UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number |
811-23014 |
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BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. |
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(Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, New York 10286 |
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(Address of principal executive offices) (Zip code) |
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Deirdre Cunnane, Esq.
240 Greenwich Street
New York, New York 10286 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6400 |
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Date of fiscal year end:
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8/31 |
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Date of reporting period: |
8/31/2023
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FORM N-CSR
Item 1. Reports to Stockholders.
BNY Mellon Alcentra Global Credit Income 2024 Target Term
Fund, Inc.
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ANNUAL REPORT August
31, 2023 |
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BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund,
Inc. Protecting
Your Privacy Our Pledge to You THE FUND IS COMMITTED TO YOUR PRIVACY.
On this page, you will find the fund’s policies and practices for collecting, disclosing, and safeguarding
“nonpublic personal information,” which may include financial or other customer information. These
policies apply to individuals who purchase fund shares for personal, family, or household purposes, or
have done so in the past. This notification replaces all previous statements of the fund’s consumer
privacy policy, and may be amended at any time. We’ll keep you informed of changes as required by law. YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The fund maintains
physical, electronic and procedural safeguards that comply with federal regulations to guard nonpublic
personal information. The fund’s agents and service providers have limited access to customer information
based on their role in servicing your account. THE FUND COLLECTS INFORMATION
IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT. The fund collects a variety of nonpublic
personal information, which may include: • Information
we receive from you, such as your name, address, and social security number. • Information about your transactions with us, such as the purchase
or sale of fund shares. • Information
we receive from agents and service providers, such as proxy voting information. THE
FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS PERMITTED BY LAW. Thank you for this opportunity
to serve you. |
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The views expressed
in this report reflect those of the portfolio manager(s) only through the end of the period covered and
do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in
the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time
based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility
to update such views. These views may not be relied on as investment advice and, because investment decisions
for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
FOR MORE INFORMATION
Back Cover
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Save time. Save paper. View your next shareholder report online as soon as it’s
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DISCUSSION
OF FUND PERFORMANCE (Unaudited)
For the period from September 1, 2022, through August 31, 2023,
as provided by the fund’s primary portfolio managers, Kevin Cronk, Chris Barris and Brandon Chao of
Alcentra NY, LLC, the fund’s sub-adviser.
Market and Fund Performance Overview
For the 12-month period
ended August 31, 2023, BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. (the “fund”)
produced a total return of 12.61% on a net-asset-value basis and 12.18% on a market-price basis.1
Over the same period, the fund provided aggregate income dividends of $0.5550 per share, which reflects
a distribution rate of 7.12%.2 In comparison, the ICE BofA Global High
Yield Index (the “Index”), the fund’s benchmark, posted a total return of 8.58% for the same period.3
Global credit instruments generally delivered positive returns over the period,
benefiting from increased visibility on the direction of action from the U.S. Federal Reserve (the “Fed”)
as inflationary pressures moderated, the pace of interest-rate increases slowed, and markets began to
anticipate a “soft landing,” with inflation tamed without inciting a recession. The fund’s performance
benefited from all allocations, particularly its exposure to structured credit, European loans and global
high yield instruments.
The Fund’s Investment Approach
The fund’s investment objectives are
to seek high current income and to return at least $9.835 per Common Share (the initial public offering
price per Common Share (as defined below) after deducting a sales load of $0.165 per Common Share but
before deducting offering costs of $0.02 per Common Share (“Original NAV”) to holders of record of
shares of the fund’s common stock (“Common Shares”) on or about December 1, 2024 (subject to certain
extensions, the “Termination Date”).4
The fund will normally
invest primarily in credit instruments and other investments with similar economic characteristics. Such
credit instruments include: first lien, secured, floating-rate loans, as well as investments in participations
and assignments of such loans; second lien, senior unsecured, mezzanine and other collateralized and
uncollateralized subordinated loans; corporate debt obligations other than loans; and structured products,
including collateralized bond, loan and other debt obligations, structured notes and credit-linked notes.
Principal investment strategies include:
• Senior Secured
Loans and Other Loans
• Corporate Debt
• Special Situations
• Structured Credit
Rising Interest Rates and Favorable Economic Prospects Bolster
Global Loan Markets
The reporting period began on a negative note, as bond prices
broadly retreated in September and early October 2022 in the face of high levels of inflation and sharply
rising interest rates. Although U.S. inflation appeared to peak before the period began, topping at over
9% in June, it remained over 8% at the start of the period, well above the Fed’s 2% target rate. The
Fed responded with its third consecutive 0.75% increase to the federal funds rate in September, while
indicating that additional increases were likely, increasing concerns of a possible recession. In Europe,
inflation-related worries were exacerbated by Russia’s ongoing war in Ukraine, which increased energy
prices and heightened regional geopolitical instability.
2
The economic backdrop began improving in mid-October as inflationary pressures
eased, and economic data reassured investors that a recession was not imminent. In the United States,
inflation dropped steadily, dipping below 3% in June 2023 and remaining under 4% through the end of the
period. While the Fed continued to hike rates, the scale of increases eased, with a fourth 0.75% increase
in November 2022, followed by a 0.50% increase in December and four subsequent 0.25% increases in 2023.
At the same time, the U.S. economy continued to grow, bolstered by strong consumer spending, rising wages
and robust levels of employment. Although European economic conditions proved less robust than those
in the United States, European economies showed surprising strength despite the war in Ukraine, with
warmer-than-expected winter temperatures limiting the impact of the conflict on energy prices. European
loans, which had suffered compared to their U.S. counterparts, bounced back, returning to their historical
price relationship. Structured credit, which tends to exhibit relatively high levels of volatility, also
rebounded during the period due to attractive income opportunities, low default rates and positive technicals,
with the greatest gains in lower-credit-rated issues. Credit quality played a significant role across
all loan asset classes, with lower-rated issues outperforming higher-rated issues by a wide margin.
The
Fund Outperforms Across the Board
The fund benefited from outperformance
relative to the Index across all strategies. Structured credit, which represented one of the fund’s
largest allocation, delivered the strongest absolute and relative returns. Overall gains were bolstered
by strong selection, led by a tilt toward European issues and an emphasis on lower-quality B-rated credits,
which outperformed higher-quality BB-rated credits. A tilt toward European loans further enhanced returns,
which were bolstered as well by strong issue selection, particularly in the health care and technology
sectors. The fund’s global high yield positions also performed relatively well, driven primarily by
favorable selection in health care, services and telecommunications. Among U.S. loans, the fund added
value through selection in the technology and health care sectors, along with underweight exposure to
the lagging broadcasting sector. The overall underweight exposure to energy proved one of the fund’s
few areas of relative weakness.
Positioned to Capture High Current Income
As of August 31, 2023,
we believe the market’s high current income opportunities continue to look very attractive in both
absolute and relative terms. In our opinion, the fund’s asset classes are well positioned in the prevailing
environment of relatively high but steady rates and positive economic growth. Although we anticipate
that markets are likely to remain sensitive to central bank statements and actions, we believe the current
trajectory toward high rates for an extended period supports the fund’s investment strategy of generating
high current income.
Accordingly, the fund continues to pursue its disciplined
investment approach. Structured credit remains a sizeable allocation due to attractive yield opportunities.
The fund also holds overweight exposure to high yield instruments and has increased its exposure to floating-rate
instruments, where we see additional high current-yield prospects.
3
DISCUSSION
OF FUND PERFORMANCE (Unaudited) (continued)
September 15, 2023
1 Total return includes reinvestment of dividends and any capital
gains paid, based upon net asset value per share or market price per share, as applicable. Past performance
is no guarantee of future results. Market price per share, net asset value per share and investment return
fluctuate.
2 Distribution
rate per share is based upon dividends per share paid from net investment income during the period, divided
by the market price per share at the end of the period, adjusted for any capital gain distributions.
3 Source:
FactSet - The ICE BofA Global High Yield Index is a measure of the global high-yield debt market. The
index represents the union of the U.S. high yield, the pan-European high yield and emerging-markets,
hard currency, high yield indices. Investors cannot invest directly in any index.
4 The objective to return at least the fund’s Original NAV
is not an express or implied guarantee obligation of the fund, BNY Mellon Investment Adviser, Inc., Alcentra
NY LLC or any other entity, and an investor may receive less than the Original NAV upon termination of
the fund. There is no assurance the fund will achieve either of its investment objectives and achieving
its investment objectives will depend on a number of factors, including market conditions and the success
of various portfolio strategies and cash flow management techniques. Based on market conditions as of
the date of this report, management anticipates that the likelihood of the fund achieving its objective
of returning its Original NAV upon termination of the fund has decreased substantially since the fund’s
inception.
Bonds are subject generally to interest-rate, credit, liquidity
and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely
related to interest-rate changes and rate increases can cause price declines.
High
yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s
perceived ability to continue making interest payments on a timely basis and to repay principal upon
maturity.
Credit risk is the risk that one or more credit instruments in the fund’s portfolio
will decline in price or fail to pay interest or principal when due because the issuer of the instrument
experiences a decline in its financial status.
Collateralized Loan Obligations (“CLOs”)
and other types of Collateralized Debt Obligations (“CDOs”) are typically privately offered and sold,
and thus are not registered under the securities laws. As a result, investments in CLOs and other types
of CDOs may be characterized by the fund as illiquid securities. In addition to the general risks associated
with credit instruments, CLOs and other types of CDOs carry additional risks, including, but not limited
to: (i) the possibility that distributions from collateral securities will not be adequate to make interest
or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the possibility
that the CLO or CDO is subordinate to other classes; and (iv) the complex structure of the security may
not be fully understood at the time of investment and may produce disputes with the issuer or unexpected
investment results.
The Senior Secured Loans in which the fund invests typically
will be below-investment-grade quality. Although, in contrast to other below-investment-grade instruments,
Senior Secured Loans hold senior positions in the capital structure of a business entity, are secured
with specific collateral and have a claim on the assets and/or stock of the borrower that is senior to
that held by unsecured creditors, subordinated debt holders and stockholders of the borrower, the risks
associated with Senior Secured Loans are similar to the risks of below-investment-grade instruments.
Although the Senior Secured Loans in which the fund invests will be secured by collateral, there can
be no assurance that such collateral can be readily liquidated or that the liquidation of such collateral
would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal.
Additionally, if a borrower under a Senior Secured Loan defaults, becomes insolvent or goes into bankruptcy,
the fund may recover only a fraction of what is owed on the Senior Secured Loan or nothing at all. In
general, the secondary trading market for Senior Secured Loans is not fully developed. Illiquidity and
adverse market conditions may mean that the fund may not be able to sell certain Senior Secured Loans
quickly or at a fair price.
Subordinated Loans generally are subject to similar risks as
those associated with investments in Senior Secured Loans, except that such loans are subordinated in
payment and/or lower in lien priority to first lien holders. Subordinated Loans are subject to the additional
risk that the cash flow of the borrower and collateral securing the loan or debt, if any, may be insufficient
to meet scheduled payments after giving effect to the senior unsecured or senior secured obligations
of the borrower. This risk is generally higher for subordinated, unsecured loans or debt, which are not
backed by a security interest in any specific collateral. Subordinated Loans generally have greater price
volatility than Senior Secured Loans and may be less liquid.
The use of leverage magnifies
the fund’s investment, market and certain other risks. For derivatives with a leverage component, adverse
changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially
greater than the amount invested in the derivative itself.
The fund may, but is not
required to, use derivative instruments. A small investment in derivatives could have a potentially large
impact on the fund’s performance. The use of derivatives involves risks different from, or possibly
greater than, the risks associated with investing directly in the underlying assets.
4
FUND
PERFORMANCE (Unaudited)
Comparison of change
in value of a $10,000 investment in BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc.
with a hypothetical investment of $10,000 in the ICE BofA Global High Yield Index (the “Index”).
† Source:
FactSet.
Past performance is not predictive of future performance.
The above graph compares a hypothetical investment of $10,000 made in BNY Mellon
Alcentra Global Credit Income 2024 Target Term Fund, Inc. on 10/27/2017 to a hypothetical investment
of $10,000 made in the Index on that date. All figures for the fund are based on market price. All dividends
and capital gain distributions are reinvested.
The fund invests primarily in fixed-income
securities and its performance shown in the line graph takes into account fees and expenses.. The Index
is a measure of the global high-yield debt market. The Index represents the union of the U.S. high yield,
the pan-European high yield and emerging-markets, hard currency, high yield indices. Investors cannot
invest directly in any index. Further information relating to fund performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights in this report.
5
FUND
PERFORMANCE (Unaudited) (continued)
| | | | | | |
Average Annual Total Returns as of 8/31/2023 | |
| | Inception Date | 1 Year | 5 Years | From
Inception | |
BNY Mellon Alcentra Global
Credit Income 2024 Target Term Fund, Inc. -Market Price | 10/27/2017 | 12.18% | 4.10% | 2.89% | |
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund,
Inc. -Net Asset Value | 10/27/2017 | 12.61% | 4.20% | 4.17% | |
ICE
BofA Global High Yield Index | 10/31/2017 | 8.58% | 2.26% | 1.95% | |
The performance
data quoted represents past performance, which is no guarantee of future results. Share price and investment
return fluctuate and an investor’s shares may be worth more or less than original cost upon sale of
the shares. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com
for the fund’s most recent month-end returns.
The fund’s performance shown in the graph
and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions
or the sale of fund shares.
6
DISTRIBUTION INFORMATION
The following information regarding the
fund’s distributions is current as of August 31, 2023, the fund’s fiscal year end. The fund’s returns
during the period were sufficient to meet fund distributions.
The fund’s distribution
policy is intended to provide shareholders with stable, but not guaranteed, cash flow, independent of
the amount or timing of income earned or capital gains realized by the fund. The fund intends to distribute
all or substantially all of its net investment income through its regular monthly distribution and to
distribute realized capital gains at least annually. In addition, in any monthly period, in order to
try to maintain a level distribution amount, the fund may pay out more or less than its net investment
income during the period. As a result, distributions sources may include net investment income, realized
gains and return of capital. You should not draw any conclusions about the fund’s investment performance
from the amount of the distribution or from the terms of the level distribution program. A return of
capital is a non-taxable distribution of a portion of a fund’s capital. A return of capital distribution
does not necessarily reflect a fund’s investment performance and should not be confused with “yield”
or “income.”
For the purpose of pursuing its investment objective of returning
at least the Original NAV, the fund intends to retain a limited portion of its net investment income
continuing until the final liquidating distribution. The fund also may retain a portion of its short-term
capital gains and all or a portion of its long-term capital gains. The extent to which the fund retains
income or capital gains, and the cumulative amount so retained, will depend on, among other things, prevailing
market conditions, portfolio turnover and reinvestment and overall performance of the credit instruments
held by the fund. Adjustments to the amounts of income retained and the resulting distribution rate will
take into account, among other factors, the then-current projections of the fund’s net asset value
on the Termination Date in the absence of income retention. The fund anticipates that the possibility
of some credit losses combined with the potential for declines in income over the term of the fund, as
the duration and weighted average maturity of the portfolio shorten, will likely result in successive
reductions in distributions over the approximate seven-year term of the fund. The timing and amounts
of these reductions cannot be predicted.
While the amounts retained would be included
in the final liquidating distribution of the fund, the fund’s distribution rate over the term of the
fund will be lower, and possibly significantly lower, than if the fund distributed substantially all
of its net investment income and gains in each year. To the extent that the market price of Common Shares
over time is influenced by the fund’s distribution rate, the reduction of the fund’s monthly distribution
rate because of the retention of income is expected to negatively impact the market price of the Common
Shares. Any such negative effect on the market price of the Common Shares may not be offset even though
the fund’s net asset value would be higher as a result of retaining income. In the event that the fund
elects to distribute all of its net investment income or gains (if any) in each year, rather than retaining
such income or gains, there is an increased risk to Common Shareholders that the final liquidating distribution
may be less than Original NAV.
The amounts and sources of distributions reported below are
for financial reporting purposes and are not being provided for tax reporting purposes. The actual amounts
and
7
FUND
PERFORMANCE (Unaudited) (continued)
character of the distributions for tax reporting purposes will be reported to
shareholders on Form 1099-DIV, which will be sent to shareholders shortly after calendar year-end. Because
distribution source estimates are updated throughout the current fiscal year based on the fund’s performance,
those estimates may differ from both the tax information reported to you in your fund’s 1099 statement,
as well as the ultimate economic sources of distributions over the life of your investment. The figures
in the table below provide the sources of distributions and may include amounts attributed to realized
gains and/or returns of capital.
| | | | | | | |
Distributions | |
| Current
Month Percentage of Distributions | Fiscal
Year Ended Per Share Amounts |
| Net
Investment Income | Realized
Gains | Return of Capital | Total Distributions | Net
Investment Income | Realized
Gains | Return
of Capital |
BNY
Mellon Alcentra Global Credit Income 2024 Target Term, Fund, Inc. | 100.00% | .00% | .00% | $.56 | $.56 | $.00 | $.00 |
8
SELECTED
INFORMATION
August
31, 2023 (Unaudited)
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Market
Price per share August 31, 2023 | $7.79 | |
Shares
Outstanding August 31, 2023 | 15,000,727 | |
New
York Stock Exchange Ticker Symbol | DCF | |
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MARKET PRICE (NEW YORK
STOCK EXCHANGE) | |
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| Fiscal
Year Ended August 31, 2023 |
| Quarter
Ended November 30, 2022 | Quarter Ended
February 28, 2023 | Quarter
Ended May 31, 2023 | Quarter
Ended August 31, 2023 |
High | $7.61 | $7.99 | $7.92 | $7.80 |
Low | 6.71 | 7.06 | 7.08 | 7.51 |
Close | 7.45 | 7.68 | 7.45 | 7.79 |
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PERCENTAGE GAIN (LOSS) based
on change in Market Price† | |
October
27, 2017 (commencement of operations) through August 31, 2023 | 18.08% |
September 1, 2018 through
August 31, 2023 | 22.24 |
September
1, 2022 through August 31, 2023 | 12.18 |
December
1, 2022 through August 31, 2023 | 10.33 |
March
1, 2023 through August 31, 2023 | 4.89 |
June
1, 2023 through August 31, 2023 | 6.00 |
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NET
ASSET VALUE PER SHARE | |
October 27, 2017 (commencement of operations) | $9.84 |
November
30, 2022 | 7.67 |
February
28, 2023 | 7.90 |
May
31, 2023 | 7.87 |
August
31, 2023 | 8.24 |
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PERCENTAGE
GAIN (LOSS) based on change in Net Asset Value† | |
October
27, 2017 (commencement of operations) through August 31, 2023 | 26.96% |
September 1, 2018 through
August 31, 2023 | 22.84 |
September
1, 2022 through August 31, 2023 | 12.61 |
December
1, 2022 through August 31, 2023 | 13.33 |
March
1, 2023 through August 31, 2023 | 7.84 |
June
1, 2023 through August 31, 2023 | 6.11 |
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† With dividends and capital gains reinvested.
9
STATEMENT
OF INVESTMENTS
August 31, 2023
| | | | | | | | | |
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Description
| Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% | | | | | |
Advertising
- .3% | | | | | |
Clear Channel Outdoor Holdings, Inc., Sr. Scd. Notes | | 5.13 | | 8/15/2027 | | 212,000 | c | 190,079 | |
Outfront Media Capital LLC/Outfront Media Capital Corp., Gtd.
Notes | | 5.00 | | 8/15/2027 | | 160,000 | c | 144,968 | |
| 335,047 | |
Aerospace & Defense - 1.0% | | | | | |
Bombardier, Inc., Sr.
Unscd. Notes | | 7.88 | | 4/15/2027 | | 250,000 | c | 249,621 | |
Rolls-Royce PLC, Gtd. Bonds | | 3.63 | | 10/14/2025 | | 210,000 | c | 197,925 | |
TransDigm, Inc., Gtd. Notes | | 4.88 | | 5/1/2029 | | 191,000 | | 172,032 | |
TransDigm, Inc., Gtd. Notes | | 5.50 | | 11/15/2027 | | 340,000 | | 322,973 | |
TransDigm, Inc., Sr. Scd. Notes | | 6.88 | | 12/15/2030 | | 260,000 | c | 261,999 | |
| 1,204,550 | |
Airlines
- .5% | | | | | |
American Airlines, Inc./Aadvantage Loyalty IP Ltd., Sr. Scd. Notes | | 5.75 | | 4/20/2029 | | 710,000 | c | 679,751 | |
Automobiles & Components
- 2.1% | | | | | |
Clarios Global LP/Clarios US Finance Co., Sr. Scd. Bonds | EUR | 4.38 | | 5/15/2026 | | 550,000 | c | 578,449 | |
Dealer Tire LLC/DT Issuer LLC, Sr. Unscd. Notes | | 8.00 | | 2/1/2028 | | 472,000 | c | 441,071 | |
Ford Motor Co., Sr. Unscd. Notes | | 5.29 | | 12/8/2046 | | 900,000 | | 707,547 | |
Grupo Antolin-Irausa SA, Sr. Scd. Bonds | EUR | 3.50 | | 4/30/2028 | | 360,000 | c | 290,038 | |
IHO Verwaltungs GmbH, Sr. Scd. Bonds | | 6.00 | | 5/15/2027 | | 400,000 | c,d | 381,794 | |
Standard Profil Automotive GmbH, Sr. Scd. Bonds | EUR | 6.25 | | 4/30/2026 | | 294,000 | c | 250,656 | |
| 2,649,555 | |
Banks - 1.1% | | | | | |
Citigroup, Inc., Jr. Sub. Notes | | 3.88 | | 2/18/2026 | | 113,000 | e | 99,162 | |
Freedom Mortgage Corp., Sr. Unscd. Notes | | 8.13 | | 11/15/2024 | | 460,000 | c | 457,903 | |
Freedom Mortgage Corp., Sr. Unscd. Notes | | 8.25 | | 4/15/2025 | | 380,000 | c | 374,871 | |
Societe Generale SA, Jr. Sub. Bonds | | 7.88 | | 12/18/2023 | | 400,000 | c,e | 399,340 | |
| 1,331,276 | |
Building
Materials - 1.0% | | | | | |
Eco Material Technologies, Inc., Sr. Scd. Notes | | 7.88 | | 1/31/2027 | | 381,000 | c | 371,864 | |
PCF GmbH, Sr. Scd. Bonds | EUR | 4.75 | | 4/15/2026 | | 320,000 | c | 271,407 | |
10
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Building
Materials - 1.0% (continued) | | | | | |
Standard Industries, Inc., Sr. Unscd. Notes | | 4.38 | | 7/15/2030 | | 546,000 | c | 468,580 | |
Standard Industries, Inc., Sr. Unscd. Notes | | 4.75 | | 1/15/2028 | | 121,000 | c | 111,563 | |
| 1,223,414 | |
Chemicals
- 2.6% | | | | | |
INEOS Quattro Finance 1 PLC, Sr. Unscd. Notes | EUR | 3.75 | | 7/15/2026 | | 670,000 | c | 646,316 | |
Iris Holdings, Inc., Sr. Unscd. Notes | | 8.75 | | 2/15/2026 | | 389,000 | c,d | 365,175 | |
Italmatch Chemicals SPA, Sr. Scd. Notes | EUR | 10.00 | | 2/6/2028 | | 283,000 | c | 303,227 | |
NOVA Chemicals Corp., Sr. Unscd. Notes | | 4.88 | | 6/1/2024 | | 400,000 | c | 393,827 | |
NOVA Chemicals Corp., Sr. Unscd. Notes | | 5.00 | | 5/1/2025 | | 530,000 | c | 505,100 | |
Olympus Water US Holding Corp., Sr. Scd. Notes | EUR | 9.63 | | 11/15/2028 | | 410,000 | c | 445,892 | |
Olympus Water US Holding Corp., Sr. Scd. Notes | | 9.75 | | 11/15/2028 | | 240,000 | c | 242,058 | |
SCIH Salt Holdings, Inc., Sr. Scd. Notes | | 4.88 | | 5/1/2028 | | 120,000 | c | 108,111 | |
WR Grace Holdings LLC, Sr. Scd. Notes | | 7.38 | | 3/1/2031 | | 110,000 | c | 108,423 | |
WR Grace Holdings LLC, Sr. Unscd. Notes | | 5.63 | | 8/15/2029 | | 90,000 | c | 76,194 | |
| 3,194,323 | |
Collateralized
Loan Obligations Debt - 29.3% | | | | | |
Carlyle Euro DAC CLO, Ser. 2022-5A, Cl. D, (3 Month EURIBOR
+7.63%) | EUR | 11.35 | | 10/25/2035 | | 855,000 | c,f | 891,211 | |
Carlyle Global Market Strategies Euro DAC CLO, Ser. 2014-1A,
Cl. ER, (3 Month EURIBOR +4.93%) | EUR | 8.59 | | 7/15/2031 | | 1,500,000 | c,f | 1,429,692 | |
Carlyle Global Market Strategies Euro DAC CLO, Ser. 2014-1A,
Cl. FR, (3 Month EURIBOR +6.61%) | EUR | 10.27 | | 7/15/2031 | | 3,000,000 | c,f | 2,708,866 | |
Carlyle Global Market Strategies Euro DAC CLO, Ser. 2015-3A,
Cl. ER, (3 Month EURIBOR +6.44%) | EUR | 10.10 | | 7/15/2030 | | 2,000,000 | c,f | 1,712,615 | |
CIFC European Funding II DAC CLO, Ser. 2A, Cl. F, (3 Month
EURIBOR +7.70%) | EUR | 11.36 | | 4/15/2033 | | 1,000,000 | c,f | 958,497 | |
CIFC Funding I Ltd. CLO, Ser. 2018-1A, Cl. E, (3 Month TSFR
+5.26%) | | 10.57 | | 4/18/2031 | | 1,000,000 | c,f | 899,977 | |
CQS US Ltd. CLO, Ser. 2022-2A, Cl. E1, (3 Month TSFR +6.85%) | | 12.18 | | 7/20/2031 | | 2,000,000 | c,f | 1,719,292 | |
11
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Collateralized
Loan Obligations Debt - 29.3% (continued) | | | | | |
Crown Point 9 Ltd. CLO, Ser. 2020-9A, Cl. ER, (3 Month TSFR
+7.02%) | | 12.33 | | 7/14/2034 | | 2,375,000 | c,f | 2,182,445 | |
Dryden 91 Euro DAC CLO, Ser. 2021-91A, Cl. E, (3 Month EURIBOR
+7.06%) | EUR | 10.72 | | 4/18/2035 | | 1,000,000 | c,f | 998,333 | |
Euro-Galaxy IV DAC CLO, Ser. 2015-4A, CI. FRR, (3 Month EURIBOR
+8.88%) | EUR | 12.59 | | 7/30/2034 | | 1,750,000 | c,f | 1,732,552 | |
Fidelity Grand Harbour Designated Activity Co. CLO, Ser. 2022-1A,
Cl. E, (3 Month EURIBOR +7.08%) | EUR | 10.74 | | 10/15/2036 | | 1,750,000 | c,f | 1,833,279 | |
Franklin Park Place I LLC CLO, Ser. 2022-1A, Cl. E, (3 Month
TSFR +7.50%) | | 12.81 | | 4/14/2035 | | 1,000,000 | c,f | 921,742 | |
GoldenTree Loan Management EUR 2 DAC CLO, Ser. 2A, Cl. E,
(3 Month EURIBOR +5.25%) | EUR | 8.96 | | 1/20/2032 | | 1,000,000 | c,f | 960,172 | |
Hayfin Emerald IV DAC CLO, Ser. 4A, Cl. FR, (3 Month EURIBOR
+8.68%) | EUR | 12.34 | | 10/15/2034 | | 740,000 | c,f | 599,724 | |
ICG Euro DAC CLO, Ser. 2021-1A, Cl. F, (3 Month EURIBOR +8.82%) | EUR | 12.48 | | 10/15/2034 | | 1,000,000 | c,f | 936,347 | |
KKR 23 Ltd. CLO, Ser. 23, Cl. E, (3 Month TSFR +6.26%) | | 11.59 | | 10/20/2031 | | 1,000,000 | c,f | 905,587 | |
OZLM Funding II Ltd. CLO, Ser. 2012-2A, Cl. DR2, (3 Month
TSFR +6.16%) | | 11.53 | | 7/30/2031 | | 2,250,000 | c,f | 1,893,987 | |
OZLM VI Ltd. CLO, Ser. 2014-6A, Cl. DS, (3 Month TSFR +6.31%) | | 11.62 | | 4/17/2031 | | 1,000,000 | c,f | 842,080 | |
OZLME III DAC CLO, Ser. 3A, Cl. F, (3 Month EURIBOR +6.45%) | EUR | 10.26 | | 8/24/2030 | | 1,000,000 | c,f | 874,049 | |
St. Paul's V DAC CLO, Ser. 5A, Cl. FR, (3 Month EURIBOR +6.60%) | EUR | 10.42 | | 8/20/2030 | | 4,000,000 | c,f | 3,512,348 | |
TIAA I Ltd. CLO, Ser. 2016-1A, CI. ER, (3 Month TSFR +6.46%) | | 11.79 | | 7/20/2031 | | 2,131,000 | c,f | 1,812,107 | |
Tikehau DAC CLO, Ser. 2015-1A, Cl. FRR, (3 Month EURIBOR +8.75%) | EUR | 12.48 | | 8/4/2034 | | 2,000,000 | c,f | 1,935,340 | |
Trinitas XI Ltd. CLO, Ser. 2019-11A, CI. ER, (3 Month TSFR
+7.53%) | | 12.84 | | 7/15/2034 | | 750,000 | c,f | 635,300 | |
Venture 45 Ltd. CLO, Ser. 2022-45A, CI. D1, (3 Month TSFR
+4.00%) | | 9.33 | | 7/20/2035 | | 1,500,000 | c,f | 1,319,593 | |
Vibrant III Ltd. CLO, Ser. 2015-3A, Cl. DRR, (3 Month TSFR
+6.61%) | | 11.94 | | 10/20/2031 | | 1,000,000 | c,f | 768,874 | |
12
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Collateralized
Loan Obligations Debt - 29.3% (continued) | | | | | |
Wind River Ltd. CLO, Ser. 2016-1KRA, CI. FR2, (3 Month TSFR
+8.16%) | | 13.47 | | 10/15/2034 | | 1,500,000 | c,f | 1,220,014 | |
| 36,204,023 | |
Collateralized Loan Obligations Equity - .0% | | | | | |
Madison Park Funding
X Ltd. CLO, Ser. 2012-10A, Cl. SUB | | 0.00 | | 1/20/2029 | | 3,000,000 | c,g | 180 | |
Commercial & Professional Services - 4.1% | | | | | |
Adtalem
Global Education, Inc., Sr. Scd. Notes | | 5.50 | | 3/1/2028 | | 275,000 | c | 256,547 | |
Albion Financing 1 Sarl/Aggreko Holdings, Inc., Sr. Scd. Notes | | 6.13 | | 10/15/2026 | | 250,000 | c | 236,815 | |
Allied Universal Holdco LLC/Allied Universal Finance Corp./Atlas
Luxco 4 Sarl, Sr. Scd. Bonds, Ser. 144 | GBP | 4.88 | | 6/1/2028 | | 860,000 | c | 868,677 | |
APX Group, Inc., Sr. Scd. Notes | | 6.75 | | 2/15/2027 | | 198,000 | c | 192,650 | |
BCP V Modular Services Finance II PLC, Sr. Scd. Bonds | EUR | 4.75 | | 11/30/2028 | | 420,000 | c | 386,137 | |
CPI CG, Inc., Sr. Scd. Notes | | 8.63 | | 3/15/2026 | | 178,000 | c | 172,820 | |
House of HR Group BV, Sr. Scd. Bonds | EUR | 9.00 | | 11/3/2029 | | 470,000 | c | 504,655 | |
La Financiere Atalian SASU, Gtd. Bonds | EUR | 5.13 | | 5/15/2025 | | 129,000 | | 97,462 | |
La Financiere Atalian SASU, Gtd. Bonds | EUR | 5.13 | | 5/15/2025 | | 129,000 | c | 97,462 | |
Loxam SAS, Sr. Sub. Notes | EUR | 5.75 | | 7/15/2027 | | 370,000 | | 374,116 | |
MPH Acquisition Holdings LLC, Sr. Scd. Notes | | 5.50 | | 9/1/2028 | | 222,000 | c | 188,730 | |
Neptune Bidco US, Inc., Sr. Scd. Notes | | 9.29 | | 4/15/2029 | | 230,000 | c | 214,985 | |
Prime Security Services Borrower LLC/Prime Finance, Inc., Scd.
