UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material under §240.14a-12 |
TP Flexible Income Fund, Inc. | ||
(Name of Registrant as Specified In Its Charter) | ||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||
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TP FLEXIBLE INCOME FUND, INC.
10 East 40th Street, 42nd Floor
New York, New York 10016
September 27, 2019
Dear Stockholder:
You are cordially invited to attend the 2019 Annual Meeting of Stockholders, or the Annual Meeting, of TP Flexible Income Fund, Inc. (the “Fund”), a Maryland corporation, to be held on Tuesday, December 3, 2019, at 2:00 p.m., Eastern Time, at 10 East 40th Street, 44th Floor, New York, New York 10016.
The notice of Annual Meeting and proxy statement accompanying this letter provide an outline of the business to be conducted at the Annual Meeting. At the Annual Meeting, holders of the outstanding shares of the Fund’s common stock (“stockholders”) will be asked to elect five directors of the Fund.
It is important that you be represented at the Annual Meeting. Please complete, sign, date and return your proxy card to us in the enclosed, postage-prepaid envelope at your earliest convenience, even if you plan to attend the Annual Meeting. If you prefer, you can authorize your proxy through the Internet or by telephone as described in the proxy statement and on the enclosed proxy card. If you attend the Annual Meeting, you may revoke your proxy prior to its exercise and vote in person at the Annual Meeting. Your vote is very important to us. I urge you to submit your proxy as soon as possible.
If you have any questions about the proposals to be voted on, please call AST Fund Solutions, LLC, the Fund’s proxy solicitor, at (877) 732-3612.
Further, from time to time the Fund may repurchase a portion of its common stock and are notifying you of such intention as required by applicable securities law.
Sincerely yours,
M. Grier Eliasek
Chief Executive Officer
TP FLEXIBLE INCOME FUND, INC.
10 East 40th Street, 42nd Floor
New York, New York 10016
(212) 448-0702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 3, 2019
To the Stockholders of TP Flexible Income Fund, Inc.:
The 2019 Annual Meeting of Stockholders, or the Annual Meeting, of TP Flexible Income Fund, Inc. (“FLEX” or the “Fund”), a Maryland corporation, will be held at 10 East 40th Street, 44th Floor, New York, New York 10016, on Tuesday, December 3, 2019, at 2:00 p.m., Eastern Time, for the following purposes:
• | To elect one Class I director of the Fund, as outlined below and more fully described in the accompanying Proxy Statement: |
• | Mr. Eugene S. Stark, to be voted upon by holders of the outstanding shares of the Fund’s common stock to serve until the 2022 annual meeting of stockholders or until his successor is duly elected and qualifies. |
• | To approve the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies. |
• | To transact such other business as may properly come before the Annual Meeting and any adjournments, postponements or delays thereof. |
You have the right to receive notice of and to vote at the Annual Meeting if you were a stockholder of record of the Fund’s outstanding common stock at the close of business on September 27, 2019. Please complete, sign, date and return your proxy card to the Fund in the enclosed, postage-prepaid envelope at your earliest convenience, even if you plan to attend the Annual Meeting. If you prefer, you can authorize your proxy through the Internet or by telephone as described in the proxy statement and on the enclosed proxy card(s). If you attend the Annual Meeting, you may revoke your proxy prior to its exercise and vote in person at the Annual Meeting. In the event that there are not sufficient stockholders present for a quorum or sufficient votes to approve a proposal at the time the Annual Meeting is convened, the Annual Meeting may be adjourned from time to time in order to permit further solicitation of proxies by the Fund.
If you have any questions about the proposals to be voted on, please call AST Fund Solutions, LLC, our proxy solicitor, at (877) 732-3612.
By Order of the Board of Directors,
Kristin Van Dask
Chief Financial Officer,
Chief Compliance Officer, Treasurer and Secretary
New York, New York
September 27, 2019
This is an important meeting. To ensure proper representation at the Annual Meeting, please complete, sign, date and return the proxy card in the enclosed, postage-prepaid envelope, or authorize a proxy to vote your shares by telephone or through the Internet. Even if you authorize a proxy prior to the Annual Meeting, you still may attend the Annual Meeting, revoke your proxy, and vote your shares in person.
TP FLEXIBLE INCOME FUND, INC.
10 East 40th Street, 42nd Floor
New York, New York 10016
(212) 448-0702
PROXY STATEMENT
2019 Annual Meeting of Stockholders
This proxy statement, or this Proxy Statement, is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of TP Flexible Income Fund, Inc., a Maryland corporation (“FLEX,” the “Fund,” or “we,” “us,” or “our”), for use at our 2019 Annual Meeting of Stockholders, or the Annual Meeting, to be held on Tuesday, December 3, 2019, at 2:00 p.m., Eastern Time, at 10 East 40th Street, 44th Floor, New York, New York 10016, and at any postponements, adjournments or delays thereof.
The Board has fixed the close of business on September 27, 2019 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, 2,392,140 shares of FLEX’s common stock were issued and outstanding. Each share of the common stock is entitled to one vote.
This Proxy Statement, the accompanying proxy cards and the Fund’s Annual Report for the fiscal year ended June 30, 2019 are first being sent to stockholders on or about October 3, 2019.
Unlike many companies where the majority of the outstanding shares are held by institutional investors, a majority of our stockholders are retail investors who generally hold smaller numbers of shares than institutional investors. As a result, it is important that every stockholder authorize a proxy so that we can achieve a quorum and hold the Annual Meeting. The presence at the Annual Meeting, in person or by proxy, of stockholders entitled to cast one-third of the votes entitled to be cast at the Annual Meeting for the Fund will constitute a quorum for the transaction of business for the Fund. If a quorum is not met by the Fund, or if there are not sufficient votes to approve a proposal, then we may adjourn the Annual Meeting and incur additional expenses to continue to solicit additional votes.
We have engaged AST Fund Solutions, LLC as our proxy solicitor, who may call you and ask you to vote your shares. The proxy solicitor will not attempt to influence how you vote your shares, but only ask that you take the time to cast a vote. You may also be asked if you would like to authorize your proxy over the telephone and to have your voting instructions transmitted to our proxy tabulation firm.
We encourage you to vote, either by voting in person at the Annual Meeting or by granting a proxy (i.e., authorizing someone to vote your shares). If you properly sign and date the accompanying proxy card or authorize a proxy to vote your shares by telephone or through the Internet, and we receive it in time for the Annual Meeting, the persons named as proxies will vote the shares registered directly in your name in the manner that you specified. If you return a properly executed proxy card but give no voting instructions, your shares will be voted FOR the election of the nominee as director.
If you are a “stockholder of record” (i.e., you hold shares directly in your name), you may revoke a proxy at any time before it is exercised by notifying the Fund’s Secretary in writing, by submitting a properly executed, later-dated proxy, or by voting in person at the Annual Meeting. Any stockholder of record attending the Annual Meeting may vote in person whether or not he or she has previously authorized a proxy.
If your shares are held for your account by a broker, trustee, bank or other institution or nominee, you may vote such shares at the Annual Meeting only if you obtain proper written authority from your institution or nominee and present it at the Annual Meeting. Please bring with you a legal proxy or letter from the broker, trustee, bank or other institution or nominee
confirming your beneficial ownership of the shares as of the Record Date. No stockholders of the Fund have any dissenters’ or appraisal rights in connection with any of the proposals described herein.
If your shares are registered in the name of a bank or brokerage firm, you may be eligible to vote your shares electronically via the Internet or by telephone.
