in accordance with the laws of the State of New York. The undersigned hereby revokes all powers of attorney which he may have heretofore granted regarding the subject matter
hereof.
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Dated: July 14, 2023 |
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/s/ Mark S. Garbin |
Mark S. Garbin |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, Sanjeev Handa, hereby constitutes and appoints Joshua Lefkowitz, Jennifer Juste and Nelson Joseph
and each of them, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such attorney-in-fact in such attorney-in-facts name, place and stead, in any and all capacities, to sign the registration
statement on Form N-2 (File No. 333-272426) of Carlyle Credit Income Fund, and any amendments or supplements thereto and all instruments necessary or incidental in
connection therewith, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes, may lawfully do or cause to be
done by virtue hereof. This Power of Attorney will be governed by and construed in accordance with the laws of the State of New York. The undersigned hereby revokes all powers of attorney which he may have heretofore granted regarding the subject
matter hereof.
Dated: July 14, 2023
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|
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/s/ Sanjeev Handa |
Sanjeev Handa |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, Joan Y. McCabe, hereby constitutes and appoints Joshua Lefkowitz, Jennifer Juste and Nelson Joseph
and each of them, as her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such attorney-in-fact in such attorney-in-facts name, place and stead, in any and all capacities, to sign the registration
statement on Form N-2 (File No. 333-272426) of Carlyle Credit Income Fund, and any amendments or supplements thereto and all instruments necessary or incidental in
connection therewith, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and
purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or her substitutes, may lawfully do or cause to be
done by virtue hereof. This Power of Attorney will be governed by and construed in accordance with the laws of the State of New York. The undersigned hereby revokes all powers of attorney which she may have heretofore granted regarding the subject
matter hereof.
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Dated: July 14, 2023 |
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/s/ Joan Y. McCabe |
Joan Y. McCabe |
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