Notes | | 6.25 | | 1/15/2028 | | 346,000 | c | 329,904 | |
The Hertz Corp., Gtd. Notes | | 4.63 | | 12/1/2026 | | 390,000 | c | 353,453 | |
The Hertz Corp., Gtd. Notes | | 5.00 | | 12/1/2029 | | 87,000 | c | 71,613 | |
Verisure Midholding AB, Gtd. Notes | EUR | 5.25 | | 2/15/2029 | | 740,000 | c | 698,698 | |
| 5,044,724 | |
Consumer
Discretionary - 5.9% | | | | | |
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unscd. Notes | | 4.63 | | 4/1/2030 | | 170,000 | c | 146,586 | |
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unscd. Notes | | 6.63 | | 1/15/2028 | | 80,000 | c | 76,542 | |
13
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Consumer
Discretionary - 5.9% (continued) | | | | | |
Caesars Entertainment, Inc., Sr. Scd. Notes | | 6.25 | | 7/1/2025 | | 157,000 | c | 155,923 | |
Carnival Corp., Gtd. Notes | | 6.00 | | 5/1/2029 | | 583,000 | c | 526,902 | |
Carnival Corp., Gtd. Notes | | 7.63 | | 3/1/2026 | | 608,000 | c | 606,747 | |
CCM Merger, Inc., Sr. Unscd. Notes | | 6.38 | | 5/1/2026 | | 439,000 | c | 427,099 | |
CDI Escrow Issuer, Inc., Sr. Unscd. Notes | | 5.75 | | 4/1/2030 | | 80,000 | c | 74,473 | |
Churchill Downs, Inc., Gtd. Notes | | 4.75 | | 1/15/2028 | | 260,000 | c | 240,025 | |
Everi Holdings, Inc., Gtd. Notes | | 5.00 | | 7/15/2029 | | 271,000 | c | 242,071 | |
Green Bidco SA, Sr. Scd. Bonds | EUR | 10.25 | | 7/15/2028 | | 190,000 | c | 201,824 | |
International Game Technology PLC, Sr. Scd. Notes | | 5.25 | | 1/15/2029 | | 220,000 | c | 207,074 | |
Jacobs Entertainment, Inc., Sr. Unscd. Notes | | 6.75 | | 2/15/2029 | | 168,000 | c | 152,403 | |
KB Home, Gtd. Notes | | 4.00 | | 6/15/2031 | | 324,000 | | 273,223 | |
Las Vegas Sands Corp., Sr. Unscd. Notes | | 3.20 | | 8/8/2024 | | 320,000 | | 310,014 | |
NCL Corp. Ltd., Gtd. Notes | | 5.88 | | 3/15/2026 | | 608,000 | c | 573,839 | |
NCL Corp. Ltd., Sr. Scd. Notes | | 5.88 | | 2/15/2027 | | 214,000 | c | 207,569 | |
NCL Corp. Ltd., Sr. Unscd. Notes | | 3.63 | | 12/15/2024 | | 280,000 | c | 268,227 | |
Ontario Gaming GTA LP, Sr. Scd. Notes | | 8.00 | | 8/1/2030 | | 203,000 | c | 205,389 | |
Pinewood Finance Co. Ltd., Sr. Scd. Bonds | GBP | 3.63 | | 11/15/2027 | | 240,000 | c | 264,842 | |
Raptor Acquisition Corp./Raptor Co-Issuer LLC, Sr. Scd. Notes | | 4.88 | | 11/1/2026 | | 86,000 | c | 81,208 | |
Royal Caribbean Cruises Ltd., Sr. Unscd. Notes | | 5.50 | | 8/31/2026 | | 579,000 | c | 555,329 | |
Scientific Games Holdings LP/Scientific Games US Finco, Inc.,
Sr. Unscd. Notes | | 6.63 | | 3/1/2030 | | 450,000 | c | 397,084 | |
Taylor Morrison Communities, Inc., Sr. Unscd. Notes | | 5.13 | | 8/1/2030 | | 138,000 | c | 126,700 | |
Versuni Group BV, Sr. Scd. Bonds | EUR | 3.13 | | 6/15/2028 | | 450,000 | c | 393,396 | |
Viking Cruises Ltd., Sr. Unscd. Notes | | 9.13 | | 7/15/2031 | | 275,000 | c | 284,360 | |
Windsor Holdings III LLC, Sr. Scd. Notes | | 8.50 | | 6/15/2030 | | 297,000 | c | 298,667 | |
| 7,297,516 | |
Consumer
Staples - .1% | | | | | |
Kronos Acquisition Holdings, Inc./KIK Custom Products, Inc., Sr. Scd. Notes | | 5.00 | | 12/31/2026 | | 200,000 | c | 186,728 | |
Diversified Financials
- 4.8% | | | | | |
Blackstone Secured Lending Fund, Sr. Unscd. Notes | | 2.85 | | 9/30/2028 | | 360,000 | | 297,740 | |
14
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Diversified
Financials - 4.8% (continued) | | | | | |
Encore Capital Group, Inc., Sr. Scd. Bonds | EUR | 4.88 | | 10/15/2025 | | 350,000 | c | 365,387 | |
Encore Capital Group, Inc., Sr. Scd. Notes | GBP | 4.25 | | 6/1/2028 | | 525,000 | c | 516,346 | |
Garfunkelux Holdco 3 SA, Sr. Scd. Bonds | GBP | 7.75 | | 11/1/2025 | | 500,000 | | 503,585 | |
Garfunkelux Holdco 3 SA, Sr. Scd. Bonds | GBP | 7.75 | | 11/1/2025 | | 375,000 | c | 377,688 | |
Home Point Capital, Inc., Gtd. Notes | | 5.00 | | 2/1/2026 | | 665,000 | c | 625,135 | |
Intrum AB, Sr. Unscd. Bonds | EUR | 3.13 | | 7/15/2024 | | 343,933 | c | 357,249 | |
Intrum AB, Sr. Unscd. Notes | EUR | 4.88 | | 8/15/2025 | | 520,000 | c | 492,122 | |
Jane Street Group/JSG Finance, Inc., Sr. Scd. Notes | | 4.50 | | 11/15/2029 | | 80,000 | c | 70,291 | |
Navient Corp., Sr. Unscd. Notes | | 5.00 | | 3/15/2027 | | 235,000 | | 214,044 | |
Navient Corp., Sr. Unscd. Notes | | 5.50 | | 3/15/2029 | | 350,000 | | 299,602 | |
Navient Corp., Sr. Unscd. Notes | | 5.88 | | 10/25/2024 | | 270,000 | | 266,214 | |
NFP Corp., Sr. Unscd. Notes | | 6.88 | | 8/15/2028 | | 215,000 | c | 189,560 | |
OneMain Finance Corp., Gtd. Notes | | 6.63 | | 1/15/2028 | | 209,000 | | 195,648 | |
PennyMac Financial Services, Inc., Gtd. Notes | | 5.38 | | 10/15/2025 | | 688,000 | c | 666,534 | |
PennyMac Financial Services, Inc., Gtd. Notes | | 5.75 | | 9/15/2031 | | 341,000 | c | 286,977 | |
United Wholesale Mortgage LLC, Sr. Unscd. Notes | | 5.75 | | 6/15/2027 | | 210,000 | c | 193,696 | |
| 5,917,818 | |
Electronic Components - .3% | | | | | |
Sensata Technologies,
Inc., Gtd. Notes | | 4.38 | | 2/15/2030 | | 370,000 | c | 327,929 | |
TTM Technologies, Inc., Gtd. Notes | | 4.00 | | 3/1/2029 | | 109,000 | c | 94,790 | |
| 422,719 | |
Energy
- 5.7% | | | | | |
Aethon United BR LP/Aethon United Finance Corp., Sr. Unscd. Notes | | 8.25 | | 2/15/2026 | | 937,000 | c | 942,528 | |
Antero Midstream Partners LP/Antero Midstream Finance Corp.,
Gtd. Notes | | 5.75 | | 3/1/2027 | | 330,000 | c | 320,138 | |
Blue Racer Midstream LLC/Blue Racer Finance Corp., Sr. Unscd.
Notes | | 6.63 | | 7/15/2026 | | 400,000 | c | 393,489 | |
Chesapeake Energy Corp., Gtd. Notes | | 5.88 | | 2/1/2029 | | 131,000 | c | 125,504 | |
Comstock Resources, Inc., Gtd. Notes | | 6.75 | | 3/1/2029 | | 410,000 | c | 383,997 | |
CVR Energy, Inc., Gtd. Bonds | | 5.25 | | 2/15/2025 | | 998,000 | c | 969,004 | |
Energy Transfer LP, Jr. Sub. Debt., Ser. B | | 6.63 | | 2/15/2028 | | 340,000 | e | 274,254 | |
15
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Energy
- 5.7% (continued) | | | | | |
EQM Midstream Partners LP, Sr. Unscd. Notes | | 4.00 | | 8/1/2024 | | 120,000 | | 117,189 | |
EQM Midstream Partners LP, Sr. Unscd. Notes | | 5.50 | | 7/15/2028 | | 239,000 | | 228,571 | |
New Fortress Energy, Inc., Sr. Scd. Notes | | 6.50 | | 9/30/2026 | | 77,000 | c | 71,643 | |
New Fortress Energy, Inc., Sr. Scd. Notes | | 6.75 | | 9/15/2025 | | 805,000 | c | 778,849 | |
Northern Oil & Gas, Inc., Sr. Unscd. Notes | | 8.13 | | 3/1/2028 | | 270,000 | c | 270,894 | |
Rockcliff Energy II LLC, Sr. Unscd. Notes | | 5.50 | | 10/15/2029 | | 668,000 | c | 616,467 | |
Rockies Express Pipeline LLC, Sr. Unscd. Notes | | 4.80 | | 5/15/2030 | | 390,000 | c | 341,358 | |
Venture Global Calcasieu Pass LLC, Sr. Scd. Notes | | 3.88 | | 11/1/2033 | | 553,000 | c | 449,868 | |
Venture Global Calcasieu Pass LLC, Sr. Scd. Notes | | 4.13 | | 8/15/2031 | | 160,000 | c | 135,883 | |
Venture Global LNG, Inc., Sr. Scd. Notes | | 8.13 | | 6/1/2028 | | 459,000 | c | 463,427 | |
Western Midstream Operating LP, Sr. Unscd. Notes | | 4.05 | | 2/1/2030 | | 250,000 | | 223,263 | |
| 7,106,326 | |
Environmental Control
- .5% | | | | | |
Covanta Holding Corp., Gtd. Notes | | 4.88 | | 12/1/2029 | | 312,000 | c | 268,624 | |
Covanta Holding Corp., Gtd. Notes | | 5.00 | | 9/1/2030 | | 155,000 | | 131,638 | |
Waste Pro USA, Inc., Sr. Unscd. Notes | | 5.50 | | 2/15/2026 | | 230,000 | c | 217,032 | |
| 617,294 | |
Food
Products - .4% | | | | | |
Boparan Finance PLC, Sr. Scd. Bonds | GBP | 7.63 | | 11/30/2025 | | 346,000 | c | 298,929 | |
Post Holdings, Inc., Gtd. Notes | | 4.63 | | 4/15/2030 | | 195,000 | c | 172,942 | |
| 471,871 | |
Health
Care - 4.0% | | | | | |
Bausch Health Cos., Inc., Sr. Scd. Notes | | 11.00 | | 9/30/2028 | | 370,000 | c | 265,082 | |
CHEPLAPHARM Arzneimittel GmbH, Sr. Scd. Notes | | 5.50 | | 1/15/2028 | | 235,000 | c | 213,025 | |
CHS/Community Health Systems, Inc., Sr. Scd. Notes | | 5.25 | | 5/15/2030 | | 364,000 | c | 287,388 | |
CHS/Community Health Systems, Inc., Sr. Scd. Notes | | 5.63 | | 3/15/2027 | | 990,000 | c | 872,239 | |
Cidron Aida Finco Sarl, Sr. Scd. Bonds | GBP | 6.25 | | 4/1/2028 | | 273,000 | c | 304,630 | |
HealthEquity, Inc., Gtd. Notes | | 4.50 | | 10/1/2029 | | 298,000 | c | 264,631 | |
Jazz Securities DAC, Sr. Scd. Notes | | 4.38 | | 1/15/2029 | | 280,000 | c | 251,140 | |
16
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Health
Care - 4.0% (continued) | | | | | |
LifePoint Health, Inc., Sr. Scd. Notes | | 9.88 | | 8/15/2030 | | 336,000 | c | 332,220 | |
Medline Borrower LP, Sr. Scd. Notes | | 3.88 | | 4/1/2029 | | 107,000 | c | 93,510 | |
Medline Borrower LP, Sr. Unscd. Notes | | 5.25 | | 10/1/2029 | | 964,000 | c | 857,011 | |
Option Care Health, Inc., Gtd. Notes | | 4.38 | | 10/31/2029 | | 434,000 | c | 382,226 | |
Tenet Healthcare Corp., Gtd. Notes | | 6.13 | | 10/1/2028 | | 400,000 | | 385,638 | |
Tenet Healthcare Corp., Sr. Scd. Notes | | 4.25 | | 6/1/2029 | | 470,000 | | 420,077 | |
| 4,928,817 | |
Industrial
- .5% | | | | | |
Artera Services LLC, Sr. Scd. Notes | | 9.03 | | 12/4/2025 | | 220,000 | c | 204,909 | |
Dycom Industries, Inc., Gtd. Notes | | 4.50 | | 4/15/2029 | | 149,000 | c | 133,178 | |
Xerox Holdings Corp., Gtd. Notes | | 5.50 | | 8/15/2028 | | 310,000 | c | 270,040 | |
| 608,127 | |
Information
Technology - 1.7% | | | | | |
AthenaHealth Group, Inc., Sr. Unscd. Notes | | 6.50 | | 2/15/2030 | | 819,000 | c | 712,039 | |
Black Knight InfoServ LLC, Gtd. Notes | | 3.63 | | 9/1/2028 | | 460,000 | c | 426,599 | |
Central Parent, Inc./CDK Global, Inc., Sr. Scd. Notes | | 7.25 | | 6/15/2029 | | 420,000 | c | 414,669 | |
Cloud Software Group, Inc., Sr. Scd. Notes | | 6.50 | | 3/31/2029 | | 170,000 | c | 152,210 | |
Elastic NV, Sr. Unscd. Notes | | 4.13 | | 7/15/2029 | | 235,000 | c | 202,230 | |
SS&C Technologies, Inc., Gtd. Notes | | 5.50 | | 9/30/2027 | | 260,000 | c | 250,536 | |
| 2,158,283 | |
Insurance
- 1.3% | | | | | |
Acrisure LLC/Acrisure Finance, Inc., Sr. Scd. Notes | | 4.25 | | 2/15/2029 | | 610,000 | c | 528,121 | |
Acrisure LLC/Acrisure Finance, Inc., Sr. Unscd. Notes | | 7.00 | | 11/15/2025 | | 510,000 | c | 493,397 | |
Alliant Holdings Intermediate LLC/Alliant Holdings Co-Issuer,
Sr. Scd. Notes | | 6.75 | | 4/15/2028 | | 300,000 | c | 295,843 | |
AssuredPartners, Inc., Sr. Unscd. Notes | | 5.63 | | 1/15/2029 | | 165,000 | c | 143,535 | |
Global Atlantic Financial Co., Gtd. Notes | | 3.13 | | 6/15/2031 | | 260,000 | c | 192,998 | |
| 1,653,894 | |
Internet
Software & Services - 1.1% | | | | | |
Arches Buyer, Inc., Sr. Scd. Notes | | 4.25 | | 6/1/2028 | | 149,000 | c | 129,783 | |
United Group BV, Sr. Scd. Bonds | EUR | 3.13 | | 2/15/2026 | | 1,180,000 | c | 1,174,321 | |
| 1,304,104 | |
Materials
- 3.1% | | | | | |
ARD Finance SA, Sr. Scd. Notes | | 6.50 | | 6/30/2027 | | 400,000 | c,d | 321,941 | |
17
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Materials
- 3.1% (continued) | | | | | |
Ardagh Metal Packaging Finance USA LLC/Ardagh Metal Packaging
Finance PLC, Sr. Scd. Notes | | 3.25 | | 9/1/2028 | | 200,000 | c | 170,265 | |
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc., Gtd.
Notes | GBP | 4.75 | | 7/15/2027 | | 380,000 | c | 381,561 | |
Clydesdale Acquisition Holdings, Inc., Gtd. Notes | | 8.75 | | 4/15/2030 | | 578,000 | c | 523,273 | |
Clydesdale Acquisition Holdings, Inc., Sr. Scd. Notes | | 6.63 | | 4/15/2029 | | 120,000 | c | 114,294 | |
Kleopatra Finco Sarl, Sr. Scd. Bonds | EUR | 4.25 | | 3/1/2026 | | 400,000 | c | 363,145 | |
LABL, Inc., Sr. Scd. Notes | | 9.50 | | 11/1/2028 | | 158,000 | c | 162,822 | |
LABL, Inc., Sr. Unscd. Notes | | 10.50 | | 7/15/2027 | | 396,000 | c | 379,459 | |
Mauser Packaging Solutions Holding Co., Scd. Notes | | 9.25 | | 4/15/2027 | | 169,000 | c | 153,282 | |
Mauser Packaging Solutions Holding Co., Sr. Scd. Notes | | 7.88 | | 8/15/2026 | | 367,000 | c | 361,732 | |
Pactiv Evergreen Group Issuer, Inc./Pactiv Evergreen Group
Issuer LLC, Sr. Scd. Notes | | 4.00 | | 10/15/2027 | | 280,000 | c | 252,090 | |
Trivium Packaging Finance BV, Gtd. Notes | | 8.50 | | 8/15/2027 | | 200,000 | c | 190,821 | |
Trivium Packaging Finance BV, Sr. Scd. Notes | | 5.50 | | 8/15/2026 | | 420,000 | c | 396,608 | |
| 3,771,293 | |
Media
- 5.4% | | | | | |
Altice Financing SA, Sr. Scd. Bonds | | 5.75 | | 8/15/2029 | | 410,000 | c | 325,155 | |
Altice Finco SA, Scd. Notes | EUR | 4.75 | | 1/15/2028 | | 860,000 | c | 613,617 | |
CCO Holdings LLC/CCO Holdings Capital Corp., Sr. Unscd. Notes | | 4.50 | | 5/1/2032 | | 213,000 | | 172,873 | |
CCO Holdings LLC/CCO
Holdings Capital Corp., Sr. Unscd. Notes | | 4.75 | | 3/1/2030 | | 438,000 | c | 376,983 | |
CCO Holdings LLC/CCO Holdings Capital Corp., Sr. Unscd. Notes | | 5.13 | | 5/1/2027 | | 420,000 | c | 395,218 | |
CSC Holdings LLC, Gtd. Notes | | 5.38 | | 2/1/2028 | | 220,000 | c | 180,573 | |
CSC Holdings LLC, Gtd. Notes | | 5.50 | | 4/15/2027 | | 380,000 | c | 328,445 | |
CSC Holdings LLC, Sr. Unscd. Bonds | | 5.25 | | 6/1/2024 | | 600,000 | | 569,716 | |
CSC Holdings LLC, Sr. Unscd. Notes | | 5.75 | | 1/15/2030 | | 200,000 | c | 110,815 | |
DIRECTV Financing LLC/DIRECTV Financing Co-Obligor, Inc., Sr.
Scd. Notes | | 5.88 | | 8/15/2027 | | 250,000 | c | 221,780 | |
DISH DBS Corp., Gtd. Notes | | 7.75 | | 7/1/2026 | | 156,000 | | 116,821 | |
DISH Network Corp., Sr. Scd. Notes | | 11.75 | | 11/15/2027 | | 868,000 | c | 881,490 | |
Gray Television, Inc., Gtd. Notes | | 5.88 | | 7/15/2026 | | 225,000 | c | 206,076 | |
Gray Television, Inc., Gtd. Notes | | 7.00 | | 5/15/2027 | | 217,000 | c | 194,998 | |
18
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Media
- 5.4% (continued) | | | | | |
iHeartCommunications, Inc., Sr. Scd. Notes | | 6.38 | | 5/1/2026 | | 625,000 | | 545,947 | |
Scripps Escrow II, Inc., Sr. Scd. Notes | | 3.88 | | 1/15/2029 | | 140,000 | c | 112,550 | |
Scripps Escrow, Inc., Gtd. Notes | | 5.88 | | 7/15/2027 | | 160,000 | c | 129,438 | |
Summer BidCo BV, Sr. Unscd. Bonds | EUR | 9.00 | | 11/15/2025 | | 750,032 | c,d | 772,994 | |
Virgin Media Secured Finance PLC, Sr. Scd. Bonds | GBP | 5.00 | | 4/15/2027 | | 100,000 | c | 115,788 | |
Ziggo Bond Co. BV, Gtd. Notes | | 5.13 | | 2/28/2030 | | 330,000 | c | 256,458 | |
| 6,627,735 | |
Metals
& Mining - 1.2% | | | | | |
FMG Resources August 2006 Pty Ltd., Gtd. Notes | | 4.38 | | 4/1/2031 | | 390,000 | c | 327,148 | |
Novelis Corp., Gtd. Notes | | 3.25 | | 11/15/2026 | | 400,000 | c | 362,883 | |
Taseko Mines Ltd., Sr. Scd. Notes | | 7.00 | | 2/15/2026 | | 816,000 | c | 753,389 | |
| 1,443,420 | |
Real
Estate - 2.5% | | | | | |
Diversified Healthcare Trust, Gtd. Notes | | 4.38 | | 3/1/2031 | | 114,000 | | 86,117 | |
Diversified Healthcare Trust, Gtd. Notes | | 9.75 | | 6/15/2025 | | 132,000 | | 129,946 | |
Diversified Healthcare Trust, Sr. Unscd. Notes | | 4.75 | | 2/15/2028 | | 114,000 | | 87,196 | |
Diversified Healthcare
Trust, Sr. Unscd. Notes | | 4.75 | | 5/1/2024 | | 230,000 | | 218,585 | |
Greystar Real Estate
Partners LLC, Sr. Scd. Notes | | 7.75 | | 9/1/2030 | | 200,000 | c | 202,250 | |
Ladder Capital Finance Holdings LLLP/Ladder Capital Finance
Corp., Gtd. Notes | | 5.25 | | 10/1/2025 | | 710,000 | c | 682,881 | |
Park Intermediate Holdings LLC/PK Domestic Property LLC/PK
Finance Co-Issuer, Sr. Scd. Notes | | 4.88 | | 5/15/2029 | | 390,000 | c | 338,676 | |
Rithm Capital Corp., Sr. Unscd. Notes | | 6.25 | | 10/15/2025 | | 740,000 | c | 698,245 | |
RLJ Lodging Trust LP, Sr. Scd. Notes | | 4.00 | | 9/15/2029 | | 380,000 | c | 318,130 | |
Starwood Property Trust, Inc., Sr. Unscd. Notes | | 3.75 | | 12/31/2024 | | 320,000 | c | 308,010 | |
| 3,070,036 | |
Retailing - 3.7% | | | | | |
1011778 BC ULC/New
Red Finance, Inc., Sr. Scd. Notes | | 3.88 | | 1/15/2028 | | 353,000 | c | 321,394 | |
Beacon Roofing Supply, Inc., Sr. Scd. Notes | | 4.50 | | 11/15/2026 | | 200,000 | c | 188,376 | |
eG Global Finance PLC, Sr. Scd. Notes | EUR | 4.38 | | 2/7/2025 | | 342,167 | c | 360,689 | |
Foundation Building Materials, Inc., Gtd. Notes | | 6.00 | | 3/1/2029 | | 310,000 | c | 262,622 | |
19
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Retailing
- 3.7% (continued) | | | | | |
Kohl's Corp., Sr. Unscd. Notes | | 4.25 | | 7/17/2025 | | 400,000 | | 376,576 | |
Kohl's Corp., Sr. Unscd. Notes | | 4.63 | | 5/1/2031 | | 139,000 | | 102,464 | |
Macy's Retail Holdings LLC, Gtd. Notes | | 4.50 | | 12/15/2034 | | 135,000 | | 96,385 | |
Macy's Retail Holdings LLC, Gtd. Notes | | 5.88 | | 4/1/2029 | | 190,000 | c | 171,927 | |
PetSmart, Inc./PetSmart Finance Corp., Gtd. Notes | | 7.75 | | 2/15/2029 | | 500,000 | c | 477,956 | |
QVC, Inc., Sr. Scd. Notes | | 4.85 | | 4/1/2024 | | 580,000 | | 564,055 | |
Shiba Bidco SPA, Sr. Scd. Bonds | EUR | 4.50 | | 10/31/2028 | | 291,000 | c | 285,648 | |
SRS Distribution, Inc., Gtd. Notes | | 6.00 | | 12/1/2029 | | 288,000 | c | 246,548 | |
SRS Distribution, Inc., Sr. Scd. Notes | | 4.63 | | 7/1/2028 | | 73,000 | c | 65,047 | |
Staples, Inc., Sr. Scd. Notes | | 7.50 | | 4/15/2026 | | 225,000 | c | 186,380 | |
The Very Group Funding PLC, Sr. Scd. Bonds | GBP | 6.50 | | 8/1/2026 | | 358,000 | c | 361,678 | |
White Cap Buyer LLC, Sr. Unscd. Notes | | 6.88 | | 10/15/2028 | | 398,000 | c | 365,613 | |
Yum! Brands, Inc., Sr. Unscd. Notes | | 5.38 | | 4/1/2032 | | 175,000 | | 164,395 | |
| 4,597,753 | |
Technology
Hardware & Equipment - .2% | | | | | |
Western Digital Corp., Gtd. Notes | | 4.75 | | 2/15/2026 | | 261,000 | | 249,100 | |
Telecommunication Services - 4.5% | | | | | |
Altice France Holding
SA, Sr. Scd. Notes | EUR | 8.00 | | 5/15/2027 | | 550,000 | c | 290,160 | |
Altice France Holding SA, Sr. Scd. Notes | | 10.50 | | 5/15/2027 | | 1,059,000 | c | 575,572 | |
Altice France SA, Sr. Scd. Notes | | 5.50 | | 1/15/2028 | | 600,000 | c | 450,178 | |
Altice France SA, Sr. Scd. Notes | | 5.50 | | 10/15/2029 | | 200,000 | c | 144,644 | |
C&W Senior Financing DAC, Sr. Unscd. Notes | | 6.88 | | 9/15/2027 | | 200,000 | c | 185,808 | |
Connect Finco Sarl/Connect US Finco LLC, Sr. Scd. Notes | | 6.75 | | 10/1/2026 | | 315,000 | c | 299,145 | |
Eolo SPA, Sr. Scd. Bonds | EUR | 4.88 | | 10/21/2028 | | 240,000 | c | 188,348 | |
Frontier Communications Holdings LLC, Scd. Notes | | 6.75 | | 5/1/2029 | | 170,000 | c | 132,117 | |
Frontier Communications Holdings LLC, Sr. Scd. Notes | | 8.75 | | 5/15/2030 | | 171,000 | c | 166,369 | |
Iliad Holding SASU, Sr. Scd. Notes | | 6.50 | | 10/15/2026 | | 820,000 | c | 783,170 | |
Level 3 Financing, Inc., Sr. Scd. Notes | | 10.50 | | 5/15/2030 | | 298,000 | c | 302,974 | |
Lorca Telecom Bondco SA, Sr. Scd. Bonds | EUR | 4.00 | | 9/18/2027 | | 450,000 | c | 453,191 | |
Lumen Technologies, Inc., Sr. Scd. Notes | | 4.00 | | 2/15/2027 | | 214,000 | c | 135,069 | |
TalkTalk Telecom Group Ltd., Gtd. Notes | GBP | 3.88 | | 2/20/2025 | | 290,000 | | 306,296 | |
20
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | a,b | Value
($) | |
Bonds
and Notes - 91.3% (continued) | | | | | |
Telecommunication
Services - 4.5% (continued) | | | | | |
Telesat Canada/Telesat LLC, Sr. Scd. Notes | | 5.63 | | 12/6/2026 | | 287,000 | c | 202,794 | |
ViaSat, Inc., Sr. Unscd. Notes | | 5.63 | | 9/15/2025 | | 800,000 | c | 757,752 | |
Zayo Group Holdings, Inc., Sr. Scd. Notes | | 4.00 | | 3/1/2027 | | 232,000 | c | 174,078 | |
| 5,547,665 | |
Utilities
- 2.4% | | | | | |
Calpine Corp., Sr. Unscd. Notes | | 4.63 | | 2/1/2029 | | 155,000 | c | 134,865 | |
Calpine Corp., Sr. Unscd. Notes | | 5.00 | | 2/1/2031 | | 1,060,000 | c | 897,877 | |
NRG Energy, Inc., Gtd. Notes | | 5.25 | | 6/15/2029 | | 340,000 | c | 306,352 | |
NRG Energy, Inc., Jr. Sub. Bonds | | 10.25 | | 3/15/2028 | | 300,000 | c,e | 294,962 | |
PG&E Corp., Sr. Scd. Notes | | 5.00 | | 7/1/2028 | | 418,000 | | 384,908 | |
Pike Corp., Gtd. Notes | | 5.50 | | 9/1/2028 | | 185,000 | c | 166,676 | |
Solaris Midstream Holdings LLC, Gtd. Notes | | 7.63 | | 4/1/2026 | | 575,000 | c | 565,689 | |
Vistra Corp., Jr. Sub. Notes | | 7.00 | | 12/15/2026 | | 272,000 | c,e | 252,008 | |
| 3,003,337 | |
Total Bonds
and Notes (cost $119,955,528) | | 112,850,679 | |
| | | | | | | | |
Floating Rate Loan Interests - 42.6% | | | | | |
Advertising - .3% | | | | | |
CB Poly US Holdings,
Inc., Initial Term Loan, (1 Month TSFR +5.50%) | | 10.83 | | 5/20/2029 | | 131,479 | f | 125,464 | |
Clear Channel Outdoor Holdings, Term Loan B, (1-3 Month TSFR
+3.50%) | | 9.04 | | 8/23/2026 | | 174,395 | f | 170,980 | |
Dotdash Meredith, Inc., Term Loan B, (1 Month TSFR +4.00%) | | 9.42 | | 12/1/2028 | | 120,000 | f | 115,950 | |
| 412,394 | |
Automobiles & Components - .3% | | | | | |
Burgess Point Purchaser,
Initial Term Loan, (1 Month TSFR +5.35%) | | 10.68 | | 7/25/2029 | | 123,022 | f | 117,365 | |
First Brands Group LLC, 2022 Incremental Term Loan, (3 Month