For information on how to obtain directions to attend the Annual Meeting in person, please contact AST Fund Solutions, LLC, our proxy solicitor, at (877) 732-3612.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON DECEMBER 3, 2019
The following materials relating to this Proxy Statement are available at: www.proxyonline.com /docs/tpflexibleincomefundinc2019.pdf
• | this Proxy Statement; |
• | the accompanying Notice of Annual Meeting; and |
• | the Fund’s Annual Report for the fiscal year ended June 30, 2019. |
Purpose of Annual Meeting
The Annual Meeting has been called for the following purposes:
• | To elect one Class I director of the Fund, as outlined below and more fully described in this Proxy Statement: |
• | Mr. Eugene S. Stark, to be voted upon by holders of the outstanding shares of the Fund’s common stock to serve until the 2022 annual meeting of stockholders or until his successor is duly elected and qualifies. |
• | To approve the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies. |
• | To transact such other business as may properly come before the Annual Meeting and any adjournments, postponements or delays thereof. |
Quorum Required
A quorum must be present at the Annual Meeting for any business to be conducted for the Fund. The Fund’s Bylaws provide that the presence at the Annual Meeting, in person or by proxy, of the holders of shares of the Fund’s outstanding stock entitled to cast one-third of the votes entitled to be cast with respect thereto as of the Record Date will constitute a quorum, except with respect to any such matter that, under our charter, applicable statutes or regulatory requirements, requires approval by a separate vote of one or more classes of stock, in which case the presence in person or by proxy of the holders of shares entitled to cast a one-third of the votes entitled to be cast by each such class on such a matter shall constitute a quorum.
Shares that are present at the Annual Meeting, but then abstain, including by reason of so called “broker non-votes,” will be treated as present for purposes of establishing a quorum. However, abstentions and “broker non-votes” on a matter are not treated as votes cast on such matter. A broker non-vote with respect to a matter occurs when a nominee holding shares for a beneficial owner is present at the meeting with respect to such shares, has not received voting instructions from the beneficial owner on the matter in question and does not have, or chooses not to exercise, discretionary authority to vote the shares on such matter.
If a quorum is not present at the Annual Meeting, the chairman of the Annual Meeting or, if there are not sufficient votes to approval a proposal, the stockholders of the Fund who are present at the Annual Meeting, may adjourn the Annual Meeting for the Fund from time to time to permit further solicitation of proxies.
Votes Required
Election of Director. The nominated director will be elected by a plurality of all the votes cast at the Annual Meeting in person or by proxy, provided that a quorum is present. Stockholders may not cumulate their votes. Abstentions will not be included in determining the number of votes cast and, as a result, will have no effect on this proposal. Any shares not voted (whether by abstention, broker non-vote or otherwise) or voted against a nominee will have no impact on the election of directors, except to the extent that the failure to vote for an individual results in another individual receiving a larger proportion of votes. Under the rules of the New York Stock Exchange, brokers do not have discretionary authority to vote for the election of directors. As a result, absent specific voting instructions from the beneficial owner of the applicable shares, brokers will not be permitted to vote shares for the election of directors.
Additional Solicitation. If there are not enough votes to approve a proposal at the Annual Meeting, the stockholders, by the affirmative vote of a majority of the votes cast for the proposal, may approve the adjournment of the Annual Meeting for the Fund with respect to any or all of the proposals, to permit the further solicitation of proxies with respect to any proposal.
If a quorum is present, a stockholder vote may be called on the proposals described in this Proxy Statement prior to any such adjournment if there are sufficient votes for approval of such proposals.
Information Regarding This Solicitation
The Fund will bear the expense of the solicitation of proxies for the Annual Meeting, including the cost of preparing, printing and mailing this Proxy Statement, the accompanying Notice of Annual Meeting of Stockholders and the proxy cards. If brokers, nominees, fiduciaries and other persons holding shares in their names, or in the name of their nominees, which are beneficially owned by others, forward the proxy materials to and obtain proxies from such beneficial owners, we will reimburse such persons for their reasonable expenses in so doing.
In addition to the solicitation of proxies by the use of the mail, proxies may be solicited in person and by telephone or facsimile transmission by directors or officers of the Fund and officers or employees of Prospect Flexible Income Management, LLC (“PFIM” or the “Fund’s investment adviser”), Prospect Capital Management L.P. (“PCM”), the operating member of the Fund’s investment adviser, Triton Pacific Securities, LLC, the Fund’s dealer manager, and/or Prospect Administration LLC (“Prospect Administration”), the Fund’s administrator. No additional compensation will be paid to directors, officers or employees for such services.
The Fund has also retained AST Fund Solutions, LLC to assist in the solicitation of proxies for the Annual Meeting for a fee of approximately $25,388 plus out-of-pocket expenses.
Stockholders may provide their voting instructions by telephone or through the Internet. These options require stockholders to input the control number which is located on the proxy card. After inputting this number, stockholders will be prompted to provide their voting instructions. Stockholders will have an opportunity to review their voting instructions and make any necessary changes before submitting their voting instructions and terminating their telephone call or Internet link. Stockholders who authorize a proxy via the Internet, in addition to confirming their voting instructions prior to submission, will also receive an e-mail confirming their instructions upon request.
Any proxy given pursuant to this solicitation may be revoked by notice from the person giving the proxy at any time before it is exercised. Any such notice of revocation should be provided in writing and signed by the stockholder in the same manner as the proxy being revoked and delivered to our proxy tabulator.
Investment Advisers and Administrator
PFIM serves as the Fund’s investment adviser and Prospect Administration serves as the Fund’s administrator. PFIM and Prospect Administration are located at 10 East 40th Street, 42nd Floor, New York, New York 10016.
Security Ownership of Certain Beneficial Owners and Management
The Fund’s directors are divided into two groups - interested directors and independent directors. Interested directors are “interested persons” of the Fund, as defined in the 1940 Act.
The following table sets forth, as of September 26, 2019, certain ownership information with respect to the Fund’s common stock for those persons who may, insofar as is known to us, directly or indirectly own, control or hold with the power to vote, 5% or more of the Fund’s outstanding common stock and the beneficial ownership of each current director, the nominee for director, the Fund’s executive officers, and the executive officers and directors as a group.
Ownership information for those persons, if any, who own, control or hold the power to vote, 5% or more of the Fund’s shares of common stock is based upon Schedule 13D or Schedule 13G filings by such persons with the Securities and Exchange Commission (the “Commission”) and other information obtained from such persons, if available. Such information is as of the date of the applicable filing and may no longer be accurate.
Unless otherwise indicated, we believe that each person set forth in the table below has sole voting and investment power with respect to all shares of the Fund’s common stock he or she beneficially owns and has the same address as the Fund. The Fund’s address is 10 East 40th Street, 42nd Floor, New York, New York 10016.
Name and Address of Beneficial Owner(1) | Number of Shares of Common Stock Beneficially Owned(2) | Percentage of Shares of Common Stock Outstanding(3) | ||||||
5% or more holders | ||||||||
None | ||||||||
Interested Directors | ||||||||
M. Grier Eliasek(4) | — | — | ||||||
Craig J. Faggen(5) | 17,555.71 | * | ||||||
Independent Directors | ||||||||
Andrew C. Cooper | — | — | ||||||
William J. Gremp | — | — | ||||||
Eugene S. Stark | — | — | ||||||
Executive Officers | ||||||||
Kristin Van Dask | — | — | ||||||
Executive officers and directors as a group (6 persons) | 17,555.71 | * |
_______________________________
* | Represents less than one percent. |
(1) | The business address of each director and executive officer of the Fund is c/o TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016. |
(2) | Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Assumes no other purchases or sales of the Fund’s common stock since the most recently available Commission filings. This assumption has been made under the rules and regulations of the Commission and does not reflect any knowledge that the Fund has with respect to the present intent of the beneficial owners of the Fund’s common stock listed in this table. |
(3) | Based on a total of 2,392,140 shares of FLEX’s common stock issued and outstanding as of September 26, 2019. |
(4) | Mr. Eliasek also serves as the Chief Executive Officer and President of the Fund. |
(5) | The Fund issued 14,815 shares of its common stock to an affiliate of Mr. Faggen in exchange for gross proceeds of $200,003 and the affiliate of Mr. Faggen has received 2,740.71 shares through the Fund’s distribution reinvestment plan. |
The following table sets forth the dollar range of equity securities beneficially owned by each director and the nominee for election as a director of the Fund and equity securities beneficially owned by each director and the nominee for election as a director within the same family of investment companies as of September 26, 2019. Information as to beneficial ownership is based on information furnished to the Fund by the directors. The Fund is part of a “family of investment companies”, as that term is defined in the 1940 Act, that includes Priority Income Fund, Inc. (“Priority”) and Prospect Capital Corporation (“PSEC” and, collectively with Priority and FLEX, the “Fund Complex”).
