DEFC14A: Angel Oak Financial Strategies Income Term Trust Seeks Shareholder Approval for New Advisory Agreement Amidst Brookfield Acquisition

Angel Oak Financial Strategies Income Term Trust is asking shareholders to approve a new investment advisory agreement due to Brookfield's acquisition of a majority stake in Angel Oak Companies, LP, the parent company of the fund's adviser.

Summary

• Angel Oak Financial Strategies Income Term Trust is holding an annual meeting on June 26, 2025, to seek shareholder approval on three key proposals.
• The first proposal involves approving a new investment advisory agreement with Angel Oak Capital Advisors, LLC, due to Brookfield Asset Management Ltd.'s acquisition of a majority stake in Angel Oak Companies, LP, the parent of the Adviser.
• The transaction is expected to close by September 30, 2025, and will not result in material changes to the day-to-day management and operations of the Fund or any increase in fees.
• The second proposal is to re-elect Keith M. Schappert and Andrea N. Mullins as Class II Trustees of the Board, with a shareholder also nominating himself for the position.
• The Board supports the current nominees, Schappert and Mullins.
• The third proposal is to ratify the selection of Cohen & Company, Ltd. as the Fund's independent registered public accounting firm for the fiscal year ending January 31, 2026.
• The Board recommends voting FOR all proposals.
• Shareholders of record as of April 16, 2025, are eligible to vote.

Sentiment

Score: 7

Explanation: The document is generally positive, emphasizing continuity and lack of disruption due to the acquisition. However, there are some underlying concerns about fees and the potential for future changes in control.

Positives

• The acquisition by Brookfield is not expected to result in material changes to the day-to-day management and operations of the Fund.
• The fees for investment advisory services will remain the same under the new agreement.
• The Board has been assured that there will be no reduction in the nature or quality of the investment advisory services provided to the Fund due to the Transaction.
• The Board supports the Funds nominees for election as the Class II Trustees Mr. Schappert and Ms. Mullins.

Negatives

• A new investment advisory agreement is required, creating administrative overhead.
• A shareholder has nominated himself as a nominee to serve as a Class II Trustee of the Fund, potentially creating a contested election.

Risks

• The closing of the Transaction is subject to certain conditions, and there is no assurance that the Transaction will be completed as planned, or that the necessary conditions will be satisfied.
• If Proposal 1 is not approved by shareholders of the Fund, the Board will evaluate other shortand long-term options permitted by law, which could include an interim investment advisory agreement of limited duration with the Adviser or maintaining the current ownership structure pending further discussions.

Future Outlook

Beginning in 2027, Brookfield will have a right to acquire additional beneficial ownership in Angel Oak Companies, LP, which over time could result in Brookfield taking control of the board of directors of Angel Oak Companies, LP.

Management Comments

• The Transaction will not result in material changes to the day-to-day management and operations of the Fund or any increase in fees.
• The personnel, officers and managers of the Adviser are expected to remain the same.
• The Board has been assured that there will be no reduction in the nature or quality of the investment advisory services provided to the Fund due to the Transaction.

Industry Context

This announcement reflects the ongoing trend of consolidation and acquisitions within the asset management industry, as larger firms like Brookfield seek to expand their reach and capabilities by acquiring specialized investment managers.

Comparison to Industry Standards

• The document mentions that the Funds management fee was higher than the median management fees of its peer closed-end funds and that its net expense ratio was higher than the median of its peer closed-end funds.
• The Board noted that the quality of services provided by the Adviser and the relatively strong performance of the Angel Oak Funds demonstrated that the advisory fee still offered an appropriate value for the Fund and its shareholders.

Stakeholder Impact

• Shareholders are asked to vote on key proposals affecting the Fund's management and operations.
• The acquisition by Brookfield could potentially impact the Fund's distribution arrangements, particularly with institutional investors.
• The Adviser has agreed to keep the current Operating Expense Limitation Agreement in place through September 30, 2027, which benefits shareholders.

Next Steps

• Shareholders need to vote on the proposals by June 25, 2025.
• The Brookfield acquisition is expected to close by September 30, 2025, pending satisfaction of closing conditions.
• The Board will continue to monitor the performance and fees of the Fund.

Key Dates

Keywords

investment advisory agreement, Angel Oak Financial Strategies Income Term Trust, Brookfield Asset Management, trustees, Cohen & Company, proxy statement, annual meeting, investment adviser, shareholder vote, fund governance