TSFR +5.00%) | | 10.88 | | 3/30/2027 | | 195,556 | f | 193,234 | |
Truck Hero, Inc., Initial Term Loan, (1 Month TSFR +3.75%) | | 9.18 | | 2/24/2028 | | 50,935 | f | 49,492 | |
| 360,091 | |
Building Materials - 1.3% | | | | | |
Cornerstone Building,
New Term Loan B, (1 Month TSFR +3.35%) | | 8.66 | | 4/12/2028 | | 430,290 | f | 421,282 | |
21
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Building Materials -
1.3% (continued) | | | | | |
LSF10 XL Bidco SCA, Facility Term Loan B-4, (3 Month EURIBOR
+3.93%) | EUR | 7.52 | | 4/9/2028 | | 1,280,206 | f | 1,169,551 | |
| 1,590,833 | |
Commercial & Professional Services - 8.2% | | | | | |
Albion
Financing 3 Sarl, 2023 & 2026 Term Loan, (3 Month EURIBOR +5.25%) | EUR | 8.95 | | 8/17/2026 | | 1,000,000 | f | 1,094,684 | |
American Auto Auction, First Lien Tranche Term Loan B, (3
Month TSFR +5.00%) | | 10.24 | | 12/30/2027 | | 361,150 | f | 343,092 | |
CIBT Global, Inc., First Lien Term Loan, (3 Month TSFR +1.26%
& 3 Month LIBOR +1.26%) | | 6.46 | | 6/1/2024 | | 1,077,542 | f | 767,210 | |
CoreLogic, Inc., First Lien Initial Term Loan, (1 Month TSFR
+3.61%) | | 8.95 | | 6/2/2028 | | 255,000 | f | 238,471 | |
Electro Rent Corp., Extended Term Loan, (3 Month TSFR +5.50%) | | 10.83 | | 11/1/2024 | | 215,736 | f | 208,455 | |
Element Material Technology, Delayed Draw Term Loan B, (3
Month TSFR +4.35%) | | 9.59 | | 6/24/2029 | | 72,401 | f,h | 71,134 | |
Element Material Technology, USD Initial Term Loan B, (3 Month
TSFR +4.35%) | | 9.59 | | 6/24/2029 | | 156,868 | f | 154,122 | |
Galaxy US Opco, Inc., Initial Term Loan, (1 Month TSFR +4.75%) | | 10.08 | | 5/2/2029 | | 89,298 | f | 85,057 | |
Indigocyan Holdco 3 Ltd., Facility Term Loan B, (3 Month SONIA
5D +4.87%) | GBP | 10.06 | | 12/31/2024 | | 2,000,000 | f | 2,512,229 | |
Indy US Bidco LLC, 2021 Refinancing Term Loan, (1 Month EURIBOR
+3.75%) | EUR | 7.38 | | 3/5/2028 | | 997,462 | f | 1,019,795 | |
Indy US Holdco LLC, Fifth Amendment Incremental Term Loan,
(1 Month TSFR +6.25%) | | 11.57 | | 3/5/2028 | | 305,000 | f | 298,900 | |
KUEHG Corp., Term Loan, (3 Month TSFR +5.00%) | | 10.24 | | 6/12/2030 | | 270,000 | f | 270,819 | |
Minerva Bidco Ltd., Term Loan B, (3 Month SONIA 5D +4.62%) | GBP | 9.83 | | 7/31/2025 | | 1,000,000 | f | 1,254,132 | |
Modulaire Group Holdings, Facility Term Loan B, (3 Month EURIBOR
+4.43%) | EUR | 8.02 | | 12/31/2028 | | 1,000,000 | f | 1,019,593 | |
Neptune Bidco US, Inc., Dollar Term Loan B, (3 Month TSFR
+5.10%) | | 10.40 | | 4/11/2029 | | 491,956 | f | 449,729 | |
RLG Holdings LLC, First Lien Closing Date Initial Term Loan,
(1 Month TSFR +4.25%) | | 9.70 | | 7/8/2028 | | 214,952 | f | 207,966 | |
22
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Commercial & Professional
Services - 8.2% (continued) | | | | | |
Signal Parent, Inc., Initial Term Loan, (1 Month TSFR +3.60%) | | 8.92 | | 4/1/2028 | | 225,963 | f | 191,051 | |
| 10,186,439 | |
Consumer Discretionary - 3.0% | | | | | |
Ammega Group BV, 2023
Facility Term Loan B-2, (2 Month EURIBOR +5.00%) | EUR | 8.60 | | 12/1/2028 | | 1,150,000 | f | 1,235,050 | |
Crown Finance US, Inc., Initial Term Loan, (1 Month TSFR +8.50%) | | 14.38 | | 7/31/2028 | | 127,500 | d,f | 128,635 | |
ECL Entertainment LLC, Term Loan B, (1 Month TSFR +4.75%) | | 5.50 | | 8/16/2030 | | 101,333 | f | 101,903 | |
J&J Ventures Gaming LLC, Delayed Draw Term Loan, (1 Month
TSFR +4.25%) | | 5.00 | | 4/26/2028 | | 60,714 | f | 58,893 | |
J&J Ventures Gaming LLC, Delayed Term Loan, (1 Month TSFR
+4.25%) | | 5.00 | | 4/26/2028 | | 109,286 | f | 106,007 | |
Recess Holdings, Inc., New Term Loan, (1 Month TSFR +4.00%) | | 5.00 | | 3/24/2027 | | 304,865 | f | 305,246 | |
Scientific Games Holdings, Term Loan B-2, (3 Month TSFR +3.50%) | | 8.77 | | 4/4/2029 | | 283,374 | f | 282,356 | |
Stage Entertainment BV, Facility Term Loan B-2, (3 Month EURIBOR
+3.25%) | EUR | 7.02 | | 5/2/2026 | | 1,000,000 | f | 1,069,440 | |
Tecta America Corp., First Lien Initial Term Loan, (1 Month
TSFR +4.00%) | | 9.45 | | 4/10/2028 | | 438,104 | f | 438,652 | |
| 3,726,182 | |
Consumer Staples - .6% | | | | | |
Hunter Douglas, Inc.,
Tranche Term Loan B-1, (3 Month TSFR +3.50%) | | 8.89 | | 2/25/2029 | | 343,668 | f | 334,864 | |
Kronos Acquisition Holdings, Inc., Tranche Term Loan B-1,
(3 Month TSFR +4.01%) | | 9.25 | | 12/22/2026 | | 445,166 | f | 440,715 | |
| 775,579 | |
Diversified Financials - .9% | | | | | |
BHN Merger Sub, Inc.,
Second Lien Term Loan, (1 Month TSFR +7.10%) | | 12.41 | | 6/15/2026 | | 175,000 | f | 171,364 | |
Edelman Financial Center, 2021 Refinancing Term Loan, (1 Month
TSFR +3.61%) | | 8.95 | | 4/7/2028 | | 328,325 | f | 325,060 | |
Hudson River Trading LLC, Term Loan, (3 Month TSFR +3.26%) | | 8.63 | | 3/18/2028 | | 268,626 | f | 265,699 | |
23
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Diversified Financials
- .9% (continued) | | | | | |
Russell Investments US, 2025 New Term Loan, (1 Month TSFR
+3.60%) | | 8.58 | | 5/30/2025 | | 424,333 | f | 393,781 | |
| 1,155,904 | |
Electronic Components - 1.1% | | | | | |
ADB Safegate BVBA,
Facility Term Loan B, (3 Month EURIBOR +4.75%) | EUR | 7.53 | | 10/2/2024 | | 1,000,000 | f | 1,004,108 | |
Roper Industrial Product, Initial Dollar Term Loan, (3 Month
TSFR +4.50%) | | 9.74 | | 11/22/2029 | | 355,384 | f | 356,299 | |
| 1,360,407 | |
Energy - .8% | | | | | |
Freeport LNG Investments, Initial Term Loan B, (3 Month TSFR
+3.50%) | | 9.09 | | 12/21/2028 | | 492,647 | f | 488,984 | |
Gulf Finance LLC, Term Loan, (1-6 Month TSFR +7.02%) | | 12.40 | | 8/25/2026 | | 465,485 | f | 467,396 | |
| 956,380 | |
Financials - .1% | | | | | |
Jump Financial LLC,
Term Loan, (3 Month TSFR +4.76%) | | 10.00 | | 8/6/2028 | | 159,190 | f | 152,822 | |
Food Products - 1.6% | | | | | |
Biscuit Holding SASU,
Facility Term Loan B, (6 Month EURIBOR +4.00%) | EUR | 7.27 | | 2/14/2027 | | 1,000,000 | f | 922,532 | |
ZF Invest SAS, Term Loan B, (3 Month EURIBOR +3.73%) | EUR | 7.39 | | 7/12/2028 | | 1,000,000 | f | 1,047,135 | |
| 1,969,667 | |
Food Service - .8% | | | | | |
Telfer Investments
SL, Facility Term Loan B-1, (6 Month EURIBOR +4.75%) | EUR | 8.49 | | 7/1/2026 | | 1,000,000 | f | 1,044,424 | |
Health Care - 9.1% | | | | | |
Aenova
Holding GmbH, Facility Term Loan B-2, (3 Month EURIBOR +4.50%) | EUR | 8.21 | | 3/31/2026 | | 1,000,000 | f | 1,083,895 | |
Auris Luxembourg III SA, Facility Term Loan B-1, (6 Month
EURIBOR +4.00%) | EUR | 7.78 | | 2/21/2026 | | 1,000,000 | f | 1,056,650 | |
Auris Luxembourg III SA, Facility Term Loan B-2, (3-6 Month
LIBOR +3.75%) | | 9.11 | | 2/21/2026 | | 997,396 | f | 965,978 | |
Chrome Bidco SASU, Facility Term Loan B, (1 Month EURIBOR
+3.70%) | EUR | 7.33 | | 6/1/2028 | | 1,000,000 | f | 1,069,695 | |
24
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Health Care - 9.1% (continued) | | | | | |
eResearchTechnology,
Inc., First Lien Initial Term Loan, (1 Month TSFR +4.61%) | | 9.95 | | 2/4/2027 | | 343,717 | f | 336,842 | |
Financiere Verdi I SASU, Facility Term Loan B, (3 Month SONIA
5D +4.50%) | GBP | 9.74 | | 4/15/2028 | | 1,000,000 | f | 1,086,959 | |
Gainwell Acquisition Corp., Term Loan B, (3 Month TSFR +4.10%) | | 9.34 | | 10/1/2027 | | 558,429 | f | 550,751 | |
HomeVi, Senior Facility Term Loan B-1, (3 Month EURIBOR +3.25%) | EUR | 6.96 | | 10/31/2026 | | 1,000,000 | f | 997,754 | |
Inovie SASU, Senior Facility Term Loan B, (3 Month EURIBOR
+4.00%) | EUR | 7.60 | | 3/3/2028 | | 2,000,000 | f | 2,097,946 | |
LifePoint Health, Inc., First Lien Term Loan B, (3 Month TSFR
+4.01%) | | 9.38 | | 11/16/2025 | | 237,188 | f | 235,617 | |
PetVet Care Centers LLC, First Lien Initial Term Loan, (1
Month TSFR +2.75%) | | 8.18 | | 2/14/2025 | | 161,883 | f | 160,500 | |
Sirona BidCo SASU, Facility Term Loan B, (3 Month EURIBOR
+4.00%) | EUR | 7.52 | | 12/16/2028 | | 1,000,000 | f | 1,067,700 | |
WCG Purchaser Corp., First Lien Initial Term Loan, (1 Month
TSFR +4.11%) | | 9.43 | | 1/8/2027 | | 477,280 | f | 473,700 | |
| 11,183,987 | |
Industrial - 1.4% | | | | | |
KP Germany Erste GmbH,
Facility Term Loan B, (6 Month EURIBOR +4.73%) | EUR | 8.67 | | 2/9/2026 | | 1,000,000 | f | 1,004,260 | |
LSF12 Badger Bidco LLC, Term Loan B, (1 Month TSFR +6.00%) | | 6.00 | | 7/25/2030 | | 150,000 | f | 148,875 | |
Powerteam Services LLC, First Lien Initial Term Loan, (3 Month
TSFR +3.25%) | | 8.59 | | 3/6/2025 | | 130,000 | f | 121,672 | |
Revere Power LLC, Term Loan B, (1 Month TSFR +4.25%) | | 6.58 | | 3/29/2026 | | 143,690 | f | 121,537 | |
Revere Power LLC, Term Loan C, (1 Month TSFR +4.25%) | | 6.58 | | 3/29/2026 | | 12,584 | f | 10,644 | |
VAC Germany Holding GmbH, Term Loan B, (6 Month LIBOR +4.00%) | | 9.73 | | 3/8/2025 | | 331,865 | f | 325,228 | |
| 1,732,216 | |
Information Technology - 3.9% | | | | | |
Ascend Learning LLC,
Initial Term Loan, (1 Month TSFR +3.60%) | | 8.93 | | 12/10/2028 | | 324,728 | f | 313,421 | |
25
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Information Technology
- 3.9% (continued) | | | | | |
CT Technologies, 2021 Reprice Term Loan, (1 Month TSFR +4.25%) | | 9.70 | | 12/16/2025 | | 168,456 | f | 159,673 | |
Finastra USA, Inc., First Lien Dollar Term Loan, (6 Month
LIBOR +3.50%) | | 9.23 | | 6/13/2024 | | 278,716 | f | 278,688 | |
Finthrive Software Intermediate, Term Loan, (1 Month TSFR
+4.11%) | | 9.45 | | 12/17/2028 | | 192,999 | f | 165,014 | |
Fintrax International Holdings, New Facility Term Loan B-1,
(6 Month EURIBOR +5.25%) | EUR | 8.86 | | 5/27/2026 | | 598,086 | f | 637,185 | |
Fintrax International Holdings, New Facility Term Loan B-2,
(6 Month EURIBOR +5.25%) | EUR | 8.86 | | 5/27/2026 | | 20,096 | f | 21,409 | |
Fintrax International Holdings, New Facility Term Loan B-3,
(6 Month EURIBOR +5.25%) | EUR | 8.86 | | 5/27/2026 | | 231,101 | f | 246,208 | |
Fintrax International Holdings, New Facility Term Loan B-4,
(6 Month EURIBOR +5.25%) | EUR | 8.86 | | 5/27/2026 | | 150,718 | f | 160,571 | |
HS Purchaser LLC, First Lien 7th Amendment Refinancing Term
Loan, (3 Month TSFR +4.00%) | | 9.47 | | 11/30/2026 | | 210,000 | f | 202,913 | |
Hyland Software, Inc., 2021-1 Incremental Facility Term Loan,
(1 Month TSFR +6.25%) | | 11.70 | | 7/7/2025 | | 120,000 | f | 119,535 | |
Idera, Inc., First Lien Initial Term Loan, (3 Month TSFR +3.75%) | | 9.27 | | 3/2/2028 | | 258,677 | f | 256,284 | |
Mitchell International, Second Lien Initial Term Loan, (1
Month TSFR +6.61%) | | 11.95 | | 10/15/2029 | | 158,974 | f | 144,369 | |
Polaris Newco LLC, First Lien Dollar Term Loan, (3 Month LIBOR
+4.00%) | | 9.54 | | 6/4/2028 | | 369,184 | f | 359,109 | |
Polaris Newco LLC, Sterling Term Loan, (1 Month SONIA 5D +5.25%) | GBP | 10.44 | | 6/4/2028 | | 982,500 | f | 1,120,952 | |
Quest Software, Inc., First Lien Initial Term Loan, (3 Month
TSFR +4.40%) | | 9.77 | | 2/1/2029 | | 287,007 | f | 236,243 | |
Tibco Software, Inc., Term Loan, (3 Month TSFR +4.60%) | | 9.84 | | 9/30/2028 | | 169,522 | f | 163,619 | |
UKG, Inc., 2021 Second Lien Incremental Term Loan, (3 Month
TSFR +5.35%) | | 10.62 | | 5/3/2027 | | 65,000 | f | 64,832 | |
26
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Information Technology
- 3.9% (continued) | | | | | |
West Technology Group LLC, Term Loan B-3, (1 Month TSFR +4.00%) | | 9.58 | | 4/10/2027 | | 130,000 | f | 124,781 | |
| 4,774,806 | |
Insurance - 1.7% | | | | | |
Acrisure LLC, 2022
Additional Term Loan, (3 Month TSFR +5.75%) | | 11.12 | | 2/15/2027 | | 389,023 | f | 390,968 | |
Amynta Agency Borrower, 2023 Refinancing Term Loan, (1 Month
TSFR +5.10%) | | 10.43 | | 2/28/2028 | | 404,401 | f | 404,474 | |
Asurion LLC, New Term Loan B-4, (1 Month TSFR +5.36%) | | 10.70 | | 1/20/2029 | | 414,791 | f | 365,304 | |
Asurion LLC, Second Lien Term Loan B-3, (1 Month TSFR +5.36%) | | 10.70 | | 2/3/2028 | | 1,068,450 | f | 960,600 | |
| 2,121,346 | |
Internet Software & Services - 1.8% | | | | | |
Endure Digital, Inc.,
Initial Term Loan, (6 Month LIBOR +3.50%) | | 8.79 | | 2/10/2028 | | 186,449 | f | 178,525 | |
ION Trading Finance Ltd., Initial Dollar Term Loan, (3 Month
TSFR +4.85%) | | 10.09 | | 4/1/2028 | | 215,600 | f | 211,624 | |
MH Sub I LLC, 2023 May New Term Loan, (1 Month TSFR +4.25%) | | 9.58 | | 5/3/2028 | | 180,000 | f | 173,307 | |
Proofpoint, Inc., Initial Term Loan, (1 Month TSFR +3.36%) | | 8.70 | | 8/31/2028 | | 431,065 | f | 427,472 | |
PUG LLC, USD Term Loan B, (1 Month TSFR +3.61%) | | 8.95 | | 2/13/2027 | | 185,000 | f | 176,386 | |
THG Operations Holdings, Facility Term Loan B, (6 Month EURIBOR
+4.50%) | EUR | 8.26 | | 12/11/2026 | | 1,000,000 | f | 1,017,934 | |
| 2,185,248 | |
Materials - .9% | | | | | |
Berlin Packaging LLC,
Tranche Term Loan B-5, (1 Month TSFR +3.86% & 3 Month LIBOR +3.75%) | | 9.24 | | 3/11/2028 | | 287,521 | f | 285,298 | |
MAR Bidco Sarl, USD Facility Term Loan B, (3 Month TSFR +3.95%) | | 9.00 | | 6/28/2028 | | 178,540 | f | 171,994 | |
Mauser Packaging Solutions Holding Co., Initial Term Loan,
(1 Month TSFR +4.00%) | | 9.32 | | 8/10/2026 | | 232,764 | f | 233,217 | |
Proampac PG Borrower LLC, 2020-1 Term Loan, (1-3 Month TSFR
+3.97%) | | 9.29 | | 11/3/2025 | | 420,428 | f | 420,428 | |
| 1,110,937 | |
27
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Media - .4% | | | | | |
DIRECTV
Financing LLC, Closing Date Term Loan, (1 Month TSFR +5.00%) | | 10.45 | | 8/2/2027 | | 437,943 | f | 433,489 | |
Metals & Mining - .1% | | | | | |
Arsenal AIC Parent
LLC, Term Loan B, (3 Month TSFR +4.50%) | | 9.88 | | 8/18/2030 | | 76,000 | f | 76,171 | |
Real Estate - .3% | | | | | |
Cushman & Wakefield
US Borrower LLC, 2023-2 Refinancing Term Loan, (1 Month TSFR +4.00%) | | 9.33 | | 1/31/2030 | | 200,000 | f | 199,500 | |
Greystar Real Estate Partners LLC, Term Loan, (1 Month TSFR
+3.75%) | | 9.06 | | 8/21/2030 | | 138,889 | f | 138,889 | |
| 338,389 | |
Retailing - .2% | | | | | |
New Look Corporate
Ltd., Term Loan, (1 Month GBPLIBOR +0.00%) | GBP | 0.00 | | 11/9/2029 | | 24,012 | f,i | 1,065 | |
Staples, Inc., 2019 Refinancing New Term Loan B-1, (3 Month
LIBOR +5.00%) | | 10.63 | | 4/12/2026 | | 235,064 | f | 202,283 | |
| 203,348 | |
Semiconductors & Semiconductor Equipment - .2% | | | | | |
Natel
Engineering Co., Inc., Initial Term Loan, (1 Month TSFR +6.36%) | | 11.68 | | 4/30/2026 | | 299,851 | f | 232,759 | |
Technology Hardware & Equipment - 1.7% | | | | | |
Atlas CC Acquisition
Corp., First Lien Term Loan B, (3 Month TSFR +4.51%) | | 9.93 | | 5/25/2028 | | 203,569 | f | 187,741 | |
Atlas CC Acquisition Corp., First Lien Term Loan C, (3 Month
TSFR +4.51%) | | 9.93 | | 5/25/2028 | | 41,403 | f | 38,184 | |
Expleo Services SAS, Term Loan B, (3 Month EURIBOR +5.00%) | EUR | 5.00 | | 9/28/2027 | | 1,000,000 | f | 1,055,073 | |
McAfee Corp., Tranche Term Loan B-1, (1 Month TSFR +3.85%) | | 9.17 | | 3/1/2029 | | 442,962 | f | 435,763 | |
Perforce Software, Inc., Term Loan, (1 Month TSFR +3.75%) | | 9.20 | | 7/1/2026 | | 190,000 | f | 183,481 | |
VeriFone Systems, Inc., First Lien Initial Term Loan, (3 Month
TSFR +4.26%) | | 9.65 | | 8/20/2025 | | 258,642 | f | 240,275 | |
| 2,140,517 | |
Telecommunication Services - 1.1% | | | | | |
CCI Buyer, Inc., First
Lien Initial Term Loan, (3 Month TSFR +4.00%) | | 9.24 | | 12/17/2027 | | 720,949 | f | 714,489 | |
28
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a,b | Value
($) | |
Floating
Rate Loan Interests - 42.6% (continued) | | | | | |
Telecommunication Services
- 1.1% (continued) | | | | | |
Consolidated Communications, Term Loan B-1, (1 Month TSFR
+3.50%) | | 8.95 | | 10/2/2027 | | 200,000 | f | 173,984 | |
Lumen Technologies, Inc., Term Loan B, (1 Month TSFR +2.36%) | | 7.70 | | 3/15/2027 | | 263,854 | f | 173,558 | |
Telesat LLC, Term Loan B-5, (3 Month TSFR +2.75%) | | 8.43 | | 12/6/2026 | | 250,000 | f | 180,625 | |
Zayo Group Holdings, Inc., Initial Dollar Term Loan, (1 Month
TSFR +3.00%) | | 8.45 | | 3/9/2027 | | 190,000 | f | 152,750 | |
| 1,395,406 | |
Transportation - .1% | | | | | |
Odyssey Logistics &
Technology Corp., Initial Term Loan, (3 Month TSFR +4.50%) | | 9.92 | | 10/12/2027 | | 120,000 | f | 119,500 | |
Utilities - .7% | | | | | |
Eastern Power LLC,
Term Loan B, (1 Month TSFR +3.86%) | | 9.20 | | 10/2/2025 | | 457,330 | f | 440,859 | |
Generation Bridge Northeast LLC, Term Loan B, (1 Month TSFR
+4.25%) | | 9.56 | | 8/7/2029 | | 114,000 | f | 114,143 | |
Hamilton Projects Acquiror, Term Loan, (1 Month TSFR +4.61%) | | 9.95 | | 6/26/2027 | | 295,000 | f | 293,003 | |
| 848,005 | |
Total Floating
Rate Loan Interests (cost $53,167,785) | | 52,587,246 | |
| | | | | Shares | b | | |
Common
Stocks - .0% | | | | | |
Media
- .0% | | | | | |
Altice USA, Inc., Cl. A (cost
$38,829) | | | | | | 2,000 | j | 6,140 | |
Retailing - .0% | | | | | |
New
Look, Cl. B | | | | | | 611,628 | i,j | 0 | |
Total
Common Stocks (cost $38,829) | | | 6,140 | |
29
STATEMENT
OF INVESTMENTS (continued)
| | | | | | | | | |
|
Description | 1-Day Yield
(%) | | | | Shares | | Value
($) | |
Investment
Companies - 2.6% | | | | | |
Registered
Investment Companies - 2.6% | | | | | |
Dreyfus
Institutional Preferred Government Plus Money Market Fund, Institutional Shares (cost
$3,176,789) | | 5.41 | | | | 3,176,789 | k | 3,176,789 | |
Total
Investments (cost $176,338,931) | | 136.5% | 168,620,854 | |
Liabilities, Less Cash and Receivables | | (36.5%) | (45,081,710) | |
Net Assets | | 100.0% | 123,539,144 | |
EURIBOR—Euro
Interbank Offered Rate
LIBOR—London Interbank
Offered Rate
SONIA—Sterling Overnight
Index Average
TSFR—Term Secured
Overnight Financing Rate Reference Rates
EUR—Euro
GBP—British Pound
a Amount stated in U.S. Dollars unless otherwise noted above.
b Security,
or portion thereof, has been pledged as collateral for the fund’s Revolving Credit and Security Agreement.
c Security
exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may
be resold in transactions exempt from registration, normally to qualified institutional buyers. At August
31, 2023, these securities were valued at $102,765,307 or 83.18% of net assets.
d Payment-in-kind security and interest may be paid in additional
par.
e Security
is a perpetual bond with no specified maturity date. Maturity date shown is next reset date of the bond.
f Variable
rate security—interest rate resets periodically and rate shown is the interest rate in effect at period
end. Security description also includes the reference rate and spread if published and available.
g Collateralized
Loan Obligations equity positions are entitled to recurring distributions which are generally equal to
the remaining cash flow of payments made by underlying securities less contractual payments to debt holders
and fund expenses. The effective yield is estimated based upon the current projection of the amount and
timing of these recurring distributions in addition to the estimated amount of terminal principal payment.
The estimated yield and investment cost may ultimately not be realized.
h Investment, or portion of investment, represents an unfunded
floating note loan interest outstanding.
i The fund held Level 3 securities at August 31, 2023. These
securities were valued at $1,065 or .0% of net assets.
j Non-income producing security.
k Investment in affiliated issuer. The investment objective
of this investment company is publicly available and can be found within the investment company’s prospectus.
| |
Portfolio Summary (Unaudited) † | Value
(%) |
Collateralized
Loan Obligations | 29.3 |
Consumer, Non-cyclical | 27.9 |
Consumer, Cyclical | 16.9 |
Communications | 14.7 |
Financial | 12.8 |
Industrial | 10.9 |
Technology | 7.9 |
Energy | 6.5 |
Basic Materials | 3.8 |
Utilities | 3.1 |
Investment
Companies | 2.6 |
| 136.4 |
† Based on net assets.
See
notes to financial statements.
30
| | | | | | |
Affiliated
Issuers | | | |
Description | Value ($) 8/31/2022 | Purchases
($)† | Sales ($) | Value ($) 8/31/2023 | Dividends/ Distributions
($) | |
Registered Investment Companies - 2.6% | | |
Dreyfus Institutional Preferred Government Plus Money Market
Fund, Institutional Shares - 2.6% | 7,602,310 | 107,959,117 | (112,384,638) | 3,176,789 | 167,371 | |
† Includes reinvested dividends/distributions.
See notes to financial statements.
| | | | | |
Forward Foreign Currency Exchange Contracts | |
Counterparty/ Purchased Currency | Purchased
Currency Amounts | Currency Sold | Sold
Currency Amounts | Settlement Date | Unrealized
Appreciation ($) |
Citigroup Global Markets Inc. |
United States Dollar | 56,900,644 | Euro | 52,350,000 | 9/29/2023 | 55,662 |
United States Dollar | 13,435,465 | British Pound | 10,595,000 | 9/29/2023 | 11,894 |
Gross Unrealized Appreciation | | | 67,556 |
See notes to financial statements.