Name of Director | Dollar Range of Equity Securities in FLEX (1)(2) | Dollar Range of Equity Securities in Priority(1)(2) | Dollar Range of Equity Securities in PSEC(1)(2) | |
Interested Directors | ||||
M. Grier Eliasek | None | None | Over $100,000 | |
Craig J. Faggen | Over $100,000 | None | None | |
Independent Directors | ||||
Andrew C. Cooper | None | None | None | |
William J. Gremp | None | None | $50,000 - $100,000 | |
Eugene S. Stark | None | None | Over $100,000 |
_______________________________
(1) | The dollar range of equity securities beneficially owned is based on an assumed current public offering price of $11.38 per share of the Fund’s common stock, as of September 26, 2019. Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, which requires pecuniary interest. |
(2) | The dollar ranges are: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or over $100,000. |
ELECTION OF DIRECTORS
Pursuant to the Fund’s Bylaws, the Board of the Fund may change the number of directors constituting the Board, provided that the number thereof shall never be less than three, except for a period of up to 60 days after the death, removal or resignation of a director pending the election of such director’s successor. In accordance with the Fund’s Bylaws, the Fund currently has five directors on its Board. Members of the Board have been divided into three staggered classes of directors, with directors in each class elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following their election and until their successors are duly elected and qualify.
• | Eugene S. Stark is standing for election as a Class I director at the Annual Meeting to serve until the 2022 annual meeting of stockholders or until his successor is duly elected and qualifies. |
A stockholder can vote for or withhold his or her vote from the nominee. In the absence of instructions to the contrary, it is the intention of the persons named as proxies to vote such proxy FOR the election of the nominee named above. If the nominee should decline or be unable to serve as a director, it is intended that the proxy will be voted for the election of such person as is nominated by the Board as a replacement. The Board has no reason to believe that the person named above will be unable or unwilling to serve, and such person has consented to being named in this Proxy Statement and to serve if elected.
The Board of the Fund recommends that you vote FOR the election of the nominees named in this Proxy Statement.
ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES
The Fund’s stockholders may be asked to consider and act upon one or more adjournments of the Annual Meeting, if necessary or appropriate, to solicit additional proxies in favor of any or all of the other proposals set forth in this Proxy Statement.
If a quorum is not present at the Annual Meeting, the Chairman of the meeting may adjourn the Annual Meeting to solicit additional proxies. If a quorum is present at the Annual Meeting, but there are not sufficient votes at the time of the Annual Meeting to approve one or more of the proposals, the Fund’s stockholders may be asked to vote on the proposal to approve the adjournment of the Annual Meeting to permit further solicitation of proxies in favor of the other proposals. However, a stockholder vote may be taken on one of the proposals in this Proxy Statement prior to any such adjournment if there are sufficient votes for approval on such proposal.
If the adjournment proposal is approved, and the Annual Meeting is adjourned, the Board will use the additional time to solicit additional proxies in favor of any of the proposals to be presented at the Annual Meeting, including the solicitation of proxies from stockholders that have previously voted against the relevant proposal.
The Board believes that, if the number of shares of the Fund’s stock voting in favor of any of the proposals presented at the Annual Meeting is insufficient to approve a proposal, it is in the best interests of the Fund’s stockholders to enable the Board, for a limited period of time, to continue to seek to obtain a sufficient number of additional votes in favor of the proposal. Any signed proxies received by the Fund in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. The time and place of the adjourned meeting will be announced at the time the adjournment is taken. Any adjournment of the Annual Meeting for the purpose of soliciting additional proxies will allow the Fund’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Annual Meeting as adjourned or postponed.
The Board unanimously recommends a vote “FOR” the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies.
OFFICER AND DIRECTORS
Information about the Board and Director Nominee
Certain information with respect to the Class I director nominee of the Fund for election at the Annual Meeting, as well as each of the other directors of the Fund, is set forth below, including their names, ages, a brief description of their recent business experience, including present occupations and employment, certain directorships that each person holds, and the year in which each person became a director of the Fund.
The 1940 Act requires that the Board consist of at least a majority of independent directors. Under the 1940 Act, in order for a director to be deemed independent, he or she, among other things, generally must not: own, control or hold power to vote, 5% or more of the voting securities or be an officer or employee of the Fund or of an investment adviser or principal underwriter to the Fund; control the Fund or an investment adviser or principal underwriter to the Fund; be an officer, director or employee of an investment adviser or principal underwriter to the Fund; be a member of the immediate family of any of the foregoing persons; knowingly have a direct or indirect beneficial interest in, or be designated as an executor, guardian or trustee of an interest in, any security issued by an investment adviser or principal underwriter to the Fund; be a partner or employee of any firm that has acted as legal counsel to the Fund or an investment adviser or principal underwriter to the Fund during the last two years; or have certain relationships with a broker-dealer or other person that has engaged in agency transactions, principal transactions, lent money or other property to, or distributed shares on behalf of the Fund.
The Board, in connection with the 1940 Act, has considered the independence of members of the Board who are not employed by PFIM, Prospect Administration, PCM, the Fund’s dealer manager or any of their affiliates and has concluded that Andrew C. Cooper, William J. Gremp and Eugene S. Stark are not “interested persons” as defined by the 1940 Act and therefore qualify as independent directors under the standards promulgated by the 1940 Act. In reaching this conclusion, the Board concluded that Messrs. Cooper, Gremp and Stark had no relationships with PFIM, Prospect Administration, PCM, the Fund’s dealer manager or any of their affiliates, other than their positions as directors of the Fund and, if applicable, investments in us that are on the same terms as those of other stockholders.
Eugene S. Stark has been nominated for election as a Class I director at the Annual Meeting to serve until the 2022 annual meeting of stockholders or until his successor is duly elected and qualifies. Mr. Stark is not being proposed for election pursuant to any agreement or understanding with any other director or the Fund. Mr. Stark has agreed to serve as a Class I director, if elected, and has consented to be named as a nominee.