31
STATEMENT
OF ASSETS AND LIABILITIES
August 31, 2023
| | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | | | |
Unaffiliated issuers | 173,162,142 | | 165,444,065
| |
Affiliated issuers | | 3,176,789 | | 3,176,789
| |
Cash | | | | | 20,206 | |
Cash
denominated in foreign currency | | | 3,642,761 | | 3,647,041 | |
Dividends
and interest receivable | | 2,399,856 | |
Receivable for investment securities sold | | 1,360,250 | |
Cash
collateral held by broker—Note 4 | | 380,000
| |
Unrealized
appreciation on forward foreign currency exchange contracts—Note 4 | | 67,556 | |
Prepaid
expenses | | | | | 14,134 | |
| | | | |
176,509,897 | |
Liabilities ($): | | | | |
Due to BNY Mellon Investment Adviser, Inc.
and affiliates—Note 3(b) | | 129,919 | |
Loan payable ($49,000,000
face amount, respectively, report net of unamortized debt issuance cost
of $82,790)—Note 2 | | 48,917,210 | |
Payable for investment securities
purchased | | 3,294,995 | |
Distributions payable | | 525,026 | |
Interest
and loan fees payable—Note 2 | | 9,845 | |
Directors’ fees and expenses payable | | 3,319 | |
Other
accrued expenses | | | | | 90,439 | |
| | | | |
52,970,753 | |
Net Assets ($) | | |
123,539,144 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 146,924,958 | |
Total distributable earnings
(loss) | | | | | (23,385,814) | |
Net
Assets ($) | | |
123,539,144 | |
| | | | |
Shares
Outstanding | | |
(100 million shares of $.001
par value Common Stock authorized) |
15,000,727 | |
Net Asset Value Per Share ($) | | 8.24 | |
| | | | |
See notes to financial statements. | | | | |
32
STATEMENT
OF OPERATIONS
Year
Ended August 31, 2023
| | | | | | |
| | | | | | |
| | | | | | |
Investment
Income ($): | | | | |
Income: | | | | |
Interest | | | 14,862,209 | |
Dividends: | |
Unaffiliated issuers | | | 1,213 | |
Affiliated issuers | | | 167,371 | |
Total
Income | | |
15,030,793 | |
Expenses: | | | | |
Management fee—Note 3(a) | | | 1,389,011 | |
Interest
expense and loan fees—Note 2 | | | 3,121,223 | |
Professional
fees | | | 156,999 | |
Custodian
fees—Note 3(b) | | | 148,079 | |
Registration
fees | | | 23,824 | |
Shareholders’
reports | | | 22,909 | |
Directors’
fees and expenses—Note 3(c) | | | 22,006 | |
Shareholder
servicing costs | | | 16,071 | |
Chief
Compliance Officer fees—Note 3(b) | | | 11,518 | |
Miscellaneous | | | 112,416 | |
Total
Expenses | | |
5,024,056 | |
Net Investment Income | | |
10,006,737 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4
($): | | |
Net realized gain (loss) on investments and
foreign currency transactions |
(9,934,741) | |
Net realized gain (loss) on
forward foreign currency exchange contracts |
(1,693,548) | |
Net Realized Gain (Loss) | | | (11,628,289) | |
Net
change in unrealized appreciation (depreciation) on investments
and foreign currency transactions |
15,441,671 | |
Net
change in unrealized appreciation (depreciation) on
forward foreign currency exchange contracts |
(107,417) | |
Net Change in Unrealized Appreciation (Depreciation) | | | 15,334,254 | |
Net
Realized and Unrealized Gain (Loss) on Investments | | | 3,705,965 | |
Net
Increase in Net Assets Resulting from Operations | | 13,712,702
| |
| | | | | | |
See notes to financial statements. | | | | | |
33
STATEMENT
OF CASH FLOWS
Year
Ended August 31, 2023
| | | | | | |
| | | | | |
| | | | | | |
Cash Flows from Operating Activities ($): | | | | | |
Purchases of portfolio securities | |
(134,042,352) | | | |
Proceeds from sales of portfolio securities | 137,214,160 | | | |
Net purchase (sales) of short-term securities | 3,355,486 | | | |
Dividends and interest income received | | 14,608,130 | | | |
Interest and loan fees paid | | (3,167,804) | | | |
Expenses paid to BNY Mellon Investment
Adviser, Inc. and affiliates | | (1,656,012) | | | |
Operating expenses paid | | (354,502) | | | |
Net realized gain (loss) from forward foreign
currency | | | | | |
| exchange
contracts transactions | | (1,693,548) | | | |
Net Cash Provided (or Used) in Operating Activities | | | | 14,263,558 | |
Cash
Flows from Financing Activities ($): | | | | | |
Dividends paid to Common Stockholders | | (8,550,413) | | | |
Decrease in loan outstanding | | (5,000,000) | | | |
Net Cash Provided (or Used) in Financing Activities | | (13,550,413) | |
Effect of Foreign Exchange Rate Changes on Cash | |
(4,767) | |
Net Increase
(Decrease) in Cash | | 708,378 | |
Cash and cash denominated in foreign currency at beginning
of period | | 3,338,869 | |
Cash
and Cash Denominated in Foreign Currency at End of Period† | |
4,047,247 | |
Reconciliation
of Net Increase (Decrease) in Net Assets | | | |
| Resulting from Operations to Net Cash Provided | | | |
| by Operating Activities ($): | | | |
Net
Increase in Net Assets Resulting From Operations | | 13,712,702 | |
Adjustments to Reconcile Net Increase (Decrease) in Net Assets | | | |
| Resulting from Operations to Net Cash | | | |
| Provided (or Used) in Operating Activities ($): | | | |
Decrease in investments in securities at cost | | 22,659,890 | |
Increase
in dividends and interest receivable | | (422,663) | |
Decrease in receivable for investment securities
sold | | 637,645 | |
Decrease in prepaid expenses | | 122
| |
Decrease in Due to BNY Mellon Investment
Adviser, Inc. and affiliates | | (107,404) | |
Decrease in payable for investment securities purchased | | (6,835,500) | |
Increase
in interest and loan fees payable | | 3,744
| |
Increase in unamortized debt issuance cost | | (50,325) | |
Increase
in Directors' fees and expenses payable | | 593
| |
Decrease in other accrued expenses | | (992) | |
Net
change in unrealized (appreciation) depreciation on investments | | (15,334,254) | |
Net Cash Provided (or
Used) in Operating Activities | |
14,263,558 | |
| | | | | | |
† | Includes
deposits held as collateral by broker. |
See notes to financial statements. | | | | | |
34
STATEMENT
OF CHANGES IN NET ASSETS
| | | | | | | | | |
| | | | Year Ended August 31, |
| | | | 2023 | | 2022 | |
Operations ($): | | | | | | | | |
Net investment income | | | 10,006,737 | | | | 8,220,345 | |
Net
realized gain (loss) on investments | | (11,628,289) | | | | 4,393,029 | |
Net
change in unrealized appreciation (depreciation) on investments | | 15,334,254 | | | | (26,604,516) | |
Net Increase
(Decrease) in Net Assets Resulting from Operations | 13,712,702 | | | | (13,991,142) | |
Distributions
($): | |
Distributions to shareholders | | |
(8,325,403) | | | |
(8,997,622) | |
Capital
Stock Transactions ($): | |
Distributions reinvested | | | - | | | | 194,987 | |
Increase
(Decrease) in Net Assets from Capital Stock Transactions | - | | | | 194,987 | |
Total Increase
(Decrease) in Net Assets | 5,387,299 | | | | (22,793,777) | |
Net Assets
($): | |
Beginning of Period | | | 118,151,845 | | | | 140,945,622 | |
End of
Period | | | 123,539,144 | | | | 118,151,845 | |
Capital
Share Transactions (Shares): | |
Shares issued for distributions
reinvested | | | - | | | | 20,879 | |
Net
Increase (Decrease) in Shares Outstanding |
- | | | | 20,879 | |
| | | | | | | | | |
See notes to financial statements. | | | | | | | | |
35
FINANCIAL
HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Market price total return is calculated assuming an initial investment made at the market price at the
beginning of the period, reinvestment of all dividends and distributions at market price during the period,
and sale at the market price on the last day of the period. These figures have been derived from the
fund’s financial statements and market price data for the fund’s shares.
| | | | | | | | |
| |
| Year Ended August 31, |
| 2023 | 2022 | 2021 | 2020 | 2019 |
Per Share Data ($): | | | | | | | | |
Net
asset value, beginning of period | | | | 7.88 | 9.41 | 8.60 | 9.20 | 9.65 |
Investment Operations: | | | | | | | | |
Net investment incomea | | | | .67 | .55 | .63 | .63 | .69 |
Net
realized and unrealized gain (loss) on investments | | | | .25 | (1.48) | .78 | (.60) | (.49) |
Total
from Investment Operations | | | | .92 | (.93) | 1.41 | .03 | .20 |
Distributions: | | | | | | | | |
Dividends from net investment income | | | | (.56) | (.60) | (.60) | (.63) | (.58) |
Dividends from net realized gain
on investments | | | | - | - | - | - | (.07) |
Total
Distributions | | | | (.56) | (.60) | (.60) | (.63) | (.65) |
Net
asset value, end of period | | | | 8.24 | 7.88 | 9.41 | 8.60 | 9.20 |
Market value, end of
period | | | | 7.79 | 7.48 | 9.58 | 8.12 | 9.29 |
Market Price Total Return (%) | | | | 12.18 | (16.17) | 26.24 | (5.61) | 9.08 |
Ratios/Supplemental Data (%) | | | | | | | | |
Ratio of total expenses to
average net assets | | | | 4.29 | 2.87 | 2.42 | 2.69b | 3.00 |
Ratio
of net expenses to average net assets | | | | 4.29 | 2.87 | 2.42 | 2.69b | 2.99 |
Ratio
of interest expense and loan fees to average net assets | | | | 2.66 | 1.12 | .76 | 1.05b | 1.52 |
Ratio
of net investment income to average net assets | | | | 8.54 | 6.24 | 6.87 | 7.37b | 7.43 |
Portfolio Turnover
Rate | | | | 78.40 | 60.09 | 85.31 | 85.90 | 54.94 |
Net Assets, end of period ($ x 1,000) | | | | 123,539 | 118,152 | 140,946 | 128,744 | 137,587 |
Average
borrowings outstanding ($ x 1,000) | | | | 46,273 | 57,134 | 55,386 | 55,279 | 60,000 |
Weighted average number
of fund shares outstanding ($ x 1,000) | | | | 15,001 | 14,997 | 14,968 | 14,963 | 14,961 |
Average amount of debt per share ($) | | | | 3.08 | 3.81 | 3.70 | 3.69 | 4.01 |
a Based on average shares outstanding.
b The ratios have been corrected due to immaterial corrections
within the August 31, 2020 annual shareholder report which reflected a total expense ratio of 1.87%,
a net expense ratio of 1.87%, an interest expense and loan fees ratio of .73% and a net investment income
of 5.14%. The prior ratios were based on managed assets not average net assets.
See notes to financial statements.
36
NOTES
TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Alcentra
Global Credit Income 2024 Target Term Fund, Inc. (the “fund”) is registered under the
Investment Company Act of 1940, as amended (the “Act”), as a diversified closed-end management investment
company. The fund has a limited term of approximately seven years. The fund’s investment objectives
are to seek high current income and to return at least $9.835 (the “Original NAV”) per share of Common
Share (the public offering price per Common Share after deducting a sales load of $.165 per Common Share
but before deducting offering costs of $.02 per Common Share) to holders of record of Common Shares on
or about December 1, 2024 (subject to certain extensions). The objective to return at least the fund’s
Original NAV is not an express or implied guarantee obligation of the fund, BNY Mellon Investment Adviser,
Inc. Alcentra NY, LLC or any other entity, and an investor may receive less than the Original NAV upon
termination of the fund. There is no assurance the fund will achieve either of its investment objectives
and achieving its investment objectives will depend on a number of factors, including market conditions
and the success of various portfolio strategies and cash flow management techniques. Based on market
conditions as of the date of this report, management anticipates that the likelihood of the fund achieving
its objective of returning its Original NAV upon termination of the fund has decreased substantially
since the fund’s inception.
BNY Mellon Investment Adviser, Inc. (the
“Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”),
serves as the fund’s investment adviser. Alcentra NY, LLC (the “Sub-Adviser”), serves as the fund’s
sub-adviser. Prior to November 1, 2022 (the “Closing Date”), the Sub-Adviser served as the sub-adviser
to the fund pursuant to a sub-investment advisory agreement (the “Prior Sub-Advisory Agreement”)
between the Adviser and the Sub-Adviser. Prior to the Closing Date, the Sub-Adviser was an indirect subsidiary
of BNY Mellon and an affiliate of the Adviser.
On May 30, 2022, BNY Mellon entered into
a definitive agreement to sell all of its indirect equity interest in Alcentra Group Holdings, Inc.,
including its subsidiary the Sub-Adviser (the “Transaction”), to Franklin Resources, Inc., a global
investment management organization operating as Franklin Templeton (“Franklin Templeton”). Franklin
Templeton, through its specialist investment managers, offers boutique specialization on a global scale,
bringing extensive capabilities in fixed income, equity, alternatives, and multi-asset solutions. The
Transaction was completed on the Closing Date.
37
NOTES
TO FINANCIAL STATEMENTS (continued)
As a result of the Transaction, there was a “change in control” of the Sub-Adviser,
which effected an assignment and automatic termination of the Prior Sub-Advisory Agreement, pursuant
to its terms and the applicable provisions of the Act, as of the Closing Date. Consequently, the fund’s
Board of Directors (the “Board”) had approved a new sub-investment advisory agreement (the “New
Sub-Advisory Agreement”) between the Adviser and the Sub-Adviser, with respect to the fund, and called
a Special Meeting of Stockholders which was held on October 13, 2022 to seek stockholder approval of
the New Sub-Advisory Agreement. At the Special Meeting of Stockholders held on October 13, 2022, stockholders
of the fund approved the New Sub-Advisory Agreement.
There was no increase
in the advisory fee payable by the fund to the Adviser as a consequence of the Transaction and the sub-advisory
fee payable by the Adviser to the Sub-Adviser under the New Sub-Advisory Agreement is the same as that
payable by the Adviser to the Sub-Adviser under the Prior Sub-Advisory Agreement. The New Sub-Advisory
Agreement is substantially similar in material respects to the Prior Sub-Advisory Agreement and the fund’s
investment strategy and management policies currently are not expected to change in connection with the
implementation of the New Sub-Advisory Agreement. The fund’s Common Shares trade on the New York Stock
Exchange (the “NYSE”) under the ticker symbol DCF.
The Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference
of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to
be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC
registrants. The fund is an investment company and applies the accounting and reporting guidance of the
FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared
in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results
could differ from those estimates.
The fund enters into contracts
that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is
unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a)
Portfolio valuation: The fair value of a financial instrument is the amount that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement
38
date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes
the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally,
GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly
and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced
disclosures around valuation inputs and techniques used during annual and interim periods.
Various
inputs are used in determining the value of the fund’s investments relating to fair value measurements.
These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted
prices in active markets for identical investments.
Level 2—other significant
observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds,
credit risk, etc.).
Level 3—significant unobservable inputs (including
the fund’s own assumptions in determining the fair value of investments).
The
inputs or methodology used for valuing securities are not necessarily an indication of the risk associated
with investing in those securities.
Changes in valuation techniques may result
in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used
to value the fund’s investments are as follows:
The Board has designated the Adviser as
the fund’s valuation designee, effective September 8, 2022, to make all fair value determinations with
respect to the fund’s portfolio investments, subject to the Board’s oversight and pursuant to Rule
2a-5 under the Act.
Investments in debt securities and floating rate loan interests,
excluding short-term investments (other than U.S. Treasury Bills) and forward foreign currency exchange
contracts (“forward contracts”), are valued each business day by one or more independent pricing
services (each, a “Service”) approved by the Board. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the judgment of a Service are valued
at the mean between the quoted bid prices (as obtained by a Service from dealers in such securities)
and asked prices (as calculated by a Service based upon its evaluation of
39
NOTES
TO FINANCIAL STATEMENTS (continued)
the market for such securities). Securities are valued as determined by a Service,
based on methods which include consideration of the following: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.
The Services are engaged under the general supervision of the Board. These securities are generally categorized
within Level 2 of the fair value hierarchy.
Investments in equity securities are valued
at the last sales price on the securities exchange or national securities market on which such securities
are primarily traded. Securities listed on the National Market System for which market quotations are
available are valued at the official closing price or, if there is no official closing price that day,
at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid
price is used when no asked price is available. Registered investment companies that are not traded on
an exchange are valued at their net asset value. All of the preceding securities are generally categorized
within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or
the national securities market, or securities for which there were no transactions, are valued at the
average of the most recent bid and asked prices. These securities are generally categorized within Level
2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance
of a Service using calculations based on indices of domestic securities and other appropriate indicators,
such as prices of relevant American Depositary Receipts and futures. Utilizing these techniques may result
in transfers between Level 1 and Level 2 of the fair value hierarchy.
When
market quotations or official closing prices are not readily available, or are determined not to accurately
reflect fair value, such as when the value of a security has been significantly affected by events after
the close of the exchange or market on which the security is principally traded (for example, a foreign
exchange or market), but before the fund calculates its net asset value, the fund may value these investments
at fair value as determined in accordance with the procedures approved by the Board. Certain factors
may be considered when fair valuing investments such as: fundamental analytical data, the nature and
duration of restrictions on disposition, an evaluation of the forces that influence the market in which
the securities are purchased and sold, and public trading in similar securities of the issuer or comparable
issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending
on the relevant inputs used.
40
For securities where observable inputs are limited, assumptions about market activity
and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange.
Forward contracts are valued at the forward
rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary
of the inputs used as of August 31, 2023 in valuing the fund’s investments:
| | | | | | |
| Level
1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | | Level
3-Significant Unobservable Inputs | Total | |
Assets ($) | | |
Investments
in Securities:† | | |
Collateralized Loan Obligations | - | 36,204,203 | | - | 36,204,203 | |
Corporate Bonds | - | 76,646,476 | | - | 76,646,476 | |
Equity Securities - Common Stocks | 6,140 | - | | 0 | 6,140 | |
Floating Rate Loan Interests | - | 52,586,181 | | 1,065 | 52,587,246 | |
Investment Companies | 3,176,789 | - | | - | 3,176,789 | |
Other Financial Instruments: | | |
Forward
Foreign Currency Exchange Contracts†† | - | 67,556 | | - | 67,556 | |
† See Statement of Investments for additional detailed categorizations,
if any.
†† Amount
shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchange-traded
and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
41
NOTES
TO FINANCIAL STATEMENTS (continued)
The following is a reconciliation of Level 3 assets for which significant unobservable
inputs were used to determine fair value:
| |
Floating
Rate Loan Interests & Equity Securities-Common Stocks
($) |
Balance
as of 8/31/2022† | 5,579 |
Purchases/Issuances | - |
Sales/Dispositions | - |
Net realized gain (loss) | - |
Change in unrealized appreciation (depreciation) | (4,514) |
Transfers into Level
3 | - |
Transfers out of Level 3 | - |
Balance
as of 8/31/2023† | 1,065 |
The amount of total
net realized gains (loss) for the period included in earnings attributable to the net change in unrealized
appreciation (depreciation) relating to investments still held at 8/31/2023 | (4,514) |
† Securities
deemed as Level 3 due to lack of significant observable inputs by management assessment.
(b)
Foreign currency transactions: The fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from the fluctuations arising
from changes in the market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss on investments.
Net realized foreign
exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on
securities transactions between trade and settlement date, and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than investments resulting from changes
in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included
with net realized and unrealized gain or loss on investments.
(c) Securities transactions
and investment income: Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized
on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization
of premium on investments, is recognized on the accrual basis. Interest income from investments in collateralized
loan obligation (“CLO”) equity is recorded based upon an effective yield to maturity utilizing assumed
cash flows. The Adviser monitors the expected cash flows from its CLO equity investments and effective
yield is determined and adjusted as needed.
42
(d)
Affiliated issuers: Investments in other investment companies advised by the Adviser are considered
“affiliated” under the Act.
(e) Market Risk: An investment in the fund is subject to
investment risk, including the possible loss of the entire amount that you invest. Your investment in
Common Shares represents an indirect investment in the credit instruments and other investments and assets
owned by the fund. The value of the fund’s portfolio investments may move up or down, sometimes rapidly
and unpredictably. The value of the instruments in which the fund invests may be affected by political,
regulatory, economic and social developments, and developments that impact specific economic sectors,
industries or segments of the market. In addition, turbulence in financial markets and reduced liquidity
in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely
affect the fund. Global economies and financial markets are becoming increasingly interconnected, and
conditions and events in one country, region or financial market may adversely impact issuers in a different
country, region or financial market. These risks may be magnified if certain events or developments adversely
interrupt the global supply chain; in these and other circumstances, such risks might affect companies
world-wide
Credit Risk: The fund invests primarily in credit instruments, which
are subject to credit risk. Credit risk is the risk that one or more credit instruments in the fund’s
portfolio will decline in price or fail to pay interest or principal when due because the issuer of the
instrument experiences a decline in its financial status. Losses may occur because the market value of
a credit instrument is affected by the creditworthiness or perceived creditworthiness of the issuer and
by general economic and specific industry conditions and the fund’s investments will often be subordinate
to other debt in the issuer’s capital structure. Because the fund generally expects to invest a significant
portion of its Managed Assets (as defined below) in below investment grade instruments, it will be exposed
to a greater amount of credit risk than a fund which invests in investment grade securities. The prices
of below investment grade instruments are more sensitive to negative developments, such as a decline
in the issuer’s revenues or a general economic downturn, than are the prices of investment grade instruments,
which may reduce the fund's net asset value.
Floating Rate Loan Risk. Unlike publicly traded
common stocks which trade on national exchanges, there is no central market or exchange for loans to
trade. Loans trade in an over-the-counter market, and confirmation and settlement, which are effected
through standardized procedures and documentation, may take significantly longer than seven
43
NOTES
TO FINANCIAL STATEMENTS (continued)
days to complete. Extended trade settlement periods may, in unusual market conditions
with a high volume of shareholder redemptions, present a risk to shareholders regarding the fund’s
ability to pay redemption proceeds within the allowable time periods. The secondary market for floating
rate loans also may be subject to irregular trading activity and wide bid/ask spreads. The lack of an
active trading market for certain floating rate loans may impair the ability of the fund to realize full
value in the event of the need to sell a floating rate loan and may make it difficult to value such loans.
There may be less readily available, reliable information about certain floating rate loans than is the
case for many other types of securities, and the fund’s portfolio managers may be required to rely
primarily on their own evaluation of a borrower’s credit quality rather than on any available independent
sources. The value of collateral, if any, securing a floating rate loan can decline, and may be insufficient
to meet the issuer’s obligations in the event of non-payment of scheduled interest or principal or
may be difficult to readily liquidate. In the event of the bankruptcy of a borrower, the fund could experience
delays or limitations imposed by bankruptcy or other insolvency laws with respect to its ability to realize
the benefits of the collateral securing a loan. The floating rate loans in which the fund invests typically
will be below investment grade quality and, like other below investment grade securities, are inherently
speculative. As a result, the risks associated with such floating rate loans are similar to the risks
of below investment grade securities, although senior loans are typically senior and secured in contrast
to other below investment grade securities, which are often subordinated and unsecured. Floating rate
loans may not be considered to be “securities” for purposes of the anti-fraud protections of the
federal securities laws, including those with respect to the use of material non-public information,
so that purchasers, such as the fund, may not have the benefit of these protections.
Collaterlized
Debt Obligations (“CDO”) Risk: The risks of an investment in a CDO, including
a Collaterlized Bank Obligation or CLO, depend largely on the type of the collateral and the tranche
of the CDO in which the fund invests. CDO tranches can experience substantial losses due to actual defaults,
increased sensitivity to defaults due to collateral default, market anticipation of defaults, as well
as aversion to CDO securities as an asset class. In addition to the normal risks associated with credit-related
securities discussed elsewhere in this prospectus (e.g., interest rate risk and default risk), investments
in CDOs may be more volatile, less liquid and more difficult to price than other types of investments.
Additional Information section within the annual report dated August 31, 2023,
provides more details about the principal risk factors.
44
(f)
Dividends and distributions to Common Shareholders: Dividends and distributions are recorded
on the ex-dividend date. Dividends from net investment income are normally declared and paid monthly.
Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund
may make distributions on a more frequent basis to comply with the distribution requirements of the Internal
Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can
be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income
and capital gain distributions are determined in accordance with income tax regulations, which may differ
from GAAP.
Common Shareholders will have their distributions reinvested
in additional shares of the fund, unless such Common Shareholders elect to receive cash, at the lower
of the market price or net asset value per share (but not less than 95% of the market price). If market
price is equal to or exceeds net asset value, shares will be issued at net asset value. If net asset
value exceeds market price, Computershare Inc., the transfer agent, will buy fund shares in the open
market and reinvest those shares accordingly.
For the purpose of pursuing its investment
objective of returning at least the Original NAV, the fund intends to retain a limited portion of its
net investment income continuing until the final liquidating distribution. The fund also may retain a
portion of its short-term capital gains and all or a portion of its long-term capital gains. The extent
to which the fund retains income or capital gains, and the cumulative amount so retained, will depend
on, among other things, prevailing market conditions, portfolio turnover and reinvestment and overall
performance of the credit instruments held by the fund. Adjustments to the amounts of income retained
and the resulting distribution rate will take into account, among other factors, the then-current projections
of the fund’s net asset value on the Termination Date in the absence of income retention. The fund
anticipates that the possibility of some credit losses combined with the potential for declines in income
over the term of the fund, as the duration and weighted average maturity of the portfolio shorten, will
likely result in successive reductions in distributions over the approximate seven-year term of the fund.
The timing and amounts of these reductions cannot be predicted. While the amounts retained would be included
in the final liquidating distribution of the fund, the fund’s distribution rate over the term of the
fund will be lower, and possibly significantly lower, than if the fund distributed substantially all
of its net investment income and gains in each year. To the extent that the market price of Common Shares
over time is influenced by the fund’s distribution rate, the reduction of the fund’s monthly distribution
rate because of the retention of income is
45
NOTES
TO FINANCIAL STATEMENTS (continued)
expected to negatively impact the market price of the Common Shares. Any such
negative effect on the market price of the Common Shares may not be offset even though the fund’s net
asset value and liquidating distribution would be higher as a result of retaining income. In the event
that the fund elects to distribute all of its net investment income or gains (if any) in each year, rather
than retaining such income or gains, there is an increased risk to Common Shareholders that the final
liquidating distribution may be less than Original NAV.
On August 24, 2023,
the Board declared a cash dividend of $.035 per share from undistributed net investment income, payable
on September 22, 2023 to Common Shareholders of record as of the close of business on September 8, 2023.
The ex-dividend date was September 7, 2023.
(g) Federal income taxes: It is the policy of
the fund to continue to qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions
of taxable income and net realized capital gain sufficient to relieve it from substantially all federal
income and excise taxes.
As of and during the period ended August
31, 2023, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes
interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement
of Operations. During the period ended August 31, 2023, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended August 31, 2023 remains subject to
examination by the Internal Revenue Service and state taxing authorities.
At
August 31, 2023, the components of accumulated earnings on a tax basis were as follows: ordinary income
$2,384,055, accumulated capital losses $15,972,734 and unrealized depreciation $9,272,109.
The
fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss
carryovers retain their character as either short-term or long-term capital losses.
The accumulated capital
loss carryover is available for federal income tax purposes to be applied against future net
realized
capital gains, if any, realized subsequent to August 31, 2023. The fund has $3,061,151 of short-term
capital losses and $12,911,583 of long-term capital losses which can be carried forward for an unlimited
period.
46
The tax character of distributions paid to shareholders during the fiscal year
ended August 31, 2023 and August 31, 2022 was as follows: ordinary income $8,325,403 and $8,997,622.
During the period ended August 31, 2023, as a result of permanent book to tax
differences, primarily due to excise tax paid, the fund increased total distributable earnings (loss)
by $53,838 and decreased paid-in capital by the same amount. Net assets and net asset value per share
were not affected by this reclassification.
(h) New accounting pronouncements: In 2020, the FASB issued
Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential
burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
The objective of the guidance in Topic 848 is to provide temporary relief during
the transition period. The FASB included a sunset provision within Topic 848 based on expectations of
when the LIBOR would cease being published. At the time that Update 2020-04 was issued, the UK Financial
Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade,
or compel, banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set
for December 31, 2022—12 months after the expected cessation date of all currencies and tenors of LIBOR.
In March 2021, the FCA announced that the intended cessation date of the overnight
1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset
date of Topic 848.
Because the current relief in Topic 848 may not cover a period
of time during which a significant number of modifications may take place, the amendments in this Update
defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024 (“FASB Sunset Date”),
after which entities will no longer be permitted to apply the relief in Topic 848.
Management
had evaluated the impact of Topic 848 on the fund’s investments, derivatives, debt and other contracts
that will undergo reference rate-related modifications as a result of the Reference Rate Reform. Management
has no concerns in adopting Topic 848 by FASB Sunset Date. Management will continue to work with other
financial institutions and counterparties to modify contracts as required by applicable regulation and
within the regulatory deadlines.
47
NOTES
TO FINANCIAL STATEMENTS (continued)
NOTE
2—Borrowings:
The fund has a $68,000,000 Revolving Credit Facility Credit
Agreement with Societe Generale (the “Agreement”), which terminates on December 31, 2024 (or the
prior business day, as necessary). Under the terms of the Agreement, the fund may borrow (“Loans”)
on collateralized basis. The interest to be paid by the fund on such Loans is determined with reference
to the principal amount of each Loan outstanding from time to time. The fund also pays additional fees
pursuant to the Agreement.
During the period ended August 31, 2023, total fees pursuant
to the Agreement amounted to $3,121,223 inclusive of $2,899,986 of interest expense and $221,237 of loan
fees. These fees are included in Interest expense and loan fees in the Statement of Operations.
The average amount of borrowings outstanding under the Agreement during the period
ended August 31, 2023 was $46,272,603 with a related weighted average annualized interest rate of 6.27%.
The fund’s borrowings under the Agreement are secured by its portfolio holdings.
NOTE 3—Management Fee,
Sub-Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a Management
Agreement with the Adviser, the management fee is computed at the annual rate of .85% of the value of
the fund’s “Managed Assets” and is payable monthly. “Managed Assets” of the fund means the
total assets of the fund, including any assets attributable to leverage (i.e., any loans from certain
financial institutions and/or the issuance of debt securities (collectively, “Borrowings”), preferred
stock or other similar preference securities (“Preferred Shares”), or the use of derivative instruments
that have the economic effect of leverage), minus the fund’s accrued liabilities, other than any liabilities
or obligations attributable to leverage obtained through (i) indebtedness of any type (including, without
limitation, Borrowings), (ii) the issuance of Preferred Shares, and/or (iii) any other means, all as
determined in accordance with generally accepted accounting principles.
Pursuant
to the Prior Sub-Advisory Agreement and New Sub-Advisory Agreement between the Adviser and the Sub-Adviser,
the Adviser pays the Sub-Adviser a fee at the annual rate of .425% of the value of the fund’s average
daily Managed Assets and is payable monthly.
(b) The fund has an arrangement with The Bank
of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of the Adviser,
whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained.
For financial reporting purposes, the
48
fund includes this interest income and overdraft fees, if any, as interest income
in the Statement of Operations.
The fund compensates the Custodian under a custody agreement,
for providing custodial services for the fund. These fees are determined based on net assets and transaction
activity. During the period ended August 31, 2023, the fund was charged
$148,079 pursuant to the custody agreement.
During the period ended
August 31, 2023, the fund was charged $11,518 for services performed by the fund’s Chief Compliance
Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates”
in the Statement of Assets and Liabilities consist of: management fee of $123,504, Custodian fees of
$4,600 and Chief Compliance Officer fees of $1,815.
(c) Each board member also
serves as a board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees
and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities and forward contracts, during the period ended August 31,
2023, amounted to $125,024,718 and $137,199,672, respectively.
Floating Rate Loan Interests:
Floating rate instruments are loans and other securities with interest rates that adjust or “float”
periodically. Floating rate loans are made by banks and other financial institutions to their corporate
clients. The rates of interest on the loans adjust periodically by reference to a base lending rate,
plus a premium or credit spread. Floating rate loans reset on periodic set dates, typically 30 to 90
days, but not to exceed one year. The fund may invest in multiple series or tranches of a loan. A different
series or tranche may have varying terms and carry different associated risks.
The
fund may enter into certain credit agreements all or a portion of which may be unfunded. The fund is
obligated to fund these commitments at the borrower’s discretion. The commitments are disclosed in
the accompanying Statement of Investments. At August 31, 2023, the fund had sufficient cash and/or securities
to cover these commitments.
Derivatives: A derivative is a financial instrument whose performance
is derived from the performance of another asset. The fund enters into
49
NOTES
TO FINANCIAL STATEMENTS (continued)
International Swaps and Derivatives Association, Inc. Master Agreements or similar
agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract
counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements
include provisions for general obligations, representations, collateral and events of default or termination.
Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’
payables and/or receivables with collateral held and/or posted and create one single net payment in the
event of default or termination. The SEC adopted Rule 18f-4 under the Act, which regulates the use of
derivatives transactions for certain funds registered under the Act. The fund is deemed a “limited”
derivatives user under the rule and is required to limit its derivatives exposure so that the total notional
value of derivatives does not exceed 10% of fund’s net assets, and is subject to certain reporting
requirements.
Each type of derivative instrument that was held by the fund
during the period ended August 31, 2023 is discussed below.
Forward Foreign Currency Exchange Contracts:
The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part
of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a
foreign currency at a specified rate on a certain date in the future. With respect to sales of forward
contracts, the fund incurs a loss if the value of the contract increases between the date the forward
contract is opened and the date the forward contract is closed. The fund realizes a gain if the value
of the contract decreases between those dates. With respect to purchases of forward contracts, the fund
incurs a loss if the value of the contract decreases between the date the forward contract is opened
and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases
between those dates. Any realized or unrealized gains or losses which occurred during the period are
reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of
changes in value of underlying financial instruments. The fund is also exposed to credit risk associated
with counterparty non-performance on these forward contracts, which is generally limited to the unrealized
gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund
and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover
the fund’s exposure to the counterparty. Forward Contracts open at August 31, 2023 are set forth in
the Statement of Investments.
50
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities”
require disclosure on the offsetting of financial assets and liabilities. These disclosures are required
for certain investments, including derivative financial instruments subject to Master Agreements which
are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose
both gross and net information with respect to such investments. For financial reporting purposes, the
fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements
in the Statement of Assets and Liabilities.
At August 31, 2023, derivative assets
and liabilities (by type) on a gross basis are as follows:
| | | | | |
Derivative
Financial Instruments: | | Assets
($) | | Liabilities ($) | |
Forward contracts | | 67,556 | | - | |
Total
gross amount of derivative | | | | | |
assets and liabilities in the | | | | | |
Statement of Assets and Liabilities | | 67,556 | | - | |
Derivatives not subject to | | | | | |
Master Agreements | | - | | - | |
Total
gross amount of assets | | | | | |
and liabilities subject to | | | | | |
Master Agreements | | 67,556 | | - | |
The following table presents derivative assets net of amounts available for offsetting
under Master Agreements and net of related collateral received or pledged, if any, as of August 31, 2023:
| | | | | | |
| | | Financial | | | |
| | | Instruments | | | |
| | | and Derivatives | | | |
| Gross
Amount of | | Available | Collateral | | Net Amount of |
Counterparty | Assets
($) | 1 | for
Offset ($) | Received ($) | 2 | Assets
($) |
Citigroup
Global Markets Inc. |
67,556 | |
- | (67,556) | | - |
| | | | | | |
| | | | | | |
1
Absent a default event or early termination, OTC derivative assets and liabilities are presented at
gross amounts and are not offset in
the Statement of Assets and Liabilities. |
2
In some instances, the actual collateral received and/or pledged may be more than the amount shown due
to over collateralization. |
The
following table summarizes the average market value of derivatives outstanding during the
period ended August 31, 2023:
| | |
| | Average Market Value ($) |
Forward
contracts | |
66,521,952 |
51
NOTES
TO FINANCIAL STATEMENTS (continued)
At
August 31, 2023, the cost of investments for federal income
tax purposes was $177,898,120; accordingly, accumulated net unrealized depreciation on investments was
$9,277,266, consisting of $3,000,396 gross unrealized appreciation and $12,277,662 gross unrealized depreciation.
52
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of the Fund and Board of Directors of
BNY Mellon Alcentra
Global Credit Income 2024 Target Term Fund, Inc.
Opinion on the Financial
Statements
We
have audited the accompanying statement of assets and liabilities of BNY Mellon Alcentra
Global Credit Income 2024 Target Term Fund, Inc. (the Fund), including the statement of
investments, as of August 31, 2023, the related statements of operations and cash flows for the
year then ended, the statement of changes in net assets for each of the years in the two-year period
then ended, and the related notes (collectively, the financial statements) and the financial highlights
for each of the years in the five-year period then ended. In our opinion, the financial statements and
financial highlights present fairly, in all material respects, the financial position of the Fund as
of August
31, 2023, the results of its operations and its cash flows for the year then ended, the
changes in its net assets for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended, in conformity with U.S. generally
accepted accounting principles.
Basis for Opinion
These
financial statements and financial highlights are the responsibility of the Fund’s management. Our
responsibility is to express an opinion on these financial statements and financial highlights based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of material misstatement, whether
due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement
of the financial statements and financial highlights, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements and financial highlights. Such procedures also
included confirmation of securities owned as of August 31, 2023, by correspondence
with custodian, agent banks and brokers or by other appropriate auditing procedures when replies from
agent banks and brokers were not received. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. We believe that our audit provides a reasonable basis
for our opinion.
We have served as the
auditor of one or more BNY Mellon Investment Adviser, Inc. investment companies since 1994.
New York, New York
October
23, 2023
53
ADDITIONAL
INFORMATION (Unaudited)
Dividend Reinvestment Plan
The fund has a dividend reinvestment plan
(the “Plan”) commonly referred to as an “opt-out” plan. Each holder of Common Shares who participates
in the Plan will have all distributions of dividends and capital gains (“Dividends”) automatically
reinvested in additional Common Shares by Computershare Trust Company, N.A. as agent (the “Plan Agent”).
Shareholders who elect not to participate in the plan will receive all Dividends in cash paid by check
mailed directly to the shareholder of record (or if the Common Shares are held in street or other nominee
name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose Common
Shares are held in the name of a broker or nominee should contact the broker or nominee to determine
whether and how they may participate in the Plan.
The Plan Agent serves as agent for the
fund’s shareholders in administering the Plan. After the fund declares a Dividend, the Plan Agent will,
as agent for the shareholders, either (i) receive the cash payment and use it to buy Common Shares in
the open market, on the NYSE or elsewhere, for the participants’ accounts or (ii) distribute newly
issued Common Shares of the fund on behalf of the participants.
A. The
Plan Agent will receive cash from the fund with which to buy Common Shares in the open market if, on
the Dividend payment date, the fund’s net asset value per Common Share exceeds the market price per
Common Share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend
in newly issued Common Shares of the fund if, on the Dividend payment date, the market price per Common
Share plus estimated brokerage commissions equals or exceeds the net asset value per Common Share of
the fund on that date. The number of Common Shares to be issued will be computed at a per share rate
equal to the greater of (i) the net asset value or (ii) 95% of the closing market price per Common Share
on the Dividend payment date.
B. If
the market price per Common Share is less than the net asset value per Common Share on a Dividend payment
date, the Plan Agent will have until the last business day before the next ex-Dividend date for the Common
Shares, but in no event more than 30 days after the Dividend payment date (as the case may be, the “Purchase
Period”), to invest the Dividend amount in Common Shares acquired in open market purchases. If, at
the close of business on any day during the Purchase Period on which the fund’s net asset value is
calculated, the fund’s net asset value on the Dividend payment date equals or is less than the market
price per Common Share plus estimated brokerage commissions, the Plan Agent will cease making open market
purchases and the uninvested portion of such Dividends shall be filled through the issuance by the fund
of new Common Shares at the price set forth in paragraph A above.
Participants
in the Plan may withdraw from the Plan upon notice to the Plan Agent. Such withdrawal will be effective
immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be
effective for all subsequent Dividends. When a participant withdraws from the Plan or the Plan is terminated,
such participant
54
will receive whole Common Shares in his or her account under the Plan and will
receive a cash payment for any fraction of a Common Share credited to such account. If any participant
elects to have the Plan Agent sell all or part of his or her Common Shares and remit the proceeds, the
Plan Agent is authorized to deduct a $2.50 fee plus $0.10 per share brokerage commissions.
The
Plan Agent’s fees for the handling of reinvestment of Dividends will be paid by the fund. However,
each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan
Agent’s open market purchases in connection with the reinvestment of Dividends. The automatic reinvestment
of Dividends will not relieve participants of any income tax that may be payable or required to be withheld
on such Dividends.
The fund reserves the right to amend or terminate the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at 1-800-522-6645.
Investment
Objectives and Principal Investment Strategies
Investment Objectives. The fund’s investment
objectives are to seek high current income and to return at least $9.835 per Common Share (the public
offering price per Common Share (as defined below) after deducting a sales load of $0.165 per Common
Share but before deducting offering costs of $0.02 per Common Share (“Original NAV”)) to holders
of record of shares of the Fund’s common stock (“Common Shares”) on or about the December 1, 2024
(subject to certain extensions, the “Termination Date”). The objective to return at least the fund’s
Original NAV is not an express or implied guarantee obligation of the fund, the Adviser, the Sub-Adviser
or any other entity, and an investor may receive less than the Original NAV upon termination of the fund.
The fund will attempt to strike a balance between its investment objectives, seeking
to provide as high a level of current income as is consistent with the fund’s Credit Strategies (as
defined herein), the declining average maturity of its portfolio and its objective of returning at least
the Original NAV on or about the Termination Date. However, as the fund approaches the Termination Date,
its monthly distributions are likely to decline, and there can be no assurance that the fund will achieve
either of its investment objectives or that the fund’s investment strategies will be successful.
There is no assurance the fund will achieve either of its investment objectives.
The fund’s investment objectives are fundamental and may not be changed without prior approval of the
fund’s shareholders.
Principal Investment Strategies. Under normal market conditions, the fund
invests at least 80% of its Managed Assets in credit instruments and other investments with similar economic
characteristics. Such credit instruments include: first lien secured floating rate loans, as well as
investments in participations and assignments of such loans; second lien, senior unsecured, mezzanine
and other collateralized and uncollateralized subordinated loans; corporate debt obligations other than
loans; and structured products, including collateralized bond, loan and other debt obligations,
55
ADDITIONAL
INFORMATION (Unaudited) (continued)
structured notes and credit-linked notes. To the extent that the fund invests
in derivative instruments with economic characteristics similar to those credit instruments, the value
of such investments will be included for purposes of the fund’s 80% investment policy.
The
fund may invest in credit instruments of any credit quality, including credit instruments that, at the
time of investment, are rated below investment grade (i.e., below BBB- or Baa3) by one or more of the
nationally recognized statistical rating organizations (“NRSROs”) that rate such instruments, or,
if unrated, determined to be of comparable quality by the Sub-Adviser. Instruments of below investment
grade quality, commonly referred to as “junk” or “high yield” instruments, are regarded as having
predominantly speculative characteristics with respect to an obligor’s capacity to pay interest and
repay principal and are more susceptible to default or decline in market value due to adverse economic
and business developments than higher quality instruments. The fund may invest in credit instruments
that, at the time of investment, are distressed or defaulted, or illiquid, unregistered (but are eligible
for purchase and sale by certain qualified institutional buyers) or subject to contractual restrictions
on their resale. The fund also may invest in investment grade credit instruments.
The
fund may invest in credit instruments of any maturity or duration. “Expected maturity” means the
time of expected return of the majority of the instrument’s principal and/or the time when a reasonable
investor would expect to have the majority of the principal returned. The expected maturity of some credit
instruments may be the same as the stated maturity. Certain credit instruments may have mandatory call
features, prepayment features or features obligating the issuer or another party to repurchase or redeem
the instrument at dates that are earlier than the instruments’ respective stated maturity dates. For
these credit instruments, expected maturity is likely to be earlier than the stated maturity.
The
fund focuses its investments in credit instruments of U.S. and European companies, although as a global
fund, the fund may invest in companies located anywhere in the world. Under normal circumstances, the
fund invests in at least three countries, which may include the United States. The fund’s investments
in European companies are generally anticipated to be in companies in Northern and Western European countries,
including the United Kingdom, Ireland, France, Germany, Austria and Switzerland, as well as the Benelux
countries (Belgium, the Netherlands and Luxembourg) and the Scandinavian countries (Sweden, Denmark,
Norway and Finland). Other European countries in which the fund may seek to invest include, but are not
limited, to Spain, Italy, Greece and Portugal. The fund also may invest in other developed countries,
including Canada. The fund will not invest more than 25% of its Managed Assets in securities of issuers
located in any single country outside the United States. Moreover, the fund will not invest more than
25% of its Managed Assets in companies located in emerging market countries. The fund expects that, under
current market conditions, it will seek to hedge substantially all of its exposure to foreign currencies
against the value of the U.S. dollar (i.e., up to 100% of its Managed Assets in the event the fund holds
no U.S. dollar-denominated investments).
56
The fund generally does not intend to invest, at the time of purchase, more than
5% of its Managed Assets in any one issuer (except securities issued by the U.S. Government and its agencies
and instrumentalities). In addition, the fund will not invest more than 25% of its Managed Assets in
issuers in any one particular industry.
The fund may use, to a limited extent,
derivative instruments as a substitute for investing directly in an underlying asset, to increase returns,
to manage credit or interest rate risk, to manage foreign currency risk, or as part of a hedging strategy.
Although the fund is not limited in the types of derivatives it can use, the fund currently expects that
its use of derivatives will consist principally of credit default swaps and foreign currency forward
and futures contracts. The fund will not invest more than 10% of its net assets in derivatives, except
that such limitation will not apply to derivatives used as part of a hedging strategy. The fund’s use
of derivatives will be limited by the Act.
The fund may employ leverage to enhance
its potential for achieving its investment objectives. The fund currently intends to utilized leverage
in an amount equal to 30% of the fund’s total assets, but may borrow up to the limits imposed by the
Act (i.e., for every dollar of indebtedness from Borrowings, the fund is required to have at least three
dollars of total assets, including the proceeds from Borrowings) principally through Borrowings from
certain financial institutions.
In seeking to return at least the Original
NAV on or about the Termination Date, the fund utilizes various portfolio and cash flow management techniques,
including setting aside a portion of its net investment income, possibly retaining capital gains. The
average maturity of the fund’s holdings is generally expected to shorten as the fund approaches its
Termination Date, which may reduce interest rate risk over time but which may also reduce returns and
net income amounts available for distribution to holders of the fund’s Common Shares (“Common Shareholders”).
During any wind-down period, the fund’s portfolio composition will depend on then-current market conditions
and the availability of the types of securities in which the fund may invest. Accordingly, the fund’s
portfolio composition during that period cannot currently be estimated, nor can the fund precisely predict
how its portfolio composition may change as the fund’s Termination Date approaches. There can be no
assurance that the fund’s strategies will be successful.
Credit Strategies
The Sub-Adviser constructs the fund’s investment portfolio by allocating the
fund’s assets to credit instruments and related investments in the following credit strategies: (i)
Senior Secured Loans and Other Loans; (ii) Corporate Debt; (iii) Special Situations; and (iv) Structured
Credit (collectively, the “Credit Strategies”). The Sub-Adviser has considerable latitude in allocating
the fund’s Managed Assets and the composition of the fund’s investment portfolio will vary over time,
based on the allocation to the Credit Strategies and the fund’s exposure to different types of credit
instruments. Under normal market conditions, the Sub-Adviser generally allocates the fund’s Managed
Assets as follows:
● at
least 25% in the Senior Secured Loans and Other Loans Strategy;
57
ADDITIONAL
INFORMATION (Unaudited) (continued)
● at least 25% in the
Corporate Debt Strategy;
● no
more than 15% in the Special Situations Strategy; and
● no more than 30% in both the Special Situations Strategy and
the Structured Credit Strategy.
Allocations among the Credit Strategies
will vary over time, perhaps significantly, and the fund may not be invested in all of the Credit Strategies
at all times and may maintain zero exposure to a particular Credit Strategy or type of credit instrument.
The fund’s primary portfolio managers make all determinations regarding allocations
and reallocations of the fund’s Managed Assets to each Credit Strategy. The fund’s primary portfolio
managers set target allocations for each Credit Strategy, which may be modified at any time. The percentage
allocations among Credit Strategies may, from time to time, be out of balance with the target allocations
set by the fund’s primary portfolio managers due to various factors, such as varying investment performance
among Credit Strategies, illiquidity of certain portfolio investments or a change in the target allocations.
At least quarterly, the fund’s primary portfolio managers review the percentage allocations to each
Credit Strategy and rebalance the fund’s portfolio and/or modify the target allocations as they deem
necessary or appropriate in light of economic and market conditions, available investment opportunities
and the relative returns and risks then represented by each type of security.
Senior Secured Loans
and Other Loans Strategy. The Senior Secured Loans and Other Loans Strategy seeks to generate high current
income by investing in the secured debt of borrowers in the higher credit quality categories of the below
investment grade corporate debt market. As part of this strategy, the fund may invest in first lien secured
floating rate loans (“Senior Secured Loans”), which typically are syndicated. Senior Secured Loans
are loans secured by specific collateral of the borrower and are senior to most other securities of the
borrower (e.g., common stock or debt instruments) in the event of bankruptcy. The fund also may purchase
participations and assignments in, and commitments to purchase, Senior Secured Loans. Investments in
Senior Secured Loans may provide more favorable exposure to the below investment grade corporate debt
market due to their senior position in an issuer’s capital structure, which promotes lower price volatility
and higher recoveries in the event of default. Senior Secured Loans also may provide additional protection
through financial covenants and access to private management accounting information from the borrower.
There also is a more established market for syndicated Senior Secured Loans, which, under normal market
conditions, may facilitate a more liquid trading environment.
As part of this Credit
Strategy, the fund also may invest in second lien, senior unsecured, mezzanine and other collateralized
and uncollateralized subordinated loans (“Subordinated Loans”). Subordinated Loans sit below the
senior secured debt in a company’s capital structure, but have priority over the company’s bonds
and equity securities. The fund, from time to time, also may seek to participate in the upside gain of
a business through the exercise of warrants or other equity securities acquired in connection with its
investment in a Subordinated Loan.
58
Corporate
Debt Strategy. The Corporate Debt Strategy seeks to generate high current income by capturing
the higher yields offered by below investment grade corporate credit instruments while managing the fund’s
exposure to interest rate movements. As part of this strategy, the fund may invest in corporate debt
obligations including corporate bonds, debentures, notes, commercial paper and other similar instruments,
such as certain convertible securities (“Corporate Debt”). The Sub-Adviser expects that most of the
Corporate Debt the fund invests in will be rated below investment grade. The fixed rate Corporate Debt
in which the fund invests typically will be unsecured, while the floating rate Corporate Debt in which
the fund invests typically will be secured.
Special Situations Strategy.
The Special Situations Strategy seeks to generate attractive total return driven by income and capital
appreciation by investing in specialized credit opportunities in the below investment grade debt markets,
on both a long-term and short-term basis. As part of this strategy, the fund may invest in loans and
other credit instruments related to companies engaged in extraordinary transactions, such as mergers
and acquisitions, litigation, rights offerings, liquidations outside of bankruptcy, covenant defaults,
refinancings, recapitalizations and other special situations (collectively, “Special Situations Investments”).
The Sub-Adviser intends to focus the fund’s Special Situations Investments in companies that have experienced,
or are currently experiencing, financial difficulties as a result of deteriorating operations, changes
in macro-economic conditions, changes in governmental monetary or fiscal policies, adverse legal judgments,
or other events which may adversely impact their credit standing. The Sub-Adviser seeks opportunistic
investment opportunities where it believes that the return potential exceeds the downside risk. Consequently,
the fund’s Special Situations Investments will focus on loans and other secured credit instruments
over equity securities, as those credit instruments provide a claim on an issuer’s assets. As part
of this strategy, however, the fund may acquire equity securities incidental to the purchase or ownership
of Special Situations Investments.
Structured Credit Strategy. The Structured Credit
Strategy seeks to generate income with the potential for capital appreciation by investing predominately
in the mezzanine (i.e., rated below the senior tranches but above the most junior tranches) tranches
and most junior tranches of CLOs backed by Senior Secured Loans. When analyzing the value and suitability
of CLO tranches, the Sub-Adviser assesses collateral composition, subordination levels and cash flow
levels. The underlying portfolio is reviewed by the Sub-Adviser, which looks at, among other things:
downgrade and default risk for individual credits; recovery rate expectations and the amount of second
lien and mezzanine exposure in the portfolio; and the pricing on the underlying portfolio.
In addition to investing in CLOs and other collateralized debt obligations (“CDOs”)
backed by Senior Secured Loans, the fund also may invest in structured notes and credit-linked notes
that provide exposure to Senior Secured Loans, as well as investments in asset-backed securities, including
mortgage-backed securities. These instruments collectively are referred to as “Structured Credit Investments.”
The Sub-Adviser believes attractive returns in Structured Credit Investments can be achieved
59
ADDITIONAL
INFORMATION (Unaudited) (continued)
through a combination of current income and price appreciation due to the discounted
valuations of many of these investments.
Non-Principal Investment Strategies. Although not a principal
investment strategy, the fund may invest up to 20% of its Managed Assets in other securities and instruments
including, without limitation: (i) equity securities of issuers that are related to the fund’s investments
in credit instruments, such as common stock, preferred stock and convertible securities (including warrants
or other rights to acquire common or preferred stock); (ii) U.S. and foreign government securities; and
(iii) short-term fixed income securities and money market instruments.
During
temporary defensive periods or in order to keep the fund’s cash fully invested, including during the
wind-down period of the fund, the fund may deviate from its investment objectives and policies. During
such periods, the fund may invest up to 100% of its assets in money market instruments, including U.S.
Government securities, repurchase agreements, bank obligations and commercial paper, as well as cash,
cash equivalents or high quality short-term fixed income and other securities. Accordingly, during such
periods, the fund may not achieve its investment objectives.
Principal Risk Factors
An
investment in the fund involves special risk considerations, which are described below. The fund is a
diversified, closed-end management investment company designed as a long-term investment and not as a
vehicle for short-term trading purposes. An investment in the fund’s Common Shares may be speculative
and it involves a high degree of risk. The fund should not constitute a complete investment program.
Due to the uncertainty in all investments, there can be no assurance that the fund will achieve its investment
objectives. Different risks may be more significant at different times depending on market conditions.
Your Common Shares at any point in time may be worth less than your original investment, even after taking
into account the reinvestment of fund dividends and distributions.
General Risks
of Investing in the Fund
Risk of Market Price Discount From Net Asset Value. Shares of closed-end
funds frequently trade at a market price that is below their net asset value. This is commonly referred
to as “trading at a discount.” This characteristic of shares of closed-end funds is a risk separate
and distinct from the risk that the fund’s net asset value may decrease.
Whether
Common Shareholders will realize a gain or loss upon the sale of the Common Shares will depend upon whether
the market value of those Common Shares at the time of sale is above or below the price the Common Shareholder
paid, taking into account transaction costs, for the Common Shares and is not directly dependent upon
the fund’s net asset value. Because the market value of the Common Shares will be determined by factors
such as the relative demand for and supply of the Common Shares in the market, general market conditions
and other factors beyond the control of the fund, the fund cannot predict whether its Common Shares will
trade at, below or above net asset value, or below or above the initial offering price for such Common
Shares.
60
Management
and Allocation Risk. The fund’s primary portfolio managers make all determinations regarding allocations
and reallocations of the fund’s Managed Assets to each Credit Strategy. The percentage allocations
among Credit Strategies may, from time to time, be out of balance with the target allocations set by
the fund’s primary portfolio managers due to various factors, such as varying investment performance
among Credit Strategies, illiquidity of certain portfolio investments or a change in the target allocations.
Any rebalancing of the fund’s portfolio, whether pursuant to a fixed percentage allocation or otherwise,
may have an adverse effect on the performance of the fund and may be subject to certain additional limits
and constraints. There can be no assurance that the decisions of the fund’s primary portfolio managers
with respect to the allocation and reallocation of the fund’s Managed Assets among the Credit Strategies,
or that an investment within a particular Credit Strategy, will be successful.
Seven-Year Term Risk.
It is anticipated that the fund will terminate on or about December 1, 2024, subject to certain extensions
described herein. As the assets of the fund will be liquidated in connection with its termination, the
fund may be required to sell portfolio securities when it otherwise would not, including at times when
market conditions are not favorable, which may cause the fund to lose money. During any wind-down period,
the fund may deviate from its 80% investment policy and its Credit Strategy allocations and may not achieve
its investment objectives. In addition, the Board of Directors may choose to adopt a plan of termination
prior to the Termination Date upon written notice to all shareholders of the fund.
As
the fund approaches its Termination Date, the portfolio composition of the fund will change as more of
the fund’s investments mature or are called or sold, which may cause the fund’s returns to decrease.
The fund may also shift its portfolio composition to securities the Sub-Adviser believes will provide
adequate liquidity upon termination of the fund, which may also cause the fund’s returns to decrease.
In addition, rather than reinvesting the proceeds of its matured, called or sold credit investments,
the fund may distribute the proceeds in one or more liquidating distributions prior to the final liquidation,
which may cause the fund’s fixed expenses to increase when expressed as a percentage of assets under
management, or the fund may invest the proceeds in lower yielding securities or hold the proceeds in
cash, which may adversely affect the performance of the fund.
The Board of Directors
may choose to commence the liquidation and termination of the fund prior to the Termination Date, which
would cause the fund to miss any market appreciation that occurs after the termination is implemented.
Conversely, the Board of Directors may decide against early termination, after which decision, market
conditions may deteriorate and the fund may experience losses. Upon its termination, it is anticipated
that the fund will have distributed substantially all of its net assets to Common Shareholders, although
securities for which no market exists or securities trading at depressed prices, if any, may be placed
in a liquidating trust. Securities placed in a liquidating trust may be held for an indefinite period
of time until they can be sold or pay out all of their cash flows. The fund cannot predict the amount
of securities that will be required to be placed in a liquidating trust.
61
ADDITIONAL
INFORMATION (Unaudited) (continued)
Investment
and Market Risk. An investment in the fund is subject to investment risk, including the possible
loss of the entire amount that you invest. Your investment in Common Shares represents an indirect investment
in the credit instruments and other investments and assets owned by the fund. The value of the fund’s
portfolio investments may move up or down, sometimes rapidly and unpredictably. The value of the instruments
in which the fund invests may be affected by political, regulatory, economic and social developments,
and developments that impact specific economic sectors, industries or segments of the market. In addition,
turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may
negatively affect many issuers, which could adversely affect the fund. Global economies and financial
markets are becoming increasingly interconnected, and conditions and events in one country, region or
financial market may adversely impact issuers in a different country, region or financial market. These
risks may be magnified if certain events or developments adversely interrupt the global supply chain;
in these and other circumstances, such risks might affect companies world-wide. Recent examples include
pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments,
including closing borders, restricting international and domestic travel and imposing prolonged quarantines
of large populations, and by businesses, including changes to operations and reducing staff. The effects
of COVID-19 have contributed to increased volatility in global markets and will likely affect certain
countries, companies, industries and market sectors more dramatically than others. The COVID-19 pandemic
has had, and any other outbreak of an infectious disease or other serious public health concern could
have, a significant negative impact on economic and market conditions and could trigger a prolonged period
of global economic slowdown. To the extent the fund has significant investments in certain countries,
regions, companies, industries or market sectors, such positions will increase the risk of loss from
adverse developments affecting those countries, regions, companies, industries or sectors.
Tax
Risk.
Certain of the fund’s investments will require the fund to recognize taxable income in a taxable year
in excess of the cash generated on those investments during that year. In particular, the fund invests
in loans and other debt obligations that will be treated as having “market discount” and/or original
issue discount for U.S. federal income tax purposes. Because the fund may be required to recognize income
in respect of these investments before, or without receiving, cash representing such income, the fund
may have difficulty satisfying the annual distribution requirements applicable to regulated investment
companies and avoiding fund-level U.S. federal income and/or excise taxes. Accordingly, the fund may
be required to sell assets, including at potentially disadvantageous times or prices, borrow, raise additional
equity capital, make taxable distributions of its shares or debt securities, or reduce new investments,
to obtain the cash needed to make these income distributions. If the fund liquidates assets to raise
cash, the fund may realize gain or loss on such liquidations; in the event the fund realizes net capital
gains from such liquidation transactions, its shareholders may receive larger capital gain distributions
than they would in the absence of such transactions.
Risks of Investing
in Credit Instruments
62
Issuer
Risk.
The market value of credit instruments may decline for a number of reasons that directly relate to the
issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods
and services. The market value of a credit instrument also may be affected by investors’ perceptions
of the creditworthiness of the issuer, the issuer’s performance and perceptions of the issuer in the
market place.
Credit Risk. Credit risk is the risk that one or more credit instruments
in the fund’s portfolio will decline in price or fail to pay interest or principal when due because
the issuer of the instrument experiences a decline in its financial status. Losses may occur because
the market value of a credit instrument is affected by the creditworthiness or perceived creditworthiness
of the issuer and by general economic and specific industry conditions and the fund’s investments will
often be subordinate to other debt in the issuer’s capital structure. Because the fund generally invests
a significant portion of its Managed Assets in below investment grade instruments, it will be exposed
to a greater amount of credit risk than a fund which invests in investment grade securities. The prices
of below investment grade instruments are more sensitive to negative developments, such as a decline
in the issuer’s revenues or a general economic downturn, than are the prices of investment grade instruments,
which may reduce the fund’s net asset value.
Interest Rate Risk. Prices of fixed rate
credit instruments tend to move inversely with changes in interest rates. Typically, a rise in rates
will adversely affect these instruments and, accordingly, will cause the value of the fund’s investments
in these securities to decline. Interest rates in the United States have been rising and may continue
to increase in the near future. During periods of very low interest rates, which occur from time to time
due to market forces or actions of governments and/or their central banks, including the Board of Governors
of the Federal Reserve System in the United States, the fund may be subject to a greater risk of principal
decline from rising interest rates. The magnitude of these fluctuations in the market price of fixed
rate credit instruments is generally greater for instruments with longer effective maturities and durations
because such instruments do not mature, reset interest rates or become callable for longer periods of
time.
Unlike investment grade instruments, however, the prices of
high yield (“junk”) instruments may fluctuate unpredictably and not necessarily inversely with changes
in interest rates. In addition, the rates on floating rate instruments adjust periodically with changes
in market interest rates. Although these instruments are generally less sensitive to interest rate changes
than fixed rate instruments, the value of floating rate loans and other floating rate instruments may
decline if their interest rates do not rise as quickly, or as much, as general interest rates. Substantial
increases in interest rates could cause an increase in loan defaults as borrowers might lack resources
to meet higher debt service requirements.
Prepayment Risk. During periods of declining interest
rates, the issuer of a credit instrument may exercise its option to prepay principal earlier than scheduled,
forcing the fund to reinvest the proceeds from such prepayment in potentially lower yielding instruments,
which may result in a decline in the fund’s income and distributions to
63
ADDITIONAL
INFORMATION (Unaudited) (continued)
Common Shareholders. This is known as prepayment or “call” risk. Credit instruments
frequently have call features that allow the issuer to redeem the instrument at dates prior to its stated
maturity at a specified price (typically greater than par) only if certain prescribed conditions are
met (“call protection”). An issuer may choose to redeem a fixed rate credit instrument if, for example,
the issuer can refinance the instrument at a lower cost due to declining interest rates or an improvement
in the credit standing of the issuer. For premium bonds (bonds acquired at prices that exceed their par
or principal value) purchased by the fund, prepayment risk may be enhanced.
Reinvestment Risk.
Reinvestment risk is the risk that income from the fund’s portfolio will decline if and when the fund
invests the proceeds from matured, traded or called credit instruments at market interest rates that
are below the portfolio’s current earnings rate. A decline in income could affect the Common Share
price or its overall return.
Spread Risk. Wider credit spreads and decreasing market
values typically represent a deterioration of the fixed income instrument’s credit soundness and a
perceived greater likelihood or risk of default by the issuer. Fixed income instruments generally compensate
for greater credit risk by paying interest at a higher rate. The difference (or “spread”) between
the yield of a security and the yield of a benchmark, such as a U.S. Treasury security with a comparable
maturity, measures the additional interest paid for credit risk. As the spread on a security widens (or
increases), the price (or value) of the security generally falls. Spread widening may occur, among other
reasons, as a result of market concerns over the stability of the market, excess supply, general credit
concerns in other markets, security- or market-specific credit concerns or general reductions in risk
tolerance.