Name (Age) Position(s) with the Fund (Since) Address(1) | Class Term Expires(2) | Number of Funds in the Fund Complex overseen by the Director or Nominee | Principal Occupation(s) and Other Public Company Directorships Held During the Past 5 Years(3) | |||
Interested Directors(4) | ||||||
Craig Faggen (50) Director (2012) | Class II Continuing 2020 | 1 | Private Equity Professional, co-founder and Chief Executive Officer of Triton Pacific Capital Partners, LLC; and former President and Chairman of Triton Pacific Investment Corporation, Inc. | |||
M. Grier Eliasek (46) Chairman of the Board, Director, Chief Executive Officer and President (2019) | Class III Continuing 2021 | 3 | President and Chief Operating Officer of PFIM, Director, President and Chief Operating Officer of Prospect Capital Corporation, Managing Director of Prospect Capital Management and Prospect Administration, and Director, Chief Executive Officer and President of Priority Income Fund, Inc. | |||
Independent Directors | ||||||
Eugene S. Stark (61) Director (2019) | Class I Nominee for Director 2022 | 3 | Principal Financial Officer, Chief Compliance Officer and Vice President-Administration of General American Investors Company, Inc. from May 2005 to present. Member of Board of Directors of Prospect Capital Corporation and Priority Income Fund, Inc. | |||
William J. Gremp (76) Director (2019) | Class II Continuing 2020 | 3 | Mr. Gremp is responsible for traditional banking services, credit and lending, private equity and corporate cash management with Merrill Lynch & Co. from 1999 to present. Member of Board of Directors of Prospect Capital Corporation and Priority Income Fund, Inc. | |||
Andrew C. Cooper (57) Director (2019) | Class III Continuing 2021 | 3 | Mr. Cooper is an entrepreneur, who over the last 15 years has founded, built, run and sold three companies. He is Co-Chief Executive Officer of Unison Energy, LLC, a company that develops, owns and operates distributed combined heat and power co-generation solutions. Member of Board of Directors of Prospect Capital Corporation and Priority Income Fund, Inc. |
_______________________________
(1) | The business address of each director of the Fund is c/o TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016. |
(2) | For the nominee, the term stated assumes election by stockholders at the Annual Meeting. |
(3) | The Fund Complex consists of the Fund, Priority and PSEC. Each of Messrs. Eliasek, Cooper, Gremp and Stark are directors of all three entities in the Fund Complex. Mr. Stark is up for election as a director of three entities in the Fund Complex. |
(4) | Mr. Eliasek is an interested director as defined in the 1940 Act because of his positions with PCM and the Fund. Mr. Faggen is an interested director as defined in the 1940 Act because of his position as an officer of Triton Pacific Capital Partners, LLC, an affiliate of the Fund’s dealer manager. |
Committees of the Board
The Board has established an Audit Committee and a Nominating, Corporate Governance and Compensation Committee. The charter of each committee is made available on our website at www.flexbdc.com. For the fiscal year ended June 30, 2019, the Board held nine Board meetings, five Audit Committee meetings and no Nominating, Corporate Governance and Compensation Committee meetings. All directors attended at least 75% of the aggregate number of meetings of the Board and of the respective committees on which they served. We require each director to make a diligent effort to attend all board and committee meetings, as well as each annual meeting of stockholders. All five directors attended our prior annual meeting of stockholders in person.
The Audit Committee. Our Audit Committee is composed wholly of our independent directors. The Audit Committee operates pursuant to a charter approved by the Board. The charter sets forth the responsibilities of the Audit Committee, which include the following. The Audit Committee is responsible for approving our independent accountants, reviewing with our independent accountants the plans and results of the audit engagement, approving professional services provided by our independent accountants, reviewing the independence of our independent accountants and reviewing the adequacy of our internal accounting controls. The Audit Committee is also responsible for aiding our Board in determining a fair market value of our debt and equity securities that are not publicly-traded or for which current market values are not readily available. The Board and Audit Committee may utilize the services of an independent valuation firm to help them determine the fair value of these securities. Messrs. Cooper, Gremp and Stark are the members of our Audit Committee, and Mr. Stark is the chairman. Our Board has determined that Mr. Stark is an “audit committee financial expert” as defined under relevant SEC rules.
The Nominating, Corporate Governance and Compensation Committee. The Nominating, Corporate Governance and Compensation Committee is responsible for selecting qualified nominees to be elected to the Board by stockholders; selecting qualified nominees to fill any vacancies on the Board or a committee thereof; developing and recommending to the Board a set of corporate governance principles applicable to FLEX; overseeing the evaluation of the Board and management; determining or recommending to the Board for determination the compensation of any of our executive officers to the extent we pay any
executive officers’ compensation; and undertaking such other duties and responsibilities as may from time to time be delegated by the Board to the Nominating, Corporate Governance and Compensation Committee. Currently, the FLEX’s executive officers do not receive any direct compensation from FLEX. The Nominating, Corporate Governance and Compensation Committee takes into consideration the educational, professional and technical backgrounds and diversity of each nominee when evaluating such nominees to be elected to the Board. The Nominating, Corporate Governance and Compensation Committee does not have a formal policy with respect to diversity. The Nominating, Corporate Governance and Compensation Committee is presently composed of three persons: Messrs. Cooper, Gremp and Stark, each of whom is not an “interested person” as defined in the 1940 Act.
The Nominating, Corporate Governance and Corporate Governance Committee considers candidates suggested by its members and other directors, as well as our management and stockholders. A stockholder who wishes to recommend a prospective nominee for the Board must submit the same information and follow the same procedures regarding advance notice and other requirements of our Bylaws applicable to stockholder-nominated director candidates.
In determining whether to recommend a director nominee, the Nominating, Corporate Governance and Compensation Committee considers and discusses diversity, among other factors, with a view toward the needs of the Board as a whole. The Nominating, Corporate Governance and Compensation Committee generally conceptualizes diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to the Board, when identifying and recommending director nominees. The Nominating, Corporate Governance and Compensation Committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the Nominating, Corporate Governance and Compensation Committee’s goal of creating a Board that best serves our needs and those of our stockholders.
Corporate Governance
Board Leadership Structure
The Board believes that the combined position of Chief Executive Officer of the Fund and Chairman of the Board of the Fund is a superior model that results in greater efficiency regarding management of the Fund, reduced confusion due to the elimination of the need to transfer substantial information quickly and repeatedly between a chief executive officer and chairman, and business advantages to the Fund arising from the specialized knowledge acquired from the duties of the dual roles. The need for efficient decision making is particularly acute in the line of business of the Fund, whereby multiple factors including market factors, interest rates and innumerable other financial metrics change on an ongoing and daily basis. The Board has not identified a lead independent director of the Board of the Fund in as much as the Board consists of only five individuals.
Director Independence
The 1940 Act requires that the Board consist of at least a majority of independent directors. Under the 1940 Act, in order for a director to be deemed independent, he or she, among other things, generally must not: own 5% or more of the voting securities or be an officer or employee of the Fund or of an investment adviser or principal underwriter to the Fund; control the Fund or an investment advisor or principal underwriter to the Fund; be an officer, director or employee of an investment adviser or principal underwriter to the Fund; be a member of the immediate family of any of the foregoing persons; knowingly have a direct or indirect beneficial interest in, or be designated as an executor, guardian or trustee of an interest in, any security issued by an investment adviser or principal underwriter to the Fund; be a partner or employee of any firm that has acted as legal counsel to the Fund or an investment adviser or principal underwriter to the Fund during the last two years; or have certain relationships with a broker-dealer or other person that has engaged in agency transactions, principal transactions, lent money or other property to, or distributed shares on behalf of the Fund. On an annual basis, each member of the Board is required to complete an independence questionnaire designed to provide information to assist the Board in determining whether the director is independent under the 1940 Act. The Board has determined that each of its directors, other than Messrs. Eliasek and Faggen, is independent under the 1940 Act.
Role of the Chairman and Chief Executive Officer
As Chairman of the Board and Chief Executive Officer of the Fund, Mr. Eliasek assumes a leading role in mid- and long-term strategic planning and supports major transaction initiatives of the Fund. Mr. Eliasek also manages the day-to-day operations of the Fund, with the support of the other executive officers. As Chief Executive Officer, Mr. Eliasek has general responsibility for the implementation of the policies of the Fund, as determined by the Board, and for the management of the business and affairs of the Fund. The Board has determined that its leadership structure, in which the majority of the directors
are not affiliated with the Fund, PFIM, Prospect Administration, PCM or their affiliates, is appropriate in light of the services that PFIM and Prospect Administration and their affiliates provide to the Fund and the potential conflicts of interest that could arise from these relationships.
Experience, Qualifications, Attributes and/or Skills that Led to the Board’s Conclusion that such Members Should Serve as Directors of the Fund
The Board believes that, collectively, the directors have balanced and diverse experience, qualifications, attributes and skills, which allow the Board to operate effectively in governing the Fund and protecting the interests of its stockholders. Below is a description of the various experiences, qualifications, attributes and/or skills with respect to each director considered by the Board.
M. Grier Eliasek
Mr. Eliasek has been the Chairman of the Board and the Fund’s Chief Executive Officer and President since March 31, 2019, the date on which Pathway Capital Opportunity Fund, Inc., or PWAY, merged (the “Merger”) with and into Triton Pacific Investment Corporation, Inc., or TPIC. Prior to the Merger Mr. Eliasek served as PWAY’s Chairman of the Board and the Fund’s Chief Executive Officer and President since PWAY’s inception. Mr. Eliasek also currently serves as President and Chief Operating Officer of PFIM, as a Managing Director of the Administrator, as President, Co-Founder and Chief Operating Officer of PSEC and as President and Chief Operating Officer of Prospect Flexible Income Management, LLC. He also serves on the Board of Directors for PSEC and leads each of PCM’s investment committees in the origination, selection, monitoring and portfolio management of investments. Prior to joining PCM in 2004, Mr. Eliasek served as a Managing Director with Prospect Street Ventures, an investment management firm which, together with its predecessors, invested in various investment strategies through publicly traded closed-end funds and private limited partnerships. Prior to joining Prospect Street Ventures, Mr. Eliasek served as a consultant with Bain & Company, a global strategy consulting firm. Mr. Eliasek received his MBA from Harvard Business School and his Bachelor of Science degree in Chemical Engineering with Highest Distinction from the University of Virginia, where he was a Jefferson Scholar and a Rodman Scholar.
Mr. Eliasek brings to the Board business leadership and experience and knowledge of the energy sector, senior secured loans, other debt, private equity and venture capital investments and, as well, a knowledge of diverse management practices. His depth of experience in managerial positions in investment management, securities research and financial services, as well as his extensive knowledge of the Fund’s business and operations, provides the Board valuable industry-specific knowledge and expertise on these and other matters. Mr. Eliasek’s service as Chairman of the Board, Chief Executive Officer and President of the Fund, as Chief Operating Officer and President of PFIM and as a Managing Director of PCM and Prospect Administration provide him with a specific understanding of the Fund, its operation, and the business and regulatory issues facing the Fund.
Craig J. Faggen
Mr. Faggen was, prior to the Merger, the Chairman of TPIC’s board of directors and its Chief Executive Officer since TPIC’s inception in 2011. Following consummation of the Merger on March 31, 2019, he ceased serving in such capacities but remained a member of the Fund’s Board. Mr. Faggen has over 20 years of experience developing and implementing strategic initiatives and structuring numerous complex capital markets transactions. For the past five years, Mr. Faggen has served as the co-founder and Chief Executive Officer of Triton Pacific Capital Partners, LLC, or TPCP, and has been actively involved in building its private equity division. As CEO of TPCP, Mr. Faggen has overall firm oversight responsibilities. Prior to co-founding TPCP, he was a founder and a partner in the boutique investment banking firm Triton Pacific Capital, LLC. There he was instrumental in the due diligence, structuring, and closing of several billion dollars of transactions. Prior to co-founding TPCP, Mr. Faggen worked in Arthur Andersen’s Capital Markets Group, where he acted as a financial advisor to a number of public and private companies on various transactions including IPOs, securitized debt transactions, equity private placements, dispositions and M&A related opportunities. Mr. Faggen received a B.A. in Economics from UCLA and a Master’s Degree from MIT. Craig Faggen sits on the board of a number of private companies, most of which are portfolio companies of investment funds managed or sponsored by TPCP or its affiliates. Mr. Faggen has not, during the past five years, sat on the board of any other registered investment companies or other public companies. Mr. Faggen’s experience as our former Chairman and Chief Executive Officer and his investment experience enhances his services to our board of directors.
Andrew C. Cooper
Mr. Cooper’s over 30 years of experience in venture capital management, venture capital investing and investment banking provides the Board with a wealth of leadership, business investing and financial experience. Mr. Cooper’s experience as the co-founder, Co-CEO, and director of Unison Energy, a co-generation company that engineers, installs, owns, and
operates cogeneration facilities as well as the former co-CEO of Unison Site Management LLC, a leading cellular site owner with over 4,000 cell sites under management, and as co-founder, former CFO and VP of business development for Avesta Technologies, an enterprise, information and technology management software company bought by Visual Networks in 2000, provides the Board with the benefit of leadership and experience in finance and business management. Further, Mr. Cooper’s time as a director of CSG Systems, Protection One Alarm, LionBridge Technologies Weblink Wireless, Aquatic Energy and the Madison Square Boys and Girls Club of New York provides the Board with a wealth of experience and an in-depth understanding of management practices. Mr. Cooper’s knowledge of financial and accounting matters qualifies him to serve on the Fund’s Audit Committee and his independence from the Fund, PFIM and Prospect Administration enhances his service as a member of the Board.
William J. Gremp
Mr. Gremp brings to the Board of Directors a broad and diverse knowledge of business and finance as a result of his career as an investment banker, spanning over 40 years working in corporate finance and originating and executing transactions and advisory assignments for energy and utility related clients. Since 1999, Mr. Gremp has been responsible for traditional banking services, credit and lending, private equity and corporate cash management with Merrill Lynch & Co. From 1996 to 1999, he served at Wachovia as senior vice president, managing director and co-founder of the utilities and energy investment banking group, responsible for origination, structuring, negotiation and successful completion of transactions utilizing investment banking, capital markets and traditional commercial banking products. From 1989 to 1996, Mr. Gremp was the managing director of global power and project finance at JPMorgan Chase & Co., and from 1970 to 1989, Mr. Gremp was with Merrill Lynch & Co., starting out as an associate in the mergers and acquisitions department, then in 1986 becoming the senior vice president, managing director and head of the regulated industries group. Mr. Gremp’s knowledge of financial and accounting matters qualifies him to serve on the Fund’s Audit Committee and his independence from the Fund, PFIM and Prospect Administration enhances his service as a member of the Board.
Eugene S. Stark
Mr. Stark brings to the Board over 30 years of experience in directing the financial and administrative functions of investment management organizations. The Board benefits from his broad experience in financial management; SEC reporting and compliance; strategic and financial planning; expense, capital and risk management; fund administration; due diligence; acquisition analysis; and integration activities. Since May 2005, Mr. Stark’s position as the Principal Financial Officer, Chief Compliance Officer and Vice President of Administration at General American Investors Company, Inc., where he is responsible for operations, compliance, and financial functions, allows him to provide the Board with added insight into the management practices of other financial companies. From January to April of 2005, Mr. Stark was the Chief Financial Officer of PSEC, prior to which he worked at Prudential Financial, Inc. between 1987 and 2004. His many positions within Prudential include 10 years as Vice President and Fund Treasurer of Prudential Mutual Funds, four years as Senior Vice President of Finance of Prudential Investments, and two years as Senior Vice President of Finance of Prudential Annuities. Mr. Stark is also a Certified Public Accountant (inactive status). Mr. Stark’s knowledge of financial and accounting matters qualifies him to serve on the Fund’s Audit Committee and his independence from the Fund, PFIM and Prospect Administration enhances his service as a member of the Board.
Means by Which the Board Supervises Executive Officers
The Board is regularly informed on developments and issues related to the Fund’s business, and monitors the activities and responsibilities of the executive officers in various ways.
At each regular meeting of the Board, the executive officers report to the Board on developments and important issues. Each of the executive officers, as applicable, also provide regular updates to the members of the Board regarding the Fund’s business between the dates of regular meetings of the Board.
Executive officers and other members of PFIM, PCM and Prospect Administration, at the invitation of the Board, regularly attend portions of meetings of the Board and its committees to report on the financial results of the Fund, its operations, performance and outlook, and on areas of the business within their responsibility, including risk management and management information systems, as well as other business matters.
The Board’s Role in Risk Oversight
The Board performs its risk oversight function primarily through (a) its two standing committees, which report to the entire Board and are comprised solely of independent directors and (b) monitoring by the Fund’s Chief Compliance Officer in accordance with its compliance policies and procedures.