Inflation/Deflation Risk. Inflation risk is the risk that the value
of certain assets or income from the fund’s investments will be worth less in the future as inflation
decreases the value of money. As inflation increases, the real value of the Common Shares and distributions
on the Common Shares can decline. In addition, during any periods of rising inflation, the costs associated
with the fund’s use of leverage through Borrowings would likely increase, which would tend to further
reduce returns to Common Shareholders. Deflation risk is the risk that prices throughout the economy
decline over time—the opposite of inflation. Deflation may have an adverse effect on the creditworthiness
of issuers and may make issuer defaults more likely, which may result in a decline in the value of the
fund’s portfolio.
Below Investment Grade Instruments Risk
The
fund may invest all of its assets in below investment grade instruments. Below investment grade instruments
are commonly referred to as “junk” or “high yield” instruments and are regarded as predominantly
speculative with respect to the issuer’s capacity to pay interest and repay principal. Below investment
grade instruments, though generally higher yielding, are characterized by higher risk. These instruments
are especially sensitive to adverse changes in general economic conditions, to changes in the financial
condition of their issuers and to price fluctuation in response to changes in interest rates. During
periods of economic downturn or rising interest rates, issuers of
64
below investment grade instruments may experience financial stress that could
adversely affect their ability to make payments of principal and interest and increase the possibility
of default. The secondary market for below investment grade instruments may not be as liquid as the secondary
market for more highly rated instruments, a factor which may have an adverse effect on the fund’s ability
to dispose of a particular security. There are fewer dealers in the market for high yield instruments
than for investment grade instruments. The prices quoted by different dealers may vary significantly,
and the spread between the bid and asked price is generally much larger for high-yield securities than
for higher quality instruments. Under adverse market or economic conditions, the secondary market for
below investment grade instruments could contract, independent of any specific adverse changes in the
condition of a particular issuer, and these instruments may become illiquid. In addition, adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may also decrease the values
and liquidity of below investment grade instruments, especially in a market characterized by a low volume
of trading.
Default, or the market’s perception that an issuer is likely
to default, could reduce the value and liquidity of below investment grade instruments held by the fund,
thereby reducing the value of an investment in the Common Shares. In addition, default, or the market’s
perception that an issuer is likely to default, may cause the fund to incur expenses, including legal
expenses, in seeking recovery of principal or interest on its portfolio holdings, including litigation
to enforce the fund’s rights. In any reorganization or liquidation proceeding relating to a portfolio
company, the fund may lose its entire investment or may be required to accept cash or securities with
a value less than its original investment. Among the risks inherent in investments in a troubled entity
is the fact that it frequently may be difficult to obtain information as to the true financial condition
of such issuer. The Sub-Adviser’s judgment about the credit quality of an issuer and the relative value
of its securities may prove to be wrong. In addition, not only may the fund lose its entire investment
on one or more instruments, Common Shareholders may also lose their entire investments in the fund. Investments
in below investment grade instruments may present special tax issues for the fund to the extent that
the issuers of these securities default on their obligations pertaining thereto, and the U.S. federal
income tax consequences to the fund as a holder of such distressed securities may not be clear.
Because of the greater number of investment considerations involved in investing
in below investment grade instruments, the ability of the fund to meet its investment objectives depends
more on the Sub-Adviser’s judgment and analytical abilities than would be the case if the portfolio
invested primarily in securities in the higher rating categories. While the Sub-Adviser will attempt
to reduce the risks of investing in below investment grade instruments through active portfolio management,
diversification, credit analysis and attention to current developments and trends in the economy and
the financial markets, there can be no assurance that a broadly diversified portfolio of such instruments
would substantially lessen the risks of defaults brought about by an economic downturn or recession.
65
ADDITIONAL
INFORMATION (Unaudited) (continued)
Distressed
or Defaulted Issuers. The fund may invest up to 15% of its Managed Assets in credit instruments of
distressed or defaulted issuers. Such instruments may be rated in the lower rating categories (Caa1 or
lower by Moody’s Investors Service, Inc., or CCC+ or lower by S&P Global Ratings or Fitch Ratings,
Inc.) or, if unrated, are considered by the Sub-Adviser to be of comparable quality. For these securities,
the risks associated with below investment grade instruments are more pronounced. Instruments rated in
the lower rating categories are subject to higher credit risk with extremely poor prospects of ever attaining
any real investment standing, to have a current identifiable vulnerability to default, to be unlikely
to have the capacity to pay interest and repay principal when due in the event of adverse business, financial
or economic conditions and/or to be in default or not current in the payment of interest or principal.
Ratings may not accurately reflect the actual credit risk associated with a corporate security.
Investing in distressed or defaulted securities is speculative and involves substantial
risks. The fund may make such investments when, among other circumstances, the Sub-Adviser believes it
is reasonably likely that the issuer of the distressed or defaulted securities will make an exchange
offer or will be the subject of a plan of reorganization pursuant to which the fund will receive new
securities in return for the distressed or defaulted securities. There can be no assurance, however,
that such an exchange offer will be made or that such a plan of reorganization will be adopted. In addition,
a significant period of time may pass between the time at which the fund makes its investment in distressed
or defaulted securities and the time that any such exchange offer or plan of reorganization is completed,
if at all. During this period, it is unlikely that the fund would receive any interest payments on the
distressed or defaulted securities, the fund would be subject to significant uncertainty whether the
exchange offer or plan of reorganization will be completed and the fund may be required to bear certain
extraordinary expenses to protect and recover its investment. The fund also will be subject to significant
uncertainty as to when, in what manner and for what value the obligations evidenced by the distressed
or defaulted securities will eventually be satisfied (e.g., through a liquidation of the issuer’s assets,
an exchange offer or plan of reorganization involving the distressed or defaulted securities or a payment
of some amount in satisfaction of the obligation). Even if an exchange offer is made or plan of reorganization
is adopted with respect to distressed or defaulted securities held by the fund, there can be no assurance
that the securities or other assets received by the fund in connection with the exchange offer or plan
of reorganization will not have a lower value or income potential than may have been anticipated when
the investment was made, or no value.
Senior Secured Loans Risk
The
Senior Secured Loans in which the fund invests typically will be below investment grade quality. Although,
in contrast to other below investment grade instruments, Senior Secured Loans hold senior positions in
the capital structure of a business entity, are secured with specific collateral and have a claim on
the assets and/or stock of the borrower that is senior to that held by unsecured creditors, subordinated
debt holders and stockholders of the borrower, the risks associated with Senior Secured Loans are
66
similar to the risks of below investment grade instruments. Additionally, if a
borrower under a Senior Secured Loan defaults, becomes insolvent or goes into bankruptcy, the fund may
recover only a fraction of what is owed on the Senior Secured Loan or nothing at all.
Although
the Senior Secured Loans in which the fund invests will be secured by collateral, there can be no assurance
that such collateral can be readily liquidated or that the liquidation of such collateral would satisfy
the borrower’s obligation in the event of non-payment of scheduled interest or principal.
In
the event of the bankruptcy or insolvency of a borrower, the fund could experience delays or limitations
with respect to its ability to realize the benefits of the collateral securing a Senior Secured Loan.
In the event of a decline in the value of the already pledged collateral, if the terms of a Senior Secured
Loan do not require the borrower to pledge additional collateral, the fund will be exposed to the risk
that the value of the collateral will not at all times equal or exceed the amount of the borrower’s
obligations under the Senior Secured Loan. To the extent that a Senior Secured Loan is collateralized
by stock in the borrower or its subsidiaries, such stock may lose some or all of its value in the event
of the bankruptcy or insolvency of the borrower. Senior Secured Loans that are under-collateralized involve
a greater risk of loss. Some Senior Secured Loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate a Senior Secured Loan to presently existing or future
indebtedness of the borrower or take other action detrimental to lenders, including the fund. Such court
action could, under certain circumstances, include invalidation of a Senior Secured Loan.
In
general, the secondary trading market for Senior Secured Loans is not fully-developed. No active trading
market may exist for certain Senior Secured Loans, which may make it difficult to value them. Illiquidity
and adverse market conditions may mean that the fund may not be able to sell certain Senior Secured Loans
quickly or at a fair price. To the extent that a secondary market does exist for certain Senior Secured
Loans, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods. Furthermore, Senior Secured Loans may not be considered securities, and purchasers,
such as the fund, may not be entitled to rely on the anti-fraud protections of the federal securities
laws, including those with respect to the use of material non-public information.
If
legislation or state or federal regulations impose additional requirements or restrictions on the ability
of financial institutions to make Senior Secured Loans, the availability of Senior Secured Loans for
investment by the fund may be adversely affected. In addition, such requirements or restrictions could
reduce or eliminate sources of financing for certain borrowers.
If legislation or federal
or state regulations require financial institutions to increase their capital requirements this may cause
financial institutions to dispose of Senior Secured Loans that are considered highly levered transactions.
Such sales could result in prices that, in the opinion of the Adviser or the Sub-Adviser, do not represent
fair value. If the
67
ADDITIONAL
INFORMATION (Unaudited) (continued)
fund attempts to sell a Senior Secured Loan at a time when a financial institution
is engaging in such a sale, the price the fund could obtain for the Senior Secured Loan may be adversely
affected.
Loan
Valuation Risk. Because there may be a lack of centralized information and trading for certain
loans in which the fund may invest, reliable market value quotations may not be readily available for
such loans and their valuation may require more research than for securities with a more developed secondary
market. Moreover, the valuation of such loans may be affected by uncertainties in the conditions of the
financial market, unreliable reference data, lack of transparency and inconsistency of valuation models
and processes. Trades can be infrequent and the market for floating rate loans may experience substantial
volatility. As a result, the fund is subject to the risk that when a loan is sold in the market, the
amount received by the fund may be less than the value that such instrument is carried at on the fund’s
books immediately prior to the sale.
Participations and Assignments Risk. A participation interest
gives the fund an undivided interest in a loan in the proportion that the fund’s participation interest
bears to the total principal amount of the loan, but does not establish any direct relationship between
the fund and the borrower. If a Senior Secured Loan is acquired through a participation, the fund generally
will have no right to enforce compliance by the borrower with the terms of the loan agreement against
the borrower, and the fund may not directly benefit from the collateral supporting the loan obligation
in which it has purchased the participation. The fund may be subject to delays, expenses and risks that
are greater than those that would be involved if the fund would enforce its rights directly against the
borrower. Moreover, under the terms of a participation interest the fund may be regarded as a creditor
of another lender or co-participant (rather than of the borrower), so that the fund may also be subject
to the risk that such party may become insolvent. Similar risks may arise with respect to the agent for
a Senior Secured Loan if, for example, assets held by the agent for the benefit of the fund were determined
by the appropriate regulatory authority or court to be subject to the claims of the agent’s creditors.
Further, in the event of the bankruptcy or insolvency of the borrower, the obligation of the borrower
to repay the loan may be subject to certain defenses that can be asserted by such borrower as a result
of improper conduct by the agent or intermediate participant.
The fund also may have
difficulty disposing of participation interests and assignments because to do so it will have to sell
such securities to a third party. Because there is no established secondary market for such securities,
it is anticipated that such securities could be sold only to a limited number of institutional investors.
The lack of an established secondary market may have an adverse impact on the value of such securities
and the fund’s ability to dispose of particular participation interests or assignments when necessary
to meet the fund’s liquidity needs or in response to a specific economic event such as a deterioration
in the creditworthiness of the borrower. The lack of an established secondary market for participation
interests and assignments also may make it more difficult for the fund to assign a value to these securities
for purposes of valuing the fund’s portfolio.
68
Covenant-Lite
Loan Risk. The fund may invest in “covenant-lite” loans. Certain financial institutions
may define “covenant-lite” loans differently. Covenant-lite loans may have tranches that contain
fewer or no restrictive covenants. The tranche of the covenant-lite loan that has fewer restrictions
typically does not include the legal clauses which allow an investor to proactively enforce financial
tests or prevent or restrict undesired actions taken by the company or sponsor. Covenant-lite loans also
generally give the borrower/issuer more flexibility if they have met certain loan terms and provide fewer
investor protections if certain criteria are breached. The fund may experience relatively greater realized
or unrealized losses or delays in enforcing its rights on its holdings of certain covenant-lite loans
than its holdings of loans with the usual covenants. In the event of a breach of a covenant in non-covenant-lite
loans, lenders may have the ability to intervene and either prevent or restrict actions that may potentially
compromise the borrower’s ability to pay or lenders may be in a position to obtain concessions from
the borrower in exchange for a waiver or amendment of the specific covenant(s). In contrast, covenant-lite
loans do not always or necessarily offer the same ability to intervene or obtain additional concessions
from borrowers. This risk is offset to varying degrees by the fact that the same financial and performance
information may be available with or without covenants to lenders and the public alike and can be used
to detect such early warning signs as deterioration of a borrower’s financial condition or results.
With such information, the Sub-Adviser is normally able to take appropriate actions without the help
of covenants in the loans. Covenant-lite corporate loans, however, may foster a capital structure designed
to avoid defaults by giving borrowers or issuers increased financial flexibility when they need it the
most.
Subordinated Loans Risk. Subordinated Loans generally are subject
to similar risks as those associated with investments in Senior Secured Loans, except that such loans
are subordinated in payment and/or lower in lien priority to first lien holders (e.g., holders of Senior
Secured Loans) in the event of the liquidation or bankruptcy of the issuer. In the event of default on
a Subordinated Loan, the first priority lien holder has first claim to the underlying collateral of the
loan. Subordinated Loans are subject to the additional risk that the cash flow of the borrower and collateral
securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect
to the senior unsecured or senior secured obligations of the borrower. This risk is generally higher
for subordinated unsecured loans or debt, which are not backed by a security interest in any specific
collateral. There also is a possibility that originators will not be able to sell participations in Subordinated
Loans, which would create greater credit risk exposure for the holders of such loans. Subordinated Loans
generally have greater price volatility than Senior Secured Loans and may be less liquid.
Corporate Debt Risk
The market value of Corporate Debt generally
may be expected to rise and fall inversely with interest rates. The market value of intermediate and
longer term Corporate Debt is generally more sensitive to changes in interest rates than is the market
value of shorter term Corporate Debt. The market value of Corporate Debt also may be affected by factors
directly related to the issuer, such as investors’ perceptions of the
69
ADDITIONAL
INFORMATION (Unaudited) (continued)
creditworthiness of the issuer, the issuer’s financial performance, perceptions
of the issuer in the market place, performance of management of the issuer, the issuer’s capital structure
and use of financial leverage and demand for the issuer’s goods and services. There is a risk that
the issuers of Corporate Debt may not be able to meet their obligations on interest and/or principal
payments at the time called for by an instrument. Corporate Debt rated below investment grade quality
is often high risk and has speculative characteristics and may be particularly susceptible to adverse
issuer-specific developments.
Special Situations Investments Risk
The
Sub-Adviser focuses the fund’s Special Situations Investments in companies that have experienced, or
are currently experiencing, financial difficulties as a result of deteriorating operations, changes in
macro-economic conditions, changes in governmental monetary or fiscal policies, adverse legal judgments,
or other events which may adversely impact their credit standing. These investments are subject to many
of the risks discussed elsewhere herein, including risks associated with investing in high yield fixed
income securities. Special Situations Investments generally will be treated as illiquid securities by
the fund.
From time to time, the Sub-Adviser may take control positions, sit on creditors’
committees or otherwise take an active role in seeking to influence the management of the issuers of
Special Situations Investments, in which case the fund may be subject to increased litigation risk resulting
from its actions and it may obtain inside information that may restrict its ability to dispose of Special
Situations Investments.
Structured Credit Investments Risk
Holders
of Structured Credit Investments bear risks of the underlying investments, index or reference obligation
and are subject to counterparty risk. The fund may have the right to receive payments only from the issuers
of the structured product, and generally does not have direct rights against the issuer or the entity
that sold the assets to be securitized. While certain Structured Credit Investments enable the investor
to acquire interests in a pool of securities without the brokerage and other expenses associated with
directly holding the same securities, investors in Structured Credit Investments generally pay their
share of the investment’s administrative and other expenses. Although it is difficult to predict whether
the prices of indices and securities underlying structured products will rise or fall, these prices (and,
therefore, the prices of structured products) will be influenced by the same types of political and economic
events that affect issuers of securities and capital markets generally. If the issuer of a Structured
Credit Investment uses shorter term financing to purchase longer term securities, the issuer may be forced
to sell its securities at below market prices if it experiences difficulty in obtaining such financing,
which may adversely affect the value of the Structured Credit Investments owned by the fund.
CDOs
may be thinly traded or have a limited trading market. CDOs, such as CLOs, are typically privately offered
and sold, and thus are not registered under the securities laws. As a result, investments in CLOs and
other types of CDOs may be characterized by the
70
fund as illiquid securities, especially investments in mezzanine and subordinated/equity
tranches of CLOs; however, an active dealer market may exist for certain investments and more senior
CLO tranches, which would allow such securities to be considered liquid in some circumstances. In addition
to the general risks associated with credit instruments discussed herein, CLOs and other types of CDOs
carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral
securities will not be adequate to make interest or other payments; (ii) the quality of the collateral
may decline in value or default; (iii) the possibility that the class of CLO or CDO held by the fund
is subordinate to other classes; and (iv) the complex structure of the security may not be fully understood
at the time of investment and may produce disputes with the issuer or unexpected investment results.
Credit-linked notes, which are used to transfer credit risk, are typically privately
offered and sold. Certain credit-linked notes also may be thinly traded or have a limited trading market.
As a result, investments in credit-linked notes may be characterized by the fund as illiquid securities.
The performance of the notes is linked to the performance of an underlying reference entity. The main
risk of credit-linked notes is the risk of the reference entity experiencing a credit event that triggers
a contingent payment obligation by the special purpose vehicle (“SPV”) that sold the credit protection.
Should such an event occur, the SPV would have to pay the transaction sponsor and payments to the note
holders would be subordinated.
Asset-backed securities are a form of
derivative instrument. Payment of principal and interest may depend largely on the cash flows generated
by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds
or other forms of credit or liquidity enhancements. The value of these asset-backed securities may be
affected by the creditworthiness of the servicing agent for the pool of assets, the originator of the
loans or receivables or the financial institution providing the credit support.
Zero
Coupon, Pay-In-Kind and Step-Up Securities Risk
The amount of any discount on these securities
varies depending on the time remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and perceived credit quality of the issuer. The market prices of these securities
generally are more volatile and are likely to respond to a greater degree to changes in interest rates
than the market prices of securities that pay cash interest periodically having similar maturities and
credit qualities. In addition, unlike bonds that pay cash interest throughout the period to maturity,
the fund will realize no cash until the cash payment date unless a portion of such securities are sold
and, if the issuer defaults, the fund may obtain no return at all on its investment. The interest payments
deferred on a PIK security are subject to the risk that the borrower may default when the deferred payments
are due in cash at the maturity of the instrument. In addition, the interest rates on PIK securities
are higher to reflect the time value of money on deferred interest payments and the higher credit risk
of borrowers who may need to defer interest payments. The deferral of interest on a PIK loan increases
its loan to value ratio, which is a measure of the riskiness of a loan. An election to defer PIK interest
payments by
71
ADDITIONAL
INFORMATION (Unaudited) (continued)
adding them to principal increases the fund’s Managed Assets and, thus, increases
future investment management fees to the Adviser (and, indirectly, the Sub-Adviser). PIK securities also
may have unreliable valuations because the accruals require judgments by the Sub-Adviser about ultimate
collectability of the deferred payments and the value of the associated collateral. Federal income tax
law requires the holder of a zero coupon security or of certain pay-in-kind or step-up bonds to accrue
income with respect to these securities prior to the receipt of cash payments.
LIBOR
Risk
Many credit instruments, derivatives and other financial instruments, including
those in which the fund may invest, utilized LIBOR as the reference or benchmark rate for variable interest
rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations
in 2012. In July 2017, the Financial Conduct Authority announced plans to phase out the use of LIBOR
by the end of 2021. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing
most LIBOR tenors, including some USD LIBOR tenors, on December 31, 2021, and ceased publishing the remaining
and most liquid USD LIBOR tenors on June 30, 2023. The Financial Conduct Authority has announced that
it will require the publication of synthetic LIBOR for the one-month, three-month and six-month USD LIBOR
settings after June 30, 2023 through at least September 30, 2024. Various financial industry groups around
the world have been planning the transition to the use of different benchmarks. In the United States,
the Federal Reserve Board and the New York Fed convened the Alternative Reference Rates Committee, comprised
of a group of private-market participants, which recommended the Secured Overnight Financing Rate as
an alternative reference rate to USD LIBOR. While the transition away from LIBOR became increasingly
well-defined in advance of the anticipated discontinuation of LIBOR, the impact on certain debt securities,
derivatives and other financial instruments has not been determined and may remain uncertain for some
time. Many market participants have transitioned to the use of alternative reference or benchmark rates
prior to the applicable LIBOR publication cessation date or have otherwise amended certain legacy instruments
referencing LIBOR to include fallback provisions and other measures that contemplate the discontinuation
of LIBOR or other similar market disruption events. However, neither the effect of the transition process,
in the United States or elsewhere, nor its ultimate success, can yet be known. While some instruments
tied to LIBOR may include a replacement rate to LIBOR, not all instruments have such fallback provisions
and the effectiveness of such replacement rates remains uncertain. The transition process may lead to
increased volatility and illiquidity in markets that relied on the LIBOR to determine interest rates.
The cessation of LIBOR could affect the value and liquidity of investments tied to LIBOR, especially
those that do not include fallback provisions, and may result in costs incurred in connection with closing
out positions and entering into new trades.
Foreign Investments Risk
Investing
in foreign instruments involve certain risks not involved in domestic investments. Foreign securities
markets generally are not as developed or efficient as
72
those in the United States. There may be a lack of comprehensive information regarding
foreign issuers, and their securities are less liquid and more volatile than securities of comparable
U.S. issuers. Similarly, volume and liquidity in most foreign securities markets are less than in the
United States and, at times, volatility of price can be greater than in the United States. The risks
of investing in foreign securities also include restrictions that may make it difficult for the fund
to obtain or enforce judgments in foreign courts. These risks also include certain national policies
that may restrict the fund’s investment opportunities, including restrictions on investments in issuers
or industries deemed sensitive to national interests and/or limitations on the total amount or type of
position in any single issuer.
Certain foreign countries may impose restrictions on the ability
of issuers within those countries to make payments of principal and interest to investors located outside
the country. In addition, the fund will be subject to risks associated with adverse political and economic
developments in foreign countries, which could cause the fund to lose money on its investments in non-U.S.
instruments. The ability of a foreign sovereign issuer to make timely payments on its debt obligations
will also be strongly influenced by the sovereign issuer’s balance of payments, including export performance,
its access to international credit facilities and investments, fluctuations of interest rates and the
extent of its foreign reserves. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, as many external debt obligations bear interest at rates
which are adjusted based upon international interest rates.
Some foreign instruments
may be less liquid and more volatile than securities of comparable U.S. issuers. Similarly, there is
less volume and liquidity in most foreign securities markets than in the United States and, at times,
greater price volatility than in the United States. Because evidences of ownership of such instruments
usually are held outside the United States, the fund will be subject to additional risks if it invests
in non-U.S. instruments, which include possible adverse political and economic developments, seizure
or nationalization of foreign deposits and adoption of governmental restrictions which might adversely
affect or restrict the payment of principal and interest on the foreign instruments to investors located
outside the country of the issuer, whether from currency blockage or otherwise. Foreign instruments may
trade on days when the Common Shares are not priced.
Foreign government
debt includes bonds that are issued or backed by foreign governments or their agencies, instrumentalities
or political subdivisions or by foreign central banks. The governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and/or interest when due in accordance
with terms of such debt, and the fund may have limited legal recourse in the event of a default.
The risks associated with investing in foreign securities are often heightened
for investments in emerging market countries. These heightened risks include: (i) greater risks of expropriation,
confiscatory taxation and nationalization, and less social, political and economic stability; (ii) the
small size of the markets for securities of emerging market issuers and a low or nonexistent volume of
trading, resulting in lack of liquidity
73
ADDITIONAL
INFORMATION (Unaudited) (continued)
and in price volatility; (iii) certain national policies which may restrict the
investment opportunities including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property. The purchase and sale of portfolio investments in certain
emerging market countries may be constrained by limitations as to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign
investors. In certain cases, such limitations may be computed based upon the aggregate trading by or
holdings of the fund, the Adviser, the Sub-Adviser and their affiliates and their respective clients
and other service providers. The fund may not be able to sell securities in circumstances where price,
trading or settlement volume limitations have been reached.
European Investments
Risk
A number of countries in Europe have experienced severe economic and financial
difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been
forced to restructure, their debts. Many other issuers have faced difficulties obtaining credit or refinancing
existing obligations. Financial institutions have in many cases required government or central bank support,
have needed to raise capital, and/or have been impaired in their ability to extend credit, and financial
markets in Europe and elsewhere have experienced significant volatility and declines in asset values
and liquidity. These difficulties may continue, worsen or spread within and without Europe. Responses
to the financial problems by European governments, central banks and others, including austerity measures
and reforms, may not be effective, may result in social unrest and may limit future growth and economic
recovery or have other unintended consequences. Further defaults or restructurings by governments and
others of outstanding debt could have additional adverse effects on economies, financial markets and
asset valuations around the world.
Decreasing imports or exports, changes
in governmental or European Union (“EU”) regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by an EU member country on its sovereign debt, and/or an economic
recession in an EU member country may have a significant adverse effect on the securities of EU issuers.
The European financial markets have recently experienced volatility and adversity due to concerns about
economic downturns, or rising government debt levels, in several European countries. These events have
adversely affected the exchange rate of the euro and may continue to significantly affect every country
in Europe.
The risk of investing in Europe may be heightened due to the withdrawal of the
United Kingdom from membership in the EU (known as “Brexit”). Although the effects of Brexit are
unknown at this time, Brexit may result in fluctuations of exchange rates, increased illiquidity, inflation,
and changes in legal and regulatory regimes to which certain of the fund’s assets are subject. These
and other geopolitical developments could have a negative impact on both the United Kingdom’s economy
and the economies of the other countries in Europe, as well as greater volatility in the global financial
and currency markets. The effect on the economies of the United Kingdom and the EU
74
likely will depend on the nature of trade relations between the United Kingdom
and the EU and the other major economies. These events could negatively affect the value and liquidity
of all of the fund’s investments, not only the fund’s investments in securities of issuers located
in Europe.
Foreign Currency Transactions Risk
As
the fund invests in securities that trade in, and receives revenues in, foreign currencies, or in derivatives
that provide exposure to foreign currencies, it will be subject to the risk that those currencies will
decline in value relative to the U.S. dollar, or, in the case of hedging positions intended to protect
the fund from decline in the value of non-U.S. currencies, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly
over short periods of time for a number of reasons, including changes in interest rates, intervention
(or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities
such as the International Monetary Fund, or by the imposition of currency controls or other political
developments in the United States or abroad. As a result, the fund’s investments in foreign currency
denominated securities may reduce the returns of the fund. While the fund generally seeks to hedge substantially
all of its non-U.S. dollar-denominated securities into U.S. dollars, hedging may not alleviate all currency
risks. Furthermore, the issuers in which the fund invests may be subject to risks relating to changes
in currency rates, as described above. If a company in which the fund invests suffers such adverse consequences
as a result of such changes, the fund may also be adversely affected as a result.
Continuing
uncertainty as to the status of the euro and the EU has created significant volatility in currency and
financial markets generally. Any partial or complete dissolution of the EU could have significant adverse
effects on currency and financial markets, and on the values of the fund’s portfolio investments. If
one or more EU countries were to stop using the euro as its primary currency, the fund’s investments
in such countries, if any, may be redenominated into a different or newly adopted currency. As a result,
the value of those investments could decline significantly and unpredictably. In addition, instruments
or other investments that are redenominated may be subject to foreign currency risk, liquidity risk and
valuation risk to a greater extent than similar investments currently denominated in euros.
Principal
Risks of the Use of Derivatives
The fund is subject to additional risks
with respect to the use of derivatives. Derivatives can be volatile and involve various types and degrees
of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole.
Derivatives permit the fund to increase or decrease the level of risk, or change the character of the
risk, to which its portfolio is exposed in much the same way as the fund can increase or decrease the
level of risk, or change the character of the risk, of its portfolio by making investments in specific
securities. However, derivatives may entail investment exposures that are greater than their cost would
suggest, meaning that a small investment in derivatives could have a large potential impact on the fund’s
performance. If the fund
75
ADDITIONAL
INFORMATION (Unaudited) (continued)
invests in derivatives at inopportune times or judges market conditions incorrectly,
such investments may lower the fund’s return or result in a loss. The fund also could experience losses
if its derivatives were poorly correlated with the underlying instruments or the fund’s other investments,
or if the fund were unable to liquidate its position because of an illiquid secondary market. The market
for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant,
rapid and unpredictable changes in the prices for derivatives. If a derivative transaction is particularly
large or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate
a position at an advantageous time or price. Additionally, some derivatives the fund may use may involve
economic leverage, which may increase the volatility of these instruments as they may increase or decrease
in value more quickly than the underlying security, index, currency, futures contract, or other economic
variable.
Derivatives may be purchased on established exchanges or through privately negotiated
transactions referred to as OTC derivatives. Exchange-traded derivatives generally are guaranteed by
the clearing agency that is the issuer or counterparty to such derivatives. As a result, unless the clearing
agency defaults, there is relatively little counterparty credit risk associated with derivatives purchased
on an exchange. In contrast, no clearing agency guarantees OTC derivatives. Therefore, many of the regulatory
protections afforded participants on organized exchanges for futures contracts and exchange-traded options,
such as the performance guarantee of an exchange clearing house, are not available in connection with
OTC derivative transactions. As a result, each party to an OTC derivative bears the risk that the counterparty
will default. Accordingly, the Sub-Adviser will consider the creditworthiness of counterparties to OTC
derivatives in the same manner as it would review the credit quality of a security to be purchased by
the fund. OTC derivatives are less liquid than exchange-traded derivatives since the other party to the
transaction may be the only investor with sufficient understanding of the derivative to be interested
in bidding for it.
Because many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially
greater than the amount invested in the derivative itself. Certain derivatives, such as written call
options, have the potential for unlimited loss, regardless of the size of the initial investment. If
a derivative transaction is particularly large or if the relevant market is illiquid (as is the case
with many privately-negotiated derivatives, including swap agreements), it may not be possible to initiate
a transaction or liquidate a position at an advantageous time or price.
Credit Derivatives.
The use of credit derivatives is a highly specialized activity which involves strategies and risks different
from those associated with ordinary portfolio security transactions. If the Sub-Adviser is incorrect
in its forecasts of default risks, market spreads or other applicable factors, the investment performance
of the fund would diminish compared with what it would have been if these techniques were not used. Moreover,
even if the Sub-Adviser is correct in its forecasts, there is a risk that a
76
credit derivative position may correlate imperfectly with the price of the asset
or liability being protected.
Swap Agreements. The fund may enter into swap transactions,
including credit default and total return swap agreements. Such transactions are subject to market risk,
risk of default by the other party to the transaction and risk of imperfect correlation between the value
of such instruments and the underlying assets and may involve commissions or other costs. Swaps generally
do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk
of loss with respect to swaps generally is limited to the net amount of payments that the fund is contractually
obligated to make, or in the case of the other party to a swap defaulting, the net amount of payments
that the fund is contractually entitled to receive. The fund bears the risk of loss of the amount expected
to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty.