As set forth in the descriptions regarding the Audit Committee and the Nominating and Governance Committee, the Audit Committee assists the Board in fulfilling its risk oversight responsibilities. The Audit Committee’s risk oversight responsibilities include reviewing and discussing with management and the independent accountants the annual audited financial statements of the Fund, including disclosures made in management’s discussion and analysis; reviewing and discussing with management and the independent accountants the Fund’s quarterly financial statements prior to the filings of its quarterly reports on Form 10-Q; pre-approving the independent accountants’ engagement to render audit and/or permissible non-audit services; and evaluating the qualifications, performance and independence of the independent accountants. Acting as the Nominating and Governance Committee, the Board’s risk oversight responsibilities include selecting qualified nominees to be elected to the Board by stockholders; selecting qualified nominees to fill any vacancies on the Board or a committee thereof; developing and recommending to the Board a set of corporate governance principles applicable to the Fund; and overseeing the evaluation of the Board and management. The Audit Committee consists solely of independent directors.
The Board also performs its risk oversight responsibilities with the assistance of the Chief Compliance Officer. The Chief Compliance Officer prepares a written report annually discussing the adequacy and effectiveness of the compliance policies and procedures of the Fund and certain of its service providers. Each Chief Compliance Officer’s report, which is reviewed by the Board, addresses at a minimum (a) the operation of the compliance policies and procedures of the Fund and certain of its service providers since the last report; (b) any material changes to such policies and procedures since the last report; (c) any recommendations for material changes to such policies and procedures as a result of the Chief Compliance Officer’s annual review; and (d) any compliance matter that has occurred since the date of the last report about which the Board would reasonably need to know to oversee the Fund’s compliance activities and risks. In addition, the Chief Compliance Officer meets separately in executive session with the independent directors at least once each year.
The Fund believes that its Board’s role in risk oversight is effective and appropriate given the extensive regulation to which it is already subject as a business development company, or BDC, under the 1940 Act. Specifically, as a BDC the Fund must comply with certain regulatory requirements that control certain types of risk in its business and operations. For example, the Fund’s ability to incur indebtedness is limited such that its asset coverage must equal at least 200% immediately after each time it incurs certain kinds of indebtedness, and the Fund generally has to invest at least 70% of its total assets in “qualifying assets.” On March 23, 2018, President Trump signed into law the Small Business Credit Availability, which included various changes to regulations under the federal securities laws that impact BDCs, including changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement to 150% from 200% under certain circumstances. At the special meeting held on March 15, 2019, the Fund’s stockholders approved the application to the Fund of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, and subject to certain additional disclosure requirements and the repurchase obligations, the minimum asset coverage ratio applicable to the Fund was reduced from 200% to 150%, effective as of March 16, 2019. That means that for every $100 of net assets, the Fund may raise $200 from senior securities, such as borrowings or issuing preferred stock. If this ratio declines below 150%, the Fund may not be able to incur additional debt and may need to sell a portion of its investments to repay some debt when it is disadvantageous to do so, and the Fund may not be able to make distributions.
In addition, the Fund elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended. As a RIC, the Fund must, among other things, meet certain income source, asset diversification and income distribution requirements.
The Fund believes that the extent of its Board’s and its committees’ role in risk oversight complements its Board’s leadership structure because it allows the Fund’s independent directors to exercise oversight of risk without any conflict that might discourage critical review through the two fully independent board committees, auditor and independent valuation providers, and otherwise.
The Fund believes that a board’s role in risk oversight must be evaluated on a case by case basis and that its Board’s practices concerning risk oversight are appropriate. However, the Fund continually re-examines the manner in which the Board administers its oversight function on an ongoing basis to ensure that they continue to meet the Fund’s needs.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines on behalf of the Fund. These Corporate Governance Guidelines address, among other things, the following key corporate governance topics: director responsibilities; the size, composition, and
membership criteria of the Board; composition and responsibilities of directors serving on committees of the Board; director access to officers, employees, and independent advisors; director orientation and continuing education; director compensation; and an annual performance evaluation of the Board.
Code of Ethics
The Fund, PFIM and Prospect Administration have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and PFIM and Prospect Administration have each adopted a code of ethics pursuant to Rule 204A-1 under the Investment Advisers Act of 1940, as amended, that establishes procedures for personal investments and restricts certain personal securities transactions. The Fund’s code of ethics is available on the EDGAR Database on the SEC’s Internet site at www.sec.gov. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by the Fund, so long as such investments are made in accordance with the code’s requirements.
Internal Reporting and Whistle Blower Protection Policy
The Fund’s Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters (collectively, “Accounting Matters”), and the confidential, anonymous submission by personnel of concerns regarding questionable Accounting Matters. Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer. Persons who are uncomfortable submitting complaints to the Chief Compliance Officer, including complaints involving the Chief Compliance Officer, may submit complaints directly to the Audit Committee Chairman. Complaints may be submitted on an anonymous basis.
The Chief Compliance Officer may be contacted at:
TP Flexible Income Fund, Inc.
Chief Compliance Officer
10 East 40th Street, 42nd Floor
New York, New York 10016
The Audit Committee Chairman may be contacted at:
TP Flexible Income Fund, Inc.
Audit Committee Chairman
10 East 40th Street, 42nd Floor
New York, New York 10016
Communication with the Board
Stockholders with questions about the Fund are encouraged to contact the Fund. Stockholders may communicate with the Fund or its Board by sending their communications to TP Flexible Income Fund, Inc., Chief Compliance Officer, 10 East 40th Street, 42nd Floor, New York, New York 10016. All stockholder communications received in this manner will be delivered as appropriate to one or more members of the Board.
Information about Executive Officers Who Are Not Directors
Name, Address and Age | Position(s) Held with the Fund | Term at Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Kristin Van Dask, 40(1) | Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary | Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary since March 31, 2019 | Ms. Van Dask has been the Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary of the Fund since March 31, 2019. Ms. Van Dask previously served as controller at Prospect Administration LLC. Ms. Van Dask is also the Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary of PFIM, Priority Income Fund, Inc., Priority Senior Secured Income Management, LLC and Prospect Capital Corporation. |
_______________________________
(1) | The business address of Ms. Van Dask is c/o TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016. |
Compensation of Executive Officers and Directors
The following table sets forth information regarding the compensation received by the directors and executive officers from the Fund for the fiscal year ended June 30, 2019. No compensation is paid to the interested directors by the Fund.
Compensation Table
Name and Position | Aggregate Compensation from the Fund | Pension or Retirement Benefits Accrued as Part of the Fund’s Expenses(1) | Total Compensation from the Fund and Fund Complex | |||||
Interested Directors | ||||||||
M. Grier Eliasek(2) | None | None | None | |||||
Craig J. Faggen(2) | None | None | None | |||||
Independent Directors | ||||||||
Andrew C. Cooper(3) | None | None | $ | 200,000 | ||||
William J. Gremp(3) | None | None | $ | 200,000 | ||||
Eugene S. Stark(3) | None | None | $ | 200,000 | ||||
Executive Officers | ||||||||
Kristin Van Dask(2) | None | None | None |
_______________________________
(1) | The Fund does not have a bonus, profit sharing or retirement plan, and directors do not receive any pension or retirement benefits. |
(2) | The Fund has not paid, and does not intend to pay, any annual cash compensation to its executive officers for their services as executive officers. Messrs. Eliasek and Faggen are compensated by PCM and an affiliate of the Fund’s dealer manager, respectively, from the income PCM and such affiliate of the Fund’s dealer manager receive as distributions from PFIM of fees received under the investment advisory agreement between PFIM and FLEX. Ms. Van Dask is compensated from the income Prospect Administration receives under the administration agreements. |
(3) | Messrs. Cooper, Gremp and Stark joined the Board on March 31, 2019. |
Certain Relationships and Transactions
The Fund has procedures in place for the review, approval and monitoring of transactions involving the Fund and certain persons related to the Fund. For example, the Fund has a code of conduct that generally prohibits any employee, officer or director from engaging in any transaction where there is a conflict between such individual’s personal interest and the interests of the Fund. Waivers to the code of conduct for any executive officer or member of the Board must be approved by the Board and are publicly disclosed as required by applicable law and regulations.
We have entered into an investment advisory agreement with Prospect Flexible Income Management, LLC in which certain members of our senior management hold an equity interest. Pursuant to the investment advisory agreement, we pay PFIM a base management fee and an incentive fee. Members of our senior management also serve as principals of other investment managers affiliated with PFIM that do and may in the future manage investment funds, accounts or other investment vehicles with investment objectives similar to ours.
As a BDC, we are subject to certain regulatory restrictions in making our investments, including in negotiating certain investments with entities with which we may be restricted from doing so under the 1940 Act, such as PFIM and its affiliates, unless we obtain an exemptive order from the SEC. For example, we have in the past and expect in the future to co-invest on a concurrent basis with certain affiliates, consistent with applicable regulations and our allocation procedures. The parent company of PFIM has received an exemptive order from the SEC (the “Order”) granting the ability to negotiate terms, other than price and quantity, of co-investment transactions with other funds managed by PFIM or its affiliates, including us, PSEC and Priority, subject to certain conditions included therein. Under the terms of the Order permitting us to co-invest with other funds managed by PFIM or its affiliates, a majority of our independent directors who have no financial interest in the transaction must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. The Order also imposes reporting and record keeping requirements and limitations on transactional fees. We may only co-invest with certain entities affiliated with PFIM in negotiated transactions originated by PFIM or its affiliates in accordance with such Order and existing regulatory guidance. These co-investment transactions may give rise to conflicts of interest or perceived conflicts of interest among us and the other participating accounts. To mitigate these conflicts, PFIM and its affiliates will seek to allocate portfolio transactions for all of the participating investment accounts, including us, on a fair and equitable basis, taking into account such factors as
the relative amounts of capital available for new investments, the applicable investment programs and portfolio positions, the clients for which participation is appropriate and any other factors deemed appropriate. We intend to make all of our investments in compliance with the 1940 Act and in a manner that will not jeopardize our status as a BDC or RIC.
We have entered into an administration agreement with Prospect Administration LLC in which certain members of our senior management hold an equity interest and act as principals. Pursuant to the administration agreement, we reimburse Prospect Administration for expenses necessary to perform services related to our administration and operations.
The Fund and PFIM have entered into a dealer manager agreement with Triton Pacific Securities, LLC pursuant to which the Fund and will pay the dealer manager a fee of up to 6% of gross proceeds raised in the offering, some of which will be re-allowed to other participating broker-dealers. Triton Pacific Securities, LLC is an affiliated entity Triton Pacific Adviser, LLC, which was TPIC's (as defined below) investment adviser prior to the Merger (as defined below) and is partially owned by one of our directors, Craig Faggen.
We have entered into an expense limitation agreement with PFIM pursuant to which PFIM, in its sole discretion, may waive a portion or all of the investment advisory fees that it is entitled to receive under the investment advisory agreement in order to limit our operating expenses to an annual rate, expressed as a percentage of our average quarterly net assets, equal to 8.00%.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act, our directors and executive officers, and any persons holding more than 10% of the Fund’s equity securities, are required to report their beneficial ownership and any changes therein to the Commission and to the Fund. Specific due dates for those reports have been established, and we are required to report herein any failure to file such reports by those due dates. Based on our review of Forms 3, 4 and 5 filed by such persons, and information provided by our directors and officers, the Fund does not know of any directors, executive officers, or any persons holding more than 10% of the Fund’s equity securities who during the fiscal year ended June 30, 2019, failed to file on a timely basis the required reports.
ADDITIONAL INFORMATION
Overview
On March 31, 2019, Triton Pacific Investment Corporation, Inc. (the “TPIC”) completed a merger with Pathway Capital Opportunity Fund, Inc. (“PWAY), pursuant to which PWAY merged with and into TPIC (the “Merger”). TPIC was the combined surviving corporation of the Merger and changed its name to TP Flexible Income Fund, Inc. Although TPIC was the legal survivor in the Merger, PWAY was considered the accounting survivor. Accordingly, PWAY is reflected as the predecessor to the Fund’s financial statements for the periods ending after March 31, 2019. The Fund’s historical financial condition, financial statements and results of operations shown for comparative purposes in future periodic filings will reflect PWAY’s historical results and financial statements. In addition, the Fund changed its fiscal year from December 31 to June 30 as a result of the foregoing to coincide with PWAY’s fiscal year end.
The financial statements of PWAY (the accounting survivor of the Merger) as of and for the years ended June 30, 2018 and 2017 were audited by BDO USA, LLP (“BDO”). The financial statements of TPIC as of and for the years ended December 31, 2018 and 2017 were audited by FGMK, LLC (“FGMK”).
After the completion of the Merger, the Audit Committee of the Board, which has the responsibility to engage and dismiss the Fund’s auditor, considered which accounting firm was best suited to serve as the Fund’s principal accounting firm for the fiscal year ending June 30, 2019 in light of PWAY being the accounting survivor, as discussed above. At a meeting held on April 22, 2019, the Audit Committee unanimously approved dismissing FGMK and appointing BDO to serve as the Fund’s independent registered public accounting firm for the fiscal year ending June 30, 2019.
The audit reports of FGMK on TPIC’s financial statements as of and for the years ended December 31, 2018 and 2017 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During TPIC’s fiscal years ended December 31, 2018 and 2017 and through April 22, 2019, there were no disagreements with FGMK on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of FGMK would have caused it to make reference to the subject matter of the disagreements in connection with its audit report, nor were there any “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K, promulgated under the Exchange Act.
On April 22, 2019, upon the recommendation of the Audit Committee, the Board appointed BDO to serve as the Fund’s independent registered accounting firm to audit the Company’s consolidated financial statements for the fiscal year ended June 30, 2019. Each of the Audit Committee and the Board voted unanimously to appoint BDO. BDO previously audited the financial statements of PWAY as of and for the years ended June 30, 2018 and 2017.
Except as described above, during the two most recent fiscal years and through April 22, 2019, the date of the appointment of BDO, none the Fund, PWAY or any person on their behalf has consulted with BDO with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund’s or PWAY’s consolidated financial statements or (ii) any matter that was either the subject of a “disagreement” or a “reportable event” as such terms are described in Items 304(a)(1)(iv) or 304(a)(1)(v), respectively, of Regulation S-K promulgated under the Exchange Act.
Independent Public Accountants
The 1940 Act requires that the Fund’s independent registered public accounting firm be selected by a majority of the independent directors of the Fund. One of the purposes of the Audit Committee is to recommend to the Fund’s Board the selection, retention or termination of the independent registered public accounting firm for the Fund. The Fund’s independent registered public accounting firm for the fiscal year ended June 30, 2019 was BDO USA, LLP (“BDO”). At meetings held on September 17, 2019, the Fund’s Audit Committee recommended and the Board, including a majority of the independent directors, approved the selection of BDO as the Fund’s independent registered public accounting firm for the fiscal year ending June 30, 2020. The 1940 Act rules do not require that the Board’s selection of BDO be submitted for ratification by stockholders of the Fund. We expect that a representative of BDO will be present at the Annual Meeting and will have an opportunity to make a statement if he or she so chooses and will be available to respond to appropriate questions. After reviewing the Fund’s audited financial statements for the fiscal year ended June 30, 2019, the Fund’s Audit Committee recommended to the Board that such statements be included in the Fund’s Annual Report to stockholders. A copy of the Audit Committee’s report appears below.
The Audit Committee and the Board have considered the independence of BDO and have concluded that BDO is independent as required by the applicable rules of the Public Company Accounting Oversight Board. In connection with their determination, BDO has advised the Fund that neither the firm nor any present member or associate of it has any material financial interest, direct or indirect, in the Fund or its affiliates.