The fund will enter into swap agreements only with counterparties that meet certain standards of creditworthiness
(generally, such counterparties would have to be eligible counterparties under the terms of the fund’s
repurchase agreement guidelines). In addition, it is possible that developments in the swaps market,
including potential government regulation, could adversely affect the fund’s ability to terminate existing
swap agreements or to realize amounts to be received under such agreements.
The
federal income tax treatment of payments in respect of certain derivatives contracts is unclear. Common
Shareholders may receive distributions that are attributable to derivatives contracts that are treated
as ordinary income for federal income tax purposes.
The SEC adopted Rule 18f-4 under the Act,
which regulates the use of derivatives by the fund and is effective as of August 18, 2022. The
rule defines “derivatives transactions” as (i) any swap, security-based swap, futures contract, forward
contract, option, any combination of the foregoing, or any similar instrument (“derivatives instrument”),
under which a fund is or may be required to make any payment or delivery of cash or other assets during
the life of the instrument or at maturity or early termination, whether as margin or settlement payment
or otherwise; (ii) investment in a security on a when-issued or forward-settling basis, or with a non-standard
settlement cycle, unless (a) the fund intends to physically settle the transaction and (b) the transaction
will settle within 35 days of its trade date; (iii) any short sale borrowing; and (iv) any reverse repurchase
agreement or similar financing transactions if a fund relies on Rule 18f-4(d)(1)(ii) and therefore is
required to treat its reverse repurchase agreements and similar financing transactions as derivatives
transactions. Funds that use derivatives, other than “limited” derivatives users, must comply with
one of two value-at-risk (“VaR”) based limits on fund leverage: (1) a default test based on relative
VaR (L e., 200% of the VaR of the fund’s designated reference portfolio, which either may be an index
that meets certain requirements, or the fund’s own securities portfolio (excluding derivatives transactions);
or (2) if applicable, an exception to the default test based on absolute VaR (L e. , 20% of the value
of the fund’s net assets). The rule also requires funds that use derivatives, other than “limited”
derivatives users, to adopt and
77
ADDITIONAL
INFORMATION (Unaudited) (continued)
implement a written derivatives risk management program (a “DRM Program”)
administered by a board-approved derivatives risk manager (a “DRM”). The DRM Program must include
the following elements: (1) the identification and assessment of derivatives risks; (2) the establishment,
maintenance, and enforcement of investment, risk management or related guidelines that provide for quantitative
or otherwise measurable criteria, metrics or thresholds related to the derivatives risks; (3) stress
testing of the derivatives risks; (4) backtesting of the VaR calculation model; (5) internal reporting
and escalation of certain matters to the fund’s portfolio management team and board; and (6) periodic
review by the DRM. A fund that is a “limited” derivatives user is not required to adopt a DRM Program
or otherwise comply with a VaR test if it adopts and implements policies and procedures reasonably designed
to manage the fund’s derivatives risks. A fund will qualify as a “limited” derivatives user if
its derivative exposure does not exceed 10% of its net assets, excluding derivatives transactions used
to hedge certain currency and interest rate risks. The rule defines the term “derivatives exposure”
to mean the sum of: (1) the gross notional amounts of a fund’s derivatives transactions and (2) in
the case of short sale borrowings, the value of any asset sold short. Derivatives instruments that do
not involve future payment obligations—and therefore are not a “derivatives transaction” under
the rule—are not included in a fund’s derivatives exposure.
The fund has been deemed
to be “limited” derivatives users and has adopted and implemented policies and procedures reasonably
designed to manage the fund’s derivatives risks, including counterparty risk, leverage risk, liquidity
risk, market risk, operational risk, and legal risk.
Valuation Risk
Unlike publicly traded common stock which trades on national exchanges, there
is no central place or exchange for loans or other credit instruments in which the fund may invest to
trade. Some credit instruments trade in an OTC market which may be anywhere in the world where the buyer
and seller can settle on a price. Due to the lack of centralized information and trading, the valuation
of credit instruments may carry more risk than that of common stock. Uncertainties in the conditions
of the financial market, unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. In addition, other market participants may
value instruments differently than the fund. As a result, the fund may be subject to the risk that when
a credit instrument is sold in the market, the amount received by the fund is less than the value that
such credit instrument is carried at on the fund’s books.
In addition, certain
of the fund’s investments will need to be fair valued in accordance with valuation procedures approved
by the Board of Directors. Those portfolio valuations may be based on unobservable inputs and certain
assumptions about how market participants would price the instrument. As a result, there will be uncertainty
as to the value of certain of the fund’s investments. The fund expects that inputs into the determination
of fair value of those investments will require significant management judgment or estimation. The net
asset value of the fund, as determined based, in part,
78
on the fair value of those investments, may vary from the amount the fund would
realize upon the sale of such investments.
Furthermore, the fund may use the services
of one or more independent valuation firms to aid it in determining the fair value of certain investments.
Because valuations may fluctuate over short periods of time and may be based on estimates, fair value
determinations may differ materially from the value received in an actual transaction. Additionally,
valuations of private securities and private companies are inherently uncertain. The fund’s net asset
value could be adversely affected if the fund’s determinations regarding the fair value of those investments
were materially higher or lower than the values that it ultimately realize upon the disposal of such
investments.
The Board has designated the Adviser as the fund’s valuation
designee to make all fair value determinations with respect to the fund’s portolfio investments, subject
to the Board’s oversight.
Liquidity Risk
In addition to the
various other risks associated with investing in credit instruments, to the extent those instruments
are determined to be illiquid or restricted securities, they may be difficult to dispose of at a fair
price at the times when the fund believes it is desirable to do so. The market price of illiquid and
restricted securities generally is more volatile than that of more liquid securities, which may adversely
affect the price that the fund pays for or recovers upon the sale of such securities. Illiquid and restricted
securities are also more difficult to value, especially in challenging markets. The Sub-Adviser’s judgment
may play a greater role in the valuation process. Investment of the fund’s assets in illiquid and restricted
securities may restrict the fund’s ability to take advantage of market opportunities. In order to dispose
of an unregistered security, the fund, where it has contractual rights to do so, may have to cause such
security to be registered. A considerable period may elapse between the time the decision is made to
sell the security and the time the security is registered, thereby enabling the fund to sell it. Contractual
restrictions on the resale of securities vary in length and scope and are generally the result of a negotiation
between the issuer and purchaser of the securities. In either case, the fund would bear market risks
during the restricted period.
Leverage Risk
The fund’s use of
leverage could create the opportunity for a higher return for Common Shareholders, but would also result
in special risks for Common Shareholders and can magnify the effect of any losses. If the income and
gains earned on the securities and investments purchased with leverage proceeds are greater than the
cost of the leverage, the return on the Common Shares will be greater than if leverage had not been used.
Conversely, if the income and gains from the securities and investments purchased
with such proceeds do not cover the cost of leverage, the return on the Common Shares will be less than
if leverage had not been used. There is no assurance that a leveraging strategy will be successful. In
addition, derivative transactions can involve leverage or
79
ADDITIONAL
INFORMATION (Unaudited) (continued)
the potential for leverage because they enable the fund to magnify the fund’s
exposure beyond its investment.
Leverage involves risks and special considerations
compared to a comparable portfolio without leverage including: (i) the likelihood of greater volatility
of the fund’s net asset value; (ii) the risk that fluctuations in interest rates on Borrowings will
reduce the return to the Common Shareholders or will result in fluctuations in the dividends paid on
the Common Shares; (iii) the effect of leverage in a declining market, which is likely to cause a greater
decline in the net asset value of the Common Shares than if the fund were not leveraged; (iv) when the
fund uses leverage, the investment management fees payable to the Adviser (and, indirectly, the Sub-Adviser)
will be higher than if the fund did not use leverage, and may provide a financial incentive to the Adviser
and the Sub-Adviser to increase the fund’s use of leverage and create an inherent conflict of interest;
and (v) leverage may increase expenses, which may reduce total return.
The
fund may continue to use leverage if the benefits to the Common Shareholders of maintaining the leveraged
position are believed to outweigh any current reduced return, but expects to reduce, modify or cease
its leverage if it is believed the costs of the leverage will exceed the return provided from the investments
made with the proceeds of the leverage.
Cybersecurity Risk
The
fund and its service providers are susceptible to operational and information security risks due to cybersecurity
incidents. In general, cybersecurity incidents can result from deliberate attacks or unintentional events.
Cybersecurity attacks include, but are not limited to, gaining unauthorized access to digital systems
(e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or
sensitive information, corrupting data or causing operational disruption. Cyber attacks also may be carried
out in a manner that does not require gaining unauthorized access, such as causing denial-of-service
attacks on websites (i.e., efforts to make services unavailable to intended users). Cybersecurity incidents
affecting the Adviser or other service providers, as well as financial intermediaries, have the ability
to cause disruptions and impact business operations, potentially resulting in financial losses, including
by interference with the fund’s ability to calculate its net asset value; impediments to trading for
the fund’s portfolio; the inability of Common Shareholders to transact business with the fund; violations
of applicable privacy, data security or other laws; regulatory fines and penalties; reputational damage;
reimbursement or other compensation or remediation costs; legal fees; or additional compliance costs.
Similar adverse consequences could result from cybersecurity incidents affecting issuers of securities
in which the fund invests, counterparties with which the fund engages in transactions, governmental and
other regulatory authorities, exchange and other financial market operators, banks, brokers, dealers,
insurance companies and other financial institutions and other parties. While information risk management
systems and business continuity plans have been developed which are designed to reduce the risks associated
with cybersecurity, there are inherent limitations in any cybersecurity risk management systems or business
continuity plans, including the possibility that certain risks have not been identified.
80
Recent
Changes
The following information in this annual report is a summary of certain changes
since August 31, 2022. This information may not reflect all of the changes that have occurred since you
purchased the fund.
During the period ended August 31, 2023, except as noted above,
there were: (i) no material changes in the fund’s investment objectives or policies that have not been
approved by stockholders, (ii) no changes in the fund’s charter or by-laws that would delay or prevent
a change of control of the fund that have not been approved by stockholders, (iii) no material changes
to the principal risk factors associated with investment in the fund, and (iv) no change in the persons
primarily responsible for the day-to-day management of the fund’s portfolio.
81
PROXY
RESULTS (Unaudited)
The fund’s stockholders voted on the following proposal presented at the annual
stockholders’ meeting held on June 14, 2023.
| | | | |
| Shares |
| For | | Authority
Withheld |
To elect three Class I Directors: † | | | |
| Andrew
J. Donohue | 12,570,380 | | 686,738 |
| Roslyn M. Watson | 12,586,280 | | 670,838 |
| Benaree Pratt Wiley | 12,584,296 | | 672,822 |
† The
terms of these Class I Directors expire in 2026.
82
INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S
MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Directors held on March 6-7, 2023, the Board
considered the renewal of the fund’s Management Agreement, pursuant to which the Adviser provides the
fund with investment advisory and administrative services, and the Sub-Investment Advisory Agreement
(together, with the Management Agreement, the “Agreements”), pursuant to which Alcentra NY, LLC (the
“Sub-Adviser”) provides day-to-day management of the fund’s investments. The Board members, none
of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of
the fund, were assisted in their review by independent legal counsel and met with counsel in executive
session separate from representatives of the Adviser and the Sub-Adviser. In considering the renewal
of the Agreements, the Board considered several factors that it believed to be relevant, including those
discussed below. The Board did not identify any one factor as dispositive, and each Board member may
have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality
of Services Provided to the Fund. The Board considered information provided to it at the meeting
and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality
of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser noted
that the fund is a closed-end fund without daily inflows and outflows of capital and provided the fund’s
asset size.
The Board also considered research support available to, and
portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser
also provides oversight of day-to-day fund operations, including fund accounting and administration and
assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive
administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities
over the Sub-Adviser.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense
Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc.
(“Broadridge”), an independent provider of investment company data based on classifications provided
by Thomson Reuters Lipper, which included information comparing (1) the fund’s performance with the
performance of a group of leveraged closed-end loan participation funds selected by Broadridge as comparable
to the fund (the “Performance Group”) and with a broader group of funds consisting of all leveraged
closed-end loan participation funds (the “Performance Universe”), all for various periods ended December
31, 2022, and (2) the fund’s actual and contractual management fees and total expenses with those of
the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of
funds consisting of all leveraged closed-end loan participation funds, excluding outliers (the “Expense
Universe”), the information for which was derived in part from fund financial statements available
to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description
of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense
Group and Expense Universe.
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INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S
MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Performance
Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons
may be affected by a number of factors, including different investment limitations and policies and the
extent and manner in which leverage is employed that may be applicable to the fund and comparison funds
and the end date selected. The Board also considered the fund’s performance in light of overall financial
market conditions. The Board discussed with representatives of the Adviser and the Sub-Adviser the results
of the comparisons and considered that the fund’s total return performance, on a net asset value basis
and market price basis, was below the Performance Group and the Performance Universe medians for all
periods, except the four-year period when the fund’s total return performance was above the Performance
Group and the Performance Universe medians. The Board also considered that the fund’s yield performance,
on a net asset value basis and market price basis, was above the Performance Group median for each of
the five one-year periods and above the Performance Universe median for four of the five one-year periods
ended December 31st. The Board discussed with representatives of the Adviser
and the Sub-Adviser the reason for the fund’s underperformance versus the Performance Group and Performance
Universe during certain periods under review and noted that the portfolio managers are very experienced
with an impressive long-term track record and continued to apply a consistent investment strategy.
Management
Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management
fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management
services and the sub-advisory services provided by the Adviser and the Sub-Adviser, respectively. In
addition, the Board reviewed and considered the actual management fee rate paid by the fund over the
fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees
and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds
and discussed the results of the comparisons.
The Board considered
that, based on common assets alone and based on common and leveraged assets together, the fund’s contractual
management fee was slightly higher than the Expense Group median contractual management fee, the fund’s
actual management fee was slightly higher than the Expense Group median and slightly higher than the
Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense
Group median and higher than the Expense Universe median total expenses.
Representatives
of the Adviser reviewed with the Board the contractual management fee paid by the one fund advised by
the Adviser that is in the same Lipper category as the fund (the “Similar Fund”), and explained the
nature of the Similar Fund. They discussed differences in fees paid and the relationship of the fees
paid in light of any differences in the services provided and other relevant factors, noting that the
fund is a closed-end fund. The Board considered the relevance of the fee information provided for the
Similar Fund to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser
noted that there were no separate accounts and/or other
84
types of client portfolios advised by the Adviser or the Sub-Adviser that are
considered to have similar investment strategies and policies as the fund.
The
Board considered the fee payable to the Sub-Adviser in relation to the fee payable to the Adviser by
the fund and the respective services provided by the Sub-Adviser and the Adviser. The Board also took
into consideration that the Sub-Adviser’s fee is paid by the Adviser, out of its fee from the fund,
and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of
the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and
the resulting profitability percentage for managing the fund and the aggregate profitability percentage
to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method
used to determine the expenses and profit. The Board concluded that the profitability results were not
excessive, given the services rendered and service levels provided by the Adviser and its affiliates.
The Board also had been provided with information prepared by an independent consulting firm regarding
the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds
and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of
scale might emerge in connection with the management of a fund.
The
Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation
of whether the fees under the Agreements, considered in relation to the mix of services provided by the
Adviser and the Sub-Adviser, including the nature, extent and quality of such services, supported the
renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent
to which economies of scale would be realized if the fund grows and whether fee levels reflect these
economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that,
because the fund is a closed-end fund without daily inflows and outflows of capital, there were not significant
economies of scale at this time to be realized by the Adviser in managing the fund’s assets. Representatives
of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon
fund complex, the extent of economies of scale could depend substantially on the level of assets in the
complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies
of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in
the fund’s asset level. The Board also considered potential benefits to the Adviser and the Sub-Adviser
from acting as investment adviser and sub-investment adviser, respectively, and took into consideration
that there were no soft dollar arrangements in effect for trading the fund’s investments.
At
the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information
to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions
and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of
the services provided by the Adviser and the Sub-Adviser are adequate and appropriate.
85
INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S
MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
· The
Board was generally satisfied with the fund’s long-term performance.
· The Board concluded that the fees paid to the Adviser and
the Sub-Adviser continued to be appropriate under the circumstances and in light of the factors and the
totality of the services provided as discussed above.
· The Board determined that the economies of scale which may
accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately
considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Management
Agreement and that, to the extent in the future it were determined that material economies of scale had
not been shared with the fund, the Board would seek to have those economies of scale shared with the
fund.
In evaluating the Agreements, the Board considered these conclusions
and determinations and also relied on its previous knowledge, gained through meetings and other interactions
with the Adviser and its affiliates and the Sub-Adviser, of the Adviser and the Sub-Adviser and the services
provided to the fund by the Adviser and the Sub-Adviser. The Board also relied on information received
on a routine and regular basis throughout the year relating to the operations of the fund and the investment
management and other services provided under the Agreements, including information on the investment
performance of the fund in comparison to similar funds and benchmark performance indices; general market
outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of
the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the
Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board
oversees, during which lengthy discussions took place between the Board and representatives of the Adviser.
Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the
Board’s conclusions may be based, in part, on its consideration of the fund’s arrangements, or substantially
similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined
to renew the Agreements.
86
BOARD
MEMBERS INFORMATION (Unaudited)
Independent
Board Members
Joseph
S. DiMartino (79)
Chairman of the Board (2017)
Current term expires in 2024
Principal
Occupation During Past 5 Years:
· Director
or Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the
fund’s Statement of Additional Information) (1995-Present)
Other Public Company
Board Memberships During Past 5 Years:
· CBIZ,
Inc., a public company providing professional business services, products and solutions, Director
(1997-May 2023)
No. of Portfolios for which Board Member Serves: 86
———————
Francine
J. Bovich (72)
Board Member (2017)
Current term expires in 2025
Principal
Occupation During Past 5 Years:
· The
Bradley Trusts, private trust funds, Trustee (2011-Present)
Other
Public Company Board Memberships During Past 5 Years:
· Annaly Capital Management, Inc., a real estate investment
trust, Director (2014-Present)
No. of Portfolios for which Board Member
Serves: 47
———————
Andrew J.
Donohue (73)
Board Member (2019)
Current term expires in 2026
Principal
Occupation During Past 5 Years:
· Attorney,
Solo Law Practice (2019-Present)
· Shearman
& Sterling LLP, a law firm, Of Counsel (2017-2019)
· Chief of Staff to the Chair of the SEC (2015-2017)
Other Public Company Board Memberships During Past 5 Years:
· Oppenheimer Funds (58 funds), Director
(2017-2019)
No. of Portfolios for which Board Member Serves: 40
———————
87
BOARD
MEMBERS INFORMATION (Unaudited) (continued)
Kenneth
A. Himmel (77)
Board Member (2017)
Current term expires in 2024
Principal
Occupation During Past 5 Years:
· Related
Urban Development, a real estate development company, President and Chief Executive Officer
(1996-Present)
· American
Food Management, a restaurant company, Chief Executive Officer (1983-Present)
· Himmel
& Company, a real estate development company, President and Chief Executive Officer
(1980-Present)
· Gulf
Related, an international real estate development company, Managing Partner (2010-December 2020)
No.
of Portfolios for which Board Member Serves: 18
———————
Bradley
Skapyak (64)
Board Member (2021)
Current term expires in 2025
Principal
Occupation During Past 5 Years:
· Chief
Operating Officer and Director of The Dreyfus Corporation (2009-2019)
· Chief Executive Officer and Director of BNY Mellon Securities
Corporation (the “Distributor”) (2016-2019)
· Chairman and Director of The Dreyfus Transfer Agent, Inc.
(2011-2019)
· Senior
Vice President of The Bank of New York Mellon (2007-2019)
No. of Portfolios for which Board Member
Serves: 18
———————
Roslyn M.
Watson (73)
Board Member (2017)
Current term expires in 2026
Principal
Occupation During Past 5 Years:
· Watson
Ventures, Inc., a real estate investment company, Principal (1993-Present)
Other Public Company Board Memberships During Past 5 Years:
· American Express Bank, FSB, Director
(1993-2018)
No. of Portfolios for which Board Member Serves: 40
———————
88
Benaree
Pratt Wiley (77)
Board Member (2017)
Current term expires in 2026
Principal
Occupation During Past 5 Years:
· The
Wiley Group, a firm specializing in strategy and business development, Principal
(2005-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ,
Inc., a public company providing professional business services, products and solutions, Director
(2008-Present)
· Blue
Cross-Blue Shield of Massachusetts, Director (2004-2020)
No. of Portfolios for
which Board Member Serves: 57
———————
The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser,
Inc., 240 Greenwich Street, New York, New York 10286.
89
OFFICERS
OF THE FUND (Unaudited)
DAVID DIPETRILLO, President since January 2021.
Vice
President and Director of the Adviser since February 2021; Head of North America Distribution, BNY Investment
Management since February 2023; and Head of North America Product, BNY Mellon Investment Management from
January 2018 to February 2023. He is an officer of 53 investment companies (comprised of 103 portfolios)
managed by the Adviser or an affiliate of the Adviser. He is 45 years old and has been an employee of
BNY Mellon since 2005.
JAMES WINDELS, Treasurer since July 2017.
Director
of the Adviser since February 2023; Vice President of the Adviser since September 2020; and Director–BNY
Mellon Fund Administration. He is an officer of 54 investment companies (comprised of 122 portfolios)
managed by the Adviser or an affiliate of the Adviser. He is 64 years old and has been an employee of
the Adviser since April 1985.
PETER M. SULLIVAN, Chief Legal Officer since July 2021 and Vice President and
Assistant Secretary since March 2019.
Chief Legal Officer of the Adviser and
Associate General Counsel of BNY Mellon since July 2021; Senior Managing Counsel of BNY Mellon from
December 2020 to July 2021; and Managing Counsel of BNY Mellon from March 2009 to December 2020. He is
an officer of 54 investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate
of the Adviser. He is 55 years old and has been an employee of BNY Mellon since April 2004.
JAMES
BITETTO, Vice President since July 2017 and Secretary since February 2018.
Senior
Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to
December 2019; and Secretary of the Adviser. He is an officer of 54 investment companies (comprised of
122 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 57 years old and has been
an employee of the Adviser since December 1996.
DEIRDRE CUNNANE, Vice President and Assistant
Secretary since March 2019.
Managing Counsel of BNY Mellon since December
2021; and Counsel of BNY Mellon from August 2018 to December 2021. She is an officer of 54 investment
companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the Adviser. She is
33 years old and has been an employee of BNY Mellon since August 2013.
SARAH S. KELLEHER, Vice
President and Assistant Secretary since July 2017.
Vice President of BNY
Mellon ETF Investment Adviser; LLC since February 2020; Senior Managing Counsel of BNY Mellon since September
2021; and Managing Counsel of BNY Mellon from December 2017 to September 2021. She is an officer of 54
investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the Adviser.
She is 47 years old and has been an employee of BNY Mellon since March 2013.
JEFF PRUSNOFSKY, Vice President
and Assistant Secretary since July 2017.
Senior Managing Counsel
of BNY Mellon. He is an officer of 54 investment companies (comprised of 122 portfolios) managed by the
Adviser or an affiliate of the Adviser. He is 58 years old and has been an employee of the Adviser since
October 1990.
AMANDA
QUINN, Vice President and Assistant Secretary since March 2020.
Counsel
of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management
Services from September 2018 to May 2019; and Senior Regulatory Specialist at BNY Mellon Investment Management
Services from April 2015 to August 2018. She is an officer of 54 investment companies (comprised of 122
portfolios) managed by the Adviser or an affiliate of the Adviser. She is 38 years old and has been an
employee of BNY Mellon since June 2012.
JOANNE SKERRETT, Vice President and Assistant Secretary since
March 2023.
Managing Counsel of BNY Mellon since June 2022; and Senior
Counsel with the Mutual Fund Directors Forum, a leading funds industry organization, from 2016 to June
2022. She is an officer of 54 investment companies (comprised of 122 portfolios) managed by the Adviser
or an affiliate of the Adviser. She is 51 years old and has been an employee of the Adviser since June
2022.
90
NATALYA
ZELENSKY, Vice President and Assistant Secretary since March 2017.
Chief
Compliance Officer since August 2021 and Vice President since February 2020 of BNY Mellon ETF Investment
Adviser, LLC; Chief Compliance Officer since August 2021 and Vice President and Assistant Secretary since
February 2020 of BNY Mellon ETF Trust; Managing Counsel of BNY Mellon from December 2019 to August 2021;
Counsel of BNY Mellon from May 2016 to December 2019; and Assistant Secretary of the Adviser from April
2018 to August 2021. She is an officer of 54 investment companies (comprised of 122 portfolios) managed
by the Adviser or an affiliate of the Adviser. She is 38 years old and has been an employee of BNY Mellon
since May 2016.
DANIEL GOLDSTEIN, Vice President since
March 2022.
Head of Product Development of North America
Distribution, BNY Mellon Investment Management since January 2018; Executive Vice President of North
America Product, BNY Mellon Investment Management since April 2023; and Senior Vice President, Development
& Oversight of North America Product, BNY Mellon Investment Management from 2010 to March 2023. He
is an officer of 53 investment companies (comprised of 103 portfolios) managed by the Adviser or an affiliate
of the Adviser. He is 54 years old and has been an employee of the Distributor since 1991.
JOSEPH
MARTELLA, Vice President since March 2022.
Vice
President of the Adviser since December 2022; Head of Product Management of North America Distribution,
BNY Mellon Investment Management since January 2018; Executive Vice President of North America Product,
BNY Mellon Investment Management since April 2023; and Senior Vice President of North America Product,
BNY Mellon Investment Management from 2010 to March 2023. He is an officer of 53 investment companies
(comprised of 103 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 46 years old
and has been an employee of the Distributor since 1999.
GAVIN C. REILLY, Assistant Treasurer since
July 2017.
Tax Manager–BNY Mellon Fund Administration. He is an officer
of 54 investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the
Adviser. He is 55 years old and has been an employee of the Adviser since April 1991.
ROBERT SALVIOLO, Assistant
Treasurer since July 2017.
Senior Accounting Manager–BNY Mellon
Fund Administration. He is an officer of 54 investment companies (comprised of 122 portfolios) managed
by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser
since June 1989.
ROBERT SVAGNA, Assistant Treasurer since July 2017.
Senior
Accounting Manager–BNY Mellon Fund Administration. He is an officer of 54 investment companies (comprised
of 122 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has
been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer
since July 2017.
Chief Compliance Officer of the BNY Mellon
Family of Funds and BNY Mellon Funds Trust since 2004; and Chief Compliance Officer of the Adviser from
2004 until June 2021. He is the Chief Compliance Officer of 53 investment companies (comprised of 105
portfolios) managed by the Adviser. He is 66 years old.
91
OFFICERS
AND DIRECTORS
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc.
240
Greenwich Street
New York, NY 10286
| | | |
Directors | | Officers (continued) | |
Independent Board Members: | | Assistant Treasurers
(continued) | |
Joseph S. DiMartino, Chairman | | Robert Salviolo | |
Francine J. Bovich | | Robert Svagna | |
Andrew J. Donohue | | Chief Compliance Officer | |
Kenneth A. Himmel | | Joseph W. Connolly | |
Bradley Skapyak | | Portfolio Managers | |
Roslyn M. Watson | | Chris Barris | |
Benaree Pratt Wiley | | Brandon Chao | |
| | Kevin Cronk | |
Officers | | | |
President | | Adviser | |
David DiPetrillo | | BNY Mellon Investment Adviser, Inc. | |
Chief Legal Officer | | Sub-Adviser | |
Peter M. Sullivan | | Alcentra NY, LLC | |
Vice President and Secretary | | Custodian | |
James Bitetto | | The Bank of New York Mellon | |
Vice Presidents and
Assistant Secretaries | | Counsel | |
Deirdre Cunnane | | Proskauer Rose LLP | |
Sarah S. Kelleher | | Transfer
Agent, Registar and | |
Jeff Prusnofsky | | Dividend Disbursing Agent | |
Amanda Quinn | | Computershare Inc. | |
Joanne Skerrett | | Stock Exchange Listing | |
Natalya Zelensky | | NYSE Symbol: DCF | |
Treasurer | | Initial SEC Effective Date | |
James Windels | | 10/27/17 | |
Vice Presidents | | | |
Daniel Goldstein | | | |
Joseph Martella | | | |
Assistant Treasurers | | | |
Gavin C. Reilly | | | |
The fund’s net asset value
per share appears in the following publications: Barron’s, Closed-End Bond Funds section under the
heading “Bond Funds” every Monday; The Wall Street Journal, Mutual Funds section under the heading
“Closed-End Bond Funds” every Monday. |
Notice is hereby given in accordance with Section 23(c) of the Act that the fund
may purchase shares of its common stock in the open market when it can do so at prices below the then
current net asset value per share. |
92
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93
BNY
Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc.
240 Greenwich Street
New
York, NY 10286
Adviser
BNY
Mellon Investment Adviser, Inc.
240 Greenwich Street
New
York, NY 10286
Sub-Adviser
Alcentra
NY, LLC
9
West 57th Street,
Suite 4920
New
York, NY 10019
Custodian
The
Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer
Agent &
Registrar
Computershare Inc.
480
Washington Boulevard
Jersey City, NJ 07310
Dividend Disbursing Agent
Computershare
Inc.
P.O. Box 30170
College Station, TX 77842
For more information about
the fund, visit https://im.bnymellon.com/closed-end-funds. Here you will find the fund’s most recently
available quarterly fact sheets and other information about the fund. The information posted on the fund’s
website is subject to change without notice.
The fund files its complete schedule of portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The fund’s Forms
N-PORT are available on the SEC’s website at www.sec.gov.
A
description of the policies and procedures that the fund uses to determine how to vote proxies relating
to portfolio securities and information regarding how the fund voted these proxies for the most recent
12-month period ended June 30 is available at www.im.bnymellon.com
and
on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
| |
0822AR0823
| |
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics
that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller,
or persons performing similar functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the
period covered by this Report.
Item 3. Audit Committee Financial Expert.
The Registrant's Board determined that Bradley
J. Skapyak, a member of the Audit Committee of the Board, is an audit committee financial expert as defined by the SEC. Mr. Skapyak is
"independent" as defined by the SEC for purposes of audit committee financial expert determinations.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for
each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal
accountant (the "Auditor") for the audit of the Registrant's annual financial statements or services that are normally provided
by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $64,860
in 2022 and $66,200
in 2023.
(b) Audit-Related Fees. The aggregate fees
billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the
audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $6,300
in 2022 and $6,500
in 2023. These services consisted of one or more of the following: (i)
agreed upon procedures related to compliance with Internal Revenue Code section 817(h), (ii) security counts required by Rule 17f-2 under
the Investment Company Act of 1940, as amended, (iii) advisory services as to the accounting or disclosure treatment of Registrant transactions
or events and (iv) advisory services to the accounting or disclosure treatment of the actual or potential impact to the Registrant of
final or proposed rules, standards or interpretations by the Securities and Exchange Commission, the Financial Accounting Standards Boards
or other regulatory or standard-setting bodies.
The aggregate fees billed in the Reporting Periods
for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling,
controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"),
that were reasonably related to the performance of the annual audit of the Service Affiliates, which required pre-approval by the Audit
Committee were $0 in 2022
and $0 in 2023.
(c) Tax Fees. The aggregate fees billed in
the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice, and tax planning ("Tax Services")
were $0 in 2022
and $0 in 2023.