As a result of PWAY being the accounting survivor of the Merger, the predecessor to the Fund’s financial statements, and the use of PWAY’s historical financial condition and financial statements in the Fund’s periodic filings, the fees related to BDO are reflected below.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the integrated audit of our year-end financial statements included in the Company’s Annual Report on Form 10-K and a review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, or services that are normally provided by BDO in connection with statutory and regulatory filings for the past two fiscal years. Audit fees incurred by the Company for its fiscal years ended June 30, 2019 and June 30, 2018 were approximately $383,029 and $152,523, respectively. The fees incurred by the Company for review of its shelf registration were approximately $150,200 and $26,750 for the fiscal years ended June 30, 2019 and June 30, 2018, respectively.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. There were no audit-related fees for the fiscal years ended June 30, 2019 and 2018.
Tax Fees. The aggregate fees billed for professional services by BDO for tax compliance, tax advice and tax planning in the fiscal years ended June 30, 2019 and 2018 were approximately $0 and $6,000, respectively.
All Other Fees. There were no fees billed for services rendered by BDO that are not included above in the fiscal years ended June 30, 2019 and June 30, 2018.
Non-Audit Fees. For the fiscal years ended June 30, 2019 and June 30, 2018, the aggregate fees billed by BDO for non-audit services rendered to the Fund and for non-audit services rendered to the Fund’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment
advisor) and/or to any entity controlling, controlled by or under common control with the Fund’s investment advisor that provides ongoing services to the Fund and the Fund’s investment advisor were approximately $0 and $0, respectively.
Audit Committee Pre-Approval Policies and Procedures. The Audit Committee pre-approves BDO’s engagements for audit and non-audit services to the Fund or the Fund’s investment adviser. Pre-approval considerations include whether the proposed services are compatible with maintaining BDO’s independence. All of the services described above were pre-approved by the Audit Committee. No services described above were approved by the Audit Committee pursuant to the “de minimis exception” set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X. The Audit Committee has considered and concluded that the provision of non-audit services rendered by BDO to the Fund’s investment adviser and any entity controlling, controlled by, or under common control with the Fund’s investment adviser that were not required to be pre-approved by the Audit Committee is compatible with maintaining BDO’s independence.
Audit Committee Report
The following is the report of the Audit Committee with respect to the Fund’s audited financial statements for the fiscal year ended June 30, 2019.
The Audit Committee has reviewed and discussed the Fund’s audited financial statements with management and BDO, with and without management present. The Audit Committee included in its review results of BDO’s examinations, the Fund’s disclosure controls and procedures, and the quality of the Fund’s financial reporting. The Audit Committee also reviewed the Fund’s procedures and disclosure controls designed to ensure full, fair and adequate financial reporting and disclosures, including procedures for certifications by the Fund’s chief executive officer and chief financial officer that are required in periodic reports filed by the Fund with the Commission.
The Audit Committee also has discussed with BDO matters relating to BDO’s judgments about the quality, as well as the acceptability, of the Fund’s accounting principles as applied in its financial reporting as required by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standards No. 1301 (“AS 1301”). In addition, the Audit Committee has discussed with BDO their independence from management and the Fund, as well as the matters in the written disclosures received from BDO as required by AS 1301. Further, as required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence,” the Audit Committee received written, as well as oral communications from BDO confirming their independence and discussed the matter with BDO. The Audit Committee discussed and reviewed with BDO the Fund’s critical accounting policies and practices, disclosure controls, other material written communications to management, and the scope of BDO’s audits and all fees paid to BDO during the fiscal year. Pursuant to the Audit Committee charter, the Audit Committee may review and pre-approve audit and permissible non-audit services performed by BDO for the Fund. The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent registered public accounting firm to management. The Audit Committee has reviewed and considered the compatibility of BDO’s performance of non-audit services with the maintenance of BDO’s independence as the Fund’s independent registered public accounting firm.
Based on the Audit Committee’s review and discussions referred to above, the Audit Committee recommended to the Board that the Fund’s audited financial statements for the fiscal year ended June 30, 2019 be included in the Fund’s Annual Report on Form N-CSR for the same fiscal year for filing with the Commission. In addition, the Audit Committee has engaged BDO to serve as the Fund’s independent registered public accounting firm for the fiscal year ending June 30, 2020.
Respectfully Submitted,
The Audit Committee
Eugene S. Stark, Chairman
Andrew C. Cooper
William J. Gremp
September 17, 2019
Financial Statements and Other Information
The Fund will furnish, without charge, a copy of the Fund’s most recent annual report and the most recent quarterly report succeeding the annual report, if any, to any stockholder upon request. Requests should be directed to the Fund at TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016 (telephone number (212) 448-0702).
Householding of Proxy Materials
The Commission has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Please note that only one Proxy Statement and/or annual report may be delivered to two or more stockholders who share an address, unless the Fund has received instructions to the contrary. To request a separate copy of this Proxy Statement and/or annual report or for instructions as to how to request a separate copy of this document and/or annual report or as to how to request a single copy if multiple copies of this document and/or annual report are received, stockholders should contact the applicable Fund at the address and phone number set forth below.
Requests should be directed to TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016 (telephone number: 212-448-0702). Copies of these documents may also be accessed electronically by means of the Commission’s home page on the Internet at www.sec.gov.
Other Business
The Board knows of no other matters that may be presented for stockholder action at the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon them in their discretion.
Submission of Stockholder Proposals
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in the Fund’s proxy statement and for consideration at the Fund’s 2020 Annual Meeting of Stockholders. To be eligible for inclusion in the Fund’s 2020 Proxy Statement, a stockholder proposal must be received in writing not less than 120 calendar days before the first anniversary of the date the Fund first released its proxy statements for the preceding year’s annual meeting and must otherwise comply with Rule 14a-8 under the Exchange Act. Accordingly, a stockholder proposal of business intended to be considered at the 2020 Annual Meeting of Stockholders must be received by the Secretary not later than May 30, 2020 to be eligible for inclusion in our 2020 Proxy Statement. While the Board will consider stockholder proposals, the Fund reserves the right to omit from the Fund’s Proxy Statement any stockholder proposal that it is not required to include under the Exchange Act, including Rule 14a-8 of the Exchange Act.
In addition, the Fund’s Bylaws contain an advance notice provision with respect to director nominations and with respect to proposals for business, whether or not included in our proxy statement. The Fund’s Bylaws currently provide that, in order for a stockholder to nominate a candidate for election as a director at an annual meeting of stockholders or propose business for consideration at an annual meeting, written notice in the manner provided for in the Bylaws containing the information required by the Bylaws generally must be delivered to the Fund’s Secretary at its principal executive office not earlier than the 120th day prior to the first anniversary of the date the Fund first released its proxy statement for the preceding year’s annual meeting nor later than 5:00 p.m., Eastern Time, on the 90th day prior to the first anniversary of the date the Fund first released its proxy statement for the preceding year’s annual meeting. Accordingly, under the Fund’s current Bylaws, a stockholder nomination for director or proposal of business intended to be considered at the 2020 Annual Meeting must be received by the Fund’s Secretary not earlier than May 30, 2020, and not later than 5:00 p.m., Eastern Time, on June 29, 2020. Proposals should be addressed to Corporate Secretary, c/o TP Flexible Income Fund, Inc., 10 East 40th Street, 42nd Floor, New York, New York 10016. In the event that the date of the next annual meeting is advanced or delayed by more than 30 days from the first anniversary of the Annual Meeting, a notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to the date of such annual meeting and not later than 5:00 p.m. Eastern Time on the later of the 90th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
By Order of the Board of Directors,
Kristin Van Dask
Chief Financial Officer,
Chief Compliance Officer, Treasurer and Secretary
New York, New York
September 27, 2019