These services consisted of: (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state
and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments; (iii) tax advice regarding
tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held, and (iv) determination
of Passive Foreign Investment Companies. The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service
Affiliates, which required pre-approval by the Audit Committee were $0
in 2022 and $0
in 2023.
(d) All Other Fees. The aggregate fees billed
in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through
(c) of this Item, were $0 in 2022
and $0 in 2023.
The aggregate fees billed in the Reporting Periods
for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item,
which required pre-approval by the Audit Committee, were $0 in 2022
and $0 in 2023.
(e)(1) Audit Committee
Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy")
for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates
without specific case-by-case consideration. The pre-approved services in the Policy can include pre-approved audit services, pre-approved
audit-related services, pre-approved tax services and pre-approved all other services. Pre-approval considerations include whether the
proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.
(e)(2) Note. None of the services described
in paragraphs (b) through (d) of this Item 4 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
(f) None
of the hours expended on the Auditor's engagement to audit the Registrant's financial statements for the most recent fiscal year were
attributed to work performed by persons other than the Auditor's full-time, permanent employees.
Non-Audit Fees. The aggregate non-audit fees
billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $3,945,912
in 2022 and $4,074,591
in 2023.
Auditor Independence. The Registrant's Audit
Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved
(not requiring pre-approval), is compatible with maintaining the Auditor's independence.
(j) Not applicable.
Item 5. Audit Committee of Listed Registrants.
During the reporting period, the Registrant
had a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934. From September 1, 2022 to February 16, 2023, the Registrant's audit committee consisted of the following members: Joseph
S. DiMartino, Francine J. Bovich, Andrew J. Donohue, Kenneth A. Himmel, Roslyn M. Watson and Benaree Pratt Wiley. Effective
February 16, 2023, Bradley J. Skapyak became a member of the Registrant's Audit Committee, in addition to the members noted above.
Item 6. Investments.
(a) Not applicable.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
SUMMARY OF THE REGISTRANT'S PROXY VOTING
POLICY AND PROCEDURES
Due to the nature of the investments held in
connection with the Registrant's investment strategy, the Registrant does not anticipate regular proxy voting activity. If presented with
a proxy voting opportunity, Alcentra will seek to make voting decisions that are consistent with its proxy voting policy and procedures.
The Registrant does not currently participate in a securities lending program.
The Registrant's Board of Directors has adopted
the following procedures with respect to proxy voting by the Registrant.
Delegation of Proxy Voting Responsibility
and Adoption of Proxy Voting Procedures
The Board has delegated the authority to vote
proxies of companies held in the Registrant's portfolio to the Registrant's sub-investment adviser, Alcentra NY, LLC ("Alcentra"),
as described below. BNY Mellon Investment Adviser, Inc. ("BNYM Investment Adviser") serves as the Registrant's investment adviser.
In addition, the Board has adopted Alcentra's
proxy voting procedures pursuant to which proxies of companies held in the Registrant's portfolio will be voted.
Proxy Voting Operations
The Registrant has engaged Institutional Shareholder
Services Inc. ("ISS") as its proxy voting agent to administer the ministerial, non-discretionary elements of proxy voting and
reporting.
Voting Shares of Certain Registered Investment
Companies
Under certain circumstances, when the Registrant
owns shares of another registered investment company (an "Acquired Fund"), the Registrant may be required by the Investment
Company Act of 1940, as amended (the "1940 Act") or the rules thereunder, or exemptive relief from the 1940 Act and/or the rules
thereunder, to vote such Acquired Fund shares in a certain manner, such as voting the Acquired Fund shares in the same proportion as the
vote of all other shareholders of such Acquired Fund.
Securities on Loan
The Registrant may participate in a securities
lending program to generate income for its portfolio. Generally, the voting rights pass with the securities on loan and any securities
on loan as of a record date cannot be voted by the Registrant. In certain circumstances, BNYM Investment Adviser may seek to recall a
security on loan before a record date in order to cast a vote (for example, if Alcentra determines, based on the information available
at the time, that there is a material proxy event that could affect the value of the loaned security and recalling the security for voting
purposes would be in the best interest of the Registrant). However, BNYM Investment Adviser anticipates that, in most cases, the potential
income the Registrant may derive from a loaned security would outweigh the benefit the Registrant could receive from voting the security.
In addition, the ability to timely recall securities on loan is not entirely within the control of BNYM Investment Adviser or Alcentra.
Under certain circumstances, the recall of securities in time for such securities to be voted may
not be possible due to applicable proxy voting record dates occurring before the proxy statements are released or
other administrative considerations.
Policies and Procedures; Oversight
The Registrant's Chief Compliance Officer is
responsible for confirming that Alcentra has adopted and implemented written policies and procedures that are reasonably designed to ensure
that the Registrant's proxies are voted in the best interests of the Registrant. In addition, the adequacy of such policies and procedures
are reviewed at least annually, and proxy voting for the Registrant is monitored to ensure compliance with Alcentra's procedures, as applicable,
such as by sampling votes cast for the Registrant, including routine proposals as well as those that require more analysis, to determine
whether they complied with Alcentra's Proxy Voting Procedures.
Review of Proxy Voting
BNYM Investment Adviser reports annually to
the Board on the Registrant's proxy voting, including information regarding: (1) proxy voting proposals that were voted; (2) proxy voting
proposals that were voted against the management company's recommended vote, but in accordance with the applicable proxy voting guidelines;
and (3) proxy voting proposals that were not voted, including the reasons the proxy voting proposals were not voted.
Availability of Proxy Voting Records
Pursuant to Rule 30b1-4 under the 1940 Act,
the Registrant is required to file its complete proxy voting record with the SEC on Form N-PX not later than August 31st of
each year for the most recent twelve-month period ended June 30th. In addition, this information is available, by August 31st
of each year, at www.im.bnymellon.com. The Registrant has delegated the responsibility
for gathering this information, filing Form N-PX and posting voting information to the website to BNYM Investment Adviser, with the assistance
of ISS.
SUMMARY OF ALCENTRA'S PROXY VOTING POLICY
AND PROCEDURES
Scope
This Policy applies to all strategies across
Alcentra.
Alcentra generally will not be called upon
to vote proxies for its syndicated loan and direct lending investments because of the nature of the instruments involved in the investment
strategy (i.e., loans rather than securities). An exception is when Alcentra may hold loan investments which could be converted
to voting securities.
Proxy votes are also not generally conducted
for corporate bonds. In addition, proxy votes may take place from time to time on structured credit investments where our fund holds the
equity tranche.
Purpose
When engaged by a client to provide discretionary
advisory services, Alcentra is typically delegated the responsibility to vote on matters considered at portfolio companies' shareholder
meetings, usually by means of a proxy ballot ("proxy voting").
In these instances, Alcentra has a duty to
monitor corporate events and to vote proxies in the best interest of its client and not subrogate the interests of its clients to its
own interests. This generally means voting with a view toward enhancing the economic value of the investment. In the case of social and
political responsibility issues that, in Alcentra's opinion, do not primarily involve financial considerations, it is Alcentra's objective
to support shareholder proposals that Alcentra believes promote good corporate citizenship while enhancing long-term shareholder value.
When it has voting responsibility, Alcentra
will make every attempt to vote when given an opportunity to do so. However, there may be instances when Alcentra is unable or unwilling
to vote because of legal or operational difficulties or because it believes the administrative burden and/or associated cost exceeds the
expected benefit to a client.
Regulatory
Context
The SEC has taken the position that proxy voting
is only required where the adviser exercises discretion over advisory assets and the adviser's contract is silent on proxy voting responsibilities
or specifically provides that the adviser will vote proxies.
The Department of Labor's (the "DOL")
ERISA rules require an adviser to vote proxies for ERISA clients unless the plan administrator or other fiduciary has expressly precluded
such responsibilities.
For most other clients, unless another service
provider is delegated proxy voting responsibilities, the adviser's role as an adviser with investment discretion would include proxy voting
responsibilities.
Alcentra, Advisers
Act Requirements
In line with the requirements of Section 206(4)
of the Advisers Act, it is Alcentra's policy to:
adopt and implement
written policies and procedures that are reasonably designed to ensure that the adviser votes client securities in the best interest of
clients, which procedures must include how the adviser addresses material conflicts that may arise between the adviser's interests and
those of the adviser's clients;
disclose to clients
via the Form ADV Part 2A, how they may obtain information from the adviser about how the adviser voted with respect to their securities;
and
describe to clients
via Form ADV Part 2A the adviser's proxy voting policies and procedures and, upon request, furnishes a copy of the policies and procedures
to the requesting client.
Alcentra,
ERISA Requirements
Following from the DOL's guidance on proxy
voting in respect of ERISA pension plan funds, it is Alcentra's policy to:
Clearly delineate
responsibility for voting between Alcentra and the trustee or other plan fiduciary that appointed Alcentra, possibly through the investment
advisory agreement ("IAA").
Take reasonable steps
to ensure that it has received all proxies for which it has voting authority and implemented appropriate reconciliation procedures.
In voting, act prudently
and solely in the interests of pension plan participants and beneficiaries. In so doing Alcentra considers factors that would affect the
value of the plan's investments and may not subordinate the interests of plan participants and beneficiaries in their retirement income
to unrelated objectives, such as social considerations. However, other DOL pronouncements in the context of investment decisions indicate
that social considerations may be used in making investment decisions to select among investments of equal risk and return.
The plan administrator
will periodically monitor Alcentra's voting activities, and both the client's monitoring activities and Alcentra's voting activities (including
the votes cast in each particular case) must be documented.
Voting
Alcentra reviews the circumstances for each
vote to determine which stance would best serve its clients and votes accordingly. Alcentra votes and documents its vote as follows:
A Voting File has
been established to document how Alcentra voted on each proxy vote.
While Alcentra expects
to vote all identical client proxies in the same manner across each client account, the relevant Portfolio Manager or Investment Committee
may vote certain client accounts differently than others if it is determined that it is in the best interest of the respective clients
to do so.
Alcentra Portfolio
Manager or Investment Committee for the particular Investment Vehicle, or designee, will decide, on a case-by-case, how each vote should
be cast in order to best serve the interest of each respective client.
A record noting the
details of the vote, as well as an assessment as to whether a material conflict of interest exists, is maintained in the Voting File.
Copies of actual voting
records will be maintained.
Non-Voting of
Proxies
When it has voting responsibility, Alcentra
will make every attempt to vote when given an opportunity to do so. However, there may be instances when Alcentra is unable or unwilling
to vote because of legal or operational difficulties or because it believes the administrative burden and/or associated cost exceeds the
expected benefit to a client.
Conflicts of
Interest
While Alcentra does not anticipate that it
will regularly face a material conflict of interest in the exercise of its voting responsibilities, Alcentra has developed a Proxy Voting
Form (the "Form") which has been designed to identify and document conflicts of interest. Based on the responses to the Form,
the Portfolio Manager or designee will determine if there is any actual or perceived conflict of interest. If a conflict exists, the Portfolio
Manager or designee will determine whether the conflict is "material" based on the nature of the business or personal relationship,
the specific proxy proposal and such other factors or criteria as the Portfolio Manager or designee determine are relevant.
In the event of any uncertainty relating to
the presence of a conflict of interest or whether a conflict is material, the Portfolio Manager or designee may consult with others as
appropriate. Employees involved in the decision-making process or administration of proxy votes are prohibited from revealing how Alcentra
intends to vote on a proposal in order to reduce any attempted influence from interested parties.
If a material conflict of interest is found
to exist, the Chief Investment Officer and Chief Compliance Officer will be consulted to ensure that the vote is cast in a manner that
is in the best interest of the client(s). Alcentra may seek an independent third party to recommend how to vote the proposal. Such recommendation
may be based on the third party's predetermined voting policies (so long as the subject matter of the proposal is specifically addressed
in the guidelines) or independent research conducted by the third party.
In an effort to minimize the appearance that
certain relationships or situations may inappropriately influence its voting decisions, Alcentra has determined that when presented with
the opportunity to vote on shareholder proposals issued by an "Affiliated Fund" (for purposes of this policy, any pooled investment
vehicle that is sponsored by a subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon") shall be considered an "Affiliated
Fund"), it will vote in the same proportion as all other voting shareholders of such Affiliated Fund ("echo voting"). If
"echo voting" is not operationally feasible, the vote recommendations of an independent third party shall be applied. The independent
third party shall be ISS, if available, or Glass Lewis & Co. ("Glass Lewis"), if ISS is not available.
Notwithstanding the foregoing, Alcentra also
may resolve any material conflict in such other manner as Alcentra believes is in the best interest of the client.
Record Keeping
In line with the record-keeping requirements
in Rule 204-2 under the Advisers Act, it is Alcentra's policy to maintain the following books and records:
Copies of the adviser's
proxy voting policies and procedures.
A copy of each proxy
statement that the adviser receives regarding client securities. Advisers may rely upon third-party service providers to maintain such
records. For example, if an adviser uses a third-party proxy voting service to vote client proxies, that company may maintain copies of
the proxy statements on behalf of the adviser. The proxy voting service must agree to provide the statements to the adviser promptly upon
request. Alternatively, the adviser could rely upon obtaining a copy of a proxy statement from the SEC's EDGAR system.
A record of each vote
cast by the adviser on behalf of a client. Advisers may rely upon the records maintained by a third-party proxy voting service, if the
records can be obtained by the adviser promptly upon request.
A copy of any document
created by the adviser that was material to making a decision on how to vote proxies on behalf of clients or that memorializes the bases
for that decision. For example, some advisers adopt general policies on how they will vote on certain issues.
A copy of each written client request for information
on how the adviser voted proxies on behalf of the client, and a copy of any written response by the adviser to any written or oral request
for information regarding how the adviser votes proxies on behalf of the requesting client.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) The following information is as of October
25, 2023, the date of the filing of this report:
Chris Barris, Brandon Chao, CFA and Kevin Cronk,
CFA, are the Registrant's primary portfolio managers, positions they have held since October 2017, November 2022 and October 2017, respectively.
Mr. Barris joined Alcentra in January 2013
as part of the combination of Alcentra with Standish Mellon Asset Management Company LLC's high yield business, and is a Manager, U.S.
Liquids. He is responsible for managing all U.S. and global high yield portfolios and has extensive experience managing a broad range
of high yield bond strategies for both institutional and retail funds. Mr. Barris also is responsible for managing Alcentra's multi-asset
credit portfolios, including US and European bonds and loans, and has considerable experience in credit analysis with over 21 years of
investment experience. Mr. Barris joined Standish Mellon Asset Management Company LLC, an affiliate of BNYM Investment Adviser and Alcentra,
in 2005, where he served as a Director and Senior Portfolio Manager for U.S. and global high yield investments.
Mr. Chao joined Alcentra in March 2017 and
is a Managing Director and Senior Portfolio Manager and a member of the Structured Credit team. He is responsible for analyzing investments
in structured products across Alcentra's funds. Mr. Chao joined Alcentra from Omega Advisors, where he worked for five years as a senior
analyst covering structured products with a focus on CLO equity and mezzanine investing and opportunistic corporate credit. Prior to that,
he worked at King Street Capital Management, investing in corporate structured products, high yield and distressed credit, and at Credit
Suisse, performing leveraged finance research.
Mr. Cronk joined Alcentra in January 2013 as
part of the combination of Alcentra with Standish Mellon Asset Management Company LLC's high yield business, and is a Manager, U.S. Liquids,
and a member of the U.S. Investment Committee. Mr. Cronk joined Standish Mellon Asset Management Company LLC, an affiliate of BNYM Investment
Adviser and Alcentra, in 2011 from Columbia Management, where he worked for eleven years as a High Yield Analyst and Portfolio Manager.
Prior to that, he worked as a High Yield Investment Associate at Putnam Investments.
(a)(2) Information about the other accounts
managed by the Registrant's primary portfolio managers is provided below.
Subject to the supervision and approval of
BNYM Investment Adviser and the Registrant's Board, Alcentra is responsible for investment decisions and provides the Registrant with
portfolio managers who are authorized by the Registrant's Board to execute purchases and sales of securities. Chris Barris, Brandon Chao
and Kevin Cronk are the Registrant's primary portfolio managers.
Portfolio Managers Compensation. Portfolio
managers' compensation is comprised primarily of a market-based salary and an incentive compensation plan (annual and long-term).
Alcentra's compensation arrangements include a fixed
salary, discretionary cash bonus and a number of long term incentive plans that are structured to align an employee's interest with the
firm's longer term goals. Portfolio managers are compensated in line with portfolio performance, rather than the growth of assets under
management. Other factors that may be taken into consideration include asset selection and trade execution and management of portfolio
risk.
Additional Information About Portfolio Managers.
The following table lists the number and types of other accounts advised by the primary portfolio managers and assets under management
in those accounts as of August 31, 2023:
Portfolio Manager |
Registered Investment Company Accounts |
Assets Managed |
Pooled Accounts |
Assets Managed |
Other Accounts |
Assets Managed |
Chris Barris |
5 |
$2.1B |
5 |
$400M |
1 |
$400M |
Brandon Chao |
2 |
$451M |
5 |
$3.7B |
None |
N/A |
Kevin Cronk |
5 |
$2.1B |
5 |
$400M |
1 |
$400M |
None of the funds or accounts are subject to a performance-based
advisory fee.
The dollar range of shares of the Registrant beneficially
owned by the primary portfolio managers are as follows as of August 31, 2023:
Portfolio Manager |
Registrant Name |
Dollar Range of Registrant
Shares Beneficially Owned |
Chris Barris |
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. |
$100,001-$500,000 |
Brandon Chao |
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. |
None |
Kevin Cronk |
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. |
$100,001-$500,000 |
Portfolio managers may manage multiple accounts for
a diverse client base, including mutual funds, separate accounts (assets managed on behalf of private clients or institutions such as
pension funds, insurance companies and foundations), private funds, bank collective trust funds or bank common trust accounts and wrap
fee programs that invest in securities in which the Registrant may invest or that may pursue a strategy similar to the Registrant's component
strategies ("Other Accounts").
Potential conflicts
of interest may arise because of BNYM Investment Adviser's, Alcentra's or a portfolio manager's management of the Registrant and Other
Accounts. For example, conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation
of limited investment opportunities, as BNYM Investment Adviser or Alcentra may be perceived as causing accounts it manages to participate
in an offering to increase BNYM Investment Adviser or Alcentra's overall allocation of securities in that offering, or to increase BNYM
Investment Adviser or Alcentra's ability to participate in future offerings by the same underwriter or issuer. Allocations of bunched
trades, particularly trade orders that were only partially filled due to limited availability, and allocation of investment opportunities
generally, could raise a potential conflict of interest, as BNYM Investment Adviser or Alcentra may have an incentive to allocate securities
that are expected to increase in value to preferred accounts. Initial public offerings, in particular, are frequently of very limited
availability. A potential conflict of interest may be perceived to arise if transactions in one account closely follow related transactions
in a different account, such as when the Registrant purchase increases the value of securities previously purchased by the Other Account
or when a sale in one account lowers the sale price received in a sale by a second account. Conflicts of interest may also exist with
respect to portfolio managers who also manage performance-based fee accounts, which could give the portfolio managers an incentive to
favor such Other Accounts over the Registrant, such as deciding which securities to allocate to the Registrant versus the performance-based
fee account. Additionally, portfolio managers may be perceived to have a conflict of interest if there are a large number of Other Accounts,
in addition to the Registrant, that they are managing on behalf of BNYM Investment Adviser or Alcentra. BNYM Investment Adviser and Alcentra
periodically review each portfolio manager's overall responsibilities to ensure that he or she is able to allocate the necessary time
and resources to effectively manage the Registrant. In addition, BNYM Investment Adviser and Alcentra could be viewed as having a conflict
of interest to the extent that BNYM Investment Adviser, Alcentra or their affiliates and/or portfolio managers have a materially larger
investment in Other Accounts than their investment in the Registrant.
Other Accounts may have investment objectives,
strategies and risks that differ from those of the Registrant. In addition, the Registrant, as a registered investment company, may be
subject to different regulations than certain of the Other Accounts and, consequently, may not be permitted to engage in all the investment
techniques or transactions, or to engage in such techniques or transactions to the same degree, as the Other Accounts. For these or other
reasons, the portfolio managers may purchase different securities for the Registrant and the Other Accounts, and the performance of securities
purchased for the Registrant may vary from the performance of securities purchased for Other Accounts. The portfolio managers may place
transactions on behalf of Other Accounts that are directly or indirectly contrary to investment decisions made
for the Registrant, which could have the potential
to adversely impact the Registrant, depending on market conditions. In addition, if the Registrant's investment in
an issuer is at a different level of the issuer's capital structure than an investment in the issuer by Other Accounts, in the event of
credit deterioration of the issuer, there may be a conflict of interest between the Registrant's and such Other Accounts' investments
in the issuer.
BNY Mellon and its affiliates, including BNYM
Investment Adviser, Alcentra and others involved in the management, sales, investment activities or business operations or distribution
of the Registrant, are engaged in businesses and have interests other than that of managing the Registrant. These activities and interests
include potential multiple advisory, transactional, financial and other interests in securities, instruments and companies that may be
directly or indirectly purchased or sold by the Registrant or the Registrant's service providers, which may cause conflicts that could
disadvantage the Registrant.
BNY Mellon and its affiliates may have deposit,
loan and commercial banking or other relationships with the issuers of securities purchased by the Registrant. BNY Mellon has no obligation
to provide to BNYM Investment Adviser, Alcentra or the Registrant or effect transactions on behalf of the Registrant in accordance with,
any market or other information, analysis, or research in its possession. Consequently, BNY Mellon (including, but not limited to, BNY
Mellon's central Risk Management Department) may have information that could be material to the management of the Registrant and may not
share that information with relevant personnel of BNYM Investment Adviser or Alcentra. Accordingly, in making investment decisions for
the Registrant, the Adviser does not seek to obtain or use material inside information that BNY Mellon or its affiliates may possess with
respect to such issuers. However, because an Adviser, in the course of investing Registrant assets in loans (as described above), may
have access to material non-public information regarding a Borrower, the ability of the Registrant advised by such Adviser to purchase
or sell publicly-traded securities of such Borrowers may be restricted.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to
the procedures applicable to Item 10.
| Item 11. | Controls and Procedures. |
(a) The
Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures
are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized
and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files
or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There
were no changes to the Registrant's internal control over financial reporting that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
| Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
The Registrant did not participate in a securities lending program
this period.
(a)(1) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund,
Inc.
By: /s/ David J. DiPetrillo
David J. DiPetrillo
President (Principal Executive Officer)
Date: October
23, 2023
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
By: /s/ David J. DiPetrillo
David J. DiPetrillo
President (Principal Executive Officer)
Date: October
23, 2023
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: October
20, 2023
EXHIBIT INDEX
(a)(1) Code of ethics referred to
in Item 2.
(a)(2) Certifications of principal
executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification
of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)
THE BNY MELLON FAMILY OF
FUNDS
BNY MELLON FUNDS TRUST
Principal Executive Officer and Senior Financial
Officer
Code of Ethics
I.
Covered Officers/Purpose of the
Code
This code of ethics (the "Code"), adopted by
the funds in the BNY Mellon Family of Funds and BNY Mellon Funds Trust (each, a
"Fund"), applies to each Fund's Principal Executive Officer,
Principal Financial Officer, Principal Accounting Officer or Controller, or
other persons performing similar functions, each of whom is listed on Exhibit A (the "Covered Officers"),
for the purpose of promoting:
·
honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships;
·
full, fair, accurate, timely and
understandable disclosure in reports and documents that the Fund files with, or
submits to, the Securities and Exchange Commission (the "SEC") and in
other public communications made by the Fund;
·
compliance with applicable laws
and governmental rules and regulations;
·
the prompt internal reporting of
violations of the Code to an appropriate person or persons identified in the
Code; and
·
accountability for adherence to
the Code.
Each Covered Officer should adhere to a high standard
of business ethics and should be sensitive to situations that may give rise to
actual as well as apparent conflicts of interest.
II.
Covered Officers Should Handle
Ethically Actual and Apparent Conflicts of Interest
Overview. A
"conflict of interest" occurs when a Covered Officer's private
interest interferes with the interests of, or his service to, the Fund. For
example, a conflict of interest would arise if a Covered Officer, or a member
of his family, receives improper personal benefits as a result of his position
with the Fund.
Certain conflicts of interest arise out of the
relationships between Covered Officers and the Fund and already are subject to
conflict of interest provisions in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the Investment Advisers Act
of 1940, as amended (the "Investment Advisers Act"). For example,
Covered Officers may not individually engage in certain transactions (such as
the purchase or sale of securities or other property) with the Fund because of
their status as "affiliated persons" of the Fund. The compliance
programs and procedures of the Fund and the Fund's investment adviser (the
"Adviser") are designed to prevent, or identify and correct,
violations of these provisions. The Code does not, and is not intended to,
repeat or replace these programs and procedures, and the circumstances they
cover fall outside of the parameters of the Code.
Although typically not presenting an opportunity for
improper personal benefit, conflicts arise from, or as a result of, the
contractual relationship between the Fund and the Adviser of which the Covered
Officers are also officers or employees. As a result, the Code recognizes that
the Covered Officers, in the ordinary course of their duties (whether formally
for the Fund or for the Adviser, or for both), will be involved in establishing policies and implementing decisions that will
have different effects on the Adviser and the Fund. The participation of the
Covered Officers in such activities is inherent in the contractual relationship
between the Fund and the Adviser and is consistent with the performance by the
Covered Officers of their duties as officers of the Fund and, if addressed in
conformity with the provisions of the Investment Company Act and the Investment
Advisers Act, will be deemed to have been handled ethically. In addition, it
is recognized by the Fund's Board that the Covered Officers also may be
officers or employees of one or more other investment companies covered by this
or other codes of ethics.
Other conflicts of interest are covered by the Code,
even if such conflicts of interest are not subject to provisions in the
Investment Company Act and the Investment Advisers Act. Covered Officers
should keep in mind that the Code cannot enumerate every possible scenario.
The overarching principle of the Code is that the personal interest of a
Covered Officer should not be placed improperly before the interest of the
Fund.
Each Covered Officer must:
·
not use his personal influence or
personal relationships improperly to influence investment decisions or
financial reporting by the Fund whereby the Covered Officer would benefit
personally to the detriment of the Fund;
·
not cause the Fund to take action,
or fail to take action, for the individual personal benefit of the Covered
Officer rather than the benefit of the Fund; and
·
not retaliate against any employee
or Covered Officer for reports of potential violations that are made in good
faith.
III.
Disclosure and Compliance
·
Each Covered Officer should
familiarize himself with the disclosure requirements generally applicable to
the Fund within his area of responsibility;
·
each Covered Officer should not
knowingly misrepresent, or cause others to misrepresent, facts about the Fund
to others, whether within or outside the Fund, including to the Fund's Board
members and auditors, and to governmental regulators and self-regulatory
organizations;
·
each Covered Officer should, to
the extent appropriate within his area of responsibility, consult with other
officers and employees of the Fund and the Adviser with the goal of promoting
full, fair, accurate, timely and understandable disclosure in the reports and
documents the Fund files with, or submits to, the SEC and in other public
communications made by the Fund; and
·
it is the responsibility of each
Covered Officer to promote compliance with the standards and restrictions
imposed by applicable laws, rules and regulations.
IV.
Reporting and Accountability
Each Covered Officer must:
·
upon adoption of the Code (or
thereafter, as applicable, upon becoming a Covered Officer), affirm in writing
to the Board that he has received, read, and understands the Code;
·
annually thereafter affirm to the Board
that he has complied with the requirements of the Code; and
·
notify the Adviser's General
Counsel (the "General Counsel") promptly if he knows of any violation
of the Code. Failure to do so is itself a violation of the Code.
The General Counsel is responsible for applying the
Code to specific situations in which questions are presented under it and has
the authority to interpret the Code in any particular situation. However,
waivers sought by any Covered Officer will be considered by the Fund's Board.
The Fund will follow these procedures in investigating
and enforcing the Code:
·
the General Counsel will take all
appropriate action to investigate any potential violations reported to him;
·
if, after such investigation, the
General Counsel believes that no violation has occurred, the General Counsel is
not required to take any further action;
·
any matter that the General
Counsel believes is a violation will be reported to the Board;
·
if the Board concurs that a
violation has occurred, it will consider appropriate action, which may include:
review of, and appropriate modifications to, applicable policies and
procedures; notification to appropriate personnel of the Adviser or its board;
or dismissal of the Covered Officer;
·
the Board will be responsible for
granting waivers, as appropriate; and
·
any waivers of or amendments to
the Code, to the extent required, will be disclosed as provided by SEC rules.
V.
Other Policies and Procedures
The Code shall be the sole code of ethics adopted by
the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the
rules and forms applicable to registered investment companies thereunder. The Fund's,
its principal underwriter's and the Adviser's codes of ethics under Rule 17j-1
under the Investment Company Act and the Adviser's additional policies and
procedures, including its Code of Conduct, are separate requirements applying
to the Covered Officers and others, and are not part of the Code.
VI.
Amendments
Except as to Exhibit A, the Code may not be amended
except in written form, which is specifically approved or ratified by a
majority vote of the Fund's Board, including a majority of independent Board
members.
VII.
Confidentiality
All reports and records prepared or maintained
pursuant to the Code will be considered confidential and shall be maintained
and protected accordingly. Except as otherwise required by law or the Code,
such matters shall not be disclosed to anyone other than the appropriate Funds
and their counsel, the appropriate Boards (or Committees) and their counsel and
the Adviser.
VIII.
Internal Use
The Code is intended solely for the internal use by
the Fund and does not constitute an admission, by or on behalf of the Fund, as
to any fact, circumstance, or legal conclusion.
Dated as of: January 14, 2021
Exhibit A
Persons Covered by the
Code of Ethics
David J. DiPetrillo
|
President
|
(Principal Executive
Officer, BNY Mellon Family of Funds)
|
|
|
|
Patrick T. Crowe
|
President
|
(Principal Executive
Officer, BNY Mellon Funds Trust)
|
|
|
|
James M. Windels
|
Treasurer
|
(Principal Financial and
Accounting Officer)
|
[EX-99.CERT]—Exhibit (a)(2)
SECTION 302 CERTIFICATION
I, David J. DiPetrillo, certify that:
1. I have reviewed this report
on Form N-CSR of BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund,
Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement
of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such
disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such
internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the
effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation;
and
(d) Disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other
certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
By: /s/ David
J. DiPetrillo
David J. DiPetrillo
President (Principal Executive Officer)
Date: October
23, 2023
SECTION 302 CERTIFICATION
I, James Windels, certify that:
1. I have reviewed this report
on Form N-CSR of BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund,
Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement
of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such
disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such
internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the
effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation;
and
(d) Disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other
certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
By: /s/ James
Windels
James Windels
Treasurer (Principal Financial Officer)
Date: October
20, 2023
[EX-99.906CERT]
Exhibit (b)
SECTION 906 CERTIFICATIONS
In connection with this report
on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and
(2) the
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.
By: /s/
David J. DiPetrillo
David J. DiPetrillo
President (Principal Executive Officer)
Date: October
23, 2023
By: /s/ James
Windels
James Windels
Treasurer (Principal Financial Officer)
Date: October
20, 2023
This certificate is furnished pursuant to the requirements of Form N-CSR
and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the
liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934.
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